Berkshire Hathaway Annual Meeting 2025 Transcript

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Berkshire Hathaway Annual Meeting 2025 Transcript Morning Session

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Introduction and quarterly numbers

[00:00:00] Warren Buffett: Everyone will please take their seats. This is my 60th annual meeting, and it’s the biggest, and I think it’ll be the best yet. Before I start, I’d like to give you a few figures from yesterday because we have set all kinds of records. Yesterday, we had 19,700 people join us in the afternoon between noon and 5:00, and that was up from 16,200, which was the previous record the year before, and in every aspect, we set records. See’s Candy to the $317,000 against $283,000 the year before, and most of these were limited by capacity. I mean, there were lines throughout the day. Brooks did this 310,000. This was an all-time record sale for them, and I think they have close to 3000 runners lined up for Sunday, which is a lot of people that get up I think we’ve had 2200 to 2400 before, but 3000, and that doesn’t count me, and it won’t count me, and I could go up, and down the line. Jazwares, around 250,000, doubled from the previous year. They just sell as fast as they can, and most place has people lined up at the cash register.

Sometimes they’re a lot longer wait than we wish they were, but we’ll learn the game eventually, and it goes on, and on. Every company sets records, and there’s no way of knowing how many people we have here. Today, we have people listening in around the world, but I think we’ll probably set records in a great variety of ways, and we’re going to have, in a minute, we’ll get to the question, and answer, but I would like to first introduce our directors, and I’m] Warren Buffett, and I was born, and bred right here in Omaha. We have Greg Abel. He was born and bred in Canada, and we have Ajit Jain, who was born and bred in India, so we have a very diverse group.

In the audience, I will introduce them alphabetically, and if they stand as I introduce them, I know it will be an effort. But withhold your applause till the end so that we can get through the list, but we’ll start alphabetically with Howard Buffett, how I wish you would stand. Withhold the applause, and go to his head. Susan Buffett. We have Steve Burke, Ken Chenault, Chris Davis, and Sue Decker. Sue’s our lead director. Charlotte Diamond, Tom Murphy Jr, Ron Olsen, and I’ll have a few, and when we finish all of it, a few more things to know about him. Wally White, Merrill Whitmer, and with that, you’ve got our All-Star cast.

And Ron, if you don’t mind standing, I would like to point out that Ron and they finally got through an age director thing at Berkshire, I think we had five that were over 90 here not so long ago. But we put in the highest. Sue tells me anyway that it’s the highest age limit any of the companies she checked out came up with. But Ron has been on the board for 28 years and has been associated with Charlie Munger. Munger tolls for many years beyond that, and has been around it in a variety of times of crisis, joy, disappointments, surprises, and everything else at Berkshire, and has been of invaluable help to us. So I think I’d like to give a special hand to Ron Olson.

And I think I’ll do something else that isn’t done usually in annual meetings, but I haven’t had a chance. I listened to him on Thursday afternoon. It’s the only investment quarterly call that I listened to, but I listened to Tim Cook, and I understand it’ll be tough for me to see him from up here. But Tim Cook, there he is. I’m somewhat embarrassed to say that Tim Cook has made Berkshire a lot more money than I’ve ever made for Berkshire Hathaway. So, credit should be given to him, for I knew Steve Jobs briefly, and Steve, of course, did things that nobody else could have done in developing Apple, but Steve picked out Tim to succeed him, and he really made the right decision. Steve died young, you know, and nobody but Steve could have created Apple, but nobody couldn’t. But Tim could have developed it. I have to ask so. So, on behalf of all of Berkshire, thank you, Tim. There are a couple of other people I’d like to thank. I don’t do any work, in terms of the show or anything else around Berkshire, but what you see today is the product of a lot of people at Berkshire.

You know that they don’t think of themselves as the ones who are supposed to screw a light in and leave for somebody else specialists to come along, and do other things. The people of Berkshire put on this show every year, and our Chief Financial Officer and just everybody pitch in. It’s a remarkable organization that way, but it’s been led this year, in the last few years, by Melissa Shapiro, and she’s made this whole thing work. And then we got an idea a while back. Well, many years ago. Well, I’m thinking all the way back, maybe 65 years ago. I met Carrie Sova’s grandfather, and his wife, who had nine children, and Susie, and I joined a playhouse group. I don’t look like the kind of guy who would join the playhouse group, but it turned out to be a great move in many ways. First of all, I enjoy the plays, but beyond that, I met not only Carrie’s grandfather, who ran an insurance company in Omaha, Bill Kizer.

But I also met the pumpkin boys’ parents, Louie and Francis. So in one sort of accident, when I was in my 20s, I came up with all kinds of good things, and in connection with Carrie, her father ran a company called Central States, and later on, we bought that company, and then her father ran the company. Her sister worked for Berkshire some years ago, and then she decided to have a family, and subsequently had four kids, so she left, but Carrie moved right in, and Carrie has amazing talent behind, just like I’ve got many people who have talent you don’t realise. You give them some responsibility, and so, 10 or 11 years ago, I asked Carrie to do a 60th-anniversary book about Berkshire, and just use your imagination, she didn’t need to check with me or do anything. She never edited the book. She’d never published the book. She’d never dealt with the printers before, but she just went out and promptly put together this 60th-anniversary book.

And then this year, well then, Carrie, of course, got married, and had three kids, so she had to leave us. But we go to a baseball game once a year, and we invite some of our distinguished alumni, like Carrie, to join us, and Carrie, even though she was raising three children, and you may have met one or two of them on the last day or so, she volunteered to bring together the 60th-anniversary book, and which I asked for, and again, she took the whole thing. She just did it. She kept doing the things with her kids, and every now, and then I’d ask her how it was going, and she tells me how it was going, and so she put together this 60th anniversary book, and got it done by maybe a week before the meeting, because I get rid of the assignment very late.

And yesterday, we sold, I think it’s 4000 plus, 4500 maybe. Wait, wait, 4400. We printed 8000. We intended to print 5000, but we sold 4400 books yesterday, and we’ll have, I guess, some roughly 3600 out there today, it is kind of whimsical but accurate, and she came out with just the book. I hope she will come out with it, and then, as we went through this publishing experience, Carrie wouldn’t take a dime. But I did get her to name her; they were charity, and this Stevens Center, which takes care of all those people, and does a great many other things. It’s located about five or six miles from where we are here, south, and she has been doing a wonderful job. Her grandfather helped, Forman. Her husband now joins the board, and we are selling 20 copies of–this is a commercial place, isn’t it? We are selling 20 copies which we have sold 10 prior to the meeting. That’s all we let them sell, and we raised a few hundred thousand dollars in doing that. I think we sold one for $100,000.

But we limited it to 10, and the only difference in the $25 version is that Carrie and I signed them, but we saved six for yesterday, and the six brought $148,000, which is a pretty good average per book of about $20,000, and then I had them save four more. So this afternoon, when we disbanded at 1:00, the area right behind us had all the goods in the bookstore. They will sell the final four, and when they get all through, they’ll match whatever we’ve raised for the 20, and we’ll give the Stevens Center a boost both financially and in awareness.

And when you look at that book, Carrie really did the whole thing. I mean, there’s a lot of information in there, and she dug her within, and she came through a couple of times, maybe to check a fact or two, but she got material from the Munger family. She did a wonderful job, and I couldn’t get her to take a penny for it. So I’m going to have to do a lot of other things in the future.

OK. With that, I think we’ve covered all the business. Becky has questions that she’s received from all over the country, and perhaps outside the country, and she’s picked out a group of them that she has not shared with me, we will alternate questions between Becky, and the audience, which we have by zones, and that I will turn things over to Becky for the first question.

Warren Buffett’s view on tariffs

[00:17:08] Becky Quick: Thanks, Warren. This first question comes from Bill Mitchell. I received more questions about this than any other question. He writes, “Warren, in a 2003 Fortune article, you argued for import certificates to limit trade deficits, and said these import certificates basically amounted to a tariff. But recently, you called tariffs an act of economic war. Has your view on trade barriers changed, or do you see import certificates as somehow distinct from tariffs?”

[00:17:40] Warren Buffett: Yeah, well, the import certificates were distinct, but their goal was to balance imports against exports. So that the trade deficit would not grow in an enormous way. In fact, it had various other provisions in it that helped third world countries, at that time as they were called, perhaps catch up a little bit, and they had a variety of aspects to them, but basically, they were designed to balance trade, and I think you can make some very good arguments for the fact that balanced trade is good for the world, and the more balanced trade there is the better it will continue to be better.

For cocoa to be raised in Ghana, coffee in Colombia, and a few things, and over time, the American industry has gone from being an agricultural country. This was nothing but an ag country, I mean, but virtually, and that was only 250 years ago. We have become a very industrial country, and we did not want to make that a situation. In my view, we run greater, and greater deficits, building up greater, and greater debts against every side. I designed this import certificate thing, which Charlie thought was too much like a Rube Goldberg. I don’t know where they got, at the time, the name is, but it’s gimmicky. It’s certainly a lot better than, I think, we’re talking about now, and there’s no question that trade can be an act of war.

And I think it’s led to bad things. Just the attitudes that have been brought out in the United States. I mean, we should be looking to trade with the rest of the world, and we should do what we do best, and they should do what they do best. That’s what we did originally. I mean, we’re producing tobacco, and cotton 250 years ago, and we traded it, and we want a prosperous world. With eight countries with nuclear weapons, including a few others, what I would call quite unstable. I do not think it’s a great idea to try and design a world where a few countries say, “Hahaha, we’ve won”, and other countries are envious. So, my import certificate idea went to no place. I think we’ve got extra copies, with not a great demand for them copies, and if you’d like, and write to the office, I think we could probably send you a copy of it, but the main thing to do is that trade should not be a weapon.

And the United States, we’ve won. I mean, we have become an incredibly important country starting from nothing 250 years ago. There’s nothing been anything like it, and it’s a big mistake in my view when you have 7 1/2 billion people that don’t like you very well, and you have 300 million that are crawling in some way about how well they’ve done. I don’t think it’s right, and I don’t think it’s wise. I do think that the more prosperous the rest of the world becomes, it won’t be at our expense. The more prosperous we become, and we’ll then the safer we’ll feel, and your children will feel someday. But don’t expect my import certificate idea to go down there with Adam Smith’s Wealth of Nations. OK. Let’s go to Area 1.

Interest rates in Japan

[00:22:44] ST Jang: Mr. Buffett, Mr. Abel, and Mr. Jaen. Good morning. I’m ST Jang. I’m from Hong Kong. Mr. Buffett and Mr. Munger made a very good and successful investment in Japan in the past five or six years. The recent CPI in Japan is currently above 3%. Not far away from its 2% target. The Bank of Japan seems very determined to raise rates while the Fed, ECB, and other central banks are considering cutting them. Do you think the BOJ, Bank of Japan, makes sense to proceed with the rate hike? Will its planned rate hike deter you from further investing Japanese stock market or even considering realising your current profits? Thank you very much for arranging this great event every year. Finally, I wish you healthy always and keep holding this shareholder meeting.

[00:24:04] Warren Buffett: Thank you. Well, I’m going to extend the same goodwill to Japan that you just extended to me. I let the people in Japan determine their best course of action in terms of economics. It’s an incredible story, and it’s been about six years now, as you pointed out, I was just going through a little handbook that probably had two or 3000 Japanese companies. The one problem I have is that I can’t read that handbook anymore because the print is too small, and there were these five trading companies that had a special name form in Japan, but they were selling it at ridiculously low prices.

So I spent about a year acquiring them, and then we got to know the people better, and everything that Greg and I saw we liked better as we went along. So we got fairly close to the 10% limit that we told the company we would never exceed without their permission, and so we did ask them recently whether that limit could be relaxed, and it’s in the process of being relaxed somewhat. I would say that I’ll speak for the great beyond me that in the next 50 years, and I hope he’s running things in, we won’t give a thought to selling those. I mean, Japan’s record has been extraordinary. My guess is that Tim Cook would tell you that iPhone sales there are about as great as any country outside the United States. American Express would tell you that they sell their product very, very well in Japan. Coca-Cola, our investment, does extraordinarily well in Japan. They have a number of habits in a civilization that operate differently from ours.

In Japan, their containers, their soft drinks, they have a whole different sort of distribution system there. But we have been treated extremely well by the five companies. They talked with Greg primarily. I went over there a year or two ago. Greg’s more cosmopolitan than I am, so he isn’t saying much, actually. I don’t know how many times you think you’ve met with representatives of one company or the other?

[00:27:37] Greg Abel: Yeah. When you think of the five, there’s definitely a couple of meetings a year, Warren, and I think the thing we’re building with the five companies is one, it’s been a very good investment, but we are really, as Warren touched on, we envision holding the investment for 50 years or forever. But I think we are also building relationships to do incremental things with each of those companies, and we really do hope to do big things with them globally. They bring different perspectives and different opportunities, and we see that’s why we’re building that long-term relationship with them.

[00:28:16] Warren Buffett: It’s super long term, and they have different customs, they have different approaches to business, that’s true around the world. We don’t have any intention, in any way, of trying to change what they’ve done because they do it very successfully, and our main activity is just to cheer and clap. I can still do it, 94. So, we will own those.

We will not be selling any stock. I mean, that will not happen in decades. My guess is that they will find things because they cover the world pretty much, the five trading companies. We will find things occasionally that may be large for any individual company there. They may, in some way, be assisted by some help we bring to the situation, but that will be an expanding relationship. It’s too bad that Berkshire has gotten as big as it is because we love that position, and I’d like it to be a lot larger than it is. But even with the five companies, being very large, and they’re large companies in Japan, and we’ve got a market in the range of $20 billion invested, but I’d rather have 100 billion than 20 billion, and that’s the way I feel about it.

We have several other investments, but size is an enemy of performance at Berkshire, and I don’t know any good way to solve that problem. Charlie always told me that having a few problems was good for me. I never quite understood that, but if you listen to him more, you will understand that it’s not an impossible problem at all. The Japan investment has been right up our alley. Did you want to add anything to that?

[00:31:13] Greg Abel: No, I think you’ve touched it. As you said, it’s right up our alley, and I absolutely agree, Warren. I do believe we’ll see some very large opportunities long term, and that’s just been a great plus of that relationship.

[00:31:30] Warren Buffett: Yeah, I would say they would like to present us with opportunities. We would like to receive them. We’ve got the money. We both get along very well with each other, and they have different they have different customs than we have. They drink the number one Coca-Cola product. They drink over there, something called Georgia Coffee. So I haven’t converted them to Cherry Coke, and they’re not going to convert me to Georgia coffee. But it’s a perfect relationship. I just wish we could get more like it.

I never dreamt of that when I picked up that little handbook, it was about that thick, but sometimes two companies to a page, and a couple of thousand pages, I believe. But it’s amazing what you can find when you just turn the page. We showed a movie last year about Turn Every Page, and I would say that turning every page is one important ingredient to bring to the investment field. That’s what very few people do: turn every page, and the ones that turn every page aren’t going to tell you what they’re finding.

So you’ve got to do a little of it yourself, OK? Becky?

Berkshire Hathaway’s cash

[00:33:11] Becky Quick: This next question comes from Advit Prasad in New York. He writes, “Today, Berkshire holds over $300 billion in cash and short-term investments, representing about 27% of total assets. A historically high figure compared to the 13% average over the last 25 years. This has also led Berkshire to effectively own nearly 5% of the entire U.S. Treasury market. Beyond the need for liquidity to meet insurance obligations is the decision to raise cash, primarily a de-risking strategy in response to high market valuations, or is it also a deliberate effort to position Berkshire’s balance sheet for a smoother leadership transition, providing Greg Abel with maximum flexibility, and a clean slate for future capital allocation decisions?”, and I will add one line from another shareholder, Mike Conway, who asks, “Are you encouraged you may see some fat pitches coming your way?”

[00:34:15] Warren Buffett: I wouldn’t do anything nearly so noble as to withhold investing myself just so that Greg could look good later on. Now, if he gets any edge from what I leave, I’ll resent that. The amount of cash we have–We came pretty close to spending ten billion not that long ago, for example. We spend 100 billion, I mean, and those decisions are not tough to make. When something is offered that makes sense to us, and that we understand, offers good value, and where we don’t worry about losing. The one problem with the investment business is that things don’t come along in an orderly fashion, and they never will. I mean, it isn’t like every day the long-term record is sensational. But that is not a product.

See how we had 200 trading days times 80 years on it. I mean, 16,000 trading days. It would be nice if every day you got four opportunities or something like that, and they were expected to be equally attractive. You know, if I were running a numbers racket, you know, every day would have the same expectancy of that I would keep 40% of whatever the handle was, and so the only question would be is how much we transacted, but we’re not running that kind of business. We’re running a business which is very, very, very opportunistic. Charlie always thought I did too many things. I thought if we did about five things in our lifetime, we’d end up doing better than if we did 50, and that we never concentrated enough.

