Berkshire Hathaway Annual Meeting Notes 2015 Final

BerkshireHathawayAnnualMeeting2015 May2,2015Thesenotesarerecollectionsonly,withouttheaidofarecordingdevice.Theyshouldnotbereliedupon.PB

[standingovationafterthemovie]WB:Thankyou.ImWarren,thisisCharlie.Hecanhear,Icansee,weworktogether.[laughter]WB:Inafewmoments,wellmovetoregularprocedures.FirstisJohnLandis,directedandconceivedtheFloydMayweathermovie,alsodidAnimalHouse,TradingPlaceswithDanAkroydandEddieMurphy,andCharliesfavoriteJamieLeeCurtis,DonAmici.WellJohn,thankyou,thankyou.Wereallyappreciateit.Theotherspecialthanks,ayoung30yearoldwoman,with1yearoldbabyathome,sheputsonthiswholeevent.CarrieSilva,thanks![clapping].Carrie,afewmonthsago,IsaidtoherthatIthoughtitwouldbenicetohavecommemorativebook,aretrospective,doyoumindputtingittogetherinyoursparetime.Ithinkitsreallyspecial.Wesold5,000yesterday,printed15,000.Ijustwanttothankherpersonally,andIhopeyoullthankher.Wellhaveannualmeetingat3:30pm,andatthattimewellbevotingondirectors.Manywontbehere,alltheoverflowroomsmaybefull,andwehaveseatsatGrandBallroomatHilton.Ifyoucantfindseathereatleastgiveitatry.Wegotalltheroomspossible.Attendancemayhaveoutgrowntheseatsthistime.Youllvoteondirectorsafter3:30pm.Withholdapplauseuntilend,andyoucanwithholdthentooifyoulike.HowardBuffett,SteveBurke,SueDecker,BillGates,SandyGottesman,CharlotteGuyman,ThomasMurphy,RonOlson,WalterScott,MerylWittmer.Theyareagreatbunchofdirectors.[clapping]WearemissingDonKeogh.HewasButternutcoffeesalesman,broadcastfootballgames.HewasfollowedbyJohnnyCarson.Usedtoday,Don,whateverhappenedtothatCarsonfellow?Dondiedafewweeksago,andsoweareverygratefulthatMickeyKeoghhiswifehasjoinedustodayletshaveahandforMickey.Mickeypracticallyraisedourkids,soiftheyhaveanyfaults,talktoMickeyaboutit.Hereisoneslideonourquarterlyearnings.Nothingremarkable,BNSFdiddramaticallybetterthanlastyear,operationallyintermslikeaveragevelocityandontimeaswellasearningswegotbehindlastyearearlyinyear.Lotsofmoneyandeffortspenttogetrailroadoperatinglikeitshouldbe,earningsimproveddramaticallyrelativetootherrailroads,improvementhasbeenhuge,MattRoseandCarlIcethanksMattandCarl.[Shoutfromaudience:Weloveyou.]Ididntquitegetitbutassumeitwascomplimentary.Welltakequestionsfromjournalists,analysts,andthentheaudience.Takeabreakforhouratnoon,startingat54questionswelltakethemallfromaudience.Eachpersonselectedbydrawingtoaskquestions.Thewomanwhowillstartjustretiredaftersixtyyears,arecordatTimeInc.,andinmyopinionsheisthebestprintjournalistinworld.Andthatdoesntsoftenherupatallfolks.[laughter]

Q1:CL:Wevebeengettingquestionsfor2monthstherearealotofthem.Idontnormallysoftenthemup.Lotsofgoodones,sorryifwedontaskyours.FrankGifford,Texas.Ivebeenashareholderfor15years,butnowsufferingheartburn.Ethicalcompany,benefittingsocietythruAcmeandBNSF.OneSeattleTimesstoryonpredatorypracticesatClayton,mustassumefactsarecorrect.GrowingpartnershipatTimHortons,gutted20%ofstaff,guttedawellruncompany.Inpast,avoidedantisocialinvestmentsliketobacco.Capitalismandcompassion?Whatismoralcasefor3G?WB:Claytonarticlefirst.Itisbettertobackuptothesituationinmortgagelendingthathadtakenplace,Claytonfollowsapatternwhichisextraordinaryreally.Ifyoulookbackatbubble,thegreatestcausewasthatmortgageholderbecamedivorcedfromhomebuilderandservicer.Homebuildersolditdidntmattertowhom.Originatorpackagedmortgage,andsolditaroundworld.Originatorsufferednolossifloanwentbad.Theyhadnoconnectionwithoutcome,whethergoodmortgageornot.Weoffermortgagestoallthebuyersofhomes,andwehaveretained$12bilon300khomes.Whenamortgagegoesbad,twopeoplelose;thepersonwhoownshouseandthepersonwhoownsmortgage.Itisalosstousandlosstothem.Muchtalkinchangestorulestokeeporiginatortokeepskiningame.Wekeep100%ofthemortgage.Wehaveexactlythesameinterestassocietyandhomebuyer,notmakingloanstopeoplewhowillgetintrouble.Manufacturedhousinghitslowerendofmarket.Newhomessellingfor$150korless,70%aremanufactured.ManybuyersdontqualifyonFICOscoreforgovernmentguarantee.Canyoulendintelligentlytopeoplewhowillkeephouse?About3%ofmortgagesdefaultperyearandwhentheydowelosemoney.97%dont,andmostwouldntliveinthenicehouseslikeyouseeinauditorium.For$69,500thathousewillbetransportedanderectedandreadytogo.Youneedtheland.Withappliances,a/c,1200sqf.Youllputanother$25kintoland,so$95kallincostmakeyourownjudgementonwhetherdecentvalue.Wehelpthosewhoaspiretoliveinthosehomes.Withourownmoneyatrisk,ifwemakemistake,ithurtsthemandus.Thisisunusualinthefinancialindustry.Ireadthestoryyoureferredto,butitemsinitarenottrue.TheauthorsaidaClaytonexecutivesaidaverageprofitwas$11,700or20%profitmargin.Butnowheredoesitsaythatintheaffidavit.4%ofgrossprofits.25xcommissionyoucomeupwith$11,170.Grossprofitisnotsamethingasprofit.Macys40%gross,pretax8.5%,posttax5.4%.Theyhavecostslikesalespeoplerentutilitiesandothercosts,sogrossprofitisnotthesame.Ourgrossmarginis20%,butwriterofstorysaidnetprofit,andournetprofitmarginisactually3%.IneveryretailClaytonestablishmentwehavealenderboard,whichshowswhatavarietyoflendersarewillingtodoandwhattheirtermsare,andwealsohaveasheetwhichislessthanfullpage,setsoutlendersavailable,attopitsayscheckoutmorethanonelender.Nosmallprintonthispage.Multiplelendersareonit.Sometimesthelocalcreditunionwilllend.Youwilllikelytaketheloanthathasthebestterms.IhavenotreceivedonecallfromanypartyinconnectionwithClaytonhome,on300kloans.Weareregulatedinalmosteverystate.Inlast3years,wevehad91examinationsbythestatetomakesureweconformwiththelaw.Inthose91,thelargestfinewas$5500dollars.Thelargestgroupofrefundswas$110k.Wereregulatedbystates,byallkindsofpeople.WetrytogetthemanFHAloan,butmostborrowersarebelow630fico.Averageprincipalandinterestis$600permonthforawellequippedhouse.Claytonhasbehavedverywell,over4yearsagowesaidwonthave30yearmortgages.Weput30kpeopleinhomesatlowcost,averygoodhome,averyhighpercentagewillhavepaidoffin20years.Illgetto3Ginasecond,butwanttoletCharliehaveachancetocomment.Charlie?

CM:IdontknowalotaboutthemortgagepracticesofClayton.Wesoldanenormousnumberofhouses,wehavea50%share.Ivealwayswonderedwhymanufacturedhomesdonthavelargershare.Capitalismmadetrackhousingverycompetitive.Wecantmakelendingtopoorpeopledefaultless,ifwedidtoomanypeoplewhodeservedcreditwouldntgetit.Deathanddisabilityorjoblossareoftenreasonsforlosinghouse,shouldntpenalizepeopleclosetoedge.Ourdelinquencyis3%andsopeoplewanttoliveinthosehousesandtheydeserveto.Oneofthesehomeswassoldtocameramanonmovieyoujustsaw.MattMasonisveryhappywiththehousehebought.WB:Regarding3G,Idontthinkweveeversaidthereshouldbemorepeoplethanareneeded.Theyvebuiltmarvelousbusinesses,wheremorepeoplearerunningthebusinessthanneeded.Aftertheyreducedtheheadcount,companieshavedoneextremelywell.BurgerKingoutgrewmaincompetitor,TimHortonshasverygoodfiguresin1Q.Manycompanies,but3Ggetsitdowntowhattheyneed.Berkshirecompaniestypicallydonthavemorethantheyneed.If3Gcanfind50peopletodoworkof100thenwethinkthatmakessense.CM:Thealternatetorightsizingcompanies,waswhathappenedinRussia,whereeveryonehasajob.Theyusedtosay,theypretendtopayusandwepretendtowork.Ofcoursewewantrightnumberofpeopletohavejobs.WB:1.6milpeopleinrailroadbusinessin1952.Capitalwasshort,businesswaspoor.Nowtherearelessthan200k.From1.6mtolessthan200k,andtheyhavemorefreight,moredistance,andsafetyup.Ifbettertorunrailroadwith1.6m,aterriblebusiness.Efficiencyisrequiredincapitalism.Itipmyhatto3G.Q2:JB:VanTuyl,averyproductiveautodealer.Negotiatedmodel,profitableaddonfinancialandinsurance.Butothershavefixedpricesandnoforcedselling.Howhardtochange?WB:Ifchangeisrequired,changeswillbemade,andhaveexperimentedwithitbefore.Verymanywouldlikenohaggling,butitseemstobreakdownforsomereason.Negotiationgoesoninalotofbusinesses.Peoplesaytheydontlikeit,butitiswhathappens.VanTuylwilladapttowhattheworldwants.Iwouldntbesurprisedifsystemstaysthesame,butwouldntbesurprisedifitchangestoo.Icantpredictoutcome.VanTuylwillbeaprofitableandimportantpartofBerkshire.CM:Ilikethatacquisitionbecausewecandoalotmorelikeit.WB:Willwebenegotiating?CM:Itsbeenamazinglyresistanttochangemywholelifetime.Peopleseemtowanttonegotiate.Wouldhousestradeatlistprice?Inbigticketitems,thenaturaldesireistonegotiateandbid.Q3:Station1.Canyouname5characteristicsofacompany?CM:Wedonthaveaonesizefitsallsystem.Everyindustryisdifferent.Whatwedidtenyearsago,wedobetternow.

