[ZT]2020年伯克希尔股东会实录(中/英）

第一部分：PPT介绍

　　芒格状态很好明年会重返股东会

　　许多来参会的股东都习惯了我和查理一起讲话的(伯克希尔)股东大会，他的声音很有磁性(智慧)。但我觉得，今年他没来也不算赖。芒格开始了新生活，并正在适应中。他已经把Zoom加入到他的每日日程当中，每天和不同的人在Zoom上连线。从对技术的理解来看，他比我超前。

　　查理的生活和工作没有太大的变化，我可以向大家保证，查理的身体很强壮，他明年会重回股东会。我们希望明年股东大会的时候一切可以恢复正常。

　　我们负责保险业务的副董事长Jain(阿吉特·贾恩)目前人在纽约，(疫情下)让他从纽约来奥马哈也是不合适的。我们的非保险业务副董事长Greg(格雷格·亚伯)和我一起来主持这个会议，他目前掌管的资金规模大概是1500亿美元，尤其是管理着12万名的员工。他做这个工作已经两年了。如果没有Jain和Greg来帮助我，我未必能够做到像现在(这么好)，我现在的工作只有两年前的1/4。我也很感谢Greg今天能够过来跟我们一起开会。

　　“老狗也能学到新技能” 巴菲特股东大会首次使用PPT

　　今天的会议，我们将分成四个部分。首先第一部分是我自己的“独白”，但我借助一些PPT来给大家讲解。说道使用PPT，从我21岁到现在89岁——大家会说“老狗也能学到新技能”，是的，我正在学习新的技能。第二部分，我会简短地对伯克希尔第一季度的营收做个总结，一季报已经在伯克希尔官网上发布，其中会有一季度的详细情况，我届时会对其中的一两点进行讲解，部分我们可能在4月份已经讲过了，但这对伯克希尔(的股东们和雇员们来说)是新的东西。之后，我们会有一个正式的股东会，大概15~20分钟。最后，Becky Ourick(贝基·奎克，CNBC主播)会对我们进行问答或访谈，他们从很多股东中征集到很多问题，我和Greg会进行回答，问答访谈会持续一到两个小时。

　　巴菲特“独白”时间

　　疫情对健康卫生和经济的影响不可能出现更坏的结果

　　想必每个人脑海中当前都充斥着这种想法，(疫情)已经爆发一两个月了，现在美国的卫生健康状况如何？尤其是美国的经济情况如何？今年的几个月或者未来几年会是什么样子？

　　关于健康方面的话题，我没有更多的观点，因为在学校的时候我会计(课程)学得不多，我的生物(课程)更是学得一塌糊涂，所以我关于疫情的了解和大家并没有什么差别。

　　从个人感受来看，我感觉非常棒的是，我们国家有一位像Anthony Fauci(安东尼·福西，白宫卫生顾问)博士这样的专家，虽然1年以前我都不知道他是谁。福西博士已经79岁了，每天还在24小时连轴转地工作。而且他坚持幽默、客观的态度，把非常复杂的事实直接了当地告诉大家，他知道的以及他不知道的。

　　我们在这里不谈有关的政治或者政治人物，但我还是非常感谢福西先生能够教育和提醒我们，让我们这些人能够真实了解(疫情)。还有我的朋友盖茨先生，他一直告诉我目前疫情的进展，所以关于疫情我可以说有比较充分的了解，而这其中，福西博士给我提供了很重要的信息。

　　当疫情发展到奥马哈，我看到今天现场多了几万个空位子，而去年这时候现场是爆满的。

　　Greg刚跟我讲，以往不管多少人，这个场地都是完全坐满的，当时可能也没有人会想到今年3月份会发生这么疯狂的事情。对(美国)全国居民的行为和心理都产生了非常大的影响。

　　在一开始我们还没有做好准备的时候，存在各种各样的可能，无论是在健康领域还是经济领域。没有人知道最后可能会出现什么结果，为疫情的涉及范围太广了，尤其是对康卫生和经济的影响上，而它们之间又会互相影响、互相制约。

　　我想再次重申，关于疫情我不知道更多的情况，只是在当前范围下各种各样的机会和可能性都越来越集中了，我们不会得到更坏的结果。虽然我们目前对(新冠肺炎)病毒的研究还是比较困难，因为很多事情我们不了解，但现在有非常聪明的一些人，正在这种方面努力工作。

　　我们知道此次新冠肺炎疫情明显是个高传染性的疾病，这虽然很不好，但还没有像1918年的西班牙流感那样致命。我们的父辈有些人经历过这个事情，在3月15日奥马哈的报纸上面有个非常棒的故事，文章上讲到当时流感的时候，连续4个月的时间有974例死亡，已经占到当时总人口的1%。我想，那时不仅奥马哈，全国的死亡率应该也在1%左右。当前疫情看起来没有当时西班牙流感那么致命，但是传染性很强，而且我们不知道到底有多少人现在被传染了，包括有症状的和无症状的。

　　疫情让美国经济完全转向带来前所未有的考验

　　疫情对经济的影响非常广泛，目前还不完全知道(影响的深度)：关停行业、隔离社区对经济将会造成多大的影响。

　　2008年、2009年，经济危机导致很多行业“脱轨”(脱离正常发展轨道)了，目前有些行业也被从“轨道”上拉下来了。美国作为最具生产力的世界强国，现在的经济完全被动转向了。这让很多人感到焦虑，有些人可能觉得(经济和生活)已经开始难以控制。对我们来讲，这是前所未有的考验。

　　对于这些问题的严重性，我们现在无从知晓答案，但很多年以后，我们会得到这个问题的答案——一个非常重要的回答。

　　以往发生过更严峻的事情，都没能阻止美国的进步，这次也不会

　　现在我和大家谈一下美国经济的未来会如何发展？我目前仍认定，无论是古巴导弹危机、911恐怖袭击还是2008年金融危机，都没能阻止美国前进。我们现在面临的问题，和以往面临过的重大危机有许多相似之处，甚至更为严峻，可美国总是能化危为机。

　　我希望大家可以回顾一下历史，如果不考虑性别、才智等问题，让你自主选择出生的时间点，我想你不会选择1720年、1820年或1920年，你绝对会选在今天出生，而且会选在美国出生。

　　因为自1789年乔治·华盛顿领导建立美国之后，很多人就希望自己是美国人。美国虽然只有200多年的历史，还有很多的人希望能够搬到美国来。

　　图片1:

　　大家看第一张图片(图片1:美国成立至今231年，巴菲特和芒格年龄加起来185岁)，我们的国家还很年轻，虽然我和芒格挺老的。可我们为伯克希尔找到了一位年轻向上的青年——Grag，他现在是我们的副董事长。你们可以预期美国的美好未来，我们还是一个非常年轻的国家。

　　我们的成就是非常伟大的，有着辉煌的历史。1790年的时候，我们只有390万的人口，虽然这不是当时人口调查时的数字(1920年美国商业部着火了，数字不一定准确)。但那时候在390万的人口中有60万是所谓的奴隶(黑奴)，大概0.5%的黑奴生活在13个州。你可以想象生活在200多年前是怎么样的，当时肯定也想不到二三百年后会成为如今这个样子。我、查理和亚伯三辈人中，就算是最乐观的人们，也不可能想到我们现在可以喝酒、喝可乐。现在我们国家有2.8亿辆汽车在路上穿梭，这也是我没想到的。此外，可以随时岸对岸飞4万公里等，还有医疗系统的完善、娱乐的完善等，都是1790年的人没法想象的。这就是美国231年间的伟大变化。

　　图片上是1790年数据，当然早期的数据不一定可信，其实各方面都是如此。

　　例如，以房地产为例，居住的房产、地产或者是公寓等等，每一个房子看起来价格都不太一样，跟其他国家也不一样。再比如，1803年用1500万美元可以购买整个路易斯安那州，也就是美国“下48州”的1/4。如果你住在德州，你的祖父可能会叮嘱他的孙子不要把矿权给卖了。因为购买整个路易斯安那州，可以获得约20万盎司的黄金，买土地其实也买了地下的矿产。

　　我推测的这些数据都是合理的，我们在1790年就有10亿美元的财富。这是为后面做推测提供很重要铺垫的数字。

　　现在我们拥有大概100兆的财富，当然这中间还包括了一些所谓的通货膨胀。

　　成立FDIC机构给银行上了保险

　　1929年美国股市从顶点走进崩溃，道琼斯工业平均指数在9月3日收盘380.17点，创造了一个高峰。但人们着迷于投资股票，因为汽车工业正在兴起，空中旅行开始，家用电器、电话等发展很快，企业利润很好，一切都似乎预示着当时是个不错的投资良机。但之后的2个月，道琼斯工业平均指数下跌了一半，人们开始觉得情况变得严重。现在看我们当前在这么短的时间内，指数丢掉了1/3？

　　1929年股市大崩溃，对当前是有一定意义的。我是1930年出生，在股市崩溃的9个半月后市场企稳了，回升了大约20%，当时人们觉得不会有大萧条的，不过是一次经济衰退，但随后市场再度下跌。如果在我出生当天持有1000美元的股票，到了1932年的7月8日，不到两年的时间，将仅剩下170美元，损失83%。

　　在大萧条之后，美国建立了FDIC机构(联邦存款保险公司1933年设立，是美国联邦政府的独立金融机构)，我认为这是大萧条带来的最好的事情了。之前，人们认为把钱放在银行是安全的，但最后却发现全部损失了，而FDIC在没有让纳税人多交一分钱的基础上，却给银行上了保险。

　　美国势头依然强劲，不要在美国上下错注

　　1954年初的时候，股票市场只有280点，年尾的时候接近400点(超过1929年最高点)，那是股票市场最棒的一年。这在当时看起来觉得很高了，但其实还不够高，未来还会更高。到上周五收盘，道琼斯指数大概是24000点。

　　所以，有时候当投资者已经对市场失去信心了，这表示他并没有看到股票市场的潜在能力。后来我们发现，美国的发展势头是不可阻挡的——这都是事实。极端情况有可能发生，美国在1929年就已经经历过劫难。

　　最后还是要提醒投资者，绝对不要在美国身上下错赌注，美国(经济和社会)是非常强壮的。从1789年到现在，我们变成了一个更有价值、更有财富的国家。过去如此，未来也会如此。

　　我相信美国股市会迎来好的结果

　　从1776年的独立宣言到现在，我们还有很长的路要走，我认为我们不要把对美国的赌注下错。我们现在来看一些更广泛的课题，这些课题是我看不懂，也许我会有一定的偏见，可我不觉得会有人知道，就是市场明天会怎样？下周会怎样？下个月会怎样？明年会怎样？

　　我知道美国人在很长时间一直都是勇往直前的，但我们不知道2001年9月11日会发生什么，也不会提前了解当前会有一个新的病毒(突然出现)——任何事情都有可能随时发生。但从市场来讲，如果你要做空美国，你就要非常小心，因为市场可能会发生任何事情，但没有先知可以提前知道第二天会发生什么。

　　我只是想说，我是相信美国。从我11岁开始“下注”，直到现在我一直是相信美国的。当然，美国的市场也并非每天都按照我希望的方式去发展。

　　就目前(新冠肺炎)瘟疫发展的情况，有人会问要不要借钱在这个时候进行投资？我们伯克希尔一直都是要提前做好最坏的打算，当然我们的判定不一定都是正确的，但如果此时借钱投资，我认为并不是十分理性的。

　　自宇宙出现以来，有些事情注定会发生，只是你不知道什么时候会发生。但从目前来看，我认为美国的资源还没有全部枯竭，未来我们可以看到好的结果。从长期来看，我们最终会迎来好的结果，对股票而言尤其如此。

　　跨行业购买自己了解的全部产业

　　股票所能够给我们提供的只是商业活动的一小部分，但从1789年至今，你可能存了一部分钱，可能用当时储蓄的钱买了一块私有产权，也许是个房子，然后你可能租给了别人。你也可能买了股权或者债券，如果有人和你说要买你的股票且收益高于(持有)国库券，但有一定的风险，人们对于股票或者国库券的态度又会是怎样的呢？

　　瘟疫发生之前，股票的价格和现在完全不一样，当前没有人强迫你必须卖出你的股票，如果你觉得你投资的公司——它的业务是你喜欢的，而且你觉得他做得非常好，比如我们伯克希尔公司，股票还是有自己相应的优势的，你完全可以继续在美国进行投资。当然，除非你有自己独特的想法，想要投资其他领域。

　　另外，有些人总是只投资一种股票，但我觉得平衡在投资中是很重要的，我也是这么做的，并且也有所成就了。我的公司、我的业务，还有我的观点都是跨行业的。从美国现有的趋势看，当中虽然会有一些颠覆的状况(出现)，但你要知道你的定位在哪里。我的观点是，在美国，股票收益绝对是比国库券或债券收益要好的。

　　例如标普500指数基金，你可以投资；如果其他行业你了解的话，你也可以进行投资。我们是下注美国，伯克希尔的策略和其他机构不太一样，我们买就会买整个企业，我们常常这么做。

　　现在我要强调一件事，我们会选择自己了解的业务进行购买，这和标普500很类似，且我们要购买的时候都是买整个行业。我希望大家能够下注美国、相信美国，尽管我不知道在未来几个月或者几年会有什么样的结果，但我希望大家能够相信我刚刚讲的，就是跨行业或者去全面性分布地平衡购买，要有乐观的态度和想法。

　　我希望每个人在买股票的是时候，都能够有一种思维，你买的并不是股票，而是买到了公司业务的一部分。

　　一季报解读部分

　　伯克希尔一季度的收益比之前低很多

　　保险业务、铁路等业务受到疫情的影响

　　接下来就是一季报的情况。任何一个季度的投资损益通常都是没有意义的，还有可能产生极大的误导。所以，要看全年的总收入到底是多少，但是全年情况是怎样的我们现在并无法预测。

　　我们一季度的运营收益比之前低很多，在疫情的影响下，我们的某些业务现在处于暂停状态，甚至更加严重。比如我们的保险业务、我们最大的铁道公司等业务在运营过程中都受到了不同程度的影响。此前这些业务的收益都是挺理想的，并给我们带来了更多的现金流。

　　当然我们希望伯克希尔能够始终维持理想的(收益)表现，也希望能够向自己的合伙人保证，或许在未来的10年、15年甚至50年之后，我们的合伙人、律师们会被分配到能够享受终生的利润。

　　我们的合伙人一直在工作，然后把他们赚到的钱拿给我们管理，他们的命运几乎维系在伯克希尔哈撒韦公司给他们作出的承诺之上。所以，不管是在50年内还是更久远的时间里，我们要照顾好这些合伙人，管理好他们的财产。在这个过程中，最重要的事情就是不要“冒险”，这一点我和查理早有体会。因为早期我们也是拿自己的钱去做投资的，几年之后才开始这样(给比人管钱)。所以。我认为，我们的工作就是实现别人对我们的“信任”，为他们达成我们需要达成的目标。

　　充沛的现金储备仍是重要的战略

　　美联储主席鲍威尔的救市行动或将载入史册

　　今年3月31号的时候，我们的现金规模大约是1240亿美元-1250亿美元，我们一直保持很高的现金储备，包括“911”之后那几天市场关闭，我们也有很多现金准备。今年1月份的时候大家都没有想到疫情可能会有大的爆发，但是我们一直在为这种意外情况留有现金。很多人都选择在大跌之后接盘，不过我们没有。现在我们手中的现金有着前所未有的价值，包括我们在2008年和2009年的时候留在手里的现金都没有创造出这样的价值来。

　　多年来，我一直对保罗-沃尔克(前美联储主席)怀有特别的敬意，就美联储主席而言，他是一个特别完美的人选，我当时和他联系非常紧密，经常进行交流，他去世前还写了一本书叫做《坚持不懈》。他写的是非常棒的，他是一个十分正直也非常和蔼和善的人。那么现在的美联储主席鲍威尔和美联储董事会都配得上与沃尔克同样的尊敬，他将来或许会被载入史册，因为在3月中旬的时候他就采取了“救市”行动。也许是看上去就是说2008年2009年看那个时候的教训，他们的回应是非常大的行动。

　　或许2008年和2009年所发生的事情在某种程度上指导了他们的工作。他们做出了规模空前的反应，从那时起，实质上使一切都按照原样进行。在3月份融资市场几乎被冻结了，直到3月23日才开始“融化”。而在3月份也是有史以来公司债券发行额度最大的一个月。每位在3月底和4月发行公司债券的人，都应该给美联储写一封感谢信，因为如果他们没有以前所未有的速度和决心采取行动，发行公司债券就不可能成功。

　　所以，伯克希尔也会应该顺势而为，我们现在就留下1200亿美元到1250亿美元的现金，作为我们的储备。

　　我确实错判了航空股

　　已经卖出了美国四大航空公司全部持仓

　　第一季度我们买了大约60亿美元的股票、债券，4月份我们的净卖出有60亿。在评估航空公司股票方面我们犯了一个“可以理解的错误”。我不知道美国人会不会改变他们的生活习惯，在这种半关闭的状况下，我也不知道将来的趋势人们会怎么做。但事实证明，我对这项业务的看法是错误的，这不是四位优秀的CEO的错。航空业是一个非常具有挑战性的困难行业，他们做这些公司的CEO，并不是开心、容易的工作，尤其在目前这种大家都被告知不要去航空旅行情况下。

　　伯克希尔哈撒韦已经卖出了美国四大航空公司(美国航空、达美航空、西南航空和美国联合航空)的“全部持仓”。是的，我们要卖不是卖一部分，而是全部卖掉。如果一旦我们的想法改变，不会一点一点地做，会一下子进行到底，可能卖的时候，卖价比收购价低很多，但我们还是把整个航空股全卖掉了。

　　不得不说我之前在这方面的判断是错误的。目前航空行业处于一个很艰难的状况。航空公司会做一个非常巨大的改变，会借很多的钱，自己的利润会吐出来，回购自己的股票，这都会影响到他们之后的经营，未来显得模糊不清，尤其是在旅游、航空、邮轮、酒店行业，航空公司受到的影响巨大。如果现在再购买航空公司股票风险会更大。

　　股东问答部分

　　问：请伯克希尔把4个航空公司的名字念一下，它们都是哪些公司呢？

　　巴菲特：我一般不会这么讲，当然这些是需要有解释的。一般我们不会对航空业感到失望，因为航空公司的商业、进行的业务以及公司的领导人都很棒。

　　这四大航空公司是美国航空、达美航空、美国西南航空和美联航，大概占有了美国的旅客飞行里数的80%，除了西南航空，其它三大航空公司，也有很多的国际航线。但是现在由于疫情，四大航空公司面临的情况有很大的变化。很长一段时间将处于半关闭的情况，现在我不知道美国人是不是会改变生活习惯。

　　我也不知道将来的趋势以及我们会怎么做。在过去7个星期的时间，我是第一次戴上领带，这么长时间没理发，谁知道我们最后会出现什么情况呢。

　　但是相应的行业，比如说像航空公司这样的行业，它们受到的损失尤其巨大，而且疫情发生，它们是没有办法控制的，那么它们要关闭很大一部分业务。

　　(花絮：查理芒格并没有出席会议，巴菲特说让查理来补充一下，后来发现查理不在，所以让格雷格·阿贝尔进行了补充。)

　　格雷格：在四大航空公司上，我们当时差不多投资了七八十亿，但是现在我们想要拿出来，这是我的错。但投资总会有这样的问题，虽可能性很低，但还是发生在航空业里面了，所以我要做出这样(卖出)的决定。

　　问：现在确认一下，刚才提到的公司，是持有它们(航空公司)的股票是吧？

　　巴菲特：是的。所以我们会卖，当然我们卖股票的时候，经常说是全部的股票，我们并不是说在一个公司里还持有一部分，我们会全部把它卖掉。不是说，本来拥有它们100%的股票，现在我们把它们减持到只持有90%或是80%，我们是全部卖出的。

　　我们的卖价比我们的收购价可能要低很多，但是航空公司的股票一般以大额的交易方式进行的，所以我们把整个(航空公司的股票)都卖掉了。

　　问：你现在是不是建议投资者们买入股票？但是你自己却留了这么多的现金，实际上你并没有想买那么多，尽管你建议投资者现在是购买的好时机。

　　巴菲特：我当时是说，现在有一些情况很难，但发生了。我也希望它不发生，但并不表明不会发生。比方说保险业，当飓风来临时，我们需要做好准备，要为可能发生的事情造成的一连串影响做好准备。还有一些其他的事情，当时我们只是按照最坏的角度最坏的情况出发的。我并不是说人们在今天或明天或者下个礼拜或者下个月就要去买股票，这要看各自的情况，但是我觉得现在还是购入的好时期，因为你要为自己在经济财务上，以及心理上做好对付疫情的长期准备。

　　当然，你在买的时候不会是最低价，也不会有人替你想好什么时候买，但是你自己要准备好，比如当股票跌了50%的时候，你是不是可以准备好可以买入了呢？也许在一年或两年之前，我们当时的年度报告里说，在此前伯克希尔的历史上，我们曾有过三次自己的股票下降了50%以上的价值。那么，当时伯克希尔在这三次(股票价值下降超过50%)发生的时候，并不是我们公司出了什么错，所以当时你看到这些股票价格的时候，你觉得当时是不是要采取行动了？或者思考，应该是发生了什么，或者别人告诉你现在应该卖了，或者有其他的事情正在进行等等。

　　对我们来讲，现在处于一个变数中，而且变动是极大的。有一些事情我能感觉到的，我想查理可能也感觉到了，有些人是可以控制自己的心理上的一些变数的，但是有些人不见得，如果你可以控制自己的心理变数的话，你就可以进行购买。你做的任何的事情都是根据所自己了解的，而进一步的行动。所以我的建议是，要了解自己的位置、定位，进而判断今天是不是购买股票的最好时机，或者20年30年之后或者两年之后股票到底会值多少，我是没有办法预测的。或者你今天听完了，礼拜一就买了，或者礼拜一市场又变化了，也不一定。

　　问：上次经济危机时，你支持了8个不同的投资，你对这8个股票都有极大的信心，得到了更多的价值。现在的利息特别的低，而且某些基金也非常的低。在过去的两个月之中，为什么您对于所谓借款投资并没有做出任何举动？

　　巴菲特：因为我还没有看到更有趣更吸引人的股票。美联储现在做了一个非常重要的决策，而且做得非常的快速，这是他们应该做的事情。但是很多公司，他们也许更需要钱，他们可能会更早地在做财务上的一些处理。所以在过去的5个礼拜之内，这些财务上的变化是非常巨大的。

　　有些很大的公司，他们也开始进行巨大的借款，而且好多次都发生了，伯克希尔当然不需要更多的钱，当然有的时候借钱也不是坏事。有些边缘型的公司，或者利润比较少的，它们也许并没有任何短缺的现象。当然，如果它们的利润不够，我们是不会向它们进行投资的。所以为什么我们目前没有进行投资，是因为我们还没有找到吸引人的公司，也许在不久的将来还会改变。

　　2008年2009年的时候，我们投资了8家公司，并不是说我们故意要告诉大家我们做了什么事。我们之所以进行了投资，是因为那个时候我们觉得投资这些公司在市场上来讲是一个非常好的抉择，而且从竞争力角度看，也是非常好的举措。所以就花了大概4~5个月的时间才做了这样的结果，当然那个时候的时机可能还是不够理想的，可是就算时机不够理想的情况之下，我们还是找到了这几家相对理想的投资。所以那个时候我不是故意做出这样的举措让大众看的，那个时候那几家公司都是非常吸引人的，而且它们也邀请我们希望来进行投资。

　　市场有时候就是这样的，有时候一些短期的因素发生了，比如现在病毒发生了，大家开始紧张，开始觉得有一些变化。这种变化发生时，当美联储开始降息的时候，大家又开始紧张，我并不知道以后会发生怎么样的情形，而且没有任何人会知道，这中间会有一些不同的情况，而且疫情之后可能会发生不同的变化，什么样的情景会有什么样的结果，现在是没有人知道的。

　　格雷格：(从利率的角度讲)现在是借钱的最好时光，当然不见得每个人都愿意去借钱，可是对于整个国家来讲，这个时候是借钱最好的时机。对于伯克希尔来讲，不见得是我们要做的时机，但是对很多的人来讲，现在是借钱的大好时机，我们的钱是要用在刀口上。

　　问：有些人开始进行兑现，大疫情中也进行了一些资金流转，我们现在有了伯克希尔的资产负债表，伯克希尔是怎么样的情况？

　　格雷格：我们现在也开始发一些资金给某些需要的公司，当然我们不可能无限制地帮助这些公司。现在的变化非常大，比一年之前或者6个月之前有极大的变化，比如我们刚刚讲的航空公司，我们基本上就把钱给抽出来了，因为现在亏损太大了。如果这个公司没有希望，我们是不会继续再投资的，比如在1965年的时候，我们也投资纺织业，之后我们发觉买的并不是极好的决定，后来我们就想卖掉它们，所以我们不是在做拯救公司。在拯救公司需要花太多钱的状况之下，我们不会这么做。我们不买报社或者报纸公司，或者是其他类似的商业机构，我们有自己的定位。