If we’ve got 335 billion now in treasuries, we would rather have conditions that have developed where we would have like 50 billion or something like that, but that just isn’t the way the business works. We have made a lot of money by not wanting to be fully invested at all times. We don’t think it’s improper, actually, for people who are passive investors just to make a few simple investments, and sit for their life in. But we’ve made the decision to be in the business. So we think we can do a little better than that by behaving in a very irregular manner.

If you told me that I had to invest, well, let’s say that we have roughly 40 billion a year coming in, and we start with 335. If you told me I had to invest 50 billion every year till we got down to 50 billion, that would be the dumbest thing in the world to invest in that manner. Things get extraordinarily attractive very occasionally. The long-term trend is up. Nobody knows, and I certainly don’t know. Greg doesn’t know. Ajit doesn’t know. Nobody knows what the market is going to do tomorrow, next week, or next month, and nobody knows what business is going to do tomorrow, next week or next month. But they spend all their time talking about it because it’s easy to talk about, but it has no value.

I’ve never found anybody I wanted to listen to on the subject. On the other hand, I’ve found the leafing through things like those big Japanese books that I can’t read anymore. That’s a treasure hunt, and every now and then, you find something, and occasionally, very occasionally, but it’ll happen again, that I don’t know when. It could be next week, it could be five years off, but it won’t be 50 years off. We will be bombarded with offerings that we’ll be glad we have the cash for, and it’d be a lot more fun if that happened tomorrow, but it’s very unlikely to happen tomorrow. Very, very unlikely to happen tomorrow, but it’s not unlikely to happen in five years, and then the probabilities get higher as you go along. It’s kind of like that. I mean, if you’re 10 years old, the chances that you’re going to die the next day are low. If you get to be 115 or something like that, it’s almost a cinch, particularly if you’re a male. I mean, all the records are held by females in terms of age, and I tried to get Charlie to have a sex change so he could test that. He did pretty well for being a male, I’ll put it that way. OK, station 2.

Real estate investing

[00:40:37] Jackie Han: Good morning, Warren, Craig, and Ajit. My name is Jackie Han. I’m from China and now work in Toronto, Canada. This is my 8th Berkshire Hathaway meeting at this point. I’ve probably spent more time with you than most people spend on Netflix. As you might guess, coming from a Chinese family, we always have a soft spot for real estate. So the usual question isn’t Why don’t you own a house? Is it why you are still buying stocks instead of more property? So here is my question. With today’s high interest rates and global uncertainty, do you still believe in being greedy when others are fearful, or the value investing facing new challenges in today’s environment? Thank you.

[00:41:25] Warren Buffett: With respect to real estate, it’s so much harder than stocks in terms of negotiation of deals, time spent, the involvement of multiple parties, and the ownership. Usually, when real estate gets in trouble, you’ll find out you’re dealing with more than the equity holder. But there have been times when large amounts of real estate have changed hands at bargain prices, but usually, stocks were cheaper, and they were a lot easier to do. So, Charlie did more real estate. Charlie enjoyed real estate transactions, and he actually did a fair number of them in the last five years of his life. He was playing a game that was interesting to him. But I think if you’d asked him to make a choice when he was 21. He had to be in stock exclusively. The rest of his life was in real estate. For the rest of his life, he would have chosen the stocks in the second. There’s just so much more opportunity, at least, in the United States. There’s so much more opportunity that presents itself in the security market than it does in real estate.

In real estate, you’re usually dealing with a single owner or a family that owns maybe a large property they’ve had a long time. Maybe they’ve borrowed too much money against it. Maybe the population trends are against them. But to them, it’s an enormous decision. When you walk down to the New York Stock Exchange, you can do billions of dollars worth of business, totally anonymous, and you can do it in five minutes, and the trades are complete when they’re complete.

In real estate, when you make a deal, a big deal with a distressed lender, and you know, when you sign the deal, then you go into another phase, then people start negotiating more things, and more things. It’s a whole different game, and a different type of person, to some extent, enjoys the game. We did a few real estate deals that came our way in 2008 and 9, but the amount of time that they would take us compared to doing something intelligent, and probably better, and securities, there was just no comparison. I mean, in a real estate deal, every sentence is as important as a person.

In stocks, if somebody needs to sell 20,000 shares of Berkshire or something, they call us, and the price is right, it’s done in five seconds, and it closes all the time. In stocks, partly that’s because they’re probably having their wires or phones or whatever it is recorded as to what they’ve said, and everything but the completion rate for working on anything. In stocks, assuming you got a meeting of the minds on prices, essentially 100%. In real estate, it just begins when you agree, and it takes forever. For a guy, 94, it’s not the most interesting thing to get involved in something where the negotiations could take years. In fact, if you go all the way back to Zeckendorf in the 1960s, he was going to change the world, and Century City, out in California, is a product of this. He was sitting on top of the world with the years building.

So people tend to get in trouble in that business. The banks usually don’t want to recognize it, but that takes a long time to go through the bank processes. They just got through redoing the Musk loan that he made when he was buying, three years ago, the company that’s now X, and you know, three years to work out a transaction where you’ve got parties on both sides that aren’t ready to act. We find it much better when people are just ready to pick up the phone, and you can do hundreds of millions of dollars worth of business in a day. I’ve been spoiled, but I like being spoiled, so we’ll keep it that way. OK, Becky.

AI and insurance

[00:47:00] Becky Quick: This question comes from Sam England in San Francisco, and it’s for Warren and Ajit. “As AI systems become more capable and harder to interpret, how do you see that affecting the insurance industry’s ability to assess price, and transfer risk? Are there parallels to past disruptions Berkshire has navigated in underwriting for capital allocation?”

[00:47:27] Warren Buffett: OK, Becky. Ajit got about a hundred points of IQ on me, and he’s just going to be here this morning, so I’m going to let him answer the question first.

[00:47:37] Ajit Jain: There is no question in my mind that AIs are going to be a real game changer, and it’s going to change the way we assess risk. The price risk, the sell risk, and then the way we end up paying claims. Having said that, I certainly also feel that people end up spending an enormous amount of money trying to chase the next new fashionable thing. We are not very good in terms of being the fastest or the first mover. Our approach is more to wait and see until the opportunity crystallizes, and we have a better point of view in terms of risk of failure, upside, and downside. So right now, individual insurance operations do dabble in AI, and try, and figure out what is the best way to exploit it. But we have not yet made a conscious, big-time effort in terms of pouring a lot of money into this opportunity, and my guess is we will be in a state of readiness, and should that opportunity pop up, we’ll be in a state where we’ll jump in promptly.

[00:48:50] Warren Buffett: I wouldn’t trade everything that’s developed in AI in the next 10 years for Ajit. So, if you gave me a choice of having a hundred billion dollars available to participate in the insurance property casualty insurance business for the next 10 years and a choice of getting the top AI product out of whoever’s developing it or having Ajit making the decision, I would take Ajit anytime, and I’m not kidding about that. OK, Station 3.

Portillo’s Hot Dogs

[00:49:50] Sean Siegel: Hello, I’m Sean Siegel from Chicago, IL. Thank you for investing your time, and to the executive committee for putting on this meeting, and for bringing together a diverse group of people in attendance under one roof Out of all the companies that Berkshire Hathaway owns, there was one that you acquired, the Chicago-based company Portillo’s Hot Dogs. How did you know that this would be a good fit for the overall company’s portfolio?

[00:50:26] Warren Buffett: Well, I’ll have to ask Greg about that because I don’t know anything about it. So maybe he bought it when I was looking the other way.

[00:50:37] Greg Abel: I think I’ve got to call a friend on this one.

[00:50:44] Warren Buffett: We own a lot of companies, but I do like to think I know most of them, but maybe a subsidiary of a subsidiary in some way. But I really don’t know anything about it. I’m sorry, but that may be a good thing. I do know something about hot dogs, though.

[00:51:06] Greg Abel: We do have a lot of companies in Chicago, Warren, through Marmon, and that’s been a great opportunity where we’ve accumulated a variety of excellent companies under that portfolio, but as you noted, I don’t believe Portillo’s falls under that.

[00:51:28] Warren Buffett: I look at the financial statements of about, perhaps, 50 or 60 of our companies every month but in the case of Marmon, for example, Marmon itself owns over 100 companies. It was created by Jay Pritzker, and his brother Bob, and it was a remarkable company when we bought it. But it was highly diversified already, and then we diversified it further.

So it is something of a Berkshire within Berkshire. We found that that’s working very good as an arrangement. It was interesting. Jay Pritzker was a remarkable manager, and there are various branches of the Pritzker family. So it really goes back to A.N. Pritzker before Jay, and so on. But in 1954, they changed the federal tax code very dramatically in the United States. It was quite a blow to me because I’ve been at Columbia, and I’ve been reading a J.K. Lasser book about the tax code, and then they went and changed the whole damn thing.

But ‘54 was a big year. Big change. Those years come every now, and then like 1986, and you may see a big one of these days. There was a company called Rockwood Chocolates in Brooklyn, and they made Rockwood Chocolate Bits, which we used to sell at the Buffet grocery store, and people made chocolate chip cookies out of them, and everything, and then it turned out that cocoa, which lately has had a big run to cocoa was $0.05 a pound in 1941 when LIFO was first allowed for insurance, for tax purposes. The Rockwood Chocolate company went into the LIFO. So they owned 30 million pounds of cocoa.

Then, cocoa took a run in 1955, and I just moved to New York. There was a provision in the new tax code that if you were in two or more companies, and you did certain things, and you’ve been in them for five years, and you got out of one of them there would be no capital gains tax on LIFO inventory gains, and tax rates were around 48%, maybe 52%, and so there was this huge profit cause the cocoa had gone up in price, but that made it terrible for them in selling Rockwood Chocolate Bits because the price of retail, which of the chocolate bits did not match what was going on at wholesale. Something almost identical has been happening in the chocolate business. Recently, Hershey Chocolate just came out, and they’re going to have a bad quarter, and we’re paying $4.50 a pound for chocolate because things are going on in West Africa that make cocoa prices go up dramatically.

In any event, Jay Pritzker bought control of Rockwood, the chocolate company, and as I say, I was 24 or 25 years old, and they called the meeting to split off one of the chocolate businesses in a way that would enable them to recognize the gain on this these cocoa beans without paying roughly 50% federal taxes on the gain. So I went to the meeting, which was in Brooklyn, and nobody was there, this was in the turned every page category, except one guy. I was 24, and he was 29, and it was Jay Pritzker. Nobody had shown up at the meeting, and it was kind of a crummy building they had. But they had a lot of corporates there, and Jay just gave me a lecture or a lesson, I should say, on the tax code, and I could have gone to graduate school for years, and never learned as much as he did, and then later, we actually bought the company, that Rockwood Company, but after he did some other things became the basis for Marmon, and Marmon, among other things, developed the car that won the first Indianapolis Speedway race, and it invented the rearview mirror, which I’m not sure is a great advantage in economics or anything. They used to have, at the Indianapolis 500, two people in the car. One guy was to look back and see what the other people were doing, and the other guy was to drive the car. Our guy got sick, and so they invented a rear-view mirror. So if you want to see what’s going on in the laboratories of Berkshire Hathaway, we’ve got people working on things like the rear-view mirror.

[00:57:40] Greg Abel: Hey, Warren? I’m happy a friend called. So that still works. Peter Eastwood, who runs one of our Berkshire subsidiaries, and does a great job of running it, tracked down that Portillo’s is owned by a private equity firm called Berkshire Partners. So that was the basis of the question. But it’s not associated with Berkshire. So, we got to the bottom of that one. Thank you, Peter.

American exceptionalism

[00:58:19] Warren Buffett: That’s just the sample of the way we operate around. OK, Becky.

[00:58:32] Becky Quick: This question comes from Jessica Poon, who says, “You’ve long been a strong believer in the American tailwind, and the resilience of the United States, and history has proven you correct. Today, the US appears to be undergoing significant, and potentially revolutionary changes. Some investors are now questioning the concept of American exceptionalism. In your view, are investors being overly pessimistic about the US economy, or is the country indeed entering a period of fundamental change that requires a reassessment from a new perspective?”

[00:59:09] Warren Buffett: I would say that Jessica quite believes this. In some sense, she is the step-granddaughter of one of our managers that I mentioned in the annual report. It may not be the same one. But in the event, America has been an insignificant, and revolutionary change, ever since it was developed. I mentioned that we started out as an agricultural society. We started out a society with high promises, and we didn’t deliver on it very well. We said all men were created equal, and then we wrote a constitution that counted blacks as three-fifths of a person. In Article 2, you’ll find male pronouns used 20 times, and no female pronouns used. So it took till, I should say until the 19th amendment was passed saying, “Oh yeah, we promised the women back in 1776, and now we’ll do something about it.”, and then we didn’t do something about it for a long time. We’re always in the process of change. We’ll always find all kinds of things to criticize in the country.

The luckiest day in my life was the day I was born. You know, I was born in the United. States, and at the time about 3% of all the births in the world are taking place in the United States. I’d like to say that if I had something to do was to send messages out to my parents, for God’s sake, move to the United States before I was born or anything. But I was just lucky, and I was lucky to be born pale, I was lucky to be born white, and all kinds of things. But if you don’t think the United States has changed since I was born in 1930, we’ve gone through all kinds of things, and we’ve gone through great recessions, we’ve gone through world wars, we’ve gone through the development of atomic bomb that we never dreamt of the time I was born.

So I would not get discouraged about the fact that that’s not like we solve every problem that comes along. If I were being born today, you know, I would just keep negotiating in the womb until they said you can be in the United States. So we’re all pretty lucky. We’ve got two non-United States guys here just to get the other side. OK, Station 4.

Being patient vs acting fast

[01:02:23] Daniel: Hi, Mr. Buffett. My name is Daniel, and I’m from Tenafly, NJ. First of all, I just want to say how grateful I am for getting the opportunity to ask you a question. When it comes to your principles of investing. You often talk about how important it is to be patient. Has there ever been a situation in your investing career where breaking that principle, and acting fast has benefited you? Thank you.

[01:02:46] Warren Buffett: Well, that’s a good question. There are times when you have to act fast. In fact, we made a great deal of money because we’re willing to act faster than anybody around. Jessica Toonskel, I think she’s the step-granddaughter of Ben Rosner, manager of ours.

In 1966, I got a call from a man named Felstiner in New York, and he said, I represent Mrs. Annenberg. There were actually nine Annenberg sisters, I believe before Moe Annenberg came along as a son. But he said we have a business we’d like to sell you. So I called Charlie, and I got a few details, and it sounded very interesting. Charlie, and I went back to the office of Will Felstiner in New York, who was a marvellous guy. Never met him since, but he was handling things for Mrs. EAS, E. A Simon, but she was named Annenberg. Her husband had been the partner of Ben Rosner, but he had died and then got kind of tense about working with her. So he offered his business at a bargain price. He offered us a business for $6 million, 2 million in cash, and another 2 million dollar piece of property in the 900 block of Market Street.

It was making 2 million a year pretax, and the price was 6 million. Charlie and I went back to this place, and Ben Rosner was there. He was just upset about doing business with his partner’s widow. She was extremely wealthy. He wasn’t enjoying it. He was very nervous about selling it, and he said to me, and Charlie, I’ll run this business for you until December 31st, and then I’m out of here. I got Charlie, we went down the hallway, and I said, If this guy quits at the end of the year, you can throw away every book on psychology. So we bought the company and had a great relationship.

I’ve had a couple of times, and I’m one of them where people in the East felt that they had a stereotype, in their mind, of what people from the Midwest were like. Ben had been married. His first marriage was to a woman from Iowa, and he just figured that anybody from the Midwest was okay, and the trick when you get in the business with somebody, they’re getting the room with somebody like that, and they want to sell you something for $6 million, it’s got 2 million in cash, and couple million real estate, and it’s making 2 million a year. You know. You don’t want to be patient then, you want to be patient, then wait to get the occasional call.

My phone will ring sometimes, and it’s something that wakes me up. I may be sleeping in there or something. You just never know when that will happen, and that’s what makes it fun. So it’s a combination of patience, and willingness to do something that afternoon if it comes to you. You don’t want to be patient about acting on deals that make sense, and you don’t want to be very patient with people talking to you about things that will never happen. So it’s not a constant asset. It’s not a constant liability to be patient. Well, when I was going to add.

[01:07:55] Greg Abel: Well, I was going to add as you’re being patient, I happen to know, and I think that goes for our Ajit also, and all our managers, very patient when we’re looking at opportunities, and as you touched on, we want to act quickly. But while we’re being patient, never underestimate the amount of reading, and work that’s being done to be prepared to act quickly because we do know, be it equities, but I would include a variety of private companies that when the opportunity presents itself, we’re ready to act, and that’s a large part of being patient is using it to be prepared.

[01:08:36] Warren Buffett: Yeah, and of course it doesn’t come in anything like an even flow. I mean, the most uneven sort of activity you could get into. The main thing you have to do is you have to be willing to hang up after five seconds, and you have to be willing to say yes after five seconds. You can’t be filled with self-doubt in the business.