WB:BNSFrailroadalotgoesthroughourmind,manythingsstopusfromgoingforward.Ifweseeitinabusiness,wewontgoon.Verydifferenttypesofstops.Wearelookingforreasonablefixonhowitwilllookin5to10years.Notthesamequestions.Thebigquestion,dowewanttobeinpartnershipwiththisperson,andcountonthemtobehaveinfuturewhentheydontownthebusinessasinthepastwhentheydid.Wedonthavelistoffive,ifwedoCharliesbeenkeepingitfromme.[laughter]Q4:BQ:IsIBMliketextilemillsin1960s?CM:No,IBMtotallydominatedpunchcard,anddominatedcomputingforawhile.ItsrarecompanysinceIBMadaptsaswell.PChasbeenmixedbagforIBM.Itsaverycrediblecompany.Weownalotofcompaniesthathavetemporaryreverses,ormightbemightierinfuture.WB:Whenweboughtit,itwasa20vote.[laughter]WB:Peoplethinkwewanttotalkthemupwehavenointerestinencouragingotherstobuyittooespeciallyifcompanyisbuyingbackshares.Itisntbetterifitgoesup.Ifwetalkedourbook,wewouldsaypessimisticthingsaboutourbigfourholdingsCM:Ifpeoplewerentsooftenwrong,wewouldntbesorich.[laughter]WB:Hesfinallyexplainedittome.[laughter]Q5:GaryRansom:Agreethatcantrepeatinsurancesuccesstoday,andwhatconditionswouldinhibitarepeatperformance?WB:Wehavehadthreeextraordinarypiecesofluckwithinsurancebusiness.OnewhenIwas20yearsold,NormDavisonspentfourhourswithkidhedidntknow,andIgotthatatage20whatIcouldnthavegottenthatatanybusinessschool.Hespentfourhourswithme.IjustwenttoWashington.In1967,JackRingwaldt,for5minuteseveryyear,wantedtosellhiscompany.SoIsaidnexttimehesinmood,gethiminmyoffice.Wecouldnthaveboughtitadaylateroranhourlater.Inmid80s,onSaturday,someguycameintomyoffice,AjitJain,saidneverworkedininsurancebusinessThattrifectawouldbehardtorepeat.Inbusiness,ideaistobeopentoideasastheycomealong.WarrenDavis,hehitacordwithme.AndIcouldunderstandNationalIndemnity.Havetokeepyourselfopentogoodaccidentsinlife,andavoidbadones.Wecouldntexpecttohavethreelikethathappenagain.Butifwewerestartingoveragain,wedfindsomethingtodo.Charlie?CM:Wewouldntfindthatsuccess.ReinsurancecreatedoutofclothhereinOmaha.Insurancehasbeendifferentforus.Q6:Station2.Germany.Youarerolemodelsforintegrity.Howcanweasinvestorsjudgethestateofcultureafteryoudepart?WB:Fairthatyoudoquestion,butIthinkyouwouldbepleasedwithoutcome.Berkshiresculturerunsasdeepasanycompanyinworld.34daysagoweclosedontransactionwithMs.Louis,whospent35yearsbuildingretailshopsdealingwithmotorcycleownersinGermany.Husbanddiedafewyearsago.

ShewantedtoselltoBerkshire.Thatwouldnothavebeencase3040yearsago.ItisvitalpartofBerkshiretohaveclearlydefinedandembeddedculture.Itisreflectedinourshareholders,where97%ofshareholdersvotedfornodividend,notanothercompanylikeitinworld.Wehavedirectorswholookatitasgreatopportunityofstewardship.Theybuystockinmarketlikeyoudo.Wetrytomakeclearthatcultureineverywaypossible.Peoplewhojoinusbelieveinit,itisselfreinforcing.Virtualcertaintytocontinue,itisinstitutionalized.Itwillcontinuefordecadestocome.CM:AsIsaidinannualreport,Berkshirewilldofineafterwearegone.Thereareworsetragediesinlifethanwehaveassetswedoandgrowthslows.WB:Nameone.CM:.[Laughter]WB:Cultureisimportant.HardtoturnSalomonintoBerkshire.CM:IdontthinkanyonehasdoneitonWallStreet.WB:Berkshirenotamonastery.ButCarrieSalvosheandeveryoneelsewantbetteroutcomeforBerkshirethanforthemselves.Thatisgood.Q7:ARS:Sugarbadforus.Inflectionpoint?Sugarconsumption,moatnarrowing?WB:Enormouslywidemoat,buttrendsyoudescribearehappening.1.9bilproductsofcokeconsumedtoday.Wontseeanythingrevolutionary.Allfoodandbeveragecompanieswilladjusttoexpressedpreferencesofconsumers.Nocompanydoeswellignoringconsumers.Ipredict20yearsfromnowmoreCocaColacasesconsumedbysomemargin.In1980sfortunesaidCokegrowthwasover.Whenweboughtin1980speoplewerententhused.IamonequarterCocaCola,judgingfromallmycaloriesconsumedinlast25years.IfIeatbroccoliIdontthinkIdliveaslong,everymealwouldbelikegoingtojail.[PassesCharliesomepeanutbrittle,laughter]CM:Sugarisenormouslyhelpfulsubstance,itpreventsprematuresofteningofarteries.IfIdiealittlesooner,Illbeavoidingafewmonthsofdroolinginanursinghome.[laughter]WB:Damnthegreenvegetables.Butthereisashift,butitisremarkablehowdurablethingsare.WewerelargestshareholderofGeneralFoods,until1980swhenboughtbyPhilipMorris.WeregoingtoownthosebrandsagaininKraft.Heinzgoesbackto1870orso.Cokeis1886.Itisprettygoodbetthatawfullotofpeoplewilllikesamething.WhenIcomparedrinkingCocaColatosomethingsomebodywouldsellmeatWholeFoods,IjustdontseesmilesonfacesofpeopleatWholeFoods.[laughter]IlikethebrandswearebuyingAndrew.Q8:GW:Autodealerswhatwasattractive?Returnfromrollingupautodealersorfullservicemodel?WB:Nothugeadvantageofscaleinowninglotsofdealers.Itisalocalbusiness.Itisagoodbusiness.Thereare17kdealersincountry.Youdontwidenmarginsbyhaving1000dealersvs.100oreven1verygooddealer.Wewillbebuyingmoredealerships.Itwillbelocalconsideration.Financeside,we

bringnothingtothat.WellsFargohascostoffundsadvantage.Johnsliabilitiescosthim12bps.Theyarenaturallenders,sowewontbeinfinancebusiness.Wewillkeeplookingfordealerships,itdoesntgiveusbuyingdiscountfrommanufacturers,anditisregardedaslocalbusinessbythecustomers.Butwontbewideningoutmargins,unlessincaseswecanrunbetter.CM:VanTuylhassystemofmeritocracy,rightpeoplegetpower.KiewitbusinessverysimilarrightpeopleareprosperinginVanTuyl.Q9:Station3.StewartKay,StamfordCT.Culturestewardship.Tipsfromyou,whatcharacteristicswhatdidyouthinkabout45yearsago?WB:Culturehastobefromtop,rewardedwhenfollowed,punishedwhennot,mucheasiertodoifinheritcultureyoulike,easierinsmallfirms.CanthinkofmanylargecompanieswhereifCMandIwerearoundwecouldntdoanything.Childseeswhatyoudo,notwhatyousay.Peopleseehowpeopleabovethemmove.Wehave330kpeopleworkingforus,andIguaranteesomeofthemaredoingwhattheyshouldntbedoing.Whenyoufindout,youhavetodosomethingaboutit.Ididntlikemaking30yearmortgages5yearsagoatClayton.Kirbyhadsomesalespractices,witholderpeople,sonowifyouareover65,andforanyreason,youcangetallyourmoneybackwithinyear.AtGEICO,wellsettlemillionsofclaims.Whentwopeopleinaccident,theyoftendontagreeonwhoisatfault.Weworkallthetimeastryingtobehaveinwayincasepositionsreversed.Ifkeepworkingatit,youllgetresults.CM:Wewerealwaysdissatisfiedwithwhatweknew,wantedtoknowmore.Ifwewerefrozenintime,notsameresult.Wewerelearning.Q10:CL:PercentageofmarketcaprelativetoGDP.Bestmeasure.Thisindicatorat125%.ThatratioofcaptoGNP.Thatiswhatitwasin1999shortlybeforebubblebroke.2ndindicatorfrom1999speech,articleinfortune,corporateprofitsas%ofGDP.46.5%overlongperiodoftime,19511999.Now10.5%accordingtoStLouisFederalReserve.Areeitheroftheseamatterofconcernforpublic?WB:Thesecondfigure,profitsaspercentageofGDP,segmentsofsocietymaycare,terribledisadvantage,prosperedincredibly.FirstcomparisonisverymuchaffectedbyinterestrateenvironmentwhichCMandIwouldhavethoughtalmostimpossiblenotmanyyearsago.Profitsareworthawholelotmoreifyield1%insteadof5%.Alternativesandopportunitycostformanyisbondspayingnothing,orstocksathighpriceshistorically,butnotinsameinterestrateenvironment.Ilookatnumbers,andworldhaslowinterestratesJapansituation?Ifwegetbacktonormalinterestratesstockswilllookhigh.Butifratesstaylow,thenstockslookcheap.CM:Ifwefailedtopredictitinpast,whyaskustopredictagainthefuture.WB:CMandIhaveneverdoneornotdonesomethingonmacrofactors.BNSFweboughtatterribletime.Weknowwedontknowwhatnext12monthslooklike.Butdoesntmakedifferenceifwehold100years.Howstrongismoat?Anycompanythathaseconomist,hasoneemployeetoomany.CM,canyouthinkofanythingrudetosaythatIhaventsaid?[laughter]CM:Hardtotopthatone.[laughter]

