• 2015年股东大会
  • 上午场
    • 1. 巴菲特的开幕笑话
    • 2. 约翰·兰迪斯与《颠倒乾坤》
    • 3. 感谢卡丽·索瓦
    • 4. 人比座位多
    • 5. 介绍伯克希尔董事
    • 2015年年度会议
  • 第二部分/第六部分
    • 20. 任何有经济学家的公司都“多雇了一个人”
    • 20. Any company with an economist has “one employee too many”
    • 21. 新的原油铁路运输安全规定对BNSF的影响
    • 21. Effect on BNSF of new crude-by-rail safety rules
    • 22. “幸运”地避开了商学院
    • 22. “Lucky” to have avoided business school
    • 23. 铁路事故、保险和BNSF
    • 23. Railroad accidents, insurance, and BNSF
    • 24. 为什么在保险子公司之间转移资产？
    • 24. Why move assets around insurance subsidiaries?
    • 25. “50年后美元仍将是世界储备货币”
    • 25. “Dollar will be the world’s reserve currency 50 years from now”
    • 26. 子公司使用伯克希尔哈撒韦名称
    • 26. Subsidiaries using the Berkshire Hathaway name
    • 27. MidAmerican对风能的拥抱
    • 27. MidAmerican’s embrace of wind power
    • 28. 巴菲特最难忘的失败
    • 28. Buffett’s most memorable failure
    • 29. 对低利率未引发通胀感到惊讶
    • 29. Surprised that low rates haven’t sparked inflation
    • 30. 递延税款并非“隐藏的权益”
    • 30. Deferred taxes aren’t a “hidden form of equity”
    • 34. 从未被问过的问题
    • 35. 巴菲特：我们经营伯克希尔的方式几乎和3G一样严谨
    • 36. “强大的品牌会生存下来，伟大的零售商会做得很好”
    • 37. 在中国的价值投资？
    • 38. 美国需要防范灾难性的恐怖袭击
    • 39. 同一个人同时负责投资和运营的可能性不大
    • 40. 韦施勒和康姆斯是优秀的投资者和好人
    • 41. 巴菲特对冲基金赌局的最新情况
  • 下午会议
    • 1. 没有提前收到关于克莱顿房屋的问题
    • 1. Didn’t get Clayton Homes question in advance
    • 2. 高通胀下表现最好的业务
    • 3. 有机增长 vs. 收购
    • 4. 芒格论声誉和良好行为
    • 8. 巴菲特谈亚当·斯密的《国富论》
    • 9. 子公司并非过于关注短期
    • 10. 巴菲特对德国公司的兴趣
    • 11. 为什么竞争对手有时比GEICO定价更低
    • 12. 再保险业务因“幌子”而恶化
    • 13. 如何赢得朋友并影响他人
    • 14. 尽管有劳资问题，NetJets并非错误收购
    • 15. 税法助力了Duracell与宝洁的交易
    • 16. 我为什么要捐出大部分财富
    • 17. 是否应将长期持股分配给股东？
    • 18. 年轻人减少组建家庭是永久性的吗？
    • 19. 为什么个人慈善优先于公司慈善？
    • 20. 欧元能够经受欧元区的变化
    • 21. 芒格：GEICO的协同效应是“愚蠢的想法”
    • 22. 巴菲特不再关注白银市场
• 2015年股东大会
  • 第5/6部分
    • 23. 巴菲特之后，激进投资者能否控制公司？
    • 23. Could activists take control after Buffett?
    • 24. 美国运通与信用卡历史
    • 24. American Express & credit card history
    • 25. 为什么孩子需要良好的财务习惯
    • 25. Why children need good financial habits
    • 26. 没有改变债务水平的计划
    • 26. No plans to change debt level
    • 27. 汽车经销商没有规模经济
    • 27. No economies of scale for auto dealers
    • 28. 巴菲特认为互联网比私人飞机更有价值
    • 28. Buffett values internet more than private jet
    • 29. 提高劳动所得税抵免而非最低工资
    • 29. Raise earned income tax credit instead of minimum wage
    • 30. “荒谬的论点”：大学提高终身收入
    • 30. “Ridiculous argument” that college boosts lifetime earnings
    • 31. 看好中国
    • 31. Bullish on China
    • 35. 无法回答“最聪明的问题”
    • 35. No help for “the most intelligent question”
    • 36. 巴菲特谈乐趣和“游戏”
    • 36. Buffett on fun and “the game”
    • 37. 道琼斯错失的重大机会
    • 37. Dow Jones’s big missed opportunity
    • 38. 问答环节结束
    • 38. Q&A concludes
    • 39. 伯克希尔正式年度业务会议
    • 39. Berkshire’s formal annual business meeting
    • 40. 选举伯克希尔董事
    • 40. Election of Berkshire directors
    • 41. 伯克希尔正式年度会议休会
    • 41. Adjournment of formal Berkshire annual meeting

WARREN BUFFETT: Thank you. Thank you. Thank you. I’m Warren; this is Charlie. He can hear. I can see. We work together. (Laughter) In just a couple of minutes we’ll move onto the questions and answers and follow the same procedures as in previous years.

WARREN BUFFETT: But first, there’s just a couple of special introductions I’d like to make. And I’d like to start it off with John Landis. Do we have a spotlight that we can pick out John? John is the man that directed, conceived, et cetera, of the Floyd Mayweather fight. And John, as you know, directed “Coming to America,"" Animal House,” and the one I particularly like is “Trading Places.” If you haven’t seen “Trading Places,” by all means get it. It has Dan Aykroyd, and Eddie Murphy, and Charlie’s favorite, Jamie Lee Curtis. (Laughter) And it’s a truly great movie. It brought back Ralph Bellamy and Don Ameche. Don Ameche had disappeared. Have we got a light on — can we get a light on John? Where’s John? He should be right down here. (Applause) We’re going to find — over here? Come on. Well, John, thank you, thank you, thank you.

He did all that and now came to the meeting. We really appreciate it.

WARREN BUFFETT: The other person I want to say — have a special thanks for — is a young, 30-year-old woman who has a 1 1/2-year-old baby at home and manages to put on this whole event with the help of hundreds that come from our various companies, and that’s Carrie Sova. I hope Carrie is here, that we can give her a thanks. (Applause) Carrie, a few months ago, while she was already working on this meeting, I said to Carrie, “I think it would be kind of nice if we had a commemorative book, sort of a retrospective on the 50 years.” And I said, “Would you mind turning out a book, you know, in your spare time during these couple months while you’re putting together the meeting?” And she put together what I think is an absolutely terrific book, which we have outside. We printed up — we thought we printed 15,000 copies, but I think there’s not quite that many. We sold 5,000 yesterday and then held back copies. But it’s really a nice history of Berkshire Hathaway.

And the credit, 100 percent, goes to Carrie for putting that together. So I’d just like to thank her personally and I hope you’ll thank her.

WARREN BUFFETT: Now, we’ll have the annual meeting at 3:30, and at that time we will be voting on directors, but many of you won’t be here at that time, although we’ll have a full house in here. I should mention all of the overflow rooms in — here at the CenturyLink — are full now. There may be seats — we’ve got the grand ballroom and the second ballroom over at the Hilton — and there may be some seats left over at the Hilton. So if you can’t find a seat here at the CenturyLink, either here or in the overflow rooms, at least give it a try over there at the Hilton. We’ve got all the rooms we could possibly get, but I think the attendance may have outrun the seats this time.

WARREN BUFFETT: I’d like to introduce the directors, and, like I say, you’ll vote on them at a little after 3:30. And if they’ll stand — and we’ll get a light down here — and withhold your applause until the end, and you can withhold it then, if you would like. (Laughter) And we’ll do this alphabetically. You’ve met Charlie, of course, but we’ll start with Howard Buffett, Steve Burke, Sue Decker, Bill Gates, Sandy Gottesman, Charlotte Guyman, Tom Murphy, Ron Olson, Walter Scott, and Meryl Witmer. They’re a great bunch of directors. (Applause) We’re missing one of our great directors, Don Keough, my neighbor from over 55 years ago. He was a coffee salesman, then, for Butter-Nut Coffee, for those of you around Omaha. He broadcast Nebraska football games and around 1950 had a radio show on WOW, for 15 minutes. He was followed by a fellow named Johnny Carson, who had another 15-minute program.

And Don, when I would see him in later years, he’d always say, “What happened to that Carson fellow?” (Laughs) And Don died a few weeks ago, but we are very grateful that his wife, Mickie Keough, has joined us together, so let’s have a hand for Mickie Keough. Mickie, will you stand? (Applause) Mickie practically raised our kids, so if they have any faults, talk to Mickie about it. (Laughter)

WARREN BUFFETT: OK. We have just — we have one slide that relates to our quarterly earnings that — if we could put up. We released these yesterday afternoon, and nothing particularly remarkable. The railroad, BNSF, did dramatically better last year, not only in earnings, but in all kinds of performance measures, in terms of train velocity, and on time, and you name it, so that the — You know, we got behind last year, early in the year, and there’s been lots of money, and more important, lots of effort, spent to get the railroad operating like it should be. And in the first quarter those efforts paid off. We gained share. Our earnings, relative to other railroads, improved dramatically, so, you know, we got the trains running. We’re going to spend a lot of money making sure we get even better. But the improvement has been huge, and I want to thank Matt Rose and Carl Ice for a really extraordinary performance and having our railroad running the way it should be running. So thanks, Matt and Carl. (Applause)

VOICE FROM AUDIENCE: (Inaudible)

WARREN BUFFETT: I didn’t quite get, it but I’ll assume it was complimentary. (Laughter)

So it takes a lot of time, and you’ll — you know, at GEICO we’re going to — you know, we’re going to settle millions and millions and millions of claims. And I will guarantee you that when two people are in an auto accident, they don’t agree 100 percent of the time on whose fault it was, so they may go away and be unhappy for a time. But we work all the time at trying to behave with other people as if our positions were reversed. That’s what Charlie’s always advised in all our activities, and we’ve tried to follow it. And we’re certainly far from perfect at it, but if you keep working at it, it does get results. Charlie?

CHARLIE MUNGER: Yeah. I think the one thing that we did that’s worked best of all is we were always dissatisfied with what we already knew and we always wanted to know more. And Berkshire, if Warren and I had stayed frozen in time, particularly Warren, it would have been a —

WARREN BUFFETT: I’d like to do it, understand.

CHARLIE MUNGER: It would have been a terrible place. It’s what we kept learning that made it work, and I don’t think that will ever stop.

20. Any company with an economist has “one employee too many”

WARREN BUFFETT: Carol?

CAROL LOOMIS: This question comes from Mona Dyan (PH). And it concerns two indicators, Warren, that you have discussed in the past about the general level of the stock market. The first one is the percentage of total market cap relative to the U.S. GNP, which you have said is probably the best single measure of where valuations stand at any given moment. This indicator is at about 125 percent. That is the ratio of total market cap to U.S. GNP, and that’s about what it was when Warren talked about this back in 1999 just before the — shortly before — the bubble broke. The second indicator, which you mentioned in a famous 1999 speech that subsequently became an article in Fortune, is the corporate profits — is corporate profits — as percent of GNP. You had said at the time that that number ranged between 4 percent to 6 1/2 percent over a long period of time, which I believe was 1951 to 1999. Well, as of Friday, it is about 10 1/2 percent, according to the St. Louis Federal Reserve site. That is way above the range you had mentioned.

Are the current levels of either one, or both, of these indicators a matter of concern for the general investing public?

WARREN BUFFETT: Yeah. Well, the — it might be — the second figure, which is the profits as a percentage of GDP, might be a concern for other segments of society because what it indicates is that American business has done wonderfully well in recent years. And I know it says how — what a terrible disadvantage it has, because of U.S. tax rates and a host of other things, you know, the facts are that American business has prospered incredibly. And the first comparison is very much affected by the fact that we live in an interest rate environment, which Charlie and I probably would have thought was almost impossible, not too many years ago. And, obviously, profits are worth a whole lot more if the government bond yield is 1 percent, than they’re worth if the government bond yield is 5 percent. So it gets back — and, you know, Charlie in that movie talked about alternatives and opportunity cost. And for many people, the opportunity cost is owning a lot of bonds, which pay practically nothing, or owning stocks, which are selling at fairly high prices historically, but they weren’t selling at those historic prices with interest rates like this.

So I would not — I look at those numbers, but I also look at them in the context of the fact that we’re living in a world that has incredibly low interest rates, and the question is how long those are going to prevail. Is it going to be something like Japan that goes on decade after decade, or will we be back to what we thought was normal interest rates? If we get back to what are normal interest rates, stocks at these prices will look pretty high. If we continue with these kinds of interest rates, stocks will look very cheap. And now I’ve given you the answer and you can take your pick. (Laughs) Charlie?

CHARLIE MUNGER: Well, since we failed to predict what happened, and what exists now, why would anybody ask us what our prediction is in the future? (Laughter)

WARREN BUFFETT: Yeah, yeah. We — incidentally, the one thing I can assure you, Charlie and I, to my knowledge, or my memory, I can’t recall ever us making an acquisition or turning down one based on macro factors that — you know, and we talk about deals when they come along, but whether it was See’s Candy, or whatever it might have been, the Burlington Northern we bought at a terrible time, in general economic conditions. But we don’t — it just doesn’t come up, because we don’t — we know we don’t know what the next 12 months, 24 months, 30 — we know we don’t know what that’s going to look like. But it doesn’t really make any difference if we’re buying a business to hold for a hundred years. What we have to do is figure out what’s likely to be the average profitability of the business over time and how strong its competitive mode is and that sort of thing. So, people have trouble believing that. They think we talk about it.

