Berkshire Hathaway Annual Meeting 2011

8/6/2019 Berkshire Hathaway Annual Meeting 2011

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BerkshireHathawayAnnualMeeting

April30,2011

Thesenotesarerecollectionsonly,withouttheaidofarecordingdevice.Theyshouldno

Goodmorning,ImWarren,hesCharlie.Icansee,hecanhear,thatiswhyweworktogetrsnamessometimes. Wearegoingtointroducedirectors,thefirstquarterresultsandtzol commentarytranscriptwillbeputuppromptly,maybethisafternoon.Wewantallshaatter.1 Introducedirectors.Pleaseholdyourapplauseuntiltheend,andyoucanwithhotelyifyouchoose.HowardBuffett,StevenBurke,SusanDecker,BillGates,SandyGottesmonKeough,RonOlson,TomMurphy,WalterScott,andSusieDecker. Nowwehaveafewslide

mphasizethesearepreliminary.This isearliestmeetingwehavehad,usuallyfirstfulllofourbusinesseswith exceptionofthoserelatedtoresidentialhousingaregettingbeaveover 70,andMarmonhasover100.WearecrosssectionoftheAmericaneconomy,anduarter,likesincefall2009,mostofournonresidentialconstructionsbusinessesandothettingbetter,butwhatwasdifferentwasthatwehadsecondworstquarterinthe insurancophesaroundglobe.Normallythirdquarterisworst,when hurricanesappearinUS.InemajorcatastrophesinPacificarea, andthathitreinsuranceindustryhard.Probablycallyparticipate35%.You canseewerecorded$821mdown,andwehavemarkedupSwissRormalizedearningspowerof$17bpretaxand$12baftertax,assumingbreakevenon insuranedonebetterthanbreakevenforeightyears.Butitisunlikelywewill haveanunderwrblewecouldbreakeven,butthatisimprobable assumption.Firsttimeinnineyears,wess.Ourrecordshouldbebetter thanmostothers.Thisdoesntchangemyexpectationtheakeven, andthenwegetfreeuseoffloat.Ifyoulookatotherlines,insuranceinvest

scalledinAprilandGEwillbecalledinOctober.Wecalledthe12%SwissRe,especiallreeveryhighyieldinvestmentssothatlinewillgodown. Atendofquarterwehad$38eyisearningalmost nothing.Wedonotexpectthatthatcashwillearnzeroforeverallions. WehadfullownershipofBNSFinfirstquarterofthisyear(vs.onlysinceFebarterofownership.BSNFshouldhaveverygoodyearthisyear.Competitive advantageofdent,almostbytheday,especiallywithfuelpriceincreases. 1

AuditCommitteeReportdatedApril26,2011here.

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Wegothitininsurancebusiness.Wethink$1.6blosspretaxoninsurance,butsubjecttomatenow.Over40%ofunderwritinglosscomesfromacontractwithSwissRe.We get20%ract.Theytoldusnotrenewing.Wishtheytoldus thatacouplemonthsearlier!Wevesesgoupward.The tornadoesinApriljustatGeicoweestimatethat25kcarswillget.Ithasbeenanextraordinarytornadoseason.Wedontdolifeinsurance,andwedontryhard.Ithasbeenmultipleevents(notasingle),andnotlike NZearthquake.Ibelitthatinperspective,thepopulation ofNZCharliewhatisit? CM:Idontknow,4o

ichis10xKatrina.Thesehavebeenextraordinary earthquakes.Worstpartofseasonisancemanywillremember, buttheywouldprefertoforget. Wehavesomegoodnewsinines.GoodwillofGeicois carriedat1bil.Thatvalueisneverincreased,butdoesgrow.timateitsvaluecurrentlyat$14bil.Everypolicyholderhasavalueofabout$1500dollater(381kasofyesterday)weadded$500mtobookvalue,anditdoesntinclude profitshisvalueonthebalancesheetbutitiseverybit asreal.Wearegainingmarketsharedwillof $100k.Itwilltakecareofsomeofexpensesofthemeeting. Onemoreitemonciousnessofaccounting.Itrelatestohowwe valueoursecurities,andwhetherwetakeorary impairment.Ifyoupaidxforit,andselling80%ofxforquiteawhile,youshoroughincomestatement.Wemarkitdownforbalancesheetforbookvalue, butonlywhenargo,withcostof$8b.Marketvalueis now$11bil.Somehadbeenboughtathigherpricwnthe higherpricepurchases,andignoredthe$3.7bofgaininincomeaccountfromthes

.Therearetwowaystovaluesecuritiesifweusedaveragecostmethodwewouldnt hthodsavesusmoney,andgivesusthetimeuseof money,bcuasewhenwesellshareswecalduseaverage costmethod,toavoidwritedowns,butweprefertoignorethegainsorlo. Wemakeownestimateofintrinsicvalue.Iapologizefortheaccountinglesson,andwhaystheallimportantfigureitisactuallythealldeceptivenumber.Wespendtime tryinancials. Idliketocommentforafewminutes,andaskCharlietogivehisthoughtsonzolstock.ThemovieclipfromSolomonoccurred20yrsagothisAugust.Atthattimeitolomonat3pminafternoon,andIwentdowntoaddress 2


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apressgroup.Someoneasked,Whathappened?Thephrasethatcameoutofmymouth(so)whathappenedwasinexplicableandinexcusable.Iwillnever understandwhysomeofnspire.Whenlookingatthissituation,David Sokoldidntnotifymethathehadanyconsesofstockpriorto recommendingtoBerkshire.Idontthinkthereisanyquestionabod acodeofethics,insidertradingrules,andprinciplesIlayouteverytwoyearstoalditcommitteereport. Inexplicablepartitisinexplicable.Illtellyouwhatgoesthdisguisethathewasbuyingthestock.OftenthistradingisdoneintrustsinLuxembourg

oksattradingactivitytheydontseenamesassociatedwiththedeal.Dave leftaclely,andnormallyalways,wehadtoreporttoFinra whoknewaboutitwhen.Wethenlistttimes.Then,awhile later,wegetalistofnamesandFinraasksifanynameringsast,theoddsareverymuchagainstyou.Davedidnotdisguisethetrade.Itisinexplicadinghediditrightoutinopen.ThesecondfactwasthatDave hasanetworthinver.Wegotourmoneys worth.Thereareplentyofactivitiesthatareunsavory,butIwitMidAmericanattheendof1999.Webought80%,andthereweretwooperatingpeople, Da.Ivetoldthisstoryprivately,notpublicly.WalterScott cametome,andsaidIthirrangementforDaveandGreg, iftheyperforminamazingmanner.Iscribbledsomethingolapalooza. Itprovidedforlargecashpayoutbasedonfiveyearcompoundedgains,onhigrewasachieved.Itwas$50mtoDaveand$25mtoGregAble.IsatdownwithDaveandsaiinkofthisplan?Ithadfiguresandpayout.Hesaidthis ismorethangenerous,butyo

venlyformeandGreg.It shouldbe$37.5meach.Sohegave$12.5mtohisjuniorpartnes.Therewasnothinginitforhim.Then$3mdollarstenyearslaterleadstothesecurrble.TwentyyearsfromnowCharliewillbe107.Iwontunderstand20 yearsfromnowwhatewithoutanycredit,andbuya significantamountofstock.The10kand10qaredatedave calledme,hesaidnothingaboutCitigroup.Idontknowcompany,butDavesaiditmkshiretypecompany.Imadeamistakenotaskinghimwhenhebought. Wellundoubtedlyietocomment. CM:Itisgenerallyamistaketoassumethatrationalitywillbeperfectttyregularlyourselves. WB:Whatcontributestoirrational? CM:IthinkhubriscontriWB:Ok,letsgotowork. 3