Q11:JB:Brakes,speedlowerfortrainsoverlylongtimescheduleforrules.Donewrulesstrikerightbalanceofsafety?Marmontankcarsubsidiary?5000tankcarsbuyingforBNSF?WB:2daysago300pages.IvetalkedbrieflytoMattandFrankPtak,interestofrailroadandtankcarmaydivergeattimes.Wehaveinterestindevelopingsafercars.Carswethoughtsafearelessthanwethought.Wehavetocarryammoniaandchlorine.Wearerequiredtocarryascommoncarrier.Morelogicaltotransportbyrailthantruckorpipeline.Iwouldsayeverybodywillbeunhappywithrules.ItisuptoWashingtontodeviserulesforsomethingdangeroustobetransported.Pipelineshaveproblems,railroads.Safetyfiguresdramaticallybetteryearafteryear.BNSFleadsindustry.Butwillhavederailments.CM:Bigcompanies,havealotofengineers,andlonghistoriesoftryingtobewaysafer.Youdhavetobeoutofyourmindnottofocusonsafety.WearenotoutofourmindsCM:Condensateitismisnamed.Itismorevolatile.WB:BNSFhasbestsafetyrecord.BerkshireEnergyamazingrecord.Whattheybuygetssafer.Omahapipelinehadbeenmismanaged,andwewatchedtheBerkshirepeopleworkdayandnight.Theydidntwantexplosions.Wewentfromlastinsafetytofirst.Orsecond,becauseourotherpipelinewasfirst.Q12:Station4.Howtonetworkwithinfluentialpeoplewithoutexistingnetwork?CM:Youshoulddobestyoucanplayinghandyouvegot.WB:CharlieisveryOldTestament,didntgetpastGenesis.[laughter]CM:Ineverhadbusinessschooltrainingwhyshouldyouhaveit?[laughter]WB:Businessesschoolswereteachingperfectpricing,efficientmarkets.CM:Youwereluckytoavoidwhatyouhaveavoided.Lawfirms,itisapieeatingcontest,ifyouwinyougettoeatalotmorepie.Q13:BQ:IsBerkshireprotectedfromlargelossfortrainaccident?WB:Weoffered$5billionexcessliabilityrisktootherrailroads.Ifyouhadexactwrongcircumstances,inurbanareathepossibilityexists.Verysmallprobabilities,butmillionsofmilesyearafteryear,somethingwillhappen.So,youminimizeit,youruntrainsslowerinurbanareas(35mphintownsof100,000).Alwaysworkingtobesafer,nevercanbeperfectlysafe.WedontneedtoinsureatBerkshire,wecantakeit.Railroadindustrydidntlikeourrates.Sotheyhaventboughtbutdoesntmeantheywontinfuture.ToJonathan,Idontthinkwellbuythe5000railcars.ThereislotgoingonatMarmon,onceweknowwhatretrofittingrequires,wellbeworking3shiftsretrofitting.Industryiswaiting.Q115therewerepracticallynonewtankcardsordered,becauseneedtoseeregulations.Activeinretrofitting.Historicallyrailshaveneverownedtankcars.Havingcarlessorswilllikelycontinueinfuture,ratherthanhavingrailroadowning.

Q14:GaryRansom,intracompanyGEICOtoNationalIndemnity,andmovedClaytonupfromGEICOtoholdco.Moreactivitythannormal?Whatispurpose?Whynow?WB:Whynowwellwejustgotaroundtoit.HugechunkofcapitalisatNationalIndemnity.WevemovedpremiumvolumegeneratedatGEICOorothersuptoparentjustsimplerthatwayandkeepingallofmoneyinvested.Insteadof50pocketsyouhaveacouplemainpockets.Norealchangeincertaintyofpaymentofpolicies.Lifeisalittleeasierjusteasiertohaveitoneplace,inNationalIndemnity.WehadsomeinGEICOcorp,justdecidedtomoveituptotop.Butweliketokeepplacesloadedwithcapital,solikelymorecashwillgotoNationalIndemnity.Q15:Station5,MinneapolisMinnesota.USnotfoundingmemberofAIIB[AsianInfrastructureBank].Iftrendofnext50years,howwillimpactUSmultinationalcorporations?WB:ThatissubjectIknownothingabout,perhapsCharliedoes?CM:Iknowlessthanyou.Q15,cont:dollarasreservecurrency?WB:Itwillbereservecurrencyin50years.CM:Imhappierifweprintmoneytoimproveinfrastructureratherthanspreaditaroundwithhelicopter.Alwaysmoredangerousthaneconomicprofessionalsthink.Q16:ARS:RenamingsubsidiariestoBH.Discussriskstoname.Fruitofloomchangetoo?WB:WedidcreateBerkshireHathawayHomeServices,anditisafranchise,webought2/3rdsofPrudential,andwillbuyremainingthird.WewillloserighttoPrudentialnameovertime.GregAbelaskedandIsaidyes.Butifabusedwouldbeyanked.Wehadnoideaonhouseholdnameandcreatingextravalue.VanTuylwearecallingBerkshireHathawayautomotivegroup.Ifproblems,wellchangeit.IfproblemsmaybeIhearaboutitfaster.Wedontanticipatewewillbrandabunchofproducts.CM:WedbecrazytotrytosellBerkshireHathawaypeanutbrittle,thoseoldnamesareworthalotofmoney.Q17:GregWarren,generatorstostoreenergy.Batteriesforthehome.Howlongdoyouthinkdistributedgenerationbecomesthreattoutilities?WB:Youputfingeronitwithstorageathome.Wepayalotofattention.Bestdefenseisverylowcostenergy.MidAmericanisdoinggreatjob.Solarinourterritoriesisstillsmall.CM:Obviouslywewillusemorerenewableenergy.Berkshireisveryaggressiveandverywelllocated.Igrewuphere.Tohave20%ofIowapowertocomefromwind,itishugestunt.DesirableinplacelikeIowa,wellneedbetterstorage.Technologyimproving.Itisnotthreat,hugebenefittohumanityandhugebenefittoBerkshire.IloveowningMidAmericanwithmorestorageandgrid.Whatthehell

wouldwedoasfossilfuelsranout?Ofcoursemorestorageandmoredisruption,butIthinkmoreopportunitythandisruption.WB:Justinlastweek,400MWinNebraska,andapprovedfor$1.5bilmoreofIowawind.IfGregAbelcouldtakemicrophonemaybeitisahighernumberthan20%.Greg,whatpercentagewillwebeinIowawhenpresentprojectscompleted?GA:Weannouncedour10thprojectinIowa,4000MWinIowa,and58%ofenergyinIowawillbefromwindby2018.Ifcontinuetolookatotherutilities,wenowhave$18bilcommittedtorenewableassets.NVenergywevecommittedtoretire76%ofcoalby2017.Muchreplacedbyrenewable,itiscontinuedcommitment.CM:Moredisruptiontofearortolove?GA:Moredisruptiontolove.CM:Sowecouldntbeluckier.WB:Windandsolardependentonsubsidies.BecauseBHEnergyispartoflargercorporation,abletoinvestfarmoremoneythanonstandalonebasis.Nooneisbettersituatedbecausepartofconsolidatedtaxreturn,putfoottofloortobebiggest,andlikelytocontinuetobe.Andmostutilitiesdontpaythatmuchincometax,solimitedonhowfartheycanpush.Q18:Station6.Chicago/Berkeley.Firstmeeting,plantoattendonceevery50yrs.Thanksforessayonpastpresentfuture.Mostmemorablefailure,howdealwithit?WB:WevediscussedDextermanytimesinannualreport.Ilookedatshoebusinessandpaid$400mforsomethingworthzeroinafewyears.Berkshirestockthatwasusednowworth$67bilnow.Nobodymisleadmeonthat.Ilookedatitandcameupwithwronganswer.Almostanytimeweveissuedsharesithasbeenamistake.RightCharlie?CM:Ofcourse.WB:Wedontdoitmuchanymore.Familyandfriendsareinthecompany,manyhavehalfoftheirnetworthinthecompany.Wevebeenverycautious.Weprobablycouldhavestretchedalittleafewtimes.Ijustdontwanttotakea1%chanceonAuntieKatiesnetworth.Idratherbe99%cautiousvs.1%incautious.CM:Ifwehadusedleverageothersdid,Berkshirewouldhavebeenalotbigger.Itscrazytosweatatnight.WB:Overfinancialthings.[laughter]Wewontpursuethatfurther.Carol?Q19:CL:Inflation?Isitcoming?Consequences?HowinflationwhathappenstoBerkshire.JamesCook,Maine.WB:Ivebeenverywrong.Charliesbeenalittlewrong.

CM:Ofcourse.[laughter]WB:Iwouldnothavepredictedyoucouldhave56yearsofclosetozerorates,andrunlargedeficits.Countrycansustain22.5%debtonaverageandnotincreasetheratio.Deficitisnotadirtyword.WetookFedReservefrom1trillionto4trillion.Peoplewhosavedhavegottenkilledonincomefromtheirsavings.MuchofitwasnotinanEcon101book.Stillhardtoseeifyoutossmoneyfromhelicopters,inflationissupposedtohappen.WhenPolandissuesbondsatnegativeinterestrateIdidnthavethatinmyforecast.Weareinworldwedontunderstandverywell.ButBerkshire,willdobetterthanmostbigcompanies.Wearepreparedforanything.Wearepreparedtoact.Thatisrealadvantage.Wedontcountonanyoneelse.Wehave$60bilnow.Idratherbesittingwith$20bilandhavegreat$40bilacquisition.Butwewillactquicklyandmostwont.CM:Wehavemadelittleprogresstryingtooutguessmacro.Weswimwithtideandstopworryingaboutdirection.Theproblemispeoplewhopredicttidesgraduallythinktheyknowsomething,itismuchbettertosaytheyareignorant.WB:Youcanbesureyouwillseethingsyoudidntthinkwerepossible.Youhavetobepreparedpsychologically.Q20:JB:cashtaxesandreportedtaxesnow$37bildifference.Doyouconsideranyofthateconomicearnings?Orwillcashandtaxesflip.Givenmassiveappetiteforspending,orwilldeferredtaxneverhavetobepaid,andwillthatformoffloatgrow?WB:Floatfromdeferredtaxesoneisunrealizedappreciationonsecurities.Otherisdepreciationaround$37billion,butIthinktotaldeferredtaxesisabout$60bil.Mostofthatisaccelerateddepreciation.Certainlyinutilitybusiness,thathelpsourcustomerbutdoesnthelpus.Wegetareturnonequityandregulatorycommissiontakesthatintoaccount.Idontthinkwebenefitenormouslyfromthat.Wedontneedtoborrowasmuch.IdontthinkIdlookatitashiddenformofequity.Idratherhaveitthannothaveitaccruedat35%taxrate,andifratechangedthenmaybemajorchange.CM:Itwouldbebookequitychange,noncash.Itwouldntmeanmuch.WB:Floatininsuranceisabigasset.Deferredtaxisassetbutnothugeone.Q21:Station7.HenrySingletonsTeledyne?Unwound?Different?WB:Charlieknewhimpersonally.Thereisalottobelearnedduringoperatingyears,andsubsequently.CM:HenrywassmarterthanmeorWarren.Hegot800ateverytestandleftearly.Playedblindchess.Warrendidbetterinvestingheworkedatit.HehadhorribledeficitofIQcomparedtoSingleton.Henryhadverycleverincentivesonallthekeyexecutives.Theyweretoughandmeaningful.Buthegotintotroublewiththreedifferentdefensedepartments.Peoplewenttoofarindealingwithgovernment.Wehaventhadtroublelikethat.

