Berkshire Hathaway Annual Meeting 2024 transcript afternoon session

Berkshire Hathaway Chairman and CEO Warren Buffett presides over the company’s annual meeting. Watch the full coverage of Berkshire Hathaway annual shareholders meeting on https://www.cnbc.com/.

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Easily discover all the topics of this interview transcript by clicking on the table of contents:

Buffett on Berkshire’s Philanthropy

[00:00:00] WARREN BUFFETT: So please take your seats. We’re going to finish at 3:00, so the sooner we start, the sooner [we have] more chance we’ll have to talk about various questions you may have. I just like to follow on, however, with that film we showed just before we left for lunch because it says something about Berkshire.

There are all kinds of public companies and wealthy public companies throughout America, and there are certainly cases where, in one family, somebody has made a very large amount of money and is devoting it to philanthropy, or much of it to philanthropy, such as the Walton family would be the number one [example] in Walmart. And certainly, Bill did the same thing, Bill Gates did the same thing at Microsoft.

But what is unusual about Berkshire is that a very significant number of Berkshire shareholders located all over the United States, not just in Omaha, but [in] many different [places], Berkshire holders who have contributed $100 million or more to their local charities, usually with people not knowing about it. I think it’s many multiples of any other public company in the country. It’s not more [than] multiples [of what] those [who] put a whole lot into philanthropy, and I don’t know the details of the family, but clearly there’s a huge sum of money that the Walmart family, I’m sure, has done all kinds of things philanthropically and will continue to do it.

But I don’t think you’ll find any company where a group of shareholders who aren’t related to each other… So many of them have done something along the lines of what Ruth did a few weeks ago, just to exchange a little piece of paper that they’ve held for five decades, and they’ve lived well themselves. They haven’t denied their family anything, but they don’t feel that they have to create a dynasty or anything, and they give it back to society. And a great many do it anonymously. They do it in many states. To some extent, we see some concentration of it in Nebraska, because generally, when you’re giving away a lot of money, they call it, in the philanthropic world, they call it “absorption capacity.” And the truth is, it’s very hard to give away a billion dollars to $10 at a time to people who are needy or something of the sort. And so large institutions have this absorption capacity, which tends to be universities or colleges or that sort of thing. And some philanthropies are much more imaginative than others.

But the one thing I’ve never… Well, most of them want to do it anonymously, so I can’t tell their specific stories. But I have to say one thing that was astounding is that the same day we bought a billion dollars worth of Berkshire Class A stock from Ruth… So that… And I guess we were actually buying it from the school at that point because she’d just given [it to] them. And then… So the transaction was with them. But Mark Millard in our office bought a billion dollars from them, but he also bought $500 million worth of stock from somebody else that nobody will ever have heard of and in a different state. And I won’t elaborate beyond that, but we have had a very significant number of people, and there’s more to come. And obviously, they had to be people that came in early, or their parents did, or their grandparents did, but they’ve all lived good lives. They haven’t denied themselves anything. You know, they have second homes, and they… But they generally… In fact, I would say almost universally, they… People knew them in the community, [and] everything. But they’ve used what they accomplished, what they saved… They denied themselves, consumption themselves. That’s what savings are, is consumption deferred. And they’ve given… They’ve financed everything all over the country. And usually, they like to do it anonymously.

I outed my sister when I wrote about her in the annual report, but Bertie’s here today. I told her she should wear a T-shirt or something, [that] said, “No solicitors allowed” or something, but they just do it. And it’s really– both Charlie… I [have] felt it’s really fun to work for a group of people like that rather than for index funds or for hedge funds or whatever it may be. I mean, you’re just seeing what people actually… It sort of restores your faith in humanity, that people defer their own consumption within a family for decades and decades, and then they could do something like [that]. And they will. I think it may end up being 150 people to pursue different lives and [who are] talented people and diverse people [and who have] the dream of being a doctor and not [having] to incur incredible debt to do it, or whatever may be the case. There’s a million different examples.

And I want you to know that… That you’re very… You’re a unique, actually, group of shareholders among public companies, as far as I know, in terms of the way you’ve deferred your own consumption while living fine to help other people. And it takes a lot of years, but it can really amount to something very substantial. And what Ruth did was [at] roughly my age. She looked at a little piece of paper, which actually was a claim check on the output of others in the future. And she said, instead of the output being for her, that the output would be for a continuing stream of people, for decades and decades and decades to come, that were having a different life in the pursuit of becoming doctors than they otherwise would have.

And Berkshire has been… Of course, her husband Sandy contributed substantially to Berkshire’s record. Sandy was a wonderful partner to have. So it was both input by him, and then there was deferred consumption by his family. And then there was ultimately this final gift to Albert Einstein [College of Medicine]. And like I say, the same day, there’s only 500 million [dollars that] will go to [another cause] in a different way. But it’s happening all over, and I don’t think any, any companies [are] like that.

So I just want to tell you that it’s inspiring to work for a group of shareholders [like you].

And Becky, go to it.

Buffett’s Succession: Abel’s Role in Berkshire’s Investment Portfolio

[00:09:49] BECKY QUICK: All right, the next question comes from Slavin Vucelbrot. As CEO, will Mr. Abel be in charge of the portfolio of common stocks that Mr. Buffett has been managing, or will this function be exercised by Mr. Combs and Mr. Weschler? As investing could be defined as the discipline of relative selection, can major capital allocation decisions, such as large acquisitions, be separated from the common stock selection process?

[00:10:16] WARREN BUFFETT: Yeah, I would say that decision actually will be made when I’m not around, and I may try and come back and haunt them if they do it differently. But I’m not sure the Ouija board will get that job done. So that job, I’ll never know the answer on whether it [will] get covered, but I feel very comfortable about the fact that it will be made by a board, that they’ve got loads of brainpower, they’ve got a dedication to an unusual institution, and they will figure things out.

But I would say that if I were on that board and were making the decision, I would probably, knowing Greg, I would just leave… I would leave the capital allocation to Greg. And he understands businesses extremely well. And if you understand businesses, you understand… you understand common stocks. I mean, if you really know how business works, you are, you are an investment manager. How much you manage, maybe just your own funds or maybe other people’s [funds]. And if you really are primarily interested in getting assets under management, which is where the money is, you know, you don’t really have to understand that sort of thing.

But that’s not the case with Ted or Todd, obviously. But I think the responsibility ought to be entirely with Greg. The responsibility has been with me, and I farmed out some of it. And I used to think differently about how that would be handled, but I think the responsibility should be that of the CEO. And whatever that CEO decides may be helpful in effectuating that responsibility. That’s up to [him or her] to decide at the time they’re running the money.

So I would say that my thinking on that has developed to some extent as the sums have grown so large at Berkshire, and we do not want to try and have 200 people around that are managing a billion each. [It] just doesn’t work. And I think that when you’re handling the sums that we will have, you’ve got to think very strategically about how to do very big things, and I think Greg [is] capable of doing that. I think I’ve missed a lot of stuff in the past, so I’m actually wiser about doing that now. But I, you know, I would do it better this time around in 2008 and 2009 if something akin to that happened. But it won’t be exactly like 2008 or [2009], you can be sure of that. But you also can say that there will be times when having huge sums available extremely quickly… Maybe it will be once every five years, probably [more like] once every ten years or something. But as the world gets more sophisticated, complicated, and intertwined, more can go wrong. And there’s no sense going through here exploring the possibilities of the different things that could happen.

But you do want to be able to act when [something] happens. And I think the chief executive should be somebody that can weigh buying businesses, buying stocks, doing all kinds of things that might come up at a time when nobody else is willing to move. It wasn’t that people didn’t have money in 2008. It’s that they were paralyzed. And we did have the advantage of having some capital and eagerness to act, and a government that, in effect, looked at us as an asset instead of a liability.

And I think that all of those qualities will be even more important as our capital pile grows. So I think Greg may have even more fun than I had in a period when extraordinary things were happening, and we were the logical place to go. You never know whether it’ll be next week, next year, [or the] next decade, but you [know], it won’t be a century from now, that is for sure. [The more] intertwined and sophisticated the world financial situation gets, the more vulnerable it gets in a certain sense. It solves a lot of small problems, but it leaves [the system] more vulnerable to large problems.

Greg, does that bother you at all or not?