　　问：伯克希尔的公司里的雇员，哪些运作的哪些没有被疫情影响，哪些又被影响到？公司会持续雇用这些人吗？

　　巴菲特：比如我们没有在旅馆业里进行投资，但是一些旅游和休闲行业，可能会发生巨大的变化。我不觉得今后5年，我们伯克希尔会雇佣更多的人。但病毒可能还会持续，这将对制造业产生很大的影响，那时候对人员的需求可能会有很大程度的降低，那么到时可能会有裁员情况发生。

　　另外，比如伯克希尔能源公司，用电消耗量降低了10%，但是实际上对我们的生意没有非常大的影响，从长期来讲，我们业务还所有增长，即便现在的危机时机，对这些行业的影响还是不大。对于零售业，现在很多商店都关门了，还有珠宝业等等，这些我们应该根据环境做相应的调整，尤其在就业方面，将来我们的商店还会重新开门，我们还会雇更多的员工回来。

　　问：这个问题来自一位长期股票持有者，他以前参加过年会，他说4月17日查理曾提到，说伯克希尔拥有的一些小公司，疫情过后不会重新开张，能不能说明一下伯克希尔麾下哪些公司会受到影响？

　　巴菲特：伯克希尔下面有97个不同的商业组织，过去两三个月发生了一些剧变，今后可能进一步衰退。也许这些行业里顾客，会有其他的消费习惯，不再使用它们的产品。这是现在的零售业在发生的情况，而且这些行业以前就有些问题，现在问题更大。比如现在报纸行业没落了，但是我们现在实际上是增加了更多投资，而且帮助它们偿还债务。事实上，疫情发生之前，报业的广告、销售量、发行量都已经在下降，在这之后将更加严重。另外，汽车行业也是一样，现在疫情对汽车行业造成影响，卖汽车的汽车商，也不会在报纸上做广告了，以前这种情况就发生，现在只是这个情况被更加强了，严重了。

　　问：疫情过后，伯克希尔对于下面的小公司将不再重新开放自己的业务，这是否会影响伯克希尔长期的政策？

　　巴菲特：伯克希尔的长期政策是30年以上的，但在疫情的情况下，将来还可能会亏损，我们可能会把这些公司卖给其他人，但不管怎么样，我们不会继续保持这些公司，这不是一个新的政策，并没有发生改变。

　　某种程度上看，如果我们拥有所有的航空公司，那么现在对我们来说会是一个非常困难的决定，是继续坚持承担它们运营，会有巨大损失。另外，如果制造业下降，需求下降，那么航空公司就太多了，在这种情况下，我们要做决定时，需要根据自己的业务来决定，所以我们做出来的这种经营性的决定是非常困难的。政府已经对航空公司进行了第一波补助，但是航空公司还在非常主动地进行融资，我对此印象深刻，其中就有至少就有两家航空公司增加了股本。当然，它们需要政府帮助，也需要在内部做出调整，以适应运营资金的需求。这是公司的经营者需要做的，但对于投资者来说，这是不是合情合理，我们还要拭目以待。

　　问：很多人现在没有开车了，GEICO是不是又给了这些不开车的人一些信用额度？

　　巴菲特：GEICO现在是全美国第二大的汽车保险公司，还有一些汽车保险公司，它们也开始在保单上面进行一些改变计划。当然每个人还是想开车的，只是开车的里程数更低了。因为开车里程数的减少，我们有更快速的项目，能够节省投保人的保费。我们现在已经对很多人给了两个月或者更长时间的折扣，而且每个月在进行改变。我们会给今天的投保人更多时间，也会给更长的支付期限，只要他们不取消保单，当然如果迟付的话，可能会要付迟付金。

　　问：可以让我们了解一下大疫情对于保险公司的影响如何嘛？很多保险公司已经在报告开始报告损失了。但是我们看到的是赔钱的情况并没有那么严重，伯克希尔公司承保情况有什么变化？

　　巴菲特：我想这中间可能还会有在进行投诉或者在打官司的状况，这些事情已经在发生了，以后诉讼情况可能会非常多，因为诉讼是非常大的成本开支，在汽车保险业，也就是我们现在保险比较大的部分，这些是需要再定义的。所以在诉讼结果出来之后，您才可以看到更明显的结果。

　　问：伯克希尔以后是不是也会有关于大疫情的这些保险呢？

　　巴菲特：我们保的方面非常多，如果有一天有人来找我们，说必须要保一个什么险，显示大概有100亿的保险额度，那么我们可能不会接受这样的保险，但是我们会写一些关于大疫情的保单，如果有人需要，而且我们觉得价钱是对的话，我们也会进行承保的。

　　当然如果说是毫无限制的投保，可能我们不会给你写保单，所以要跟投保的保额价值以及投保的范围来决定。另外，比如有故意放火而来投保火险，我们是绝对不可能接受的。一些不寻常的投保，不管范围有多大或者金额有多大，这都是停止保险的范围，可疑的东西我们是不会做的。

　　问：沃伦喜欢在企业需要资金渡过危机的时候和他们讨价还价，但这个时机在长期来看并不多，所以如果没有沃伦和查理，伯克希尔还能够做到吗？

　　格雷格：不管查理和沃伦在不在，我们都做着同样的工作，我们现在的团队很有才能，在伯克希尔的管理团队中，所有的经理人都必须有这样的能力。当然，我们的经理人还在寻找更多这样的机会，我们现在要绝对维持伯克希尔在投资领域的强势能力。

　　巴菲特：他讲的很对，如果我们的经理人没有这样的能力，我们是不会留着他的。我们现在有三位非常有能力、能创造价值的经理人，他们会在寻找资金和机会上表现的很好，我和查理不在，他们也能做的很好。

　　问：一些奥马哈的小型外贸公司，它们可能达到了政府补助的标准，伯克希尔下属公司有申请政府补助吗？

　　巴菲特：我们的下属公司没有任何一个在使用政府的补助基金。对于我们的报纸企业，可能会有一个更好的生存机会，如果疫情还持续的话，让它们独立经营可能更好。所以在一个行业里面，如果我们持有的一家公司出现了问题，我们会找其他人更适合的人来接手。伯克希尔在未来10年或50年都会致力于寻找优秀的公司，但并不是所有持有的公司我们都会坚持到底，这也是为什么我要买指数基金的原因。我不会把所有钱放在任何一个公司里面，即使有些公司是我很熟悉的，因为我们经常会遇到一些惊喜，例如有一些公司突然间会高速发展，当然也可能出现相反的情况，一些公司的运营没有我们预期的好。

　　格雷格：我并不知道我们下属的任何企业在接受政府贷款，我和这些公司的管理层对话的时候，他们没有人在申请贷款。疫情发生后，这些无论是中等规模还是小规模的企业，都仍拥有一个比较坚实的基本面。

　　巴菲特：我不知道疫情会持续多久，因为没人知道。慢慢地病毒的传染性可能会下降，慢慢消失，然后到秋天又卷土重来，那时美国人又该怎么办？我认为还是要保持希望。我们有很多学者在为了防疫而努力，但依然有太多未知因素存在，今后6个月或一年你会做什么？谁也不知道。

　　问：过去5~15年的标普500指数涨幅超过了伯克希尔表现，那么，我们现在是不是要卖出伯克希尔的股票了？

　　巴菲特：未来10年，我们的收益有可能比标普500好，也可能不好，但我们伯克希尔的股票和任何的一个单只股票投资相比都是毫不逊色的。我不能保证伯克希尔未来的收益一定会比标普500更好，但我们会很努力。在过去的20年，我们在保险业、能源业等方面做的很好，特别是保险业，没有人比伯克希尔做得更好。

　　问：伯克希尔在进行投资时是怎样考虑？

　　格雷格：我们会关注一家企业10年、20年或30年后的情况，我们取得的能源公司现在的折旧还是很适当的，以前投入的项目还是得到一个适当的回报。我们现在在找一些可生性能源公司投资机会，会适当增加一些支出，在以后的九年里大约增加400亿美元左右。

　　巴菲特：我们的投资收益总是增加的，有的时候我们花了很长时间等待，但最终会得到相应的回报的，能源就是这样一个行业。

　　问：石油公司还有没有长期投资机会？

　　巴菲特：投资石油公司的收益波动源于石油价格的变动，但在以后的几年之中，也许开采石油都不是值得做的一些工作了。我们遇到一些难题，比如额外的原油需要存在哪里？不知道未来油价是不是会显著增长。沙特以及俄国以后还会继续争斗？这些都是我们不能了解也无法预知的。

　　问：有一种传言说伯克希尔会被分拆开，能不能保持目前的结构？

　　巴菲特：我们能不能把资本部署到各个地方去很重要，例如转移到保险业中，在目前的结构下，我们把资本部署到其他行业是有优势的。目前这种构架会延续很久，同时，如果分拆的话，我们会考虑将资本转移到保险行业去，会让伯克希尔的投资人不受影响。

　　问：如果利率降到零以下，会对保险业务有什么影响？

　　巴菲特：这是过去10年一直在发生的事情，我之前做了错判。伯克希尔的资金有很大一部分投资了国债，长期来看，国债的收益很少，但至少有一点可以保证的是，国债的稳定性比较高。如果全球都变成负利率了，而且要持续很长时间，那我必须亲眼看见才能相信。对于负利率，我们都不能预期后果是什么，但是我觉得一定会带来一些后果，现在可能被人为压制了，在未来会被暴露出来的。

　　问：伯克希尔做了很多资本密集型产业的投资，这方面的风险你怎么看？

　　巴菲特：对于资本密集型的公司来说，你能找到一家不需要资金就运营的很好吗？没有的。资本密集型的公司就是这样的特点，它们本身需要很多资本投入才能运营，就像铁路行业尽管没有增长，但还是需要很多的资本注入的。资本密集型的公司从企业性质来说，总是需要不断投入资金，但从市场价值来说，它们却拥有几万亿美元的市场。现在市场有很多不需要我们注入很多资金就能经营很好的公司存在，这是我们在经营了五六十年后才发现，而哪些公司不需要注入大量资本就能继续赚钱的，恰恰是我们想要寻找的公司，例如我们的保险业务，这么多年，我们的很多利润都是来自保险业务。

　　当然在通货膨胀的时候，我们可能不会取得像之前那么好的回报，所以当们遇到理想的投资回报时机时，我们才会进行投资。在这种背景下，投资铁路公司还是对的。

　　另外，要相信美元，相信美国资产的表现，我认为现在下调美国政府的信用是很没道理的。我认为我们现在的政府很强大，虽然政府在借债，但是不会对国债利息违约，我认为美国政府不会丧失信用。

　　问：伯克希尔的公司最近又在回购，讲讲回购的情况吧。

　　巴菲特：很多回购的情况非常简单的，回购是分配现金的一种方法。例如，你、我和Gray我们三个人，要买一个汽车的经销商，现在我们每人出资100万，我们三个人都相处的不错，业务也成长得不错。

　　今天其中一人表示，我想把赚来的钱花掉，另外两个人则表示要继续把赚的钱放在这个业务中，让它继续成长。然后我们就需要开始讨论，我们不会三个人都想把100%的红利或者是股息拿出来，也不会因某个人或者合伙机构要离开而冻结股份。此时，通过回购，可以解决这个问题，即另外两个人把想花掉股息的投资者的股份给回购回来。这就是回购的过程。

　　我从2006年开始部分减持我持有的股份。得到我的股份的投资者就等于是，他在回购我们的股票了。这些人必须要花一些钱，但他们非常高兴能够回购这些股票。

　　从现有资金上计算，如果回购达到一定数量，例如300万股，那可能会对公司产生一定影响。但我不会强迫任何人，谁必须把资金留在公司，谁必须把钱再投资。我们公司有足够的资本，我们还要继续成长，那我们未来时候会再回购呢？有时候我们需要保留一些钱，为了更好地购买一些产品。

　　第二点，我已经讲过了，如果今天回购的价格是比现有价值更低，那就是一个合理的回购，这也是我们今天要遵循的一个回购规则。比如说Timmy Morgan和另外一位也曾经讲过，我们能够保持我们原有的资本，然后以更低的成本去买到我们现有的这些股票，无论是100亿或者是50亿等等都是可能出现的。这些是以价值为基准的，而且是让你觉得很放心的一种回购。所以不要认为某个公司在进行回购，就是发生了一些所谓的风险或者是灾难了，并不是这样。我想我们进行回购，是一个非常智慧的举措，我们还会持续这么做的。

　　巴菲特：Greg你有没有任何的补充？

　　格雷格：我想你(巴菲特)刚刚已经讲了。我们当前是支持回购的，但回购也存在一些问题，例如，有些公司财务上仅有一点点盈余也去开展回购，且不说其在经营过程中会有波动，它这么做很可能会为未来埋下隐患。

　　回购当前是比较流行的，在当前的背景下，你开始回购增加股份数量，是个不错的选择。但有一些计划或项目却是不够聪明，虽然不至于非常愚蠢，但也是够傻的了。

　　我们喜欢的公司，它们回购都是会坚持自己的标准的，如果你发现它的股票所有市值的价值比他真正的价值还要低，不去回购，简直就是个错误。

　　很多人在讲所谓的政治正确性，但我们不会考虑政治的正确与否，我们喜欢的公司如果价值敏感，合乎我们的需要，我们还是会去回购的。

　　问：伯克希尔的A股跟B股到底有什么不同？

　　巴菲特：现在如果同时将A股和B股卖出，所付出的税负是有不同的。例如，卖掉1股A股，可能需要支付二十几万美元的税负。如果是B股的话，可能我就不需要卖那么多股份，也就不需要多付那么多的税负。

　　所以在卖掉A股还是B股，你的退休基金持有不同的股份可能会让你获得不同的结果。之前我们讲过，如果以赠予的方式把A股转换成B股，这对很多人来讲是有益的，这也是比较常见的操作。我在最近14年间进行了很多的捐赠，也都是通过将A股转换成B股来实现了，我们之前还曾将B股进行拆分，以便让B股可以更好地被管理。

　　当然，A股会拥有更多的投票权益，因此，A股和B股不能放在同一个天平上来衡量的。如果你想要得到更多的现金，你有很多A股，可以把A股卖出去，然后转换成B股，给自己释放一些流动性，很多人都愿意这么做。

　　问：受疫情影响很多负债比较大的企业压力很大，未来存在“暴雷”可能。您在投资银行的时候，怎么来确定哪些银行家是真正能做好银行的决策人呢？

　　巴菲特：我们的联储主席鲍威尔如果工作更好一点的话，如果2008年，银行地位更巩固，那他们联储的工作就好做多了。现在不仅我们，他们也在担心，对银行要怎做，是把它们合并起来，还是加强它们的地位？

　　2008年金融危机中，银行被牵扯到很多行业中，但目前情况下，美国银行系统应该还不存在太大问题。政府决定隔离，经济停滞的事实已经发生了，这不是任何人的错误，就像地震、大的飓风等都会发生，而且是人们不可抗拒的事情。

　　银行需要监管，FDIC对他们是非常有利的。政府在后面的支持，使得银行业务有了保险，也使这些银行有更良好的举动行为。

　　目前银行板块应该是处于非常不错的位置。我们投资了很多银行，某些年份还可能追加投资，这些银行都有非常好的储备，资产负债表也都做得很漂亮。目前银行还没有太让我担心的问题，银行的运营大部分是来自于别人，如果这个事情变得非常严重，那就将在经济中变成问题，发展的很严重，即使很强壮的银行，也会受到很大的压力，除非政府在后面给它们做后盾。

　　因此，现有机制下，我认为银行体制目前问题不是很大。但这也不是100%，银行也有发生一些问题的概率。例如，能源业、消费者信用等方面都可能发生问题。但当前它们资本充足，一季报显示，它们储备很多，也许今后会建立更多的储备。

　　巴菲特：Greg你这方面有什么想法吗？

　　格雷格：因为我们不知道疫情后面是否会有第二波，现在我们只能以不变应万变来经营我们下面的业务，想到它可能存在的变化。

　　问：为什么在1、2月份有回购公司股票，而在3月份市场短期内下挫30%的时候，反而没有回购股票？

　　巴菲特：我认为目前伯克希尔的现值并没有出现像以前，值得我们付比较高的价值的时候，我觉得(3月份暴跌)我们股票实质的价值并没有多少变化。

　　但事实是有变化的，有时候我可能也会改变主意，我们总是会这么想。但是我不觉得现在比3个月、6个月甚至9个月前比起来，更应该买伯克希尔的股票。当然也有可能，我们要看将来怎么样。

　　巴菲特：Greg您的想法，你要不要重新购买股票？

　　格雷格：我们的处理方式就像您所预期的一样，我觉得我们目前的处理办法对我们股票持有人来说是好事，而且我们对市场目前的看法并没有变化。

　　有些东西的股票价值下降了，例如航空业，这个投资当时是我做的决定。但对我来说，还没有更多有说服力的东西，来表明现在相较于之前是更应该都买伯克希尔的股票。

　　问：多年来信用卡利率越来越高，但目前政府利率又很低，从该角度看，将来信用卡是否将降低它们的利息？

　　巴菲特：这会影响到我们持有的一些银行的股票，如美国运通。当然这可能使信用卡在这方面亏损发生的可能性有所降低。但这方面我没有什么更多看法。

　　因为很多事情并不真实，我们有家具公司，它们发行自己的信用卡，通过信用卡做很多消费者的生意。当然我们伯克希尔对信用卡行业的兴趣本身就并不是很大，但我们知道大家应该使用信用卡，它可以作为另外一个钱财的来源。

　　有位女士跟我说，他有很多钱，该拿这些钱怎么办？我说，把信用卡里所欠的账款还清。她告诉我她需要支付银行18%的利息，我都没有这么高的收益。所以，如果我有钱的话，我不会让信用卡有任何债务，利率太高了。即使12%的利率，我也认为不应该支付这些钱给信用卡公司，我们要完全把信用卡债务给还掉。

　　我跟她说，如果你的孩子有1000美元或者2000美元，想做投资，最好的方式就是你向她借钱，并将18%的利息付给她。

　　借钱这么高的利率，从我的角度是违反了伯克希尔的利益的。但如果有人希望建立自己的信用卡，并愿意不断支付信用卡的利息，你也可以这样做。

　　巴菲特：Greg你给你的孩子提出什么样的建议？

　　格雷格：我有三个小孩，他们都用信用卡，但都很小心。随着电子世界到来，网上商务等发展，他们都使用信用卡来付钱，因为现在你只能使用信用卡来做这些交易。这增加了风险，当然了对很多人来讲，这很方便的事情。如果说我借钱要支付12%的利息，我觉得这不是件好事。伯克希尔也不会支付这么多。

　　问：关于政府做出的公司税保护政策您是怎么看的？

　　巴菲特：我觉得这是一个好主意。它能照顾到哪些失业人群，这是个非常好的情况，我非常赞成。

　　对别人施以援手的人，我从来不会提批评意见，包括银行或者通过银行来实现帮助。当然，做这件工作是非常困难的，它中间会有诈骗等等问题。我并不是说所有的事情都是完美无缺的。但照顾这些失业人群，尤其是在疫情中受到伤害的人是好事。

　　谁知道疫情会持续多长时间呢？现在有数百万人在担心，他们在疫情之前是不需要担心的。几个月前，他们自己并没有做什么错事，每天去上班，每天去满足需要服务的人群。然而，现在他们失业了。所以对于PPP项目计划我是非常支持的。另外，本次政府反应的很快，我觉得需要给政府褒奖一下，并且能够真正的捕捉到人们的需求完成补救，这比2007年、2008年、2009年的行动还要更好。

　　问：我们现在已经开始创建了一些新的工作，比如在医疗界服务方面，那我们怎么样才能够继续支持在医疗界服务的人？

　　巴菲特：对于比较贫苦的人，我想他们应该已经遭受到比较痛苦的情况。有的人必须要工作24小时。我们要怎么样帮助这些人？国家基本上已经做了很多的一些善事，但是我们是一个比较富有的国家，做这一类工作的人的贡献是比我们其他人更大一些。

　　相对人均GDP，也许每人6万美元可以过得还不错，即使养两个小孩都还过得很好。但是每一个人都不应该被丢在后头。

　　我们现在不是在讲家庭非常有钱就好了，或是我们是比较好的公民，或哪一些人最会做生意。我们要看到他们现在是否具备的一些技能。

　　所以我希望说我现在是在20%的人群，但是我不希望我是五六十年前的20%。我们在开始朝着一个正确的方向在走，现在的一些情况并不会太剧烈的影响到我们的国家。对比百年之前的情况要理想很多，而且我们现在的标准也没有那么高。

　　问：您怎么看待市场发挥的作用，它运转的好吗？

　　巴菲特：我想如果让市场完全不受管控的话，结果会是非常惨痛的。

　　我们的国家今天之所以会如此，是因为我们市场的系统以及它的功能一直在进行改善，而且是非常积极的改善。市场的系统是非常棒的，而且在各个方面我们也都是觉得是非常好，但是绝对要有政府的领导。我们已经营造了这样子的一个架构，如果今天要完全摧毁的话，这将是一个非常惨痛的战争。对于现有的一些系统，我不想再有更多的一些资本上的改变。

　　我想我们的国家或者我们的社会还是以资本理论为重，有很多的思维出现，如果我们还是在过着以前的原始生活，以你现在的技能来讲，会发生怎么样状况？我们都没有无线电视或者付款机制。

　　在1941年，道琼斯指数只有400多点，到现在会变成什么样那时候没人可以判断的。我自己掌管的这些金钱也不是我当初可以想到的。当然，这中间还有一些随机发生的情况，包括现在面临的一些状况，我想我们可以把最好的制度保留，例如让每一个人都能参与市场的繁荣。

　　格雷格：我们的想法是，即使现在有疫情的发生，但我们只要适当的进行管理，有时候这个状况其实是一些机会，这个系统绝对会在走上正轨的。

　　巴菲特：格雷厄姆是我认识的最聪明的人之一，他每天都喜欢做一件非常有创造力的，而且非常慷慨的事，但是有的时候在别人看来是非常愚蠢的。我觉得智商并不能够解读成今天出现的结果，不是IQ很高就能成功。如果让我选，我更倾向于选一个比较努力的人，而不是智商特别高、在做决策的时候常常出乱子的人。有的时候我们会碰到一些，比如说不高兴的、惊讶的事情，但是这些事情是每天都在发生，有的时候是没法预料的。所以，美国人对于现在的情况会有怎么样的反应，有各个方方面面的可能性，但我可以做一个结论，就是对美国人来讲任何事情都不是难事。期待明年大家来坐满体育场，明年见了！

 

Warren Buffett Berkshire Hathaway Annual Meeting Transcript 2020

Warren Buffett: (00:06)
This is the annual meeting of Berkshire Hathaway. It doesn’t look like an annual meeting. It doesn’t feel exactly like an annual meeting, and it particularly doesn’t feel like an annual meeting because my partner of 60 years, Charlie Munger, is not sitting up here. I think most of the people that come to our meeting really come to listen to Charlie. But I want to assure you, Charlie at 96 is in fine shape. His mind is as good as ever. His voice is as strong as ever, but it just didn’t seem like a good idea to have him make the trip to Omaha for this meeting. Charlie, Charlie is really taking to this new life. He’s added Zoom to his repertoire. So has meetings every day with various people, and he’s just skipped right by me technologically. But that really isn’t such a huge achievement. It’s more like, kind of like stepping over a peanut or something. But nevertheless, I want you to assure you, Charlie is in fine shape, and he’ll be back next year. We’ll try to have everything in the show that we normally have next year.

Warren Buffett: (01:26)
Ajit Jain also, who is the vice chairman in charge of insurance, is safely in New York. Again, it just did not seem worthwhile for him to travel to Omaha for this meeting. But on my left we do have Greg Abel, and Greg is the vice chairman in charge of all operations except insurance. So Greg manages a business that has more than 150 billion in revenues and crosses across dozens of industries and has more than 300,000 employees. He’s been at that job a couple of years, and frankly, I don’t know what I’d be doing today if I didn’t have Ajit and Greg handling the duties that I was doing only about a quarter as well a couple of years ago. So I owe a lot of thanks to Greg, and you’ll get exposed to him more as this meeting goes along.

Warren Buffett: (02:37)
The meeting will be divided into four parts, and in a moment or two, I will talk. Sort of a monologue was slides. I’ve never really used slides before. I’ve taught college classes intermittently but pretty steadily from age 21 to age 88, and I never recall using a single slide. But who says you can’t teach an old dog new tricks? So we’ll see whether you can or not. I’ve got a number of slides, and I would like you to take you through those. The first section, which we’ll start in just a minute, and then we’ll move on to a brief recap of Berkshire’s first quarter results.