WB:Webelieveinpowerofincentives.Wetrytoavoidhiddenincentives.WeveseendecentpeoplemisbehavebecausetheyfelttherewasloyaltytoCEOtodelivercertainnumbers,becauseCEOmadeforecastsaboutwhattoearn.IfIsaidBerkshiretoearnXX,andifwehadexecutivesthatsetlossreserves,andotherswhocanloadupchannelsatendofyear.ItismisbehaviortomakeCEOnotlookbad.Whentheygetegoinvolved,theydostufftheyshouldntdo.CM:Attheend,HenrywantedtosellbusinesstoBerkshireforstock.Hewassmartrighttotheend.WB:Youshouldunderstandhumanbehaviorifyouaregoingtorunabusiness.AtNationalIndemnityin1960s,JackRingwaldtwasmarvelousman.Histennispartnerwasinchargeofclaims.Ifclaimfor$25kcamein,Jackwouldsay,howcanyoudothistome?Fellowhewasjokingtostartedhidingclaims,andstuckthemindrawer.Sowemisinformedourreinsurersandregulators.Fellowdidnthaveanyfinancialinterest,justdidntliketohaveJackyellathim.IfyoutellmanagersyouneverwanttodisappointWallStreet,theymightstarttofudge.WetrytoavoidthatatBerkshire,weveseentoomuchtroublewithit.[clapping]Q22:BQ:LincolnNE.IfgovernmentregulatorsdeemBHInsurancetoobigtofail,howwoulditaffectBH?WB:Europeangrouplookingatinsurersgenerally,andhasdesignatedninecompanieswithspecialattention.OnemorerelevantinUSisFinancialStabilityandOversightCommitteeanditdesignatesSIFIs[SystemicallyImportantFinancialInstitutions].DesignatedGEandPrudentialandMetropolitan.Metropolitanisfightingdesignation.WalmartandApplearelargebutnoonethinksofthemasSIFIs.85%ofrevenuesneedtocomefromfinancialmatters.Wedontcomeclose,wearelike20%.ProblemsBerkshireencounterscoulditdestabilizefinancialsystemincountry?TheyspentayearwithMetropolitanbeforedesignating.Wedontthinkwewillbedesignated.Wewereabouttheonlypartysupplyinghelptofinancialsystemduringthelastcrisis.Wearealmostuniqueinthelayersofsafetywevebuiltintosystem,cashandoperatingbusinesses.Itismootquestion,lawexists,wehaventbeenapproached,takesayearorsotobeassessed,IdontthinkwecomewithinmilesofqualifyingasaSIFI.CM:Thatistrue,butgenerallytherestillistoomuchriskinhighfinance.DoddFrankhasntremovedit.Derivativesarelikebucketshopsin1920s,gamblingparlors.Theylikemakingmoneywiththeirgamblingparlor.Thereisdangerinfinancialsystem.Ourcompetitorsdontlikeitthatwearenotdeemeddangerousandimportant,andthereisdangerinthattoo.WB:DoddFrankweakenedtheFedandtheTreasuryfromtakingtheactionstheytookin2008andthosewereneededin2008tokeepsystemfromgoingintoutterchaos.FederalReservecanbackupwhatitsays.WhenHankPaulsonsaidmoneymarketdepositswereguaranteed,moneymarketshadlost$175bilindepositsinthreedays,systemwouldhavegonedown,wouldhavebeen$1trilwithinafewdaysmore.Youhavetohavesomeonesomewhereduringpanic,whosaysheorshewilldowhateverittakes.YousawinEuropewhathappenedwhenDraghisaidit,andinUSwhenPaulsonsaidit.Ifyoudont,panicswillaccelerate.Inolddays,peoplewouldcometoputupgoldtheywouldpileitupinsideabank,ondisplay,thatwasonlythingthatstoppedrunonthebank.StandinginfrontandsayingBasel2Ratiois11.4%doesntgetjobdone.Bernankegotjobdone,hesaid,were

guaranteeingnewcommercialpaper,andDoddFrankweakensthatandthatisaterriblethingtoweaken.Q23:GR:Youhavestartedworkerscompensationonline.Whatisstrategy?Channelconflict?WB:Progressivedidokwithchannelconflict.Wevedonewellwithdirectauto.Channelconflictnotabigproblemforus,maybemoreforothercompanies.WewritecommercialautothroughGEICO.Hasntachievedwhatprivatepassengerautohasdone.Wehaveknowhowtowritethatbusiness.Wehaveawfullygoodinsurancebusiness,buteverythingchanges.Wasalldirectmailin1930s.Basicideacontinues.ButmovedfromdirectmailtoTV.Nowinternet.Nowmobile.Worldmoveson.Keyistosavemoneyforcustomerandgivegoodservice.Whateverwaywinswelltrytostayontopofit.Q24:Station8.Whatneveraskedthatyoudliketoliketoanswernow?WB:Ivebeenaskedalmostallofthem.CM:Idliketoaskher,whatisworstthingyouhavedone?Q24cont:CanIbuyyoulunch?CM:Imsoheavilyinvolvedwiththosegirlsfromthemovie,Idonthavetimeonmylist.Q25:ARS:Takeprideinmanagersrunningtheircompanies,stayinguninvolved.Investmentcharacteristics.Is3Gsmanagementmethodcongruent?WB:Therewouldbesomecompaniesthatweownwheretheywouldmakechanges.GEICOisrunas3Gwouldrunithowever.Wecouldhave500peopleatheadquarters.Floorforstrategy,finance,etc.Newspaperstheyhavecutbackasrevenueisshrinking.Wecutbackintextiles,IclosedWaumbecmillearly.Ihaddrawerfullofproposalsforimprovements,weputinloomtoreducelaborcosts.Idontthinkanythingtherearesomebusinesseswhereweemploytoomany.Iwilltolerateitinamanager.Wehaveafew,butveryfew.Ithinkbetterof3G.Iwouldneverabdicaterunningbusinessatalossifgoingtocontinue.YoullseeinourOwnersManual,for30years.Ourattitudeissameatheadquarters.CM:Wehave2/3rdsof1inLA.[laughter]Q26:GW:Consumerbrands,wouldKraftHeinzbeaconsolidator,orcouldNestleorothersslowitdown?WB:GeneralFoodsin1980shadalotofbrandswhichKraftownsnow.CocaColasoldmorecasesofbeveragelastyearthananyyearinhistory.Astrongbrandispotentstuff.60%brandsharehereinUS,higherinothercountries.Retailerandbrandswillalwaysfight.Retailermaywanttoshifttoprivatelabel.Privatelabelhasbeenaroundforever.ItastedfirstsixpackofSamsCola30yearsago,andWalmarthasalotofpower.ButsodoesCocaCola.Youhavetonourishbrands.RCColafirstdietproductin1960s.Wilkinsonhadbladein1960,butGillettehas70%marketsharegloballynow.In1972weboughtSeesCandiesweworriedhowmuchdamageRussellStovercoulddotoSees.Ifyouve

protectedit,itisafabulousasset.Brandswillhavetroublewithgreatretailersalways,andeachwillstickaround.CM:Wevealmostexhaustedthistopic.Wavesoflayoffsfrightenpeople.Itisnosmallthingtoloseajob.Butwhatwouldourcountrybeifwekepteveryoneonthefarm?Weneedourbusinessestoberightsized.Q27.Station9.Veryexcitingtoseemysuperstars.China.Performancepressure.Doyouthinkvalueinvestingcanbeappliedinallmarkets?Anysuggestionsforvalueinvestors?WB:NotsureIgotallofthatbutCharliewillhelp.Investmentprinciplesdonotstopatborders.IwouldusesameprinciplesasfromIntelligentInvestor.FocusattentiononbusinesseswhereIunderstoodcompetitiveadvantage.CM:Chinesehavehistoryofbeingentrepreneurial.Alsogamblingwhentheyhaveopportunity.VolatilityinChinesestockmarketsishigh.ChinalooksalotlikeSiliconValley.IthinkChinawouldbebetteroffwithmorevalueinvestingandlessspeculation.TobemorelikeBerkshireisbetterforChina.WB:Ironyisthatwewoulddobestinmarketwherepeopleoperatefoolishly.Wildenthusiasm,orwilddepressionallowspeopletomakemoneyinsecurities.CharlieandIhavebenefittedenormouslyinafewperiods,like1973/1974whenstockswereunbelievablycheap,cheaperthan2008/2009.Itdoesntmakesense,butifyouareyounginvestorandcanstandback,andinvestwhenthingsarecheap,nomatterwhatisonTV,notareallytoughgameifyoucancontrolyouremotions.Chinesemarketmayhavemorespeculativeinfluencesinit,andasanewdevelopmentmayfacegreaterextremes.CM:Greatopportunitiesforexcessandnastycontractionsafternaturalbooms.Chinaiswisetoreduceexcess.Whowantsanythingelsethanvaluewhenbuyingsomething.Peoplearelookingforeasierway.Itlookseasier,butinfactisharder.Thereisalotofmiseryfrommisusingstocks.WB:Noonebuysfarmfornextweekornextmonth.Noquoteonit.Betterwaytolookatstocks.Q28:CL:SuperioreconomicsysteminUSA?ChemicalandnuclearriskandbiologicandcybersecuritythenewCNBC.Effectyouroutlook?WB:Theyaregreatthreat.Grandchildrenwilllivebetter.Wemoveinfitsandstarts.Lookatthiscountrystartingin1776andeverythingsincethenisprofitandunleashingbrains.Thathasntbeenlostatall.2%growthwith1%populationgrowth,isa20%GDPgaininageneration,soanother$10kofGDPpercapitainnextgeneration.Thatcanallbenullifiedbyroguestatesorreligiousfanatics,cannowcanaddchemicalandcybertothelist.HugenumbersofpeoplewishharmonUS,thosepeoplewontgoaway.Theylllookforwaystoutilizerawmaterials.WeneedanextremelyvigilantsecurityoperationinUSA.Weliveincountrywhichwilldoverywell,soweneedtowardoffthethreats.BabybeingborntodayinUSAisbestinhistoryprobabilistically.CM:Wewerefavoredplacewithfavoredoutcome,besttimeinhistory.Chinahascomeupalotfasterthananyotherbignation.