[00:16:16] GREG ABEL: Without directly answering the question, I think there’s one important thing, [and that] is I think as we go through any transition, it’s important to know that the capital allocation principles that Berkshire lives by today will continue to survive. Warren and I think that’s the thing I’d want to communicate. We have our operating businesses, insurance, [and] non-insurance, [and] we’re going to [support] that. We’ll provide them the capital necessary to be successful and grow, if it’s appropriate. At the same time, we’re expecting [a] return of capital from them when they have excess cash.

And then, as we’ve discussed, or you’ve touched on, always looking at potentially new businesses as a whole or in a piece, and as you’ve always highlighted, and I fully agree, it’s… we’ll always look at equities as [if] we’re investing in a business, either 1% or 100%, but we’re looking at the business, we’re looking at the economic prospects of that business, how sustainable it is, and what it will look like ten years from now. And is our capital… the capital we originally put in at exponential risk, or where’s that risk set that profile? And then, of course, and then we’ll obviously continue to always put excess cash in the safest investment there is in US Treasuries, knowing we want to maintain that fortress of a balance sheet for two reasons. One, to act, but also to always protect our shareholders if we have a… We want to maintain the position Berkshire is in now, realistically for the… To ensure it, to ensure it endures.

[00:17:59] WARREN BUFFETT: Well, when he says that, it makes me wish I’d stayed around to be number two instead of number one in this process over the years. It’s, you know, it doesn’t get more fun than what we’re doing, and we’re better positioned than ever before. We’re not positioned, though, however, to earn extraordinary returns versus what American business generally earns. I would hope we could be slightly better, but nobody’s going to be dramatically better [than anyone else] over the next century. It gets very hard. It gets very hard to predict who the winner will be. If you look back, as we did a few meetings ago, at the top 20 companies in the world at ten-year intervals, you realize the game isn’t quite as easy as it looks. Getting a decent result actually is reasonably… should be reasonably easy if you just don’t get talked out of doing what has worked in the past, and don’t get carried away with fads, and don’t listen to people who have different interests in mind than the interests of our shareholders.

Okay, we’ll go to station number one.

Berkshire’s Missed Opportunity: Buffett and Abel on the Tech Data Bid

[00:19:32] TOMO DRGE: Hello, Mr. Buffett, my name is Tomo Drge. I’m from Düsseldorf, Germany. This is my first time out here in Omaha, so thank you for having us here today. So my question is directed to you, Mr. Buffett and Mr. Abel.

In 2019, you reportedly made a bid for the IT distribution business, Tech Data, and commented that you understand its role as a middleman. I wonder if you could kindly elaborate on the criteria you look at when evaluating IT distribution businesses like Tech Data and their competitive position. Thank you.

[00:20:16] WARREN BUFFETT: Well, we had some experience with distribution businesses, and we know their potential to a degree and their limitations. And, Greg, you were involved in that more than I was. I mean, that was a case where there had been a bid made, and there was a go-shop provision, and I think the management probably would have preferred that we buy it. And when we went in with a better bid, the original party raised their bid, and we never make the same offer twice, so… Greg, tell [us about it].

[00:20:52] GREG ABEL: Yeah, so, absolutely. In 2019, we saw Tech Data as a unique opportunity. When we saw the other bid and the underlying value of that distribution business, we did… Warren, Warren and I were talking, [and] others made the conclusion we should talk to management. We talked to the team. They were very interested in Berkshire being their long-term owner, and we still saw good value in the opportunity. And we had a good understanding of distribution businesses.

We have TTI. It’s not exactly identical to Tech Data in that they’re very specific to who their customers are and who they serve and supply and who they purchase from. Because on the distribution side, it’s important to have that input coming in from folks who want their product. And, you know, it’s needed on the other side that there’s demand for it. And they had an excellent model, if you think of TTI, for example, that Warren’s talked about Paul Andrews many times, [who was] the person who founded this business.

But it’s a unique business in that our revenues on that business are approximately $10 billion. The average part they sell is a little over nine cents. Ninety-five billion parts go through their warehouse every year. But it’s a model that, if you have the right people on both sides of the equation and you understand that well, there’s a unique opportunity there. And that is something we saw in Tech Data.

And as Warren highlighted, we made our bid. Unfortunately, it was then topped by the original bidder, and we moved on. But we thought very highly of it.

[00:22:46] WARREN BUFFETT: We’ve probably seen at least five of them in aggregate over the last three or four, five years. It’s not a business that you can dream about because it’s a decent business.

But, for example, many of the items that the manufacturer just… they don’t want to tie up their capital [in inventory]. If you have, you know, a million-plus SKUs (stock-keeping units), it’s like selling jelly beans or something like that. And you do… You’re serving a purpose to a degree, but you don’t… You don’t really… It isn’t your product, in effect. I mean, you’re just a good system for the producer of the equipment to get it to the end user without tying up a lot of capital, being in a business they don’t want to be in. We understand, but there’s no magic to it.

With TTI, you had a marvellous man running things, and when you get a marvellous person running something, to some extent, that’s [a] deluxe [situation]. [They attract] better people underneath. Greg and I went to Paul Andrews’ funeral a few years ago, and there were 300 people or so there, and there wasn’t one person that had to say something particularly nice, but [everyone] stretched a little bit about the deceased. I mean, everybody… Paul Andrews was the real McCoy, and he was an amazing man. He behaved wonderfully with Berkshire. I mean, he wanted to do more for Berkshire than Berkshire would do for him. I mean, it was very simple.

And you run into those people, as I say, you run into people that bend over backwards for us, and then some bend over forwards. But that’s just the way it is in this world, and we’ve had quite a few that have been [bending] over backward for us.

The distribution business is not a wonderful business, but it is a business. And if it’s big enough, it’s one we would look at and we would buy [more of], and TTI makes some smaller acquisitions on its own all the time. I didn’t even hear about them until I read the quarterly reports. And so we… We want to build up… We want to build our businesses in every area that we operate, and we’ve got unlimited capital to do it. So we’re willing to have small acquisitions take place if they fit in with something we already have. But we’re not in the business of going out after small acquisitions, and if we did, we [wouldn’t be successful]. We just don’t have the people for it, and it wouldn’t move the needle anyway. At Berkshire, we may or we would have been happy doing the deal [that] the questioner asked about.

But if we don’t do it, you know, it just doesn’t make that much difference. We [only] want to do it if we [can] do it well. We’ll do it right. They’ll make the right decision. If they don’t, you know, we will find something else to do with the money in the end. And we can always buy a little more of TTI for you, the shareholders, by just buying in our stock, too.

[00:26:42] GREG ABEL: Exactly.

[00:26:42] WARREN BUFFETT: Yeah. Okay. Let’s see. We need Becky next, don’t we? Yeah, Becky?

Buffett’s Cash Build-Up: What It Signals About Market Opportunities

[00:26:50] BECKY QUICK: All right, Warren, earlier you talked about selling some of the Apple shares in order to build up your cash supply. And I think it’s had a lot of people wondering where you see opportunities or what might be coming or [about] market valuations. So I’ll ask this question from Foster Taylor. At the 1999 annual meeting, you mentioned that if you owned all of America’s 500 businesses, you would be making $334 billion while paying $10.5 trillion. You emphasized that this was not a good return on investment. Today, by my math, the S&P 500 has a market capitalization of around $44 trillion, with profits of around $1.45 trillion. This is a very similar return on investment to the 1999 levels. Do you see similarities in the market today and the 1999 levels?

[00:27:39] WARREN BUFFETT: Well, one thing has changed dramatically from… Well, from 1990… I misunderstood [the question] on the 1999 [meeting], but there have been times in my life that I’ve been awash in so many opportunities that I could have invested everything by nightfall. And then there are other times when the year goes… Well, not in the early days, but now we just… We haven’t seen anything that makes sense that moves the needle. Now, we’ve made small acquisitions during the year. Our companies have made acquisitions. And we… You know, Greg and I may talk about something that involves a $300 million purchase or something like that. And, you know, if it fits well enough, we do it.

But… And if our managers see things that fit them, we want to look at them because our managers do not have necessarily the same equations in mind that we do. But there are some managers [to] which we would have just say, you know, whatever you decide to do. And then there are other managers that would not know how to allocate capital, particularly, and that they don’t have to be able to be great capital allocators. If they happen to be great at serving customers and understand their own industry and all of that, they can be great managers. A good many of them are capital allocators, and others aren’t.