We think any company that has an economist, you know, certainly, has one employee too many. (Laughter) Charlie? Can you think of anything rude to say that I haven’t said? (Laughter)

CHARLIE MUNGER: Well, it would be hard to top that one. (Laughter)

WARREN BUFFETT: I know. OK. (Laughter)

21. Effect on BNSF of new crude-by-rail safety rules

WARREN BUFFETT: OK. Jonathan?

JONATHAN BRANDT: There’s been an awful lot written about what should be done to improve the safety of the crude-by-rail infrastructure. Both this week and last month, federal regulators introduced new standards. These new standards include thicker tanks, better fire protection, electronically controlled pneumatic brakes, and speed limits in more populous areas to reduce the chance of derailments near where people live. The railroad association has complained that the brakes are too expensive, while others have complained about what they view as an overly-long timetable to switch out the old tank cars. Given the tank car industry’s limits on manufacturing and retrofitting capacity, and the impact on overall rail network velocity from speed limits, do you think the new rules strike the right balance between efficiency and safety? For Berkshire, what impact will these new rules have on the operations of Marmon’s Union Tank Car subsidiary and on the BNSF Railroad? Can you also update us on the BNSF initiative to purchase up to 5,000 of its own oil tankers — oil tank cars — which is a departure from historic industry practices, and what drove that decision?

WARREN BUFFETT: Yeah. Well, you’ve asked all the questions I’ll be asking. But I think those rules just came out, what, two days ago now? Yeah. And they’re 300 pages. And little as I have to do with this meeting and everything, I have not read those, although I have talked very briefly to Matt Rose and also Frank Ptak who runs our — the company that manufactures and leases tank cars. You know, our interest — actually, the interest of our railroad and our tank car manufacturing and leasing operation may diverge in various ways. Clearly, we’ve got an interest — the country has an interest — in developing safer cars, and we found that the — some cars we thought were safe have turned out to be less safe than we thought going in. The most dangerous kinds of thing we carry, of course, are — as a common carrier, we have to carry chlorine, we have to carry ammonia, and we’re required to carry that. We’d rather not carry it.

There are dangerous products that have to get transported in the country, and they’re — it’s more logical to transport them by rail than either truck or pipeline, and some of those we’d rather not carry but we do carry. I would say that the — probably everybody will be somewhat unhappy with the rules, but the — you know, it’s up to — it is up to Washington, and the government, to devise the rules under which something that is potentially dangerous is transported. And transporting by pipeline has its problems. Transporting by rail has its problems. And railroads have gotten dramatically safer over the years. Our safety figures — and Burlington Northern leads the industry in safety — but the safety figures get better and better year after year. And — but you are — but you’re going to have derailments, and you better have very safe cars carrying that, and nothing will be perfect. Charlie?

CHARLIE MUNGER: Yeah. Well, big companies and successful companies, like Burlington Northern and Exxon and Chevron and so on, have a lot of engineers and they have long histories of trying to be way safer than average and knowing a lot about how to do it. And none of that is going to change. You’d be out of your mind to own these big companies and not run them with big attention to safety. And we’re not out of our minds and neither are the people who run Burlington Northern. The safety is going to be improved continuously, and should be.

WARREN BUFFETT: Yeah. And it has been consistently, but —

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: But there are new problems. For one thing, the Bakken crude has been proven to be quite a bit more volatile than most of the crude that is —

CHARLIE MUNGER: It’s not really crude. It’s condensate. I mean, it’s almost misnamed, to call it crude. It is more volatile.

WARREN BUFFETT: Yeah. I can tell you — and I may write about this next year in the report, though — that Burlington Northern has the best safety record among the big railroads. And Berkshire Hathaway Energy, it’s extraordinary, their safety record, in terms of utilities. And every new utility we purchase at Berkshire Hathaway Energy, we’ve brought — the safety statistics, they’ve gotten far better after Greg Abel has taken over.

CHARLIE MUNGER: After they bought the Omaha pipeline, which had been mismanaged and safety had been improperly ignored, we watched those people, the Berkshire employees, just work day and night improving the safety. They didn’t want more pipeline explosions.

WARREN BUFFETT: Yeah. We went from last out of 40-some — I think it was — to either second or first. And if we were second, it was because our other pipeline was first. (Laughter)

22. “Lucky” to have avoided business school

WARREN BUFFETT: OK. Station 4?

AUDIENCE MEMBER: Hello, Mr. Munger and Mr. Buffett. Nirav Patel from Haverhill, Massachusetts. What advice would you give to someone who’s trying to network with influential people but doesn’t have access to the alumni network of a top business school?

CHARLIE MUNGER: Let me take that one. I think you should do the best you can — (Laughter) — playing the hand you’ve got.

WARREN BUFFETT: Charlie is very Old Testament on this. (Laughter) He didn’t get much past Genesis. (Laughter) Was his question that he didn’t have a lot of associations because of —?

CHARLIE MUNGER: Well, he’d like to have you help him —

WARREN BUFFETT: — tap into —

CHARLIE MUNGER: — tap — do well without business school training. I never had any business school training, why should you have any? (Laughter)

WARREN BUFFETT: And actually, I would say the business school training, particularly in investments, was a handicap about 20 years ago when they were preaching efficient market theory because essentially they told you it didn’t do any good to try and figure out what a company was worth because the market had a price perfectly already. Imagine paying, you know, 30 or $40,000 a year to hear that. (Laughter)

CHARLIE MUNGER: You were very lucky to avoid a lot that you’ve avoided. (Laughter)

WARREN BUFFETT: How do you feel about your law school training, Charlie, while we’re on it? (Laughter)

CHARLIE MUNGER: Well I have a son-in-law who recently explained how modern profitobsessed law school — law firms — work. He said it’s like a pie eating contest, and if you win, you get to eat a lot more pie. (Laughter)

23. Railroad accidents, insurance, and BNSF

WARREN BUFFETT: OK, Becky. You’re on.

BECKY QUICK: This question is a follow-up to the one that Jonathan Brandt just asked. It’s an appropriate follow-up for that, though. It comes from Mark Blakley in Tulsa, Oklahoma, who says that one risk to Berkshire and BNSF appears to be a large railroad accident. “It appears many recent accidents have occurred in rural areas. However, how would a worstcase scenario, perhaps one in a more urban area or a BP-type accident, impact BNSF and Berkshire Hathaway? And is the company insured or protected against such losses?

WARREN BUFFETT: Our insurance — reinsurance — unit actually went to the four major railroads offering very high limits. I think we — this is from memory, I could be off on this somewhat, but I think we offered something like $5 or $6 billion, excess — or maybe a billion and-a-half or something like that that the railroad retained. So we — there’s no question about it. If you had the exact wrong circumstances, you know, a train with a lot of ammonia or chlorine or something, you know, right in some terrible urban area, the possibility always exists that that can happen. It can happen — you know, you can have plane crashes. There are things that are very small probabilities. But if we run trains millions and millions of miles, year after year, something will happen just like, you know, they happen in every other possible accident way. So you minimize it. You obviously — you run trains slower in urban areas. They’ve already instituted that with crude. I think they’ve brought it down to 35 miles an hour in towns of 100,000. That’s the maximum.

So you’re always working to be safer; you’ll never be perfectly safe. We do not — we have some insurance at Burlington Northern, but we don’t need insurance at Berkshire. You know, we’ve got the capability to take any loss that comes along. So we actually would be more likely to be offering that insurance, and we did offer that insurance, and the railroad industry didn’t like our rates, which is understandable, and so they haven’t bought it. But that doesn’t mean they won’t at some time in the future. I should add one thing that I forgot to say to Jonathan. The — I don’t think we will be buying the 5,000 railcars. I think — I don’t know that for sure, but, you know, there’s going to be a lot going on in terms of retrofitting. Our Marmon operation has actually taken on a new facility that will be working very hard — once we know what the retrofit requires — we will be, I’m sure, working three shifts on retrofitting cars, probably our own, probably some other people’s.

We’ll be building new cars. The industry has been waiting to see what the requirements would be before moving ahead. The first quarter of 2015, there were practically no tank cars ordered. There’s a backlog, but there’s — no tank cars were ordered, because we need to see what the regulations are. But we’ll be very active in retrofitting and in manufacturing new cars, but I don’t think we’ll be — historically the railroads have never really owned tank cars. That goes back to the Rockefeller days. And I think the present method of having car lessors, such as the one we own, I think will continue in the future rather than having the railroads own them.

24. Why move assets around insurance subsidiaries?

WARREN BUFFETT: OK. Gary?

GARY RANSOM: I have a question on intercompany transactions within the insurance companies. In the last couple of years, you’ve had a number of them, including 50 percent of the business ceded up to — from GEICO — to National Indemnity. You did something similar with MedPro and with GUARD. You also moved some of the companies — or the subsidiaries — like Clayton Homes, out of the Geico sub and up into the holding company. It seems like a lot more activity than normal, and I’m just asking, what is the main purpose of all those movements, what financial flexibility might it provide you, and why now?

WARREN BUFFET: Yeah. Well, there are a lot of things at Berkshire that the ‘why now’ is answered by — going to be answered by the fact, well, we just got around to it. The huge chunk of capital, in the insurance companies, is at National Indemnity. So we have moved through these, quote, “share arrangements,” we moved premium volume that is generated at GEICO or MedPro or different companies, we’ve moved that up to the parent, because that’s where all the — there’s a — you know, there’s just extra layer after extra layer after extra layer of capital there, and it makes it a little simpler that way. It makes it a little simpler just in keeping all the money invested, as opposed to having 50 pockets or 75 pockets to look at it, if you have a couple of main pockets to look at it. There’s no real change in the certainty of payment of policies or anything of the sort. It really makes life a little — just a little easier — in terms of managing the money by having most of the — most of the funds concentrated in National Indemnity.

So there’s no mastermind to it. We ended up with a few companies in GEICO Corp, which was a holding company for GEICO itself. And it just seemed that we probably ought to get those up to the parent company level and we put them there. But our general approach is just to keep every place loaded with more capital than anybody could possibly conceive of us needing. And that’s going to result, more and more, probably, in the funds being concentrated in National Indemnity.

25. “Dollar will be the world’s reserve currency 50 years from now”

WARREN BUFFETT: OK. Station 5.

AUDIENCE MEMBER: Good morning, Warren. Good morning, Charlie. My name is David Tollefson (PH) from Minneapolis, Minnesota. Currently, the U.S. is not a prospective founding member of the Asian Infrastructure Investment Bank, where many European countries are. The AIIB is relatively small, but if this is part of an ongoing trend in the next 50 years, how will that impact the U.S. multinational corporations? Thank you.

WARREN BUFFETT: Well, that’s a subject I know absolutely nothing about, so let’s hope Charlie does. (Laughter)

CHARLIE MUNGER: I know a little less than you do. (Laughter)

WARREN BUFFETT: I really apologize to you, in terms of your question, but, you know, if we started talking about it, we’d be bluffing.

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: Do you have a second question? (Laughter)

AUDIENCE MEMBER: Off the top of my head, how about the dollar as a reserve currency? Do you have any issues or concerns in the next 50 again — I know we’re in a good position now — but with us losing that position?

WARREN BUFFETT: I think the dollar will be the world’s reserve currency 50 years from now, and I think the probabilities of that are very high. Nothing certain, but I would bet a lot of money on that one. Charlie?

CHARLIE MUNGER: Well, I have a little feeling on that subject. I’m probably more nervous than a lot of people about printing a lot of money and spending it. There are times when you have to do it, I’m sure, and we just came through one. But I’m happier when we print money and use it improving infrastructure than I am when we just spread it around with a helicopter. (Applause)

WARREN BUFFETT: So what do you think is going to happen if we keep spreading it around with a helicopter?

CHARLIE MUNGER: I think it’s always more dangerous than the economic profession thinks.

26. Subsidiaries using the Berkshire Hathaway name

WARREN BUFFETT: OK. With that, we’ll go to Andrew.

ANDREW ROSS SORKIN: This question comes from a local shareholder, Max Rudolph, who writes in: “Recently, several subsidiaries were renamed to include Berkshire or BH in their name, which Mr. Buffett has avoided doing previously, at least due in part, I imagine, to increased reputational risk should something go wrong. “Can you discuss how you decide which subs are allowed to rebrand, and discuss those risks, given that Clayton, NetJets, and others, have received negative publicity this year?” And attached to that question, Steve Rider (PH) of Chicago asks, “Will Fruit of the Loom become Berkshire Undergarments?” (Laughter)

WARREN BUFFETT: Well, if it does, we won’t pay him a royalty for the idea. (Laughter) The — we did create a Berkshire Hathaway HomeService operation, which is a franchise operation. We bought two-thirds of the Prudential franchise operation a couple of years ago, and we have a contract where we can buy the — where we will — buy the remaining third in another couple of years. And so we were going to lose the rights to Prudential over time. And Greg Abel asked me about using Berkshire Hathaway, and I told him that they could use it, but that if I started hearing of any abuses of it or anything of the sort, we would yank it, and that maybe that would be a useful tool in making sure that people behaved like we wanted them to. And so far, that’s worked out fine. We’ve had no idea that we wanted to take Berkshire Hathaway into becoming a household name and that that would create extra value, but we were going to rename a large franchising operation. And, like I say, as long as the name does not get abused, that will be fine.

And the Van Tuyl Auto — we’re calling it the Berkshire Hathaway Automotive Group. Certain of the dealers will have the right to use that as a tag line and others won’t. And, again, if there’s problems connected with it, we’ll change it. But in a sense, that isn’t bad. If there are going to be problems, I’d just as soon hear about them. If I hear about them because the name is “Berkshire Hathaway,” that may mean that I get on top of them faster than I would otherwise. We have no — we have — a good many of our companies, at the bottom of their letterhead or something of the sort, they say a “Berkshire Hathaway Company,” and that’s fine. But we have no — we do not anticipate that we’re going to turn it into some huge asset by branding a bunch of products that way. Charlie?