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WB:Ishouldintroduceourgroup.Carol,AndrewRossSorkinandBeckyQuickofCNBC. Consforacouplemonths.Somesenttoallthree,someto oneofus.Hardtocount,clostion. Whateverwedoask,WarrenandCharliehavenohints,theyhavenoideaaboutanyoideaoftheanswereither. Q1/CL:Iamalongtermshareholder,andwhenyoufoundoutely yourealizedimmediatelyitwoulddamageBerkshiresreputation.Pressreleasewasidedtherelease,withoutexpressinganyanger.Whywereyounotincensed?Whydidyou nondsoinadequately? WB:IlearnedonMarch14thabouttheCitigroupinteraction.Igot

ourthingsfordecades.Hecalledandsaidcongratulations,andarentyouproudofourtquisitionandtheywereproudtobepartofit.Thatwasallnewsto me.ThatsetupsolDave,andDavereadilygave theinformationonwhenheboughtthestockandhowmuch.ecalledaguytogettheirphonenumber.Lubrizolneededtoprepareaproxystatement.rkonproxystatement.Weeagerlyawaitedtoseefirstdraftof that.Iwasleavingforroxystatementisthehistoryofthe transaction.Itgivesyouablowbyblowofwhathasidaythe 18th,withfairamountofmaterialofDavesinvolvementwithCitigroup.Ibelimgotinvolved.RonOlsendirectorofBerkshirewasontriptoAsia.WetraveledtogetheathispartnersatMungerTolleswereinterviewingDaveaboutstock purchasesandhistorytigroup.Idonthaveablackberry.Ronwouldgetsome informationwhilewewereovertedmeetingof Berkshireboard.WedlearnaboutwhatattorneysatMungerTolleshadlearingtobringwebroughtCharlieinbeforeboardmeeting.At5pmorso,aletterwas deli

lue.Hewasretiringonahighpoint,Idontknowif questioninghadaffectedattitude.ouldhavebeenawith orwithoutcause.Andaretirementeliminatedtheissueofcause.beenthesubjectofcriticism.Hehasdonemanygoodthings,andsomeextraordinarythingeemtobeunlawful.ItalkedwithCharlieandRonaboutthatwording.Ronwould havebetthesentenceaboutbeingthesuccessor.Isentitto himasecondtime.HewasokaywowthatLubrizolhad aninterestintalkingtousonDecember17th.HeappearedonCNBCrectfacts.Itwasnewstotheboard.Theygotreleasealittleaheadoftime.Theyalstthefactsofthestockpurchasesandanythingelsethey wantedtoknow.Weactedveryementdivisiontobewell versed.Davewasgone,atminimumcost,withminimumchancesomningevidencetopublicandSEC.WhatIthinkbotherspeoplewasthattherewasntsome

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outrage.Ipleadguiltytothat.Hehaddonemanygoodthingsforus.Iwantedtolistmforyearstocome.Thatishistoryofmythinkingonit. CM:Wecanconcedethatthateleaseinhistoryofthe world.Wedidnotforeseethenaturalreaction.Youdontwantoaddonesingleiotaofruthlessness.TomMurphyusedtotellhispeople,Youcanalwahagoodidea.TheangerpartIdontthinkitiswrongto rememberthemansvirtues.Weveneverhadanargument. Q2/Audience:WhatwillbetheimpactofthePOMOprogre.Thereisnosecretwhattheyaregoingtodo.Itismost advertisedopenmarketpurch

tpermonth,andwhatbalance sheetwilllooklike.Idontthink,ifsomethingisthatcountedbythispointintime.Ifyousayyouaregoingtoincreasetaxrates,anditisyitgoesthroughtobuildintoprices.Iseenoreasonwhysimplyhaving thatprogramct.Alargemarketforcewillbewithdrawn.Youbuy $600byouleavesometraces.Govtirent. CM:Ihavenothingtoadd. Q3/BQ:IdliketoaskaquestionfromRoninKansas.ainingtalent.RecenteventsaroundMr.Sokolsuggestwewerentfarfromhavingmanagerthical.Howdoweknowthesuccessionplandoesntincludeamanagerwith similarethicaonaboutSokolbeingnextinlinewhichisntwarranted,buthecertainlywasa candidatedBuffettshouldbeChairmanisbecausewecan makemistakes.Hewillgetpaidnothingapany.Oddsofusmakinga mistakearelow.Leadingcandidatenowisstraightasanarroearth.Thequestionis,willtheystaymeek?Independentchairmanwillbevotingalargede,itallowsforchange,andnowchairmanshipnotlockedinwithCEO.IftheCEO isnot

,butnotveryeasy.ItishardertoremovemediocreCEO. Hecontrolsagenda.Independgovertheplaceitisasafety measureforthepossibilityhoweverremotethatwrongdrewillbe thinkingaboutqualityofhumanbeingaswellasmanagementskills.Hemustcself. CM:RockefellersleftmanagementofStandardOil,butstayedonboard.AndtheydEOofStandardOilofIndianaonmoralgrounds.Itaddsanotherstringinourbow. Q4/Auds,whatsectororassetclasswouldyouwanttoaddtoyour circleofcompetency? 5


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WB:Itisagoodquestion,andIlikethepreamble.Youwouldpicksomethinglarge.IfIuldbutitisntgoingtohappen.Itwillbehugefield,afewenormous winnersandaajoroilcompanies,nobigedgebetween anyofthem.Degreeofdisparityonlargetechcic.Youllhave betterluckwithCharlieonthisone. CM:Itwouldbeeithertechorenrtise.Ifweweregoing todoit,itwouldhavealreadyhappened.Wemight,however,idt welike.Ithasbeenhardforus,butwevedonebetterlately. WB:ItwasagoodquedwithLubrizol.Whatmadeyouwarmtocompany?What changed?WhatwasDavidsrolein

sIdidntknowanythingabout.Iwouldneverunderstandthechemistry, butdidIundersry.CharlieisalotsmarteraboutoilthanIam,why notgivehimacall?Idontknowe,andhesaidI dontunderstanditeither.Isaidforgetit,hesasbadasIam.Wambreck,andIlaterconfirmedIthoughtIgotagoodunderstandingof industrydynamiatrelationshipoilcompanieswouldhavefor chemicaladditives.Theyhavegottenoutofated,Ilookedateaseofentry.In 1972,withSeescandy,Iaskedmyself,couldItaketartasoftdrinkcompanyandcompetewithCocaCola?RichardBransontriedit,andbythiseonVirginCola[laughter].Thereisrelativelylowcostofwhat LubrizolbringstopakethemonIfeltthereprettygoodsizemoat onthisbusiness.Theyhavelotsofpatships.IfeltIhad understandingofeconomicsofbusiness,likewithIscar.TaketungsidetoolsbutIthinktheyhavedurablecompetitiveadvantage.Lubrizol,as#1companyissustainable.Whenmetalisonmetal,lubricantsareimportantandtheywill alwaysbe

gcompanyforawhile.Ididnothaveafixonthat,nordid Charlie,priortoDaverelationtoit.IthoughtI understooditandstillthinkIunderstandit.Ithinkwillben aftertheuproar,theyregarditasidealhome. CM:IscarandLubrizolaresistersundharenotattractiveto anyonewithsensetoenter.Andtheyarebothfanaticsonservicenacall. Q6/Audience:Ontario.Valuationeachshareis95kofsecurities,andannualscountratemeansBerkshireshouldtradefor$180k.Iscomplexityavaluetrap? WB:You,andyourfiguresarepretax,soyoudhavetoadjustforthatin yourdiscountrate.Icreasetheyarealmostcertainto 6