WB:Ithinkthatisgoodforus.CM:Nothingismoreimportantthanfutureclosecollaborationandtheneedtolikeandtrustoneanother,andworktogethertoavoidbadconsequences.BothChinaandUSarecrazynottocollaborateandincreasetrust.Nothingismoreimportantthatwecoulddoforourrespectivesafetyandbenefitofworld.WB:Wouldyouratherbebornnoworwhenyouwereborn?CM:Wellveryinterestingnow.Alwaysinteresting.Idontliketheseverytheoreticalquestions.Idratherthinkabouthowwegainadvantageorhowsomeoneelsecan.Q29:JB:Allocatingcapitalamongstbusinesses.Capitalallocationiskey.WhynotCEOasinvestorandCOOasoperations?WB:Notinconceivable,butveryunlikely.CIOshouldhavesignificantarrayofskillsusefulforchiefexecutiveoffice.ButIwouldntwanttoputsomeonewithjustinvestingexperienceinchargeofanoperationlikeBerkshire,withoutoperatingexperience.IvelearnedalotthroughoperationsthatIwouldnothavelearnedbybeinginfinance.Ifyouhadsomeonewithdualexperience,ok,buthard.CM:OwnedandcontrolledbusinessesgetmoreimportanttoBerkshire,soweneedtogowithtide.Weneedexpertisebeyondtypicalportfolioanalyst.WB:Iveseenmanywhodontunderstandmathverywell.Someofouroperatingmanagersknowalotaboutinvesting.Q30:Station10.Caracas,VZ.TedWeschler.Investmentphilosophyandqualities?WB:TedandToddareverysmartaboutbusinessesandinvestments.Itisacompetitivestrength.TheyhavequalitiesofcharacterwhichareincrediblyimportanttomeandCharlie.Weveseendozensanddozensofmanagers,weusedtodropintoseethem.Iknew20peoplewhenIclosedwhohadgreatrecordsoverlast6to10years.IpickedBillRuane.$10kthenisnow$4mil.Heisterrificmanagerbutalsoterrificman.Iwanteveryaspectofpersonalityyoujustwanttobearoundthem.CharliemetToddfirst.ImetTedfirst.Wetalkedmoreonwhatkindofpeopletheywere.CM:Wholethingworkingwell.Theyareusefulapartfromhandlingsecurities.Eachhashelpedtobuyabusinessrecently.WB:Theyknowrighttouch.Toddworkedon[CharterBrokerage].TedworkedonGermanoperation.Heknowshowtodealwithpeople.Werunintomoredysfunctionalpeoplewith160IQs,Salomongaveusourshare.CM:Wevespecializedinit.

WB:MorepeoplewithhighIQshaveselfdestructedtomakemoneytheydidntneed.WehaveverysolidpeopleinTedandTodd,andtheyareverybright.TheyidentifywithBerkshiremorethanthemselves.CM:Trustworthinessismoreimportantthanbrains.Wewouldnthireanyoneifwedidnttrustthem.WB:Ok,everyyearIputupthisslide,whichmeasuresagroupof5hedgefundsversustheS&PorVanguard.Ibetfeeswouldntbeovercomebymanagerialbrilliance.Paying2/20andoverrideforFundswasok.InfirstyearIfellfarbehind,butsevenyearsintoit,63%vs20%.Interestingthingisthatsomeofthatisunderperformance.2/20at$1bilyouget$20mjustforcomingtooffice.Investorshavepaidaprice.Hedgefundmanagershavedonefine.WeconvertedtoBerkshireafewyearsago.Winnerwillgetmorethan$1mil.Ifyouwanttoentertainyourself,findlongbets.comonlinetheyareinWashingtonandhundredsofbetsareupthere.Youcangothereandmakebets.Peoplegivereasons,arguments.Ifyoudonthaveanythingbettertodo.Innexthourwellhavealunchandseeyoubackhereat1pm.LUNCHBREAKWB:MydaughtersuggestedthatIremindyouthatCaroldidnttellmethequestionshewouldask,butIdidexpectaquestionaboutClaytonandsoIpreparedthoseslides.Q31:BQ.Inflationastapeworm.WhichbusinessesatBerkshirewillthriveduringinflation,whichwillsuffer?WB:Realestateingeneralgoodduringinflation.Inflationaryexpansionincapital.Pricedintermsofreplacementcostovertime,getinflationarykick.Utilityandrailroadeatingupmoremoney,tendstobepoorbusinessduringinflation.Abrandisawonderfulthingtoownduringinflation.Wevehadtonourishitaswegoalong.Valueincreasesduringinflation.ThinkofimpressionsofGillettebuyingrightstoWorldSeriesin1939,andtryingtohavesimilarimpressionsnowwillcostafortune.Greatinvestmentin1939dollars,anditpaysoffin1989dollars.CM:Butifinflationgoesoutofcontrol,neverknowhowitholdsup.TwosomeofgreatdepressionandWeimerRepublicbroughtusHitler.WedontwantinflationbecauseitisgoodforSeesCandy.WB:Idont.Q32:GR,Berkshirespecialty.Hasitreplacedideaofbuyinglargecompany?WB:Almostcertainitwonttakeoverlargecommercialinsurance.BerkshireHathawaySpecialtywehaverightsetup,morecapitalthananycompanyinworld,ourpoliciesbetterthananyoneelse.Ifwebuysomeoneelse,wepaysubstantialacquisitionpremium.Canbeverybigoperationfivetotenyearsfromnow.Charlie?CM:Icertainlyagreewithyou.WB:Thatshowhekeepshisjob.[laughter]

WB:Weapologizetothosewhocouldntgetaseatthismorning.Q33:Station11.Intheletter,yourefertopracticalmentalmodel,whichwouldyousuggesttobuildcompaniesofdistinction.WhyisSeessmaller?WB:Charlie?CM:ThankyouWarren.WB:Youretheguywhowroteit.CM:Lindberghgotbestreputationquickly.Restofusacquirereputationslowly.Iseeopportunitiescomeallthetime,andcredibilityinpastgivesthemthenewopportunity.Thereisnothingbetterthanbehavingwellinlife.Wehavetriedtobehavebetteraswevegainedmorerecognition.Nothingcanguaranteetotalapowerhousebrand.WB:Whenyougetold,youllgetreputationyoudeserve,saidAgnelliofFiattome.Sameistrueofcompanies.Hasreputationforbeingsomewhatdifferentcompany.Wedidntsetouttodothat,butithasworkedoutthatway.Q34:ARS:Climatechangeasriskfactor?AreBerkshiresmodelsdifferent?WB:SECrequiresriskfactors,lawyershaveyouputineverything.Peopleputinweather,orsomemodelthatshowsit.Wepriceiteveryyear.Lifeinsurance,youvesetapricefor6070yearsinfuture.Ipriceannually.Iseenothingthatshowsmethatglobalwarmingshouldchangemypricesalot.Itdoesntmeanthatitisnotthreattohumanity.Justin1yearcontract,Iamnotthinkingaboutglobalwarming,inmaterialway,inmyjudgment.Ifwriting50yearwindstormpolicyIwouldthinkveryhardaboutwhatglobalwarmingmightdotoincidenceandpotentialofhurricanes.NotsomethingIwouldputinthe10k.CM:Notclearwhateffectsofglobalwarmingwillbeonextremeweather.Lotsofhowlingaboutcalamitiespeoplegetsoexcitedandarenotnecessarilycorrect.WB:Wouldyouchangeratetomorrow?Idoubtit.Oneyear?No.CM:Iwouldnot.WB:Idowantourunderwritersthinkingaboutclimatechange,IwanttothinkmoreaboutMarvintheTorch,whoalwaysburnedhisbuilding.Heexplained:Idontburnbuildings,Icreatevacantlots.Q35:GW:Commoditybusinesses,notgood.Manysoldatloss.MakesenseforGregtodecide?WB:Wecallitenergy,butnotmuchoilandgas.WearelookingforopportunitiesforBHEnergytospendbigmoney.Wepaid$35persharetobuythestock.Investmentbankersspentaweekdoingnothing.SoIsaidIwouldpay35.05andthentheycouldsaytheygotlastnickeloutofme.Ineverpaiddividend.Probablymakes$30persharethisyear,andwewillgetto$35pershare.WewroteConoco

down,thoughactuallywemadesomemoneyinit,alsoExxon.Welookatcashandavailableopportunities.Notlastoilandgascompanywewillbebuying.Wepassedup1or2largeones.CM:Notabadcashsubstituteifyouthinkofitthatway,withdividendExxonvscash.Q36:Station1.Thankyouforhostingmeeting.Taxcodeisbroken,atindividualandatcorporatelevels.2.5triloverseas,highincomeratesofover50%.Realchangeandsimpler?WB:Ittakes218membersofHouseofRepresentatives,and51senatorsandaPresidenttosignbill.Questionofhowmuchshouldgovernmentspendandfromwhomdoyougetit?Despitetaxrate,shareofGDPfromcorporateprofitsishigh.Revenuesfromcorporateswas4%ofGDPandnowitis2%.Imaybeoptimistonthis,OrrinHatchandRonWydenonSenateFinanceCommittee,maymakesomethingneitherlikebutbothcanagreeon.Ifwespend22%ofGDP,weshouldprobablyraise19%.19%of17.5trillion,nowthatsrealmoney.Howmuchfromcorporates,individuals,estatetax?Youcanbringcashbackfromabroad,ourcorporateratesare35%(wehaveoperatedat52%).IdontshedanytearsforAmericanbusiness.Therecouldbeanequitabletax.Getting%onCDs,andbusinessesmaking15%ontangibleequity,equityholdersaregettingtreatedverywellinthiseconomy.CM:Iagreewithyou,andIdontdieoverlittledifferencesintaxcode.13%statetaxinCAoncapitalgainsdrivesrichaway.Andtheydontevenburdentheschools,soIthinkCAhasstupidtaxpolicy.ButIdontthinkUStaxpolicyisstupidatall.Theydiditonpurpose.WB:Callitearlystagesofparanoia...[laughter]CM:Theideaofdrivingtherichpeopleout,itisdemented.Whodoesntwantrichpeoplecomingtospendinyourstate?[laughter]WB:Ithinkachancethereisadealthisyear,they{Hatch/Wyden]arepatrioticandsmart,andtheyknowtheycantgetanyplacetogetdone.Ithinkthatiswaytogetitdone.CMalwayssayswhatwouldhavehappenedatConstitutionalCongressifitallhappenedinfrontofTVcameras.Ittakescompromisetogetitdone,whenpeoplehavefundamentallydifferentviewsontaxcode.Idontthinkimpossiblethatwehavenewcorporatetaxcodebyendofyear.Q37:CL:Fourbooksyouhavementionedyoucherishinsecurityanalysis.AdamSmithWealthofNations,1776,thoughyouhaveseldomdiscussedthisbook.Whatdidyoulearn,howdoesitshapeyou?WB:MyfriendBillGatesgavemeanoriginalcopyofit.IfyoureadAdamSmith,Keynes,Ricardo,andWhereAreCustomersYachtsyouwillhavealotofwisdom.DownstairswedohaveBerkshireBombertshirts,butalsoFredSchwedsWhereAreCustomersYachts.YoushouldreadWealthofNationstoo.CM:AdamSmithhaswornwell,oneofwisestpeoplethatcamealong.LessonsaresameascommunismfailingandSingaporewinning,thatproductivepowerofcapitalismisawesome.WB:Iappliedspecialtyoflabortophilanthropy.Ifsomeoneelsebetter,shoveofftothosethatarebetter.