You just forget it in your work, and go to some other activity. One of the great pleasures–it is a great pleasure actually in this business–is having people trust you. Why work at 90 when you’ve got more money than anybody could count? You know, if they started today, and have machines that are helping them, and everything else. It means nothing in terms of how you’re going to live, how your children are going to live or anything else.

Both Charlie, and I just enjoyed the fact that people trusted us, and they trusted us 60 years ago or 70 years ago, and in partnerships we had, and we never sought out professional investors to join our partnerships. Among all my partners, I never had a single institution. I never wanted an institution. I wanted people. I didn’t want people who were sitting around having people present to them every three months and tell them what they wanted to hear, and all that sort of thing. That’s what we got, and that’s why we’ve got this group here today. So it’s all worked out. But you don’t want to be patient when the time comes to act, you want to get it done that day. OK, Becky.

Modernizing GEICO

[01:11:04] Becky Quick: This question is from Flavio Montenegro, a shareholder from Guatemala “A couple of years ago, in this meeting, Mr. Jain outlined the significant challenges GEICO faced in modernizing, and integrating its IT systems. It was also mentioned that competitors were ahead in their pricing strategies because of the use of telematics. Today GEICO’s turnaround is evident through strong pricing and operational improvements. Could you provide more details on the specific actions taken under Todd’s leadership, and how those changes will help sustain a long-term competitive advantage in the coming years?

[01:11:40] Ajit Jain: Yeah. Todd has done a great job for us in terms of turning around the operations. When he took over, there were two major issues that GEICO was behind its competitors on.

Firstly, the term Warren used, and we all have been using is “matching rate to risk.”, and secondly, telematics. We were at the bottom of the list, and so far as telematic circuits about five or six years ago. Since then, we have made rapid strides, and telematics, which used to be a source of competitive disadvantage to us, is no longer so. I would argue that our telematics at GEICO is about as good as anyone else is today.

So that’s been one huge catch-up. Secondly, in terms of matching rate-to-risk there again, I think we have caught up with our competitors, and we are as good as anyone else in the field. All this together with the cost reduction effort that GEICO and Todd get a lot of credit for. He has basically reduced the workforce by 20,000. Starting with something close to 50,000. He’s brought it down to 20,000, and that translates to, I guess, at least $2 billion. All this has allowed GEICO to become a much-focused competitor. So in the last seven quarters, GEICO has shown a combined ratio that has eight in front of it.

And I never thought I’d live to see the day when anyone could have a combined ratio as low as it is right now. So I think GEICO has done a great job. Its 80 combined translates to the largest profit anyone is making on the underwriting side in the personal automobile business. We’ve achieved a lot. Todd has achieved a lot, but I do not want to be so arrogant as to say that mission accomplished. We’ve achieved a lot, but I still think we need to do a lot more in technology. AI, as we talked about, is going to be a big force, and we need to play catch-up there, not catch up. But we are to be in a state of readiness. So I think GEICO is in great shape right now. Warren, don’t you want to add anything?

[01:14:08] Warren Buffett: It’s a fascinating case study, but that’s what’s so interesting about the whole game of business, but particularly about our businesses, is that each one is a little different. They all have challenges of certain sorts, but they also many certain numbers have many opportunities. We paid $50 million for half of GEICO in 1976. What turned out to be half of GEICO, 50 million. We now own 100%, but 50% of the 2 billion that we earned in the first quarter is a billion dollars, which on a $50 million investment is you know 20 to one in a quarter.

So that takes years to develop, but the interesting thing is the auto insurance policy, which didn’t even exist a hundred years ago. Well, I should say 120 years ago. It’s by far the largest item in the property casualty insurance business. It’s huge.

[01:15:33] Ajit Jain: The only thing I’d like to add is that in addition to the underwriting profit, GEICO provides $39 billion of float.

[01:15:41] Warren Buffett: Oh yeah. In addition, yeah, and that’s not unimportant. You paid $50 million to get the businesses giving you $29 billion to work with for nothing, and on top of that gives you a billion dollars of profit in the quarter. The interesting thing about auto insurance is that we are a company that was started in 1936. We’re selling the same product as in 1936. We’re being more sophisticated about pricing it than we were then. Somebody just made the judgment. That’s all that came from USAA, which made the judgment that government employees–the name GEICO stands for Government Employees Insurance Company– the government employees were better drivers than average.

I don’t think he was an actuator or anything else, but he just made an observation, and so he left USAA, which is still a very successful company, and he started GEICO for a few hundred thousand dollars, and he made money the first year from underwriting. He made money the second year. This is not a public offering type of thing. They aren’t, you know. He’s only accounting for 10 years, and all that sort of thing. They just price it to make money, and that’s exactly what’s been done since 1936. Your auto insurance policy looks a lot like the one from back then. This huge field has sprung up around us, and it’s still growing. Of course, nobody likes to buy insurance, but they sure like to drive.

GEICO is a fascinating story, and about three times over the years, the company has gotten sidetracked one way or another, and then it gets back to its basics, and it’s a wonderful, wonderful business. We showed at this annual meeting one time a message from Lorimer Davidson. In January of 1950, he was the only person in the building. I had gone down on a Saturday to visit but turned out they didn’t work on Saturdays in Washington, I pounded on the door till finally a janitor let me in, and I said to the janitor, “Is there anybody else I can talk to here except you?” He didn’t take it personally, and he said, “Well, there’s one guy on the 6th floor.”, and a fellow named Lorimer Davidson did wonderful things for me.

You get a few breaks in life, in terms of people you will meet who will just change your life dramatically. If you’ve had a handful of those, and when you get them, you treasure them. We’ve had them on this board of Berkshire: Tom Murphy, Sandy Gottesman, Walter Scott, and Bill Scott. One thing we’ve done is we’ve held on to human assets, we’ve made lifelong assets out of people that are the right sort, and with incredible talent, but also just lots of fun to work with, and always doing more than their share, and to get a chance to talk to Lorimer Davidson on a Saturday afternoon, you just listen carefully. That comes in the category of “turn every page”, you know, some of them you want to turn pretty fast, But you just get lucky in life, and you want to take advantage of your luck. OK, Station 5.

Greg Abel’s successor qualities

[01:19:58] Benjamin Graham Sanderson: My name is Benjamin Graham Sanderson from Pasadena, CA Warren, thank you for all you’ve taught us over the years. Earlier, you said, “Nobody but Steve Jobs could have created Apple, but nobody but Tim Cook could have developed it like he has.” Warren, nobody but you could have created Berkshire, and I presume you view Greg as an outlier among outliers? But he seems so normal. Sorry, Greg.

[01:20:26] Warren Buffett: That’s a nice way of saying not normal, actually, but I appreciate it.

[01:20:33 Benjamin Graham Sanderson: So I was hoping you could share what specifically about Greg makes him your preferred successor, and Greg, we’re excited to get to know you more over the next few decades. Thank you.

[01:20:43] Greg Abel: Thank you.

[01:20:51] Warren Buffett: Well, you’ve hit on the most important question, and now in terms of the business, they’ve got a wonderful group of businesses. We’ve got an ability to do things that nobody else can do, which is hard to get in a capitalistic system that’s been developed as fully as the United States has been. I mean, imagine being able to create something that in a very, very, very big playing field it would be very, very hard to develop anything like that. I don’t think you could develop the people around you with that, let alone the capital position, the history, and everything else.

And the answer, of course, is that it does take a long, long time. It takes getting around a small cadre of people, which then spreads out somewhat, where you’ve got mutual trust, where people do more than their share. I’ve been around a lot of businesses over the years, and by nature, I’m somewhat critical of everything. I mean, I’m looking for what’s wrong in things because that’s part of investing is looking. What are you missing? But we’ve got people who, if they’re asked to put on a show like this, instead of doing their regular job, they participate.

I went around the groups of people who were exhibiting yesterday for an hour, and a half, and these are people that are thanking me, you know, and totally enthused about coming and doing a lot of work for which they don’t get paid anything extra, and I don’t know anything about the arrangements the individual companies make, but they work hard, and they enjoy their work, and you really want to work in something you enjoy.

I’ve had five bosses in life, and I liked every one of them, and they were all interesting. I still decided that I’d rather work for myself than anybody else. But if you find people that are wonderful to work with, you know that’s the place to go. I’ve told my kids that you don’t get lucky like I did when I found that seven or eight years of age, which really interested me but it could have taken a lot longer. There’s a movie called The Glenn Miller Story, and Glenn Miller went on from having a broken-down band for 15 years. He found the sound and created the first gold record, and you know what it was, but it was the Chattanooga Choo Choo in 1941.

He turned around from being a nothing with the band that he had till he found the sound, and I have always told my kids ever since that their sound isn’t my sound, and you don’t find it necessarily on the first job you take because you got to eat, you know. But if you get lucky like I did, you find it when you’re very young, and then just keep doing it. Don’t worry too much about starting salaries, and be very careful who you work for because you will take on the habits of the people around you, so there are certain jobs you shouldn’t take. But you’ve got the greatest country in the world, and you got the greatest time in the world. So I would say that I’m handing this over to Greg.

You can’t even dream all the dreams that you could have about a place like Berkshire, but the big thing you have to do though, is always to be sure you can play the next day. I mean, in terms of financial activities on a meaningful scale.

There was a book about how you only have to get rich once. I mean, you don’t want to do anything but risks. If very stupid things are happening around you, you do not want to participate. If people were making more money because they’re borrowing money or they’re participating in securities that are really pieces of junk but they hope to find a bigger sucker later on, you just have to forget that. That will bite you at some point.

The basic game is so good, and you’ve been so lucky to be born now. I mean, if I’ve been born in 1700, I’d say, “I want to go back in the womb. What the hell with this? It’s too hard.” But now I’ve come along to do something where I can just play around all day with things I enjoy doing, and it’s a pretty wonderful life. Anything, Greg, you want to add or subtract from that.

[01:27:30] Greg Abel: Nothing to subtract, but I would always just say it couldn’t be more, as I’ve said in the past, more humble than honoured obviously be in this role, but to have actually been part of Berkshire. Warren, it’s now 25-plus years. I had the opportunity to be part of Berkshire and to work with you, Ajit, our board, and many other people in our company, and as you touched on when you find something like that, and you find something like that like Berkshire that’s so special, you fall in love with it, and it becomes just what you want to do every day, and it’s just an incredible opportunity. So, thank you.

[01:28:15] Warren Buffett:, and to the gentleman who asked the question. If you don’t find it immediately, you know, don’t starve to death in the meantime, but you will find it, and you’ll find it in the right individual. In this sense, it’s almost like finding the right person in marriage. I mean, probably some of you may have married the person you met on your first date, although I guess they don’t even have dates anymore. But you know, sometimes it pays to wait too. OK, Becky.

Investments in foreign currency-denominated assets

[01:29:00] Becky Quick: This is a question from Mark Bonki and Helen Fredrickson in Rapid City South Dakota. “As the US dollar quickly loses value in relation to other foreign currencies in 2025, is Berkshire Hathaway taking steps to minimize this currency risk, and its impact on quarterly, and annual earnings? If so, please explain. I’ll just add Mary Chang, another shareholder. “Berkshire currently borrows in Japanese yen to offset its currency risk and its Japanese stock investments. In the future, will you invest in foreign currency-denominated assets unhedged?”

[01:29:36] Warren Buffett: Yeah. Well, we always have–pretty much. The Japanese situation is different because we intend to stay long in that position, and the funding situation is so cheap. I’ve attempted to some degree to match purchases against yen-denominated funding but that’s not a policy of ours. In fact, that’s the first time we’ve done that, and we’ve owned lots of securities in foreign currency. So, we do nothing in terms of the question about its impact on quarterly, and annual earnings. We don’t do anything based on its impact on quarterly, and annual earnings. I mean, there’s never been a board meeting. I can remember the conversation I had with Charlie when I said, “If we do this, our annual earnings will be this, you know, and therefore we ought to– Whether it’s accounting or with anything, the number will turn out to be what it will be. What counts is where we are five 10 or 20 years from now.

And if you start focusing on what number you’re going to produce, you will quickly get tempted, at least based on the experience I’ve seen from viewing 20 companies. One way or another, I’ll play around with the numbers, and sometimes seriously play around with the numbers, and I’ve seen people that you know, I trust them in all kinds of other ways, but they regard playing around with numbers as perfectly okay, and that’s just not something. We just don’t think about that.

Actually, the relationship with the yen in the last quarter resulted in certain GAAP charges, but it doesn’t make any difference. It will change next month or next year, and obviously, we wouldn’t want to own anything that we thought was in a currency that was really going to hell. That’s the big thing, we worry about with the United States currency. I mean, it’s the tendency of a government to want to debase its currency over time. There’s no system that beats that. You can pick dictators. You can pick representatives. You can do anything. But the people, there will be a push toward weaker currencies.

And of course, I mentioned very briefly in the annual report that fiscal policy is what scares me in the United States because it’s made the way it is, and all the motivations are doing a lot of things that will cause trouble with money, but that’s not limited to the United States. It’s all over the world, and in some places, it gets out of control regularly. As you know, they devalue it. Rates that are breathtaking and that’s continued. I mean, people can study economics, and you can have all kinds of arrangements. But in the end, if you’ve got people that control the currency, you can issue pay for money, and you will or you can engage in clipping currencies like they used to centuries ago, and there will always be people. It’s the nature of their job.

I’m not singling them out as particularly evil or anything like that, but the natural course of government is to make the currency worth less over time, and there are important consequences. It’s very hard to build checks and balances into the system to keep that from happening, and we’ve had a lot of fun here, either the first 100 days or the last 100 days, whatever you want to call it. What happens when people try to make sure that they aren’t running fiscal risks, and that the game isn’t over, and never will be over. You know, in finality, if you look up, and you search the great inflations of post-World War 2, it’s just a list that goes on forever, and the same names keep popping up, and everything. So value of currency is a scary thing, and we don’t have any great system for beating that. We do in this particular Japanese position because we expect to hold it for 50 or 100 years or more, and we will be owning something that’s denominated in the end, and easily predictable, and we’ll just as long as the carry-on is right. We’ll attempt the issue of Japanese-denominated liabilities, but that’s not because of anything we care about in terms of quarterly or annual earnings. Greg, do you have anything to say?

[01:36:11] Greg Abel: I was just going to say that relative to the question, there’s no question we were fundamentally very comfortable with investing in the five Japanese companies, and recognizing we’re investing in yen. The fact we could then borrow in yen was almost just like a nice incremental opportunity, but we are very comfortable both with the Japanese companies and with the currency we would ultimately realize, IE, in the yen.

[01:36:41] Warren Buffett: We only made, as I referred to earlier one big currency play which was connected a little bit with when I wrote that article for Fortune. We got along 12 other currencies, as I remember, only four or five of them are really big currencies. But when I say we got long, it means we’re short the dollar. So we held that position for a couple of years, and we made several billion dollars on it which was significant to us then. Charlie always felt that if you had to pick an area outside of stocks in which to invest—And he knew a lot about bonds. He knew a lot about real estate. He knew a lot about a lot of things.—But he said he thought he could make a lot of money out of being in foreign currency.

We’ve done it once. It’s not inconceivable that we would do it again, but it’s unlikely, there could be things happen in the United States that would make us want to own a lot of other currencies, and I suppose if we made some very large investment, European country or some, there might be a situation where we would do a lot of financing in their currency, but it was something that just was sort of obvious to do. In the Japanese situation where we had the ability to borrow yen at a very, very low carrying cost, and we felt very good about the income we’d been receiving from these securities.

If the present condition–which it won’t, I mean, it never does— prevail for decades and decades, we would probably keep doing the same sort of thing, but things change in the world too, so don’t take that as a prediction. OK. Section 6.

Advice for Emerging Markets

[01:39:22] Dash from Mongolia: Good morning, Warren, and Greg, Ajit, thank you so much for hosting this event. It’s good to be here. My name is Dash, and I’m from the great country of Mongolia. A little bit of background about my country. Mongolia is an emerging market and a landlocked country sandwiched between Russia, and China. But we are reaching history, and minerals, and have a full democracy, and a growing economy. Last week, we hosted our second annual Mongolia Investor conference in New York to attract investors like yourself. I know you needn’t give advice informally to government leaders such as South Korea, China, and India. What advice would you give to government business leaders of emerging markets like Mongolia to attract institutional investors like yourself? It would be great if you had long-term plans for exposure to emerging markets as a hedge or an opportunistic investment. Lastly, I welcome all of you to Mongolia, and my country’s folks would be very happy if you could make it to our Economic Forum this July.

[01:40:52] Warren Buffett: Thank you. Yeah, I have trouble planning a trip to Council Bluffs, which is just a few miles from here, but it takes an optimist. Actually, I met a fellow here at the annual meeting probably 20 years ago or more who did a lot of Mongolia, and he did very well in Mongolia, and actually moved there for quite a while. I would say that if you’re looking for advice to give the government over there is to develop a reputation for having a solid currency over time. I mean, we don’t really want to go into any country where we think there’s a chance, I mean, a significant probability of runaway inflation. It’s just too hard to figure.