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increase.Thatislikelytogoup.Investmentsareaboutsameastheywereatyearend.rygoalistobuildoperatingearningsfigures.IfCharlieandIhadtostick anumberigurewhatwedowithcapitalinthefuture. Rangeswoulddiffermodestly.Maybedifferlsfrommeonceor twice,whenwesaidwewouldbuyinstock,whenstockwascheap.Wedingany.Thereisaselfdefeatingfactorabouttakingthekindofapproachwe do.Onlyheap.SometimescorporateAmericabuysstock whenitishighratherthanlow.Wedonot.Recentlywehadlarge internationalcompanythatmighthavewantedtodosomethingwith

company.Itwasaverylargedeal,andweneededtousestock,butwewontusestock,asllyvalueditisamistaketouseascurrency.Weused30%for stockinBNSF.Wehadnoestock.Wewouldbegivingaway thebusinessesweownfortoolittle.Togiveawayape uspoorer.Drawyourownconclusions. CM:Youarelookingatthetworightfigures.Wytodointeresting things.Weshouldbedoingalotmoredeals.Wewontbethisinacti9bofour$12bofannualearningpower.Wouldyouuse stockCharlie? CM:Foragoodenoallynotwisetopartwiththe businesseswedoowntogetbusinesswedontown. Q7/CL:yeconomymakeyousohappy.WhenlookingatUnited States,howcanyouseegoldwhereonbeanythingbutenthusedaboutthiscountry.Lookat1776,ithasbeen themostextraoryofworld.IwasbornAugust30th,1930,andif someonehadcometomeinthewomb,an4,000banks,havingadustbowl,andgrasshoppersaretakingoveritsliketheWoodyAlhathashappenedsince1930isthattheaveragestandardof livinghasincreased6for1.

.Wehavesystemthatworksmagnificently. Systemalwayshastroublesandgetsgummedusachild hearingabouthowthingsweregoingtohell,myfatherhatedtheNewDeal.Id,andDocThompsonsatinchairforacouplehours.Warrenyouaregoing tofailbutittarvedanyway.Itisnotyourfault,itis becausetheDemocratsareinandtakingworldt married.WhenIgotoutofschoolin1951,myDadandBenGrahambothtoldmedontstnthathigh.Therearealwaysnegatives.Ithasgonethrough allkindsofthings.Wevd.Wellalwayshavealist.Itdoesntdo itinastraightline.Thepowerofcapitalession.In fallof2008,governmentwasneededinahuge,hugeway.Theywereonlyone.


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in1800swhenpeopledidntknowwhatmonetarypolicywas.Recusitativepowersofcapitaleisnotup.Restofworldhascaughtup,andstatecapitalisminplaceslikeChinaaret100years,therewillprobablybefifteenortwentylousy yearsbutwellbesofaraheable. CM:Wecouldgobackfather.EuropesurvivedtheBlackDeath.Theworldisgoingharlie. CM:Hamberg[whohadsentinthequestion]acedmeoutofchiefcandlesnufferanbecheerfulevenifthingsareslightlydeteriorating.Ihaveasaying,thatthe politivetowantthemback. Q8/Audience:CambridgeMA.ArehighROIClowcapitalbusinessest

ry environment,orisahighfixedassetbusinesslikearailroadbetter? WB:Thefirstttertohavehigherreturns.Ifyoucanhaveaproduct whichuseslowcapitaltogrow,tion.Yourownearningabilityis testamenttothis.Asinflationgoesalongyourservichnomore investmentinyourself.Peoplethinkalonglivedrealestateorfarmwhereno,butitisalwaysbettertohavehighreturns.Theworsttypeofbusinessesarewherevooumustdoubleyourreceivablesandworkingcapitalrequiredtodo thebusinessthatissandrailroad,eachareentitledtoearnreturns onassetswhicharemoreandmorevaluaolumewhenwe boughtit,andtheysold16mpoundsofcandy.Itwasa$30mofbusinessthlecapitalthenandnow$40moftangiblecapital,and$1.5bofpretaxcashflow sincethaflation. CM:Whatisinterestingiswedidntalwaysknowthis. WB:Andsometimeswetinuouslearningisrequiredtohaveanysignificantcontributionintheworld. WB:Yountin1970sthatwasntcreatingreturnsforequityinvestors.Ideal assetisaroyaltyo

ation.Itisbasedontheirsalesvolume.No receivables,nofixedassets.Eventhoughusinessitreflectsfact thatwecantdeploythecapitalwehave.Wearentdoingasusnowbillionsayear.Thereisadisadvantagetosize.Wejusthopeproblemgrows. CMgsoon,andIwillneedincomeIneedtogeneratecashflow.Sometimeswesella sharexpectdividends?

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WB:Whenwepayoutdividendsperhapsweshouldpayout100%.Wewilldoitifwelosewallarofvalue.Letsassumeyouhadsavingsaccountpaying 5%.Youcantake$50out,orollarinvestedcreated morethan$1.Itismoreintelligenttoleavedollarinsellinepinvestingtoincreasevalue?Sofar,byleaving$160bilinthebusiness,shareholdersllcomeatimewhenwedonotthinkwecanlayout1520bayearandget somethingworthmeswhen$1buys90c,wellgive ittoyou.IthinkdayBerkshiredeclaresadividendthngwithsellingBerkshiretobuyjewelryifyouareintherightplace. WB:Yesterdaymy

esterday.Hermotherdidthesamething.SoI recommendtoyougooutthere,andseetts.HowaboutWellsFargoandUSBancorpwithnegativemacrooutlook? Whatisoutlookftasattractiveasbefore,buttheworstisprobablyover.WellsFargoandUSBancorpareheyaredifferentthanmoneycenterbanks.Wellsis4xlargerthanUSB. Bankingprofitassinperiodaheadthaninearlythiscentury,because leverageisreduced.Itwillbebgswithleverage,andsothe actionsofonehadconsequencesforeveryone.Iwouldsayrarsago,buttherearelessassetsforcommonequitysoreturnonequitywillbeless.Wetionsandverydecentbusinesses,butarenotasattractiveaswhen leveragewashigher.ngyouveseenworstinthepast.Loanlossesare trendingdown.JohnStumpfoncesaolose moneywhenoldwaysworkedsowell.Federalgovernmenthasnthadtopayout.FDce1930s.AndithasnotcosttheUStaxpayerapennyitisamutualassurance companubleontheassetside.Ithasanimplicit federalguarantee,andyougettoleverageup

iesarevery wellrun.Ithinkreturnfigureswere25%to30%ontangibleequityandt. CM:M&Tbankisheadedbyreallysensiblefellow.Ithasbeenawonderfulinvestment.outtheAmericanFinancialEconomyandhehasgood observations.ReadthesecondpartablsoJamieDimonsletteratJPMis tourdeforce.Hehassomerealinsights.Wedontowfrom. CM:Forthosewholikemoralityinbusiness,Wilmersoundslikeanoldtestamentprakingmoneyoutoftrading.Theyaretryingtomakemoneytradingagainsttheirown customersinweboftrust.