CHARLIE MUNGER: We’d be crazy to try and sell Berkshire Hathaway peanut brittle instead of See’s. Those old brand names are worth a lot of money.

27. MidAmerican’s embrace of wind power

WARREN BUFFETT: OK. Gregg?

GREGGORY WARREN: This question is on the energy business. During last year’s meeting, we touched briefly on the topic of distributed generation, a method of generating electricity on a small scale at the point of consumption, from renewable and nonrenewable energy sources. Much of this has come around the last several years due to the growth of renewable energy sources like solar and wind. Up until now, though, it has been difficult, if not cost prohibitive, for self-generators to store this energy. Now that Elon Musk has joined the fray this week with his idea of batteries for the home, for his new Tesla Energy initiative, which could lead the way for larger systems, and realizing that disruptive technologies can, at times, upend an industry’s business model and competitive positioning, how long do you believe it will be before distributed generation becomes a meaningful threat to your utilities, especially if power can be stored more easily at the end user’s place of business or home?

WARREN BUFFETT: Well, you put your finger on storage being the key. And Charlie follows storage a little bit more than I do, and maybe I’ll have Greg Abel talk about it. But obviously, distributed energy is something we pay a lot of attention to. One of the — probably the best defense is to have very low-cost energy, and MidAmerican has done a terrific job in that respect. And the figures, in terms of people who have adopted solar in our territories, are just minuscule and will stay that way. But huge improvements in storage would make a difference in a lot of ways. And, Charlie, what are your thoughts on that?

CHARLIE MUNGER: Well, obviously, we’re going to use a lot more renewable energy because the fossil fuels aren’t going to last forever. And, obviously, Berkshire is very aggressive and very well located, in terms of this development. You know, I grew up here in this part of the world, and to have 20 percent of the power of Berkshire utilities in Iowa coming from the wind, I regard as a huge stunt. And it’s, of course, very desirable, in a windy place like Iowa where the farmers like the extra income, to be getting a lot of power out of the wind. And, of course, we’re going to have a lot better storage, and the technology has been improving. And this is — it’s not a threat, it’s a huge benefit to humanity, and I think it will be a huge benefit to Berkshire. And everything is working for us. I love owning MidAmerican in an era where we’re going to have more storage, more wind, more solar, more grid. And I think we’re so lucky.

What the hell would we do if the fossil fuels run down, if we didn’t have the sun to use indirectly in these forms? And, of course, the — it’s going to be a lot more storage. And, of course, there will be some disruption in the utility industry, but there will be more opportunity, I think, than disruption.

WARREN BUFFETT: Just in the last week, we’ve announced two different — we’re already the leader — and we’ve announced two different projects. One in Nebraska — I think it’s 400 megawatts in Nebraska. That will be the first time we’ve had a wind farm here. And then, we just got approval in the last couple days for, I think, a billion-and-a-half-worth more of wind in Iowa. And I think Charlie mentioned 20 percent, but if we could — if Greg Abel could take the microphone, I think it’s a lot greater percentage than that now. It’s a moving target. So I may not have kept Charlie posted on the number. But, Greg, would you bring people up to date on what percent we will be in Iowa when the present projects are completed, and also what has happened in Nevada and a few places like that? Greg?

GREG ABEL: So, I’d love to provide an update. Actually, as it’s been touched on, we announced our tenth project in Iowa. That brings us to more than 4,000 megawatts built over the last ten years in that state. And at the end of 2016, we will now have 58 percent of our energy — approximately 58 percent — of our energy that we provide to our customers coming from wind. And then, if you continue to — thank you. (Applause) And then, if you continue to look at our other utilities and our unregulated businesses — Warren, you’ve touched on this in the past — we now have more than $18 billion committed to renewable assets across our different utilities. And if you look at NV Energy, our Nevada utility, for example, we’ve committed to retire 76 percent of their coal by 2019, and a large portion of that will be replaced with renewable energy. So, clearly a continued commitment to that. (Applause)

CHARLIE MUNGER: Greg, in our utility business, do you think we have more disruption to fear, or more opportunity to love?

GREG ABEL: Distributed generation and solar bring great opportunities for all of our different utilities, and we’ll embrace it.

CHARLIE MUNGER: The answer is, you couldn’t be luckier, is what I’m telling you.

WARREN BUFFETT: And one thing that has helped in this respect, is that wind and solar are — the development of wind and solar at present — are dependent on tax credits. In other words, the federal government has made a decision that the market system would not produce solar or wind under today’s economics, but it has an interest, as a society, in developing it. So they have established a credit — I think it’s one-point — electric is 1.9 cents a kilowatt — for ten years. And because Berkshire Hathaway Energy is part of the consolidated tax return of Berkshire Hathaway Incorporated, it has been able to invest far more money than it would make sense to invest on a stand-alone basis. Among electric utilities in the United States, there’s really no one situated as well as MidAmerican Energy is, because it’s part of this consolidated tax return, to really put its foot to the floor, in terms of developing wind and solar.

So it’s become the biggest developer, by far, among the utility industry, and it — I think it’s very likely to continue to be, simply because most utilities really don’t pay that much income tax and, therefore, they’re sort of limited in how far they can push development of wind and solar.

28. Buffett’s most memorable failure

WARREN BUFFETT: OK. Station 6?

AUDIENCE MEMBER: Hello. I’m Linen Cygaloski (PH). I’m from Chicago, Illinois, and Berkeley, California. I’d like to thank you for giving the opportunity to ask this question. This is my first meeting. I plan to attend once every 50 years. (Laughter) And also, for your essay on the — both of your essays — on the past, present, and future of Berkshire. As we reflect on the last 50 years, I’d like to ask you this question: what was your most memorable failure and how did you deal with it? Thank you.

WARREN BUFFETT: Yeah. Well, we’ve discussed Dexter many times in the annual report, where I — back in the mid-1990s — I looked at a shoe business in Dexter, Maine, and decided to pay 400-or-so million dollars for something that was destined to go to zero in a few years, and I didn’t figure that out. And then on top of that, I gave the purchase price in stock, and I guess that stock would be worth, I don’t know, maybe 6 or 7 billion now. It makes me feel better when the stock goes down because the stupidity gets reduced. (Laughter) Nobody misled me on that, in any way. I just looked at it and came up with the wrong answer. But I would say almost any time we’ve issued shares, it’s been a mistake. Wouldn’t you say that, Charlie?

CHARLIE MUNGER: Of course.

WARREN BUFFETT: Yeah. (Laughter)

CHARLIE MUNGER: We don’t do it much anymore.

WARREN BUFFETT: No. We probably could have pushed harder, particularly in the earlier years. We’ve always been — well, we’ve had all of our own net worth in the company, we’ve had all our family’s net worth, and we’ve had all these friends that came out of our partnership, many of whom put half or more of their net worth with us, so we’ve been very, very, very cautious in what we’ve done. And there probably were times when we could have stretched it a little and pulled off something quite large, that we made a mistake, looking back. But, I wouldn’t want to take a 1 percent chance, you know, of wiping out my Aunt Katie’s net worth or something. It’s just not something in life that I could live with. So I would rather be, you know, a hundred times too cautious than 1 percent too incautious, and that will continue as long as I’m around.

But people looking at our past would say that we missed some big opportunities that we understood, and could have swung, if we wanted to go out and borrow more money. Charlie?

CHARLIE MUNGER: Well, it’s obviously true. If we had used the leverage that a lot of successful operators did, Berkshire would be a lot bigger.

WARREN BUFFETT: A lot bigger.

CHARLIE MUNGER: A lot bigger. And — but we would have been sweating at night. It’s crazy to sweat at night. (Laughter)

WARREN BUFFETT: Over financial things.

CHARLIE MUNGER: Over financial things, yes. (Laughter and applause)

WARREN BUFFETT: Well, we won’t pursue that.

29. Surprised that low rates haven’t sparked inflation

WARREN BUFFETT: Carol? (Laughter)

CAROL LOOMIS: In your 2008 annual letter, you mentioned that a likely consequence of the Treasury and Federal Reserve’s action to stabilize the economy would be, quote, “an onslaught of inflation.” Now that we are presumably nearing the time when the Federal Reserve will begin raising interest rates, could you share your thoughts regarding both the likelihood of accompanying high inflation, and the consequences that might follow? And if high rates of inflation did occur, how would the consequences for Berkshire compare to those for most large companies? And this question, I say belatedly, came from James Cook (PH) of Waterville, Maine.

WARREN BUFFETT: Well, so far we’ve been very wrong — or I’ve been very wrong. Charlie has probably been a little bit wrong, too. (Laughs)

CHARLIE MUNGER: Of course.

WARREN BUFFETT: Yeah. No, I would not have predicted that you could have five or six years of, you know, close to zero rates, and now get negative rates in Europe, and run fairly large deficit, although the current deficit is not that large. I mean, the country could sustain on average, you know, 2 or 2 1/2 percent deficits forever and not increase the ratio of debt to GDP. So the word “deficit” is not a dirty word. But very large deficits, and sort of uncontrollable, are scary. But, you know, we’ve taken the Federal Reserve balance sheet up from a trillion to over 4 trillion, and we’ve done a lot of things that weren’t in my Economics 101 course, and so far nothing bad has happened, except for the fact that people who saved and kept their money in short-term savings instruments have just totally gotten killed, in terms of their — the income that they received from that. But it’s still hard for me to see how if you toss money from helicopters that eventually you don’t have inflation.

Certainly, if the money supplied grows faster and faster relative to the output of goods and services, something like that is supposed to happen. But I’ve been surprised by what’s happened. I’ve been — you know, when Poland issues bonds at negative interest rates, you know, I did not have that list — in my list — of forecasts a few years ago. And so I think we’re operating in a world that Charlie and I don’t understand very well and that — And to the second part of the question, I think Berkshire, in almost any kind of environment, will do better than most big companies. I mean, we are prepared for anything. We’ll always be prepared for anything. And if we see really unusual opportunities, we’re also prepared to act. And that gives us a real advantage over most big companies. We don’t count on anybody else. We’re sitting with over 60 billion right now. I’d rather be sitting with 20 billion and made a great $40 billion acquisition.

But we will — you know, we will be very willing to act if economic turbulence of any kind occurs, and we’ll be prepared and most people won’t be. Charlie?

CHARLIE MUNGER: Yeah. We have made very little progress in life by trying to outguess these macroeconomic factors. We basically have abdicated. We’re just swimming all the time, and we let the tide take care of itself.

WARREN BUFFETT: And we really don’t see — we’ve not seen great successes by others who have been all involved in macro predictions. I mean, they get a lot of air time, but that’s about all that happens.

CHARLIE MUNGER: The trouble with making all these economic pronouncements is that people gradually get so they think they know something. (Laughter) It’s much better just to say, “I’m ignorant.” (Laughter)

WARREN BUFFETT: Yeah. We will find things, though, under any circumstances. They don’t come at an even flow. They may not — and, you know, you cannot predict the size or anything — but you can be sure that over the next ten years, you’ll see a lot of things you didn’t think were possible. And we will occasionally see something that makes sense for Berkshire, and we will be prepared to do it both psychologically and financially.

30. Deferred taxes aren’t a “hidden form of equity”

WARREN BUFFETT: OK. Jonathan?

JONATHAN BRANDT: For a variety of reasons, bonus depreciation on fixed assets investments in the noninsurance businesses perhaps being the most important, Berkshire’s cash taxes have been meaningfully lower than reported taxes for the last several years. The cumulative difference between cash taxes and reported taxes, which could be viewed as another form of float, now stands at around 37 billion. Do you consider any portion of the cash flow from annual increase in deferred taxes to be economic earnings? Is this a sustainable dynamic, or do you expect the relationship between cash and reported taxes to ever flip, for instance, if bonus depreciation ever expires? Given Berkshire’s massive appetite for capital spending at the utility and the railroad, is it possible, instead, that its deferred tax liability will never have to be paid, no matter what Congress does with bonus depreciation? And is it perhaps even likely that this form of float will continue to grow?

I mean, GEICO was all direct mail back in 1936, when Leo Goodwin and his wife sat there and stuffed envelopes. And the basic idea of saving people money on auto insurance continues to this day, but it went from direct mail to — it went to the TV and the phone, went to cable TV, and then went to the Internet and — and goes to mobile and it — you know, the world moves on. And the key is to be able to save people money and give them good service. And whatever way does that in the most effective way is going to be what wins 20 or 30 or 50 years from now, and we’ll try to stay on top of it.

WARREN BUFFETT: OK. Station 8.

AUDIENCE MEMBER: Hello. My name is Paula, and I’m from Gainesville, Florida. And I would just like to ask Mr. Buffett, after all these years of interviews and meetings, what is the one question that you’ve never been asked that you would like to answer now? (Laughter and applause)

WARREN BUFFETT: Well, I can think of the question I haven’t been asked, but I’m not sure I want to answer it now. (Laughter) I think I’ve been asked almost all of them, and many of them, time after time after time. Charlie, do you have anything that you’re just dying to be asked?

CHARLIE MUNGER: Well, if this lady will first tell us the worst thing she ever did in her life. (Laughter)

AUDIENCE MEMBER: Those secrets are not —

WARREN BUFFETT: Paula, I wish we could help you. Have you got another question you’d like to throw at us?

AUDIENCE MEMBER: I could ask you another question.

WARREN BUFFETT: Good.

AUDIENCE MEMBER: Can I buy you lunch? (Laughter)

WARREN BUFFETT: I think she’s talking to you, Charlie. (Laughter) He always wins. You saw him in the movie. He always gets the girl.