The other people figured out ways to make money in hyperinflationary situations, but that’s not our game, and I don’t think I’d play it well. So, that would be a factor with us. The chances are we won’t find anything in Mongolia that fits our size requirements aside from that. But like I say I think my friend that I met here 20 years ago has done very well in Mongolia. If the country develops their reputation for being business-friendly, and currency-conscious. You know, I think that bodes very well for the residents of that country, particularly if it has some other natural assets that it can build around. I don’t know that much about the minerals there or anything of the sort, but I mean, who would have bet on the United States in 1790? We didn’t have to have perfection. We just had to be better than the other guy for quite a while. We started out with nothing, and we ended up with close to 25% of the world’s GDP, faster growth rates, generally sounder recurrences, and all kinds of things. So I wish you well. OK, Becky.

Private equity “competition”

[01:43:53] Becky Quick: This question is from Peter Shen in New Jersey. It’s for Mr. Buffett and Mr. Jain. In recent years, large private equity firms like Blackstone, Apollo, and KKR have aggressively expanded into insurance, raising permanent capital, managing float, and aiming to replicate the model that Berkshire pioneered decades ago, given that these firms are now directly competing for insurance assets, often using higher leverage and more aggressive investment strategies, how do you view their impact on Berkshire’s insurance operations and underwriting discipline? Do you believe that the private equity model poses risks to policyholders in the broader financial system, and has this competition made it more challenging for Berkshire to find, and price insurance opportunities safely, and profitably today?

[01:44:43] Ajit Jain: OK. Yeah. Part of the question is very easy. There’s no question that private equity firms have come into this space, and we are no longer competitive in this space. We used to do a fair amount in this space. But in the last three to four years, I don’t think we’ve done a single deal. Now you are to separate this whole segment into two separate segments. One is the property casualty end of the business and the life end of the business. The private equity firms that you mentioned are all very active in the life end of the business, not the property casualty end of the business. You are right in identifying the risks these private equity firms are taking on both in terms of leverage, and in terms of credit risk, and while the economy is doing great, credit spreads are low. These private equity firms who’ve taken the assets from very conservative investments, and I wouldn’t say high octane, but they’ve certainly invested these assets in situations where they get a lot more return on the investment, and as I said, as long as the economy is good, and credit spreads are low, they will make money. They’ll make a lot of money because of leverage. However, there is always the danger that at some point, the regulators might get cranky, and say, you know, you’re taking too much too much risk on behalf of your policyholders, and that could end in tears. We do not like the risk-reward that these situations offer, and therefore, we put up the white flag, and said, you know, we can’t compete in this segment right now.

[01:46:32] Warren Buffett: There are people who want to copy Berkshire’s model, but usually they don’t want to copy it by also copying the model of the CEO having all of this money in the company forever. I mean, they’ve got a different equation. They’re interested in—and that’s capitalism. But they have a whole different situation, and they probably have a somewhat different fiduciary feeling about what they’re doing. Sometimes it works, and sometimes it doesn’t work. If it doesn’t work, they go on to other things. If what we do here at Berkshire doesn’t work, I spend the end of my life regretting what I’ve created. So it’s just a whole different personal equation. There is no property casualty company that can basically replicate Berkshire that wasn’t the case at the start. I mean, at the start, we just have National Indemnity a few miles from here, and anybody could have duplicated what we had, but that was before Ajit came with us in 1986, and at that point, the other fellow should have given up. Yeah, Station 7, please.

Advice for young investors

[01:48:17] Marie: Hi, my name is Marie. I’m from Melrose, MA Thank you for the time today. As a young person interested in investing like myself. I would love to hear your insights, Mr. Buffett. What were some pivotal lessons you learned early in your career, and what advice do you have for young investors who are looking to develop their investment philosophy? Thank you.

[01:48:45] Warren Buffett: Those are good questions. I wish I thought of them myself earlier in my life. Who you associate with it’s just enormously important, and don’t expect you’ll make every decision right on that. I mean, you’re going to have your life progress in the general direction of the people that you work with, that you admire, that become your friends.

I mentioned a few fellows who have died in the last couple of years. Well, all of those people were people, if they were working together on something ten-thousandth the size of Berkshire, I mean, they’d be the kind of people you choose. There are people who will make you want to be better than you are, and you want to hang out with people who are better than you are, and that you feel are better than you are, because you’re going to go in the direction of the people that you associate with, and that’s something you’ll learn.

Of course, you’ve learned late in life. It’s hard to really appreciate how important some of those factors are until you get much older. But when you’ve got people around you, like Tom Murphy, Sandy Gottesman, and Walter Scott, then you’re just going to live a better life. If you just go out and look, and somebody is just making a lot of money, and decide you’re going to try, and copy them or something of the sort. So I would try to be associated with smart people, too, where I could learn a lot from them.

I would try to look for something that I would do if I didn’t need the money. I mean, what you’re really looking for in life is something where you’ve got a job that you’d hold if you didn’t need the money, and I’ve had that Charlie out for a very, very long time. All the fellows that I named had it. Every one of those I named, always did more than their share, and they thought like they never sought more than their share of the credit. They just behave the way you’d like anybody you work with, and when you find them, you treasure them, and when you don’t find them, you still keep doing whatever causes you to eat or enables you to eat but you don’t give up on looking around, and you will find people do wonderful things for you.

So, I mentioned earlier that you know, going down to GEICO, and knocking on the door when the door was locked. I mean, who knows what was behind that doorway? I went in, and in 10 minutes, I found the man who was going to be just wonderfully helpful to me. Of course, if somebody’s going to be helpful to you, you want to try to figure out ways to be helpful to them so you get a compounding of good intentions and good behaviour, and unfortunately, you can get the reverse of that in life, too.

I was lucky to have a good environment for living that kind of life, and other people, you know, have a whole different environmental situation, they have to overcome it. But don’t feel guilty about your good luck if you’ve got it. If you live in the United States, there are 8 billion people in the world, and there are 330 million in the United States, you’ve already won the game to a great degree, and then just keep making the most of it. But you don’t want to associate with people or enterprises that ask you to do something or tell you to do something that you shouldn’t be doing. That’s one of the problems.

I mean, different professions select for different types of people. It’s interesting to me that in the investment business, many people get out of it after they’ve made a pile of money. If you really want something that you’ll stick around for, whether you need the money– Greg doesn’t need the money, Ajit doesn’t need the money, remotely, but they enjoy what they do, and they’re so damn good at it. I’ve had the advantage of seeing how that works over time. The best manager I ever knew, and there’s a lot of contention for who that would be, but actually was Tom Murphy Sr, who lives in his almost 98, and I’ve never seen anybody who could get the potential out of other people more than Murph.

If you want to become a better person, you want to work for Tom Murphy, and there are all kinds of successful people who really don’t bring that to the party. I’m not saying that’s the only way to succeed. I think it’s the most pleasant way to succeed for sure. The Berkshire experience is pretty dramatic. I mean, to operate with Sandy Gottesman from 1963 until he died a couple of years ago, Walter Scott for 30 years. You really can’t miss it. You’ll learn all the time. You’ll not only learn how to be successful in business, you’ll learn how to be successful in life. So, that’s my recommendation, and for some reason, apparently, you live longer too. It’s pretty amazing, I mean, these people I’m talking about, including myself, I mean, I’d like to attribute it to this, and a few other things, but I think a happy person lives longer than somebody that’s doing some things that they don’t really admire that much in life. OK. Let’s move on to, I guess, it’s Becky next.

Purchaeses in the recent market volatility

[01:57:08] Becky Quick: The first quarter ended March 31st, and it did show that Berkshire’s cash pile expanded from the end of last year. But the greatest market turmoil came in April. Martin Devine, a shareholder from Scotland who is attending the meeting today, wants to know, “Has the recent market volatility presented Berkshire with opportunities?” Martin just wrote in an addendum in the last 40 minutes or so, pointing out that you mentioned Berkshire almost invested $10 billion recently and wanted to know if you could talk more about that.

[01:57:40] Warren Buffett: I can give you a good answer to the second part, which is no. But $10 billion wouldn’t have done that much. That’s the other side and another side of it. What has happened in the last 45 days, 100 days, whatever you want to pick up, whatever this period has been, it’s really nothing. There have been three times since we acquired Berkshire that Berkshire has gone down 50% in a fairly short period of time. Three different times. Nothing was fundamentally wrong with the company at any time, but this was not a huge move. The Dow Jones average hit 381 in September 1929. It got down to 42, so that’s by going from 100 to 11. This has not been a dramatic bear market or anything of the sort. I mean, as I pointed out, I’ve had 250 trades per day for many years. I’ve been old enough to trade stock. I’ve got 17,000 or 18,000 trading days. There have been plenty of periods that are dramatically different from this.

I mean, the day I was born, the Dow Jones was 240, and that was August 30th, 1930, and between that and the low, it went from 240 to 41. So, if people think that it made a really major change, it didn’t. If it had gone up 15% instead of down 15%, people would take that with remarkable grace. But if it makes a difference to you whether your stocks are down 15% or not, you need to get a somewhat different investment philosophy. The world is not going to adapt to you, you’re going to have to adapt to the world.

The world is not going to adapt to you, you’re going to have to adapt to the world.

You will see a period in the next, certainly in the next 20 years, you’ll see a period that will be in. Somebody in the market described it one time as a “hair curler” compared to anything you’ve seen before. I mean, it just happens periodically. The world makes big, big, big mistakes, and surprises happen in dramatic ways. The more sophisticated the system gets, the more the surprises can be out of the right field. That’s part of the stock market, and that’s what makes it a good place to focus your efforts. If you’ve got the proper temperament for it, and a terrible place to get involved. If you get frightened by markets that decline and get excited when stock markets go up, I don’t mean to sound particularly critical. I mean, I know people have emotions, but you’ve got to check them at the door when you invest. OK. Station 8, please.

Major setbacks or low points in life

[02:01:37] Peter Chan: Good morning, Mr. Buffett, Mr. Greg, and Mr. Ajit. My name is Peter Chan. I’m from Shanghai, China. This is my first time attending this shareholders’ meeting. I would like to ask a question about the wisdom of life. Have you ever encountered any major setbacks or low points in your life, and how did you get through, and overcome them? Thank you very much.

[02:02:08] Warren Buffett: Well, everybody gets setbacks, and some people have particularly bad luck in that respect, and others get through with fairly minor setbacks. Charlie had setbacks. I had setbacks, and it’s part of life, and they’re not fun. I don’t have any great advice for you about having the time of your life while you’re having some major setbacks, but it comes with a lifetime. You certainly have a setback when you die. So everybody’s got setbacks guaranteed to them. But some people get, and I mean, it is no laughing matter in a sense, because people get extraordinary bad luck, and other people get extraordinary good luck.

Usually, the people who get good luck don’t really think it was so much luck as themselves. Think that you’re less likely to have it in terms of medical problems. In terms of, you know, various things in life. I mean, you were born at a good time. If you look all the way through the history of China, when would you rather have been born? You know, 100 years ago, 500 years ago, a thousand years ago or now? You know it’s just hands down. You’d be lucky. If I came from 20 generations of shepherds, I think I get kind of tired of my life just looking at these sheep every day. But you know, we can sit here, and I can watch Nebraska. Not quite play the same game of football that we played 20 years ago.

But I mean, everything in life has been made so much better that you’ve got to figure that you do a lucky straw by staying in the womb for a couple hundred thousand years, and then just emerging it at the right time. So I would focus on the things that have been good in my life rather than the bad things that have happened. Bad things do happen, but it can often be a wonderful life. You could get terrible breaks in it. So far, that really hasn’t happened. But it happened with some of my friends, but he gets some bad breaks from time to time. But for 94, I’ve been able to drink whatever I want to drink.

They predict all kinds of terrible things for me, but it hasn’t happened yet. If you look at what pro football players are making now, and everything compared to what they were making 30 or 40 years ago, you can say, well, isn’t that wonderful? But if you look at the lifespan of professional athletes, after a while, you get to decide that you’re better off if you really weren’t the first one chosen to be on the baseball team or the basketball team, or anything else.

Charlie, and I, and I think I speak for the others to some extent, that we never did, we never really exercised that much or did anything. We have been carefully preserving ourselves for years. So look at the bright side of things to the extent that you can. You’re lucky enough you’re here today. You’re healthy, and you come from a long distance, and you’re getting a chance to learn more about something that interests you, and compare that with the situation a couple of hundred years ago that you would have been offered. So anyway, that’s enough moralizing. OK, Becky.

Autonomous vehicles and GEICO

[02:07:10] Becky Quick: This question comes from Himanshu Bindal for Ajit and Warren. “Autonomous vehicles are already driving across roads in American cities with no driver involvement. How do Warren, and Ajit think about any disruption risk from these autonomous vehicles to GEICO’s auto insurance business, which is built around understanding, and underwriting human drivers? Wouldn’t what we call auto insurance today just become a product liability for autonomous vehicles and autonomous software companies?

[02:07:45] Warren Buffett: Well, Ajit.

[02:07:47] Ajit Jain: Yeah, there’s no question that insurance for automobiles is going to change dramatically once self-driving cars become a reality. The big change that we will see is what you identified. Most of the insurance that is sold, and bought revolves around operator errors, how often they happen, how severe they are, and therefore what premium we ought to charge. To the extent these new self-driving cars are most safe, and are involved in fewer accidents, that insurance will be less required. Instead, it will be substituted by, as you mentioned, product liability. So we at GEICO, and elsewhere certainly try to get ready for that switch where we move from providing insurance for operator errors and be more ready to provide protection for product errors, and errors, and omissions in the construction of these automobiles.

[02:08:56] Warren Buffett: Yeah, we expect a change in all our businesses and good thing we did— Charlie pushed me into it, but if I’d settle for being in New England textiles, you know, and even though it worked well for 70 years or so prior–the world changes. If the game didn’t change at all, it really wouldn’t be very interesting. If every time you swung the baseball, you hit a home run in the game, it wouldn’t be interesting. If every time you hit a golf ball, you had a hole-in-one, it wouldn’t be interesting. So the fact that there will be things you have to think about all the time as you go along, and you’ll make mistakes, and all that, and then that’s really part of the fun. I mean, your brain would turn to mush if you didn’t have a few problems now, and then.

So, auto insurance will change, although it’s remarkable how little it has changed. But it’s only been around since, you know, for relatively a short time. Who knows what we’ll be doing in transportation a hundred years from now? Going back a couple of hundred years ago, who could have predicted the United States would look like what it does, and people would move like they do, and people would enjoy themselves like they do? I mean, it’s a dynamic world, and the biggest thing we have to worry about, unfortunately, is that we’ve learned how to destroy the world.

We’ve got this wonderful world, which now we know that there are eight countries that, and probably a ninth coming, that can destroy it. We don’t have what I would consider necessarily the perfect people leading each one of the nine or some of the nine countries. When Einstein came up with the E=mc² in 1905. He didn’t dream of the fact that mass could be converted into energy in a way that would change the world.

When I was born in 1930, knowing about the law of physics that Einstein had come up with 25 years earlier, nobody, to my knowledge, had thought about what can this do to change warfare in the future. Literally, it wasn’t thought. Einstein didn’t think about it at that point, and then in 1939, Roosevelt got a letter around the month before Germany moved into Poland. He then got it around August 1st. The most famous letter in history was from Leo Szilard. Leo Szilard couldn’t get his letter in front of Roosevelt, because whoever heard of Leo Szilard? But he got Einstein to sign it.

Roosevelt probably understood about as much about physics as I do, so he didn’t understand it. But he understood that Einstein signed. So he calls in—General Groves may not have been general then—and said we should do something about this, and all we did was learn how to destroy the world, and we needed to do it. Germany had Heisenberg. He looked like he was ahead of us, and we couldn’t put that genie back in the bottle.

The world does change, and we’ve got wonderful things. But we have a guy in North Korea. If we criticize his haircut, who knows what he might decide to do? What does North Korea need nuclear weapons for? I mean, can that be a good thing in the world? But they’re not going to go away. So it’s a world of change, and we are enjoying incredible change that’s contributed to everybody in this room living so much better than people were living a couple of hundred years ago. We haven’t changed human beings very much so far. We’ve certainly changed weapons of mass destruction but we haven’t made much progress with the human race.

We’ll see what happens with that, but in the meantime, we’ll see changes in auto insurance, too, of course. That will be more, and it is easier for us to deal with it than it was when we had to deal with the problems of turning textiles in New England, and you deal with the world as it develops, and like I say, everybody here is living in the luckiest period. Enjoy your luck, and you still try to figure out the answers to what’s going to happen, and all insurance as we go along, we’ve done pretty well. There are a few big problems in insurance, and I don’t know how the insurance industry adapts to them, particularly, but that makes the game interesting.