Warren Buffett: (03:43)
Now we put those up in the 10Q, which was posted on the internet and berkshirehathaway.com this morning. There’s lots and lots of detail in there, so I’m not going to go through that. I’ll point out one or two things that may be of interest to you, and actually I’ll talk a little bit about what we did on April, which something that is new to Berkshire, be that current. But I’ll give you that. Then we’ll have the formal meeting, which will take maybe 15 or 20 minutes, and from there we’ll go to Becky Quick, who for a couple of hours will grill me and Greg on questions she’s selected from a huge batch that I’m told she’s received. They went to Carroll Lumas and Andrew Ross Sorkin as well as to Becky, but to simplify things. We’ve consolidated all those questions that Becky will ask. Like I say, we’ll go for a couple of hours, and there’s no specified cutoff time present. We’ll just see how things develop.

Warren Buffett: (05:02)
What’s of course on everybody’s mind the last two months or so is what’s going to be the situation in terms of health in the United States and what’s going to be the situation in terms of the economy in the United States in the months and perhaps the years to come. I don’t really have anything to add your knowledge on health. In school, I did okay in accounting, but I was a disaster in biology. I’m learning about these various matters the same way you are.

Warren Buffett: (05:52)
I think, personally I feel extraordinarily good about being able to listen to Dr. Fauci, who I had never heard of a year ago. But I think we’re very, very fortunate as a country to have somebody at 79 years of age who appears to be able to work 24 hours a day and keep a good humor about him and communicate in a very, very straightforward matter about fairly complex subjects and tell you when he knows something and when he doesn’t know something. So I’m not going to talk about any political figures at all or our politics generally this afternoon, but I do feel that I owe a huge debt of gratitude to Dr. Fauci for educating and informing me, actually along with my friend Bill Gates too, as to what’s going on. I know I get it from a straight shooter when I get it from either one of those. So thank you Dr. Fauci.

Warren Buffett: (07:13)
When this hit us, and as I sit here in this auditorium with 17 or 18,000 empty seats. The last time I was here, it was absolutely packed. Creighton was playing Villanova, and there were 17 or 18,000, whatever it holds. It was full, and there wasn’t one person in that crowd. This was in January. There wasn’t one person in that crowd that didn’t think that March madness wasn’t going to occur. It’s been a flip of the switch in a huge way in terms of national behavior, the national psyche. It’s dramatic. When we started on this journey, which we didn’t ask for, it seemed to me that it was an extraordinary wide variety of possibilities on both the health side and on the economic side. There was DEFCON 5 on one side and DEFCON 1 on the other side, and nobody really knows, of course, all the possibilities that there are, and they don’t know what probability factor to stick on them.

Warren Buffett: (08:38)
But in this particular situation, it did seem to me that there was an extraordinary range of things that could happen on the health side and an extraordinary range in terms of the economy. Of course they intersect and affect each other. So they’re bouncing off each other as you go along. I would say, again, I don’t know anything you don’t know about health matters, but I do think the range of possibilities has narrowed down somewhat in that respect. We know we’re not getting a best case, and we know we’re not getting a worst case. The possibility initially of the virus was hard to evaluate, and it’s so hard to evaluate. There’s a lot of things we’ve learned about it, a lot of things we know we don’t know, but at least we know what we don’t know. Some very smart people are working on it, and we’re learning as we go along.

Warren Buffett: (09:47)
But the virus obviously has been very transmissible, but on the good side, it’s not that good, but it is not as lethal as it might have been. We had Spanish flu in 1918 and my dad and four siblings and his parents went through it, and they have a terrific story in the March 15th edition of the Omaha World Herald that you can go to on omaha.com and look up. It’s also on the first page I believe on Google, if you put in Spanish flu Omaha. During that particular time in maybe four months or so, Omaha had 974, I believe, deaths, and that was a half of 1% of the population. That figure wasn’t greatly different than around the country. So you think about half of 1% of the population now you’re talking 1,700, 000 or thereabouts people and fortunately in terms of the worst case, this does not appear to, in fact I think you can almost rule out it being as lethal as the Spanish flu was. But it’s very, very transmissible. Of course we have the problem, we don’t know the denominator in terms of exactly how lethal it is because we don’t know how many people have had it and didn’t know they had it.

Warren Buffett: (11:36)
But in any event, the range of probabilities on health narrowed down somewhat, I would say the range, the probabilities, or possibilities, and on the economic side are still extraordinarily wide. We do not know exactly what happens when you voluntarily shut down a substantial portion of your society. In 2008 and ’09, our economic train went off the tracks, and there were some reasons why the [inaudible 00:12:23] was weak in terms of the banks and all of that sort of thing. But anyway, this time we just pulled the train off the tracks and put it on a siding, and I don’t really know of any parallel in terms of very, very one of the most important country in the world. Most productive, huge population. In effect sidelining its economy and its workforce and obviously and unavoidably creating a huge amount of anxiety and changing people’s psyche and causing them to somewhat lose their bearings in many cases, understandably.

Warren Buffett: (13:14)
This is quite an experiment and we may know the answer to most of the questions reasonably soon, but we may not know the answers to some very important questions for many years. So it still has this enormous range of possibilities. But even facing that, I would like to talk to you about the economic future of the country because I remain convinced as I have. I was convinced of this in World War II. I was convinced of it during the Cuban missile crisis, 9/11, the financial crisis, that nothing can basically stop America. We faced great problems in the past. We haven’t faced this exact problem. In fact, we haven’t really faced anything that quite resembles this problem, but we faced tougher problems the American miracle, the American magic has always prevailed, and it will do so again.

Warren Buffett: (14:39)
I would like to take you through a little history to essentially my case that if you were to pick one time to be born and one place to be born, and you didn’t know what your sex was going to be, you didn’t know what your intelligence would be. You didn’t know what your special talents or special deficiencies would be. That if you could do that one time, he would not pick 1720, you would not pick 1820, you would not pick 1920. You’d pick today, and you would pick America, and of course the interesting thing about it is that ever since America was organized in 1789 when George Washington took the oath of office, people have wanted to come here. Can you imagine that? For 231 years, there’s always been people that have wanted to come here.

Warren Buffett: (15:52)
My friend, I think I just jumped the gun just a shade. I’m putting up slide on. But I’m going to call from some slides as we go along. But the interesting thing about this country is what is on slide one? Let’s put it up. This is an extraordinarily young country. Now I’m comparing it to a couple of guys that are pretty old, but when you think about the fact that my age, Charlie’s age, our life experience, and then we’ll throw in this young guy over here, Greg Abel, and if our life experiences combined exceed the life of the United States, we are a very, very young country. But what we’ve accomplished is miraculous. Now just think of this. This little spot in history.

Warren Buffett: (16:54)
If we go to slide two, I’ve tried to estimate… Well, let’s go back. Stay with slide two, but the population in 1790, and we had 3.9 million people here. It’s funny, when you look up census figures, you find out that they had a big fire and the Department of Commerce building in 1921, so they lost a lot of the census records. So there’s some things where there’s a few gaps, but there were 3.9 million people in the United States. Actually, I’ve got .6 million. It’s closer to .7 million. There were 700,000 of those people were slaves at the time. But those 3.9 million people were one half of 1% of the population of the planet.

Warren Buffett: (17:57)
If you’d asked any of those 3.9 million people, any of them to imagine what life would be like 231 years later, even the most optimistic person; they could have been drinking heavily and even had a little pot, and they still could not in their wildest dreams have thought that in three lifetimes, Charlie’s mine, and Greg’s, that in that period you would be looking at a country with 280 million vehicles shuffling around its roads. Airplanes, maybe not today so much, but they’ll be back again. They were flying people at 40,000 feet coast to coast, five hours. That great universities would exist in one state after another, and great hospitals systems, and entertainment would be delivered to people in a way nobody could have dreamt of in 1790s. This country in 231 years has exceeded anybody’s dreams.

Warren Buffett: (19:23)
I went to the internet trying to prepare for this, and if you’ll move to the next slide, I tried to find out what was the wealth of the country in 1789, our starting point. I punched in United States wealth. I tried 1789, I tried 1790. I thought it might be a little easier in terms of a round year, and I think four. million or so references came up. I didn’t look at all 4 million, but I can tell you the data collection in those early days on many fronts was not anything like today. You really can’t find what I would consider a reliable figures. You can find out how many mules there were in the country and a few things like that, and try to add them up. But in real estate, when you’re looking at houses or apartment houses or office buildings, they’re each slightly different than each other, but they looked at comparable sales.

Warren Buffett: (20:57)
So it’s hard to find a lot of countries where the wealth has been estimated. But it was interesting to go back and think about the fact that in 1803 we purchased for $15 million, we made the Louisiana purchase. Now that’s a little later than 1789, but that’s the best comp, as they say in real estate. That’s the best combine we could find for land mass, anyway. When we made that purchase, that was equal incidentally to about a quarter, about 800,000 plus square miles. But it was about a quarter of what the lower 48 States now contain. So we bought about a quarter of the lower 48 for those $15 million back in 1803. If you live in Texas and your grandfather is close to dying, and he calls the grandchildren, children around him. In his final words, he always says, ” Don’t sell the mineral rights.” Well, the French sold us the mineral rights on that $15 million deal as well. So we got that whole strip there. We got all of Kansas, essentially all of Oklahoma, and they’ve produced 21 billion barrels of oil for us, a lot of natural gas since the purchase.

Warren Buffett: (22:58)
One of the sidelights is that we paid our 15 million for the Louisiana purchase. We paid 3 million of it, 20% of it. We paid with 200,000 ounces of gold, valued at 15 bucks an ounce, and that three million that the French took. We got South Dakota as part of the Louisiana purchase, and the home state mine up there, before it closed, produced well over 40 million ounces of gold and 40 million ounces of gold, that comes to about $60 billion worth. Like I say, 200,000 ounces took care of 20% of our purchase price. So the Louisiana purchase was a bargain, but it’s what the going price was for 800,000 square miles, I guess, at the time, and three cents an acre. So I decided by playing around with various numbers such as that, that as a reasonable estimate of the worth of the country in 1789, a billion was not crazy figure. Now, if I’d been an academician or something, I would’ve put 1,107,400,000, something like that. I would have made it look respectable. But it’s a wild guess. But it’s not a crazy figure.

Warren Buffett: (24:40)
So what has happened, let’s move on to the next slide, to the wealth of the country since then? Here we have some figures that come out pretty regularly. Well, they do come out regularly where the Federal Reserve estimates the net household worth of people in the United States, all all the households in the United States. You can look these up, and you’ll see that there’s 30 trillion of stocks, and I think maybe single family homes. What are there? There’s 82 million or so owner occupied single families, maybe 45 million rental apartments and so on. So you start adding all these up, and the Federal Reserve tells us, and I invite you to look at the data; it’s kind of interesting, that we now in the United States, 231 years later, we have a hundred trillion. We have more than a hundred trillion of household wealth, even though the stock market’s gone down somewhat since the last quarter report.

Warren Buffett: (25:55)
So you say, “Well, we’ve had a lot of inflation, everything.” We actually, in the United States, for the first half of our existence, roughly, we didn’t really have that much inflation. We had inflationary periods and deflationary periods, but the general price level did not changed that dramatically. But I will assume again for this calculation that there’s been 20 for one inflation. It’s way less than that in many commodities, and it’s very hard to measure and talk about equivalent benefits from different kinds of products and so on, and costs. But I think it’s reasonable to say that the United States in real terms has increased in wealth at something in the area of 5,000 for one, which is really, it’s mind blowing. 5,000 for one in real terms, in a country that had a half a percent of the, and a bunch of raw land. But a vision that to accomplish that in 231 years, there’s just no denying that that’s beyond what anybody could have dreamt earlier.

Warren Buffett: (27:31)
But it was not done, and this is important, because we’ve now hit a bump in the road. It was not done without some very, very serious bumps in the road. It was not 231 years of steady progress. In matter of fact, we had been in the birth of this country. We’d been into it, what? 72 years and if we go to the next slide, 1861 we now had about 31 million people. The 1960 cents to showed around 31 million people or thereabouts in the country and four million of them were slaves, and we had never really resolved the very much unfinished business of what was involved in compromises in 1789, and we’ll have more to say about that later. But we had something that not too many countries experienced, and if you had told people in 1789 that in 72 years, you were going to have a division that causes the President of the United States at Gettysburg to say that testing whether that nation, or any nation so conceived and dedicated, can long endure. Imagine the President of the United States wondering aloud whether the country that he was presiding over could long endure, only 72 years or 74 years at Gettysburg, had taken place.

Warren Buffett: (29:37)
So while this marvelous dream was being played out, roughly a third of the way through it, we face this really moment of decision, and we entered into a contest that, if we’ll go to the next slide, I made an estimate. That literally killed roughly 6% of the males in the country who were between 18 and 60. I’m assuming that there were more than 600,000 deaths in the war. I think it’s a reasonable estimate that that 18 to 60 group, males, were by far the great proportion. So imagine 6% of your working prime age males in a country are wiped out in four years. So when we look at the progress of this country and we think of our own problems now, I just ask you to ponder and we’ll move to the next slide. That would be equivalent today to having four million males in that same age group similarly wiped out. So that was one incredible interruption which this country nevertheless worked through while compiling this American dream that is one of the wonders of the world, perhaps the wonder of the world in many senses.

Warren Buffett: (31:46)
So let’s move on to another crisis of a different sort, that hit the country, and this of course is the 1929 crash, which led to the Great Depression. Here the Dow Jones average, which we’ll use through this. At that time, that’s the one everybody paid attention to, actually. The second most important average at that time, if you look at the papers, was the New York Times average, which has disappeared, and of course the Standard and Poor’s has probably, regardless is a superior yardstick. But the Dow Jones is a perfectly adequate yardstick. On September 3rd, 1929, the Dow Jones average closed at 381.17, and people were very happy and buying stocks on margin that worked wonderfully.

Warren Buffett: (32:55)
The roaring twenties had a good feeling to it with the auto coming of age and the day of air travel coming along and all kinds of new appliances and the telephone getting wider use, believe it or not. Hadn’t really caught on that much prior thereto. But the movies were coming on. It was a happy place. Then, of course, if we go to the next slide, we’ll look at what happened in the couple of months after September 3rd and the Dow Jones average almost got cut in half, and that was pretty impressive until we had this recent situation where in a shorter period of time we lost about a third. But the crash, and there’s a great book about it called The Great Crash by John Kenneth Galbraith. Let me interject one little plug here. There’s a small business in Omaha, and I hate what this-

Warren Buffett: (34:02)
… a small business in Omaha, and I hate what this is truncating this meeting, or changing can so dramatically has done to many of the businesses in Omaha, because I think small business is beneficial, and we’re the beneficiaries of a really … they got a lot of business with the Berkshire meeting, and they’re going to get it in the future, but they suffer during a period like this, and they just had a story about The Bookworm.

Warren Buffett: (34:28)
Well, The Bookworm, if you buy any books that come out of anything I recommend, think about just put in Bookworm in Omaha, and The Great Crash is a wonderful book of mine, John Kenneth Galbraith describes it, but I would like to get into a bit of a personal note which will have some relevance, not too much, but some relevance to the story of the great depression, because in 1929 my dad, who was 26 years of age then, was employed as a security salesman by a local small bank, and he sold stocks and bonds, but mostly he sold stocks.

Warren Buffett: (35:26)
And when stocks fall 48%, and they were selling them to people a few months ago, you really don’t feel like going out and facing those same people, so I think my dad probably liked to do was, they say now, shelter in place, which means stay at home, and there really wasn’t that much in our house, we just had a small yard, it was wintertime anyway, my dad wouldn’t have been puttering on the yard anyway, and the television wasn’t there, and he and my mother got along very well.

Warren Buffett: (36:10)
So under those conditions, if you’ll turn to the next slide, I was born about nine months later, but at that time, I was actually born on August 30th, but the stock market was closed that day, and so I’m using the previous day figures, but I didn’t notice at the time that the market was closed, but the stock market had actually recovered over 20% during that nine and a half month period or thereabout.

Warren Buffett: (36:47)
People did not think in the fall of 1930, they did not think they were in a great depression, they thought it was a recession very much like had occurred at least a dozen times, although not always when stock markets were important, but we’d have many recessions in the United States over that time, and this did not look like it was something dramatically out of the ordinary. For a while, actually for about 10 days after my birth, that’d be [inaudible 00:37:28] and the stock market actually managed to go up all of 1-2% there in those 10 days, but that’s the last day.

Warren Buffett: (37:42)
Well, from that point, if you’ll turn to the next slide, the stock market went from level of 240 to 241, which was a noticeable decline, because if somebody had given me $1,000 on the day I was born, and I’d bought stocks with it, and bought the Dow Average, my $1,000 would have become $170 in less than two years, and that is something that none of us here have ever experienced that we may have had it with one stock occasionally, but in terms of having a broad range of America mark down 83% in two years, and mark down 89% of the peak, that was in September 3rd, 1929, was extraordinary.

Warren Buffett: (38:52)
In that intervening period, less than one year after I was born, just slightly less than one year, my dad went to the bank where he worked and had his account, and of course the bank had a sign out of “closed” and so he had no job, and he had two kids at that point, and his father had a grocery store, but Charlie and I both worked for my grandfather. Charlie worked there in 1940, I worked there in 1941, so we didn’t know each other but my grandfather said to my father that, “Don’t worry about your groceries, Howard,” he says, “I’ll just let your bill run.”

Warren Buffett: (39:33)
That was my grandfather’s word exactly, he cared about his family but he wasn’t going to go crazy, and one of the things as I look back on that period is, and I don’t think the economists generally like to give it that much of a point of importance, but if we’d had the FDIC 10 years earlier, the FDIC started on January 1st, 1934, it was part of the sweeping legislation that took place when Roosevelt came in, but if we’d had the FDIC we would have had a much, much different experience, I believe, in the great depression.

Warren Buffett: (40:24)
People blaming on smooth hall here, and they … I mean, there’s all kinds of things, and the margin requirements in ’29, and all of those things entered into creating a recession, but if you have over 4,000 banks fail, that’s 4,000 local experiences where people save, and save, and save, and put their money away, and then someday they reach for it and it’s gone, and that happens in all 48 states, and it happens to your neighbors, and it happens to your relatives, it has to have an effect on the psyche that’s incredible.

Warren Buffett: (41:15)
So one very, very, very good thing that came out of the depression, in my view, is the FDIC, and it would have been a somewhat different world, I’m sure, if the bank failures hadn’t just rolled across this country, and with people that thought that they were savers find out that they had nothing when they went there and there was a sign that said, “Closed.”

Warren Buffett: (41:49)
Incidentally, the FDIC, I think very few people know this, or at least they don’t appreciate it, but the FDIC has not cost the American tax payer a dime, I mean its expenses have been paid, its losses have been paid all through assessments on banks, it’s been a mutual insurance company of the banks backed by the federal government, and associated with the federal government, but now it holds $100 billion and that consists of premiums that were paid in an investment income on the premiums, plus the expenses, and paying of all the losses, and think of the incredible amount of peace of mind that’s given to people that were not similarly situated when the great depression hit.

Warren Buffett: (42:51)
So the great depression went on, and it lasted a very long time, but it lasted a lot longer in the minds of people than it did actually in its effects. World War II came along, and on sort of an involuntary manner we adopted Keynesianism, we started running fiscal deficits, of course, that were absolutely huge, and took our debt up to a percentage of GDP, which we had never reached before, and never have reached since.

Warren Buffett: (43:35)
So we had an enormous economic recovery, but the minds of people had been so scarred, the memories, parents told their children, 1929 became a symbol in people’s minds, I mean, if you said 1929 it was like saying 1776, or 1492. I mean, everybody knew exactly what you were talking about, and it affected stock prices in a rather remarkable way to the point, if you’ll change to the next slide, it was January 4th of 1951 that the kid who was born on August 30th in 1930 had finished college before the stock market got back to where it was at that earlier time.

Warren Buffett: (44:42)
So take the years from 1920, 1930, or 1929 really into the 1951, or take the year from my birth, 20 years, and bear in mind that the country was only 140 years old when they started, that’s 20 years out of this amazing 231-year lifetime of our country, that was flat out a time of for a long time with no economic growth, and no feeling by people in terms about the wealth of the country, about what American economy was worth, about all these corporations that were doing far, far, far better than they were, all in all, but it took all of that time to restore in the market a price level that was equal to what it was when I was born 20 years earlier.

Warren Buffett: (45:51)
So, if you think about the fact that we’re enduring a few months, and we’ll endure some many more months, and we don’t know how it comes out, and people in the ’30s didn’t know how it was going to come out, but they endured, persevered, prospered, and the American miracle continued. But it’s interesting in that I actually don’t have a slide for the next one, because last night I was thinking after all the slides had been prepared, I was actually thinking about this a little bit, and I remembered that at the start of 1954 the stock market was … the Dow was only at about 280, and I remember 1954 because it was the best year I ever had in the stock market.

Warren Buffett: (46:53)
And the Dow went from essentially what? 280 or thereabout at the start of the year, to a little over 400 at the end of the year, and when it went to 400, as soon as it went across 381, that famous figure from 1929, when it went to 400, and this will be hard for some of you to believe, but everybody wondered, ” Is this 1929 all over again?”

Warren Buffett: (47:33)
And that seems a little farfetched because it was a different country in 1954, but that was the common question, and it actually achieved such a level of worry about whether we were about to jump off another cliff just because the 381 of 1929 had been exceeded, that they held, Senator Fulbright, Bill Fulbright of Arkansas, who became very famous later in terms of the foreign relations committee, but he headed the Senate Banking Committee, and he called a special per special investigation, and he calls it the, what did he call it? The stock market study, but it really, if you read through it, he really was questioning whether we had built another house of cards again, and on this committee, it’s interesting to see the Senate Finance Committee, one of the members was Prescott Bush, the father of George H. W. Bush, and grandfather of George W. Bush, and it had some illustrious names.

Warren Buffett: (48:54)
His committee, in March of 1955, with a Dow of 405, assembled 20 of the best minds in the United States to testify as to whether we were going crazy again, because the market was at 400, the Dow was at 400, and we had gotten in this incredible trouble before, but that was the mindset of the country, it’s incredible.

Warren Buffett: (49:24)
We didn’t really believe America was what it was, and my was, the reason I’m familiar with this 1000-page book that I have here, I found it last night in the library, was that I was working in New York for one of the 20 people that was called down to testify before Senator Fulbright, and he testified right before Bill Martin, who was running the Federal Reserve, testified, and right after General Wood who was running shares testified, theirs was very, very important then, and Bill Martin of course was the fellow that longest running chairman in the history of the Fed, and he’s the one that gave the famous quote about the function of the Fed was to take away the punch balls just when the party started to get really warmed up.

Warren Buffett: (50:17)
But Ben Graham, my boss, sent me over to the public library in New York to gather some information for him, something he could do in five minutes with a computer now, and I dug out something, and he went to testify, and on page 545 of this book, I knew where to look, I didn’t have to go through it all, but the quote which I remember, and I remember because Ben Graham was one of the three smartest people I’ve met in my life, and he was the dean of people in securities business, he wrote the classic Security Analysis book in 1934, he wrote the book that changed my life, Intelligent Investor in 1949, he was unbelievably smart.

Warren Buffett: (51:09)
And when he testified, with the Dow at 404, he had one line in there right toward the start in his written testimony, and he said, “The stock market is high, looks high, it is high, but it’s not as high as it looks.” But he said, “It is high.” And since that time, if we’ll turn to the next slide, of course, we felt the American tailwind at full force, and the Dow, well let’s see, when the Dow was … it went down on Friday, but when we made the slide it was about 24,000 so you’re looking at a market today that has produced $100 for every dollar, all you did was you had to believe in American just by a cross-section of America, you didn’t have to read the Wall Street Journal, you didn’t have to look up the price of your stock, you didn’t have to pay a lot of money in fees to anybody, you just had to believe that the American miracle was intact.

Warren Buffett: (52:16)
But you’d had this testing period between 1929 and well really certainly 1954, as indicated by what happened when it got back up to 380, you had this testing period, and people really they’d lost faith to some degree, they just didn’t see the potential of what America could do. We found that nothing can stop America when you get right down to it, and it’s been true all along, it may have been interrupted.

Warren Buffett: (53:04)
One of the scariest of scenarios, when you had a war with one group of States fighting another group of States, and it may have been tested again in the great depression, and it may be tested now to some degree, but in the end the answer is never bet against America, and that in my view is as true today as it was in 1789, and even was true during the civil war, and the depths of the depression.

Warren Buffett: (53:44)
Now, I’m now about to say something that, and don’t change the slide yet, but I’m now about to say something that some of you will be tempted to argue with me about, but I would make the case that we are imperfect in a great, great, great many ways, but I would say, and if you pull up the next slide, that we are now a better country as well as an incredibly more wealthy country than we were in 1789. We’re far, far, far from what we should be, will be, but we have gone dramatically in the right direction.