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WB:Marketsystemcreatesrewardsystemwheremoneyflowstothosewhoworkwithmoney.athasevercomeoutofbanking,rightoutofBuffalo. Q11/ARS:Commodities.WillgoldcareinBerkshirewasworthofanounceofgoldwhenwestarted.Evenat$1500anounceer]Ithinkheisrightaboutinflation.Thereare threemajorcategoriesofinvestmentoriesfirst.Categoryone: anythingdenominatedinacurrency.Iamgoingtotakeoutmsis historiceventandnotethisisaonedollarbill.Onback,itsays,InGodweterehere,shewouldsay,ingovernmentwetrust.Godhasnothingto dowithit.Anycur

ernmentnowandinfuturewillbehave. IfyoulivedinZimbabweandmadecurrencyrelateldhaveleftyouby now.Almostallcurrencieshavedeclinedinvalueovertime.Itistitiseasiertoworkwithcurrenciesthatdeclineinvalue.TheJapanesewouldlikelyaakemuchsense.Thesecondcategoryisitemsyoubuythatdontproduce anythingthatkegold,whichtheydigoutofthe ground,shiptoNewYork,andputitbackunderthegrntocubeitwillbeacube67feetonaside,165kmetrictons.Ifyouownedallthegoldadderandclimbontopandsaythatyouweresittingon topofworld,youcouldfondleitg!Youarehoping someoneelseayearfromnowwillpayyoumoreforsomethingthatcanoplewerenowaboutpapermoneyandALSOaboutwhathappenstwoyearsfromnow. Keynessteveryonewillthinkismostbeautiful.Wedidit withsilver,butithadindustrialusasthirteenyearsoff.Thethird categoryistobuyassetsbasedonwhattheycanproducerover time.Thereissomelogicalfollowon.Howmanybushelsofcorn,soybean,howm

ion.Doesitmeetexpectations?Logicallyyoushouldntcareifyougetaquoteon busi,whenwelookatBerkshire,wearelookingatwhat wethinkcanbedeliveredontheprodrice,soitisgoodifyou owncottonfortheright6or8monthsinthepastyear.Butt.Pickaproduct,crudeoil,cotton,goldsilver,etc.Cottonhasutility,golddoesntcingbusinessestooutperform.Risingpricescreatetheirown excitement,whichcanimpacourwifetellsyouthejerknextdoorismaking moneybybuyinggold,whydontyou?Peoing.Overtime itisnotthewaytogetrich. CM:Iagree.Itispeculiartobuyanassuntries youwouldgotowouldbescrewedup.Peoplewhoreallybelievethatshouldbuygathaway.Thereisanotherclassofpeoplebuypaintingsofsoupcans.Idont recommend

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WB:Theotherthingaboutgoldisthattheyareminingmoreeveryyear.Everyyearyouhatdoesntaddanyutility.TheydigitoutofgroundinSouthAfricaandputit backineworldisworthabouteighttrilliondollars. ComparethattoAmericawhichhasabout1habout2trillion.TenExxon Mobilsis4trillion.Soyoucouldownallthefarmlandiionof walkingaroundmoney.Oryoucouldhavea67footcubeofgoldthatyoucouldfonosome,butnottome. CM:Youwouldalsoneedanarmytodefendthegold.Itisnotagndgrowyourbusinessearlyon? WB:Soundslikesomeoneisstartingahedgefund.Imove

fmyfamilywantedmetopickstocks.Ididntlikesellingstocks,ifpricewentfrom20hesameway.Icouldmanagebetterinaroombymyself.Iwould bedoingwithmyownmoamrecommended me.Lateinthefallanotherfellowcamein.Wejuststumbledalongforse,withnoemployees.Ipickedupstockcertificatespersonally,didmyowntaxes.Andwisokayasahobby,butnoplaceforamanwithyourintellecttospendhis time. CM:ntfeeltoopoorlyifyouarehavingaslowtime toacceptagoodidea.YoupoundedonM:Ithelpsifyouconductedyourselfinlifesothatotherstrustyou.Ithelpsevenmoraissimple.Firstone,thentheother. WB:Withcurrentfees,attractingmoneyisverysupbeingbetter.I neverchargedanyfixedmanagementfee. CM:Westoppedtakingovhenwestillhadarelativelysmall amountofassets. Q13/CL:Berkshirelookslikeaconuedforsumofparts. WB:Weareaconglomerate,atleastoneofadvantagesofbeinganey,frombusinessesthatdogeneratemoney.Ifcarriedoutintelligently,itisagoodb

atImfamiliarwithwerestockissuancemachinestobuyearningsbought withexpensivesheme.Gulf&WestonandLittonsoftheworld. Likeanunspokenconspiracy,kindofapyedgame,then Teledyneboughtinstockwhenunderpriced.Itstartedbyissuingwhenoveionalrecord.MostofthosecompanieshadlittlerelationshiptoBerkshire.HaroldGeneedoutmanagersandtheymadenumberswhetherrealornot.Thegogostocks 11


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wereprimarilythinkingabouthowtopumpstocktobuyestablishedbusinessesatlowermulsinesseswekeepforever.Throwoffcash.Itisaconglomerate.Itisarationalway tusinessesandnotstockissuancemachine. CM:Somegotintoheavymanipulationofthenumgoingto report,IjustdontknowhowImgoingtodoit.Wedontknowwhatweregaughter] Q14/Audience:Onehundredyearsfromnow,whatdoyouwanttobeyourlegacy?ywillsay,ThatistheoldestlookingcorpseIeversaw. CM:Ihaveanothersayingfroortunehonestlygained andfairlyused.[Ednote:Blogssaywidelyusednotmyrecol

dasateacher.Iliketeaching.SomesayIdotoomuchofit.I benefittedfromgreatatteachers.WrittenonWilt ChamberlainstombstoneatlastIsleepalone. Q15/BQ:ng,howdoyouthinkaboutUSDweakness? WB:Wehadsignificantshortpositionincurrencurrencies.We arenotreallyactive.ThereisnoquestionisUSDwilldeclineovertimehdoyoushortitagainst?ShortpositionisjustviewofwhichcurrencydeclinesatfastaColawhere80%ofearningsarenondollar.Wehaveexposureinvarious otherways.Werrencybet.IdothinkUSDpurchasing powerwilldecrease.Ihavefearsofitdeclininghatdollarof1930 isworth6centsnow,16to1.Wevebothdoneprettywellinspiteoldwewouldhaveaworldwarwhichwewerelosingbriefly,andthatdollarwillhave6c peinflation,butweveadaptedandwehaventhad runawayinflationthatisharmfulforssheaded.Buttheworldmuddlesthrough.Lookataplacewithagod awfulcultureGrneyandpaytaxes.The placeisatouristcenter,anditisclosedduringsummertourist

said,Agreatcivilizationhasalotofruininit.[Easiergamethanlivinganddying.oice,IdratherbeborninUStodaythanatanyothertime inhistory. Q16/Audience:oloadmutualfund?