[02:15:51] Ajit Jain: I’d just like to add we talked about the shift to product liability into protection for accidents that take place because of an error, in terms of how the product was designed or supplied. The only thing I want to add is in addition to that shift, I think what we’ll see is a major shift where the number of accidents that take place and need to be provided for will drop dramatically because of automatic driving. But on the other hand, the cost per repair every time there’s an accident. The cost of repairing, and bringing everything back to where it used to be would go up very significantly because of the amount of technology that’s going into the car. How those two variables interact with each other in terms of the total cost of providing the insurance, I think, is still an open issue.

[02:16:47] Warren Buffett: I’ll give you two interesting figures to ponder. When I walked into GEICO’s office in the 1950s. The average price of a policy was around 40 bucks a year. It varies all over the law depending on location. It’s pretty easy to get up to $2000, and depending on how urban your areas are, and everything, you can get them considerably higher. During that same time, the number of people killed in auto accidents has fallen from roughly six per 100 million miles, rather than a little over one.

So cars become incredibly safer, and it costs 50 times as much down or thereabouts to buy an insurance policy. So, when people talk about the developments in car driving and all that sort of thing, it’s a lot easier sometimes. I mean, the Buck Rogers aspect of it, people look at it, but they don’t actually think of what really happens to the math of the business. The auto insurance industry has been a huge growth industry, and for that matter, homeowners’ insurance prices in Nebraska have doubled in the last 10 years. Adjusted for general inflation, and convective storms.

It just going on to terror, and it is still unprofitable to write home homeowners insurance in Nebraska after doubling the price in the last 10 years. So, it’s very hard to predict what these big changes mean, and you just have to keep thinking all the time, but you don’t want to read some research report that says the world’s coming to an end or the world’s going to be wonderful because of this or that. There are about 50 other developments going on at the same time that you need to think about, and that you need to keep observing as you go along. You never reach an answer in this business. You reach a point of action that you take but we try to get into as high probability things as we think we can do, and play the game in the same way, but it will be different than you think.

You should wake up every morning, and think about that, too, if you’re in the business of managing businesses.

Operating earnings

[02:19:51]Greg Abel: Warren, as we approach the break. Would you like to address the operating earnings?

[02:19:56] Warren Buffett: Oh, yeah. We released our 10-Q this morning. We always try to do it on a Saturday, so nobody gets a jump on other people. We just have three simple charts. You’ll see that our insurance underwriting income was down dramatically for the first quarter, and last year was as good a year as you’ll see in insurance. And it’s always unpredictable insurance, but everything broke our way. The insurance industry’s way last year, prices are down this year. Risks are up this year. So, you don’t have to figure out what the answer is on that. We do have unusual advantages in the insurance business that can’t really be replicated by our competition.

That doesn’t mean they aren’t trying to get advantages we don’t have. But we’ll try to replicate anything that seems better. I wouldn’t talk about her insurance business as much as I do unless I really thought we had some really permanent advantages in a very, very large industry. We just announced within the last 24 hours that we, Zurich, and Chubb, have arranged a joint operation to be the writer of really large sums that very few people can do.

And of course, we’ve got to write about the right price in terms of liability. But we can do that sort of thing without blinking, and anybody who wants to do it wants to get us in it. So anyway, our investment income did not change that much because we have a float that grows a little bit, which gives us more money for investment, and then we have retained earnings, which grow. So we would expect in a year to have like 40 billion or more that we’ll build up investments unless we find things to do with it.

So the investment income rates on treasuries are less than– they were short-term bills, I should say or less than they were before. So you had that negative effect pulling it down, but not that much, and we had more money. So we came up with a little more in the way of earnings. The railroad is earning a little more than last year. But it’s not earning, but it should be earning at the present time, and that’s solvable, and it’s getting solved, and it’s still an incredible asset for Berkshire.

The energy company last year was having particular problems, and those were absent this year. So those earnings are up, and then among our range of general businesses, they were pretty much a push, and I think you did a little calculation the other day on how many were up, and how many were down.

[02:23:30] Greg Abel: Of our 49 that we measured closely, 21 or up, and 28 were down. So you can tell it was really a mixed quarter when you go across the non-insurance operating businesses.

[02:23:50] Warren Buffett: The next slide. I’m getting a five-minute warning here, but for the long ball now. It shows our financial condition, which continues to hold a lot more. Cash, and US. Treasury Bills, I would like, but that’s simply a question of what opportunities occur, and if you get real opportunities every five or six years, you know, you have to be patient. Charlie always pointed out that we made most of our money. I’m above about eight or nine ideas over 50 years, and we talked about it every day, and we read every report, and we did everything else but if you think you can get an idea day from listening to your Frederick Booker or doing a lot of reading of the financial information published, forget it, because every now, and then you get extraordinary opportunities, and most of the time, you don’t have much of an edge. So, we also have on that thing our float, which continues to build. There’s no property casualty company that has our float, Ajit?

[02:25:21] Ajit Jain: Yeah, clearly we are head and shoulders above anyone else.

[02:25:25] Warren Buffett: Yeah. So, that is money that, as long as we’re writing it in an underwriting profit, is absolutely free money, and we would expect that over a 50 or 100-year period, we would be able to say the same thing. But there will be years when you have a very bad underwriting record, and it will lead to the float earnings. But so far in the last 20 years, I think we’ve only had one underwriting loss?

[02:26:07] Ajit Jain: If you look at the entire range, including life insurance, our cost of flow to 2.2% negative, that means we’ve got the float plus somebody has given us 2.2% of that of cash.

[02:26:23] Warren Buffett: Yeah, it’s like running a bank where people leave their money with you, and you pay a minus 2.2%, and you don’t have any check clearing or anything else. We run our business actually with a different mindset than any other P&C company, I think, probably, in the world.

I wouldn’t be talking about it if I thought they duplicated. The final pages on share repurchases, and clearly we haven’t made any, we have not made share repurchases so far this year. If Berkshire buys Berkshire shares, and repurchases, we’ve now paid more than you will pay. If you buy Berkshire shares. I don’t think people generally know that, but there is a tax that was introduced a year or so ago where we pay 1%, and that not only hurts us because we pay more for it than you do pay. It’s a better deal for you than for us.

But it is actually for some of our investing companies quite substantially. Tim Cook has done a wonderful job. I mean, really wonderful job running Apple. But he spent a hundred billion dollars roughly in a year repurchasing shares, and there’s a 1% charge attached now, so that’s a billion dollars a year. He buys Apple stock which we like compared to what you pay. It doesn’t sound like much, but well, a billion dollars sounds like a lot still. But there are people that want to increase that particular rate dramatically, and we won’t read about it or anything like that, but it’s slightly less attractive than it was before, and we will only buy in our shares if we think that they are almost certainly underpriced as valued very conservatively.

We get that opportunity occasionally, but the higher that charge goes that the federal government charges us for doing it unless we are able to do a repurchase. So on that happy note, we will rejoin at 11:00, and then we’ll continue until 1:00. In the meantime, enjoy yourself, and I think all our stores are still open, So, ring the cash register.

Berkshire Hathaway Annual Meeting 2025 Transcript Afternoon Session

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[00:00:00] Warren Buffett: OK, everyone. OK, we’re ready to go, and I’m going to lead off by actually recommending a movie. I know that’s why you came, but I would recommend all of you. You go to Amazon Prime—I’ve got no financial interest in this— but you go to Amazon Prime. Click on a documentary called Becoming Katharine Graham. It’s an incredible story from 50 or so years ago. And to some extent, I had the good luck to be kind of a viewer of some American history that I think is fascinating. So if you feel that I have misled you can write me a note, and I promise to report how many didn’t agree with it, but click on Becoming Katharine Graham, and you’ll see a story of a remarkable story of American history. There are a good many portions in there who lived for that period didn’t know about at the time. I don’t think every American citizen ought to watch it. So with that I hope you all spend some more money out there and in our friendly shops. We will go to Station 9.

What did Warren Buffett learn from Greg Abel?

[00:02:33] Robert: Hi, Warren. My name is Robert, and I’m a shareholder from Toronto, Canada. So, Warren, three years ago, Charlie Rose asked your question to the effect of what you wanted to be remembered for. And your reply was, “He was a teacher.” So in that spirit, Greg, I’m curious to hear maybe a story of where you learned something very, you know, profound from Warren. I’m sure you learned many things, but if there is a story that kind of comes up in your mind, we’d love to hear it, and vice versa, if we have the time. Warren, what’s something that you may be learned from Greg? Thank you.

[00:03:14] Warren Buffett: Yeah, I will turn this over to Greg in just one second, but now the main thing I’d like to be known for is old age.

[00:03:25] Greg Abel: Well, Warren is obviously a remarkable teacher and I benefit from that every day and as I’ve already touched on for many years, I’m fortunate that if I had to be remembered as something right now, obviously, I want to be remembered as a great father, but equally, a coach and that goes to family, friends and just being involved with the kids I coach in hockey or baseball or whatever it may be.

I think we’ve got a great opportunity to get back to him at a very young age, so obviously, those would be how I’d want to be remembered, and hopefully that will be many, many years from now, but I love thinking of Warren truly as a teacher and he and every day get the opportunity to continue to learn. Warren and I this dialogue is strong every week and we’re always talking about opportunities in Berkshire or things that are going on globally or in the US and each one is truly a learning moment.

I’ll maybe go back to the very first meeting with Warren because it still stands out in my mind, obviously, it was an incredible opportunity. Warren was buying or acquiring Mid-America Energy Holdings company at that time, or thinking about it, I had the opportunity with my partners to go over there on a Saturday morning, and we discussed the business, and Warren had the financial statements in front of them.

Like anybody, I was sort of expecting a few questions on how the business was performing or a variety of things, but Warren locked in immediately to what was on the balance sheet and the fact that we had some derivative contracts, the weapons of mass destruction. And associated with the utility business, we do have them because they use them to match certain positions, and they never match perfectly. But you do have them, and we’re required in the regulated business. I just remember Warren going to it immediately and asking about the composition of it and what the underlying risk was, and wanting to thoroughly understand.

It wasn’t that big of a position, but it was absolutely one of the risks he was concerned about as he was acquiring Mid-American and obviously, in light of Enron and everything that had gone on, it was a very pertinent question. The follow-up to that was then there was an energy crisis in the US around electricity and natural gas, and a variety of folks who were making significant sums of money. This is a year, 18 months later. And Warren’s follow-up question, a couple of years later, to me was, and I knew it was more just checking or testing, “So how much money are we making during this energy crisis? Are we making a lot? Do we have the speculative positions in place and are we making?” And the answer was we’re really not making any more today than we would have been six months ago, because all those derivatives were truly to support our business and weren’t speculative. So, just that focus on understanding the business of what he was acquiring, understanding the risks around it, still stands out in my mind. Warren?

[00:07:25] Warren Buffett: Yeah, that’s one thing we’ve really never talked about here, but I spend more time looking at balance sheets than I do income statements and Wall Street really doesn’t pay much attention to balance sheets, but I like to look at balance sheets over an 8 or 10 year period before I even look at the income account. There are certain things that are harder to hide or play games with on the balance sheet than you can with the income statement. I mean, neither one gives you the total answer on anything, but you still want to understand what the figures are saying and what they don’t say and what they can’t say and what the management will like them to say, that the auditors wouldn’t like them to say.

And I mean, there’s just a lot to be learned, and you do learn more from balance sheets in my view than most people give them credit for. I’m not worried about being remembered for that, people don’t remember. Well, they don’t remember enough about Katharine Graham, for example, in terms of this story that shaped America in many ways. Certainly, had just all kinds of impact, and I think I mean history is so fascinating, and Charlie was probably the best person you could imagine in what he learned. Charlie was never satisfied with just superficial things about any subject. He really wanted to understand it, and he always would tell me not to take a position on anything until you can describe the arguments against it better than the person who is arguing with you. That you should be able to argue their case better than they can.

He was a remarkable teacher and but so and so with those other fellows I mentioned. And, of course, my dad was an incredible teacher. So you make the most of the people you meet who are going to make you a better person, and probably forget about the rest to quite an extent. OK, let’s move on to number 12. Becky, here. Next.

Greg Abel’s view on capital allocation

[00:10:25] Becky Quick: This question comes from David Rubin, a shareholder from Scottsdale, AZ. It’s a question for Greg. “We’ve heard over the decades and are familiar with Warren and Charlie’s investment thesis and their circle of competence. During the first ten years after taking over as CEO, Greg will be tasked with allocating more capital during that time than Berkshire has had to allocate in its history. Given this, I’d like to hear from Greg about his views on capital allocation, particularly into new businesses.”

[00:10:59] Greg Abel: Sure. It’s very fortunate when you think of Berkshire again, and we’ve talked about this where we start from and clearly touch on the investment in the related investment allocation, but we start from where great place where we’ve got a great culture within the business. We have values that we as a management team and really as defined by Warren and those of Charlie and everybody associated with the business, got great values that really set Berkshire up well for the future, and obviously as we deploy capital and allocate capital, it’s critical to Berkshire as we go forward and equally it’s around managing risk.

But when I think of our values, there are a couple that are absolutely critical. One will maintain the reputation of Berkshire and that of our company. I view that in investing or how we operate things across each of our businesses, that will always be a priority and something that will ensure it is in the forefront of our minds. I think equally, as we then look at our— back to Warren’s balance sheet comment—we will have a fortress of a balance sheet. I thought Sue Decker, our lead director, said it well yesterday. We’ve got a significant set of cash right now, but it’s an enormous asset to have that, and that will continue to be a philosophy. When we can deploy it, we’ll deploy it well.

But equally, we do recognize it as a strategic asset and it allows us to weather the difficult times and at the same and not be dependent on anybody. So, again, that will be an investment philosophy. We will remain Berkshire, and we will never be dependent on a bank or some other party for Berkshire to be successful. I would then touch on allocation of capital being absolutely critical, but with that comes management of risk and understanding risk, and that falls upon all our managers, insurance, non-insurance, but we’ll bring that across Berkshire.

The other value I would touch on, but that really relates to where I’m going, is that, ultimately, we have a great set of operating companies that do produce significant cash flows. Be it in the insurance companies creating flow or various non-insurance companies producing significant cash flows on an annual basis. We intend to continue to ensure that’s the strength of Berkshire as we go forward. It’s absolutely critical to our long-term success. Now, with those cash flows and with the float, and then equally as touched on, we have significant resources already in our balance sheet. We’ll really continue to move forward with a very similar philosophy, or it’s an identical philosophy to what we’ve had currently and for the past 60 years.

We’ll start by looking at those opportunities within our business. And by that, I mean, within our insurance, non-insurance businesses. Are they properly capitalized and have the opportunity to manage their business, and will that continue to exist? They’ll operate in an autonomous way. But in the end, Berkshire still manages the capital that will go into those businesses or what potentially will come out of those businesses. Equally, the next opportunity is to acquire businesses in their totality or 100%. There are great times when we can do that. Warren touched on. We had one that was interesting in the last quarter, the $10 billion acquisition, but again, the value relative to the risk has to be right. And if it’s right, we want to own it. If it’s not the time, there’ll be another time to own assets like that.

Then there’s the opportunity to own pieces of companies through equity. But as Warrens always highlighted, and again, this will be our approach to how we think around those companies. Though we own a piece of the company. We own a piece of that cash flow. We own a piece of their balance sheet. It’s not just a share certificate. And as we approach that, really, we’ll approach it with the thought that we’re going to own this company for the long term. It’s again understanding what—be it the 100% company or the 1% company. Do we thoroughly understand, and do we have a strong view of what the economic prospects of those companies will look like? And Warren said it earlier, five years from now, 10 years from now, 20 years from now, if we don’t have a view of that, we won’t be investing, be it 100% or 2% of a company through equities.

We have to thoroughly understand what those prospects look like, and associated with understanding those prospects, we need to understand the underlying risk of the businesses and it’s really the investment philosophy and how Warren and the team have allocated capital for the past 60 years. It will not change, and it’s the approach we will take as we go forward.

[00:17:47] Warren Buffett: I don’t want to go on too long on this, but this is important because it’s very obvious that the country, for example, needs an incredible improvement, rethinking, redirection, even to some extent. We’ve outgrown what would be the model that America should have. And in a sense, it’s a problem something akin to the interstate highway system, where you needed the power of the government really to get things done because it doesn’t work so well when you get 48 or 50 jurisdictions that each have their own way of thinking about things. Of course, in World War Two, we called in people at a dollar an hour, and we knew we had to turn out ships like crazy, and we knew that we had to convert Ford Motor from being a car manufacturer into an aircraft manufacturer in a matter of days, not weeks, not months.

There are certain really major investment situations where we have capital like nobody else has in the private system. We have particular knowhow in the whole generation and transmission arena. The country is going to need it. But we have to figure out a way that makes sense from the standpoint of the government, from the standpoint of the public, and from the standpoint of Berkshire, and we haven’t figured that out yet. I don’t know whether Greg wants to even explain a few of the major problems, but that is a clear and present use of hundreds of billions of dollars. You know, you have people that set up funds and say, they’re getting paid for just assembling stuff. But that’s not the way to handle it. The way to handle it is to have some kind of government-private industry cooperation similar to what you do in a war. I don’t think when they were doing the highway system, that the government set up his own guys that were going to pour a whole cement or anything like that, but they you needed a cooperation and we’re at that point, I think in terms of energy, but I don’t think we’ve made any progress particularly. Tell us more about that.