Warren Buffett: (54:35)
It’s interesting, in 1776, we said we hold these truths to be self-evident that all men are created equal, endowed by their creator with certain unalienable rights, among these are life, liberty, and pursuit of happiness, and yet 14 years later, a year after we really officially began the country in 1789, adopted a constitution. We found that more than 15% of the people in the country were slaves, and we wrestled with that, but when you say the word self-evident, that sort of sounds like you’re saying any damn fool can recognize that, and you certainly say, he can argue maybe a little bit about life, and the pursuit of happiness, but I don’t see how in the world anybody can reconcile liberty with the idea that 15% of the population was enslaved, and it took us a long time to at least partially correct that.

Warren Buffett: (56:08)
I mean it took a civil war, it took losing 6% of those people, males that were between 18 and 60 years of age, but we’ve moved in the right direction, we’ve got a long ways to go, but we’ve moved in the right direction now. In addition, going back again to that 1776 statement, that all men are created equal, and endowed by their creator, et cetera.

Warren Buffett: (56:42)
I think it was self-evident to the 50% of the population that they were getting a fair deal for over half the lifetime of the country. It took 131 years until women were guaranteed the right to vote for our country’s leaders, and then what’s even more remarkable is that after we adopted them, the 19th amendment, 1920, it took 61 more years until a woman was allowed to join those eight males on the Supreme Court. I grew up thinking that the Supreme Court must have been somewhat … said there had to be nine men, but at 61 years, so took 192 years before Sandra Day O’Connor was appointed to the court, and now you can say that there was a pipeline problem.

Warren Buffett: (58:06)
Half the population may have been women in 1920, but there weren’t half the lawyers, or I think were 10% of the lawyers probably. So you can understand some delay, but 61 years is a long time to go and to pick 33 males in-between. If that was entirely by chance, then the odds against that fewer flipping coins is about eight billion to one, like I said, there was a pipeline problem, but it took us a long, long time, and it’s not done yet, but I think it does give meaning to the fact that we are a better society with a lot of room to go, that we are a better society that existed in 1789.

Warren Buffett: (59:02)
When you go to Colonial Williamsburg, I’ve been there a couple of times, as a matter of fact, I watched the debate between Jimmy Carter and Gerald Ford there in the 1976, and it was not a great time to be black, it was not a great time to be a woman, and both of those categories still certainly got potential for significant improvement in terms of fulfilling that pledge made in 1776 about how we believe that it’s self-evident that all men were created equal, but we have made progress, we are a better society, and we will, as the years go by. If you’ll move to the next slide, and I believe that, and I think, let’s see if I can get these slides in the proper order here. I believe that when you get through evaluating all of the qualitative facts, what we have done toward meeting the aspirations of what we wrote in 1776, what we wrote in 1776 wasn’t a fact, but it was an aspirational document, and we have worked toward those aspirations, and we have a long way to go, but I’ll repeat, if you move to the next slide, that never, never bet against America.

Warren Buffett: (01:00:59)
Now, let’s move on now to a much broader subject, what I don’t know. I don’t know, and perhaps with a bias, I don’t believe anybody knows what the market is going to do tomorrow, next week, next month, next year. I know America is going to move forward over time, but I don’t know for sure, and we learned this on September 10th, 2001, and we learned it a few months ago in terms of the virus. Anything can happen in terms of markets, and you can bet on America, but you got to have to be careful about how you bet, simply because markets can do anything.

Warren Buffett: (01:02:15)
On October, whatever it was in 1987, October 11th I believe, a Monday, markets went down 22% in one day. In 1914, they closed the stock market for about four months, after 9/11 closed the market for four days, we hustled to get it going again, but nobody knows what’s going to happen tomorrow. So when they tell you to bet on America, and I tell you that that’s what’s really gotten me through ever since I bought my first stock when I was 11, I mean I caught a huge, huge, huge tailwind in America, but it wasn’t going to blow in my direction every single day, and you don’t know what’s going to happen tomorrow.

Warren Buffett: (01:03:16)
I would like to context to the present news, point out something you may find kind of interesting. If you go to YouTube, you’ll find on June 17th, of 2015, four-plus years ago, you’ll find Sam Nunn, that was one of the people I admire the most in the United States and in the world, enormous patriot and tremendous senator, and he’s carried on thankless work since leaving the Senate, and heading something called the Nuclear Threat Initiative, which most of you haven’t heard of, but I’ve been slightly involved in it, Sam Nunn founded that.

Warren Buffett: (01:04:12)
And, the Nuclear Threat Initiative is simply organizations that are devoted to trying to reduce the chances of something of a nuclear chemical, biological, and now cyber nature, from either malevolent or accidental or whatever may be, from causing deaths to millions of Americans, and among the things that Sam co-founded it, but he’s been the heart and soul of the organization subsequently, and he’s talked about, worried about pandemics along with the nuclear threat for decades, and he’s participated in war games where they play out various scenarios, including malevolent pandemics that could be started by the same kind of nut that sent the anthrax letters around the 9/11, a little after. Sam paired down this YouTube presentation, and I’m sure he’s been on many others I just happened to look this one up, and talked about the dangers of a pandemic, and anybody should listen to Sam Nunn anytime he talks. So he said at that time, “Germs don’t have borders,” which we certainly learned in the last couple of months, and when I clicked on YouTube, if you’ll go to the next, I found out that basically it had 831 views, and this was only a few days ago, I looked it up, but I don’t know whether most of those views have just been the last few days or the last few months, I shouldn’t say, because of the interest in pandemics, but it is hard to think about things that haven’t happened yet. So we can experience, and when something like the current pandemic happens, it’s hard to factor that in, and that’s why you never want to use borrowed money, at least in my view, and then buy into investments.

Warren Buffett: (01:06:58)
And we run Berkshire that way, we run it so that we literally try to think of the worst case of not only just one thing going wrong, but other things going wrong at the same time, maybe partly caused by the first, but maybe independent even of the first. You learned in, I don’t know what grade now, probably earlier than when I went to school, but in fifth or sixth grade, that you can have any series of numbers times zero, and you just need one zero in there and the answer is zero, and there’s no reason to use borrowed money to participate in the American tailwind, but there’s every other reason to participate.

Warren Buffett: (01:07:42)
Now, I can’t resist pointing out that in October of 2019, a large 300-page, I’ve got it right here, a book was brought out, and Johns Hopkins …

Warren Buffett: (01:08:03)
And Johns Hopkins, one of the most respected institutions, country, Nuclear Threat Initiative, NTI, and the Intelligence Group at The Economist collaborated to evaluate the problems of the worldwide preparedness for pandemics, essentially.

Warren Buffett: (01:08:31)
And I think in November, Sam came out to see me with Ernie, more recent former Secretary of Energy who now is the CEO of NTI. He and Sam are co-chairmen, and Beth Cameron who did a lot of work on this report came out to see me. And they gave me in November I believe of last year, they gave me this appraisal. And the opening line, if you’ll turn the page, this is the opening line of this 300-page tome: “Biological threats—natural, intentional, or accidental—in any country can pose risks to global health, international security, and the worldwide economy.”

Warren Buffett: (01:09:24)
And this book was prepared in order to evaluate the preparedness of the various countries and rank them. We ranked pretty well, but all of us got a failing… All of the countries got a failing grade, basically.

Warren Buffett: (01:09:39)
Now, you would think with the prestige of Johns Hopkins and The Economist, along with people like Sam and Ernie, etc., that this would’ve gotten some attention. And, again, Sam… Turn to the next page. Sam and the others went on YouTube on October 24, 2019, and they have racked up, as of a couple days ago, 1,498 views.

Warren Buffett: (01:10:14)
Now, my friend Bill Gates was delivering the same warning at a TED Talk some years back. And he’s gotten a lot more views. But it just says something about the fact that you’re going to get both from the blue, and you can read papers about them, and you can talk about what’ll happen if some, as they used to, the fellows would say, Salomon used to tell me, some 25-sigma event comes along, and they’ll then say that that’ll happen once in the life of the universe. And then it happens to them a couple times in a month, and they go broke.

Warren Buffett: (01:10:52)
You just don’t know what’s going to happen. You know, at least in my view, you know that America’s tailwind is not exhausted. You’re going to get a fine result if you own equities over a long period of time. And the idea that equities will not produce better results than the 30-year Treasury bond, which yields one and a quarter percent now, it’s taxable income. It’s the aim of the Federal Reserve to have 2% a year inflation. Equities are going to outperform that bond. They’re going to outperform Treasury bills. They’re going to outperform that money you’ve stuck under your mattress.

Warren Buffett: (01:11:41)
I mean, they are a enormously sound investment as long as they’re an investment and they’re not a gambling device or something that you think you can safely buy on margin or whatever it may be.

Warren Buffett: (01:12:03)
It’s interesting that stocks offer, which, and stocks are a… We always look at stocks as just being a part of a business. I mean, stocks are a small part of a business. If in 1789 you’d saved a small amount of money and it wasn’t easy to save, you might’ve bought with those savings, you might’ve bought a tiny, tiny plot of property.

Warren Buffett: (01:12:39)
Maybe you bought a house that could be rented to somebody, but you didn’t really have the chance to buy in with 10 different people who were developing businesses, and who were presumably putting their own money in, and that would have the American tailwind behind. And of the 10, a reasonably high percentage would succeed in a way and earn decent returns, but those are the choices. You might have had to do with savings.

Warren Buffett: (01:13:23)
And they started offering bonds originally. And there again you got a limited return. But the return in those days may have been 5% or 6% or something of the sort. But you can’t buy risk-free bonds. I mean, the yardstick for me is always the U.S. Treasury. And when somebody offers you quite a bit more than the U.S. Treasury, there’s usually a reason. There’s much more risk.

Warren Buffett: (01:13:50)
But going back to stocks, people bring the attitude to them too often that because they are liquid and quoted minute by minute that it’s an important that you develop an opinion on them minute by minute. Now, that’s really foolish when you think about. And that’s something Graham taught me in 1949, I mean, that single thought, that stocks were parts of businesses and not just little things that moved around on charts or… Charts were very popular in those days, and whatever it may be.

Warren Buffett: (01:14:28)
Imagine for a moment that you decided to invest money now, and you bought a farm. And the farmland around here, let’s say you bought 160 acres, and you bought it at x per share, or per acre. And the farmer next to you had 160 identical acres, same contour, same quality, soil quality, so it was identical. And that farmer next door to you was a very peculiar character because every day that farmer with the identical farm said, “I’ll sell you my farm, or I’ll buy your farm at a certain price,” which he would name.

Warren Buffett: (01:15:29)
Now, that’s a very obliging neighbor. I mean, that’s got to be a plus to have a fellow like that with the next farm. You don’t get that with farms, you get it with stocks. You want 100 shares of General Motors, and then on Monday morning, somebody will buy you 100 shares or sell you another 100 shares at exactly the same price. And that goes on, I don’t know, five days a week.

Warren Buffett: (01:15:58)
But just imagine if you had a farmer doing that. When you bought the farm, you looked at what the farm would produce. That was what went through your mind. You were saying to yourself, “I’m paying x dollars per acre. I think I’ll get so many bushels of corn or soybeans on average, some years good, some years bad. And some years the price will be good. Some years the price will be bad,” etc.

Warren Buffett: (01:16:19)
But you think about the potential of the farm, and now we get this idiot that buys the farm next to you, and on top of that, he’s sort of a manic depressive and drinks, maybe smokes a little pot. So his numbers just go all over the place. Now, the only thing you have to do is to remember that this guy next door is there to serve you and not to instruct you. You bought the farm because you thought the farm had the potential. You don’t really need a quote on it. If you bought in with John D. Rockefeller or Andrew Carnegie, and da, da, da, da, there were never any quotes. Well, there were quotes later on, but basically you bought into the business. And that’s what you’re doing when you buy stocks. But you get this added advantage that you do have this neighbor who you’re not obliged to listen to at all who is going to give you a price every day. And he’s going to have his ups and downs. And maybe he’ll name a selling price that they’ll buy at, and in which case you sell if you want to.

Warren Buffett: (01:17:34)
Or maybe he’ll name a very low price, and you’ll buy his farm from him. But you don’t have to. And you don’t want to put yourself in a position to where you have to. So stocks have this enormous inherent advantage of people yelling out prices all the time to you, and many people turn that into a disadvantage. And of course many people can profit in one way or another from telling you that they can tell you what this farmer’s going to yell out tomorrow or next… your neighboring farmer’s going to yell out tomorrow, or next week, or next month.

Warren Buffett: (01:18:11)
There’s huge money it. So people tell you that it’s important, and they know, and that you should pay a lot of attention to their thoughts about what price changes should be, or you tell yourself that there should be this great difference. But the truth is, if you owned the businesses you liked prior to the virus arriving, it changes prices, and it changes, but nobody’s forcing you to sell. And if you really like the business, and you like the management you’re in with, and the business hasn’t fundamentally changed, and I’ll get to that a little when I report on Berkshire, which I will soon, I promise, the stocks have an enormous advantage. And you can bet on America.

Warren Buffett: (01:19:06)
But you can’t bet unless you’re willing and have an outlook to independently decide that you want to own a cross section of America, because I don’t think most people are in a position to pick single stocks; a few may be, but on balance, I think people are much better off buying a cross section of America and just forgetting about it. If you’d done that, if I’d done that when I’d got out of college, it’s all I had to do to make 100 for 1 and then collect dividends on top of it, which increased, would increase substantially over time.

Warren Buffett: (01:19:43)
The American tailwind is marvelous. American business represents, and it’s going to have interruptions, and you’re not going to foresee the interruption, and you don’t want to get yourself in a position where those interruptions can affect you either because you’re leveraged or because you’re psychologically unable to handle looking at a bunch of numbers.

Warren Buffett: (01:20:09)
If you really had a farm, and you had this neighbor, and one day he offered you $2,000 an acre, and the next day he offers you $1,200 an acre, and maybe the day after that he offers you $800 an acre, are you really going to feel that at $2,000 an acre when you had evaluated what the farm would produce, are you going to let this guy drive you into thinking, “I better sell because this number keeps coming in lower all the time”? It’s a very, very, very important matter to bring the right psychological approach to owning common stocks.

Warren Buffett: (01:20:51)
But I will tell you, if you bet on America and sustain that position for decades, you’re going to do better than, in my view, far better than owning Treasury securities or far better than following people who tell you that what the farmer’s going to yell out next… There’s huge amounts of money that people pay for advice they really don’t need and for advice where the person giving it could be very well-meaning in it and believe their own line. But the truth is that you can’t deliver superior results to everybody by just having them trade around a business.

Warren Buffett: (01:21:39)
If you bought into a business, it’s going to deliver what the business produces. And the idea that you’re going to outsmart the person next to you, or the person advising you can outsmart the person sitting next to you is, well, it’s really the wrong approach.

Warren Buffett: (01:21:57)
So find businesses. Get a cross section. And in my view, for most people, the best thing to do is to own the S&P 500 index fund. People will try and sell you other things because there’s more money in it for them if they do. And I’m not saying that that’s a conscious act on their part.

Warren Buffett: (01:22:21)
Most good salespeople believe their own baloney. I mean, that’s part of being a good salesperson. And I’m sure I’ve done plenty of that in my life too, but it’s very human if you keep repeating something often enough. That’s why lawyers have the witnesses keep saying things over and over again, that by the time they get on the witness stand, they’ll believe it whether it was true in the first place or not.

Warren Buffett: (01:22:44)
But you are dealing with something fundamentally advantageous, in my view, in only common stocks. I will bet on America the rest of my life. And I hope my successors at Berkshire do it. Now, we do it in two different ways. We do it by buying entire businesses, and we buy parts of businesses.

Warren Buffett: (01:23:09)
And I would like to emphasize that… Well, I’d like to give you a few figures that will tie in from our activities in the first quarter and also what we’ve done in April. We are not right about… We do try to pick the businesses that we think we understand. We don’t buy the S&P 500. And we like to buy the entire businesses when we buy them, but we don’t get a chance to do that very often. Most of the best businesses are not available for sale in their entirety.

Warren Buffett: (01:23:53)
But we don’t mind in the least buying partial interest in businesses. And we would rather own 6% or 7% or 8% of a wonderful company and regard it as a partnership interest, essentially, in that company. And then we get an opportunity to do that through marketable securities. And sometimes we get more opportunities than others.

Warren Buffett: (01:24:24)
And with that, I hope I’ve convinced you to bet on America. Not saying that this is the right time to buy stocks if you mean by “right,” that they’re going to go up instead of down. I don’t know where they’re going to go in the next day, or week, or month, or year. But I hope I know enough to know, well, I think I can buy a cross section and do fine over 20 or 30 years. And you may think that’s kind of, for a guy, 89, that that’s kind of an optimistic viewpoint. But I hope that really everybody would buy stocks with the idea that they’re buying partnerships in businesses and they wouldn’t look at them as chips to move around, up or down.

Warren Buffett: (01:25:20)
So we will just now take a quick look. And I see we’ve got the Becky’s email address. So if you have questions on what I’ve said or other things, you can email these questions. And she is back there probably sort of a madhouse trying to handle questions coming in and pick out the ones she’s going to prioritize. But feel free to, anything I’ve talked about so far, to send a long to her, and we’ll keep her address up when I later hold the formal part of the meeting too.

Warren Buffett: (01:26:03)
Very briefly in terms of Berkshire, in the first quarter, if you’ll put up… Do we have the slides on that? There we are. Our operating earnings were… And there’s much more about this in the 10-Q, and it’s really not worth spending any real time on. But the operating earnings for the first quarter have no meaning whatsoever in terms of forecasting what’s going to happen the next year.

Warren Buffett: (01:26:34)
And I don’t know the consequences of shutting down the American economy. I know eventually it will work, whatever we do. We may make mistakes. We will make mistakes, and during this talk and later on, I’m not going to be second- guessing people on this because nobody knows for sure what any alternative action would produce or anything short.

Warren Buffett: (01:27:06)
But what we do know is that for some period, certainly during the balance of the year, but it could go on a considerable period of time, who knows, but our operating earnings will be less, considerably less than if the virus hadn’t come along. I mean, that’s just it. It hurts some of our businesses a lot. I mean, you shut down. Some of our businesses effectively have been shut down.

Warren Buffett: (01:27:41)
It affects others much less. Our three major businesses of insurance and the BNSF railroad, railroad and our energy business, those are our three largest by some margin. They’re in a reasonably decent position. They will spend more than their depreciation. So some of the earnings will go, along with depreciation, will go toward increasing fixed assets.

Warren Buffett: (01:28:13)
But basically these businesses will produce cash even though their earnings decline somewhat. And if we’ll go to part two, at Berkshire, we keep ourselves in an extraordinary strong position. We’ll always do that—that’s just fundamental. We insure people. We’re a specialist to some extent and a leader. It’s not our main business, but we sell structured settlements. That means somebody gets in a terrible accident, usually an auto accident, and they’re going to require care for 10, 30, 50 years.

Warren Buffett: (01:29:03)
And their family or their lawyer is wise enough, in our view, to rather than take some big cash settlement to essentially arrange to have money paid over the lifetime of the individual to take care of their medical wills, bills, or whatever it may be. And we’re large. We’ve got many, many, many people that in effect have staked their well-being on the promises of Berkshire to take care of them for, like I say, I mean, 50 years or longer into the future.

Warren Buffett: (01:29:42)
And, now, I would never take real chances with money, of other people’s money under any circumstances. Both Charlie and I come from a background where we ran partnerships. I started mine in 1956 for really seven either actual family members or the equivalent. And Charlie did the same thing six years later. And we never, neither one of us, I think, I know I didn’t, and I’m virtually certain the same is true of Charlie, neither one of us ever had a single institution investment with us.

Warren Buffett: (01:30:23)
I mean, every single bit of money we managed for other people was from individuals, people with faces attached to them, or entities, or money with faces attached to them. So we’ve always felt that our job is basically that of a trustee, and hopefully a reasonably smart trustee in terms of what we were trying to accomplish. But the trustee aspect has been very important. And it’s true for the people with the structured settlements. It’s true for up and down the line. But it’s true for the owners very much too. So we always operate from a position of strength.

Warren Buffett: (01:31:07)
Now, I show on the slide that’s up, I show our… Well, let’s go back one. Yeah. I show our net, our cash and Treasury bill position on March 31st. And you might look at that and say, “Well, you’ve got $125 billion or so in cash and Treasury bills. And you’ve got…” At least at that point, we had about, I don’t know, $180 billion or so in equities.

Warren Buffett: (01:31:43)
And you can say, “Well, that’s a huge position to have in Treasury bills versus just $180 billion in equities.” But we really have far more than that in equities because we own a lot of businesses. We own 100% of the stock of a great many businesses, which to us are very similar to the marketable stocks we own. We just don’t own them all. They don’t have a quote on them.

Warren Buffett: (01:32:05)
But we have hundreds of billions of wholly owned businesses. So our $124 billion is not some 40% or so cash positions, it’s far less than that. And we will always keep plenty of cash on hand, and for any circumstances, with a 9/11 comes along, if the stock market is closed, as it was in World War I—it’s not going to be, but I didn’t think we were going to be having a pandemic when I watched that Creighton-Villanova game in January either.

Warren Buffett: (01:32:44)
So we want to be in a position at Berkshire where… Well, you remember Blanche DuBois in A Streetcar Named Desire? That goes back before many of you. But she said she didn’t want them. In Blanche’s case, she said that she depended on the kindness of strangers. And we don’t want to be dependent on the kindness of friends even because there are times when money almost stops. And we had one of those, interestingly enough. We had it, of course, in 2008 and ’09.

Warren Buffett: (01:33:32)
But right around in the day or two leading up to March 23rd, we came very close but fortunately we had a Federal Reserve that knew what to do, but money was… investment-grade companies were essentially going to be frozen out of the market.

Warren Buffett: (01:34:03)
CFOs all over the country had been taught to sort of maximize returns on equity capital, so they financed themselves to some extent through commercial paper because that was very cheap and it was backed up by bank lines and all of that. And they let the debt creep up quite a bit in many companies.

Warren Buffett: (01:34:22)
And then of course they had the hell scared out of them by what was happening in markets, particularly the equity markets. And so they rushed to draw down lines of credit. And that surprised the people who had extended those lines of credit; they got very nervous. And the capacity of Wall Street to absorb a rush to liquidity that was taking place in mid-March was strained to the limit to the point where the Federal Reserve, observing these markets, decided they had to move in a very big way.

Warren Buffett: (01:35:13)
We got to the point where the U.S. Treasury market, the deepest of all markets, got somewhat disorganized. And when that happens, believe me, every bank and CFO in the country knows is, and they react with fear. And fear is the most contagious disease you can imagine; it makes the virus look like a piker.

Warren Buffett: (01:35:41)
And we came very close to having a total freeze of credit to the largest companies in the world who were depending on it. And to the great credit of Jay Powell, I’ve always had Paul Volcker up on a special place, special pedestal in terms of Federal Reserve chairman over the years. We’ve had a lot of very good Fed chairmen, but Paul Volcker, I had him at the top of the list. And I’ll recommend another, but Paul Volcker died about, I don’t know, less than maybe a year ago or a little less.

Warren Buffett: (01:36:18)
But not much before he died, he wrote a book called Keeping at it. And if you call my friends at the Bookworm, I think you’ll enjoy reading that book. Paul Volcker was a giant in many ways. He was a big guy too. He and Jay Powell, couldn’t see more in temperament or anything, but Jay Powell, in my view, in the Fed board belong up there on that pedestal with him because they acted in the middle of March, probably somewhat instructed by what they’d seen in 2008 and ’09. They reacted in a huge way and essentially allowed what’s happened since that time to play out the way it has.

Warren Buffett: (01:37:17)
And then March, when the market had essentially frozen, closed a little after mid-month, ended up, because the Fed took these actions on March 23rd, it ended up being the largest month for corporate debt issuance I believe in history. And then April followed through with even a larger month. And you saw all kinds of companies grabbing everything, coming to market and spreads actually narrow then. And every one of those people that issued bonds in late March and April, I sent a thank you letter to the Fed because it would not have happened if they hadn’t operated with really unprecedented speed and determination.

Warren Buffett: (01:38:10)
And we’ll know the consequences of swelling the Fed’s balance sheet. You can look at the Fed’s balance sheet. They put it out every Thursday. It’s kind of interesting reading if you’re sort of a nut like me. But it’s up there on the Internet every Thursday. And you’ll see some extraordinary changes there in the last six or seven weeks.

Warren Buffett: (01:38:35)
And like I say, we don’t know what the consequences of that, and nobody does exactly. And we don’t know what the consequences of what they undoubtedly will have to do. But we do know the consequences of doing nothing. And that would’ve been the tendency of the Fed in many years past, not doing nothing, but doing something inadequate. But more [inaudible 01:39:00] brought the whatever it takes to Europe and the Fed, then with March, sort of did whatever it takes, squared, and we owe them a huge thank you.

Warren Buffett: (01:39:16)
But we’re prepared at Berkshire. We always prepare on the [ad 01:39:20], on the basis that maybe the Fed will not have a chairman that acts like that. And we really want to be prepared for anything. So that explains some of the $124 billion in cash and bills. We don’t need it all.