CHARLIE MUNGER: Yeah. I’m so heavily involved with those girls in the movie, I just don’t have room on my list. (Laughter)

WARREN BUFFETT: Thank you, Paula. (Laughs)

WARREN BUFFETT: OK. Andrew.

ANDREW ROSS SORKIN: This is a toughy, and I should say we’ve probably got — or at least I got — several dozen emails on 3G, and so this is a follow-up to what you talked about on 3G earlier. And specifically, actually, it’s two questions in one that actually came from the audience after your response about 3G. So just to put it in perspective, those shareholders are in the audience, and they asked not to be named, so here we go. This shareholder writes, “I intend no disrespect to 3G’s money making abilities and, as a Berkshire shareholder, like the partnership very much. However, you took more than a decade to shut down the Berkshire mills. “You take great pride in letting Berkshire’s managers run their companies for you, and as Charlie says, almost to the point of abdication. And that approach has made Berkshire a very attractive home for companies. “You’ve even bought newspaper groups in the face of the internet tidal wave, and acknowledged they didn’t have the same investment characteristics of other Berkshire businesses.

“Are you actually saying 3G’s management method is congruent with yours? “Asked another way, if 3G ran Berkshire, would there not be significant layoffs and consolidation among the companies and intense focus on short-term profits?”

WARREN BUFFETT: No. I think there would be — there would be some companies they’d make changes in. But I would say that GEICO, for example, 33,000 employees, or whatever the number is, is run just as efficiently as 3G would run it. I would say our home office, with 25 people — we could have a home office with 500 people. We could have floors devoted to strategy, and floors devoted to human resources and comparing the salaries of everybody at all our different companies, and so on. If they walked into that situation, they’d cut it back. I don’t know whether they’d get it down to the 25 we have, but we do not believe in having extra people around. And our newspapers, you know, unfortunately, you know, they have had to cut back, as revenue has kept shrinking. And the idea that you run a fat operation just because you’re making a lot of money — we cut back on our textile business — I closed the Waumbec mill considerably before we closed the Berkshire mills. It was only when it became apparent that it was just hopeless, we gave up on it.

But in the meantime, every time at Berkshire — I had a drawer full of proposals that said if we put in this kind of a loom, we’ll be able to get rid of eight people, and we put in the loom. I mean, we were trying to reduce our labor complement all the time because we were in competition with people that were doing the same thing. So I don’t think there’s any — I don’t think there’s anything in — we do have some businesses that probably have more people than we need, and I don’t do something about it. But I don’t encourage it in any way and most of our managers don’t operate that way. And it’s true, if 3G were running our operations, they would get more active at that than I will. But that doesn’t mean that I endorse it. It just means that I basically tolerate it where I’ve got a manager that I think well of. I think better of the 3G way — method — of operation than I do of our operators where they really have excess people in it.

We’ve got very few of those, but we do have a few. So, I would never advocate running a business at a loss. If you — where it’s going to continue. And you’ll see that in our economic principles that’s been in the back of the book — back of the annual report — for 30 years or so. And the same goes for having excess people around, and I think you’ll see our attitude toward excess people best expressed in our office here that has 25 people, and Charlie’s office in Los Angeles that has two, counting him.

CHARLIE MUNGER: I’d say we’ve got two-thirds of one. (Laughter) We’re getting by with practically nothing.

WARREN BUFFETT: Yeah.

WARREN BUFFETT: OK. Gregg?

GREGGORY WARREN: This is sort of a follow-on to the 3G question. When we look at the body of work that the firm has put together in the consumer staples universe, Anheuser-Busch, InBev, Burger King, Tim Hortons, and now Kraft Heinz, one gets the sense that they view the average consumer staples firm as being undermanaged, with a potential for substantially greater levels of profitability. Given the ongoing struggles of many packaged food firms, most of which compete in a mature category against private label and/or store brand offerings that undercut them in price and diminish the value of their brands, and many of them having to deal with large retailers, like Walmart, that provide meaningful sales volumes but are also quite demanding and continuously pushing for the lowest price available, do you see the potential for further consolidation in the industry with a firm like Kraft Heinz emerging as a big consolidator? Or do you feel that Nestle’s more recent squawking about the deal, and 3G Capital’s reputation as being a bit heavy-handed with cost cutting, being enough to keep further consolidation at bay?

WARREN BUFFETT: Well, there will be deals in the future. I mean, there are bound to be. But the strong brands — you know, just look at the ones that General Foods added in the 1980s and the ones that Kraft has now that come from that same company. And, I mean, Coca-Cola sold more cases of beverages last year than any year in their history and they’ll sell more this year. I mean, it’s — a strong brand is really potent stuff. I mean, take Heinz Ketchup or something of the sort. It’s 60 percent brand share in the United States, but it’s much higher in many other countries. So you’ll always have the fight between the retailer and the brand, and the retailer is going to use all the pressure they’ve got and, therefore, the brand has to stand for something in the consumer’s mind. Because, in the end, the retailer may want to shift to a house brand, a private label, but — and they — private labels have been around forever in the soft drink field.

I mean, I can remember when I was looking at Cott Beverage and all of those and thinking, what will it do to us? I remember when Sam Walton sent me the first six-pack. He told me, it’s the first six-pack of Sam’s Cola, 20 years ago, and believe me, Walmart has plenty of power, but so does Coca-Cola. And the brand — you’ve got to nourish them. You know, you’ve got to take very, very, very good care of them. They have to stand for the promise that’s in people’s mind about them. But a lot of people have tried to — I don’t know how many dozens, or maybe hundreds, of cola beverages there have been over the years. RC Cola. You know, they came up with the first diet product back in the early ’60s, and that looked like a big maneuver. Wilkinson came up with the blade back in the ’60s after Gillette, but Gillette ends up with 70 percent, by dollar value, worldwide of razor blades after 100 years.

So there’s all — you’ve got to protect a brand. You’ve got to enhance it in every way. You’ve got to get a promise in people’s minds that gets delivered that way. But that’s the question Charlie and I faced in 1972 when we looked at See’s. See’s was selling for $1.95 a pound, Russell Stover was selling a little cheaper, and you had to decide how much damage could a Russell Stover do if they came after See’s, and they copied our shops, and all that sort of thing. If you protect a brand — if you got a terrific brand and you protect it, it’s a fabulous asset. But you’ll always have trouble dealing with Costco and Walmart and the rest of the guys — Kroger, you name it, you know, they’re tough, too. But the great brands will survive and the great retailers will do well. Charlie?

CHARLIE MUNGER: Well, we’ve almost exhausted this topic. The — there’s no question about the fact that waves of layoffs frighten people. A job is a very important part of a person’s life, and it’s no small thing to lose it. So — but on the other hand, I don’t think you — what would our country be if we kept everybody on the farms? All this prosperous group would be pitching hay and milking cows at 4:00 in the morning. No, we need — we need our businesses to be right sized.

WARREN BUFFETT: Station 9? Better have some fudge, Charlie.

AUDIENCE MEMBER: Very exciting to see my superstars here. I’m Leo (inaudible) from China and a loyal fan of you and Charlie. Many Chinese investors feel all kinds of performance pressure, question, and even laughing, at value investing. Many also believe that value investing, that doesn’t apply to China, where the stock market just doubled over the last six months. I would like to ask Mr. Buffett, do you think value investment can be widely applied in all markets, or just the (inaudible) markets, just as the ones in the United States? Do you have any suggestions for value investors to hold against pressure and to be much happy? Thank you.

WARREN BUFFETT: I’m not sure I got all of it, but Charlie will help me. I certainly think investment principles do not stop at borders. So if I were investing in China or any place else — India, UK, Germany — I would apply exactly the same sort of principles that I learned from “The Intelligent Investor.” I would think of stocks as a small piece of a business. I would think of investment fluctuations being there to benefit me, rather than to hurt me. And I would try to focus my attention on businesses where I thought I understood the competitive advantage they had and where they would — what they would — look like in five or ten years. So I don’t think I would change the principles at all. I’m not sure I got all of the question. Maybe Charlie can elaborate on the rest.

CHARLIE MUNGER: Well, the Chinese have a history of being very entrepreneurial and gambling very heavily when they have the opportunity, and it has created great volatility in the Chinese stock markets. And when things get bouncy and prosperous, like our Internet craze here in the United States, China looks a lot like Silicon Valley. I think China would be way better to be more value investor minded and less absorbed in waves of speculation. So I think the more China copies the way Berkshire operates, I think the better it will be for China. (Applause)

WARREN BUFFETT: Yeah. There’s a certain irony, in that we will — we would — do the best, over decades, if we operated in a market where people operated very foolishly. And the more people respond to short term events and exaggerated things or — anything that causes people to get wildly enthusiastic or wildly depressed, actually, is what allows people to make lots of money in securities. And, on the other hand, it’s not the greatest thing for a society. And Charlie and I have benefited enormously by the fact that over a 50-year period, there have been a few periods, probably the most extraordinary being 1973 and ’74, where you could buy stocks unbelievably cheap, cheaper than happened in 2008 and 2009. And, you know, it doesn’t make sense to have that much volatility in the market, but humans behave the way humans behave, and they’re going to continue to behave that way in the next 50 years.

I mean, if you’re a young investor, and you can sort of stand back and value stocks as businesses and invest when things are very cheap, no matter what anybody is saying on television or what you’re reading, and perhaps, if you wish, sell when people get terribly enthused, it is really not a very tough intellectual game. It’s an easy game, if you can control your emotions. And as Charlie says, we’ve talked about a little bit that the Chinese market may be more — there may be more speculative influences in it, even than in the United States, because it’s a relatively new development and it may lend itself to greater extremes, and that should produce great opportunities. Charlie?

CHARLIE MUNGER: Yeah. But there’s great opportunities for excess and nasty contractions after unnatural booms and so on. I think China is wise to dampen the speculative booms and to — and I think the Chinese — I don’t think that value investing will ever go out of style. Who in the hell doesn’t want value when you buy something? How can there be anything else that makes any sense except value investing?

WARREN BUFFETT: It never gets that popular though. (Laughs)

CHARLIE MUNGER: People are looking for an easier way.

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: And that’s a mistake. It looks easier, but, in fact, it’s harder. And there’s a lot of misery to be obtained by misusing stocks.

WARREN BUFFETT: Yeah. Nobody buys a farm to make a lot of money next week or next month, or they buy, you know, an apartment house. They buy it based on what they think the longterm future is. And if they get a — if they make a reasoned calculation of that and the purchase price looks attractive, they buy it and then they don’t get a quote on it every day or every week or every month or even every year, and that’s probably a better way to look at stocks.

WARREN BUFFETT: Carol?

CAROL LOOMIS: “Mr. Buffett, you have expressed your optimism about the future of America many times and have often made the point that the U.S. simply has a superior economic system. “But my question” — and this is from Christopher Gottchio (PH) of New York City — “my question concerns the risk of chemical, nuclear, biological, and cybersecurity problems and the audience should reflect on the initial letters of those words when I tell you that Mr. Buffett has sometimes dubbed that C-N-B-C.” Sorry, Becky. (Laughter)

WARREN BUFFETT: I just do that to tease people, but the —

CAROL LOOMIS: Wait a minute. One more. “How do these threats affect your outlook?”

WARREN BUFFETT: Well, they are the great threat to the United States. The — we will have — we have, and will have, a wonderful economic system. You know, your children are going to live better than you do, and your grandchildren are going to live better than they do. That is — there are fits and starts and ups and downs. But just go outside or — as you fly home, just imagine what you’re flying over looked like in 1776, and everything since then is profit. I mean, the farms are incredibly more productive. The cities have grown. It’s all here, you know, and that’s all come from unleashing the energies and brains of the American people and the system that has worked quite well despite all the deficiencies that we talk about all the time. So that hasn’t been lost at all. And, you know, people get upset because we’re having 2 percent growth. Well, 2 percent growth with 1 percent population growth means 20 percent gain in a generation, and 20 percent on 54,000 of GDP per capita is another 10,000 of GDP per capita coming in the next generation.

This country has a wonderful future, but as the questioner pointed out, that can all be nullified by either madmen, or rogue states, or religious fanatics, or sociopaths, or whatever it may be, who have — who wish to have — access to weapons of mass destruction. And to nuclear, which, as I used to think was the primary one, you know, you can now add biological and chemical and cyber. And there will be an increasing number — there already are a huge number — of people that would wish harm, and particularly on the United States, although on others as well. And those people aren’t going to go away, and they’re going to look for more ingenious ways of utilizing the raw materials that they have access — or might get access to — and better delivery systems. And we need an extremely vigilant security operation in the United States, and we will have threats. I can’t — I do a little bit about those things in a few ways — but that’s something we live with. But we also live in a country that is going to do extraordinarily well.

And if we successfully ward off those threats, or at least minimize their impact on us, I still maintain that the luckiest person ever born in history, on a probabilistic basis, is the baby being born in the United States today. (Applause) Charlie?

CHARLIE MUNGER: Well, of course, we were a favored place, and we’ve had a favored outcome, and we’ve been lucky too. I think I probably lived in the most ideal era that any man in human history could have been born into. I think you have, too, Warren.

WARREN BUFFETT: Right.

CHARLIE MUNGER: But I don’t think we should get too smug. China has come up a lot faster than any other big nation ever came up, and —

WARREN BUFFETT: But that’s good for us.