[00:21:02] Greg Abel: Yeah. And I think these are not unique in that it’s sort of reflective of where we’re at. There will be very significant investment opportunities across a variety of industries. As Warren touched on in the electric industry or the energy space, we obviously know that well with our existing business. The capital required to meet the long-term needs of what’s currently projected as demand is enormous and we as Berkshire we’ll be in a good position to help address those needs, but the model around it and the risks that need to be addressed to deploy that type of capital will be different than they are today.

[00:21:53] Warren Buffett: Yeah, the muscle of the federal government will be needed. But the test of whether you can have 48 or 50, depending on the nature of things, jurisdictions that are cooperating to do something that has opposition–we’ll have opposition in every single state. And if they took in the vote during World War 2 or they took a vote on the Interstate Highway system, it would have been slowed down to an incredible degree. So the question is how to use the strengths of this country to actually turn it into what it should be capable of or self-preserving in a republic with 48 connected and a couple of unconnected States.

It will be interesting to see what happens, but we do have capital, and we actually have some knowledge that very few places have. I mean, that we know what the games are about, but putting together that energy with knowledge and with capital and everything is it’s just not easy. It should be something that we’re capable of in the country, but the country was not designed in a certain way; it was not designed for having 48 different jurisdictions that could mess up anything that we’re attempting to do. During wartime, it’s one thing to get agreement, but during peacetime, it’s a different problem. That’s going to be one for the next generation, but it’s important. OK, station 10.

How to get hired from Berkshire Hathaway

[00:24:00] Darcus Tang: Good morning, Mr. Buffett and Mr. Abel. I’m Dorcus Tang. I’m 14 years old. My father, Roy Tang MGRTCO, brought me here for two consecutive years. And I promise I will come back every year since I queue up at 2:00 in the morning for every meeting you hold. My dad owned BRKA shares, and he said I need to work hard to earn my peace of BRKB. We are both from China, Hong Kong, and I would like to ask, what’s the essential element for a global teenager like me if we want to be part of Berkshire like Mr. Greg Abel? What piece of knowledge should I learn so you will hire me in the future?

[00:25:03] Warren Buffett: If you’re talking about the future, you better talk to Greg. So we’ll let Greg answer that.

[00:25:08] Darcus Tang: My final words. Finally, Mr. Buffett, I learned a lot from this meeting, and of course, I will come here every year, and I wish you could attend as many as possible, as you and Mr. Charlie Munger, the most respectful people, have inspired me and my father a lot. I wish you happiness and health, and maybe one day in the future we can make the world more prosperous altogether, like you said. Thank you.

[00:25:43] Warren Buffett: OK. Thank you.

[00:25:53] Greg Abel: Well, I think your dad, your dad said it best. He highlighted that to become part of Berkshire to own some Berkshire shares, you’re going to have to work hard, and I think hard work takes all of us a long way in life, and I would never diminish that there are a lot of things that matter in life. But if you start with a great work ethic and have that attitude that you want to contribute, you’re going to go a long ways in life and you’ll find great enjoyment because as Warren said, if you work hard, you’re going to find the things you love in life and it’ll lead to that and we truly look forward to the day you’re part of Berkshire. Thank you.

[00:26:44] Warren Buffett: Keep a lot of curiosity and read a lot, as Charlie would say. OK, Becky.

Wildfire liabilities

[00:26:54] Becky Quick: This question comes from Matthew Tisak in Layton, UT. He said, “Please discuss your strategy on how to protect our company from future liabilities due to wildfires blamed on our electric utility companies out West.”

[00:27:09] Warren Buffett: Well, that’s a very good question. We’ve made some mistakes in the past when we bought PacifiCorp in 2005. Walter Scott, David Sokol, and myself—three guys who were capitalists at heart, and we’re dealing with our own money. But we made a mistake by not carving it up into the seven states that we were buying. It came with an aggregation where it wasn’t state by state, and we kept the same structure, and that was a big mistake. Well, every part of the country is going to need electricity, and there are going to be places where privately held electric utilities would be very foolish to operate and how that gets resolved. In a democracy, we will find out. But those are the facts as they stand now, I would say. Greg?

[00:28:28] Greg Abel: The risk around the wildfires, i.e. do the wildfires occur, they’re not going away, and we know that, and the risk probably goes up each year. So what can we do to reduce the risk of it impacting our system and our underlying assets, and unfortunately, the liabilities with such events? We can change that and manage that. We can’t eliminate the risk, but we can reduce that. And that’s where we’ve got our teams in the West, but we really are approaching it across all our energy infrastructure, because the reality is the wildfires have now occurred in Texas. They’ve had a variety of them throughout the US, and we’re all very focused on how we manage that risk.

How we manage it is we start by addressing the actual assets, how we’re maintaining them and where we invest them, or invest in them. So we try to make sure that they’re either not causing the fire or potentially even hardening the system as to what they can withstand. We start with the operational focus. We then take it even further, and this is something Warren and I’ve discussed many times, that the utilities started to recognise when we have these unusual weather events. And Warren touched on what’s been happening in Nebraska with storms, but they’re equally occurring or significant events occurring out West.

But when we have those, we’ve gotten very, very good at saying, OK, we have to manage the system differently. We’ll potentially deenergize because there’s likely to be an event. But the one thing we hadn’t tackled, and this is very relevant to the one significant event we had back in 2020 in PacifiCorp, is that we didn’t deenergize the system as the fire was approaching. Because our employees and the whole management team have been all their whole lives to keep the lights on and the last thing they want to do is turn those lights off and have a system deenergized.

After those events and as we really looked at how we’re going to move forward in managing the assets and reducing that risk, we have clearly recognized as a team that we have to deenergize those assets. So now, as we get fires encroaching at a certain number of miles, we deenergize because we do not want to contribute to the fire, nor obviously harm any of our consumers or contribute, unfortunately, if there’s a death. And that’s really where we had to take our team that we’re managing at different risks now. It’s not about keeping the lights on, it’s about protecting the general public and ensuring the fire does not spread further. So we’ve gone as far as that, and I’ll stand corrected on this one, but we’re probably the one utility or across our utilities that does that today, and we strongly believe that. Becky?

[00:31:46] Becky Quick: Can I just follow up on that? Doesn’t that open you up to other risks if you shut down your system, a hospital gets shut down, somebody dies?

[00:31:55] Greg Abel: You know, fortunately, that’s something that we do deal with a lot because we have power outages that occur by accident. So when we look at critical infrastructure because it’s an excellent point, and we’re constantly reevaluating it, and we do receive a lot of feedback from our customer groups as to how we manage that. But that is something we deal with on a more routine basis than we’d ever like. The lights go out, and we have to make sure the hospitals stay on, emergency units can respond and all that. But there is a risk there.

So then we spend a lot more time educating the consumers and our consumer groups, our customers. OK, this is what will happen. We need to understand your unusual situations and how we can best tackle them, again. So we just don’t take on another liability. So there’s a lot around deenergization. Then, just to take it to the last step, and Warren touched on that, in general on energy policy, we have to work with our States and our regulators to ensure this was never a risk we took on or envisioned when we were investing in utilities, nor would any of the investors who’ve invested in other energy companies. You were in a very set return for taking on a very set defined risk associated with that asset, and this has gone well beyond that.

We don’t earn the type of returns, nor can you earn a large enough return to take on this risk. So it’s not just about solving the return side. We really have to solve the risk side, which means we work with our regulators, we’re working with our state legislators to get to the right answer, and that will be an ongoing process. There are no silver bullets out there, but every day our teams across utilities are working hard to reduce that risk, recognizing the fundamental risk of the wildfires is not going away.

[00:33:58] Warren Buffett: There are some problems that can’t be solved, and we shouldn’t be in the business of taking your money, investors’ money and tackling things that we don’t know the solution for. You can present the arguments, but it’s a political decision when you are dealing with states or the federal government. If you’re in something where you’re going to lose, the big thing to do is quit.

If you do present your case as well as you can, and everything else, but if you don’t hold the pen in the end, you know we don’t have any business taking your money and doing dumb things with us. We can do our best to explain what the intelligent things are, but it’s your money. So it’s very hard to tell on that. I have all the questions about politically determined decisions that are going to go to court in many cases, but you know that it doesn’t make sense. We know what we think a sensible system would be, and we ought to explain what we think it is and do our best to get our position because it’s pro-social. They have the right solution to have it. But the right solution, for example, in the Interstate, wasn’t to let 48 states each decide their own way of doing it, and award contractors the jobs. You know, there are some problems that can’t be solved, and we are not in the business of trying to solve insolvable problems.

But then the problem we have, of course, is that the people who work for you, that’s their job. So they want to have reasons to keep going, and those are tough choices if you’re managing, but that’s why they have managers.

[00:36:29] Greg Abel: Hey, Warren. Can I just add, because you touched on something really important there, that effectively is, for example, with the utilities and the wildfires. we can’t just become the insurer of last resort. And that we’re going to cover any costs and all costs irrespective of what occurred. And that’s a little bit of the situation we’re in right now with our largest challenge, the 2020 wildfire, there were four fires occurring at a challenging time.

One, we’ve always asserted was a lightning strike that was not inside our service territory. The fire burned into our service territory, and we became responsible for that fire, effectively, through the courts, and we’ve continued to hold firm that we’re not responsible for that. Rightfully, I mean, we didn’t contribute to it, and we didn’t initiate it, nor did we feel we ever contributed to it.

Again, if you look at the risks that are there, we have to manage through things like that. We’ll get through that litigation. We’re happy to report, for example, on that one. After five years, the Oregon Forestry Department has come out and said the fires, the other fires we did have that we were able to manage and extinguish, did not contribute to that fire. And that fourth fires the largest fire of the four, it’s 60% of the claims. We’re five years into effectively getting that information into the courts.

Now that will outline our legal strategy obviously going forward, but it’s things we’re dealing with, but we continue to learn from this as a utility in the industry. So we’re in very much each of the legislatures, as I said, making sure we get a clear definition where liability falls, what the economic damages be, but most importantly, what the non-economic damages be. And with the thought, we can’t be the insurer of last resort. We just can’t be responsible for everything that happens in a state.

[00:38:43] Warren Buffett: If we want to do it with our own money, we can do it, but we’re not going to do things with your money that we think are stupid. You ought to get rid of us if we do. It’s easier to do stupid things with other people’s money than it is with your own money. That’s one of the problems the government has, generally. We don’t want to bring it to private enterprise.

But it is important that the United States have an intelligent energy policy, just as it was important during World War II that we learned how to make ships instead of cars extremely fast. We figured out the answer. We combined private enterprise with the power of government. But how feasible is that in a democracy? You know, it was clearly obvious during World War II what needed to be done, and we did it. But it’s not so clear when you have 330 million people all arguing their own self-interest, and of course deciding what will happen and having the people often who are making the decisions, reacting as they did 20 years earlier, when they don’t really bear the responsibility for the decision. Anyway, that’s management, and we’ll do our best. Station 11.

How to get a meeting with Warren Buffett

[00:40:37] Alitia Burek: Hello, my name is Alitia Burek, and I’m from Poland, but I currently live in Chicago. This question is on behalf of an inspiring man that I know, Wid Ahmed, who’s here with us today. Mr. Buffett, nearly 74 years ago, on a cold Saturday in January 1951. You travelled 8 hours by train from New York to Washington. You went all the way on nothing but hope that someone might teach you more about the insurance industry.

Arriving at GEICO’s office to find the doors locked. You persisted until a janitor led you inside. You credit that meeting with Lorimer Davidson for the insurance float. That was the rocket fuel behind Berkshire’s success. In 2011, when I was 15, I wrote to you with similar determination, asking to meet. You kindly rolled back, saying you had only 3000 days left and more pressing priorities.

Well, Mr. Buffett, it’s now been 5000 days since you replied. And so, inspired by your persistence in 1951 and the tenacity of Mrs. B, humbly renewed my request for just a quarter of the time Davey gave you—a single hour in your office. You may wonder why it must be you have often shared an anecdote about a Polish Jew who survived Auschwitz, who said to you once, “Warren, I’m very slow to make friends because when I look at someone, I ask myself, would they hide me?” You said that the number of people who would hide you was the best test of a life well-lived. Well, I believe that at this meeting you don’t have 40,000 shareholders, but you have 40,000 people who would hide you. You are a testament to a life extraordinarily well lived. Yet even you have not fully witnessed this transformative power of a client–

[00:42:28] Warren Buffett: I’ll let you write my biography, but I think that’s the point of your question.

[00:42:35] Alitia Burek: So respectfully, I ask again, Mr. Buffett, before Father Time wins, will you please grant Wid Ahmed an hour of your time or any time you can dedicate? Thank you so much for your time.

[00:42:49] Warren Buffett: Thank you, and I will say this to grant an hour to everybody of the 40,000 here. We’ll have an interesting time the rest of my life. But I will give you one tip. I found that when I was very young, and these companies were offbeat, they didn’t have investor relations departments then. Almost every CEO would see me because they figured they’d never see me again, and they weren’t getting calls like that.

I would ask two questions, as I would have to explain to them, it’s not a bad idea, incidentally. If you’re going to walk into somebody’s office and you say you want 10 minutes of their time, take an hourglass and stick it on the desk of the person you’re talking to and turn it up. So it’s going to go for 10 minutes and just say you’re going to get, you’re going to leave in 10 minutes. Unless they ask you to stay, and that’s the terms. But then once you have that—If they’re in the coal business, we’ll say, which happened to be one that I was interested in 70 years ago or so—they just ask one question that if they were to be stuck on a desert island and they had to own only one of their competitors stocked during the 10 years, which one would it be and why?

And then after they give you the answer, you ask the same thing if you would be short your net worth while you were on that island, which would it be, and why? Because every manager likes to talk about their competitors. They’re like a bunch of school kids when they get into talking about their competitors. I probably learned more about various industries by just making sure that they didn’t think I’d stay too long, and that in the meantime, they would have the floor and talk about their competitors. I kept my own mouth shut in those days.

They’ve departmentalised investor relations. All companies of size, frankly, now. So you’ve got, you know, 3000 companies or whatever they have, and they all have departments, and each one of them has an Investor Relations department practically. And their job is to say, This is the best thing you can do today is buy our stock. We’ll let the whole concept is totally idiocy. But it’s a big business, and it gets bigger, and the Investor Relations department gets bigger, and it’s what we have now. But do a little of your own work, your own way. But Berkshire Hathaway has got plenty of material out there for you to read, and when you get through reading it all, you’ll know way more than most of the people who work at Berkshire.

So you don’t need a personal interview. If we take an hour times even the 40,000 people we may have here, plus Becky’s many listeners and viewers, it just doesn’t work. So I admire your effort, but you’ll just have to settle for that, as the admiration that you get in this. OK. Becky.

BHE’s valuation

[00:47:04] Becky Quick: This is a question that you touched on in a lot of ways, and the last answer from before, but I did get this question from a few different people. So I’d like to ask it. Ricardo Briz, a long-time shareholder based in Panama, says that he was very happy to see Berkshire acquire 100% of BHE. It was done in two steps, one in late 2022, 1% was purchased from Greg Abel for $870 million, implying a valuation of BHE of $87 billion. And then two, in 2024, the remaining 8% was purchased from the family of Walter Scott Jr. for $3.9 billion, implying a valuation of $48.8 billion for the enterprise. That second larger transaction represented a 44% reduction in valuation in just two years. Ricardo writes that PacifiCorp’s liabilities seemed too small to explain this. Therefore, what factors contributed to the difference in value for BHE between those two moments in time?

[00:48:06] Warren Buffett: We don’t know how much we’ll lose out on PacifiCorp and decisions that are made, but we also know that certain of the attitudes demonstrated by that particular example, I’ve got analogues throughout the utility system and there’s a lot of States that so far have been very good, decent to operate in. And there are some, now, they’re rat poison.

As Charlie would say, to operate in that knowledge was accentuated. When we saw what happened in the Pacific Northwest and it’s accentuated by what we’ve seen as to how utilities have been treated in certain other situations. And then on top of that, it wasn’t just a direct question of what was involved at PacifiCorp. It’s an extrapolation of a societal trend.

Secondly, we also had a decision we didn’t expect at all in the real estate business. Those kinds of things can change values, and courts can change values. It’s a lot easier to make those decisions when you just own marketable securities than when you own businesses. I’ve made plenty of those decisions as I’ve watched what has happened in various industries and companies over 70 years. But Greg made the decision, which was fine with us, to get out. He had no knowledge of what was going to be happening in either the real estate field or the utility field, and we’re not in the mood to sell any business of it.