Warren Buffett: (01:39:39)
But we never want to be dependent on not only the kindness of strangers but the kindness of friends. Now, in the next slide, we have the what we did in equities, and these numbers are tiny when you get right down to it. I mean, for having $500 billion or so in net worth and… I mean, not net worth, but in market value at the start of the year or something close to that. We bought in $1.7 billion of stock, and our purchases were a couple of billion more than our sales of equities.

Warren Buffett: (01:40:26)
But as you saw in the previous slide, we had operating earnings of $5, almost $6 billion. So we did very little in the first quarter. And then I’ve added in another figure, which I wouldn’t normally present to you. But I want to be sure that if I’m talking to you about investments and stocks more than I usually have, I want you to know what Berkshire’s actually doing. Now, you’ll see in the month of April that we net sold $6 billion or so of securities.

Warren Buffett: (01:41:07)
And that’s basically, that isn’t because we thought the stock market was going to go down or anything of this order because somebody changes their target price or they change this year’s earnings forecast. I just decided that I’d made a mistake in evaluating. That was an understandable mistake. It was a probability-weighted decision when we bought that, we were getting an attractive amount for our money when investing across the airlines business.

Warren Buffett: (01:41:43)
So we bought roughly 10% of the four largest airlines, and we probably… This is not 100% of what we did in April, but we probably paid $7 or $8 billion and then somewhere between $7 and $8 billion to own 10-

Warren Buffett: (01:42:03)
And somewhere between seven and eight billion to own 10% of the four large companies in the airline business, and we felt for that, we were getting a billion dollars roughly of earnings. Now we weren’t getting a billion dollars of dividends, but we felt our share of the underlying earnings was a billion dollars and we felt that that number was more likely to go up than down over a period of time. It would be cyclical obviously, but it was as if we bought the whole company. But we bought it through the New York Stock Exchange, and we can only effectively buy 10% roughly of the four. And we treat it mentally exactly as if we were buying a business. And it turned out I was wrong about that business because of something that was not in any way the fault of four excellent CEOs.

Warren Buffett: (01:43:01)
I mean, believe me, no joy being a CEO of an airline, but the companies we bought are well managed. They did a lot of things right. It’s a very, very, very difficult business because you’re dealing with millions of people every day, and if something goes wrong for 1% of them, they are very unhappy. So I don’t envy anybody the job of being CEO of an airline, but I particularly don’t enjoy being it in a period like this, where essentially nobody… People have been told basically not to fly. I’ve been told not to fly for a while. I’m looking forward to flying them. May not fly commercial, but that’s another question. The airline business, and I may be wrong and I hope I’m wrong, but I think it changed in a very major way, and it’s obviously changed in the fact that there’re four companies are each going to borrow perhaps an average of at least 10 or 12 billion each.

Warren Buffett: (01:44:11)
You have to pay that back out of earnings over some period of time. I mean, you’re 10 or $12 billion worse off if that happens. And of course in some cases they’re having to sell stock or sell the right to buy a stock at these prices. And that takes away from the upside down. And I don’t know whether it’s two or three years from now that as many people will fly as many passenger miles as they did last year. They may and they may not, but the future is much less clear to me, [inaudible 00:02:52], how the business will turn out through absolutely no fault of the airlines themselves. That’s something that was a low probability event happened, and it happened to hurt particularly the travel business, the hotel business, cruise business, the theme park business, but the airline business in particular. And of course the airline business has the problem that if the business comes back 70% or 80%, the aircraft don’t disappear.

Warren Buffett: (01:45:26)
So you’ve got too many planes, but it didn’t look that way when the orders were placed a few months ago, when arrangements were made. But the world changed for airlines and I wish them well, but it’s one of the businesses we have. We have businesses we own directly that are going to be hurt significantly. The virus will cost Berkshire money. It doesn’t cost money because of our stock. And various other businesses moves around. I mean, if XYZ, which say is one of our holdings and we own it as a business and we liked the business. The stock was down 20 or 30 or 40%. We don’t feel we’re poor in that situation. We felt we were poor in terms of what actually happened to those airline businesses just as if we don’t a hundred percent of them.

Warren Buffett: (01:46:23)
So that explains those sales, which are relatively minor, but I want to make sure that nobody thinks that involves a market prediction. And that pretty well wraps it up for Berkshire. So now we move into the formal part of the meeting, which will be followed by a fairly extended question and answer period if there are a lot of questions with Becky. And while we’re doing this formal part of the meeting, it’s not too exciting. So feel free to leave whatever you’re viewing this through, and if you want to send questions to Becky, we’ll keep her contact information up on the screen. Or if you want to fix yourself a sandwich or do anything else, we will now move… Or you can pay attention to the formal part of the meeting. But we will do this, and it won’t take too long, and then we will move on to the question and answer meeting.

Warren Buffett: (01:47:42)
So with that, I will call the meeting to order. And this follows the script, if you can’t tell by what I’m saying. I’m Warren Buffett, chairman of the board of directors of the company, and I welcome you to this 2020 annual meeting of shareholders. Marc Hamburg is secretary of Berkshire Hathaway, and he will make a written record of the proceedings. Dan Jaksich has been appointed inspector of elections at this meeting. He will certify to the count of votes cast in the election for directors and the motions to be voted upon at this meeting.

Warren Buffett: (01:48:20)
The name proxy holders for this meeting are Walter Scott and Marc Hamburg. Does the secretary have a report of the number of Berkshire shares outstanding entitled to vote and represented at the meeting?

Marc Hamburg: (01:48:30)
Yes I do. As indicated in the proxy statement that accompanied this note, the notice of this meeting that was sent to all shareholders of record on March 4th, 2020, the record date for this meeting, there were 699,123 shares of class A Berkshire Hathaway common stock outstanding, with each share entitled to one vote on motions considered at the meeting, and 1,382,352, 370 shares of class B Berkshire Hathaway common stock outstanding, with each share entitled to one 10000th of one vote on motions considered at the meeting. Of that number, 472,037 class A shares and 834,802,274 class B shares are represented at this meeting by proxies returned through Thursday evening, April 30th.

Warren Buffett: (01:49:32)
Thank you. That number represents a quorum, and we will therefore directly proceed with the meeting. First order of business will be a reading of the minutes of the last meeting of shareholders. I recognize Miss Debbie Bosanek who will put some motion before the meeting.

Debbie Bosanek: (01:49:46)
I move that the reading of the minutes of the last meeting of shareholders be dispensed with and the minutes be approved.

Warren Buffett: (01:49:53)
Do I hear a second?

Speaker 3: (01:49:54)
I second the motion.

Warren Buffett: (01:49:56)
The motion is carried. The next item of business is to elect directors. I recognize Ms. Debbie Bosanek to place a motion before the meeting with respect to election of directors.

Debbie Bosanek: (01:50:08)
I move that Warren Buffett, Charles Munger, Gregory Abel, Howard Buffett, Stephen Burke, Kenneth Chenault, Susan Decker, David Gottesman, Charlotte Guyman, Ajit Jain, Thomas Murphy, Ronald Olson, Walter Scott, and Meryl Witmer be elected as directors.

Speaker 3: (01:50:29)
I second the motion.

Warren Buffett: (01:50:31)
It has been moved in second of that Warren Buffett, Charles Munger, Gregory Abel, Howard Buffett, Steve Burke, Ken Chenault, Susan Decker, David Gottesman, Charlotte Guyman, Ajit Jain, Tom Murphy, Ron Olson, Walter Scott, and Meryl Witmer be elected as directors. The nominations are ready to be acted upon. Mr. Jaksich, When you’re ready, you may give your report.

Dan Jaksich: (01:50:58)
My report is ready. The ballot of the proxy holders in response to proxies that were received through last Thursday evening cast not less than 543,203 votes for each nominee. That number exceeds a majority of the number of the total votes of all class A and class B shares outstanding. The certification required by Delaware law of the precise count of the votes will be given to the secretary to be placed with the minutes of this meeting.

Warren Buffett: (01:51:27)
Thank you. Mr. Jaksich. Warren Buffett, Charles Munger, Greg Abel, Howard Buffett, Steve Burke, Ken Chenault, Susan Decker, David Gottesman, Charlotte Guyman, Ajit Jain, Tom Murphy, Ron Olson, Walter Scott, and Meryl Witmer have been elected as directors. And Ken, if you’re watching or listening… Ken Chenault, our new director, actually got the highest vote of all the directors, well ahead of me I might add, so congratulations Ken. The next item on the agenda is an advisory vote on the compensation of Berkshire Hathaway’s executive officers. I recognize Miss Debbie Bosanek to place a motion before the meeting on this item.

Debbie Bosanek: (01:52:09)
I move that the shareholders of the company approve on an advisory basis the compensation paid to the company’s named executive officers as disclosed pursuant to item 402 of regulation SK, including the compensation discussion and analysis, the accompanying compensation tables, and the related narrative discussion in the company’s 2020 annual meeting proxy statement.

Speaker 3: (01:52:35)
I second the motion.

Warren Buffett: (01:52:37)
It has been moved and seconded that the shareholders of that company approve on an advisory basis the compensation paid at the company’s named executive officers. Mr. Jaksich, when you are ready you may give your report.

Dan Jaksich: (01:52:52)
My report is ready. The ballot of the proxy holders in response to proxies that were received through last Thursday evening cast not less than 519,750 votes to approve on an advisory basis the compensation to the company’s named executive officers. The compensation paid to the company’s named executive officers. That number exceeds a majority of the number of the total votes of all class A and class B shares outstanding. Certification required by Delaware law of the precise count of the votes will be given to the secretary to be placed with the minutes of this meeting.

Warren Buffett: (01:53:28)
Thank you Mr. Jaksich. The motion to approve on an advisory basis the compensation paid at the company’s named executive officers has passed. The next item on the agenda is an advisory vote on the frequency of shareholder advisory vote on compensation of Berkshire Hathaway’s executive officers. I recognize Miss Debbie Bosanek to place a motion before the meeting on this item.

Debbie Bosanek: (01:53:51)
I move that the shareholders of the company determine on an advisory basis the frequency whether annual, biennial, or triennial, with which they shall have an advisory vote on the compensation paid to the company’s named executive officers as set forth in the company’s 2020 annual meeting proxy statement.

Speaker 3: (01:54:11)
I second the motion.

Warren Buffett: (01:54:13)
It’s been moved and seconded that the shareholders of the company determine the frequency with which they shall have an advisory vote on compensation of named executive officers with the option being every one, two, or three years. Mr. Jaksich, When you were ready, he may give you a report.

Dan Jaksich: (01:54:37)
My report is ready. The ballot of the proxy holders in response to proxies that were received through last Thursday evening, cast 131,443 votes for a frequency of every year, 2,228 votes for a frequency of every two years and 419,984 votes for a frequency of every three years of an advisory vote on the compensation paid to the company’s named executive officers. The certification required by Delaware law of the precise count of the votes will be given to the secretary to be placed with the minutes of this meeting.

Warren Buffett: (01:55:13)
Thank you, Mr. Jaksich. The shareholders of the company have determined on an advisory basis that they shall have an advisory vote on the compensation paid to the company’s named executive officers every three years. Now we’re through with sort of the boiler plate resolutions in this. This next item is of more importance, and we have put up on the berkshirehathaway.com site some material relating to this motion, which I hope shareholders and others read, because it’s important and it’s, well, I’ll describe it as the script says. The next item of business is a motion put forth by the boards of trustees of the New York City Employees’ Retirement System, the New York City Teachers’ Retirement System, the New York City Police Pension Fund, the New York City Fire Pension Fund, collectively called the systems. The motion is set forth in the proxy statement. The motion requests that the company adopt the policy from proving board and top management diversity. The directors have recommended the shareholders vote against the proposal. I’d like to interrupt the script here just a second to point out that when we saw that it would be impossible to have shareholders attend this meeting, and traveling to Omaha and gathering… And gatherings which really neither the governor, the mayor, the public safety people thought would be advisable.

Warren Buffett: (01:56:55)
We were hoping to have somebody from the controller’s office come and present the motion and then have a good discussion at the meeting of the pros and cons, because it’s a seriously important subject. And I can tell you on a personal basis, I think I’m in sync with the controller in terms of how he wants the world to evolve. But I disagree on the specifics of this motion as applied to more generally and to Berkshire’s board in particular. And we’ve been very outspoken over the years. We’ve probably written more on qualifications for directors than probably any public company I can think of. And we’ve been consistent over the years, and we’ve explained the reasons for our position, and we know a great many people disagree with that position. So I welcomed the idea of really presenting to our meeting and having our shareholders hear what they had to say, and evaluate what our thoughts were.

Warren Buffett: (01:58:17)
And when we had to essentially not allow shareholders at the meeting, we immediately got in touch with the controller’s office, and we said we’d make an exception if anybody from the controller’s office wanted to come out and present the proposition or the proposal and engage in our discussion of the pros and cons. And as you might expect, they were not in a position to send somebody. So we offered… We may have made it even in the first place. We’d be glad to have somebody introduce the motion on their behalf, and that we would also, if they would send along a supporting statement, we would be glad to have the person that was their proxy in effect present the motion. We’d be happy to have them read the supporting statement, and we said we’d appreciate it if they keep it to five minutes or less.

Warren Buffett: (01:59:40)
And they wrote back immediately, or emailed back immediately, and said that they’d be delighted to do it that way and they’d even try and keep it down to three minutes. So they have sent a supporting statement, which is going to be read to you in a minute, and I’m glad they did it. I do hope shareholders will, or have already, and others will read. We’ll listen to what the supporting statement says, and we’ll also read the original arguments that they made in the proxy for their proposal, and they will read our reasons for voting against… That suggest voting against, because it’s an important topic. And I really hope that next year, if somebody from the controller’s office wishes to come out, we’d be glad to have even a more fulsome discussion of the subject. So with that, I will now recognize Mr. Hamburg to read a statement prepared by the controller of the city of New York in support of the motion.

Marc Hamburg: (02:01:03)
Thank you. Mr. Chairman, members of the board, fellow share owners. I’m Marc Hamburg from Berkshire Hathaway, and I’m here to present proposal four on behalf of the New York City comptroller Scott Stringer and the New York City pension funds. The funds have approximately $211 billion in assets as of February, and our substantial longterm Berkshire Hathaway share owners with 2.5 million shares. Our proposal requests that Berkshire Hathaway board adopt a diversity search policy requiring that the initial candidates from which new director nominees and external CEOs are chosen include qualified female and racially or ethnically diverse candidates.

Marc Hamburg: (02:01:49)
First of all, we would like to commend the directors for the addition of Mr. Kenneth Chenault and the fact that 21% of the board is made up of women. We would also like to recognize that the executive pipeline includes diverse candidates including Mr. Ajit Jain, another board member. Secondly, we applaud Mr. Buffett’s recognition that women in the boardroom have historically been rare, and even more importantly that although women won the right to have their voices heard in a voting booth a century ago, attaining similar status in a board room remains a work in progress.

Marc Hamburg: (02:02:28)
With our share owner proposal, what we are seeking is to nudge this particular process forward. Thirdly, one of the things that Mr. Buffett mentions is that he only buys businesses that have three criteria, the second of which is able and honest managers, and that the most important duty for a board is to find and retain a talented CEO. We would note that in reviewing Berkshire Hathaway’s largest stock market holdings of businesses, all 10 of these companies have boards that meet our board diversity requirement. In essence, the companies that Berkshire Hathaway is found fit to invest in are those that have more diverse boards. Fourthly, we would like to clarify that through this shareholder proposal, we are not asking for the Berkshire Hathaway board, our guardians, to have a quantifiable end result in terms of its composition, but that an initial pool of candidates for a board seat include a woman and another individual who is racially or ethnically diverse.

Marc Hamburg: (02:03:33)
We believe these candidates, if qualified, would also have very high integrity, business-savvy shareholder orientation, and a genuine interest in the company. According to a 2016 Harvard Business Review study, including more than one woman or a member of a racial minority in a finalist pool helps combat the unconscious biases amongst interviewers, and increases the likelihood of a diverse hire. What we are requesting is a small step in that direction to include diverse candidates at the beginning of the search. Finally, we would like to applaud Berkshire Hathaway’s robust internal CEO succession plans. Our proposal states that a CEO diversity policy should only apply in the case of an external search. The New York City comptroller’s office is disappointed that we never had the opportunity to discuss our proposal with directors or management, but remain open to constructive engagement. In the interim, we strongly urge Berkshire Hathaway share owners to support proposal four. Thank you.

Warren Buffett: (02:04:44)
Okay, thanks Marc, and thank you to the comptroller for presenting that supporting statement. The motion is now ready to be acted upon. Mr. Jaksich, when you are ready, you may give your report.

Dan Jaksich: (02:05:00)
My report is ready. The ballot of the proxy holders in response to the proxies that were received through last Thursday evening cast 65,925 votes for the motion, and 485,824 votes against the motion. As the number of votes against the motion exceeds a majority of the number of votes of all class A and class B shares properly cast on the matter, as well as all votes outstanding, the motion has failed. The certification required by Delaware law of the precise count of the votes will be given to the secretary to be placed with the minutes of this meeting.

Warren Buffett: (02:05:39)
Thank you Mr. Jaksich. The proposal fails.

Debbie Bosanek: (02:05:43)
I move that this meeting be adjourned.

Speaker 3: (02:05:45)
I second the motion to adjourn.

Warren Buffett: (02:05:47)
The motion has been made and seconded. The meeting is adjourned. So thank you. I’ve just looked at my watch, and I talked a lot longer than I should have probably. That’s not a unique experience of mine that just occurred. So now we’re ready to have questions, which Becky quickly selected from those that’s been forwarded to her directly and from Carol Loomis and Andrew Ross Sorkin, and Greg and I are available to be… We’ll be answering them for some time. So Becky, you’re on, and I hope, all the tech… I hope everything works.

Becky Quick: (02:06:39)
Yeah, Warren, I should tell you that since you put that address up on the screen, I’ve gotten more than 2,500 emails that have been coming in. So there is a lot of demand from shareholders wanting to get in and ask questions, and I’ll ask some that we’ve compiled before and some that are coming in right now. The first question though comes from one that just came in based on the comments that you were actually saying. This is a question that comes from William Lewis. He said, “Please, did I understand correctly Mr. Buffett, to say that Berkshire Hathaway sold its interest in four different airlines and if so, can you name them? Can the names of those airlines be identified?”

Warren Buffett: (02:07:12)
Yeah. I wouldn’t normally talk about it, but I think it requires an explanation, and it requires an explanation that means we were not disappointed at all in the businesses that were being run and the management, but we did come to a different opinion on it. They’re the four largest US airlines, that’s American Airlines, and Delta Airlines, and Southwest Airlines, and United Continental. And I think collectively they probably, or at least 80% of the revenue passenger miles that is flowing in the United States. And they have significant international flying too, excluding Southwest. So we like those airlines, but we don’t… The world has changed for the airlines, and I don’t know how it’s changed, and I hope it corrects itself in a reasonably prompt way. I don’t know whether the Americans will have now changed their habits or will change their habits because of an extended period if it happens that we’re semi shut down in the economy.

Warren Buffett: (02:08:37)
I don’t know whether the trends toward what people have been doing by phone. I mean, it’s been seven weeks since I’ve had a haircut. It’s been seven weeks since I… More than seven weeks since I put on attire. They think I’ve been… Just a question of which sweatsuit I wear. So who knows how we come out of this. But I think that there are certain industries, and unfortunately I think the airline industry among others, that are really hurt by a forced and in fact shut down by events that are far beyond their control. Greg, would you like to add anything to that?

Greg Abel: (02:09:21)
Really nothing to add, Warren.

Warren Buffett: (02:09:23)
Okay. We got another Charlie here.

Greg Abel: (02:09:27)
I didn’t intend to use that as a line. But you’ve covered it well.

Warren Buffett: (02:09:33)
We would have bought other airlines, too, incidentally, but those were the four big ones. Those were the ones we could put some money into and we put whatever it was, seven or eight billion into it. And we did not take out anything like seven or eight billion. And that was my mistake. But it’s always a problem if there are things on the lower levels of probabilities that happen sometimes, and it happened to the airlines. And I’m the one who made the decision.

Becky Quick: (02:10:04)
But Warren, just to clarify on his question. He asked, “Did you sell your whole stake in all four of those companies?”

Warren Buffett: (02:10:08)
Oh, yeah. The answer is yes. Yeah. When we sell something, very often it’s going to be our entire stake. I mean we don’t trim positions. That’s just not the way we approach it any more than if we buy a hundred percent of a business, we’re going to sell it down to 90% or 80%. I mean, if we like a business, we’re going to buy as much of it as we can and keep it as long as we can. Well, when we change our mind… Go ahead, I’m sorry.

Becky Quick: (02:10:38)
All right, the next question… No, go ahead. When you change your mind?

Warren Buffett: (02:10:44)
Well, when we change our mind, we don’t take half measures or anything of the sort. So I was amazed at how frankly… Now, we were selling them at far lower prices than we paid. But I was amazed at the volume there. Airlines always trade in large volume relatively, but we have sold the entire positions.

Becky Quick: (02:11:11)
Okay. Thank you. The next question comes from Robert Tomas from Toronto, Canada, and he says, “Warren, why are you recommending listeners to buy now, yet you’re not comfortable buying now as evidenced by your huge cash position?”

Warren Buffett: (02:11:24)
Well, A, as I explained, the position isn’t that huge. When I look at worst case possibilities, I would say that there are things that I think are quite improbable. And I hope they don’t happen, but that doesn’t mean they won’t happen. I mean, for example, in our insurance business, we could have the world’s, or the country’s, number one hurricane that it’s ever had, but that doesn’t preclude the fact that could have the biggest earthquake a month later. So we don’t prepare ourselves for a single problem. We prepare ourselves for problems that sometimes create their own momentum. I mean 2008 and 9, you didn’t see all the problems the first day, when what really kicked it off was when the Freddie and Fannie, the GSEs went into conservatorship in early September. And then when money market funds broke the buck… There are things to trip other things, and we take a very much a worst case scenario into mind that probably is a considerably worse case than most people do.

Warren Buffett: (02:12:51)
So I don’t look at as huge, and I’m not recommending that people buy stocks today or tomorrow or next week or next month. I think it all depends on your circumstances, but you shouldn’t buy stocks unless you expect, in my view, you expect to hold them for a very extended period and you are prepared financially and psychologically to hold them, the same way you would hold a farm and never look at a quote and never pay… You don’t need to pay attention to them. I mean, the main thing to do… And you’re not going to pick the bottom, and nobody else can pick it for you or anything of the sort. You’ve got to be prepared when you buy a stock to have it go down 50% or more and be comfortable with it, as long as you’re comfortable with the holding.

Warren Buffett: (02:13:39)
And I pointed out, I think a year, maybe two years ago on the annual report… Just the one before this most recent one, I pointed out that there had been three times in Berkshire’s history when the price of Berkshire stock went down 50%. Three different times. Now if you hold it on borrowed money, you could have been cleaned out. There wasn’t anything wrong with Berkshire when those three times occurred. But if you’re going to look at the price of the stock and think that you have to act because it’s doing this or that, or somebody else tells you, “How can you stay with that,” when something else is going up or anything. You’ve got to be in the right psychological position. And frankly, some people are not really careful. Some people are more subject to fear than others.

Warren Buffett: (02:14:32)
It’s like the virus. It strikes some people with a much greater ferocity than others. And fear is something I really never felt financially, but I don’t think Charlie’s felt it either. But some people can handle it psychologically. If they can’t handle it psychologically, then you really shouldn’t own stocks, because you’re going to buy and sell them at the wrong time. And you should not count on somebody else telling you this. You should do something you understand yourself. If you don’t understand it yourself, you’re going to be affected by the next person you talk to. And so you should be in a position to hold, and I don’t know whether today is a great day to buy stocks. I know it will work out over 20 or 30 years. I don’t know whether it’ll work out over two years at all. I have no idea whether you’ll be ahead or behind on a stock you buy on Monday morning, or the market.

Becky Quick: (02:15:36)
Warren, the next question comes from Scott Kelly, and he writes in based on the numbers you just put up. He said, “What did you spend the $426 million on equities in April? Was that adding to existing positions, or was that initiating new positions?”

Warren Buffett: (02:15:50)
Well, I don’t remember to tell you the truth, but one thing you have to allow for… Well, these are the figures for Berkshire Hathaway, and they include both Todd Combs and Ted Weschler

Warren Buffett: (02:16:03)
Both Todd Combs and Ted Weschler, managed significant sums of money. So it could well be something they bought. It could be something I bought. 462 million is not much money at Berkshire. It’s more to Todd and Ted than it is to me in terms of our positions.

Warren Buffett: (02:16:21)
But I literally have no memory of. We’re not doing anything big obviously. We’re willing to do something very big. I mean, you could come to me on Monday morning with something that involved 30 or 40 billion or $50 billion, and if we really liked what we were seeing, we would do it and that will happen someday.

Warren Buffett: (02:16:45)
If it happens in the market, we can’t put it all in on one day or one week or one month. It took us months to build up our airline position. Many months. We were able to sell them faster than we bought them, but we were selling them at lower prices. So the 462 is essentially meaningless and it may not have even, probably was not mine.