But this is not a time when the phone is going to be ringing often. But there are times for that, and Greg will know how to handle them as well or better than I have. Over time, Charlie and I, we missed a lot of things, and what we really regretted was missing something that [should have been] very big. We never worried about missing something that we didn’t understand. Why should we be able to predict the future of every business any more than we can predict what wheat yields are likely to be in Illinois next year? Well, not Wheaton, Illinois, [but] Wheaton, Kansas, but [maybe] Cornyn, Illinois.

So I don’t really think of whether it’s similar to 1999 because I’m not that good on chronology anyway. Unless something really dramatic happened at the time. I mean, I remember things from 2008 and [2009] much better than I remember whether something happened in 2015 or… Or 1987 or… Well, 1987 I remember because of October 19. But I just don’t think… I don’t think that way. I just look at what I can do every day. Greg?

[00:30:58] GREG ABEL: I’m going to have to [pass on that]. Nothing. Sorry. Nothing to add.

[00:31:00] WARREN BUFFETT: Okay, well, we’ll go to station two. I mean, it’s nice to know what lines you can get.

Buffett’s Investment Evolution: From Coca-Cola to Oxy and Paramount

[00:31:23] STEFAN WUERNBACHER: Hello. My name is Stefan Wuernbacher. I am a shareholder from Hamburg, Germany. I’ve been coming to Omaha since 2007, and I’m deeply grateful for all the things I could learn here, both about investing and about life, in particular, creating circumstances that will enable me to lead a productive life during my entire healthy lifespan. So thank you for that.

My question to Warren is, your favorite holding period is forever, holding American Express or Coca-Cola for decades. Berkshire recently went in and out of Markel, and you, I believe, sold and later bought Oxy, which I think happens to everyone all the time. But can you maybe [explain] to us [your] thought process when you exit positions? Thank you.

[00:32:29] WARREN BUFFETT: Well, there are various reasons for exiting positions. One is if you need the money, but that doesn’t happen very often with us. But it used to happen on every decision I made when I started when I was 20 years old, which I consider the post-Graham variant, although I actually started in 1942, if you just talk about buying stocks. But in any event, the decision process is really quite interesting in certain ways because we made… Charlie and I made decisions extremely fast. But in effect, after years of thinking about the parameters that would enable us to make the quick decision when it presented itself.

People have speculated on how I’ve decided to really put a lot of money into Apple, and for a reason I can’t… One thing that Charlie and I both learned a lot about was consumer behaviour. That didn’t mean we thought we could run a furniture store or anything else. But we did learn a lot when we bought a furniture chain in Baltimore. And we quickly realized that it was a mistake.

But having made that mistake, [it] made us smarter about actually thinking through what the capital allocation process would be and how people were likely to behave in the future with department stores and all kinds of things that we wouldn’t have really focused on. So we learned something about consumer behaviour from that. We didn’t learn how to run a department store. Now, the next one was See’s Candy. And See’s Candy was also a study of consumer behaviour.

We didn’t know how to make candy. There were all kinds of things we didn’t know. But we’ve learned more about consumer behaviour as we go along. And that sort of background, in a very general way, led up to [our] study of consumer behaviour in terms of Apple’s products.

And in that case, while I watched what was happening at the furniture mart, in terms of people leaving the store, even though we were selling Apple products at a price where we weren’t even making any money, [they] were just so popular that if we didn’t have it, people left the store and went to Best Buy or someplace. And if you know the Blumkins, they can’t stand anybody leaving the store, so they behave accordingly. But then you learned that [customers] had [an] interest in the brand, and then you had a million different inputs. But I think the psychologists call this apperceptive mass. But there is something that comes along that takes a whole bunch of observations that you’ve made and knowledge you have and then crystallizes your thinking into action.

[This led to] big action in the case of Apple. And there actually is something, which I don’t mean to be mysterious, but I really can’t talk about, but it was perfectly legal, I’m sure, you know, that. It just happened to be something that entered the picture and took all the other observations. And I guess my mind reached what they call apperceptive mass, which I really don’t know anything about, but I know the phenomenon when I experience it. And that is, we saw something that I felt was, well, enormously [important to the] enterprise.

Maybe I’ve used this example before, but if you talk to most people, if they have an iPhone and they have a second car, the second car costs them 30 or $35,000, and they were told that they never could have the iPhone again, or they could never have the second car again, they would give up the second car. But the second car cost them 20 times [more than the iPhone]. Now, people don’t think about their purchases that way, but I think about their behaviour. And so we just decide without knowing.

I don’t know. There may be some little guy inside the iPhone or something. I have no idea how it works. But I also know what it means. I know what it means to people, and I know how they use it.

And I think I know enough about consumer behaviour to know that it’s one of the great products, maybe the greatest product of all time. And the value it offers is incredible. And I think it has, and Tim Cook, I think it has somebody that, in his own way, is the equivalent of a partner, [a] partner with Steve Jobs that could do one thing extraordinarily well and more than one application, but one thing. And Tim was the perfect partner to serve sequentially with him. So it’s, you sort of know it when you see it.

I actually saw it with GEICO when I, I went there in 1950. I didn’t know exactly what I was seeing, but Lorimer Davidson on a Saturday, in 4 hours, taught me enough about… what I understood what auto insurance was, and I knew what a car was, and I knew what people [were thinking]. I knew they didn’t like to buy it, but I knew they couldn’t drive without it. So that was pretty interesting. And then, but he filled in all the blanks in my mind as I sat there on that Saturday afternoon.

And, you know, every now and then it happens. You know, why do you [choose] this [one] person you met? You know, there are all these different potential spouses in the room, and then something happens that you decide that this is the one for you. You know, I think Rodgers and Hammerstein, [in] “Some Enchanted Evening,” wrote about that. Well, our idea of an enchanted evening is to come up with a business, Charlie and me, and there is an aspect of knowing a whole lot and having a whole lot of experiences and then seeing something that turns on the light bulb.

And that will continue to happen. And I hope it happens a few times to you, but you can’t make it happen tomorrow, but you can prepare yourself for it happening tomorrow, and it will happen sometimes.

[00:40:08] GREG ABEL: Hey, Warren, he mentioned Oxy, which I think is a great example where you made the original decision basically on a weekend with some thought. But as [you learned] more about Oxy and, the asset position, they had their ability to operate in an exceptional manner, and then a strong CEO around capital allocation. I think your confidence, which was reflected in continuing to acquire more shares, is sort of that type of process.

[00:40:41] WARREN BUFFETT: Yeah, it’s exactly to the point. I mean, I just learned more as I went along. I learned enough. You know, I’d never, I’d heard of Occidental Petroleum. Occidental Petroleum happens to [have] been a descendant, not a descendant, but it’s a continuation of Cities Service, which was the first stock I bought. And, of course, I knew a lot about the oil and gas business, but I didn’t know anything about geology, so I knew the economics of it. I had a lot of various things stored in my mind about the business, but I never heard of Vicki Hollub until, I guess, it was a Friday or Saturday, and we met on Sunday morning. We made a deal, but that was one sort of deal. And then as time passed, all [kinds] of different events happened. You know, Icon came in. I mean, there are a million things you couldn’t predict at the start, and I formed certain opinions as I went along, but then, I learned more as I went along. And then at a point when I heard an investor call, it put things together for me in a way… It didn’t mean I knew I had a sure thing or anything like that. I don’t know what the price of oil was going to be next year, but I knew that it was something to act on. So we did, and we’re very happy we did, and we still don’t know what the price of oil is going to be next year.

I don’t know what [Vicki] does, but I think the odds are very good that it was, but not a cinch, that it was a good decision, and we’ve got options to buy more stock, and when we get through with it, it could be a worthwhile investment for Berkshire. We’re in it, and we’re in it for keeps. There are other things that we own that we aren’t in for keeps.

Oh, incidentally, I should just throw this out, since there’s been speculation on it. We’ve sold [our stake in] Paramount. I was 100% responsible for the Paramount decision. I [have] read speculation that either Ted or Todd had some involvement in that. No, it was 100% my decision, and we sold it all, and we lost quite a bit of money, and that happens in this business, too. But actually owning Paramount made me think even further… I like to think deeper, but I certainly thought harder even about the whole question of what people do with their leisure time and what the governing principles are for running an entertainment business of any sort, whether it’s sports or movies or whatever it might be. And I think I’m smarter now than I was a couple of years ago. But I also think I’m poorer because I acquired the knowledge in the manner I did. But I just want to be very clear that A, we lost money on Paramount and B, and I did it all by myself, folks.

I don’t know whether I’ve anticipated one of Becky’s questions now, but we will find out. Let’s see now.