But Berkshire Hathaway Energy is worth considerably less money than it was two years ago, based on societal factors, and that happens in some of our businesses. It certainly happened to our textile business. The public utility business is not as good a business as it was a couple of years ago, and if anybody doesn’t believe that thing, look at Hawaiian Electric and they look and look at Edison in the current wildfires situation in California and their societal trends.

Oh, I just got a note here on my monitor that says, “The books are now sold out.” So you spend your money on other things. Here’s fudge. This is what I’m eating.

But that’s the explanation—values change, and they don’t always change upwards. When we made the deal with Greg, we would have been happy to buy out the Scott family at that price, and when we needed to deal with the Scott Company, we wouldn’t have been happy to pay Greg the price he received. But that’s like Berkshire shares we bought in stock at X, and we buy in stock at less than X if conditions change. Over the years, we pay more and more because it builds in value, but it doesn’t do it in a straight line.

I would say that our enthusiasm for buying public utility companies is different now than it would have been a couple of years ago. That happens in other industries, too, but it’s pretty dramatic in public utilities. And it’s particularly dramatic in public utilities because they are going to need lots of money. So, if you’re going to need lots of money, you probably ought to behave in a way that encourages people to give you lots of money, and then we will see where we go. We’d like to see Public Utilities do well, but our responsibilities to the shareholders of Berkshire Hathaway. OK, station 1, again.

Berkshire Hathaway’s earning power

[00:52:50] Brevi Panila: Dear Warren, dear Greg and dear fellow owners, it’s such a pleasure to be here. My name is Brevi Panila. I was born in Communist Albania, but I’m now teaching economics in London, England. The wonderful writing of Warren and Charlie has significantly shaped my thinking and teaching. I thank you both very much for the many insights over the years. Warren often writes about the importance of Berkshire’s earning power to owners. My question is what was in your estimate of Berkshire’s earning power in the latest fiscal year? It will be great if you can comment on any significant items that either increased or decreased the earning power as compared to the reported net income measures for Berkshire. Thank you.

[00:53:34] Warren Buffett: Well, I think our underlying earning power was affected negatively here a while back by what happened in the utility field. I think that our earning power was not enlarged by any large acquisitions that come along, but they come along periodically. So we will see something at some point that—Well, on the one that was 10 billion, we would have added to earning power. I mean, why else would we do it?

So that’s very situational, and of course it depends so much on what the general market is doing and what interest rates are doing and what psychology is doing. We will make our best deals when people are the most pessimistic. You know that’s been true ever since I was born in 1930. When I was born, things got much more attractive over the next two years, and apparently, I didn’t do anything about it then. But you know, that was the opportunity of a lifetime, and I blew it by worrying about the kid in the next crib or something.

Over my lifetime, you know, I’ve had fabulous opportunities sometimes, and they happen because humans are human. I’m fearful of all kinds of things. I don’t want to try to be one of the launders and walk on a tiny strip between a couple of twin towers or something or whatever it may be, but I don’t get fearful of things that other people get afraid of in a financial way. And you know the idea that if Berkshire went, let’s say Berkshire went down 50% next week, I would regard that as a fantastic opportunity, and then it wouldn’t bother me in the least, and most people aren’t, they just react differently.

It’s not that I don’t have emotions, but I don’t have emotions about the prices of stocks. I mean, those decisions get all the way to my brain, whereas emotions can get bogged down somewhere. So Berkshire will increase its earning power over time, as we retain money, I mean, we are doing things, making decisions every day, people are working or retaining earnings. We will build the earning power, but it won’t be coming in any even stream, and it certainly won’t be matched dollar for dollar on either the upside or the downside in market prices, and that’s what makes it a good business, and you know the investment businesses that everything isn’t properly appraised and the sillier other people get, the better your opportunities get. OK, Becky.

Investing in big-tech

[00:57:13] Becky Quick: This question comes from Achit Patel, and it’s about the big-cap technology stocks. In the 2017 annual meeting, you said Warren, you really don’t need any money to run these companies and referred to them as ideal businesses, referring to the big tech companies, Apple, Alphabet, Microsoft and Amazon. With all of those companies now announcing massive capital investment endeavours and around AI ambitions, have you rethought the above comment just in terms of them being asset-light and what you think of them as a result?

[00:57:47] Warren Buffett: Well, it’s always better to make a lot of money without putting up anything than to make a lot of money by putting up a lot of money.

So, a business that takes no capital to speak of—Coca-Cola. The finished product, which has gone through bottling companies and everything, takes a lot of capital. But in terms of selling the syrup or the concentrate that goes into it, it doesn’t take a lot of capital. So one is a fabulous business, and one is a, yeah, it depends where it is and everything like that. Coca-Cola is popular in every place. But some places, and I mean, if you’re in the bottling business, it costs real money. You have real trucks out there, and you have all kinds of machinery, and you have capital expenditures coming up.

We’ve got businesses that take very little capital that make really high returns on capital, and the ones the politicians talk about are making high returns, actually aren’t making high returns, in terms of capital. Property casualty insurance is kind of a rare business because you need capital as a guarantee fund that you will keep your promises, but you can use it to buy other low-intensive capital.

I mean, you can buy Apple, and that would support that business. So that can be a pretty good business, and that’s one of the reasons we’ve done well over time. It’ll be interesting to see how much capital intensity. There’s more capital intensity going on with the magnificent 7 than there was a few years ago. I mean, basically, Apple has not really needed any capital over the years and its repurchased shares that dramatic amount of reduction. Whether that world is the same in the future or not is something.

Hollywood’s answer was always to get their money from other people to put up the capital. A lot of people have gotten very rich in the country by essentially figuring out how to get others to put up the capital, and that’s what people do in the money management business. They get very, very rich because they get an override on other people’s capital.

Incidentally, if all of you were paying 1% for investment management fees at Berkshire last year, you would have paid $8 billion for managing, and you really wouldn’t have had to do it, but investment management is a very good game because other people put up the capital and you charge them for the capital, whether they do well or not. And then you can charge them a lot more if they do well.

I mean it’s a well-designed business for the people who practice it, and who can blame them, I mean, that is capitalism. I saw that in operation when I was working at Solomon, but I didn’t need to see it. I knew it existed anyway. The trick in life is to get somebody else’s capital, get an override on it. Charlie and I decided it wasn’t too elegant the business after a while, but we were not criticizing the efficacy of it. It just didn’t appeal to us after a while. I did it for 12 years, though, or something.

The one difference that Charlie and I did from other people is that we put all our own money in and did it so we really did share the losses with our own capital, but we got an override on other people’s capital. And that’s been people have made advances where they get the override on other people’s capital without putting up any of their own capital to speak of. And that’s a very good business, but it can lead to a lot of abuse.

Greg, you’ve watched capital management in the United States, and would you say that Canada’s behind or any in that respect?

[01:03:02] Greg Abel: Well, I think when it comes to their capital system, Warren, it’s very comparable. There’s no question other than as we know, I mean I think the US as far as having a capitalist system, it would be tough to be touched by any country, and when I think of Canada, there’s just certain responsibilities or obligations that the government wants to take on and aren’t going to leave with the public sector. And that’s just a decision that’s made by society or by the Canadian people, or if you look at another country, Australia or wherever it may be, it’s different. But when I think of capitalism, that drive is there and the desire to, you know, allocate capital properly. It’s very similar.

[01:03:56] Warren Buffett: It’s produced wonders in the United States if you think about it. But originally, with the Rockefellers and Kennedys and Carnegies and all that, they actually put up money to build a steel mill, whatever it may have been, with refineries and pipelines and all that sort of thing. They put up money to do it. Now the trick is to use other people’s money, basically. And you know you can’t blame human beings for behaving like humans, but you should be aware of what their motivations are. Capitalism in the United States has succeeded like nothing you’ve ever seen. It’s a combination of this magnificent cathedral, which has produced an economy like nothing the world’s ever seen. And then it’s got this massive casino attached.

So you got the cathedral and the casino, and then the casino, everybody’s having a good time, and there’s lots of money changing hands and everything. You’ve got to make sure the cathedral gets fed, too, because of the temptation. And the temptation is very high now to go over to the casino where people say, you know, we’ve got magic boxes and all kinds of things that will do wonderful things for you. That’s where people are happiest. That’s where you get the most promised to you. That’s where the most money is for the people who are pushing things.

The balance between the capital and the casino and the cathedral is very important that the United States in the next 100 years make sure that the cathedral is not overtaken by the casino, because people really like to go to casinos. And it’s just so much more fun. They bring bells, and when you win, they bring you drinks and everything else, and it’s designed to move money from one pocket to another. In the cathedrals, they are basically designing things that will be producing goods and services for 300 and some million people, like it’s never been done before in history.

That’s an interesting system we developed, but it works. It dispenses rewards in what seems like a terribly capricious manner. I mean, the idea that people get what they deserve in life, and it’s hard to make that argument. But if you argue with that, any other system always seems to work better; the answer is we haven’t found one. So we’ll leave it to the next generation to send me the answer by Ouija board or whatever. OK. Station 2.

Early influence

[01:07:18] Patrick Nester: Hi, my name is Patrick Nester. I am 13 years old and from Tampa, FL. I’m here with my brother John, who’s 15, and my dad. Thank you for hosting this meeting. This is my first ever shareholder meeting. My question is what high school class or activity helped influence you to who you are today as the greatest investor of all time?

[01:07:45] Warren Buffett: Well, that’s a good question. The teachers you get in your life have an incredible impression on you, and a lot of them are the formal teachers you have, but some are informal teachers too. I mean, I’ve learned from certain employers so much. You really hope you’re learning from everybody, and you find that it was well-intentioned and there’s had a lot of experience. I had a lot of good luck in that, but I would say that where I was really lucky was my dad was in the investment business, so I would go down on Saturday and I’d wait for him to go to lunch with and I’d read the books that were around there, that nobody else have ever read.

And they just talk to me, numbers talk to me, and I could never get my feel of them, and then I discovered the public library and I read every book there was on investments, literally, in the Omaha Public Library on 19th at Harney. I enjoyed learning about that. Unlike Charlie֫, if Charlie was reading about electricity, he would want to know everything that Thomas Edison knew and more and that goes with the same thought process and understand how everything worked. I didn’t care how it worked; I just cared whether it worked, and that’s a limitation. I’m confessing here. I’m not bragging.

As Charlie would say, people would always ask, “If you could only have lunch with one person, living or dead, who would it be?” And Charlie said, “I’ve already had lunch with all of them because I’ve read all their books.” And he really did it. I think having curiosity and actually finding sympathetic teachers is very useful. I ran into a couple of teachers that both in high school and college. In fact, I would say that I went to three different universities. I went to high school in Washington, and at each place I found about two or three really outstanding people, and I just spent my time with them and didn’t pay much attention to the other classes. I was lucky to find something that really fit me very early on.

If my ambition had been to become a ventriloquist or, you know, whatever the hell it might have been and it wouldn’t work. You know, even I just spent hours and hours and hours, and I would have been any good when I got through. So I don’t believe that. I think there was a book that talked about spending 10,000 hours as something. I could spend 10,000 hours tap dancing, and you’ll throw up if you watch me.

If I spend 10 hours reading Ben Graham. I would be damn smarter when I got through. So minds are really, really different. I watch great bridge players, and I watch great physicians. I mean, people really, really, really have different talents. I think you’re supposed to have 88 billion cells in your brain. I’m not sure that all of mine are flashing bright lights. But you are different from anybody else. My dad always used to tell me that you know you’re something different, it may not be good, but you find your own path.

You will find the people in school who want to talk to you. People who teach, in general. They love having a young student who’s actually really interested in the subject, and they’ll spend extra time with you. They’ll do all kinds of things, and I ran into that. And Graham and Dodd at the Columbia, well, they’ve treated me like a son, basically, but I was interested in what they’re saying, and they found it kind of entertaining. I was so interested. So look around at what really fascinates you. I wouldn’t try and be somebody else. You’ll find the teachers at a school, and you’ll find some outstanding people who are teachers.

At least 10 people would have had huge impacts on my life, and every one of those positive, you know, because I got selected in the sense, and a number of people really like helping younger people. I’ve found that in school. And probably it helps to look a little bit lost at all. You need help, but I was at my school experiences, we’re good, but really very good, but I attribute it much more to the individual, to the institutions. OK, I’ve already told you more than I know. So we’re going to Becky, you’re next.

[01:14:17] Becky Quick: This question comes from Scott Williams in Portland, OR. He said, “Do you think the net benefit of DOGE will be positive or negative for the long-term health of the United States?”

[01:14:29] Warren Buffett: Well, why don’t you give me a hard one? I think that bureaucracy is something that is amazingly prevalent and contagious, even in our capitalist system and the big corporations. Overwhelmingly, most of them look like they could be run better. I’m sure Berkshire does in many respects. And the government is the ultimate. So it really doesn’t have any checks on it. That’s why it scares you to some extent about what the future of the currency will be, because they can print currency and if you have people that get elected by promising people things and that doesn’t mean that they aren’t sincere about all kinds of items, but there’s no politician that says to anybody that, “I really think you have bad breath and if you don’t mind would just step over that away from me.” It just doesn’t happen.

I think the problem of how you control revenue and expenses in government is the one that is never fully solved and has really hurt dramatically many civilizations. I don’t think we’re immune to it, and we’ve come close to it. But if you tell me how in the democracy you go in and really change things, you know, we’re operating at a fiscal deficit now that is unsustainable. Over a very long period of time, we don’t know whether that means two years or 20 years because there’s never been a country like the United States, but you know that, “If something can’t go on forever, it will end.” The quote is from Herbert Stein, a famous economist.

We are doing something that is unsustainable, and it has the aspect that it becomes uncontrollable to a certain point. I mean, essentially, you just give up on it. And Paul Volcker, you know, kept that from happening in the United States. But we came close multiple times. We still had very substantial inflation in the United States, but it’s never run away yet, and that’s not something you want to try and experiment with because it feeds on itself.

So I wouldn’t want the job of trying to correct what’s going on in revenue and the expenditures of the United States, with roughly a 7% gap when probably a 3% gap is sustainable and then the further away you get from that, the more you get to where the uncontrollable begins and I think that it’s a job I don’t want, but it’s a job I think should be done and Congress does not seem good at doing it.

We’ve got a lot of problems always as a country, but this is one we bring on ourselves. We have a revenue stream, a capital-producing stream, a brains-producing machine like the world has never seen. And if you picked a way to screw it up, it would involve the currency. That’s happened a lot of places. In theory, you would make it so there was a substantial downside for anybody that screw things up. There is a downside, there’s upside. It’s the problem of the most successful company in the history of the world. At this point, we have a little room to go and solve. With that, I’ll shut up and go on to Station 3.

A fair capitalism

[01:20:19] Sasha: Hello, Mr. Buffett. My name is Sasha from Germany. And first of all, I want to thank you because you made such a great impact on my life and the lives of the people I love, and that’s priceless. Mr. Buffett, imagine it’s 1776. And you’re sitting alongside Benjamin Franklin, helping to shape the foundation of a new nation. What core economic principles would you advocate for building a fair, resilient and opportunity-driven capitalism society, one that supports long-term prosperity for future generations?

[01:21:12] Warren Buffett: Well, that’s a good question, but I would probably say to Ben Franklin, you just keep thinking and don’t talk to me because you’ll come up with some better ideas than I will. He was an incredibly remarkable person. I mean, he’s almost probably the last person to have a grasp of every aspect of activity in the country. He invented all kinds of things, and he incidentally—We were talking about the power of compound and that sort of thing–he left a will that left some money to Philadelphia and another sum to Boston that would serve as an example for a couple of hundred years. You know the power of compounding and all kinds of things that he was so far ahead of his time that the best thing I could do if I were under that tree with him was to get out of his way and let him keep thinking.

He saw the problems that success could bring to a society as well as other problems, I mean, more immediate problems in all kinds of fields, but the problems of how to take 8 billion people, because there’s no way we can separate ourselves from the rest of the world. We can be an example for the rest of the world, and I think it behooves us since we have had all this good fortune in this country, and we do have a pretty good system.

I don’t think you get very far by lecturing the world on how. You were the one who should tell them what they should do with our lives. I think you get a certain amount of resentment when just a few hundred years ago, a whole different group of countries were running the world and now you start giving them advice, and I think it’s a real mistake in communication and persuasion to lecture a bunch of people where you just won the game.

I would advise Ben to figure out how to win the game and keep a certain amount of humility at the same time. And I would tell him to try and design a system that doesn’t invent too many things that can destroy the planet. You know, they become uncontrollable once you get them out there. There was no alternative to us developing the atom bomb, but the expansion of the number of people who have the ability from one to eight, and nine, probably pretty soon, with Iran. I mean, that’s a mistake. This society just could not afford to make, I mean, solve the problem in nine variables instead of simply one.

Now it’s totally understandable. My dad was in Congress when the atom bomb was first used, it’s amazing how Sam Rayburn kept the House of Representatives uninformed because they are supposed to appropriate all the money and 435 congressmen there and they had no idea they were probating money for Los Alamos or what was going on in Chicago or what was going on in Tennessee.