Becky Quick: (02:17:12)
All right. This next question comes from Leanne Dar, and his question is, “In the last financial crisis, Berkshire acted as a lender of support for eight different deals. Despite the injection of expensive capital through preferred stocks and securing warrants, these companies were in fact paying for the sign of confidence from Berkshire in the midst of a crisis and that was invaluable. Today we have QE, infinity, low interest rates, and hungry hedge funds, even though the economy has deteriorated rapidly over the last few months. Why have we not acted as a lender of support?”

Warren Buffett: (02:17:43)
Well, we haven’t seen anything attractive. And frankly, wasn’t predicated on this, but the Federal Reserve did the right thing and they did it very promptly, which they should have and I salute them for it. But that means that a lot of companies that needed money and probably should have done their financing a little earlier, but they’re perfectly decent companies, got the chance to finance in huge ways in the last five weeks or thereabouts.

Warren Buffett: (02:18:17)
I mean it’s set records. Some companies have come back twice, a number of very big companies that hadn’t bothered him to extend out their borrowings. Came a couple times. Berkshire actually raised some more money. We don’t need it, but I think it’s still a good idea over time.

Warren Buffett: (02:18:37)
And then there are some pretty marginal companies that have also had access to money. So there is no shortage of funds at rates which we would not invest at.

Warren Buffett: (02:18:55)
So we have not done anything because we don’t see anything that attractive to do. Now, that could change, very quickly or it may not change. But in 2008 and 2009, the truth is we weren’t buying those things to make a statement to the world. They may have made a statement to the world to some extent, and I’m glad that they did if they did, but we made them because they seemed intelligent things to do and markets were such that we didn’t really have much competition. Now it turned out that we would have been a lot better off if we’d waited four or five months to do similar things.

Warren Buffett: (02:19:37)
So my timing was actually terrible in 2008 or 2009 but what was available was so attracted that even though my timing was terrible, we still came out okay. Or a little bit better than okay.

Warren Buffett: (02:19:51)
But what we did was not designed to make a statement. It was designed to take advantage of what we thought were very attractive terms, but they were terms that nobody else was willing to offer at that time because the market was in a state of panic. And the market in equities was in a state of panic for a short period of time when the virus broke out or spread in the United States. And it became apparent and the debt market was frozen, or in the process of freezing, and that changed dramatically when the Fed acted. But who knows what happens next week or next month or next year? The Fed doesn’t know. I don’t know. And nobody knows.

Warren Buffett: (02:20:39)
There’s a lot of different scenarios that can play out and under some scenarios we’ll spend a lot of money and other scenarios, we won’t. Greg, you’ve been watching what’s been happening around Berkshire.

Greg Abel: (02:20:53)
Yeah. Yeah. Well I think your comment on the Fed, Warren has interestingly when it was first occurring, there were calls coming in. Not the size of transactions we’re interested in nor companies we were inclined to act upon. But there was that general interest out there as people were in a difficult point in time. Looking at their balance sheet and deciding what they were going to do.

Greg Abel: (02:21:22)
But the reality is those companies were not of interest and post basically effectively March 23rd, the companies have been able to act. And Warren touched on it, at Berkshire Hathaway energy post the Fed action, we actually issued $4 billion of securities that was associated with debts or obligations. We had maturing some short term obligations we wanted to clearly lengthen out, and we pre-funded one of our capital programs at Pacific Corp. with the thought this was the time to get the funds in place such that we could proceed with what is really an excellent opportunity both for Pacific Corporate customers and ultimately for the Berkshire shareholders.

Greg Abel: (02:22:10)
So we’ve taken action within Berkshire as Warren noted.

Warren Buffett: (02:22:15)
This is a very good time to borrow money, which means it may not be such a great time to lend money, but it’s good for the country that it’s a good time to borrow money.

Warren Buffett: (02:22:29)
Not good for Berkshire particularly. Although we borrowed some money. So we’ve put our money where our mouth is.

Becky Quick: (02:22:40)
That gets kind of to another question that came in from Mark McNicholas in Chicago, Illinois. He says, “Berkshire itself as a Fort Knox like balance sheet, but some of its operating companies may be tight on cash during the pandemic. Would Berkshire consider sending cash to its operating companies to one, ensure that they can get through the pandemic and and two, allow them to increase market share while their competitors struggle?”

Warren Buffett: (02:23:04)
Well, we’ve sent money to a few and we’re in a position to do that. We’re not going to send money indefinitely to anything where it looks like their future is not. It’s changed dramatically from what it was the year or so ago or just even six months ago. You know, we made that decision in terms of the airline business. We took money out of the business basically even at a substantial loss, and we will not fund a company that where we think that it’s going to chew up money in the future.

Warren Buffett: (02:23:40)
We started out with a company like that in our textile business at Berkshire Hathaway in 1965 and we went for 20 years trying to think we could solve something that wasn’t that solvable. So we are not in the business of subsidizing any companies with shareholders money. If people want to do that with their own money, but we’re not going to do it on their behalf. But we have advanced money, we are perfectly ready to advance money.

Warren Buffett: (02:24:08)
Gaining market share and all that. That may happen, but the companies that need money probably, market share is not their number one problem. I’ll put it that way. Greg, would you?

Greg Abel: (02:24:25)
Yeah. Well yeah. It’s interesting when we look at our different companies as we went into the pandemic or we’re addressing the COVID 19 crisis. Obviously the first focus by our management team and appropriately was our employees and effectively making sure they’re safe and that the business environment we’re in, that they could continue to operate. Then we quickly moved to looking at where our customers were in the cycle, I.E. What was the underlying demand within the business? And to great credit to our managers, they very much have adjusted their businesses consistent with the underlying needs and demands of our customer.

Greg Abel: (02:25:09)
So effectively they’re moving with the customer, meaning very few of our businesses have actually required funds. Some have. And as Warren said, we’ve advanced the funds to them, but the businesses have really reacted in a way where they’re managing consistent with where the market’s at. I.E., the demand for their products.

Warren Buffett: (02:25:32)
Berkshire is almost certain to generate cash. I mean nothing’s a hundred percent certain, but as Greg mentioned at Berkshire Hathaway energy, we had some short term financing. We don’t have short term financing to any degree. We’ll never get ourselves in a position where we have a lot of money that can come due tomorrow. And people that were financing heavily with commercial paper and then found their business stopped. Well you’ve seen what’s happened to the airlines. I mean they need money. Cruise lines need money.

Warren Buffett: (02:26:10)
There’s some businesses that, it’s just the nature of what they’re in. Berkshire will never get it in a position where it needs money. And we factor in, like I said, we factor in some things that are not ridiculously unlikely. And I’m not going to spell out scenarios because I, to some extent, you start spelling out scenarios, you may increase the chance of them happening. So it’s not something that we really want to talk about a lot, but our position will be to be to stay a Fort Knox.

Warren Buffett: (02:26:56)
But we don’t need it. We don’t need a hundred and, it’s a little higher now than it was at quarter end. We don’t need 130 or 35 billion, but we need a lot of money that’s always available. And that means we own nothing but treasury bills. I mean, we’ve never owned, we never buy commercial paper. We don’t count on bank lines and a few of our subsidiaries have them, but we basically want to be in a position to get through anything. And we hope that doesn’t happen but you can’t rule out the possibility anymore than in 1929 you could rule out the possibility that you know you would be waiting until 1955, or the end of 1954, to get even. Anything can happen and we want to be prepared for anything, but we also want to do big things.

Warren Buffett: (02:27:53)
If the prices are attractive. As Greg said, there was a period right before the Fed acted. We were starting to get calls. They weren’t attractive calls, but we were getting calls and the companies we were getting calls from after the Fed acted, a number of them were able to get money in the public market. Frankly terms we wouldn’t have given it to them.

Becky Quick: (02:28:23)
All right. This next question is one that Greg, you actually touched on the answer to this to some extent, but maybe the two of you could expand on it. It comes from Richard Sourcer from Tucson, Arizona. He says, “Berkshire’s annual report indicated the Berkshire had 391,539 employees at the end of 2019. Which areas of our operations have already been hardest hit or will be by the coronavirus pandemic? And what are the implications for the continued employment of those people?”

Warren Buffett: (02:28:54)
Those people are employed in dozens and dozens of different industries. And there are a few industries that there’s a fair likelihood that our employment could be reduced, but they’re not large.

Warren Buffett: (02:29:16)
I’m just thinking as I’m talking, it’s not like we’re in some of the businesses that are, we’re not in the hotel business. Various aspects of travel and entertainment and all of that could really be changed in a very major way.

Warren Buffett: (02:29:39)
So I don’t see our employment. I’ll put it this way, five years from now, I think Berkshire will be employing considerably more people, and I don’t see where we’ll have large dips, but the virus could take off in certain ways, that in some of our manufacturing businesses for example, the demand could be dramatically reduced. And in those cases, we would have layoffs at some point. Greg?

Greg Abel: (02:30:14)
What I would add, Warren, is that as we are in the sort of crux of the pandemic, we’re still dealing with it. So our businesses have adjusted. Some have had to adjust more.

Greg Abel: (02:30:26)
If you look at Berkshire Hathaway energy, for example, you can see US electricity consumption is down 4%. That realistically doesn’t impact our business in a significant way. And in longer term we’ll continue to grow that business. So even during the crisis, a relatively small impact to the business.

Greg Abel: (02:30:48)
But as Warren knows, we do have retailers that their doors are shut right now, be it our See’s Candy, some of our jewelers. And at that point in time, we do adjust and adapt to the environment. We adjust our workforce. But equally we do see for example, See’s at a point our stores will reopen. And at that point, we reemploy the folks.

Greg Abel: (02:31:13)
And overall for Berkshire as a whole, as Warren said, five years from now, we see our employment numbers being far greater than they are today. And that we see great prospects within the operating businesses as a whole.

Warren Buffett: (02:31:27)
See’s is an interesting example because we’ve owned that since 1972. That’s a long time and we love it and we continue to love it. And I have a box here of our peanut brittle and I’ve got another box of fudge right here and I’ll probably take them all home and not share with Greg.

Warren Buffett: (02:31:46)
But we were in the midst of our Easter season and Easter is a big sales period for See’s. And I don’t know whether we were halfway through, but we weren’t halfway through in terms of the volume is going to be delivered because it comes toward the end. And essentially we were shut down and we remain shut down. The malls that we’ve got 220 or so retail stores and we’ve got a lot of, Furniture Mart sells our candy. But the Furniture Mart’s closed down. And so See’s business stopped and it’s a very seasonal business to start with. So we have a lot of seasonal workers too that come in, particularly for the Christmas season. But we have a lot Easter candy, and Easter candy is kind of specialized too. So we won’t sell it. And we produced a good bit of it. We couldn’t ship it, we couldn’t put it in stores and there’s some of that going on.

Warren Buffett: (02:32:58)
And then of course, Greg does all the work on those sort of situations and our managers are terrific of course. And in dealing with it, but this is a very, very unusual period. And like I say, a few years from now, I think Berkshire will be employing more people than 395,000. Over the years, we started with 2000 of the textile business, and we’ve still got the same playbook.

Becky Quick: (02:33:31)
This next question comes from Drew Johnson who says that he’s a longtime shareholder who’s attended a couple of meetings. He says, “In an interview on April 17th, Charlie mentioned that some small businesses owned by Berkshire would not reopen after the pandemic eases. Can you elaborate on which businesses might be impacted?”

Warren Buffett: (02:33:49)
We have businesses within businesses. At Marmon don’t we have 97 different businesses, for example?

Greg Abel: (02:33:54)
Exactly. Yep.

Warren Buffett: (02:33:55)
Yeah. And there are some that’s weren’t doing that well before and I’m not talking about Barman Spivey, but they got a couple of them and there’s a couple of them. And it may be that in effect, what’s happened in the last couple of months has accelerated the decline and of those businesses or their customers are developing different habits. People are developing different habits in retail. There’s no question about that. Now that doesn’t mean we haven’t got a bunch of good retail businesses, but there are businesses that were having problems before and that have even greater problems now. We don’t own our newspapers anymore, but we’re financing the enterprise which does have them. We’ve actually increased our investment in the newspaper business by selling the papers to Lee and then refinancing their debt. And the newspaper business was having plenty of problems with both circulation and advertising before the buyers came along.

Warren Buffett: (02:35:08)
But advertising declines every place. Have accelerated fairly dramatically. And when the automobile industry stops, the auto dealers don’t advertise it. It’s made certain businesses that were tough before even tougher now. And there will be management of at least one of the subsidiaries is suggested to us. And so there’ll be some changes in a few businesses, but they’re very small businesses.

Warren Buffett: (02:35:45)
Our major businesses and our business of intermediate size, I can’t think of anything that’s of significance that won’t reopen, but it won’t be any fun with the businesses where the world has really changed. You’re seeing a lot of change.

Warren Buffett: (02:36:06)
If you own a shopping center, you’ve got a bunch of tenants that don’t want to pay you right now. And the supply and demand for retail space may change fairly significantly. The supply and demand for office space may changed significantly. A lot of people have learned that they can work at home or that there’s other methods of conducting their business than they might’ve thought from what they were doing a couple of years ago. And when change happens in the world, you adjust to it.

Greg Abel: (02:36:48)
Yeah. I think the, oh, go ahead.

Warren Buffett: (02:36:50)
Becky, I think Greg, one. Yeah.

Becky Quick: (02:36:51)
This next question is a follow up one.

Greg Abel: (02:36:52)
Well, I was just going to add on the Marmon example, our 97 companies there. For example, we have a food service group which sells equipment to a variety of the restaurants. We have a few businesses that realistically were challenged when the industry was performing really well. And as we come out of the crisis, their economic prospects aren’t going to be better. And in fairness to the teams and the employees in there, they understand that and they’re working through it and there’ll be other opportunities potentially within the company, within Marmon, and things like that. But there’s a very specific answer or example relative to the question.

Becky Quick: (02:37:37)
This next question is a followup on that. It comes from Chris Fareed of Philadelphia. And he says, “It’s been a longterm policy of Berkshire to not sell or close any ongoing subsidiaries as long as their business prospects weren’t a money hole.” Over the last year, he points out the sale of Berkshire Hathaway media. And then Charlie’s comments from that interview saying that several small Berkshire subsidiaries will not be opening when the coronavirus lockdown is lifted. “So should shareholders assume that Berkshire has now changed its longterm policy in regards to keeping underperforming subsidiaries around?”

Warren Buffett: (02:38:09)
I think that policies were spelled out for maybe 30 years or so. An addendum in the annual report that we have said that if a company, or if an operation, we think that its prospects are that it will continually lose money in the future, that we’ll try to sell it to somebody else. But one way or another we will not continue to hold it.

Warren Buffett: (02:38:44)
And that that is not a new policy and it’s not been changed. You can say in effect, we did that with the airline industry to some extent. If we owned all of an airline now, it would be a tough decision to decide whether to sustain billions of dollars in operating losses when you don’t know how long it’s going to happen or occur. And secondly, you know that it’s very likely that there’ll be too many planes around.

Warren Buffett: (02:39:20)
And we know what happens in airline pricing, when load factors go down and there’s an oversupply of airline seats. So we didn’t have to make that decision in terms of our own operation on it, but we did make a decision that that’s a very tough management decision to make. And the government of course is as well, they’ve had the first wave of financing for the airlines.

Warren Buffett: (02:39:50)
But to the airlines credit, they have very aggressively raised money. I mean it’s amazing to me what a good job they’ve done of that. And I think in the case of three of them, no, two of them, but there may be more coming, that they’ve raised equity money too. They are saying that the debt holders and investors, you’ve got to put more money into this business if we’re going to be able to continue. And the government’s done it. And private sources have done it and it’s exactly the right thing for the managements to be doing. But whether it makes sense, we’ll find out for the investors.

Becky Quick: (02:40:48)
This next question comes from Eric LaFont and it’s directed to Greg. He asks, “How is Precision Castparts handling the severe slowdown in the aerospace industry?”

Greg Abel: (02:40:57)
So very consistent with everything we’ve just discussed, which is obviously a large part of their business is the aerospace industry, and it can really be broken into three areas as we do in our queue, but two are being impacted.

Greg Abel: (02:41:11)
The defense contract business remains very sound and strong within Precision Castparts, but if you look at the large body aircraft, the aircraft that they use within the regional jets, that business will move directly with the demand there. And the jets that are ordered longer-term. So Precision Castparts is literally as we speak, continuing to adjust their business relative to the demand that would come out of Boeing.

Greg Abel: (02:41:41)
They would be having weekly calls with Boeing, recognizing what are their production orders there and adjusting the business accordingly.

Warren Buffett: (02:41:51)
Boeing raised 25 billion just a day or two ago, and they raised 14 billion before that. And a year ago they felt they were in a fine cash position. And I understand not all that happened.

Warren Buffett: (02:42:04)
Airbus has had the same situation. They’ve made some comments reasonably within the last week. The fact that they really don’t know what their future is, and I don’t know what their future is. We’re going to have aircraft in this country, we’re going to be flying.

Warren Buffett: (02:42:23)
But the real question is whether you need a lot of new planes or not. And when you’re likely to need them. And it affects a lot of people and it certainly affects Precision Castparts. It affects General Electric. It obviously affects Boeing and it is a blow to essentially have your demand dry up and it goes up the chain.

Warren Buffett: (02:42:55)
And the aircraft manufacturers didn’t bring it on themselves. The airlines didn’t bring it on themself. Precision Castparts didn’t bring it on itself. General electric didn’t. It’s basically that we shut off air travel in this country, and what that does to people’s habits and how they behave in the future. it’s just hard to evaluate.

Warren Buffett: (02:43:19)
I don’t know the answer, but we do know that will have an effect on Precision Castparts. And how severe it will be depends on this same sort of variables that are hitting Boeing. Then you name the company in aircrafts. And aircraft is a big business. And this country is good at it incidentally too.

Warren Buffett: (02:43:43)
I mean if you think about Boeing, it is one hell of a company and and it’s important. It’s a huge exporter and it affects a lot of jobs and some of them are with us. We hope for the best and we wish everybody the best. Obviously and we wish ourselves the best in it, but part of it is certainly out of our control.

Greg Abel: (02:44:14)
Right.

Becky Quick: (02:44:19)
This next question is for Warren. And “Do you think Geico will experience unusually high profitability in 2020 due to the reduced amount of driving, even after giving customers a 15% credit?”

Warren Buffett: (02:44:30)
We have promised to give our customers, at Geico we’re the second largest auto insurance company and different auto insurers are handling a sharing of the better experience with their policy holders in different ways.

Warren Buffett: (02:44:48)
Our plan will deliver back two and a half billion roughly or so. And in recognizing the reduced frequency of accidents during this period, what we don’t know is how long this will continue. I mean people want to drive their cars still, but conditions have reduced that driving dramatically obviously.

Warren Buffett: (02:45:14)
Now, we have instituted a program that runs saving people money for six months and so far other people have largely been two months, but some of them have given a little more for those two months than we get per month. Our total is the greatest at two and a half billion.

Warren Buffett: (02:45:36)
And in addition to that, we and all the others in the industry, it’s not just Geico, and insurance commissioners in many cases. I believe their required it, but we get people more time to pay if they aren’t paying, and if they canceled our policy or if they don’t end up paying us, we’ve in effect giving them free insurance during that period. And the delay in payments is obviously increased.

Warren Buffett: (02:46:11)
Delay of payments on, if you’ve got of a shopping center getting rent, if the delay in payments is what happens during a period like this, and that will be a significant cost to us. We don’t know how significant it will be.

Warren Buffett: (02:46:26)
There will be more uninsured motorist driving and they cause a disproportionate amount of accidents and that. So there’s a lot of variables. We made our best guess as to what we’re going to do to reflect the current reduced accidents in our premiums that we receive, really over the next year. It applies for a six month on renewals, but that we’ll be renewing policies in October that will extend it. Then next April, and so we’ve made a guess on it and we’ll see how it works out.

Becky Quick: (02:47:14)
This next question comes from Steven Staller. He’s a shareholder in Atlanta, Georgia and he says, “Would you please help us understand the effects of COVID-19 are on our insurance businesses? Other insurance companies have reported losses from boosting reserves for future insurance claims that they expect to be paying as a result of Coronavirus. Yet in Berkshire’s 10Q released this morning, we do not appear to have reported much of these future expected losses. Can you tell us why this is the case? What kind of risks Berkshire is underwriting that allows us not to be affected by the pandemic or conversely, what we are writing that might be?”

Warren Buffett: (02:47:47)
Well, the amount of litigation that is going to be generated out of what’s already happened, let alone what may happen, is going to be huge. Now, just the cost of defending litigation is huge, enormous expense, depending on how much there is.

Warren Buffett: (02:48:08)
Now, in the auto insurance field, which is our number one field in terms of premium volume by some margin, that’s more definable, but who knows what comes out of it in terms of litigation. But in what they call commercial multiple peril, which involves property losses and where some people elect to buy business interruption experience coverage, many policies quite clearly in the contract language would not have a claim for business interruption under a commercial multiple peril policy where you’ve elected that. But other policies do I know of, I think I know of one company. I don’t know the details, that’s written a fair amount where they cover or they certainly there’s a good argument perhaps that they cover business interruption that might arise from a pandemic.

Warren Buffett: (02:49:26)
Well, they’re in a very different position than the standard language which says that you recover for business interruption only if involves physical damage to the property. And you can buy all kinds of different policies. We are not big in the commercial, multiple peril business.

Warren Buffett: (02:49:47)
So I mean, this is not like our auto business or anything of that sort, but we will have claims. We’ll have litigation costs, but proportionally it’s not the same with us as with some other companies, which have been much more…

Warren Buffett: (02:50:03)
…those with some other companies which have been much heavier in writing business interruption as part of a commercial, multiple peril. But you don’t automatically get coverage if you have business interruption. I mean for example, I think it would be unusual if say General Motors had a strike, which they did, and that they have business interruption that covers a strike. We actually wrote about, probably the only annual report in the United States, we wrote about business interruption insurance because we had it over in France, when one of our properties was adjacent to a much smaller property that had a fire and then it spread to our plant and it caused a lot of physical damage and we have business interruption that ties in with that. But if we had some company we were selling auto parts to and they had a strike, our business would be interrupted, but that is not part of the coverage, unless you specifically really buy it. So, there’s some claims that are going to be very valid and related to the present situation. There’ll be an awful lot that there’ll be litigation on that won’t be valid.

Warren Buffett: (02:51:18)
And, there’s no question that some insurance companies, I know one particular, that will pay a lot of money relative to their size, in terms of policies that they’ve written. And I think we have reserved, and our history shows we generally have reserved on the conservative side, adequately at least. And that’s certainly our intent. And we tell no managers of any of our insurance operations, what numbers we expect from them or do any of that. They evaluate their losses and they build in something for social inflation. They build in things for all kinds of things. And generally speaking, Berkshire has been pretty accurate in its reserving. And, I have no reason to think that we’re otherwise than that, currently.

Becky Quick: (02:52:19)
[Steven Tedder 00:02:52:19] From Atlanta who says he’s a tenured Berkshire shareholder writes in and he says, do you see Berkshire offering pandemic coverage in future insurance policies?

Warren Buffett: (02:52:27)
Well the answer is, we ensure a lot of things. Sure. We had somebody come to us the other day wanting insurance involving a $10 billion protection on something very unusual. We’re not going to make that deal in all probability. In fact, I would say it’s dead. But we would have written pandemic insurance if people had come to us and offered us what we thought was the right price. We would have been wrong, probably in doing it. But, we have no reluctance to quote on very unusual things and very big limits. We’re famous for it. We haven’t done that much of it in certain periods because the prices aren’t right. But if you want to come and insure almost anything, and we don’t want you to insure against fire if you happen to be a known arsonist or something. But, if you come to us with any unusual coverages, either in size or in the nature of what’s covered, Berkshire is a very good place to stop. And so, somebody wants to buy, they can dream up the coverage and they can tell us the price they’ll pay, and we’ll consider writing it.

Warren Buffett: (02:54:03)
We wrote a lot of business after 9/11 for example. And there were really only a couple companies in the world that were willing to write the business. And Berkshire and AIG wrote a lot of business and we thought we knew what we were doing but we could have been surprised. I mean there could have been some follow on incidents from 9/11 that we wouldn’t have known about. You don’t know for sure the answer. That’s why people are buying insurance. But, we would be willing to write pandemic coverage at the right price.

Becky Quick: (02:54:44)
This next question is for Greg and it comes from a shareholder named [Todd Flaska 02:54:47]. He says, “I don’t expect Berkshire to outperform the S&P500 during good times. However, I remain a longterm investor because of the huge war chest that can be deployed during the downturns in the market, like we’re seeing right now. Warren has been brilliant at negotiating mutually favorable deals with companies that have somewhat urgent capital needs during these down-times. These opportunities may only come about once a decade. There’s a small window of time for these deals. They all come at once and you don’t really know if you’re at the bottom of the market when the deals start coming. Will Berkshire be able to continue this approach when Warren and Charlie are no longer at the helm?”