BNSF’s Margin Slip: Abel and Buffett on the Railroad’s Performance

[00:44:45] BECKY QUICK: Yes, you did anticipate one of the questions. Let’s go to another one. This question comes from Vincent James in Munich, Germany. In the chairman’s letter, Warren points out that the profit margins for BNSF have slipped relative to all five other railroads. However, Warren comments in the letter, “BNSF carries more freight and spends more on capital expenditures than any of the other five major railroads, and has a vast service territory second to none.” Given the comments from Warren about the clear strengths of BNSF, what explains the decline in revenue and profit, and in particular, the profit margins relative to the other five railroads? What are the issues relative to the other railroads, and what is being done to address them? Please be specific.

[00:45:31] WARREN BUFFETT: Okay. And I will… Well, how specific we get depends on what Greg wants to say. But Greg, it’s… It’s Greg’s responsibility. It’s my responsibility for the purchase and for the operation up till Greg took over. But I think I’ll let Greg answer that.

[00:45:55] GREG ABEL: Sure. Yeah, [what] Warren touched on… And the comments from the… As reflected they are very accurate. If you look at this quarter’s results or our last year’s results, they were both… They’re disappointing as shareholders and disappointing… relative to the other Class I railroads. And as highlighted in the question, there are five other Class I railroads. So it’s pretty easy to understand how you’re performing versus the others.

And there are a lot of other variables, but there are some very simple things to look at. When we look at where we’ve been with, associated with Burlington Northern Santa Fe (BNSF), I would… I would just back up a little bit because if you go back to 2021, the BNSF team and management team and the group, we’re making excellent progress on a lot of fronts when it comes to our operating [costs], and both being efficient and effective in how we’re operating the railroad. And I remember very specific comments from myself in 2022, where I commented that that was the year there were all the supply chain issues, a lot going on in the West Coast ports. Our trains were backed up in a variety of places, and we called that a reset year. And I think we did need a reset year on the operational side. But as we moved into ’23, the business cost level, and cost structure, we didn’t reset it to the underlying demand we were seeing. We anticipated more demand, and we did not reset our cost structure. And the team’s working very hard as we speak, to both reset the cost structure and allocate the cost resources where they need to be.

And when you go through something like that, what we’ve recognized as an organization… yes, the demand of the rail will drive a certain amount of the cost, but the reality is that the rail industry if you go back many, many years, it’s flat. There’s not a lot of growth in the industry. There are opportunities [to] become more efficient, and effective, and our margins can go up. But the reality is the demand is going to be flat. But it does move within different sectors of the rail. It can be in the consumer products, it can be [in] industrial, it can be [in] ag[riculture]. But overall, it’s generally going to be relatively flat. So we need to get our cost structure right, and we need to get it right, both for the coming year and for the long term. And that means it’s going to be a continuous exercise. We can’t stop. We can’t say, we’ve gotten far enough because our competitors, and we compete with the other rails, but we also do compete with the truck industry. We have to have a cost structure [that] allows us to compete both within our rail industry and within the transportation sector as a whole.

So the team at Burlington is working very hard to address the cost structure, just like we have in the past. I think one thing we do recognize when the other railroads have implemented precision scheduled railroading, there are other metrics that we have to continue to pay attention to and challenge ourselves. If we’re not at their level, what are the things that are driving it? So we’re going to… When they ask for specifics, I’ll give you a few. We have to look at our rail yards and understand how we’re managing that. We have to look at our locomotive fleet, both the size and how we’re utilizing that, and challenge ourselves. And we have to then go back to how we’re using our employee resources and allocating them across the business.

So there’s a lot to be done there. Our team’s 100% committed to driving to the right cost structure that’s going [to be] consistent with the underlying demand in the business, and then we can’t stop there, is the answer. So, a lot to be done, but we have a team that’s absolutely engaged and committed to it, and we’re going to make good progress in this current year.

[00:50:22] WARREN BUFFETT: At Berkshire, we want everybody to have the idea that there’s a lot to be done with every business, you know? So, I mean, it is… We built a remarkable, remarkable company, and [the] Omaha building company, [was] really remarkable. And there’s this question, after everything they did, that was something that was done particularly well, you know, digging a tunnel under the East River or something, [he] said it couldn’t be done. He would say he would be… He was pleased, but not satisfied. And that is exactly the way we want the attitude to be at Berkshire forever.

Omaha is a railroad town. If President Lincoln, in 1862, I think it was, had decided to pick St. Joe or Plattsmouth or anyplace else to build the transcontinental railroad, Omaha would probably [be] a little town of 20,000 or something on the banks of the Missouri. But [because of] Lincoln’s desire to make this the eastern connection and make a transcontinental railroad, Omaha just took off. So it’s been… It’s been railroading at its base. The… You know… And anybody that was interested in financial matters had to think about railroads. Plus, they had a certain glamour to them anyway.

But the interesting thing is that UP, which is our main competitor, fell way behind 20 or 25 years ago. Before Jim Young came in, in 2000, whenever it was, eight or so, I started buying three railroad stocks: Union Pacific, BNSF, and Norfolk Western, I believe. I don’t know why I wasn’t buying C&O, but in any event, Jim Young had done a marvelous job with being with Union Pacific. So we were on all three stocks. But what we did in 2009 is we were able… Well, we already owned 22% of it, but overall, it was $35 billion, which was a significant part of our capital. We were able to put it to work in a business we liked. And there are certain tax advantages that come in terms of making money in something that’s more than 80% owned. We call it 100% owned, in this case, versus making it through stocks. So it has a net benefit to us from making the same amount of money owning one of the other railroads, by owning all of the railroad, and we got $35 billion out during a recessionary period.

I think that was the worst quarter, the third quarter of 2009, maybe [that] the rails had had for a long time. So it’s worked out. Actually, it’s worked out very well, but it’s because we were putting out capital in 2008 and [2009], and if we put money in anything, we’d have made a lot of money. But it’s more satisfying, and it’s actually better in certain ways, tax-wise, to make it from something that’s 100% owned [than from] a bunch of 5% or 10% owned businesses.

As I mentioned in the annual report, railroads are absolutely essential to the country. That doesn’t mean they’re on the cutting edge of everything. They’re just essential to the country. And that’s why the government, I think took them over one time, and they negotiated what our labour settlements will be and everything. And if you shut down the railroads of the country, it would be incredible, the effects, but… And they would be impossible to construct now. I mean, look at what’s happening in California when they’re trying to build a [high-speed rail] line. I mean, you know, everybody’s worried about the environmental effect of every mile, and, you know, and what will happen to the various species of birds. Can you imagine the rail system of the United States being built? It would take decades unless [there] was a war on and the government took over things and just ordered them. You can’t create it.

So we love owning a business like that. It’s going to be around 100 years from now, [it] won’t be the best growth business in the world at all during that period, but it will be essential. And what it earns in relation to its replacement value is a pittance. But we’ll do fine in terms of what we paid for it. And we’ll distribute substantial amounts in relation to what we paid to Berkshire in a very tax-efficient way.

So [the answer to] the question is, what are the issues relative to the other railroads? It wouldn’t have been the end of the world at all if we bought the Union Pacific, and Jim Young had stayed alive to run it for us. That would have been great, too. But we had the opportunity to buy BNSF, and it’s been good for them, and it’s been good for us. And we think it’s been a very important asset to the country. And I just hope we can find something in other industries that makes as much sense as that, where we can put a whole bunch of money to work at an advantageous time.

So, let’s go on to station three. Is that correct or not? Yeah. Okay.

Buffett’s 50% Return Strategy: If He Started Again with $1 Million

[00:56:59] SIRAPOB WU: Good afternoon. Mr. Buffett, Mr. Abel. My name is Sirapob Wu. [I am] a resident of New Zealand but originally from Thailand. This is my first time in America and [my] first time attending the meeting. The journey was rough, but it was all worth it because I can now personally thank you, Mr Buffett—and the late Charlie Munger, were he still with us—for organizing such a wonderful event and, most importantly, for being such exceptional role models and sharing your wisdom with us all these years. So, thank you.

Here’s my question for you, Mr. Buffett. Towards the end of 2018, you mentioned that you guarantee you could make a 50% annual return if you had to start again with under $1 million. The question is: if tomorrow you woke up in the body of a 20-year-old American, your name was now Warren À la carte, and you had some money to invest on a full-time basis, what method or methods would you use to achieve that return? Would it involve flipping through 20,000 pages of Moody’s Manual and similar publications to find cigar butts? Or would it be hunting for great companies at a fair price, as Mr. Munger would? Or would it be a combination of both, with opportunity cost serving as the final arbiter of which method to use, given that your investing universe had now broadened significantly? Thank you. Kob khun krab.