CM:Youdidntdoyourownbowelsurgeryeither.[laughter]WB:Ihavenoreplytothat.[laughter]Q38:JB:SomeformerlypubliccompaniesatBerkshirehavemoretroublemakingdecisionsforlongerterm.Anythingtodotocombatthis?Compensation,multiyearor12month?WB:Publiccompaniesvs.privatethatweboughtaggregateofpublicvsprivatenotsureIdratherown.CM:Idontknowwherehegetsidea,notapparenttous.WB:Whenwesay100yearswemeanit,andwesetrightexample.Wetrytoconveyasstronglyaswecan.Wevebeenhammeringsamemessageforlongtime.Wedontignoreyearlyresults,wejustdontlivebythem.Igetmonthlynumbers,andwhatreallycountsiswherewellbein510years.Butdoesntmeanweshouldbethrowingawaymoneyinshortterm.ButIdontreallyagreewiththepremiseofthequestion.Q39:Station2:Thanksfor50greatyears,fromBonnGermany.YouowncompaniesinUSandGermany,whatdifferencesisthereincultureandperformancebetweenGermanandUS?CM:HewasaskingWB:Iknowthequestion,Imlookingtoyoufortheanswernotthequestion.[laughter]CM:WevehadhardtimebuyingthingsinEurope.Traditionsandfamilytraditionsaredifferent,andinsomeothercountries.Germanyhaslongtraditionofbeinggoodattechnologyandcapitalism.Weveadmired.Theyworkfewerhoursandproducealotmore,andofcourseWarrenandIareprettygoodatthat.WeadmiretheGermans,particularlytheengineeringside.WB:ButIllpredictwebuyaGermancompanyinnext5years.WehavewomanovertherewhobroughtLouistous[DetlevLouisMotorradvertriebs].Wevetriedtogetwordout.Iwouldlookforwardtothatdealwewouldbeveryveryhappy.Weveboughtfourtofivebusinesses,butverysmall.Weareeagerandwehavethemoney.Pricesmaybealittlemoreattractive.Reasonablechancepriceofferedwouldcatchmyattention,morethanUS.Q40:BQ:WifeandIarestockholders.Inour70s,calledGeicobutcouldntbeatourcurrentratewhy?WB:Wecanbeattherate40%ofthetime.Wehaveourownunderwriting,oneisage.Wehavemanyvariables.Allstateandothershavedifferentunderwriting,butnonewillbelowergenerally.Iseehowmanyquoteswemake,howmanycustomerssold.Wearesellingthem.Somecoupleswillgetbetterrate.Interestingquestionabouthowtobestevaluatedrivers.16yearoldboysareworst.16yearoldgirlsbetter.Weaskalotofquestions.Itsdefinitelyworth15minutestocallGeico.CM:Youmaybepayinganunfairpriceforinsuranceifyouarentdeterioratingasfastasyourpeers,butitisagoodtradeoff.[laughter]

WB:Ihadntthoughtofitthatway.[laughter]Q41:GR:Whatareyoudoinginreinsurancedifferently?WB:Wouldntourcompetitorsliketoknow?[laughter]Itissomethingyoucansellpeople,insuranceandreinsuranceisanecessaryforbusiness.Butitwillgetlessattractive,anditishappeningonlargerscale.Overnext510yearsreinsurancewontbeasgood,asprospectshaveturnedforworse.Notmuchwecandoaboutit.ThereareafewthingsonlyBerkshirecando.Forinstance,eightcontractshavebeenwrittenwithpremiumof$1bilormore,andwevebeenonalleight.Butmarketnotasgoodasitwas.CM:Itwillbeharder,thereiscompetition.Weplaygameonlywithlongpole,otherspretendtodoso.WB:Wecouldattractatonofmoneyandgetanoverrideonit.Wedontparticularlyadmirehowitisbeingplayed.Q42.Station3.7thgrade,Florida.Howtomakefriendsandgetpeopletolikeyouandworkwithyou?WB:Verygoodquestion.CM:Iwasobnoxiousandaskedimpertinentquestions,andnoteveryonelikedme.Theonlywaytogetpeopletolikeme,Ihadtogetrichandverygenerous.WB:Peopleseeallsortsofvirtueswhenyoucanwriteacheck.[laughter]WB:Ivehadgreatteachers,andpeopleIadmired.WhydoIadmirethem?WhyshouldntItakeontheirqualities.Ifyoulookatpeopleyoulikeinschool.Writedownqualitiesyoulike,andalsotheonesyoudontlike.Generous,friendly.Peoplewilllikeitinyou.Ifyouarelate,negative,claimingcreditgetridoftheminyourself,andyoullfindoutitworksprettywell.CM:Itreallyworksinmarriage.Ifyoucanchangeyourselfratherthanyourspouse,itisagoodidea.[laughter]WB:CMsaysdontlookforintelligenceorhumorinaspouse,insteadyoulookforsomeonewithlowexpectations.Q43:ARS:Netjetspilotspicketing.Returnoninvestmentsforaircraftonorder?Wasitamistake?WB:Idontthinkrightwaytolookatreturnoninvestment.Weresellthoseplanes,theyareheldlargelybyownersthemselves.Thatplaneismyinvestment,notNetJets.Wevehadhundredsoflaborunions.In50yearswevehad3strikesIcanremember.Wehad4daystrikeatBHTextile,4daysatBuffaloNews.AlsoSeesCandy.Wearenotantiunion,wehavesensationalpilots.Wevehadgreatpilots,friendly.Itishumannaturetohavedisagreementsoverpay.$145kperyear,7dayson,7daysoff.Wepaytogetanywhere,socanliveanywhere.Itisperfectlyunderstandabledifferencesarisefromtimetotime.Butdoesntcomeinadayorweekormonth.Volumesareupforflighthours,upon

owners.Verygladweown.Moretrainingtopilotsthananyoneelse.Ifly,mykidsfly,ourmanagersflyonit.Igetsameplanesothersget,samepilots.Intenseinterestinsafety.Professionalpilots.CM:IhaveneverinallyearsmetaNetJetspilotwhowasntdutifulandreliable.IcanthinkofnoNetJetpilotdissatisfiedwithhislife.Imnotcertainunionisfairlyrepresentingthepilots.Wehavealotofwomenpilotstoo.Q44:GW:Duracellcorebusinessindecline,alkalinelowerusage.HavingDuracellwasnotoutofordinary.Buthowmuchdidtaxplanninghavearoleindoingthisdeal.Wouldyouhavedonewithouttaxconsiderations?WB:BothBerkshireandP&Ggottaxbenefitssobothsideswerehappy.Somewhatsimilartorealestateexchange.Wekeepoldertaxbasis.Section1231realestateexchanges.Decliningbusinessyesbatteriesdeclining,butstrongworldwidepresence,andyesitwillhaveunitdeclines.ButIthinkwelldoDuracellbusiness.Willtakeuntil4Q.P&Ghasbeengreattoworkwith,couldntbebetter.Illbeveryhappywhenweownit.Q45:Station4.FromTexas.ExcitedaboutnewNFM.5companiesnowdownthere.Estateplanningnotsomuchsokidscandonothing.Giftpledge.Assettocharityandinheritancetokids?WB:Ipromised99%.Estatetaxexemption,ImighthavedifferentfeelingifIhadkidwhoworkedactivelyinbusiness.AsCharliesays,optionsgetlimited.Wherehesgoing,moneywontdohimmuchgoodanyway.NoForbes400ingraveyard.Wheredoesitdomostgood?WhenIlookatstockcertificatesinsafetydepositboxputthere50yearsago.Theyhavenoutility,theycanthelpmeconsume7,000caloriesperday.Theygiveallsortsofutilitytoothersinrestofworld.Theycandogoodnow,buteveryoneneedstheirownfeelingsaboutit.Ithinktheymightaskthemselves,wherewillitdomostgood?Icouldbuyhoteltolivein,butwouldIbehappier?Itwouldbecrazy.Wedontjudgeitbywhatothersthink.Icalledsomeoneongivingpledge,andhewasa70yearoldandhesayshedidntwanttothinkaboutit.AndIwonder,willyoumakebetteradecisionwhenyoure95withblondeonyourlap?CM:Cannowleave$5mtokids,thatwasverydesirablechangeIthink.Q46:CL:Woulditmakesense,andbepermissible,todistributelongtermequityinvestments,intaxefficientway,likeYahoowithAlibaba.UseassetsBerkshirenotmanaging,anddontwanttosellforincometaxcosts.Passive.WB:Yahoodidntsolveit.CM:Wehavenowayofdoingit.WB:Therewasawaytodoit,Isawexamplesofit.Undercodenowaytouseappreciatedsecuritiestodistributetoshareholderswithoutpayingfullcapitalgains.CM:Spinofftoshareholders.