But anyway, we do have a society that is far beyond anything that Ben Franklin dreamed of. It’s moving in the right direction. Towards solving some problems the way we made the kind of broad declarations about all men being created equal, etc. Then we did some of the things we did, but generally speaking, we moved in the right direction, but we faced problems. I don’t know how Ben Franklin would attack the problem of what you do once you get weapons of mass destruction in many hands, and when you essentially look at the world and something where there are winners and losers.

And that the winners humiliate the losers and do all kinds of things. I’ll let the people are a lot younger here. I’ll let them figure out the answers on that, but it’s still the most wonderful. There’s never been anything you could dream of like what happened in the United States. So it’s the best place and the best time to be alive by miles in the street. Just think of a couple of hundred years ago, and somebody yanking out a few of your teeth and pouring whiskey down you. I mean, it’s subsistence and particularly in this Midwest, just imagine waiting till the Missouri froze over every year just to see whether you get your wagon across, and maybe they have a pregnant woman in the back.

It’s just amazing what has happened of a positive nature during my lifetime. And then the question, how do you keep it in? How do you improve it? I do think that the fundamentals of it all, though, are having a currency that does not get debased. What that does to the stability of a society where all the people that trust their government get screwed and all the people that figure out ways to profit from it become rich or richer. I don’t think you want a society that operates in that manner. So anyway. Let’s see, that was Section 3. So we’re going to Becky, right?

Greg Abel’s approach to managing the operating subsidiaries

[01:28:53] Becky Quick: Greg, this question is for you. It comes from a shareholder named Jay Milroy, who writes, “Mr. Buffett has a hands-off approach to managing the operating subsidiaries. How would you describe your approach?”

[01:29:07] Warren Buffett: Better.

[01:29:13] Greg Abel: Well, we’ve got our managers over there and I would say going back to 2018, it’s been very fortunate being this role because one I had to learn a lot of the businesses and there’s no question as Warren bought the businesses, he had that general knowledge. I absolutely had to engage with each of them, and they’ve been great in sharing their business models, their approach, and their thoughts around where the risks and opportunities are.

And I think as we went through that, there’s no question I had questions and wanted to engage with them. And Warren talks about the curiosity being important as you go through things. That would be my style, but have questions and comments around their business, their frameworks. At the same time, they have great businesses, and they run them very autonomously and that remains in place. But if there’s opportunities to see where maybe seen something in another business or an opportunity, I may see in their industry, we’re going to discuss it and see if that’s something we should pursue or are we’re properly addressing the risk.

I found all our managers to be absolutely engaging on that and want to have those dialogues. And I’d say that’s a reflection of my approach. I’d also say that when you think of our managers, again, very autonomous, they run their businesses, they know it better than I ever will. But if I see an opportunity that it’s well worth their time to talk to another one of our managers. If it’s GEICO, and they’ve gone through a technology transformation. They’re not by themselves that need to be thinking that way. We want to make sure the right folks are talking and figuring out how we can benefit from the prior experiences. So I would say, more active, but hopefully in a very positive way, and we got an exceptional group. So it’s worked out exceptionally well as I’ve gone through that period of time.

[01:31:27] Warren Buffett: It’s working way better with Greg than with me because I just didn’t want to work as hard as he worked and I could get away with it because we’ve got a basically good business, very good business and I wasn’t in danger of you firing me by virtue of both ownership and the fact that we would do pretty well. But the fact that you can do pretty well doesn’t mean you couldn’t do better. And Greg can do better at many things. Many people want to be managed, need help in being managed. Some don’t. Some you just leave alone.

We’ve had managers it would have been crazy to start giving instructions to because they just quit. And I wouldn’t blame them because I’d be the same type myself. But a lot of people really do welcome direction and help, particularly when they’re getting it from somebody like Greg that really lives the life himself and doesn’t just come down from on high and say, “Here’s what you do”, while I do something else. A manager who behaves differently than what he’s asking the people beneath them to behave—it just doesn’t work over time.

People want a manager that they admire, and they’re not going to admire them if those people profess to behave in one manner and behave in another manner. It’s easier for an organization to see its quality move downward than it upward. I mean, if the boss behaves badly, it causes everybody to behave badly. I mean, that is really catching. It’s not as catching on the way in upper management, but if the manager is doing a little things to grease his own situation, pretty soon— Let’s say you’re running a retail establishment—pretty soon, all the employees are telling their friends that they get a discount. If their friend wants something, they’ll put it on their account and then get the discount. Once you start deviating downward, it is really contagious and it’s hard to rebuild, so you really need someone who behaves well on top and is not playing games for their own benefit. And we get a lot of managers that bend over backwards not to do that sort of thing, and then we get a few that bend over forwards. If you get enough companies, you’re going to get a lot of forms of behaviour, and Greg does something about it, and I’ve generally been lax in doing something about it, but he’s done a way better job with that than I have. OK. Station 4.

Coal phase out

[01:35:27] Kansas Lomire: Hello, Mr. Buffett and Mr. Abel. My name is Kansas Lomire. I am a junior at Elkhorn South High School and was born and raised in Omaha. My question is directed to Greg Abel. Berkshire Hathaway is the second-largest utility provider in the United States, and a 2025 Reuters investigation found that its coal fleet is the dirtiest in the nation. There are currently no concrete plans to phase out coal and fully transition to renewable energy. I’m 17 years old, considering that, what do you have to say to young people like me who will live with the consequences of climate change due to companies like Berkshire?

[01:36:24] Greg Abel: Thank you for both your question and your comments because it is important to understand, say, Berkshire Hathaway Energy, but also how they operate and maybe using Iowa, at least, as a starting example, because I think that was one of the States cited in the report. One of the important things that I’d say early in is acquiring our energy companies, and I go back to when we acquired MidAmerican, we acquired it in 1999, Berkshire purchased MidAmerican in 2000.

But one thing that became very clear to me and our teams was that what we do within our utilities is really driven on two fronts. One, we absolutely have to meet the requirements in the law that’s laid out federally, but most importantly, we had to recognise that we implement public policy across these states. And that was an interesting conversation when I went back to Iowa, and again, the report cited that as a significant problem. It was early in the 2000s when, for the first time in Iowa, we were going to as a utility, be short of power.

So we didn’t have the energy, and we entered into a significant discussion with our governor at the time, and really sat down and said, “Where do you want us to go as MidAmerican? And what resources do you want as a state?” At that time, we were predominantly a coal-based state, and we recognised that obviously and fundamentally, we personally viewed it as a risk, but we needed to have that conversation with our state as to how we would manage that going forward.

The interesting thing was that as we had that conversation in the early 2000s, again with the leadership of our state, it was clearly decided we wanted to continue to be long power, i.e. not be short for our customers. We discussed the type of resource, and I remember a very clear conversation around we wanted to stay balanced across a variety of energy sources, and at that time, it was really coal and natural gas.

And at that time, we made the decision to build the largest wind project in the US, in Iowa. So we undertook an effort to build three resources: a coal plant, a gas plant, and a what was the first wind project we owned in MidAmerican. And again, it was very consistent with what the state wanted, but we also laid some important groundwork there because we started to define the importance of renewable energy, non-carbon resources, but it has to be consistent with what the state wanted and we’ve gone on over since that period of time to deploy $16 billion into Iowa associated with renewable energy.

Again, very consistent with what our state wanted us to do, i.e. the underlying policy. We don’t get to make that decision and spend 16 billion. It’s done in conjunction with our governors, legislators, and regulators, and at the same time, we’ve had the opportunity to retire five of the 10 coal units. Now, as the report highlighted, I understand people would like those other five coal units retired at this time. But to think we deployed 16 billion to retire five, and it’s a very good outcome for our customers. We’ve been able to maintain our rates, which are some of the lowest in the country. So it’s been done very efficiently, but the reality is we still need those five coal units to keep the system stable. We cannot have a Spain-Portugal situation.

So we absolutely respect the input. We absolutely respect the process, and we’ll continue to work with each of our states to identify the path they would like to chart. And we work hard to ensure there are good, balanced outcomes because we recognize the challenges associated with other folks’ desires. So I think you’ll continue to see our utilities implement policy consistent with the needs of their stakeholders or customers, and at the same time, always respecting what’s required by any of the federal standards. So, thank you for your comments.

US health insurance reform

[01:42:05] Warren Buffett: OK, 31. Let’s see. Becky?

[01:42:09] Becky Quick: This question comes from Billy de Ross. He writes, “Mr. Buffett, as a nurse from New York State, I’ve spent years struggling to secure good health insurance for myself, even while working on the front lines to save lives. In New York, accessing insurance means navigating a confusing state-run system that feels like it’s designed to overwhelm. I’m curious what ultimately led to the end of your healthcare venture with JP Morgan and Amazon, and given your commitment to value and long-term thinking, would you ever consider taking another look at health insurance reform in the US?”

[01:42:46] Warren Buffett: We’re spending close—it’s hard to get the precise figure—but close to 20% of GDP on health. And if you go back to 1960, there were a number of countries that were each spending around 5% and then the lines began to diverge dramatically. But the mathematical fact that there are only 100 percentage points in the equation didn’t change. So we tried that experiment with JP Morgan and Amazon. We had three people who didn’t think they knew the answer, but thought that—In my case, I used the term that it was a tapeworm in the economy—the tapeworm was alive in every part of the country. The hospitals liked it. The hospitals had prominent people who worked with people. Their doctor didn’t like the system. I mean, all kinds of things. But in the end, JP Morgan, Amazon and Berkshire, we’re not going to have any effect on changing that 20%.

Now that 20%, there are only 100 percentage points available, and one of the countries spends 6 or 7%, and perhaps uses our system to their advantage, which is also very true. That is an enormous percentage of the economy. It was too entrenched to really do much in the way of change, and we spent some money on it. We did some work and we learned a good bit about our own systems, and we saw the degree to which the present system was ingrained in so many people, whether the healthcare providers or whether everybody. And these aren’t evil people. I mean, they’re just going about something and trying to save lives. But we found that whether it was in Canada or France or Britain, or wherever might be. And they do look at our cost, but they were just far higher and to some extent, we were subsidizing the rest of the world, and people would come to the United States to do the really unusual or challenging aspects of health, in terms of operations and that sort of thing. But we made no progress.

There comes a point where the governments, that I mean, it’s so involved in the situation and health is so important to everybody. What I said to Jamie and Jeff, I said, well, the tape worm won. There are problems in society when you get 20% of your GDP going into a given industry. The degree of enthusiasm for changing that industry, the political power that the industry will have, and that doesn’t mean they’re evil, it’s everybody they just ends up there.

So we came to a conclusion, we didn’t know the answer. Three of us had the money to do it. And we didn’t know how to change of 330 million people felt about their doctor, felt about their health care, what they felt entitled to. It won’t change by itself, and the government is the only one that can change it, and the only people and governments that can change it are getting the majority of 435 people and hundred people.

My dad lost one election in his life in 1948, and he was a very strong Republican. In 1950, he went back and beat the guy who beat him in 1948. And he got the doctors behind him, and they’re very well, and they believe 100% in what they’re doing. They’re helping people every day. And during the pandemic, the sacrifices made by people to save other people are just incredible. Can you imagine working in something where they’re bringing in people that are, you know, going to die by the dozens and dozens and dozens, and you try to somehow keep your own morale up and keep working with them. So you can’t argue about the importance of it.

But our costs are so different from any country in the world. It’s a huge element, and we’re a very rich country, so we can do things other countries can’t do. And through our elected representatives, and all varieties of things over time. We develop a system that is enormously resistant to any kind of major change, and it’s important in every community that it’s in.

So, I wish we had an answer for you, but I was somewhat pessimistic going in, and I was a little more pessimistic going out, but I’m glad we did what we did, and we learned something about our own failings in the process. So Berkshire, in effect, got his money’s worth, but we didn’t kill the tapeworm. Trying to change things in government is an interesting proposition in the country because you get self-selection in terms of the people who go into government and continue in it. And to some extent, they have to make decisions that they don’t like as they go along, and they learn to accept them or rationalize them or whatever it may be, but it’s still about them.

This country has worked out better than any country in the world, so you can’t argue as a failure, but you can’t argue that there are certain problems that are terribly tough to figure out ways to solve. And of course, one of them gets back to the fiscal problem, I mentioned before, because it’s easy to spend money, and it’s hard to cut people’s receipts and if you get elected, you’re going to say to yourself, well, I can do more good if I stay in. Then, if I really vote my conscience on this sort of thing, you give away a little bit here and a little bit there and a little bit there. And finally, you don’t recognize yourself in the mirror anymore.

I grew up in a political family, and I watched how people behaved, and they behave like human beings, which is what you have to expect, and I behave like a human being. So we still managed to keep moving forward in a dramatic way. It’s so much better to live here than it was 100 years ago, or 200 years ago. It’s dramatic. So you can’t say the systems of failure, but you can say that it’s very difficult to make major changes in it. OK. Station 5.

Is it easier for a business operator to be an investor or for an investor to be a business operator?

[01:52:11] Pig Huang Chen: Hi, Warren, Greg. My name is Pig Huang Chen. I’m from Taiwan. This is my seventh time here. First of all, I want to thank you, Warren, for your generosity of sharing your wisdom. You changed my life, and you are my role model. You mentioned that Mr. Abel would be in charge of capital allocation in the future, and I’d like to know your perspective. Is it easier for a business operator to be an investor or for an investor to be a business operator? Thank you.

[01:52:49] Warren Buffett: No, that’s a good question. I see we call them Mr. Abel. I even like it. It’s a lot tougher to be an operator, I mean, it’s easier to sit in a room like I do and play around with money. This is an easier life. That doesn’t mean it’s a more admirable life. It doesn’t, but it’s actually been a pleasant life for me, so I don’t complain the least. I’ve been able to choose my friends, which has made an enormous difference in my life. I’ve never had to work for anybody that I really didn’t admire, I mean, that’s the luxury of life. And five different people I work for were fantastic.

There was a manager of the local pennies, which is located, well, it used to be located a couple of miles from here, and newspaper managers and everything there. I’ve never been really disappointed by any teacher I’ve had, but I would have to admit that I have been able to choose what I do with my day to an extraordinary degree compared to being a business operator. In many cases, I would like to compete to be a top-notch business operator in terms of some of the behaviours that might be forced upon me.

I’ve found myself in this position where I can run the kind of company I want to run, and that’s an extraordinary luxury. And with that, I should say that I’m getting a section that says 5-minute warning, exclamation point, 5-minute warning, exclamation point. So I would now like to turn to a subject that I want to discuss with you a few minutes, and then when I’m through discussing this, I’ll let Becky ask me a question or two, which you may want some of the questions that come to you as either I make these comments. Tomorrow we’re having a board meeting of Berkshire and we have 11 directors. Two of the directors, who are my children, Holly and Susie, know what I’m going to talk about there. The rest of them, this will come as news, too.

But I think the time has arrived where Greg should become the chief executive officer of the company at year-end, and I want to bring that to the directors effectively and then get that as my recommendation. Let them have the time to think about what questions or what structures or anything that they want, and then at the meeting following that, which will come in a few months. We’ll take action whatever the view is of the 11 directors. I think they’ll be unanimously in favour of it. And that would mean that the year-end, Greg would be the chief executive officer of Berkshire, and I would still hang around and could conceivably be useful in a few cases, but then, the final word would be what Greg said in operations and capital deployment, whatever it might be.

I could be helpful, I believe, in certain respects, if we ran into periods of great opportunity or anything. I think that Berkshire has a special reputation that when there are times of trouble for the government that we are an asset and not a liability, which is a position that is very hard to have because usually the public and then the government get very negative on business if there’s a time like that.

But so I think I could there might be a time without I’d be home, but Greg would have the tickets and he would make, like I said whether it’s acquisitions, I think the board would be more welcome to giving him more authority on large acquisitions, probably if they knew it was around. But He would be the chief executive, period. And I can say the plan is to—And Greg doesn’t know anything about this until what he’s hearing right now—but that the board will be able to ask me questions tomorrow, as a little more of the specifics of what they should be thinking and all that. But they’ll digest it.

And then at the next board meeting after that. If we, as I would guess, we would if they act, then obviously we have something to announce to the world as a material change in Berkshire, and we’ll go forward with that operation and I will play with the Ouija board or whatever comes out in terms of doing things but I have no intention—zero—of selling one share of Berkshire Hathaway. It’ll get given away gradually.

OK, bring your Coke and calm down. I would add this decision to keep every share is an economic decision because I think the prospects of pressure will be better under Greg’s management than mine and but you know, I will come in, and there may come a time when we get a chance to invest a lot of money, and if that time comes, I think it may be helpful with the board the fact that they know I’ve got all my money in the company, and that I think it’s smart and I’ve seen what Greg has done. So that’s the news hook for the day, fellow. And thanks for coming.

The enthusiasm shown by that response can be interpreted in two ways, but I’ll take it. Thank you.