[00:58:47] WARREN BUFFETT: Good question. I’m glad you came. The answer would be, in my particular case, it would be going through the 20,000 pages. And since we were talking about railroads, you know, I went through the Moody’s Transportation Manual a couple of times. That was 1,500 or 2,000 pages, or probably 1,500 pages.

And I found all kinds of interesting things when I was [20] or 21. And I don’t imagine there’s anybody here that knows about the Green Bay and Western Railroad Company, but there were hundreds and hundreds of railroad companies, and I [liked] to read about every one of them. The Green Bay and Western… In those days, everybody had a nickname for railroads. I mean, that was just what [the] Northern Pacific was, the Nipper. And, you know, Phoebe Snow was one of them in the east that used to go up to Cornell, and the Green Bay and Western was known as “grab baggage and walk,” GB&W. And they had a… They had a bond that was actually the common stock, and they had a common stock that was actually a bond. And, you know, that that could lead to unusual things, but they wouldn’t lead to unusual things that would work for you with many millions of dollars, but if you collected a whole bunch of those, which I set out to do… And actually, that’s what impressed Charlie when I first met him because I knew all the details of all these little companies on the West Coast that he thought I would never have heard of, but I knew about the Los Angeles Athletic Club, or whatever it might be, and he thought he was the only one that knew about that.

And that became an instant point of connection. So to answer your question, I don’t know what the equivalent of Moody’s Manuals or anything would be now, but I would try and know everything about everything small, and I would find something. And with a million dollars, you could earn 50% a year. But you have to be in love with the subject. You can’t just be in love with the money. You really [have] got to just find it like a true… you know, essentially, like, you know, people find other things in other fields because they just love looking for it. A biologist looks for something because they want to find something, and it’s built into… I don’t know how the human brain works that much, and I don’t think anybody understands too well how the human brain works. But there are different people that just find it exciting to expand their knowledge in a given area.

I know great bridge players, I know great chess players. Actually, [Garry] Kasparov came to… Oh, [he] met Mrs. B. I’ve had the luck of meeting a lot of people that are unbelievably smart in their own arena and do some unbelievably dumb things in other areas. So all I know is the human brain is complicated, but it does its best when you find out what your brain is really suited for, and then you just pound the hell out of it from that point.

And that’s what I would be doing if I had a small amount of money and I wanted to make 50% a year, but I also wanted to just play the game. And you can’t do it if you really, if you don’t find the game of interest, whether it’s bridge, or whether, you know, whatever it may be, chess, or in this case, finding securities that are undervalued. But it sounds to me like you’re on the right track. I mean, anybody that’ll come all the way to this annual meeting has got something in their mind other than bridge or chess. So I’m glad you came, and come again next year.

And now we move to Becky.

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Protecting Berkshire: Limiting the Influence of Self-Interested Agents

[01:03:12] BECKY QUICK: This question comes from Denny Poland, a shareholder from Pittsburgh. When describing the principal-agent problem, Mr. Munger said that capitalism often works best when the people managing the property also own the property. In recent years, agents of pension funds and asset management firms who do not have significant personal ownership stakes in Berkshire have forwarded proposals that were not in the economic interest of shareholders. What can be done to limit the negative influence of these agents in the decades after you’re no longer able to cast significant votes against them?

[01:03:47] WARREN BUFFETT: Well, that’s a very perceptive question, and it’s been answered in a temporary manner, but who knows how the situation will develop in the future? All I know is that you have a wonderful hand at Berkshire Hathaway, but you have to be able to think your way [through it]. I mean, obviously, you have to think your way through political realities. You have to think your way [through] what will cause… You want to be on… You want to be regarded as an asset to the country because you’ll find more solutions if you are an asset. You owe [it] to the country anyway. But beyond that, you’ll find more solutions than if you’re regarded as evil or something, and worse yet if you deserve it.

So it’s something that’s constantly in our mind, and it needs to be in the mind of the directors, and they need to think for themselves on this rather than bow to conventional wisdom, which, you know, in a sense, you don’t want to become a cynic about life, but almost everybody that approaches you, if you have tons of resources, [has] got some interest in figuring out how to use your resources to their advantage, and that’s true whether they’re in politics or whether they’re in investment banking or whether they’re selling you… Well, whatever it may be that they’re selling, I don’t want to do any injury to anybody, but life insurance agents see the advantage of buying life insurance, and investment managers who get paid based on assets managed [are] interested in selling you their services.

Imagine if everybody in this room were following the investment advice of somebody who said, “You know, for 1% a year, I’ll tell you how to invest your money.” And in 1950, when we started, in 1965, they would have said, “Well, buy Berkshire Hathaway,” and if they were around now and they saw the 1% deal, they’d be collecting $8 billion a year from people who aren’t getting any dividends from us. So they would have a different interest in the kind of contract they worked out with you than you would have. And [the] best thing to do was just pay them a commission one time and own the stock.

But you have to be alert to how what human nature does to both other people and to you. And then, you know, if you think it through well and actually listen to what Charlie has told you, you’ll have a big head start on most people.

There’s one thing that I should mention that really is terribly interesting about Charlie. Charlie knew the importance of psychology and human behaviour and incentives and all of that. He figured that out very early. And, of course, he gave some talks, even on 25 or so ways, whatever it happened to be… I don’t remember the exact number of different ways that one person could take advantage of another by understanding how humans behave. And then after doing a magnificent job of explaining it… He believed in understanding what others would do, but he thought it was beneath him to actually use those methods to manipulate people.

[He’s a] really interesting human being that thinks through the psychology of human behaviour and figures out, you know, how you become a great insurance salesman or manager on Wall Street, or [how you] accumulate assets under management or whatever it may be. And you get very rich by understanding the weaknesses of others to some extent, and then [you] decide that it’s very important for you to recognize these [weaknesses] when they occur. It’s very important for you to know them better than the person who actually is using them, but not [to use them yourself]. And Charlie told me that in his lifetime after he figured this out, there were a couple of times when he used them. He wasn’t proud of it, but he also never lied to me. So he explained to me that there were a couple of times when he used some of these techniques, but he didn’t plan on using them anymore. [He] also wanted me to know that if I ever did something like that, I wasn’t really behaving terribly, that he allowed for the fact that humans may misbehave.

So I’m sure that I behaved somewhat better before my marriage than I did afterwards in my enthusiasm for different activities, like dancing or something. And he said, “We all do it, but don’t do it again.” So that’s part of acquiring human wisdom. And speaking of human wisdom, we’ve just got that one book out there by Charlie, I mean, Poor Charlie’s Almanack, and that’s worth reading three or four times. I think I read Ben Graham’s book about five or six times. And each time I read it, I realized that I just needed to think a little more deeply about certain things. They weren’t complicated or anything. But, you know, it’s better to… If you’ve got some great instruction, like you get with Charlie, it’s better to read it several times than to just figure you’ll just read every book once [that]’s in the library.

Okay, let’s go to section four.

Buffett on Heroes: The Power of Choosing the Right Role Models

[01:10:47] JEFF RABELIER: Jeff Rabelier from Tulsa, Oklahoma. And I’m thinking of Dr. Graham, Mr. Munger, [and] your father. And my question is, for all of us, but it’s probably especially for the younger people in the room, [about] the importance of picking the right heroes in life [and] choosing friends wisely, and maybe tell us a story, if you could, about each of those folks. Thank you, sir.

[01:11:18] WARREN BUFFETT: Well, there’s no question. You’re 100% right in terms of having the right heroes. And, you know, you’re lucky if you get them. I mean, Charlie had Charlie Adams, I… [Charlie] had… And the interesting thing, my sister is here today, my younger sister, [one of] the two survivors. And we both experienced having the same hero, even though as we grew older, we saw that we didn’t agree with plenty of his ideas, but we did agree with his values and motivation. And that’s, that’s a better lesson than having somebody that [is] reading to you from a catechism, that has got a lot of rules in it, which are pretty good rules, but… but there’s a special, special place for somebody that is going to continue loving you even if you break some of the rules. And that’s what Charlie had in his life, [and] what Bernie and I had in our life.