WB:WhatYahoodidhasnotgottenridofthetax,maygivethemanotheroptionifAlibabawantstoredeem.Idontthinktheyhavegottenridofthetax,unlesssubsequentlytheydosomethingwithit.Havenotseenhowtogetittoshareholderswithoutpayingtaxatcorporatelevel.Q47:JB:Mitek,Shaw,Acme,etc.Youngadultswouldgetsickofit,sonormalrateswillreturn.Buthouseholdformationstillslow.Highstudentdebt,orstrictmortgageterms.CouldUSbemorelikeEU,orsomethingchanging?Singlefamilyhomestarts?WB:Whatarelastsetoffigures?Haveyouseenfigures?Ididbestsellingthatringtotheguyinthemoviesandtheywillformahouseholdprettysoon.Italwaysturnsdowninarecession.Yourguessisasgoodasmine.CM:Ifeelsameway.IhavesomegrandchildrenthatIwishwouldmarrysomeonesuitablepromptly.[laughter]WB:Aretheyinaudience?[laughter]CM:Idontwanttonamenames.[laughter]Q48:Station5.EmmanuelVisionfoundation.Poor,fundedbyGatesfoundation.Contrastnotmoredramatic.Modelofcaring.Howcancorporationsbeencouragedtomakedifferenceinimpactoflives?WB:Iagreewithvision,butIbelieveinvisionofindividualphilanthropy.Itistheirmoney.Iencouragecompaniestocontinuephilanthropicactivitiestheyalreadyhaveinplace.Idontthinkmybusinesstowritechecktomyalmamater,anddoitoncompanyfunds.Notmymoney.Wehadsystemwhereshareholderscoulddesignate,andIhatedtogiveitup,buthadtodoit.Ihavenevergivenupamovie,atrip.EverythingIvegivenhasbeensurplus.PeoplelikeyoursonIreallyadmire.CM:Mytasteforgivingawaysomeoneelsesmoneyisreallyquiterestrained.WB:Iwasboardoforganizationwhichneededtoraisemoney.Icalledon45corporates,besuretoaskcorporatenotpersonalIsaidIwouldntdoit.Ihavereservationsaboutcorporatephilanthropy.Q49:BQ:DoyouandCharliethinkEurocurrencypositiveforEurozone,shouldFrancequitandgobacktofranc?WB:Thatstooeasyforme,IllgivetoCharlie.CM:Ihaventfaintestidea.Eurohasnobleaspiration.Straining,thebigstrainsareinGreeceandPortugal.Theycreatedsomethingthatwasprobablyunwise.Theygotcountriesinthatshouldntbethere.Youshouldntformabusinesspartnershipwithyourshiftlessdrunkenbrotherinlaw.[laughter]Theyloweredtheirstandardsalittleandithascausedstrains.WB:Everythinghereisofftherecordbytheway.[laughter]

WB:Ithascausedstrains,ithasflaws,canbecorrected,wewroteConstitutionin1779andittooksomeamendments.Butifthereareflawstheyneedtofaceuptothem.WecouldhavehadcommoncurrencywithCanadaandwecouldhavemadeitwork.CM:Wesurelycouldhaveworkeditout.WB:Itmighthavebeenuseful.Wecouldnthavehemispherewide.CM:WithArgentina.[laughter]WB:Helovestonamenames.Praisebyname,criticizebycategory.[laughter]Enforced.WB:TherewererulesonEurothatgotbrokenbyGermansandFrench.CM:Investmentbankershelpedthempreparephonyfinancialstatements.Notexactlynovel.Investmentbankeraidedfraud.WB:Euroneedssomechanges,anditwillgoindirectionofmorecohesionorless,butinpresentformitwontwork.CM?ImnotsurewhyImgivingyouanothershot[laughter]CM:IthinkIveoffendedenoughpeople[laughter]WB:Thereare1or2inthebalcony.[laughter]Q50:GR:SellGeicothroughautodealers?WB:Nothistoricallyagreatchannel.Itislowcostdelivery.Mayhavetocompensatedealers?Idoubtwedoanythingalongthoselines,Ithinkbothwilldobetterrunasindependentbusinesses.CMandIhaveseenalot.CM:Iagree,averydumbideaandwerenotgoingtodoit.Q51:Station6.Overvaluedstockmarket.Silver?WB:Idontfollowitanymore.Atonetimeweowned100mounces.Iknowafairbitaboutsupplyanddemand.Haventpaidattentiontoit.CM:Andthatsagoodthing.Wedidntdosowell.WB:Itisabyproduct,sodoesntrespondasmuchtoownsupplyanddemand,butmoretothehostproducts.WecameoutbetterthanHuntbrothers.Wedontthinkaboutsilveranymore.Q52:ARS:Activism.Gettingworseorbetter?TherewillbeatimewhenyouwontbeheretomanstoreWB:Irejectsuchdefeatism.[laughter]Q53:GW:AndshouldBerkshirebebrokenup?Whatpremium?

WB:Somelistsomesubsidiaryfor20x.Therearebenefitsfromsamecorporatetaxreturn.Ithinkunlikelythatanylongtermthatvalueofpartswillbegreaterthanwhole.Bestdefenseagainstactivismisperformance,butsomuchmoneypouringintoactivism,ithasbeensuccessful,institutionalmoneystartsflowing,andIwouldsaypeoplearereallyreaching.TypesofcompaniesIthinkreallyreaching.Ifyouaretalkingaboutmysharesgettingdispensedovertenyears.IthinkBerkshiremarketvaluewillbesogreatalltheactivistswontbeabletodomuchaboutit.Berkshirewillbeverylargeorganizationin1020yrs.CM:Buffettsupervotingpower.WB:Itell[otherCEOs]tosendthemtome,wearetheplacetodumptheiractivists.[laughter]CM:Inolddaysstockstradedforwaybelowintrinsic,butnowsayingbuybackwhenstocksareovervalued.WB:Simpledecisiononlyrepurchaseifneedsofbusinesscompleteandstocksellingforlessthanworth.Ifpartnerwantstoselltoyouat120%ofvalueyoudsayno,and80%yes.Butitisasillyandcontorteddiscussion.Ifyoulookathistoryofsharerepurchases,fallsofflikecrazywhencheap.Wewillbuyitbackbushelloadat120%ofbook.Wewontdoitat200%.Manybuystockregardlessofprice,theydontseemtowanttostop.CM:Icertainlyagreewithyou.Idontthinkitisagreatage,ageofactivism.HardformetothinkofanyactivistsIwanttomarryintofamily.WB:Ibetterstopbeforehenamesnames.[laughter]Q54:Station6:Americanexpress,1in10withCostco.Restrictiononinterchangefees,andmobile,anddoesntmarket.HowdoesAmericanExpressdefendmoat?WB:Theyvebeengood,particularlyunderKenChennault.Paymentsunderattack.AmericanExpressisspecialcompany,guidingittodifferentmarkets.Debitcards.Alotofloyalty.Aproprietarycardisbetterthanothercard.BetternottogetintoitwithCostcodirectornexttome.CM:Ilikeditbetterwhentheyhadlesscompetition.WB:Itwassuccessfulstock,butmanydidntpayattentionin1963.Firstexpresscompany,thenmovedtotravelerschecks,thencreditcardssohadatravelandentertainmentcard,priceditat$3,AmExpriceditat$5,andbrandgotbetter,cardlookedbetteratthedinnertable.Imdelightedweown15%ofcompany.Q55:Station7.SouthKorea.Investments,theydontknowhowtosavemoney.SouthAmericanschoolsforteachingfinancetochildren?WB:Charlie,anycomment?CM:Ifailedinthisactivitywithsomeofmyrelatives.Ifyoudontknowhowtosave,Icanthelpyou.

WB:Habitsmakeenormousdifference.Isntthereasaying,Chainsaretoolighttobefeltuntiltooheavytobreak.MillionairesClub,Ithinkhavingaprettygoodeffect.Inafewdayswellhave8finaliststhathavedevelopedbusinessesoftheirown.Encouraginggoodhabitswithkidsandmoneycanchangetheirlives.Iwas$9,000aheadwhenIgotoutofcollege,andwehadkidsquicklyIhadheadstart.IthinksecretMillionairesClubgreatwaytoteachlesson.Q56:Station8.GenoaItaly.Whatisrightlevelforliability?Canyouusecashtoreduceliabilitiesonbalancesheet?Ifunwindingputs,wouldyouunwindthem?WB:Onequityputs?Excesscash,cashbeyond$20bil.Wewanttobuybusinesses.Wewillgetcallsandputmoneytowork.Ifsomeonehadtoldus2yearsagothateuroratessocheap,balancesheetmighthavebeendifferentbutwedontwanttodropourstandardsbecauseliabilitiessidesolow.Unlikelywithcontractswehave,andIthinkverylikelytheyrunoutovertime.Wecarry$4bilagainstitandnowisworth$400m.WewontdeleverageBerkshire.Thefloatisreallyessentiallyclosetopermanent.Couldgoupanddownabit.Logicallyweshouldtakeonmoredebtattheseprices.Ifwefindbigdeal,maybemoredebt.CM:Wedlovetofeelcapitalconstrained,thathasnthappenedinalongtime.Tostretchalittle,thatwouldbeglorious.Q57:Station9.Shanghai.Israteofreturnhighwithdealers?Dealershipsdifferentinchina?WB:IwouldsayIdontthinkwellgetsignificantbenefitsofscaleformoreunitsinautos,whatwereallyneedismanagersintheindividualdealershipswithskiningameandrunfirstclassbusinesses.IdontknowChinaside.CM:IdontthinkwedbegoodrunningdealershipsinChina,andwereverygoodhere.WB:17,000dealers,wehave81ofthem.Multiplesprobablytickingup.Wewillusethatpriceasyardstick.Wemaybuyalot,wemaybuyveryfewdependsonprice.Ifprofitsaregood,wewanttopaylowermultiple.Rather1012xmultipleofbadyear.Q58:Station10.ShanghaiChina.Wealthmanagement.NOAH?Whatissecrettosayingsoyoung?Pleasedontsaycoke.Doyouunderstandinternet?CM:Warrenisabiginternetusercomparedtome.WB:Iloveit.Iusesearch.Playbridge.Hugechangeinmylife.IfIhadtogiveupplaneorinternet,Idgiveupplanethantheinternet.Internetcosts$10permonth,planecostsme$1.5m.CM:Interesting.WB:Charliesgivingupboth.