CHARLIE MUNGER: Oh, I think — I can hardly think of anything more important than future close collaboration between the United States and China. I think you’re talking about the two most important nations in the world going forward. And I think it is very important that we like and trust one another, and have very good relations, and work together to avoid bad consequences that come from other people’s mistakes and misbehavior. So I’m — (Applause) I think both China and the United States would be crazy not to collaborate and increase trust. I don’t think there’s anything more important that we could do for our respective safety and for the general benefit of the world. (Applause)

WARREN BUFFETT: If you had your choice, would you rather be born now with all the qualities you’ve got, or when you were born?

CHARLIE MUNGER: Well, I must say it’s very interesting now, but it was always interesting. And I think that’s too tough a question. I don’t like these very theoretical questions. (Laughter) I’d rather think about something where I might gain some advantage or help somebody else to gain an advantage.

WARREN BUFFETT: OK. Then we’ll move on to Jonathan. (Laughs)

JONATHAN BRANDT: Warren, you have up to this point said that Berkshire in the future will have a chief executive officer and one or more chief investment officers. You haven’t explicitly said that a chief investment officer cannot be the CEO, but that has, for me at least, been implied. Berkshire has been successfully managed for 50 years by a chairman and vice chairman whose principal experience was in allocating capital amongst a number of businesses and industries with which they were familiar and whose attributes they could compare. Since capital allocation is the key skill needed for a company structured the way Berkshire is, why couldn’t the company’s principal decision maker in the future also be someone who is experienced in choosing among different reinvestment options, with perhaps a second outstanding person expert in operations acting as chief operating officer, albeit a route of the hands-off one, given Berkshire’s extreme decentralization?

WARREN BUFFETT: That’s a very good question. It’s not inconceivable. It’s very unlikely, Jonny, that — but as you say, the — a chief investment officer has a — will have — or should have — a significant array of skills that would be useful, also, for a chief executive officer. But I would say, also, that I would not want to move — if I were voting on it — I would not want to vote to put somebody whose sole experience had been investments in charge of an operation like Berkshire, who had not had any, also, significant operating experience. I’ve said that I’m a better investment manager because I’ve been an operating manager, and I’m a better operating manager because I’ve been the investment manager. But the — you — operations — I’ve learned a lot through operations that I wouldn’t have learned if I’d stayed in investments all my life. I would not have been equipped to run it. I learned a lot of things about operations by being in operations.

So if you had somebody that had the dual experience and was very good at investments, but had a lot of experience in operations, that would be conceivable. Otherwise, I wouldn’t vote that way. Charlie?

CHARLIE MUNGER: Well, every year at Berkshire, as now constituted, the owned and controlled businesses get more and more important, and the measurable securities are relatively less important. So, I think it would be crazy not to go with the tide to some extent. And we need more — we need expertise beyond that of a typical portfolio analyst.

WARREN BUFFETT: Yeah. But the CEO should have some real understanding of investments and investment alternatives and all that. I’ve seen a lot of businesses run by people that really don’t understand the math of investing or capital allocation very well. So having a dual background is useful, but actually our operating managers know — some of them know — a lot about investing.

WARREN BUFFETT: OK. Station 10,

AUDIENCE MEMBER: Hello. Warren, Charlie, it’s a pleasure to be here. My name is Douglas Coburn. I’m originally from Caracas, Venezuela, but I’m here with a large group from Columbia Business School. (Cheers) My question — Thank you. My question is regarding Ted Weschler. Can you please share your views regarding his investment philosophy, his investment process, and the qualities that he brings to Berkshire?

WARREN BUFFETT: Yeah. Well, both Ted and Todd [Combs], the two investment managers, aside from myself, at Berkshire, are very, very smart about businesses and investments. I mean, they understand the reality of business operations. They understand what makes for competitive strength, and all of the things that you’d learn in business school or learn through investing. And on top of that, they have qualities of character which are terribly important to me and Charlie. We have seen dozens and dozens and dozens of investment managers with great records over the years. We used to drop in and see some of those guys, you know, that were running — I’m talking back in the 1960s and ’70s. And when I gave up my partnership, I knew probably 20 people with great records from the previous six or eight years, but I picked Bill Ruane to handle the funds of my partners going forward. And he set up a fund called Sequoia Fund, and 10,000 put in that fund has become over $4 million now. Well, Bill was a terrific investment manager, but he was a terrific human being.

And we really want people where they do more than their share, where they don’t claim credit for things they don’t do, where they — you know, they — just every aspect of their personality is such that you want to be around them, and you want to hand responsibility over to them. And Ted and Todd fit that bill, and there’s plenty of investment managers in Wall Street with great records that don’t fit that bill, in our view. So that’s about all I can tell you. Charlie met — he met Todd first. I met Ted first. And we both — when we talked about them, we talked about their record and the kind of stocks they owned, but we talked a whole lot more about what kind of people they were and we haven’t been disappointed. Charlie?

CHARLIE MUNGER: Yeah, I think the whole thing is working pretty well. And I think those people will be constructive around Berkshire for reasons apart from their expertise in handling securities. In fact, they already are.

WARREN BUFFETT: They already very are.

CHARLIE MUNGER: Oh. They’re — they’ve just — each one has helped buy a business recently.

WARREN BUFFETT: Yeah. And they will help oversee it, too, the businesses. They’re smart about business, and they know just exact — they know the right touch to apply in terms of how much they get involved. I mean, Todd worked on Charter Brokerage. He worked on an acquisition we made from Phillips. Ted just worked on this operation over in Germany, went over there a couple of times. And he’s just smart. You know, he’s got good sense. He knows how to deal with people. You know, if a deal is to be made, he’ll get it made. And we — Charlie and I run into more dysfunctional people with 160 IQs, probably, than anybody alive. But Salomon gave us a head start on that, as a matter of fact. Wouldn’t you say that —?

CHARLIE MUNGER: We’ve specialized in it.

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: We’ve absolutely specialized in it.

WARREN BUFFETT: We’ve seen — take the Salomon — we’ve seen a group of people whose IQs far surpassed those of people at Berkshire, and we’ve seen them self-destruct to make money they didn’t need, when they were already rich. You know, I mean, see, that’s madness. But a lot of people are just incapable of functioning well day after day, even though they’re capable of brilliance from time to time. And we’re looking — we’ve got very solid people in Ted and Todd. They’re very bright and they identify with Berkshire and not with themselves, and that’s a — it’s a huge factor over time. Any more, Charlie, on that?

CHARLIE MUNGER: Well, yeah. And that trustworthiness is more important than the brains. It’s not that they don’t have the brains, but we wouldn’t hire anybody, no matter how able, if we didn’t trust them.

WARREN BUFFETT: Yeah. Very occasionally — (Applause) Yeah. We’ll get disappointed on that occasionally, but not very often.

WARREN BUFFETT: We’re approaching noon. We’ll come back at 1:00. I promised — seven years ago I made this bet, which was originally to produce a million dollars for the charity of the winner, and another fellow who was in the hedge fund business — and I offered this bet to anybody. Only one person took me up on it. And we made this bet where a million dollars goes to the winner’s charity, as to whether a group of five hedge funds, the funds would beat the S&P Vanguard fund. And my point being that the fees would not overcome — would not be overcome — by managerial brilliance and that the hedge funds would fall short. And the other fellow betting, essentially, that paying people 2-and-20, and having an override to the fund of funds, was nothing to pay for the brilliance of getting Wall Street to manage your money. And I promised that every year I would report the update. And the first year I fell far behind, but we reported it then. So we’ll put that slide up.

And as you can see, seven years into it, it’s interesting that just buying Vanguard fund, you know, with no — nothing but putting the S&P 500 in there, has now given a cumulative return of 63 1/2 percent, and the hedge funds are at 19 percent. The interesting thing is, some of that is underperformance, but the hedge fund managers have done very well during that period. If they were managing a billion dollars, for example, at 2and-20, you get $20 million a year just for coming to the office. It’s — you know, it’s been — the hedge funds haven’t done bad. It’s the investors in the hedge funds have paid a very big price. And the — (Applause) We originally funded this with zero-coupon bonds. We each bought about 350,000 of zerocoupon bonds that would be worth 500,000 at the end of the period. We converted it to Berkshire Hathaway stock — so — a few years ago, the fellow on the other side of the bet did it with me. So now it now looks like the winner will get appreciably more than a million dollars.

And if you want to entertain yourself, you can go to Long Bets — on search, just put in Long Bets, and you’ll find this organization out in Washington that sort of acts as the stakeholder, sets the rules for these long bets. And now there’s hundreds of them up there, and they’re on all kinds of predictions, and you can go there, and if you want to disagree with one of the parties on there, you can make these bets that pay off in 50 years or 25 years.

1. Didn’t get Clayton Homes question in advance

WARREN BUFFETT: OK. Everybody will settle down, we’ll move right along. I want to clear up one thing. My daughter told me that because we had all those — I had — all those slides that were in answer to Carol’s first question, that Carol [Loomis] and I had discussed it ahead of time. I will guarantee you that I’ve discussed no questions with anyone on the panel, and they will tell you the same thing. But I knew I was going to be asked questions about Clayton, so I prepared the slides. It was an accident that it turned out to be the first question, but it was certain to be in the first few. So, Carol did not — Carol in 60 years has never tipped me off on anything, nor have the other panelists. And everything — but we were — but I was — prepared for the fact that people would be asking questions about Clayton. OK. Let’s move right along, and we’ll go to Becky.

BECKY QUICK: OK. This is a question — oops, that’s not the question. Hold on. Here it is. This is a question from John Wells, right here in Omaha, and he says, “You’ve described inflation as a gigantic corporate tapeworm. Which of Berkshire’s businesses are best suited to thrive during a period of high inflation and why? Which will suffer the most and why?”

WARREN BUFFETT: Yeah. Well, the best businesses during inflation are usually the best — they’re the businesses that you buy once and then you don’t have to keep making capital investments subsequently. So you get — you do not face the problem of continuous reinvestment involving greater and greater dollars because of inflation. That’s one reason real estate, in general, is good during inflation. If you built your own house 55 years ago like Charlie did, or bought one 55 years ago like I did, it’s a one-time outlay, whereas if you’re — and you get the — you get an inflationary expansion in replacement capital without having to replace yourself. And if you’ve got something that’s useful to someone else, it tends to be priced in terms of replacement value over time, so you really get the inflationary kick. Now, if you’re in a business such as the utility business or the railroad business, it just keeps eating up more and more money, and your depreciation charges are inadequate and you’re kidding yourself as to your real economic profits.

So, any business with heavy capital investment tends to be a poor business to be in in inflation and often it’s a poor business to be in generally. And the business where you buy something once — a brand is a wonderful thing to own during inflation. You know, See’s Candy built their brand many years ago. Now, we’ve had to nourish it as we’ve gone along, but the value of that brand increases during inflation, just as the value of, really, any strongly branded goods. Gillette bought the entire radio rights to the World Series in 1939. And as I remember, it cost them $100,000, and for that they got to broadcast the Yankees, I think, versus the Reds in 1939. And think of the number of impressions they made on minds in 1939 dollars for $100,000, and they were getting in the minds of young guys like myself. I was eight or nine. And millions of people — and they did it in those dollars then. And, of course, if you were going to go out and try out and do — have similar impressions on millions of minds now, it’d cost a fortune. And part of that is due to inflation.

Part of it’s due to other things. But it was a great investment, which could be made in 1939 dollars that paid off, in terms of selling razors and blades in 1960 and 1970 and 1980 dollars. So that’s the kind of business you want to own. Charlie?

CHARLIE MUNGER: Well, yeah, but if the inflation ever goes completely out of control, you have no idea how it’s going to end up. If it weren’t for the Weimar inflation, we might never have had Adolf Hitler. It was the twosome of the great German inflation followed by the Great Depression that brought us Hitler. And think of the price that the world paid for that one. We don’t want inflation because it’s good for See’s Candy. (Laughter)

WARREN BUFFETT: I didn’t quite realize I was —

CHARLIE MUNGER: No, I wasn’t criticizing you.

WARREN BUFFETT: What’s good for See’s Candy is good for the United States. (Laughter)

WARREN BUFFETT: OK. Gary?

GARY RANSOM: Three years ago you noted that you had looked at a large commercial lines insurance company as a possible acquisition, and now you’ve started up Berkshire Specialty, which seems to be off to a good start. What are your thoughts on whether that has replaced the idea of taking over — of buying or acquiring a large company, or is Berkshire Specialty doing well enough that you’re content with that —

WARREN BUFFETT: Yeah.

GARY RANSOM: — organic growth?

WARREN BUFFETT: I would say that it’s almost certain that we — I don’t want to say 100 percent certain — but it’s almost certain we will not take over a large commercial insurance company. We’ve got the ideal operation, in my view, in Berkshire Hathaway Specialty. We’ve got the right people running it. We’ve got Ajit overseeing it. We’ve got more capital than any commercial insurance company in the world so that our securities are — and, therefore, our policies — are really better than anyone else’s. So, we’ve got all these things going for us. And if we bought a big operation, we would have paid a very substantial nondeductible acquisition premium, and this way we’ve actually made money while we’re in the building stage. And I think it can be a very, very big operation five or 10 years from now. So it’s almost zero probability that we’ll buy somebody else. Charlie?

CHARLIE MUNGER: Well, I certainly agree with you.

WARREN BUFFETT: OK. The — that’s how he keeps his job. (Laughter) We’ll go to — incidentally, all the overflow rooms, including at the Hilton, got filled. I’m not sure where a couple — where station 11 is — but we always lose a fair number at lunchtime. So I’m sure everybody can find a seat, but we do apologize to those who could not find a seat this morning.

WARREN BUFFETT: Yeah. We made a little money.

CHARLIE MUNGER: Yes.