So I would just repeat what you said. I don’t need to give you a bunch of… well, when I ran away from home, I’ll give you a specific example with me. When I ran away from home and went… we hitchhiked up to Hershey, Pennsylvania, and got picked up by the state police and everything. And I talked these other two guys into it, and we lied like crazy to the state police, you know, saying we had our parents’ permission. Some kid at the place where we stayed had tipped them off that we’d run away from home.

And we started, like I said, [the] state police picked us up. We decided two things. You know, we decided to tell them a bunch of lies about the fact [that] we had our parents’ permission. And we decided we better get out of [Hershey] because these cops were going to find out sooner or later. And so anyway, we end up back in Washington after a couple of days. And when I walked in the door, well, one of the boys’ mothers… and this other kid was [the son of] Congressman Roger Bell. And his mother was in the hospital over this whole thing. He’d taken out his cash and his savings bonds. And so she was sick. And Judge Bell, her husband, was all concerned and everything. And I walked in the door in Washington, and my mother said, “How come he came back so soon?” And my father said, he said, “I know you can do better.”

And I just paid more attention to my father than [to] my mother. So you want to have the right heroes, and you don’t have to have them. It’s not [about] the heroes based on what they’ve accomplished. It’s the people that you want to be [like] yourself. And if you copy the right people, you’re off to a great start. And I don’t mean [a] great start about making money. I mean a great start about living your life. So you can check with my sister Bertie, who’s here, and see if I’ve told the story correctly.

She ran away from home, too, incidentally, but she didn’t get as far as I got. She was running away to go over to my grandfather’s house, which was about 2 miles away.

But I don’t want to denigrate her runaway attempt, at least, because she was much more accomplished than I am in all kinds of other things. But when it comes to running away, I definitely outclassed her.

Okay, let’s go to Becky.

Berkshire’s Pilot Deal: Lessons Learned from a Contentious Acquisition

[01:15:30] BECKY QUICK: This question comes from Vedant Sharma in India. Warren, you and Charlie have often said that you were able to identify the people you want to go into business with and have had an exceptional record in that.

However, in the case of Pilot, we noticed that the final stake purchase ended up in a dispute and had a sense of smart accounting, to put it one way, to squeeze a little more out from the deal than was deserved by the seller. Knowing well that this has been said, settled out of court, and needs due confidentiality, I would like your views on some of the lessons learned that may be beneficial for future deals to watch for and for coming leadership to look out for as well.

[01:16:09] WARREN BUFFETT: Well, I’ll make two comments on that. A couple of the directors had their doubts about going in, and in any event, Pilot is working out well for us. And my friend Sam Butler one time said to me that, and he was talking in general about certain kinds of situations, but he said, well, Warren, he said, all is well that ends, and that’s where we are.

So we’ll go to station five.

Well, while we’re getting to station five, I’ll tell you a little bit more about the fellow that is now running Pilot. I knew you may have met here that Greg had known for a long, long time. And he grew up in Omaha and came from a poor family and was raised by his mother. Right. And went to the same high school, public high school that my wife went to, North High.

Went to University of Omaha, set an all-time record in Russian yardage playing there. He was a bouncer, yes. Drafted by the New York Giants, as I remember. Exactly. Yeah.

But then injured, actually, in spring training, I remember, in some way. And so he ended up being an intern. Not an intern, but a trainee, you might say, for mid-American before I was there.

And now here he is, still relatively young, and he’s running a huge company, and we’ve got incredible confidence in what he will do. And we like very, very, very much the business that was created by Big Jim Haslam. And it really is almost an only in an American type story, but it does show you with somebody with some real stuff and with a mother that believes in them and with bad breaks along the way. I mean, imagine how you’d feel if you were drafted by the New York Giants and then you suffered some injury in spring training or something. I mean, you spend your life, it just, it hurts, but it’s not an experience I would have ever had.

That was the last guy chosen. But to see that he’s running a company depends on the price of deal, but it’s a huge company.

What does he have, 25000 employees or something?

And he’s got many, many, many years to go. So I couldn’t be more pleased about not only the acquisition of Pilot but just what it tells you about America. You can, what do you have to look up to? Read about them on Google or an interview with Adam.

[01:19:49] GREG ABEL: Yeah, I try and think if it’s a podcast.

[01:19:52] WARREN BUFFETT: Yeah, he’s got a podcast. Podcast that will just blow you away. And if you don’t think this is a great country, it has a lot of great people. All you got to do is read that podcast.

[01:20:06] GREG ABEL: But we do have a great set of assets. You know, if you look at Pilot, we have 800, more than 800 stations, travel centers, and just so everybody knows, I mean, the beauty of that, and there’s a question regarding this morning around fuel choices at Pilot. And the exciting thing is, in the end, Pilot’s going to serve whatever fuel our customers need. It can be electric, it can be renewable diesel, it can be diesel or any of the various sustainable fuels.

But the point is, it has exceptional locations that are on the interstate highways. Hundreds of them. Hundreds of them. And we bought an incredible franchise and now we have a great leadership team in both Adam and his team that’s around him. So we’re pleased where that opportunity will go.

[01:20:56] WARREN BUFFETT: Yeah, we’ve got probably the average one might be ten or twelve acres or something like that zone commercial on interstates throughout the whole United States. Who knows? But what was created there is amazing, too. You had a fellow that played at the University of Pennsylvania, I mean, the University of Tennessee, and undefeated and came away from this football team and you think, well, another football player, you know, maybe he goes out and, and there may be some intermediate parts in the story a little bit, but he buys a gas station and he turns it into something that is huge. So we’re really delighted with it.

And it’s another kind of only an American story.

You know, how many of us can become an all-American, number one ranked team, let alone start a business that goes on these sorts of heights? So we feel very good about it. Becky?

[01:22:11] GREG ABEL: No, I think they’re ready for five now.

[01:22:14] WARREN BUFFETT: Oh, I’m sorry.

[01:22:15] GREG ABEL: He’s up there now, ready to go.

[01:22:16] WARREN BUFFETT: Okay, go. Do it.

Buffett on Longevity: Luck, Learning, and the Power of Compounding

[01:22:18] ZHANG YABO: Hello, Miss Buffett. My name is Zhang Yabo. I came from Micro City, Hainan, China.

So I want to express my sincere gratitude for you, for the extraordinary value you generated for shareholders and the positive influences you’ve had on a younger generation of investors like us. And my question relates to the concept of maximizing the duration of compounding. As individuals age, the quality of compounding inevitably diminishes. What are your secrets in maintaining your sharp man, extraordinary judgment and great physical condition?

We wish you well. Thank you.

[01:23:10] WARREN BUFFETT: Well, you don’t know me well, but that’s. I like. Just keep talking.

Well, I, you know, you have to be just plain lucky. I mean, there’s no question about it that there’s a hundred or a thousand. You know, multiply the number of times that some drunk could have pulled out of the car and broadsided me, or, you know, just the bad luck you can have in life. And I can say my great skill has been avoiding bad luck, but that isn’t a skill.

That’s luck or bad activities. And then to get to be. I would not have been if you’d taken my high school class. And you say a couple of you are going to live to be 90. Men are going to live to be 93, maybe I’ve got.

You know, I wouldn’t. I would not have been a heavy favorite, I can tell you that. And I wouldn’t have bet on myself. But you just. Now, you should make the most of your luck when you get it.

And sometimes I’ve done that and sometimes I haven’t.

I mean, it is absolutely true that if I had to do it over again, there’d be a lot of different choices I would make, whether they would have ended up working out as well as things that worked out. It’s hard to imagine how they could have worked out any better. But it is interesting how many mistakes you can make if you just keep going.

And Charlie, you know, when he used to talk about that, that you just soldier through, you just keep going, and. But you still need luck, you know, you don’t want to. Anybody that says I did it all myself is just kidding. I mean, it’s just they’re delusional. You know, actually living a country with a life expectancy is pretty darn good, you know, so that alone is a huge plus.

I was born… if I’d been born… my sister’s here, and she was born female, and she’s just as smart as I was and everything. But even my own family, who really did well, particularly my dad, [loved] us all equally in a terrific manner. But he still told me that… Well, [my sister] was born ten years after the 19th Amendment was passed, but he basically told my sisters to marry young [because] “you still have your looks.” And he told me that the world… that [the] power [was] in [my hands] and [I] really could do anything. Well, I found there were a lot of things I couldn’t do, but the message given to females and males was incredibly different by the most well-meaning and loving of parents.