Greg Abel: (02:55:23)
I fundamentally, without Warren and Charlie at the helm, I don’t see the culture of Berkshire changing. I don’t see our billet, which a large part of that is having the business acumen to understand, the transaction, the economic prospects and then, the ability to act quickly. I really don’t see that changing as we… Well listen, there’s no one better than Warren and Charlie, but equally we’ve got a talented team in Berkshire both at the Berkshire level, and within our managers that can obviously look at opportunities too, very quickly. But, the reality is it’s a huge advantage we have right now, and we would clearly want to be in a position to maintain that position of strength. Warren?

Warren Buffett: (02:56:16)
Yeah, we will maintain it. And, we not only have it when the managers of the… In some cases, not all cases by a long shot, but in some cases we have managers that will occasionally come up with something that can be quite attractive. But between Greg and Todd and Ted, we’ve got three extraordinarily good buyers in terms of allocating capital and, I and Charlie may get an occasional call because of someone we knew 20 years ago or something. But they know a lot more people. They’ve got a lot more energy and their minds work the same way as ours have in the past. So I think it could very well be a significant improvement when the three of them are thinking about capital allocation, than when Charlie and I are now. Particularly now that he’s found zoom.

Becky Quick: (02:57:30)
All right. This next question comes from [Max Rudolph 00:02:57:31] in Omaha, Nebraska. And he asks, if Berkshire or any of its fully own businesses have participated in any of the bailouts from the fed or the treasury?

Warren Buffett: (02:57:46)
I certainly don’t know of any, I guess you could say while we own the airlines. Well no, the question is about fully owned businesses and there’s no way that I wouldn’t know about anybody that did any of that. Greg?

Greg Abel: (02:58:00)
No. In fact, we’ve been very clear with the businesses, but our businesses understood how Berkshire operates and equally we’re very clear that we would not be participating in any of those programs or quote bailouts.

Becky Quick: (02:58:22)
This is a similarly related question. It comes from [Seth Frieden 00:08:25] who says “As a longterm shareholder of Berkshire B shares, I’d like to know Warren’s viewpoint around smaller holdings, specifically Oriental Trading Company and Nebraska Furniture Mart that are based in your hometown of Omaha.” He imagines that those smaller business units have been adversely impacted by COVID shelter-in-place mandates. So would like to know if Oriental Trading or other small business units applied for PPP loans or participated in those acts. And if they didn’t qualify for a loan or didn’t participate, then how will Berkshire support those smaller businesses to make sure that they can continue to employ their employees?

Warren Buffett: (02:59:00)
Well to my knowledge, none of them have gone in for government money. And the two that are mentioned, I don’t like to get into specific companies but I can assure you that the Nebraska Furniture Mart and Oriental Trading in my view have a fine future. But, I don’t want to talk about, go down the list obviously, of every single company because some of them I don’t know the answer to. We actually decided some time ago that that our newspapers would have a much better chance of surviving if they were run as part of [Alee 00:09:48], than if we ran them independently. And, as I said earlier, we actually put considerably more money… We probably put more money in the newspaper business than virtually anybody in the country in the last six months. Because we took over a loan that would have been a problem in the year, whatever it might’ve been, maybe year and a half. And we enable them to just deal with one lender rather than a group. And they are doing a better job with the newspapers then we would do.

Warren Buffett: (03:00:22)
And that’s always our preference. If we’ve got a business that looks like it is not going to sustain itself over time in our hands. If we can find somebody else that we think will do a better job, we’d love to have them run it. So if we have a problem business, we would prefer to find somebody that thinks they can do a better job and probably can do a better job of running than we can. But some businesses, just are superior. We started with the textile business. We started a company called diversified retailing, which merged into Berkshire, became part of Berkshire and started with a department store in Baltimore. And department stores looked good in 1966 but the world has gone against them. And we had a trading stamp business at one time, and we stayed longer than anybody else but the world left trading stamps behind. And that’s going to happen with some businesses. That’s capitalism. And it will happen to some Berkshire businesses over the next 10 years and the next 50 years. We think we’ll find more of them that will grow. And net, that Berkshire will grow. But we do not think if you own a great many businesses that every one is destined for success. That’s why I suggest to people they buy an index fund. I do not, with the exception of Berkshire, I would not want to put all my money in any one company, although there’s a few, I wouldn’t mind being very close to that. But, you get surprises in this world and there will be businesses that we think are very good that turn out not to be so good, and there will be other businesses that turn out better than we think and it’s up to the world to judge our batting average, over time. Greg?

Greg Abel: (03:02:31)
Well I would just add and echo again, that when it comes to the PPP loans, we’re not aware of any of our businesses taking them. And as I said, we encouraged them if they were ever thinking that, there was going to be a dialogue and we’re not aware of any businesses pursuing them. I would also just add that when you look at our businesses as we went into the crisis, they responded very well. So as we look at our businesses, and Warren touched on this, our large businesses our mid sized businesses and even as you go down from there, they’re in very sound shape as we go through the pandemic and are really preparing to emerge now.

Greg Abel: (03:03:07)
So they’re evaluating, listen, they’re going to have a different customer, there’s going to be different consumer behaviors, how our employees work. A lot of them work at home now, does that make sense? And the communities we’re operating in have all changed. But we’re literally moving from the point of, “Okay, we’re, making it through the crisis” and really planning to reemerge now. And I would say our businesses are in an extremely sound place.

Warren Buffett: (03:03:36)
We don’t know when the-

Becky Quick: (03:03:38)
This next question-

Warren Buffett: (03:03:39)
Well I was just gonna-

Becky Quick: (03:03:40)
Okay, go ahead.

Warren Buffett: (03:03:41)
Well we don’t know. We don’t know how long this period lasts. And nobody knows. Most people think, and they know more about it than I do, that the virus will, to some extent, decline in it’s spread during summer months. And I would say a good many think, that it will come back at some later date. And how the American public reacts if they get their hopes up through some summer diminution and how they would react to a second attack, in effect by the virus. It’s like Dr Fauci… the virus is going to determine our behavior in a way. And we’re doing a lot of smart things and we’ve got a lot of very smart people, but there are unknowns. And the unknowns that apply to the health aspect create unknowns in the economy. And we’ll have to keep evaluating things as we go along. I hope, like crazy obviously, that once suppressed that it doesn’t come back and that we readjust. But things don’t always work perfectly. That doesn’t mean there was a better course of action that would not… I would not go around criticizing people at all for what they’ve done or anything of the sort. I just think you’re dealing with a huge unknown. And I think that the degree to which it’s disturbed the world and changed habits and endangered businesses in the last couple of months indicates that you better, not be too sure of yourself about what it’ll do in the next six months or year or whatever.

Becky Quick: (03:05:51)
Warren, a moment ago you mentioned that you still are recommending that people invest in an S&P500 index fund. Let me ask this question that came in from Kevin. He says “The last few weeks we’ve been hearing from active money managers that the day of passive investing is over. The historical safety of investing in an index fund longterm is gone. Would you please provide your thoughts on this topic, particularly in regards to an investment time span of 10 years?”

Warren Buffett: (03:06:17)
Well, I can tell you I haven’t changed my will and it directs that my widow would have 90% of the funds in index funds and I think it’s better advice than people are generally getting from people that are getting paid a lot to give other advice. You don’t make a lot of money advising an S&P 500 index fund. And how you can say “The D day of index funds is over.” I mean, if you say “The day of investing in America is over.” I would disagree quite violently. And then is there’s something special about index funds being a terrible way to invest, I just don’t think… it’s very hard to have evidence of that. I mean, if the index funds reflect the market and one side has high fees that think they can pick out stocks and the other side has low fees, I know which side is going to win over time.

Warren Buffett: (03:07:21)
And, you have to recognize that it’s in a great many people’s interest to convince you that they can do something, that they may well even believe they can. And a certain percentage of them will do it from luck and a few people will do it from skill. And that’s what makes it so enticing that you can find the [Jim Simons 00:17:42] or somebody that’s going to produce extraordinary return. And Jim and his group have done it by brainpower, but that’s very unusual and incidentally they are going to charge you a lot of money and they’re going to actually maybe close up their fund if they do it because they can’t do it with really huge amounts of money compared to how the record has been established in the past. Just have to recognize you’re dealing with an industry where it pays to be a great salesperson and it pays even better if you’re a great salesperson and you can actually produce something. But the money is in selling. There’s a lot more money in selling than in managing, actually, if you look to the essence of investment management.

Becky Quick: (03:08:37)
I got a number of variations on this next question, some more polite than others. This one’s right about down-the-middle. But this is from [Mark Blakely 00:03:08:44] who writes in from Tulsa, Oklahoma, and he says “Like many, I’m a proud Berkshire Hathaway shareholder. However, in comparing the performance of Berkshire with the S&P 500 over the last 5, 10 or 15 years, I’ve been disappointed in Berkshire’s under-performance. Even year to date, Berkshire is trailing the S&P 500 by 8%. To what would you attribute Berkshire’s under-performance? While I can’t imagine ever selling my Berkshire stock at some point, money is money.”

Warren Buffett: (03:09:11)
No, I agree with everything that, I forgot his name, but just said. I mean the truth is that I recommend the S&P500 to people. And I happen to believe that Berkshire is about as solid as any single investment can be, in terms of earning reasonable returns over time. But, I would not want to bet my life on whether we beat the S&P500 over the next 10 years. I obviously think there’s a reasonable chance of doing it, and we’ve had periods, I don’t know how many out of the 50 55 years we’ve been doing it or, I don’t know how many we’ve beaten or not. I mentioned earlier that 1954 was my best year, but I was working with absolutely with peanuts, unfortunately. And, I think if you work with small sums of money, I think there is some chance of a few people that really do bring something to the game.

Warren Buffett: (03:10:24)
But I think it’s very hard for anybody to identify them. And I think that when they work with large funds, it gets tougher. And it’s certainly gotten tougher for us, with larger funds. And I would make no promise to anybody that we will do better than the S&P500. But what I will promise them is that I’ve got 99% of my money in Berkshire. And most members of my family, may not be quite that extreme, but they’re close to it. And I do care about what happens to Berkshire over the long period about as much as anybody could care about it. But caring doesn’t guarantee results. It does guarantee attention. Greg?

Greg Abel: (03:11:11)
Well, I would agree Warren that there’s never guarantees. But when I look at the assets we have in place and the teams that are in place, I… You’re committed to Berkshire, but we have dedicated teams that equally are dedicated to Berkshire and they’re sure going to give it their best effort every day. And, when I look at the assets and the people, I think we have, as you said, you can’t guarantee it, but we have a great chance of sure giving a good effort to outperform it.

Warren Buffett: (03:11:43)
It’s hard to imagine getting a terrible result with Berkshire but, anything could happen. And what I do know is it would be easier to be running 5 million than… Our book, net worth at Berkshire at the quarter end, I think was Three hundred and seventy some billion, which is down, but it’s still greater than the book net worth of any corporation in the United States. I mean, maybe there’s some federal corporation that has more, but in terms of… And it may be the greatest in the world. I’m not sure. And that makes life difficult in some ways too.

Greg Abel: (03:12:21)
Right, and the potential of our operating businesses are substantial. When you think, we’ve talked about energy, you touched on it, that infrastructure is continuing to change. We’re ready for a hundred billion dollars of investment opportunities there. If we just look at the business over the next 10 years and the infrastructure that’s required and how it’s changing substantial investments there, that just tell me we have very good prospects. And we’re well positioned to pursue them. Which again to me, when you look at our core business, you touched on in Burlington, the insurance and energy, our downside is very nicely protected. We have three really core great businesses.

Warren Buffett: (03:13:08)
Yeah. And we’re better positioned than anybody in the energy business just because we don’t have dividend requirements. We retained 28 billion of earnings over 20 years. You can’t do it if you run a normal public company. And we’ve got a huge appetite and the and the country needs it, the world needs it. And we are a very logical, well structured, well managed I would say because it doesn’t involve me, a company who participate in just huge requirements around the world now. They’re slow and they involve state governments. And there’s a lot of…, It’s not anything that happens dramatically. It will happen. And, and Berkshire should participate in a huge way.

Warren Buffett: (03:14:04)
We can do things in insurance, nobody else can do. That doesn’t mean much, at many times. But occasionally it may be important. So, there are some advantages to size and strength. But there are disadvantages to size too. If we find some great opportunity for a billion dollars to double our money, that’s a billion pretax and that’s, 790 million after tax. And on a market value of 450 billion or whatever it may be. That doesn’t amount to much, unfortunately. We’ll still try and do it if we can.

Greg Abel: (03:14:45)
Yeah.

Becky Quick: (03:14:49)
I want to ask this question that came in because I think some people may have had a misinterpretation about something you said a few minutes ago. This is the benefit of being able to get these questions real time, but a few moments ago you were talking about the people at the company who will be allocating capital after you and Charlie are no longer doing it and you mentioned that you’ve got Todd, Ted and Greg all doing that, but I’ve gotten a few questions that read similar to this. This one’s from [Edward Popula 03:15:14] in New York city who says, “Dear Warren, I noticed you didn’t mention Ajit Jain, when you reeled off your list of future management, is he out of the picture?

Warren Buffett: (03:15:22)
Well, Ajit is not in the capital allocation business. He is the best… Well, he’s got one of the best minds in the world. I mean, I wrote his father after he worked for us for a few years. I wrote him again the other day. But 20 years ago I wrote him and I said, “If you’ve got another son like this, send him over from India because, well on the world.” No Ajit is one of a kind. Anybody will tell you, that’s at any contact with him, and particularly anybody in the insurance business where they know him well, he is absolutely one of a kind. But his job is not capital allocation. It’s evaluating insurance risks and that is a rare… He possesses a rare talent and he has a huge capital backing to do it. So he’s an incredible asset.

Warren Buffett: (03:16:14)
But Greg and Todd and Ted have been in the asset allocation business in a big way for a long time. That’s their game. And the Ajit’s game is insurance. So that’s why I mentioned those three. And incidentally, while Charlie and I are around, we kind of like capital allocation ourselves. So we’re not going any place voluntarily, but we probably will go someplace involuntarily. Before that long.

Warren Buffett: (03:16:43)
Charlie’s in good health incidentally. I’m in good health.

Becky Quick: (03:16:50)
Greg, let me ask you one of these capital allocation questions. This one comes from [Matt Libel 00:03:16:53] and he says “Berkshire directed 46% of capital expenditure in 2019 to Berkshire Hathaway Energy. Can you walk us through with round numbers how you think differences in capex spending versus economic depreciation versus gap depreciation and help explain the timeframe over which we should recognize the contract of return on equity from these large investments, as we as shareholders are making in Berkshire Hathaway Energy?”

Greg Abel: (03:17:22)
So when we look at Berkshire Hathaway Energy and their capital programs, we try to really look at it as it was highlighted, really in a couple of different packages. One, what does it actually require to maintain the existing assets for the next 10 20 30 years i.e. it’s not incremental, it’s effectively maintaining the asset, the reflection of depreciation. And, our goal is always to clearly understand across our businesses, do we have businesses that require more than our depreciation or equal or less? And happy to say with the assets we have in place and how we’ve maintained the energy assets, we generally look at our depreciation as being more than adequate if we deploy it back into capital to maintain the asset. Now the unique thing in the lion’s share of our energy businesses that are regulated and that exceeds 85% of them, 83% of them, we still earn on that capital we deploy back into that business. So it’s not a traditional model where you’re putting it in, but you’re effectively putting it into maintain your existing earnings stream. So it’s not drastically different, but we do earn on that capital.

Greg Abel: (03:18:43)
But what we do spend a lot of time, and that’s what when Warren and I think about the substantial amounts of opportunities, that’s incremental capital that is truly needed within new opportunities. So it’s to build incremental wind, incremental transmission, that services the wind or other types of renewable, solar. That’s all incremental to the business and drives incremental both growth in the business. It does require capital, but it does drive growth within the energy business. So there’s really the two buckets. I think we would use a number a little bit lower than the depreciation. We’re comfortable the business can be maintained at that level and as we deploy amounts above that, we really do view that as quote incremental or growth CapEX.

Warren Buffett: (03:19:33)
Yeah, we have what, 40 billion or something? What do we have in sort of kind of in the works?

Greg Abel: (03:19:42)
So we have basically, as Warren’s highlighting 40 billion in the works of capital. That’s over the next effectively nine years, 10 year period, a little approximately half of that we would view as maintaining our assets. A little more than half of it’s truly incremental. And those are known projects we’re going to move forward with. And I would be happy to report, we probably have another thirty billion that aren’t far off of becoming real opportunities in that business.

Greg Abel: (03:20:16)
As Warren said, that it takes a lot of time. It’s a lot of work. The transmission projects, for example, we’re finishing in 2020, were initiated in 2008 when we bought Pacific Corp. I remember working on that transmission plan, putting it together, thinking “Six to eight years from now, we’ll, we’ll have them in operation.” 12 years later and over that period of time we earned on that capital, we have invested and then when it comes into service, we earn on the whole amount. So we’re very pleased with the opportunity, but we plant a lot of seeds, put it that way.

Warren Buffett: (03:20:48)
Yeah. And these are not, it’s not like they’re super high return thing, they’re decent returns over time. And we’re almost uniquely situated to deploy the capital. As opposed, you could have government entities do it too, but, but in terms of the private enterprise. And they take a long time, they earn decent returns. I’ve always said about the energy business, it’s not a way to get real rich, but it’s a way to stay real rich.

Warren Buffett: (03:21:23)
And we will deploy a lot of money at decent returns, not super returns. You shouldn’t earn super returns on that sort of thing. I mean, you are getting rights to do certain things that governmental authorities are authorizing and that they should protect consumers, but they also should protect people that put up the capital. And, it’s worked now for 20 years and it’s got a long runway ahead.

Becky Quick: (03:22:04)
All right, this next question comes from Jason in New Jersey. “As both a Berkshire and Occidental shareholder, I was encouraged to see your investment in the company, but with passing weeks, it became evident that your investment facilitated Occidental management’s ability to avoid a shareholder vote on the Anadarko acquisition, a very shareholder unfriendly outcome. This deal proved to be irresponsible and expensive from an Oxy perspective and ultimately very value destructive for Oxy shareholders. In my view, it also permanently hurt Berkshire’s reputation in the marketplace. Please comment on this unfortunate outcome and tell me why Oxy shareholders and other market observers, shouldn’t feel this way.”

Warren Buffett: (03:22:40)
Well, we said right from the beginning, although we didn’t certainly expect the degree to it, what’s happened. We said essentially when you buy into a huge oil production company, how it works out is going to depend on the price of oil to a great extent. It’s not going to be your geological home runs or super mistakes or anything like that. It is a investment that depends on the price of oil and when oil goes to minus $37 as happened the other day for I guess it was the May contract, that’s off the chart. And if you own oil, you should only own oil if you expect these prices to go up significantly. I don’t know whether they’ll go up significantly or not. We’re in the transaction. Our commitment was made on a Sunday when the management of Anadarko favored Chevron and Chevron had a breakup fee of a billion dollars. And-

Warren Buffett: (03:24:02)
Chevron had a breakup fee of a billion dollars and accidental people have been working on it for several years and it was attractive at oil prices that then prevailed. And it doesn’t work obviously at $20 a barrel. It certainly doesn’t work in minus $37 a barrel but it doesn’t work at $20 a barrel. And everything the oil companies have been doing, whether it’s Exxon or Occidental or anybody else, it doesn’t work at these oil prices. That’s why oil production is going to go down a lot in the next few years because it does not pay to drill.

Warren Buffett: (03:24:45)
Now, that’s happened at other times in the past, but the situation is you don’t know where you’re going to store the incremental barrel of oil and oil demand is down dramatically and for a while the Russians and the Saudis were trying to outdo each other in how much oil they could produce. And when you’ve got too much in storage, it doesn’t work. It’s way off that very fast. Now you will have production of oil go down in the United States significantly. It does not pay to drill and all kinds of formations that paid before and it doesn’t pay to have paid the price that oil was trading at in the ground a year or two ago. And to that extent, if you’re an Occi shareholder or any shareholder in any oil producing company, you join me in having made a mistake so far in terms of where oil prices went and who knows where they go in the future.

Becky Quick: (03:26:07)
Let me follow up with this one then. This one comes in from Anish Ball who says, is there a risk of permanent loss of capital in the oil equity investments?

Warren Buffett: (03:26:15)
Well, there certainly is. There’s no question. If oil stays at these prices, there’s going to be a lot of money, a whole lot of money and middle extend to bank loans and it’ll affect the banking industry to some degree. Not that it doesn’t destroy them or anything, but there’s a lot of money that’s been invested that was not invested based on a $17 or $20 or $25 price for WTI, West Texas Intermediate oil. But you can do the same thing in copper. You can do the same thing in some of the things we manufacture. But with commodities it’s particularly dramatic and farmers have been getting lousy prices but to some extent the government subsidized them. I’m all for it actually.

Warren Buffett: (03:27:08)
But if you’re an oil producer, you take your chances on future prices, unless you want to sell a lot of futures forward. Occi actually did sell 300,000 barrels a day, puts in effect that they bought puts but and sold clause and effect to match it. And they were protected for a layer of $10 a barrel on 300,000 barrels a day. But when you buy oil, you’re betting on oil prices over time and over a long time, and oil prices, there’s risk and the risk is being realized by oil producers as we speak. If these prices prevail, there will be a lot of bad loans and energy loans and bad debts and energy loans. And if there are bad debts and energy loans, you can imagine what happens to the equity holders. So yes, there’s a risk.

Becky Quick: (03:28:17)
All right. This question comes from Bob Coleman. He says, Warren, could you bring us up to date with the status of your equity put contracts. Sourcing the 2019 annual report found on page 60, it appears at 2019 year in the fair value liability was just under a billion dollars. And if the index is declined 30% the liability obligations balloon to $2.7 billion. So if the indexes are down, 60% would Berkshire’s obligation be close to five and a half billion dollars. Does that math seem reasonable? And are there any loose ends or open exposures, associate [crosstalk 00:04:53]?

Warren Buffett: (03:28:55)
Between 2004 I think in 2006, I think we wrote 48 maybe 50 contracts, something like that. The shortest was 15 years. The longest was 20 years and we received, as I remember, roughly $4.8 billion, which we were free to do with what we wanted and we agreed pay based on where one or more of four indices are selling for at the time of expiration. They were so-called European style puts where they’re only payable based on one date and we did not have, with a small exception, we did not have to put up collateral, which was part of the deal and we’ve had that 4.8 billion.

Warren Buffett: (03:29:51)
We probably had an original nominal value of something over 30 billion, maybe 35 billion. That’s if everything went to zero. I mean Dow Jones went to zero, the footsie went to zero and the Nikkei and so on. A number of those are run off. So we now have about 14 billion nominal. We have something less than half left. We haven’t paid out anything significant. We bought back a few of them. If everything went to zero, we would owe 14 billion. If everything were to sell at the same price it was selling for on March 31st, I think it’s somewhat less than we carry as a liability on the balance sheet, which is 200 fraction billion. So far so good. I mean we’ve had the use of a lot of money and the outstanding potential of them as the market went up a lot, we wouldn’t have to pay anything and if it goes down some more, we have to pay more than a couple of billion, but we’ve got the liability set up for that. But so far so good on that and it is not anything that causes us any problem. The final one I think comes due sometime in 2023.

Warren Buffett: (03:31:19)
I think there’s, I think maybe 20 or 25% of them come due late this year. And so the questionnaire doesn’t really understand the bottom bank I can tell by the question and there’s no surprises there. There’s no way that some liability could double up on us except relating to where those indices close at the expiration of a group of different puts, which like I said, have been more than cut in half and we’ve done very well on it. Key to that-

Becky Quick: (03:32:00)
Warren, you mentioned a few minutes ago that you-

Warren Buffett: (03:32:02)
Well I was just going to say key to that was with just a couple of tiny exceptions, we did not agree to put up collateral. We never would have gotten ourselves in that position and that was when we made the deals we just would not get ourselves in that position and we never will. Where on a given date we could have some tremendous obligation that would come to that we weren’t count on getting, having come due. I’m done then Becky.

Becky Quick: (03:32:39)
Okay. Okay, thanks. So you mentioned a few minutes ago that you’re very concerned about Berkshire’s longterm health to this question came in from Drew Estos in Atlanta, Georgia who says there’s already a speculation of a post Buffet breakup of Berkshire and given the sway carried by modern activists, the speculation should be taken seriously. Many longterm owners see the folly in this view, a $25 billion anciliary earning stream provides a lot of flexibility when investing insurance float on our and your estate’s behalf, could you more forcefully make the case of maintaining Berkshire’s current architecture? If you don’t, that responsibility will fall on an unknown set of shoulders with far less credibility.