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WB:Iadvisepeopletobuyindexfundifyouarentgoingtobeactive.Anaverageindivilldoverywell.Itwillneverbeagreatinvestment,butitwillbeperfectly satisfactrrentpricesvs.indexfund.IlikeBerkshirebetter. CM:Ilikeitalotbetter,andIragefundreturnwill doworsethanBerkshire,buttheaverageBerkshirereturnovernextpast.Reducedexpectationsaregoodwaytoincreasechanceofsuccess. WB:Charlieis:ThatishowIgotmarried.Ireducedherexpectations. WB:Andheliveduptothem! Q1adingpolicyandshouldntyouhaveruleslikeothercompanies regardingpretradecleara

paniesdothat.Wehaveonlyoneassetmanagementgroup.Therearethree peoplethatcaneclericalpeoplewhoseeorders.Wearenota mutualfundorinvestmentadvisoryfirm.llbelookedatagain, butIdontthinkanythingambiguous.Toextendthoseouttheprandspirit.IwasonauditcommitteeofCocaCola.Ithasonefifthasmanyemployeesdeviolations.Berkshirehas260kpeople,aboutsame numberofhouseholdsinOmaha.Itryhighup.Weoncehada casewhereafellowwasafriendofmine,VPofsubsidiary,ashappened.WehadanemployeeinWoodburyNYarrestedintheoffice.Wewanttomake cteesaid,thisisreality.April27thletterfromJohn Mansville,readsthatauditcommicswasviolated,Thereisnogreyarea forintegrity.Wehavesentmorethanonepersolus theyaretradingincousinsname.Wewillhaveoccasionsinfuturewhenpeopledoiarylevel,withakickbackfromavendororsomethingsimilar.Itisverypainfulto hanrulestomakeitclearthatrulesarenotmadetobe dancedaround,evenpasttheedges

tgreatestinstitutionsinworld,theyselecttrustworthypeople,anditisa lotoffunttitudeoftrust.Justmakingcompliancedepartment biggerwontnecessarilyaddvalue.partmentssometimeshavemost scandals.Berkshirehasnthadthatmanyscandalsofconse:Illinois.Overseaseconomiesaredoingbetter.Anythingwecandobettertogetthingr.ChairmanBernankesaidwewillbelikethisforextendedperiod.When hewasasked,endedperiod.Wehadastimulusbill.If youdidnthaveadeficitwithastimulus,it3


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takingin15%ofGDPandspending25%ofGDP.Wehaveusedthoseleversinanunprecedentotsuretheyhavebeenasimportantassomepeoplethink.I thinkthenaturalresuscitatreimportant.Residentialconstructionwillcome back,buttakesworkingoffcrazyexcessandcomesback,youllseemuch moreofpickupinemploymentthanyouthink.Shawcarngthere.Therearemanyindirectreservoirsofjobsthatwillbedrawnuponwhenresidenk.Itwillcomeback.Ithoughtyouwouldbeseeingitbyendofthisyear.We arecresingunits.Thatproblemwillgetcured.Idont thinkweareprogressingmoreslowly,

cehasbeenslow,but economywasparalyzed,andithascomebackalot.Peakrailcarlounning190know.TTIdistributeselectroniccomponentsgloballyitissettingnewrecstry.Businessisgoingupandupandup.Economyiscomingback,and whenresidentialementinemploymentpicture. CM:Oneplacewearemakingmistakeisnotlearningenoughfhrottle thelessonsoutofitweshouldhave.Thereisalottobesaidfortakinganaxethataxe? CM:Allthefinancialpanicswereprecededbyasininebehavior.Illmakemyledtodothat.Iwouldhavetaxsystemdiscouragetrading.AddTobintaxes.Iwouldhatate,andgetridofhighfrequencycomputertradingitislike legalizedfrontrunningtofpeoplewhosucceedinstocktrading. Itiscrazythat25%ofengineersgotofinancesomeinfinancial sector.ItmakesDavidSokollooklikeahero. WB:Hesgettingwarmds,yourprofitis60%longterm gains.Congresssaysyouarespeciallytreatedandlessooms.Itis prettyextraordinarythatwehavedecidedthatthatparticularactivityis6

CM:Hedgefundoperatorsgetlowertaxratethanprofessorsofphysicsordriversoftaxitingtoourbreak.WehavebeenputtingupeveryyearourbetwithTedSeidesandhis frocomeback.S&P500hasntcaughtupyet,8.2%vs thehedgefundoffunds4.2%.Caroleahead aretheinvestmentmanagers.Wehaveclosetoanhourforlunch,andwewilltaLunchBreak]

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RonOlson:LegalteamstartedworkingaweekearlierthanWarrenmentioned.Berkshirehasinanysecuritiesonprohibitedlist[Ed.Note:Ronspokeforlonger,please referenceoingtogoto330pm,thenwilladjournforregularmeeting. Q19/CL:doesBYDremainasataunchdelays? WB:CharlieisBYDexpert. CM:ThepriceisstillwayhigherthanwhenBetisnotquiteascheapas itwasthen.AnycompanythattriestomoveasfastasBYDwiseveryyearfor6yrs,anditworkedthefirstfivetimes.Iamquiteoptimistic. WB:Idemoneytradingoil,butnotsurewhattodonow.Whatareyoursentiments regardingoi

rfromyou.Wetookapositioninoilonce. CM:Itwas$10abarrel. WB:Itwasntthatarrelsofoilthatisa lotofoiltotakeoutofgroundeveryday.Wevestuckalot.HowmanyproducingoilwellsinUS?500kwells.TherearewellsnearCharliegoingfoilisbeingfound,countriesaregrantingmuchmore complicatedconcessions.Theyaregeoreintelligentdeals,andnotletting peoplemakeasmuchmoneyasinthepast.BNSFhefoil.Ididnt thinkwecouldguessoilprice,ittakesalotoftimetorunarailroadubsidiariesdohedge.IthinkUSDwillbecomelessvaluableovertime.USD priceofcomepurchasingpoweronnominalgainsisanother question.Ithinkanintelligentpersoncgassets. CM:Ifwehaddonenothingbutoilsincethebeginning,Iamconfidentwewouldsierthanwhatyouaretryingtodo. WB:IdontknowawaytohaveanedgeinthatactethatIfeelwouldhaveedge.Wehaveanedgeincommonstocks,distressedbonds. CM:heNigerians.Thatisnotourmilieau. WB:ThatisnotapositionIveheardbefore.[la

timportantthingyouvelearnedthisyear?

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CM:Iveignoredhightechallmylife.IreadthebookInthePlexaboutGoogle,anditures,differentthanwhatIhaveatBerkshire.WillIeveruseit?Idoubtit. ButitorethanIknewbefore. WB:ThatImgoingtohaveCharliewritethenextpressrelease.eshareholdersareinterribletroubletorelyonmetocorrectyour errors. Q22/Audiencsinesspeople.Wearenottoobigtofail.Butisthiscountryonthe samepathtaxpatitutionsaroundworldthatgovernmentswouldproperlysaveequityholdersnot saved,bnstitutionsshouldnotbeallowedtofail.FannieandFreddiethat iseffectivelywhat

gautocompanies.MyhatsofftoChrysler. Theysavedafragileeconomyandtheymaderingifcountriesare toobigtofail.Thatproblemwillalwaysbewithus.Youneedto,andthereshouldbesysteminplacewhereCEOandthespouseareleftdeadbroke.Theunt.Boarddirectorsshouldhaveseverepenaltiesaswell.Ifyourunan institutionthavepoliciesmustbepainfulandreduceleverage.Butthere willbetoobigtofailinstiigtofigureout.Itismoreimportantto haverightsolutionthanimmediatesolutiontouestionoftoobigtofail. CM:PastpanicsstartedinWallStreetwithwavesofexcessivrmarket makersorpromoters.Thislastmessshouldhavecausedsituationwherenewmesshe1930s.Partlyitisstupidityratherthanfraud,andfinanceandeconomicacademic innceandeconomicsarenothardsciences.Financeattractspeoplewho shouldhavegoneinS:WashDC.YouandMelindaGatesresignedfromWashingtonPost.Isthisbecauseyouareaplan? WB:Wemadestatementthatwewouldnotbesellingshares.MyenthusiasmforWas

lhigh.Icouldsavethetravel.NormallyIdontcomment,Iamunequivocalhere thoughfpostmanagementneedsadvice.Ididitbecauseof ageMelindaIdontthinkso.Ioards Charlie? CM:IreallyadmireCostco.Pleasureofmylifeisinterfacingwiththosn boardsisforthebirds. Q24/Audience:Melbourne,AU.WeakerUSD,itwillerodevalueeoffset currency? CM:No. 16