You know, like I say, in 1930… I mean, it’s been that way for millions of years. It’s changed quite dramatically, but obviously not completely, but during my lifetime… but it’s been during the latter half of my lifetime. If you take my sisters, if they’d been born even five or ten years later, they still would have been getting instructions when they went away to college, to be sure, and get married while [they were] young, [or get] arranged so that you’re going to be married while you’re in school, because after you get out, all the good ones are taken. Bertie was telling me that was a message that [had] basically been imparted to a lot of the women she had met, obviously.

So it really… It’s extraordinary how much progress we’ve made, but it’s unbelievable how long it took to get it made. I mean, it really does make you wonder about, you know, we’ve got all these heroes from American history and all the wonderful things they did, but how could they say, “All men are created equal” and then write a Constitution that… you know, allowed women not to be able to own property, [it] depend[ed] on the state. I mean, just terrible conditions.

But anyway, that’s how you learn about what humans can do. And I feel, and you’ve got to feel, better about the future for your kids than you would have felt a hundred years ago, no matter what the situation is.

Anyway, we’ll move to Becky.

Buffett’s Inheritance Strategy: S&P 500, Peace of Mind, and Estate Planning

[01:28:28] BECKY QUICK: This question comes from Linda Frazier in Westport, Connecticut. Dear Mr. Buffett, in the past, you’ve specified that 90% of your wife’s inheritance be invested in a low-cost S&P 500 index fund and 10% in short-term government bonds. But the market cap of the “magnificent seven” tech stocks now represents more than one-quarter of the market-cap-weighted S&P 500 index, which seems like a big bet on the tech sector. I was wondering if you would now recommend investing some portion of the funds in a low-cost, equal-weight S&P 500 index fund, rather than having all of the equity exposure in a tech-heavy market-cap-weighted fund.

[01:29:06] WARREN BUFFETT: Well, that’s an interesting question. And I will tell you that I revise my will about every three years or so, and I get little thoughts from time to time, and then you don’t change it. Every time you do it, you [change] a tiny thing. But the one section I haven’t changed is that, that with my wife, [she] got left a huge amount of money by practically anybody’s measurement, except [a] pittance compared to what I’ve accumulated in total. And it won’t make one bit of difference to her in life whether she beats the S&P or anything else. All I want to leave is plenty of money to take care of [her] way beyond anything she’ll ever spend, and at the same time, give her as much peace of mind as possible and really make sure that the trustee who administers it doesn’t really have to worry about whether… it just doesn’t make any difference whether she beats the S&P or not. And the main thing is that she feels that… She feels that she’s in a financial position, which, of course, she will be, that she doesn’t even need to think about it. And the trustee doesn’t have to worry about getting sued or anything else.

So it’s simply not an economic [decision]. Now, obviously, with 99% plus of what I have going to philanthropy, and I’ve got my three children… The one good thing is that at the age of 70, 69, and 65, they have matured remarkably, probably more than their father.

But at the same time, they’ve got less time to work with the money than they would have if they were 50 or something like that. So you do the best you can in accomplishing your objectives in your will, and in the end, you know, you can’t… you don’t know what’s going to happen after you die, but you make sure that, to the extent that you leave, you have a lot of money to leave. You [want to] take… Obviously, you want to say thanks to a lot of people, and [to] quite a few people in terms of specific requests, you want to take care of your family.

But in my case, that requires practically no money and a fair amount for taxes. But I have, and my children are in charge of what happens to the funds that are left. But like I say, the problem is when you live as long as I have, and the kids get older, who knows what happens with mortality tables? And they’re the ones that I really want to see handle the distributions. And they will, and they’ll be very good about it. But if we’re all alive three years from now, they’ll be three years older. So everything… you can’t solve everything in life. You do the best you can with it.

People do interesting things. I’ve been around probably as many rich people as almost anybody, and [for] a fair number of [them], I know what they’re doing or have done with their funds. And the idea that you can have a huge amount of money and leave everybody very rich and have people liking each other less when it all happens… Humans are really… they are interesting to watch. Some of them handle it beautifully, and others [do] terribly. The one thing lawyers will always tell you is don’t use codicils. In other words, you know, when you change your mind on a will, just write a new one, but tear up the old one. Don’t do it by just adding codicils.

But I believe I’m correct… [I’ve] certainly read it… That Paul Getty, who was the richest man in the world, presumably at one point in the 1950s or 1960s, and [he] was a very interesting guy to read about, and he had five wives, and he’s the one whose grandson was kidnapped, and they sent Paul Getty an ear of the child and everything. I mean, it’s not a happy life when you get through it. But the one, one thing he did that was kind of interesting, he actually liked to use codicils because I think he had like 25 of them. And it was kind of his way of writing, “Well, I’m taking you out of the will because…” you know, and so he sort of delighted in explaining through his will how he felt about all these people.

I mean, you really get some strange things revealed in a will. I just read about a will of a fellow that made a whole lot of money and was leaving it to his… I don’t know whether it was children, grandchildren, whatever it may have been, but in any event, his opening line in his will is, and this was done some years ago, but I know something about the family. His opening line, in effect, said, “I’m writing this will while I am [riding] in the economy section of Eastern Airlines, number such and such.” I mean, he believed in getting right to the point [about] what the people who were recipients, how they should live, and he was going to be judging them.

It’s just so darned interesting to watch people’s wills. But one guy left a lot of money to his wife on the condition that she remarry, so that at least one man would mourn his passing.

Well, I’m not giving legal advice here, as I always say, but I feel very, very, very good about how things have turned out. And I wish I could figure out ways better to use the really vast resources I’ve got [to address] some of the really important questions of the world, but I haven’t been able to do that. [I had] goals when I was 30 or 40, and [I] may have written them in [my] will then, in terms of what the world needed [to be] done and how the money could be used. And unfortunately, I decided that they weren’t feasible to accomplish. And of course, I was setting out to accomplish things that were important [that] nobody’s solved yet, so you [have] got to expect that… why should I be able to solve them?

But nevertheless, it’s an interesting… And the one thing about it is everybody here, I don’t know about the ones who’ve come from other countries, but you should have a will because if you don’t have a will, you still have a will, and it’ll be whatever the state says. And it’s amazing. Four American presidents died intestate, without will. Four. You know, we’ve only had 45. And imagine becoming president of the United States and not having a will. But you can look up somebody recently, I think, Lincoln, I’m certain Lincoln was one of the four. And here’s a man, I mean, I don’t know what you can always say… Well, he didn’t get around to it, but that’s hard to imagine why Abraham Lincoln would have died intestate. I’m sure we’ve got some Lincoln scholars out there that will write me after this and explain why, and I’ll be interested to receive their letters.

But human beings are human beings, and we all have weaknesses and peculiarities and everything else. And don’t be too hard on yourself, because you have some of those. But don’t be totally forgiving either. You can change the future. You can’t change the past, but you can change the future.

Okay? Station six.

AI and Berkshire: Assessing the Risks and Opportunities

[01:38:39] CAROLINE: Good afternoon. My name is Caroline, and I’m a lawyer in San Diego.

Remember, Mr. Munger was once an attorney, too.

First, I’d like to sincerely thank you, Mr. Buffett, for your business integrity, tireless leadership, and generous contribution to philanthropy. My question for the distinguished panel of two is, now that the AI genie is out of the bottle, as someone astutely put it earlier today, what business in Berkshire Hathaway may be most at risk with AI?

[01:39:20] WARREN BUFFETT: Well, that’s a wonderful question. The problem is I really don’t know anything about AI, obviously. [It will affect] anything that’s labor-intensive and that it can create an enormous amount of leisure time. Now, what the world does with leisure time is another question, whether more leisure time… I know an awful lot of people think when they go to work at first, what they want is leisure time. And what I like is actually having more problems to solve.

But AI is profound. That’s what makes it… Makes it a genie. [The question] is what [is] going to happen? I could tell a few genie jokes about [it], but… I guess… When we probably, I don’t know what, you know, in terms of our businesses, they’ll figure things out. I mean, we’ve got smart people. It’s obviously, if it’s used in a pro-social way, it’s got terrific benefits to society.

But I don’t know how you make sure that that’s what happens any more than I know how to be sure that when you use two atomic bombs in World War II that you knew that you hadn’t created something that could destroy the world later on.

[01:41:11] GREG ABEL: Yeah, I think when we think of AI at a lot of the business units, I mean, we’re truly [in the] early [stages], trying to think how does it make us more efficient, more effective? I mean, it results in more idle time. And we’re probably not thinking of the iterative AI where we’re looking at very specific processes where our people can implement it. And either at times it displaces the labor, but then hopefully there’s other opportunities [for them] within the business.