WARREN BUFFETT: The — you know, photography — the interesting thing about silver is that there are some pure silver mines, but overwhelmingly, silver is produced as a by-product, you know, in terms of copper mining and that. So it — it doesn’t respond as much to its own supply and demand characteristics — that’s still a factor — as it does in terms of the supply and demand characteristics of the things of which it’s a by-product, like copper. So, it’s a very small market, too. But we came out better than the Hunt brothers, but other than that, we don’t think about silver anymore.

23. Could activists take control after Buffett?

WARREN BUFFETT: OK. Andrew.

ANDREW ROSS SORKIN: Charlie, question about activism. Activism continues to grow and, as Charlie stated at the 2014 annual meeting, he sees it getting worse instead of getting better. So the question is, we hope that Charlie and Warren will both be around forever, but, unfortunately, there will be a time when they’re no longer here to manage the store.

WARREN BUFFETT: I reject such defeatism. (Laughter)

ANDREW ROSS SORKIN: If Warren is giving away his shares to charity over a ten-year period through his estate plan, and activists become increasingly more powerful, how will Berkshire defend itself from activists in the near and far future? And would you consider it a failure if Berkshire were broken up in the future and shareholders received a significant premium? And for you to consider it success, what would the premium need to be?

WARREN BUFFETT: Well, if it’s run right, there won’t be a premium in breaking it up. It may look like it. I mean, people will say there’s subsidiary A that would sell at 20 times earnings and the whole place would sell, like, at 15. But the whole place won’t sell at 15 if you spin off the one at 20. I mean, it — I laid out in the annual report — there are a lot of benefits to Berkshire, in terms of having the companies in the same corporate tax return. So I think it’s unlikely that, on any long-term basis or intermediate-term basis, that the value of the parts will be greater than the value of the whole. The best defense against activism is performance. But lately, there’s been so much money pouring into activist funds, because it’s been easy to raise money for that — I mean, it’s been a successful way of handling money for the last few years, and institutional money then starts flowing into it, and the consultants recommend it, and all of that sort of thing.

And so, I would say that much of what I see as activism now, people are really reaching, in terms of what they’re — of the kind of companies that they’re talking about and the claims of what they can do and that sort of thing. I think the biggest — you know, if you’re talking about my shares getting dispensed over 10 years after my estate is settled, and the voting power they have, and I think, by the time that gets to be a reality, I think the market value of Berkshire is likely to be so great that even if all the activists gathered together, they wouldn’t be able to do very much about it. Berkshire is likely to really be a very, very large organization 10 or 20 years from now.

CHARLIE MUNGER: Besides, the Buffett super-voting power is going to last a long time.

WARREN BUFFETT: Last a long time, yeah. I always — I’ve got these friends that call me — other companies and they’ve got an activist, and they’re worried about it. I just tell them to send them over to Berkshire. We’ll welcome them. We’d love to have them buy our stock because they’re not going to get anyplace. And that’s going to be the situation for a long, long time. We should be a place where people can dump their activists. (Laughter) Charlie?

CHARLIE MUNGER: Well, the thing that I find interesting is, in the old days when many — most — stocks sold for way less than they were worth, in terms of intrinsic value, it was very rare to find an American corporation buying the stock in.

WARREN BUFFETT: Oh, yeah.

CHARLIE MUNGER: Now, in many cases, the activists are urging corporations to buy the stock in heavily, even though it’s selling for more than it’s worth. This is not a constructive activity, and it’s not a desirable change, and it’s not a very responsible activity for the activists.

WARREN BUFFETT: There’s been more stupid stuff written on such a simple activity as stock repurchase. Both stupid stuff written and stupid stuff done. I mean, it’s a very simple decision, in my view, as to whether you repurchase your shares. You know, you repurchase them if you’re taking care of the needs of the business and your stock is selling for less than it’s intrinsically worth. That — I don’t see how anything could be more simple. If you had a partnership and the partner wanted to sell out to you at 120 percent of what the business is worth, you’d say forget it. And if he’d want to sell out to you for 80 percent of what it’s worth, you’d take it. It’s not complicated. But there’s so many other motivations that entered into people’s minds about deciding whether to repurchase shares or not. It’s gotten to be a very contorted and kind of silly discussion in many cases. And Charlie is right.

The — if you look at the history of share repurchases, you know, it falls off like crazy when stocks are cheap and it tends to goes up dramatically when stocks get fully priced. But it’s not what we’ll do at Berkshire. At Berkshire, you know, we will presently — you know, we would love to buy it by the bushel basket at 120 percent of book, because we know it’s worth a lot more than that. We don’t know how much more, but we know it’s worth a lot more. And we don’t get a chance to do that very often. But if we do get a chance, we’ll do it, big time. But we won’t buy it in at 200 percent of book, because it isn’t worth it. You know, it’s not a complicated question, but people that — I’ve been around a lot of managements that announce they’re going to buy X worth and then they buy it regardless of price. And a lot of times the price makes sense.

But if it doesn’t, they don’t seem to stop, and nobody tries to — seems to want to stop them. Charlie?

CHARLIE MUNGER: Well, I certainly agree with you.

WARREN BUFFETT: OK.

CHARLIE MUNGER: I don’t think it’s a great age, this age of activism.

WARREN BUFFETT: Want to expand on that? (Laughter)

CHARLIE MUNGER: Well, I — it’s hard for me to think of any activists I want to marry into the family. (Applause)

WARREN BUFFETT: I better stop before he names names. (Laughter)

24. American Express & credit card history

WARREN BUFFETT: OK. Gregg.

GREGG WARREN: Warren, American Express, which is Berkshire’s third largest stock holding, has relied on powerful network effects and its valuable brand to generate economic profits over the years. It has created a virtual cycle with its collection of cardholders being desirable to merchants, who have been willing to pay higher transaction fees with those fees ending up funding rewards programs and services for American Express’s cardholders. More recently, though, competitors have turned this model against the firm, targeting its cardholder base with ever-increasing levels of rewards and services, while charging merchants lower fees than American Express does. The company also saw its image of exclusivity take a bit of a hit earlier this year when Costco ended a 16-year relationship with the firm, a move that affects one in 10 American Express cards in circulation and which will impact results this year and next. With restrictions on interchange fees and the growth and acceptance of mobile payment technologies likely to impact future revenue streams, and moves by the firm to go downmarket in pursuit of transaction volume potentially diminishing the brand, how does American Express defend its moat?

WARREN BUFFETT: Well, American Express has been pretty good at that, and particularly when Ken Chenault’s been running it. The — it will be — you know, it — all aspects of payments will be subject to lots of innovation and various modes of attack. I think that American Express is still a very special company. And like I say, Ken has done a sensational job in anticipating a lot of these trends and guiding it into different markets. As you mentioned, it’s going down in the — into debit cards, effectively, and things of that sort. I think there’s a lot of loyalty with American Express cardholders. I do think a proprietary card is worth more than a co-branded card, but I think that — I probably shouldn’t get into the specifics of Costco. I’ve got a Costco director sitting next to me. But we’re very happy with American Express, but we’d be even happier if the stock goes down and the 4 or 5 billion they spend a year buying in stock buys even more shares. Charlie?

CHARLIE MUNGER: Well, I like it a little better when they had a little less competition, but that’s life. (Laughter)

WARREN BUFFETT: Incidentally, you’ll find in this 50-year history of Berkshire, you know, American Express did wonders for us back in the 1960s. And there’s a little history in there on the fact that it was an assessable stock until 1965, which nobody paid any attention to until 1963 on. But the company has an incredible history of adapting. I mean, they started out as an express company, you know, move trunks around, and valuables around. And then the railroad came around and started doing the same thing, so they went to traveler’s checks as a way to — very handy way — of moving money around the world. And then the credit card came along, Diner’s Club came along, in the 1950s, and that threatened the traveler’s check and then they moved into the Travel and Entertainment card, as it was called then. And the interesting thing is that Diner’s Club, who was first — Ralph Schneider and Al Bloomingdale priced their card at, as I remember, $3, and they looked like they were sewing up the market. And American Express came along and did something very interesting.

They priced their card, I think, at $5, and actually established a better image. I mean, people that pulled out their American Express card at a dinner table, they looked like J.P. Morgan. And the guy that pulled out a Diner’s Club card, they’d have a whole bunch of flashy things on it, he looked like a guy who was kiting his expense account or something of the sort. So you just automatically felt like a more important person with your American Express card. They have been very nimble, and very smart, and particularly in recent years, under Ken, in terms of meeting all kinds of challenges. And I think they’ll have plenty of challenges in the future, and I’m delighted we own 15 percent of the company.

25. Why children need good financial habits

WARREN BUFFETT: OK. Station 7.

AUDIENCE MEMBER: Hi. My name is Chang, originally from Seoul, South Korea, and working in Los Angeles, California. I’ve been traveling more than 27 countries, and last year I taught financial literacy lesson in one of the local elementary school in (inaudible) city. Today here, we’re talking about investments in capital markets, but young students in developing countries, they don’t know how to save money, or they don’t know the concept of interest. So, in order to overcome the educational challenges, I would like to provide volunteer opportunities to talented Americans to teach in South American schools to overcome the — while they are traveling. So, what do you think about my plan or do you have any advice? Thank you.

WARREN BUFFETT: Charlie, do you have any advice?

CHARLIE MUNGER: Well, I failed in this activity with some of my relatives, so I don’t think I can improve South America. (Laughter) No, I think if you don’t — if you don’t know how to save, I can’t help you. (Laughter)

WARREN BUFFETT: No, but the important thing is to get good habits early on.

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: You really — you know someone said the chains of habit are too light to be felt until they’re too heavy to be broken. And habits really make an enormous difference in your life. So Andy and Amy Heyward have developed the “Secret Millionaires Club,” which I’ve helped out with a little, and our goal is to, in an entertaining way, present good habits to young kids through a kind of a comedy series. And I think that’s — it’s actually having a pretty good effect. And here in a few days, we’re going to have a — here in Omaha — we’re going to have eight finalists in young kids from around the country that have developed businesses of their own, and I’m always enormously impressed with these kids. But the importance of developing good habits yourself, or encouraging good habits in your children very early on, in respect to money, can change their lives. And, you know, I was 9 or $10,000 ahead when I got out of college, and I got married young and had kids very fast.

And if I hadn’t had that start, my life would have been vastly different. So it — you can’t start young enough on working on good money habits. And I do think the “Secret Millionaires Club” is very good, but there could be lots of other good ways of teaching those lessons.

26. No plans to change debt level

WARREN BUFFETT: OK. We now have moved solely to the audience, so we’ll go to station 8.

AUDIENCE MEMBER: Hello, Warren, Charlie. My name is Stefano Grasso (PH), and I come from Genova, Italy. It’s great to be here today for the 50th anniversary. Last year, I asked you what was the right level for leverage at Berkshire Hathaway, and why not to increase it. I argued that increasing liability more at the cheap level would benefit Berkshire, thanks to the investment capabilities of the present management. This year, I would like to get your view on the possibility of working on the other side of the balance sheet and using part of the cash sitting on bank chair — bank accounts — to reduce some of the liabilities currently on its balance sheet. For example, the index puts at Berkshire sold between 2004 and 2008, generated a premium of almost 5 billion. Few years down the line, Berkshire benefited from the float. The indexes are higher and the time to maturity of the put got shorter. The question is, if the unwinding of the puts were acceptable by the counterparts which bought them, would you consider unwinding them at a reasonable price? Thank you.

WARREN BUFFETT: Are you speaking — you’re speaking specifically of the equity put options we have?

AUDIENCE MEMBER: I’m speaking about them, but as just an example. I’m talking also of maybe reducing debts or doing other —

WARREN BUFFETT: Yeah. Well, what we hope, of course, is that what we call the excess cash, which is cash beyond 20 billion that we can put to work buying a business. But you can’t do, you know, one a week or one a month. So it’s opportunistic. And I don’t know whether the phone call that’s going to result in the next deal will come in next week or it may come in a year from now. We will get calls and we will put money to work. You know, we just — we can’t do it at an even flow. And we have, you know, virtually no debt. If someone had told the two of us 50 years ago that we’d be able to borrow money in euros with a long duration of 1 percent or something like that, we would have felt we would have ended up with a way different balance sheet than we have today.

But, I mean, money is so cheap that it causes people to do almost anything on the asset side, and we try to avoid doing that because we don’t, you know, we don’t want to drop our standards too fast just because the liability side is costing us so little. But I don’t think — obviously, if we can unwind a derivative trade on a basis where we thought we were mathematically ahead by a significant amount, we would do it. But I think that’s very unlikely with the contracts we have now, so we’ll probably — I think it’s very likely they just run out over time. We carry a liability of well over — I think it’s getting somewhere between 3 1/2 and 4 billion — for something that has a settlement value today of 400 million. So it’s very hard for us to — it’s very hard for us on the other side of the contract to arrive at a price that we both would be happy with. We’re not going to deleverage Berkshire. There isn’t that much leverage to start with. I mean, the float really is, essentially, very close to permanent.

I mean, it can decline a couple percent in a year, but it can also increase a few percent. So, I see no drain on funds of any consequence from the float for as far as the eye can see, and we have very little debt out. So I would not want to pay down the debt we have now. Logically, we probably should take on more debt at these prices, but that’s just not something that appeals to us. Maybe if we find a really big deal, we might take on a little more. I would like to at least have that as something I was thinking about. Charlie?

CHARLIE MUNGER: We’d love to have something come along where we actually felt a little capital constrained. We haven’t felt capital constrained for a long time. It’s a problem we’d love to have, something so attractive that we —

WARREN BUFFETT: We’d stretch a little.

CHARLIE MUNGER: We’d stretch a little. That would be glorious. And it could happen, by the way.

WARREN BUFFETT: And it could happen.

27. No economies of scale for auto dealers

WARREN BUFFETT: OK. Station 9.