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WB:WeownedAUDlastyearandhelpedour$100m.ItiseasierforAUDtogodown.Icanticineitherdirection.Wedoeverydaytrytothinkabout earningpowerandintrinsicvedontknowhowto compoundcurrentsumsatrateslikewhenwewereworkingwithsmallerpenpitmines.IcanttellyouhowBerkshirewilldoversusminesin Australia.IthinL:AppetiteforequityatBerkshireappearsanafterthought,areyoumostlyfocusedonopeavesaidyoulikebigelephants,thatyoupreferlargeacquisitions. WB:Wespendmoreo.Wehopewegetlucky,andgetsomebig acquisitions.Wehavehadseveralyoudontr

d chancestoearnsignificantlymoreinyearstocome.Wehave$157bofcashandsecuritlesecuritiesbecauseofinsurancebusiness.Welldolesswellasour fieldgetssmallee,wehopetohaveasmallone. CM:Wehaveadvantagewhendealingwithpeople.Morefunle paperjustoutsmartingpeople. Q26/Audience:WhitneyTilson.Arenttheinsurancebucauseyoucangetan underwritingprofit?Areyoubeingoverlyconservative? WB:Idaimatewhatnormalunderwritingprofitmightbeover nexttwentyyearsorso.Idontthinservative.Wecouldlose significantmoneyinunderwriting,weexpectthatevery5thorropriate toincludesomeextravalueforunderwritingprofits. CM:Whitneyletmehelpbn,wouldyouswitchBerkshireforanyotherlarge insuranceoperationintheworld?geinsuranceoperationIwouldtradeforours?Geicoidea hasbeentheresince1936.Ging.Geicowascloseto8ptsin firstquarter,thoughlikelythebestquarterofyear.ne.Itdidexist beforehegotthere.TadMontrose,verydisciplinedbusiness.Wehave

sualfranchises. CM:InvestwithanOmahaboy,andnowownthebestinsurancebusinessinmnitysamebusinessandbuildinghereweoperatedoutofin1967.Wehavemore networ.

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CM:Casualtyinsurance,atoughgame,temptationstobestupid.Ifyouareinit,youve.Inhighinflation,whichBerkshirebusinessisthebestandworst? WB:Abusinesswithtcanhavegrowthandincreaseprices.Thevalueof dollarsinourcandybusinesshasfasofcandy,but10x revenues.Businesseslikeourutilitiesgetabondlikereturn,twicty wontdothatwellhasaspectofbondlikeinvestmentandbondswontdowellininfsoneofbestinworld,andutilityoperationsareoneofbestutility operations.Itisrnmenttalkedaboutbuilding800milesofhighspeedtrack,andestimated costwas$43bil

ymuchmoreoftenthangettingreduced.Wepaid$43b includingdebtforonewith22kmilidges.Anyonewanttobuya bridge?Replacementvalueofthatassetisalreadyhuge.portation.Itisaterrificassettoown. Q28/Audience:UCLAProfessorIworkindisrunce.SplittingtypeA shares?Ifso,whatareprosandconsinyouropinion?Whatareplit1500:1.Companywillneverbesold,butifsoAshareswillbetreatedthesame. T.Wehaveasplitstockavailable.Waltshouldnotcounton Astockbeingsplit. CM:Mldlovetomakethatdeal. Q29/ARS:NorthAndover,MA.AsAjitJainmaybenextCEO,canicyAjithasmadeorhowhethinks? WB:Ajitisnotexactlyapublicityhound.Icantrove.Hetellsmeaboutbigonesandinterestingones.Heisasrationalathinkerasaninative.Wehavemovedintooneareaafteranother,when otherscopying.Iftherehappeaveopportunitytowritemore covers.Ajitsmindworkslikeamachine.IdontknowwhCM:AquotefromOsler,whobuiltthemodelmedicalschoolforworld:Secretforsuccess

ryThanksgivingAjitfliestoLondonbecausetheydonthaveaThanksgiving. WB:ImnotnextraordinarydegreeAjitthinksaboutBerkshire first.Peoplewouldhandhimasignifty,hecouldcreateafewhundredmillions ofwealth.ItdoesntcrosshismindtodothdIfeellikeIve

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leftoffazero.Hehasfun,hehascadreof30people.Manymorearesettlingclaimsantinbusinessworld. CM:Whatareourworstbusinesses? WB:Ingeneral,smallerbusinessaltobecomebig.ProbablyIwouldcall retailing,butFurnitureMartisterrificoperatusinessesforalongtime,we havenotcreatedmajorearningpowerinretail. CM:Thathealittlesmarterwecouldhavefigureditout. WB:Wedidgeneratealotofcapitalfrotomoreretail liketheduckonpondwhenitisraining.Wethinkwearerisinginwotisproperwaytothinkofreturnsoncapitalwhenintangibleslikegoodwill arealarge

giblecapitalishigh,butreturnonallocatedequitylooks drab.Foranintangible,donnieshavegoodwill,andunitsalesdecline. Maybeamortize?ShouldAOLamortize? WB:f.Donotincludegoodwillwhenevaluatingthefundamental attractivenessofbusiness.enconsideringeconomicsforgetaboutit.Butin evaluatingourpricepaidandallocathouldntamortizegoodwill ofCocaCola,butshoulduseourgoodwilltojudgepricespaidesense.But lookatreturnonnettangibleassets. CM:Wenevergetahugebargain,budwhen0%forcost ofourinsurancefloat. WB:Paying$9bilforequityofLubrizol,cuolitselfisemploying$2.5bil ofequitytoearnthat$1bilpretax.Butwepaypremium.dgeJamesHambreckon$2.5b.JudgetheCEOonreturnsofcapitalontangibleassets.Wedabusiness.CanyoumakethatclearerCharlie? CM:Wearenotgoingtobuygoodoperaimate. Q31/CL:Lookingathistory,whatareexamplesofcompanieswhodidsomethingrightharliewilltalkaboutCostco. CM:Costcobeganbestintheworldinitscategory.Itis

ysan extremeethicaldutytotakeallitspriceadvantagesandpassthemtocustomer,geyalty.OnestoreinKoreadoes$400minyear.Thiscantexistinretail.Butitdoes.emsitisquiteararecombination.Ifonceortwiceinlifetimeyou areaffiliatedwitthebestbusinessinworld,then wipedoutshareholderslastyear.Relatedataingraponizedbusiness andgreatsuccesswithverytoughcompetitorsthatisarealproblem.