But I think when you think of all our businesses, I mean, we do have a heavy labor workforce [in] a lot of them, but I think at the stage we’re at as a company and maybe where [AI] is at right now, it’s really around how do we do things more effectively, more efficiently, [and] more safely, if it involves dangerous processes? So we’re [in the] early innings.

[01:42:07] WARREN BUFFETT: John Maynard Keynes was just wonderful to read [and had an] incredible mind. But in around the time I was born, he wrote a book about what could happen. I don’t know whether it was in the next hundred years or whatever. And he predicted correctly that output per capita would grow at this incredible rate that it has. But in terms of speculating as [to] what people would do with that, I mean, this guy was unbelievably smart, but it hasn’t developed exactly the way he predicted. He was right about what was going to go into the equation, but he didn’t have it figured out exactly what the result would be. So it is really… well, we didn’t know when we were developing the bomb that there would probably be, very soon, nine countries, three of whom we should worry about plenty, that will have what they have, but we didn’t really have any choice.

And you could have had all kinds of papers written on [the subject] and everything else, but we were going to do it anyway. We needed to do it. And if you haven’t read it, it’s fascinating to go to Google and read the letter by Leo Szilard and Albert Einstein to President Roosevelt, written about a month before, almost exactly a month before Germany [moved] into Poland. And it laid out… well, Leo Szilard knew what was going to happen or had a good hunch of what was going to happen in terms of nuclear bomb development. And he couldn’t get through to Roosevelt.

But he knew that a letter signed by Albert Einstein would [get his attention]. So it’s probably the most important letter ever written, and you can read it, which is just fascinating to me, but that started the Manhattan Project. That started it. Just everything flowed out of it.

And I’ll bet anything that Roosevelt didn’t understand it, but he understood that Albert Einstein [had] sent [him] a letter, and he probably knew what he was talking about, and he better get… he better start the Manhattan Project. It is just unbelievable what happens in this world.

Anyway, let’s move on to Becky, I guess, is next, right?

Buffett’s Worry: Fiscal Deficits, Not Debt Quantity, Pose the Real Threat

[01:44:59] BECKY QUICK: Yep. Randy Jeffs from Irvine, California. The March 25, 2024, Wall Street Journal reported that the Treasury market is about sixfold larger than before the 2008-2009 crisis. Do you think that at some point in time, the world market will no longer be able to absorb all of the US debt being offered?

[01:45:20] WARREN BUFFETT: Well, I would say the answer, of course, I don’t know, but my best speculation is that US debt will be acceptable for a very long time because there’s not much alternative. But it won’t be the quantity. The national debt was nothing to speak of for a long, long time. It won’t be the quantity. It will be whether in any way inflation would get let loose in a way that really threatened the whole world economic situation. And there really isn’t any alternative to the dollar as a reserve currency. And you get a lot of people who give you a lot of speeches on that, but that really is the answer.

And Paul Volcker worried about that back in 19… before 1980, but he had threats on his life. And I happened to have a little contact with him at that time. He was an amazing, amazing fellow that, in effect, decided that he had to act, or [else] the financial system would fall apart in some way that he couldn’t predict. And he did it, and he had people threatening his life and [doing] all kinds of things, but he was the man for that crisis. But it wasn’t the quantity of US debt that was being offered that threatened the system then. It was the fact that inflation and the future value of the dollar, the “cash is trash” type thinking that… that was setting up something that could really affect the future of the world in terms of its economic system. And Paul Volcker took it on, and he was [as good as] it could be.

And if you haven’t read a book or two about him or the one he last wrote, you really ought to take a look at it. But it is… I don’t worry about the quantity, I worry about the fiscal deficit, but I’m not a worrier just generally. I mean, I think about it, but I don’t sit [around and] get up, work myself into a stew about it in the least. But I, but I can’t help thinking about it, and that’s… we’ve got a… we’ve got a great [deal of] attention… It’s interesting, I think [the] media enters into this and the focusing that focuses on the Fed, and they, you know, they just love it because things are always happening, and economists are always saying what’s going to happen with the Fed and everything else. But the fiscal deficit is what should be focused on. And Jay Powell is not only a great human being, but he’s, he’s a very, very wise man, but he doesn’t control fiscal policy.

And every now and then he sends out a kind of a disguised plea [to] please pay attention to this because that’s where the trouble will be if we have it. As one of the comics used to say, there was a stand-up comic [who] used to say, “Who have I forgotten to offend after this talk?” And I always feel like that after these meetings. But we’ve got time for at least one question and maybe two. But let’s go to station seven.

Buffett on Life’s Trade-Offs: Regrets, Priorities, and Kindness

[01:50:09] DENNIS: Hello, my name is Dennis from Gifhorn, Germany. [This is] my first time here. I’m here with my friend who would, by the way, love to invite you to dinner. You talked about the importance of heroes, and we are very happy and thankful that we have you as our hero with great values, and thank you for that. First of all, my question is, it is clear that you [have] achieved great success in life. Earlier you talked about every investment having [an] opportunity cost. From what I’ve learned in life, that does not only apply to investing your money, but also to investing your time. Every hour you spend in your office is an hour you cannot spend with your spouse or children. With the life experience you have now, if you had the possibility to start all over again, would you set your priorities any different? If yes, how and why? And what’s the best way to invite you to dinner?

[01:51:08] WARREN BUFFETT: That definitely won’t be one of my priorities if I figure out how to do that. But don’t take it personally, because you can figure [it] out [in] the maximum longer period I’ve got.

I don’t think… I mean, I can figure out all kinds of things that should have been done differently, but so what, you know? I mean, I’m not perfect. I don’t believe in [a] lot of self-criticism or being unrealistic about either what you are or what you’ve accomplished or what you’d like to do. You do the… you know, you do a lot of things, and who knows whether somewhat different trade-offs… You know, you just can’t… you can’t… You don’t know what the paths would have led.

I feel… I don’t think there’s any… any room in beating up [on] yourself over what’s happened in the past. It’s happened, and you get to live the rest of [your] life, and you don’t know how long it’s going to be. And you keep trying to do the things that are important to you. If I was a doctor or if I was [in] all kinds of different professions, I might do different things, but I really enjoy managing money for people who trust me. I don’t have any reason to do it for financial reasons. I’m not running a hedge fund or getting an override [or] anything, but I just like the feeling of being trusted. Charlie felt the same way. You know, that’s a good way to feel in life, and it continues to be a good feeling.

So I’m not really looking to change much. And, you know, if I’m very lucky, I get to play it off for six or seven years, and it could end tomorrow. But that’s… That’s true of everybody. Although the equation isn’t exactly the same. But I don’t believe in beating yourself up over anything you’ve done in the past. And I don’t believe in… well, I believe in trying to find what you’re good at, what you enjoy. And then I think the one thing that you can aspire to be, because this can be done by anybody and it’s amazing… [it] doesn’t have anything to do with money… but you can be kind. You can be kind if you’re… And then the world’s better off. I’m not sure that the world will be better off if I’m richer, but there’s no question that… I mean, you know, kind people… and in the end, aspire to be more… Or I’m sure many of you are [kind] yourself, but just aspire to be more.

So… And I guess we can take one more question from Becky, and then we’ll wind up.

Munger’s Ethical Bequest: Duty, Kindness, and Buffett’s Interpretation

[01:54:36] BECKY QUICK: This question comes from Devon Spurgeon. On March 4th, Charlie’s will was filed with the County of Los Angeles. The first codicil contained an unusual provision. It reads, “Averaged out, my long life has been a favored one, made better by duty, imposed by family tradition, requiring righteousness and service. Therefore, I follow an old practice that I wish was more common. Now, inserting an ethical bequest that gives priority not to property, but to [the] transmission of duty.” If you were to make an ethical bequest to Berkshire shareholders, what duties would you impose and why?

[01:55:19] WARREN BUFFETT: I’d probably say, “Read Charlie.” I mean, he’s expressed it well, and I would… Well, I would say that if they’re not financially well-off, if you’re being kind, you’re doing something that most of the rich people don’t do, even when they give away money. But that’s on the question of whether you’re rich or poor. And I would say, if you’re lucky in life, make sure a bunch of other people are lucky, too.

Okay. Just in case… You know what my advice to myself would be [and] has been during this period. So we only got 33 questions, or whatever it is. But thank you very, very much for coming, and I not only hope that you come next year, but I hope I come next year.

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