AUDIENCE MEMBER: Hi, Mr. Buffett and Mr. Munger. My name is George. I’m translating for my father, (inaudible), from Shanghai, China. Last year it was my father standing here asking his question, and this year it’s me. I feel so lucky. I know at the end of last year, you purchased a car sales dealer. This year, you said in your public letter that you are going to continue to buy. The ultimate purpose of investment is to seek the return. So my question is, whether the rate of return can be necessarily higher with the scale of the dealers? If so, why we cannot see that happen in China? How come the differences with the dealership business of the same nature in the United States and China? Thank you.

WARREN BUFFETT: Yeah. I don’t know the dealership situation in China. I would say — I think I mentioned this a little earlier — that I don’t think we’re going to get significant benefits of scale as we buy more units in the auto field. I just don’t see where it would come from. But we don’t need it. What we really need is managers in those individual dealerships that have skin in the game of their own, and that run them, you know, as first-class businesses, independently. And that’s what we’ll be looking for. We’ll not be looking for scale. I don’t know the situation in China. Maybe Charlie knows more about that. I think he does.

CHARLIE MUNGER: No. But I don’t think we’d be very good at running dealerships in China. And I think the people who run Van Tuyl are very good at running the ones here, so —

WARREN BUFFETT: Yeah with 17,000 here and we’ve got 81 of them, there’s a little room to expand. The problem is going to be price. Our purchase probably caused people to move up their multiples by one or two — people that have them — and we paid a full, but fair, price for Van Tuyl and we’ll be using that price, more or less, as a yardstick. And we really thought we bought the best there, so, if anything, we would be hoping to buy others, maybe for a bit less. So we will not — we may buy a lot of them, we may buy very few, just depending on price developments. The — we’re having a big car year and profits are good in the dealership field. But when profits are good, we want to pay a lower multiple. I mean, because, if we’re going to be in the car business forever, we’re going to have some good years and we’re going to have some bad years. And we would rather buy at a 10 or 12 times multiple of a bad year than buy at an eight times multiple of a good year.

And that’s not necessarily the way that sellers think, although they probably understand it, but they don’t want to think that way. So we’ll see what happens.

28. Buffett values internet more than private jet

WARREN BUFFETT: OK. Station 10.

AUDIENCE MEMBER: Hi. Mr. Buffett and Munger, very excited to be here. My name is (inaudible), also from Shanghai, China. Because now (inaudible) a company providing wealth management to the high-net wealth individuals in China. The company name is North, from North Ark (PH), listed at (inaudible). You two are my idols. What’s your secrets of keeping so young, so energetic, and so quick? Please don’t say because of Coca-Cola. (Laughter) And as someone says that old papa could not understand the internet, but I don’t believe that. What’s your opinion? Will you pay more attention to internet? Could I invite both two gentlemen to answer my question? Thank you very much.

WARREN BUFFETT: Charlie, I didn’t get all that, so you —

CHARLIE MUNGER: Well, he asked are we going to be using the internet. Warren is a big internet user compared to me. And — but —

WARREN BUFFETT: I love it. (Laughs)

CHARLIE MUNGER: He plays bridge on it.

WARREN BUFFETT: I use a lot of — I use search. It’s been a huge change in my life, and it costs me a hundred dollars a year, or something like that. If I had to give up the plane or I had to give up the internet: the plane costs me a million-and-ahalf a year, the internet costs me a hundred dollars a year. You know, I wouldn’t want to give up either one of them, but I’d give up the plane.

CHARLIE MUNGER: Interesting. (Laughter)

WARREN BUFFETT: Charlie’s given up both.

CHARLIE MUNGER: Are we going to be doing more — I think everybody’s going to be doing more things on the internet. It is growing in importance. And so like it or not, we’re dragged into modern reality.

WARREN BUFFETT: Doesn’t sound like he likes it, does it? (Laughs)

CHARLIE MUNGER: No, I don’t like it. I don’t like multitasking. I see these people doing three things at once, and I think, God, what a terrible way that is to think. I am so stupid, though, I have to think hard about a thing for a long time. And the idea of multitasking my way to glory has never occurred to me. (Laughter) But at any rate, the internet is here and it’s going to be more and more important and everybody’s going to think more about it and do more about it, like it or not. And, of course, the younger people are way more prone to use it than we are. But Berkshire — you have what, how many Bloombergs now?

WARREN BUFFETT: In the office?

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: Do we have two or three. Mark? I don’t know. They don’t tell me about them. They sort of hide them when I come in the room.

CHARLIE MUNGER: We’re into the modern world.

WARREN BUFFETT: We have — [CFO] Marc Hamburg tells me we have three — but we’ll reevaluate that situation when I get back to the office. (Laughter) What’s that? Oh, we’re not paying for one. I like that. (Laughter) Let’s see if we can not pay for two. (Laughter) No, the internet — and it’s changed many of our businesses. I mean, it’s changed GEICO’s business very, very dramatically. And it’s affecting — it affects them all, to one degree or another. It’s amazing to me — I mean, people get pessimistic about America. Just think in the last 20 or 25 years—well, just 20 years on the internet—how dramatically it’s changed your life. You know, the game is not over yet. There’s all kinds of things that are going to happen to make life better.

And Charlie may not think the internet makes life better, but when I compare trying to round up three other guys on a snowy day to come over to my house to play bridge, versus snapping the thing on and having my partner in San Francisco there and two other friends, and so on, in 10 or 20 seconds, I think the world has improved.

CHARLIE MUNGER: Well, if I had your partner, I’d think it had improved, too. (Laughter)

29. Raise earned income tax credit instead of minimum wage

WARREN BUFFETT: OK. Station 11.

AUDIENCE MEMBER: Hi. I’m Whitney Tillson, a shareholder from New York. Mr. Buffett, I know many shareholders have felt irritation, to put it mildly, when you’ve weighed in on social issues such as tax policy, or endorsed and raised money for a particular candidate, but I, for one, applaud it. I think everyone, but especially people who’ve achieved wealth and prominence and thus have real ability to effect change, have a duty to try and make the world a better place, not just through charitable donations, but also through political engagement, and I’d say that even to people whose political views are contrary to my own. My question relates to one of the big issues today: rising income inequality, and related to that, the campaign to raise the minimum wage, which has had some recent successes with some of the largest businesses in the country like Walmart and McDonald’s. How concerned are you about income inequality? Do you think raising the minimum wage is a good idea? And do you think these efforts might meaningfully affect the profitability of corporate America?

WARREN BUFFETT: Yeah. I think income inequality is — I think it’s extraordinary, in the United States, to see how far we’ve gone. Well, just go back to my own case. Since I was born in 1930, the average GDP per capita in the United States has gone up six for one. Now, my parents thought they were living in a reasonably decent economy in 1930, and here their son has lived to where the average is six times what it was then. And if you’d asked them at that time, and they’d known that fact, that it would go from 8 or $9,000 in today’s terms to $54,000, they would have said, “Well, everybody in America is going to be enjoying a terrific life,” and clearly they’re not. So, I think it is a huge factor. There are a million causes for it, and I don’t pretend to know all the answers, in terms of working towards solutions.

But I do think that everybody that is willing to work should have a reasonably decent livelihood in a country like the United States, and — (applause) — how that is best achieved — I’m actually going to write something on it pretty soon. I have nothing against raising the minimum wage, but to raise it to a level sufficient to really change things very much, I think, would cost a whole lot of jobs. I mean, there are such things as supply and demand curves. And if you were to move it up dramatically, I think you would — it’s a form of price fixing. I think you would change the opportunities available to people very dramatically. So I am much more of a believer in reforming and enlarging the earned income tax credit, which rewards people that work, but also takes care of those whose skills don’t fit well into a market system. So I think you put your finger on a very big problem. I don’t think — I don’t have anything against raising the minimum wage, but I don’t think you can do it in a significant enough way without creating a lot of distortions.

Whereas, I do think the earned income tax credit makes a lot of sense and I think it can be improved. There’s a lot of fraud in it. It pays out this lump sum, so you get into these payday type loans against — I mean, there’s — a lot of improvements can be made in it. But I think the answer lies more in that particular policy than the minimum wage. And, like I said, I think I’m going to write something on it pretty soon. And if there’s anybody I haven’t made mad yet, you know, I’ll take care of it in the next one. Charlie?

CHARLIE MUNGER: Well, you’ve just heard a Democrat speaking and here’s a Republican who says I agree with him. I think if you raise the minimum wage a lot, it would be massively stupid and hurt the poor, and I think it would help the poor to make the earned income credit bigger. (Applause)

30. “Ridiculous argument” that college boosts lifetime earnings

WARREN BUFFETT: Let’s go to station 1.

AUDIENCE MEMBER: Hi. I’m Michael Monahan (PH) from Long Island, New York. Warren, Charlie, the higher education system has expanded, covering almost everyone who would like to receive a college education. This demand has translated into rising college costs. As a high school junior, I’m looking at prestigious institutions such as UPenn, Villanova, NYU, Fordham, and Boston University. On the other hand, my parents are experiencing sticker shock. All of these schools have a sticker price of over $60,000, with some students, as shown in a businessinsider.com article, can pay over $70,000, as the case at NYU. How will the average American family be able to pay this in the future and, more importantly, how do you two feel about this?

WARREN BUFFETT: Charlie?

CHARLIE MUNGER: Well, the average American family does it by going to less expensive places and getting massive subsidies from the expensive places. If we had to give our college education to only people who could write cash checks for 60 or $70,000 a year, we wouldn’t have that many college students.

WARREN BUFFETT: No.

CHARLIE MUNGER: So most people are paying less or getting subsidies. And — but I think it is a big problem, that education has just kept raising the price, raising the price, raising the price. And they say, but college educated people do better. It’s a big bargain. But maybe they do better because they were better to start with before they ever went to college, and they never tell you that. (Applause)

WARREN BUFFETT: It’s a ridiculous argument.

CHARLIE MUNGER: And so —

WARREN BUFFETT: I think that’s one of the silliest statistics that they publish, I mean, to say that a college education is worth X because people that go to college earn this much more than the ones that don’t. You’re talking about two different universes. And to attribute the entire difference to the one variable, that they went to college as opposed to the difference between the people who want to go to college and have the ability to get into college —

CHARLIE MUNGER: It’s completely nutty —

WARREN BUFFETT: — it’s a fraud

CHARLIE MUNGER: — and about 70 percent of the people believe in it. So it gives you a certain hesitation about relying on your fellow man. (Laughter) So I think most people have to struggle through with the system the way it is. There’s a big tendency to have prices rise to what can be collected. And people just rationalize that the service is worth it. And I think a lot of that has happened in education, and, of course — (applause) — a lot is taught in higher education that isn’t very useful to the people who are learning it and, of course, a lot of those people would never learn much from anything. So it’s really wasting your time, and that’s just the way it works. So I think there’s a lot wrong.

What I noticed that was very interesting is that when the Great Recession came, every successful university in America was horribly overstaffed and they all behaved just like 3G. They all, with a shortage of money, laid off a lot of people. And the net result was they all worked better when it was all over with the people gone.

And so this right-sizing is not all bad. I don’t think there’s a college in America that wants to go back to its old habits. And — but you put your finger on — it is a real problem to look as those sticker shocks. It’s like any other problem in life. You figure out your best option and just live with it. We can’t change Villanova or Fordham. They’re going to do what they’re going to do. And as long as it works, they’ll keep raising the prices.

WARREN BUFFETT: And it will keep working.

CHARLIE MUNGER: Yes. And that’s pretty much the way the system works. When it really gets awful there’s finally a rebellion. In my place in Los Angeles, the little traffic accident got so it cost too much to everybody because of so much fraud, and the chiropractors, and some of the plaintiffs’ attorneys, and so on. And finally, the little accidents were costing so much that they worried about the guy who lived in a tough neighborhood who couldn’t afford to drive out to get a job. And the auto insurance companies thought, my God, with prices going up like this, they’ll have legislation creating state auto insurance or something. So the net result is they put the plaintiffs’ attorneys to trial in every case, and that fixed it. And maybe something like that will happen in higher education. But without some big incentive, I think higher education will just keep raising the prices.

31. Bullish on China

WARREN BUFFETT: On that cheerful note, we’ll move to station 2.

AUDIENCE MEMBER: Thank you for taking my question. My name is Brendan Chin (PH). I’m form Taipei, Taiwan. My question is, China is undergoing a number of structural changes. What do you — when you take the pulse of the Chinese economy, what do you read and what advice would you give? Thank you.

WARREN BUFFETT: Charlie’s the China expert. I think China’s going to do very fine over a period of time.

CHARLIE MUNGER: Yeah. I’m a big fan for what’s happening in China. And as a matter of fact, I’ve just ordered — prepared — a bust of Lee Kuan Yew, the recently deceased ex-prime minister of Singapore, because I think he’s contributed so much to fixing, first Singapore, and then China. And one of the things Lee Kuan Yew did in China — in Singapore — was to stop the corruption, including cashiering some of his close friends. And China is doing the same thing. And I consider it the smartest damn thing I’ve seen a big country do in a long, long time, and I think that to — it’s hard to set the proper example if the leading political rulers are kleptocrats. You know, you don’t want to be run by a den of thieves. You want responsible people. And what Lee Kuan Yew did is he paid the civil servants way better and recruited very good people. And he just created a better system and, of course, China is widely copying him. And it’s a wonderful thing they’re doing.