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you,yoursuccessfromhurtingyoumanydontdoit.Butnobusinessschoolincountryreaucracies.AlotofthathappenedinGM.Thatiswayitshould betaught.Harvardonoseeacasestudyonwhythey stopped.Therealproblemisthatacademicbureaucraciess.Itisthe subdisciplinesthatgetintheway.Theysaythisisthebaronofmarketieep. WB:Therewasaninterestingcase.Aplanehadbeenhijacked.Thereweretwodirte.Eachgetsonerequest.Charliewhatwouldyoulike?Iwouldliketogiveonce morerations.WhatwouldyoulikeMr.Buffett?Shootme first. Q32/Audience:SumitMehra,

gsisincentives.Itishardtogetkidsto workhard.IfyoudecidedtohaveakidinnB:Itwouldtakemorethanadecision![laughter] WB:Iwasafraidyouweregoingtosay,nued]:HowwouldyouincentivizethemtocompeteagainstthemotivatedkidsfromBRIC? WBmrightwomb,CharlieraisedeightchildrenandIdontthinkanyof themhavethatsensehem.Youwontgetagoodresult,butnot necessarilyabadresult.Youalsodontwantr parentsatwhattheirparentshappentobegoodat.Ifyouhaveaproblemwiththis,phinkyoucanraisekidsinanaffluentfamilyandhavethemlikeworkingsixtyhoursaweeseyourfightasgracefullyasyoucan.Thekeyistogetthem interestedinsomething.her. CM:Ifyouwereaproctologistyoumightnotlikeyourday. WB:Movingon Q33/Bouonlypay$100k? WB:ThenextCEOshouldmakealotofmoney.Jobshouldpaywell.Whdbesupplementedbyanoptionsystemthatincorporatesacouplethingsthatareunusual.dbewhatbusinessisworthattime(notanabnormallylowmarketprice), plusincreasei

inusdividendpaid.Saya7%hurdleasbaseless3% fordividend,so34%perannumhurdhoptionvalue.They 20


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deservesignificantpremiumiftheycandoit.Presentschemehasnothingtodowiththeoney.Peoplemakewellintoeightfigures,becausetheyearnit.Main thingistogettM:Ihopeitwillbealongtimeinthefuture.Idontregarditasinconceivablethatimeoneneedstobeexemplarwhodoesntgrabeverythinghe can. Q34/Audience:Kansas.Whewableenergyanddepletingnatural resources,lossofcleanwateranddecliningfoodstotsubject,butdoesntaffectourinvestmentstrategy.WedlovetobuyGeicoor BNSF,bimeframe.Thereareanumberofsocietalissues thatdontenterintoourpurchasedeci

ntowaterifthereisenoughenergyyourwaterproblemsgoaway. Israeldesalinizesauralproductivityoneofmainreasonsfor beingconstrainedwithhydrocarbonsisthatmithoutthem.Dontuseit allonheatinghousesorcars.Also,itisprobablygoodtou:Fromaprominentinvestorintheaudience(whowantstoremainanonymous):Yourpurchaseedtransaction.Youdidnotpermitcompanytogoshop.Didtheirboard breachduty? CMachitsduty.Wewouldnotparticipateinthe transactioniftheydidntdoitourway.easkedrecentlytodoone.Theywouldhavegottenless money.Wewillnotpaywhatweicantprice.Theygota certaindeal.Wewouldhavesaidgoodluck. CM:Anyoneelsehalaughter] Q36/Audience:StamfordCT.Abigpartofjobisallocatingcapital.Howcanwoneallocatingcapital? WB:Realtestiswhetherearningsprogressataratecommensurateined.Over time,thetestiswhetherthemarketvalueislessthanthecapitalretained.count.Notaperfectmeasurement.Overtime,ifwekeepyourmoney,wehavetoearnbett

hervaluation.Wehavedoneokay,butjobtoughereveryyear. Wehavecontinuedtobeat. CM:Wearebeatingthemarket,butnotattherateofthepast.

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Q37/CL:Goldman,GE,SwissRe,Marscomparingthefivedeals,whyweretermsdifferent?redstockhadunusualcharacteristics.Allweredoneatunusual times.Ouropportunityransaction.IwasearlyonGEandGoldman.Iwas thinkingwhatIcoulddowith4bil.Ioulddolater.Past dealsdontmakeanydifference.Manymakeamistake,wheretheytrytdealtheyevermade.Theyaredeterminedtomakesimilardeals.Goalisnottomakebelthatyoucandobasedonopportunityattime. CM:Ofcoursewewillmakedealsatdiffetunitycosts. Q38/Audience:Makeworldbetterplacecontinuouslearning.Youreadalo

anttoreadfaster? WB:Ireadlotsofpapersand10ksand10qs.ImnotasfastasIusngclassescanbe.IwishIcouldreadfaster.Itisahugeadvantagetoreadfast.Buttnightin20minitsaboutRussia.Idont knoweffectivenessofspeedreading. Certhanmyroommateincollegecould,buthe nevermadeamistake.Dontbediscouragedoesitmake?Pass thatpeanutbrittleWarren?[crunchingsounds] Q39/BQ:Worriedabouttceiling? WB:ItismostasinineactCongresseverperformed.Ithinktheypassedabilnabecauseeasierforschoolchildrentomemorize.Thatisonlybillthatgivescompetitibtceiling.Deficitis100bilamonth.Havingadebtceilingisamistake.2011 debtctryandshouldhaveagrowingamountofdebt. Somuchtimegetswastedonthisissue,ituldbespending timeon.Nochancetheydontincreaseit,andtheyshouldeliminateit.ses.USwonthaveadebtcrisis.Aslongaswekeepissuingourowncurrency,differencyversusanotherisnightandday.Givinguprighttoissuedebt inothercurrencyisno

oGDP.Theyhaveconsistently borrowedinowncurrency.Weweretryingtobuyabankinoney.OnlyplacewecouldfindmoneywasKuwaitidinars.Wedidntborrowdinars,wedidrliedoyouhaveacomment? CM:No.Irememberbipartisanforeignpolicy.Theyweregeneems theyarecompetingtobemoststupid,andtheykeeptoppingoneanother.[laughter]naccurateincometax,hesnotworried. Q40/Audience:NuclearpowerinIowa.Doyoubelymegacatastrophe risk? 22


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WB:Idontthinkitdoesposethatrisk.Idontthinkitisanythingliketheexposurertofreducingworldemissions,butwewontchangeinstalledbaseinany hurry.Franceclear.USgets20%fromnuclear.Omahapublicpower facilityisproposingnuclear.It.Idontthinkitwillgoanywherefora while.WhathappenedatTepcodoesntchangeetback,butdoesntchangemyviewthatnuclearpowerisimportant. CM:Wecantbesorinceofhappeningmakingadentina subsidiary.Wearerequiredtocarrytoxicmaterialssksthat threatentheenterprise.Derivatives,leverage,etc.wearenotdoinganythin

rplantwillbehellofalotsafer.Rememberwearelearningaswegoalong here. WB:ingeveryyeartheneverinnuclearpowerinthis country,anditproduces20%ofoureleylargetsunamitoreachIowa. Q41/ARS:Shareholderssince1971.Reinstatingcharitablebletosupport charitableprogram. WB:Ilovedit.Charlielovedit.Shareholderslovedhareholdersgive moneyaway.Nootherscopiedushowever.PlannedParenthooddonationsttlebusinesswithus.PamperedChefitwasadifferentsituation.Weoperatedthroughrs,largelywomenwhosupplementtheirincome.These50kwereindependent contractorsanecauseBerkshiregavetoprochoiceorganizations.Theywere threatenedwithboycotts.orswerehurt,withincomedisruption.Itwashurting innocentpeople.Wereluctantlyctedhurtingindividuals,andcutoff theirlivelihooditwasunfairtothem. CM:Wedoythesocialissuesoftheday.AlotofBerkshirestockis givenaway. Q42/Audience:Tcastlongtermcashflows,doyoutrytoestimate growth? WB:Growthispartofinvestme

ofitablegrowth.Ifwecouldfind areasofgrowthwithSees,wewould.CocaCola,in2egyfor100 yrs.Someproductstravelbetter.Welovecompanieswithgrowthandhighreedontruleoutnogrowth.Itisafactorineveryinvestmentdecisionandinfuturecappanieswithslowgrowthornogrowth. CM:Businessschoolsteachstudentstoforecastyeaoseprojectionsas doingmoreharmthangood.Wethrowthemasidewheninvestmentbanker