CM:Internetisgrowinginimportance.Likeitornotdraggedintomodernreality.Idontlikemultitasking.Theideaofmultitaskingmywaytogloryisnotmything.Youngerpeoplepronetouseit.AtBerkshirewehave3internsnotpayingforone.WB:Internetchangedbusiness,GEICOespecially.PessimisticaboutAmerica,andhowdramaticallyInternethaschangedthings,Ithinkworldimproved.CM:IfIhadyourpartnerIdthinkitwasimprovedtoo.Q59:Station11.WhitneyTilson.Iapplaudyourpoliticalengagementrisingincomeinequality.Campaigntoraiseminimumwage?Raisewage?Profitability?WB:IncomeinequalityisextraordinaryinUS,seehowfarwehavegone.Sincebornin1930,GDPup6:1,andparentsthoughtreasonablygoodeconomythen.Iftheyhadknown$8kto$54kintodaysdollar.Itisahugefactor.Everyonethatiswillingtowork,shouldhavereasonablydecentlivelihoodincountryinUS.Howthatisbestachieved,Ihavenothingagainstminimumwage,buttodosowouldcostalotofjobs.IthinkIllwritesomethingsoon.IfanyoneIhaventmademadyet,theyllbethenextone.CM:ThatwasaDemocrat,andheresaRepublican.Iagreewithit.Raiseitalotandhurtthepoor.Bettertomakeearnedincomecreditbetter.Q60:Station1.LongIsland.Goodcollegecost$60kormore.HowwillaverageAmericanfamilypayinfuture.CM:AverageAmericanfamilygoestolessexpensiveplacesgettingmassivesubsidies.Mostarepayinglessorgettingsubsidies.ButIthinkproblemthateducationcontinuestoraisetheprice.Butcollegeeducateddobetterbutmaybetheywerebetterbeforetheywenttocollege?WB:Oneofsillieststatistics,twouniverses.Whataboutthedifferencesbetweenthepools?CM:Hesitationofrelyingonfellowman.Bigtendencytoraisepricetowhatcanbeborne,andthatisterrible.Manyofthepeoplewouldntlearnmuchfromanything.Ithinkalotwrong.Whengreatrecessioncame,everyAmericanuniversitylaidoffpeople,andthentheyworkedbetter.IdontthinkcollegeinAmericaitisrealproblemonstickershock.Figureoutyourbestoption,andlivewithit.WecantchangeVillanova,aslongasitworkstheywillraiseprices.WB:Anditwillkeepworking.CM:LittleaccidentswerecostingsomuchinLA,autoinsurancecouldntafford.Theyputtheplaintiffsattorneystotrialeverytime.Q61:Station2.Chinaundergoingstructuralchanges.Anyadvice?WB:IthinkChinawilldoveryfineoverperiodoftime.CM:ImabigfanofwhatishappeninginChina.IjustorderedabustofLeeKuanYewcontributedtostoppingcorruption,andChinadoingsomeofsamesmartestthingIveseen.Hardtoberunby

kleptocrats.Leepaidmoreandrecruitedbettersystem.Chinaiswidelycopyinghim.ImveryhighonwhatishappeninginChina.Ithinklikelytowork.Theyveactuallyshotafewpeople.Thatreallygetspeoplesattention.[laughter]WB:Nowweregettingsomepracticaladvice![laughter]Strikesmeastotallymiraculous,sofarsofast.CM:Neverhappenedsofastinhistory.80%illiteratewhenIwasaboy.IgiveCommunistPartycreditforcopyingLeeKuanYew.ThatisallBerkshiredoesiscopytherightpeople.WB:in1790,Chinahad290mpeople,wehad4mil.Theyhadhardworkingpeople.NowUShas25%ofGDP,andChinadidntgoanyplace.Thosesamepeopleinfortyyearsnotsmarter,justlookwhathasbeenaccomplished.Wefoundsystemthatunleashedpotentialacouplehundredyearsago,andtheyfoundit40yearsago.Amazingtohavepeoplegonowhereintheirlives,andsamehumanbeings,andfoundwaytounlockpotentialIcongratulatethem.ChinaandUSwillbesuperpowers,itisgoodforusthatChinesehavefoundwaytounlockpotential.Inthisworld,theyneedtofindvirtuesineachotherratherthantheflaws.Wearebothbetteroffiftheotheronedoingwell.Q62.Station3.SanFrancisco.Fiftyyearsagohowdidyoufigureoutoperationalmetricswhereyoudidnthaveexperience?WB:Wedidnthaveitthoughtoutthatwellatthattime.Welookedforcompanieswherewecouldunderstandfuture.Weneededfeelforit.Knowlimitations.Westayedawayfromalotofthings.Pricesweredifferent,sodecisionswereeasier.Noplanningsessions.Keptreadingandthinking.Inthosedayscapitalconstrained,measuringsomethingyouholdagainstwhathascomealong.Wealwaysleanedtocertainresultsversushopeful.CM:Thatisexactlywhatwedid.Partofitwassplendidpeople,butwewerealsolucky.Notevery20yearoldwasknockingondoorsseekingwisdom.Werecommendyoumakingluck.Andnothingincreaseswisdomlikegettingyournosewhacked.Wethoughtweknewdepartmentstoresandtradingstampsanditsharpensyourdistinctions.Ifenjoyingwhatyouaredoing,betterthangoingtoworkwithteethclenched.CM:Wecamefromfamilieswithstrongpeople,andwewereadvantagedbythefamilieswecamefrom.WB:Youstillhaveyourdadsbriefcase?CM:Yes,butIdontknowwhereitis.Wornout.WB:IhavemyDadsdeskfrom75yearsago.Q63:Station5.Iwalkamonggiants.Howwereyouabletopersuadeyourearlyinvestorstogetovertheirfears?CM:Wedidntdoverywelluntilwehadawinningrecord.

Q63,cont:90%graham10%fisher,still?WB:Iwastwentyandsellingstocks,actedlikeIwassixteenandlookedlikeIwastwelve.Myaunt,myfatherinlaw,myroommatefromcollege.Myfatherinlawgavemeeverythingtheyhad.TheyknewIhaddonereasonablywell,Ihadbeeninvesting56years.Ihad$175katage26sotheygavemetheirmoney.BenGrahamwindinguppartnership,recommendedme.DoctorfamilycalledandthatshowImetCharlie.Recordlateronofpartnershipattractedmoney.Westartedwith$105k.CM:Ofcoursethatisthewayyoustart.ThepeoplethatfollowtheGrahamNewmanpath,theyhavealldonewell.Ifyouavoidbeingaperfectidiot,anddoitdayafterdayitsamazinghowwellitworks.WB:Manyaskedwhatbuying,IwonttellyouwhatImdoing.Itwasntplannedout.ImetCharlieandsaidbeingalawyerisokashabitbutlousybusiness.Q64:Station6.ArthurfromLA.Whatmatterstoyoumostandwhy?WB:Whatmatterstoyoumost?CM:Well,IthinkIhaveanunfortunatechannelingdevice.Iwasbetterfiguringthingsout,Iwasnevergoingtobeanactororathlete.Maindutytobecomeasrationalasyoucanbe.JudgeMungerworshippedrationality.Ithinkitismoralduty.ItisreasonIlikeConfucius.Berkshiresortofatempleofrationality.Whatisadmiredispeoplewhoseeitthewayitis.Thatgoesbeyondatechnique,formethatisamoralprinciple.Ifyouhaveignoranceanddontremoveit,Ithinkitisdishonorable.Tostaystupiderthanyouneedtobe.Youhavetobegeneroustoo,wearesocialpeopleandtiedtoeachother.WB:WhatmatterstomemostisthatBerkshiredoeswell.1milpeopleinvolvedwithus.Icanrationalizetheactivity.IwouldnotbehappyifBerkshireweredoingpoorly.ButifIfeltwewerentbuildingsomethingbettereveryyearIwouldntbehappy.ThatishappyCM:Wehatelosingsomeoneelsesmoney.WB:IhatelosingatBerkshire.IfIdosomethingwhichcostsBerkshirelongtermvalue,Idonotlikelifethatday.CM:Thegooddoctordoesntlikeitwhenpatientdiesontableeither.Notanewthought.[laughter]Q65:Station7.Denmark.WhatanswertomostintelligentquestionIcouldaskyourightnow?CM:Idontthinkitisaverygoodquestion.Youareaskingtoomuchofsomeone.WB:Idonthavesuccessinanswering.Q66:Brooklyn.Whysuccesswithsmallcapital,whattodotoimprove?WB:Ihadgreatteacher.Ihadexceptionalfocus.Rightemotionalqualities.Ienjoyedthegame.Yougiveitallbackintheend.Gamewasfun.GeneMcCarthyitsjusthardenoughtobeinteresting,but

notbeyondcapabilities.Itactuallyisprettyeasygame,requirescertainemotionalstability.IwasenjoyingwhenIdidit.Betweenage7and19,Ihadsameenthusiasm,butnoguidingprinciple.Thenhitintelligentinvestor,andBenjaminGraham,andnowIhadphilosophy.Gamebecameevenmorefun.Notmorecomplicatedthanthat.CM:Donthaveanythingtoadd.Easygameifhavetemperamentandhelikesit.Ihaveproblem.Idontlikebeinganexampletopeople,ifyouamassafortuneinlifeforbeingshrewderandbuyingpiecesofpaper.Shrewdinpickingstocks.RunningBerkshirefarmorefunthanrunningthepartnership.Hopeyoullmorphintodoingsomethingmore.Q67:Station9.Massachusetts.OldWallStreetJournal.Someunrealizedcompetitiveadvantages?WB:DowJoneswhichownedtheWSJinthe1960sand1970s,theyownedthefield.Theyhadnewsticker,theJournal,startingwiththat,financewasgrowthindustry.Chainofsmallnewspaperstotallymissedwhatwasgoingtohappen.MichaelBloombergtookawayfanaticalinformation.Theydidntseevariousopportunities.Afamilyownedit,alawyercontrolledthefamilysbehavior,andtheyweregettingdividends,noonewithimagination.Theylettheworldpassthemby.Rupertchangingthenewspaper,hesgoneintocompetitionwithNYT.CM:Theydidendupwith$67bildollars.WB:IfTomMurphyhadhadthehand,hundredsofbillions.CM:MurphymorelikemethanBillGates.WB:Idliketobuyintothatretroactively.Its3:30pmandwellstarttheannualmeetinginafewminutes.END

NotescourtesyofPeterBoodell.EditscourtesyofPatrickTodd,AnalystatHardingLoevner,locatedinBridgewater,NJ.Pleaseaddressanycommentsorconcernsaboutthisdocumenttopeter@boodellco.com.Ofnote,norecordingdeviceswereusedtocreatethesenotes.Assuch,theyshouldnotbereliedupon.Petershighschooltypingteacher,Mr.Eagle(mayherestinpeace),deserveswhatevercredit,ifany,isdue.