So I’m very high on what’s going on in China, and I think it’s — I think it’s very likely to work. If you — they’ve actually shot a few people. That really gets people’s attention. (Laughter)

WARREN BUFFETT: Now we’re starting to get some practical advice here. (Laughter) What has happened in China, you know, over the last 40 or so years, I mean, I — it just strikes me as totally miraculous. I don’t think — I would not have believed that a country could move so far so — a country of that size, particularly — so far so fast. And it’s —

CHARLIE MUNGER: It never happened before, in the history of the world, that a company so big had come so far. When I was a little boy, 80 percent of the population of China was illiterate and mired in subsistence poverty and agriculture. Now just think — and they’ve been through horrible wars and look at them. It’s one of the most remarkable achievements in the history of the Earth. And a few people made an extreme contribution to it, including this Chinese politician in Singapore. And I give the Communist Party a lot of credit for copying Lee Kuan Yew. That’s all Berkshire does is copy the right people.

WARREN BUFFETT: Yeah. In 1790, the United States had 4 million people. China had 290 million people. They were just as smart as we were. They worked as hard, similar climate, similar soil. And for 200 — close to 200 — years, you know, the United States went with those 4 million people to close to 25 percent of the world’s GDP and China really didn’t go anyplace. And then those same people, in 40 years — and they’re not working harder now than they were 40 years ago — they’re not smarter now than they were 40 years ago, in terms of the basic intelligence — and just look at what’s been accomplished. I mean, it does show you the human potential when you find a system that unleashes it, and we found a system that unleashed human potential a couple hundred years ago and they found a system that unleashed human potential 40 or 50 years ago. And, you know, when you see that example, you know, it has to have a powerful effect on what happens in the future.

WARREN BUFFETT: Yeah. We won’t do it. We can lose money on individual things, obviously. We can have bad years in the economy, and we can have years the stock market goes down a lot. That doesn’t bother me in the least. What bothers me is if I do something that actually costs Berkshire, in terms of its long-term value, and then I feel, you know, I do not feel good about life on that day. But we can avoid most of that, fortunately. We do get to pick our spots. We’re very fortunate with that.

CHARLIE MUNGER: Well, a good doctor doesn’t like it when the patient dies on the table, either, you know. (Laughter) Not a new thought. (Laughter)

35. No help for “the most intelligent question”

WARREN BUFFETT: OK. Let’s go to — let’s go to station 6.

AUDIENCE MEMBER: Hi, Mr. Buffett and Mr. Munger. My name is Petra Bergman. I’m from Stockholm, Sweden, in northern Europe. I work at something called EFN.SE. I wanted to ask you, from my point of view, what would be the answer to the most intelligent question I could ask you right now? (Laughter)

CHARLIE MUNGER: Everybody tries that question, and it would be wonderful if that would solve all your problems. But I don’t think it’s a very good question. (Laughter) Or perhaps I should say —

WARREN BUFFETT: Let’s phrase that differently, Charlie.

CHARLIE MUNGER: Well, what I mean is, you’re asking too much of somebody when you — you ask him to honestly say what is the most enlightening question he can answer.

WARREN BUFFETT: Yeah. I get that asked by the students a lot. And I’ve had a lot of practice in hearing it asked, but I haven’t had very much success in answering it. So I’ll have to beg off on that one.

36. Buffett on fun and “the game”

WARREN BUFFETT: How about 7?

AUDIENCE MEMBER: Good afternoon, Warren and Charlie. Congrats on 50 years. My name is Jim and I’m from Brooklyn, New York. This is kind of a follow-on to a recent question. You both had success in investing, even before Berkshire Hathaway, as investors and as fund managers. While it’s well known you closely followed Graham’s teachings, others, like Walter Schloss and his son, also had success with similar teachings, yet different strategies. What would you cite as the most important reason for your early success with small amounts of capital, and given hindsight today, what might you have done to improve your strategy with these small funds?

WARREN BUFFETT: Yeah. Well, I had a great teacher, I had exceptional focus, and I had the right sort of emotional qualities that would help me in being an investor. I enjoyed the game. You do give it all back in the end. It wouldn’t make any difference if I — you know, that was not the key thing. The game was enormously fun. And I think Gene McCarthy said about football one time, you know, it’s just about, you know, hard enough to be interesting but not so hard as to be beyond the capabilities of people understanding it, and that’s kind of the way this game is. I mean, it’s not like Henry Singleton, kind of questions he took on. It’s actually a pretty easy game, and it does require a certain emotional stability. And I went at it hammer and tong. I went through the manuals and everything, but I was enjoying when I did it. And, like I say, I started out — between ages seven and about 19, I had that same enthusiasm, but I didn’t really have any guiding principle.

And then I ran into “The Intelligent Investor” and Ben Graham. And then at that point, I was able to take all this energy and everything, and enthusiasm for it, and now I had a philosophy that made a lot of sense — total sense — and I found that I could employ, and so the game became even more fun. But it wasn’t really more complicated than that. Charlie?

CHARLIE MUNGER: Well, I don’t have anything to add. I do think that it’s an easy game if somebody has the temperament for it and keeps at it because he’s — likes it and it’s interesting — interested in it. I have a problem that Warren has less of. I don’t like being too much an example to people who want to get rich by being shrewd and buying and passively holding securities. I don’t think that’s enough of a life. If you wrest a fortune from life by being shrewder than other people and buying little pieces of paper, I don’t think that’s an adequate contribution in exchange for what you’re taking. So, I like it when you’re investing money for an endowment, or a pension fund, or your relatives, or something, but I never considered it enough of a life to merely be shrewd in picking stocks and passively holding them.

WARREN BUFFETT: Yeah. Running Berkshire has been far, far more fun than running, in my case, multiple partnerships, or just an investment fund. I mean, that —

CHARLIE MUNGER: You’d be less of a man. If you’d run that partnership —

WARREN BUFFETT: It would be a crazy way to go through life.

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: Yeah. I mean, it just — you know, Berkshire is incredibly more satisfying.

CHARLIE MUNGER: So if you’re good at just investing your own money, I hope you’ll morph into doing something more.

37. Dow Jones’s big missed opportunity

WARREN BUFFETT: OK. We’ll do 8 and then we’ll move onto the annual meeting.

AUDIENCE MEMBER: My name is John Boxtose (PH). I’m from South Dartmouth, Massachusetts. My question was regarding an interview that you gave, Mr. Buffett, several years ago. You made a very interesting point. It was about the old Wall Street Journal, if you will, the one before it was purchased by News Corp. You mentioned in the interview that Wall Street Journal, at some point in the past, had very significant competitive advantages, but a number of them were largely unrealized. I was just wondering if you could elaborate on that, what the advantages were, how they were unrealized, et cetera. Thank you.

WARREN BUFFETT: Well, Dow Jones, which owned the Wall Street Journal, you know, in the ’60s and ’70s, going into the era of the enormous spread of financial information — and value of financial information — you know, they basically, they owned the field. They had the news ticker and they had the Journal, which, you know, anybody interested in finance in the country identified with. And they — starting with that, in what would be an incredible growth industry, finance, you know, for the next 30 or 40 years they — I forget a couple of those ventures they went into, and they bought a chain of small newspapers, I remember, one time — and they just totally missed what was going to happen. You know, here comes Michael Bloomberg and, you know, takes away financial information. They had such an advantage. And they didn’t really see various areas that they could have pursued, which could have turned that company into something worth many hundreds of billions of dollars, in all probability. And, you know, they had a situation where a family owned it, and a lawyer essentially controlled the family’s behavior, and they were sitting pretty.

You know, they were all getting dividends, but there was nobody there with any imagination as to what could be done in the financial field. So, starting with this position, they were a trusted name, they were in every brokerage firm in the country with a news ticker. I mean, I went to Walter Annenberg’s house one time and he had the Dow Jones ticker there — it just — or the news ticker. And it was — they couldn’t have been in a better place. They couldn’t have started with a stronger position. They had a very good balance sheet. And they just let the world pass them by. Now, Rupert is changing it into a different newspaper. He’s going into — he’s basically going into competition with the — or he’s gone into competition — with the New York Times, so he — but that’s the game he likes. And it makes for a very interesting competitive situation. Charlie?

CHARLIE MUNGER: Well, they did end up with 6 or $7 billion, so they may have blown their opportunities, but they didn’t destroy their fortune.

WARREN BUFFETT: If you’d had the hand — if Tom Murphy had had the hand —

CHARLIE MUNGER: Oh, yeah.

WARREN BUFFETT: — it would have been in the hundreds of billions, wouldn’t it?

CHARLIE MUNGER: Well, I don’t know. I’m not sure if we had had that hand we would have —

WARREN BUFFETT: Well, I’m not so sure. I’m talking about Murph. (Laughs) There were a lot of opportunities there.

CHARLIE MUNGER: Well, I think even Murph is more like us than he is like Bill Gates.

WARREN BUFFETT: Well, I’m not sure where that goes, but… (Laughter)

CHARLIE MUNGER: Well, but I think it’s hard to invent new — entirely new — modalities and so on.

WARREN BUFFETT: I think Bill would have done well with Dow Jones, too.

CHARLIE MUNGER: Yes. He might —

WARREN BUFFETT: I’d like to buy into that retroactively.

38. Q&A concludes

WARREN BUFFETT: OK. 3:30 has arrived. We’re going to go to the annual meeting in about five minutes. We’ve got a certain amount of formal business to take care of. And I thank you all for coming. (Applause)

39. Berkshire’s formal annual business meeting

WARREN BUFFETT: Let’s reassemble and we’ll conduct the business of the meeting. The meeting will now come to order. I’m Warren Buffett, chairman of the board of directors of the company, and I welcome you to this 2015 annual meeting of shareholders. This morning I introduced the Berkshire Hathaway directors that are present. Also with us today are partners in the firm of Deloitte & Touche, our auditors. They are available to respond to appropriate questions you might have concerning the firm’s audit of the accounts of Berkshire. Sharon Heck is secretary of Berkshire Hathaway, and she will make a written record of the proceedings. Becki Amick has been appointed inspector of elections at this meeting. She will certify to the count of votes cast in the election for directors and the motion to be voted at this meeting. The named proxy holders for this meeting are Walter Scott and Marc Hamburg. Does the secretary have a report of the number of Berkshire shares outstanding, entitled to vote, and represented at the meeting?

SHARON HECK: Yes, I do. As indicated in the proxy statement that accompanied the notice of this meeting that was sent to all shareholders of record on March 5, 2015, the record date for this meeting, there were 824,920 shares of Class A Berkshire Hathaway common stock outstanding, with each share entitled to one vote on motions considered at the meeting, and 1,227,069,442 shares of Class B Berkshire Hathaway common stock outstanding, with each share entitled to one ten-thousandth of one vote on motions considered at the meeting. Of that number, 592,750 Class A shares and 736,403,387 Class B shares are represented at this meeting by proxies returned through Thursday evening, April 30.

WARREN BUFFETT: Thank you, Sharon. That number represents a quorum, and we will therefore directly proceed with the meeting. First order of business will be a reading of the minutes of the last meeting of shareholders. I recognize Mr. Walter Scott, who will place a motion before the meeting.

WALTER SCOTT: I move that the reading of the minutes of the last meeting of shareholders be dispensed with and the minutes be approved.

WARREN BUFFETT: Do I hear a second?

VOICE: I second the motion.

WARREN BUFFETT: The motion has been moved and seconded. Are there any comments or questions? We will vote on this motion by voice vote. All those if favor say “Aye.”

AUDIENCE: Aye.

WARREN BUFFETT: Opposed? The motion is carried.

40. Election of Berkshire directors

WARREN BUFFETT: The next item of business is to elect directors. If a shareholder is present who did not send in a proxy or wishes to withdraw a proxy previously sent in, you may vote in person on the election of directors and other matters to be considered at this meeting. Please identify yourself to one of the meeting officials in the aisle so that you can receive a ballot. I recognize Mr. Walter Scott to place a motion before the meeting with respect to election of directors.

WALTER SCOTT: I move that Warren Buffett, Charles Munger, Howard Buffett, Stephen Burke, Susan Decker, William Gates, David Gottesman, Charlotte Guyman, Thomas Murphy, Ronald Olson, Walter Scott, and Meryl Witmer be elected as directors.

WARREN BUFFETT: Is there a second?

VOICE: Second.

WARREN BUFFETT: It has been moved and seconded that Warren Buffett, Charles Munger, Howard Buffett, Stephen Burke, Susan Decker, William Gates, David Gottesman, Charlotte Guyman, Thomas Murphy, Ronald Olson, Walter Scott, and Meryl Witmer be elected as directors. Are there any other nominations? Is there any discussion? The nominations are ready to be acted upon. If are there any shareholders voting in person, they should now mark their ballot on the election of directors and deliver their ballot to one of the meeting officials in the aisles. Ms. Amick, when you are ready, you may give your report.

BECKI AMICK: My report is ready. The ballot of the proxy holders in response to proxies that were received through last Thursday evening cast not less than 657,744 votes for each nominee. That number far exceeds a majority of the number of the total votes of all Class A and Class B shares outstanding. The certification required by Delaware law of the precise count of the votes will be given to the secretary to be placed with the minutes of this meeting.

WARREN BUFFETT: Thank you, Ms. Amick. Warren Buffett, Charles Munger, Howard Buffett, Stephen Burke, Susan Decker, William Gates, David Gottesman, Charlotte Guyman, Thomas Murphy, Ronald Olson, Walter Scott, and Meryl Witmer have been elected as directors.

41. Adjournment of formal Berkshire annual meeting

WARREN BUFFETT: Does anyone have any further business to come before this meeting before we adjourn? If not, I recognize Mr. Scott to place a motion before the moving.

WALTER SCOTT: I move that this meeting be adjourned.

WARREN BUFFETT: Second?

VOICE: Seconded.

WARREN BUFFETT: A motion to adjourn has been made and seconded. We will vote by voice. Is there any discussion? If not, all in favor say “Aye.”

AUDIENCE: Aye.