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precisionjustthefactthattheyarethere,thattheycamefromacomputer,thattheyaealorimportantormeaningful. WB:IwroteScottFetzersayingwellpay$60persharer upthisletter.FellowfromFirstBostonwasthereandhadntcontactedusatall.Het.Inmomentofexuberance,hesaid,Well,wepreparedthisbook.Maybeyou wouldlikeliondollarsifyoudontshowmethe book.Davetoldmesomeprojectionsoutto2015,ons.Dontaskabarberifyouneedahaircut.Wedoprojectionsinourhead.Wearethnafewyears.Wealsothinkabouthowfaroffwecanbe. CM:Thoseofyouabouttoe

etendto doittheirway. Q43/CL:SecuritiesheldbyWEB? WB:Marc? MarcHamburg:loyeebenefitplans.Hesconsideredtobe controllingshareholderofBerkshire.Wefils. WB:Iownveryveryfewsecurities.Ispendmytimethinkingaboutsecurities.I:BusinessesinChina?Whatcharacteristicsdoyoulookfor?Anydifferentgeneral prinrobabilities.WhenboughtPetrochina,Yukoswassimilarlycheap.IdecidedI wasmorechinathanYukos.IwouldhavebeenmorecomfortablewithUS company.Buttheyhadapolsanindicationofintent.We makeallowancesforourlackofunderstanding. CM:Wemerthestoryaboutthemanwhotravelledout West,andcamebackandsaid,Ivelearneddhedid. WeveonlyhadacouplethingsinChinaitsliketheoneIndian.Youcanscinatinggame,tohearaboutcompaniesthatarenew tome.Universemuchsmallerduetoanythatmakes$3bilayearaftertaxes.[Ed.Note:Thereismorethan one] WB:IllgetBQ:Alaska.Wheredoyouputyourcash?

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WB:Choicesarelousyforshorttermmoney.Wedidnotowncommercialpaperin2004.Itrbackwhenwewantit.InSeptemberof2008wehadcommitted toput$6.5binWrigley.laceliketheydid.Butwehad themoney.OnOct6thweneeded$6.5bil.Virtuallyonlysurybills.Overwhelminglyitisintreasuries. CM:Iveseenpeoplestrugglewhowantey.Somepipelinescame forsaleonaSaturdayandclosedonMonday. WB:Sellerwaswongweek.WeneededHartScottRudino clearance,soIwrotealettertoFTCthatwewilluys needthemoney.Ourabilitytocomeupwithcash,whenworldpetrifiedthatcould

ftoSouthAmericawParisHilton.[laughter]Leavethatofftranscribedreport. Q46/ting? CM:TherewillbeanafternoonwithCharlie,onlyforhardcoreaddicts. Q47/ARS:errific,butonlywhenthewindblows.Itonlyblowsabout35%oftimeinIowa.Youcanriscleanestenergybutcantbereliedon. Economicsonlymakesensewithtaxcredit.eanadequate returnoncapital.Governmentissubsidizingwindpower.Iowaisagoodwt.ItmadesensetolocatealotofmegawattsinIowa.Ithinkwearenumber#1incountotoftaxes,andmanyutilitieswhichget100%depreciation theydonthavethetaxpayinganBerkshire.Weveprobablypaid2%ofall corporatetaxesinUSinlast5yrs.Wecanokeep ratesabsolutelyunchangedformorethanadecade. CM:Nothingtoadd. Q48/AudmentonNetJets,thatitwasdestinedforbankruptcy.How closetobankruptcy? WB:DesnedbyBerkshire.Ifastandalone,theywouldhavegone bankrupt.Wehavehadtwoinsurebankruptapart.Weputmoney intoBerkshireownedcompanies.Wegotitupto$1.9bil.

ngit. CM:Nocomment. WB:WepointedthatouttoS&P.WelookatBerkshireasontmakingthemwhole. Q49/Audience:Howtohelpyouthgetjobwithafuture?

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WB:Anythingyoudotoimproveyourownskills,youneverknowwhenitwillpayoff.Ihace,anditisfora$100DaleCarnegiecoursefrom1951.Itis incalculablethevalueIrstareaIwouldworkon.IfIhadstayedin samepositionintermsofcommunicatingmugetlucky, youfindyourpassionearlyon. CM:Economicsisatoughsubject.Onceisagree.Iwouldnt hurrytofieldswhereexpertscantagree.Iwouldmastertheeasysmics.Iwouldntregardthemaspushingmeforwardinany significantway. Q50/CL:Munitofdirectreinsuranceyoucando? WB:Itisa$4bilinvestment,or2.5%ofnetworth.

isks wearewillingtobearinreinsurancefield.$17bilregularpretaxandthatissounvestmentsarenoconstraintforus.Wewouldlovetowritemoreriskatrightprice. CMss.Ithastakenyoualongtimetodoaswellasyoudo.If notforAjit,wedbemuchess.Itlookseasymostofthetime. CM:Thatistrouble,itlookseasierthanitis.lls.Youcanmakemoneyalongtimeatwrong odds.Butifyoudoitlongenoughitwillheyaresmarterthancustomers,withyieldandhigh losses.Newonesareworse. Q51/Audsesshisprogress? CM:Hesentmealetter.Ihaddinner.Wehaveaverycomplicatedbures.[Laughter] WB:Toddhasbeenthinkingaboutfinancialcompaniesformanyyears,abhire. Thatisuseful. Q52/BQ:Chicago.JNJbigholding,recentacquisitiononSynthesupport? WB:IhaventtalkedtoanyoneatJNJmanagement.Iwouldlikedealbetterifalresentbusinessforsomethingnew,youcandrawinferencethatJNJisnot valuingitsownyasyouthinkitshouldbevalued.Thereareprobablynotalot ofsynergies. 26


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CM:Thereisadisadvantage,asyouknowmoreaboutchocolateandpizzathanmedicaldevicgue.PreLubrizol.Whatsizeistoobig?Whatcanwedotohelp? WB:Wewerelookingatock,andwerenot goingtoborrowalotofmoney.Wearenotgoingtoissueshares,ne.Ourcashbalanceswillbuildmonthtomonth.Lubrizolrequires$9bilofcash.Lookingldbecomfortable.Theyareworthdoing.Wewontstretch.Wevenever takenanyrisksssueshares.Ihavefriendwhosoldouttoasocialist companyforstock.Thesocialistinessfornothing. WB:Companiesininternetperiodcouldntissuesharesfastenough.

outofgas.Weveneverbeeninthatgame.Wehateissuingshares.Weresellingaport4/ARS:Builtoracquiredresidentialrealestatemarket.Currentconditions?WhatmightB:Immediatesituationisterrible,itaffectsShaw[Ed.note:Isteppedawaybrieflyandon]Ithoughtovertimebeingabrickmanufacturerwouldbegood,butIknowIwont beanydontlikecyclicalbusinesses.Wedontcareiflumpy.Nooneelsewasbidding forbout.Seescandylosesmoneyeightmonthsayear. WedontworryinJulythatChristmarside. Obviouslycyclicalbusinesseswontbehavesameasseasonal.Therewillbeterrsing,ifIbuyassetsatrightprice. WB:Wewilladjournforfiveminutes. NotescourtesyofPeterBoodell,PortfolioManagerandManagingPartner,Boodell&CompanytLLC,with editsbyRickSchmidt,PortfolioManagerandManagingPartnerofOrandaCapitity.Please addressanycommentsorconcernsaboutthisdocumenttoinfo@boodellco.com.evine,ithasbeen suggestedthatsomebelieverecordingdeviceshavebeenusedtocreate

e.Theywerenot,andas suchthesenotesshouldnotbereliedupon.Mytypingteacheratevercredit,ifany, isdue.

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Berkshire Hathaway Annual Meeting 2011

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