Warren Buffett: (03:33:16)
Well, if you were to sell Berkshire’s various subsidiaries, you would incur a very significant amount of tax at the corporate level before anything was distributed to the shareholders. You can spin off a given one or something of the sort, but the ability to break up a diverse company without tax implications there was something called the general utilities doctrine that prevailed in various ways up until 1986 and a lot of people seem to comment based on the fact that that didn’t happen in 1986. And there’s imaginative that ways where people try to avoid taxes and can do it in some cases. On certain types of transactions. If you were to break up Berkshire, that would be one factor, but the interaction of being able to move capital around in terms of being able to do things in insurance that we couldn’t do unless there were the backup earnings and capital employed in the other entities.

Warren Buffett: (03:34:36)
There’s enormous advantages in capital deployment within the place. So there is not a big discount to break up value embodied in Berkshire’s price and the situation actually is that although all my Berkshire shares, every share will be given to charities pursuant to a plan I developed back 14 years ago and followed ever since and will continue following this July, I’ll be giving away 3 billion or so worth of the stock, but it still involves a big voting percentage that including other people that still remain in the picture aside even from the Buffet family, it isn’t going to happen. Now, I will tell you, everybody in the world will come around and propose something and say it’s wonderful for shareholders and by the way, it involves huge fees that you do not get impartial advice from Wall Street when there’s enormous amount of fees possible for one action and no fees applicable from another action. But you can be sure I’ve thought about it and I would say that you can count on Berkshire’s present posture being continued for a long time. I can’t tell you what’s going to happen a hundred years from now and I can’t tell you exactly what would happen for example if certain ideas in terms of wealth taxes changed or taxes on foundations change. But my plan has been thought out and in place for a long time and it not only ensures that the money that’s been made, all Berkshire, all of it ends up going to various philanthropies staggered over time, but it also will keep the walls away. Greg, do you have any thoughts on that?

Greg Abel: (03:36:52)
I think the comment on the capital allocations critical that we have the ability to move the capital amongst the, be it the operating businesses or up to the insurance are down with really no consequences to our shareholders. That’s the value driver of the unique structure of Berkshire and it creates immense value. So that’s all I would add or second I guess.

Becky Quick: (03:37:21)
All right, this question comes from Rob Grandish in Washington DC he says, interest rates are negative in much of Europe, also in Japan. Warren has written many times that the value of Berkshire’s insurance companies derive from the fact that policy holders pay up front creating insurance float on which Berkshire gets to earn interest. If interest rates are negative, then collecting money up front will be costly rather than profitable. If interest rates are negative, then the insurance float is no longer a benefit but a liability. Can you please discuss how Berkshire’s insurance companies would respond if interest rates became negative in the United States?

Warren Buffett: (03:37:54)
Well, they were going to be negative for a long time. You better own equities or you better own something other than that. It’s remarkable what’s happened in the last 10 years. I’ve been wrong in thinking that you could really have the developments you’ve had without inflation taking hold, but we have 120 odd billion while we have some almost very high percentage in treasury bills some just in cash, but those treasury bills are paying us virtually nothing now. They’re a terrible investment over time, but they are the one thing that when opportunity arises, it will arise at a time and maybe the only thing you can look to pay for those opportunities is the treasury bills you have. I mean, the rest of the world may have stopped and we also need them to protect, be sure that we can pay the liabilities we have in terms of policy holders over time. And we take that very seriously.

Warren Buffett: (03:39:04)
So if the world turns into a world where you can issue more and more money and have negative interest rates over time, I’d have to see it to believe it, but I’ve seen a little bit of it. I’ve been surprised. So I’ve been wrong so far. I don’t see how you can create … I would say this, if you’re going to have negative interest rates and pour out money and incur more and more debt relative to productive capacity, you’d think the world would have discovered it in the first couple thousand years rather than just coming on it now. But we will see. It’s probably the most interesting question I’ve ever seen in that economics is can you keep doing what we’re doing now and we’ve been able to do it or the world’s been able to do it for now a dozen years or so but we may be facing a period where we’re testing that hypothesis that you can continue it with a lot more force than we’ve tested before. Greg, do you have any thoughts on that? I wish I knew the answer. Maybe you do.

Greg Abel: (03:40:30)
No, I think as you articulated, I think it was in the annual report too. I mean we don’t know the answer, but as you said, some of the fundamentals right now are very interesting relative to having a negative interest rate. But I hate to say it, but I don’t have anything to add.

Warren Buffett: (03:40:50)
I’d love to be secretary of the treasury if I knew I could keep raising money at negative interest rates, that makes life pretty simple. We’re doing things that we really don’t know the ultimate outcome and I think in general are the right things, but I don’t think they’re without consequences and I think they could be kind of extreme consequences pushed far enough but there would be kind of extreme consequences if we didn’t do it as well. So if somebody else has to unbalance those questions.

Becky Quick: (03:41:22)
All right. This question comes from Adam Schwartz in Miami, Florida and he says Berkshire is the largest holding in his partnership, which also houses most of their net worth. He says, Berkshire’s invested in many capital intensive businesses through the years, railroads as an example, how do you think about the inflationary or even deflationary risks for all of the capital intensive businesses and could this to be an existential problem for businesses? Kind of referencing what you were just talking about that eventually the bill for the debts being issued comes due, will it eventually come from all businesses through some combination of higher tax rates on corporations, increased wages for the lower middle class et cetera?

Warren Buffett: (03:42:04)
Well, I certainly think that increased corporate taxes are a much higher probability than having lower corporate taxes. So I think that we got handed as a corporation, a big chunk of what used to be the government’s profits from our business a couple of years ago. And it would depend on to some extent, which party is elected and whether they have control of both houses as well as the presidency and who knows what else. But we could very easily have higher corporate income taxes and perhaps much higher corporate income taxes at some point. And in terms of capital intensive businesses, they’re just not as good. If you can find an equally good business in terms of operations that doesn’t require capital. [inaudible 03:43:12] never required capital. Didn’t grow but it just doesn’t, it didn’t take money to expand it and it just delivered enormous sums to us.

Warren Buffett: (03:43:27)
And because we own it within Berkshire to redeploy it elsewhere didn’t require a lot of tax expense either at the corporate level or at the personal level. So you really want a business and everybody wants a business that doesn’t take any capital to speak of and keeps growing. It doesn’t take more capital as it grows. Now are you totally business, [inaudible 03:43:51] the energy business requires more capital as it grows. Our railroad business to some extent requires more capital if it doesn’t grow even. So capital intensive businesses by their nature are not as good as something where people pay in banks and you don’t need the capital. If you look at where the top market value is in a $30 trillion market, if you take the top four or five companies that account for maybe four trillion or so of that 30 trillion. Basically they don’t take much capital.

Warren Buffett: (03:44:32)
And that’s why they’re worth a lot of money because they make a lot of money and they don’t require the money to any great extent in the business. We own some businesses like that, but it’s certainly not the railroad and it’s not the energy business. There are good businesses. We love them, but if they didn’t take any capital, they’d be unbelievable. That’s what we’ve learned from 50 or 60 years of operating businesses that if you can find a great business that doesn’t require capital, when it grows, you’ve really got something. And to a certain extent, because insurance uses the kind of assets we would like to own anyway. Our insurance business doesn’t really take capital. It requires having capital available, but we’re able to invest that money largely in things we’d like to own anyway. So we’re particularly well suited for the insurance business and it’s really been the most important factor in our growth over the years. Although a lot of other things contribute. Greg, you were in the capital intensive business. Tell us about it.

Greg Abel: (03:45:49)
Well I think there’s no question obviously we would prefer to be in a less capital intensive business, but there are unique opportunities there. The one I would touch on when I think of inflation or even potentially as we go through this crisis and maybe a prolonged one or depending on how long it takes to recover. I mean we are in a unique, when we’re looking at energy or rail, we do have a certain amount of pricing power and it’s through our regulatory formulas or how our arrangements are with our customers. So if we then were to move into an inflationary period, it’s not perfect protection, but those businesses generally can recover a significant portion of their costs, even in an inflationary environment and still are in a reasonable return. They’re not going to be great returns as you highlighted Warren, but they’re still going to earn a reasonable return on their capital even in an inflationary period. There may be some lag in some things like that, but there’s still going to be very sound investments.

Warren Buffett: (03:46:52)
Oh yeah. If there was 10 for one inflation, make it extreme-

Greg Abel: (03:46:55)
Yeah.

Warren Buffett: (03:46:56)
We’d be happy we own the railroad, very happy. Well, we’d been investing a lot of capital in it, but that business is, in my view, is a very, very solid business for many, many, many, many decades to come. I said originally we bought it with a hundred year time horizon and I’ve extended that so it will earn more dollars if there’s a lot of inflation. In real terms, who knows but it would earn a lot more dollars and a lot of the energy projects but it’s better if we don’t have inflation and it’s better if we don’t have capital. If we can find the same sort of businesses that aren’t as capital intensive. We’ve got capital. I mean we’re ideally positioned for capital intensive businesses that other people will have trouble raising capital for, but they’ve still got to promise decent returns.

Becky Quick: (03:48:00)
All right. This question comes from Charlie Wang, he’s a shareholder in San Francisco. He says, given the unprecedented time of the economy and the debt level, could there be any risks and consequences of the US government defaulting on its bonds?

Warren Buffett: (03:48:14)
No. If you print bonds in your own currency, what happens to the currency is it can be a question because you don’t default. And the United States has been smart enough and people have trusted us enough to issue, which is that in its own currency and Argentina is now having a problem because the debt isn’t in their own currency and lots of countries have had that problem. And lots of competent countries will have that problem in the future. It is very painful to owe money in somebody else’s currency, but listen, if I could issue a currency Buffet bucks and I had a printing press and I could borrow money, I would never default. So what you end up getting in terms of purchasing power can be in doubt, but in terms of the US government, [inaudible 03:49:30] downgraded the United States government, I think it was [inaudible 03:49:35] some years back. That to me did not make sense.

Warren Buffett: (03:49:42)
In the end how you can regard any corporation as stronger than a person who can print the money to pay you, I just don’t understand. So don’t worry about the government defaulting. I think it’s kind of crazy incidentally, that should be said to have these limits on the debt and all of that sort of thing and then stopped government arguing about whether it’s going to increase the limits, we’re going to increase the limits on the debt. The debt isn’t going to be paid. It’s going to be refunded and anybody that thinks they’re going to bring down the national debt. I mean there’s been brief periods and I think it was the late nineties or thereabouts, when the debts come down a little bit, the country’s going to print more debt. The country is going to grow in terms of its debt paying capacity but the trick is to keep borrowing in your own currency.

Becky Quick: (03:50:44)
Emphasis on the trick. This question comes from David Cass. He is a clinical professor of finance at the University of Maryland and he says, Berkshire has invested in many companies with stock buy-back programs. Recently there’s been a backlash against buy-backs. What are your views on this subject?

Warren Buffett: (03:51:01)
Well, it’s very politically correct to be against buy-backs now and they’re going to incorporate it in the [inaudible 03:51:08] program. There’s a lot of crazy things said on buy-backs. buy-backs are so simple. I mean it’s a way of distributing cash to shareholders. And let’s just say that you and I and Greg, the three of us decided to buy an auto dealership or a McDonald’s franchise or something and we each put a million dollars in or whatever the number may be and we get along with each other and the business grows and all of that and one of us really wants to spend our share of the earnings and the other two want to leave the money in the business to grow. Now the three of us did that and we the only shareholders, we would not establish a 100% dividend payout for everybody and we wouldn’t freeze the one that wanted to get out either.

Warren Buffett: (03:52:01)
The logical thing to do is to buy a portion, whatever that person wants to spend annually from the earnings, buy a portion of their stock and the other two find their interest in the company goes up and the third person still has a little more of an interest by what they leave in but they also can take some money out of the business. You’re taking money out of the business and in either case and one you call dividends and you send it to everybody whether they want it or not. And with buy-backs you’d give it to the ones who want the money. And I have been following a policy of giving away stock now since 2006 and I’ll give away a lot of stock. But the philanthropies that receive it, they just have to spend the money very promptly on a current basis more or less.

Warren Buffett: (03:52:59)
So they are getting $ 3 billion worth of stock or whatever it may be. And I’m in effect reducing my interest in Berkshire, but Berkshire still retaining more capital than I’m giving away. So I have more dollars invested, but my interest goes down and the people that need the cash to carry out the philanthropic efforts, they cash out the stock. And I don’t force my sister or whoever it may be to take a bunch of money she doesn’t want, she wants it reinvested. All of it, reinvest in the business. And people that don’t want to consult some of their stock and the company ends up in the same position. We’ve distributed some of the capital that we don’t need for growth. Now, whether the company should buy it depends on a couple of things. One is they ought to retain the money they need for intelligent growth prospects and that’s fine.

Warren Buffett: (03:53:59)
And secondly, and this is a point that’s never mentioned, they should be buying it back below what they think it’s worth. Now they’ll make mistakes in that, but you make mistakes in a lot of businesses isn’t. But over that should be the guiding principle. And to my knowledge, JP Morgan, Jamie Diamond said out once, and we’ve said at various times, we will repurchase shares when it’s to the advantage of the continuing shareholder to have us do so. But you read about all these buy-back problems is that we’re going to spend 5 billion buying it back, or 10 billion. Well, that’s like saying I’m going to go out and buy some business this year for 5 billion without knowing what you’re going to get for the money. It should be price sensitive.

Warren Buffett: (03:54:43)
Obviously it should be needs sensitive obviously, but when the conditions are right, it should also be obvious to repurchase shares and there shouldn’t be the slightest taint to it anymore than there is to dividends and people that have now sort of taken up the cries about how terrible it was that companies bought [inaudible 03:55:05] well he didn’t say it was terrible for them to pay dividends to them. They’d have more money now, but they were doing what was intelligent at the time and I hope they continue to do it as intelligent as they go forth. Greg?

Greg Abel: (03:55:18)
No, the only thing I know you’ve commented on in the past, Warren, is that I think the one thing we are seeing, and obviously we’re supportive of buy-backs, but there are companies that used probably their financial engineering was just a little-

Warren Buffett: (03:55:34)
Extreme.

Greg Abel: (03:55:35)
Extreme and too cute that effectively you’re using every ounce of your balance sheet to buy back stock at a time where you’re really creating no cushion for your business for any type of event or bump in the road. And we’re going to see that. And I think that’s a very unfortunate outcome of them. And hence you get some of the backlash, but there are still companies as you highlighted many that do it right?

Warren Buffett: (03:55:56)
Yeah, no, if they’re buying it back because it’s fashionable because they really do like the idea. There’s nothing wrong with taking an action that increases the value of the remaining shares. But if they’re doing it … and I’ve been witness to some programs where it really is stupid, but I don’t think it’s immoral. I just think it’s stupid basically. And on the other hand we’ve favor companies that take care of all our requirements for growth and as Greg says, maintain sound balance sheets and all of that, leave a margin of error for things that you can get surprised with. And if they find their stocks selling below the business is intrinsically worth, I think that they’re making a big mistake if they don’t buy-in their stock. And it’s got to be a political football. And like I say that when it becomes politically correct to do something in this country, if you’re a politician, the best thing to do is get on board. But Berkshire is going to do what it thinks makes sense for a shareholder. And we like investing in companies that think that way too. And then not all companies obviously do.

Becky Quick: (03:57:15)
All right. Here’s a question from Lou Bogart in Boca Raton, Florida. He says, I’m a longtime shareholder with a concern as I head into retirement, I understand the theory that splitting shares does nothing for the value of shares. However, with the extremely high price on A shares, when I wish to drown down some money on my portfolio in retirement I’m facing a large tax. Say the average price has been about $300,000 this year. And I’m sitting on a $200,000 capital gains liability for each share. If I need $60,000 in additional cash during my retirement, I need to sell a full share and get hit with $200,000 tax liability. If you would split the stock 10 for one, I could sell two $30,000 shares and keep my tax liability at a more manageable 40,000. I could also maintain more of my investment in Berkshire. He said, have you thought about-

Becky Quick: (03:58:03)
…husband in Berkshire. He said, “Have you thought about this? In retrospect, I should have bought B shares but didn’t think about it at the time.”

Warren Buffett: (03:58:07)
Well, you can convert A to B shares, which is exactly what takes place when I give away the money in July to the five foundations. I actually convert it immediately before the gift. So they get B shares, and the truth is the B shares are very useful to people that want to either give away a small portion of what they have, or spend it or whatever it may be. So you can convert the A to B shares, which is exactly what I’ve been doing now for 14 years as I give it away, and solve that problem. We split the B shares, as I remember it, at one point, just to make it even more manageable so that people could deal with smaller denominations.

Warren Buffett: (03:58:58)
The A shares have a different voting power. But we passed some resolution sometime ago, I think, and certainly would be the case. In any event, we’re never going to give the A shares an advantage over the B. They used to have an advantage in a shareholder designated contribution program that we had, and we put that in there when we started. But that goes way back in time, and that doesn’t exist anymore, so that the B and the A are going to get treated exactly the same over time. It’s true, the A have more votes, and they sell very close to parity all the time. So I would say that if you want to do anything in terms of raising cash and you’ve got a lot of A shares, take one or two shares of A, and plenty of people I know have done this, and just cash it in and turn it into B and give yourself whatever amount of cash you want to get.

Becky Quick: (04:00:04)
This is one that comes from Thomas Lin in Taiwan. He says, “Warren once said that banking is a good business if you don’t do dumb things on the assets side. Given that the pandemic might put a lot of pressure on the loans, dumb things that got done in the past few years are likely to explode. Through reading annual reports, 10Qs and other public information, what clues are you looking for to decide whether a bank is run by a true banker who avoids doing dumb things?”

Warren Buffett: (04:00:29)
That’s a very good question, but I would say that the one thing that made Chairman Powell’s job a little easier this time than it was in 2008-09 is that the banks are in far better shape. So in terms of thinking about what was good for the economy, he was at the same time worrying about what he was going to do with bank A or bank B. To merge them was somebody or add strains to the syst or anything. The banks were very involved with a problem in 2008 and ’09. They had done some things they shouldn’t have done, some of them, and they were certainly in far different financial condition than now. So that the banking system is not the problem in this particular show. I mean, we decided as a people to shut down part of the part of the economy in a big way, and it was not the fault of anyone that it happened. Things do happen in this world. Earthquakes happen. Huge hurricanes happen. This was something different.

Warren Buffett: (04:01:53)
But the banks need regulation. I mean, they benefit from the FDIC, but part of having the government standing behind your deposits is to behave well. I think that the banks have behaved very well, and I think they’re in very good shape. I mean, that’s why the FDIC has built up a hundred billion dollars that I’ve talked about. I mean, they’ve assessed the banks in recent years at accelerated amounts in certain periods, and they even differentiated against the big banks. So they built up great reserves there. Then they built their own balance sheets and they are not presently part of Chairman Powell’s problem, whereas they were very much part of Chairman Bernanke’s problem back in 2008 and ’09.

Warren Buffett: (04:02:56)
How you spot the people that are doing the dumb things is not easy because… Well, sometimes it’s easy, but I don’t see a lot that bothers me, but banks are in the end, institutions that operate with significant amounts of other people’s money, and if problems become severe enough in an economy, even strong banks can be under a lot of stress, and we’ll be very glad we’ve got the federal reserve system, standing behind them. I don’t see special problems in the banking industry now. I could think of possibilities, and Jamie Diamond referred to this a little bit in the JP Morgan report. You can dream of scenarios that puts a lot of strain on banks, and they’re not totally impossible, and that’s why we have a [inaudible 04:03:58]. I think overall the banking system is not going to be the problem. I wouldn’t say that with a 100% certainty because there are certain possibilities that exist in this world where banks could have problems. They’re going to have problems with energy loans. They’re going to have problems. Some, they’re going to have extra problems with consumer credit. They’re going to have that. But they know it, and they’re well reserved. Well, they’re well capitalized for it. They were reserved building in the first quarter, and they may need to build more reserves. But they are not a primary worry of mine at all. We own a lot of banks. Or, we own a lot of bank stocks.

Warren Buffett: (04:04:48)
Greg, do you have any thoughts on it?

Greg Abel: (04:04:52)
You touched on it earlier too, just in general, which is we don’t know how long this pandemic will go. We don’t know if there’s going to be a second event, which are just risks that are really unknown at this time, and the banks will have to continue to manage that as the businesses do. But you’ve already highlighted that obviously.

Warren Buffett: (04:05:13)
Becky.

Becky Quick: (04:05:14)
All right, this question, I was looking for one of these, because I got several questions that came in similar to this. I was looking for one of these a moment ago. This one’s from Andrew [Wenky 04:05:22]. He says, “Can you ask Warren why he didn’t repurchase Berkshire shares in March when they dropped to a price that was 30% lower than the price that he had repurchased shares for in January and February?”

Warren Buffett: (04:05:33)
Yeah, it was very, very, very short period where they were 30% less. But I don’t think Berkshire shares relative to present value are at a significantly different discount than they were when we were paying somewhat higher prices. I mean, it’s like Cain said, or whoever it was. I don’t know. The facts change. I change my mind. What do you do, sir? We always think about it, but I don’t feel that it’s far more compelling to buy Berkshire shares now than I would’ve felt three months or six months or nine months ago. It’s always a possibility. We’ll see what happens. Greg, you think about repurchasing shares?

Greg Abel: (04:06:35)
Generally. No, I think our approach, Warren’s, the right approach. I can’t really add anything other than, the approach is the right approach. We approach it when we see it’s the right thing for our shareholders to be repurchasing. That doesn’t mean we’re repurchasing all timer or the view doesn’t change.

Warren Buffett: (04:07:00)
There could be a price relative to value at the time, not real as what it was worth a year ago. I mean, the value of certain things have decreased. Our airline position was a mistake. Berkshire is worth less today because I took that position than if I hadn’t. There other decisions like that, and it is not more compelling to buy the shares now than it was when we were buying them. It’s not less compelling. I mean it’s a wash. But the price has not gotten to a level or not been at a level where it really feels way better to us than other things, including the option value of money to stop up in a big, big way.

Becky Quick: (04:08:00)
This question comes from three investors in Israel. Lidars [Luf 04:08:06], Yossi Luf, and Dan Gorfung. They want to know about the credit card industry. It says, how do you explain the rise in the average credit card interest rate in recent years compared to the federal fund’s rate? What are the forces that you think might keep it at or around current levels and what are the forces that might drive it lower in the future?

Warren Buffett: (04:08:21)
Well, that is not a subject that I’m… Obviously it affects American Express to some degree. It affects the banks we own, but interest rates on credit cards respond to competition, obviously, to loss potential, which obviously has gone up significantly in the last few months. Although it’s gone down perhaps from some other periods you can pick in the past. But I don’t really have much I can bring to the party on that question. Well, that isn’t true. Our furniture companies, a couple of them have their own credit card or they do a lot of business on other people’s credit cards.

Warren Buffett: (04:09:11)
My general advice to people, I mean, we have an interest in credit cards. But I think people should avoid using credit cards as a piggy bank to be rated. I had a woman come to see me here not long ago, and she’d come on some money. Not very much, but it was a lot to her. She’s a friend of mine, and she said, “What should I do with it?” I said, “Well, what do you owe on your credit card?” She says, “Well, I owe X.” I said, “Well, what you should do…” I don’t know what interest rate she was paying, but I think I asked her and she knew. It was something like 18% or something.

Warren Buffett: (04:10:05)
I said, “I don’t know how to make 18%.” I mean, if I, owed any money at 18% the first thing I do with any money I had would be to pay it off. It’s going to be way better than any investment idea I’ve got. That wasn’t what she wanted to hear. Then later on in the conversation, she talked about her daughter and her daughter had $1000 or $2,000 or something. She said, “Well, what should I do with, she named the girls’ money?” I said, “Have her lend it to you. I mean, if you’re willing to pay 18% or whatever, I mean, she’s not going to find a better deal. I’ll lend you money.”

Warren Buffett: (04:10:50)
It just doesn’t make sense. You can’t go through life borrowing money at those rates and be better off. So I encourage everybody, it’s contrary to Berkshire’s interests in certain cases, and the world is in love with credit cards. But I would suggest to anybody that the first thing they do in life is, they can get to something else later on, but don’t be paying even 12% to anybody. I mean, it’s pay that off, and if they’re really a good credit, and they don’t want to do it, come and see me personally. I’ll lend you the money at that rate. Greg, what do you tell your children?

Greg Abel: (04:11:47)
Same advice. Excellent advice. No, I have three that carefully use their credit card. Obviously people use it a lot more as they go into the digital world and and e-commerce world, but then the goal has to be to repay it. It doesn’t mean you, because you have to use it for those types of transactions. You run up the balance. But there’s an incremental risk there now. I.

Warren Buffett: (04:12:17)
t’s a matter of convenience for some people.

Greg Abel: (04:12:19)
Yeah.

Warren Buffett: (04:12:19)
But I would have trouble, if I were paying 12% for money or whatever it might be, it would not be a good thing. You won’t see Berkshire paying that. [inaudible 00:14:43].

Becky Quick: (04:12:41)
Warren, this question is from Lindsay Schumacher. [crosstalk 00:04:12:47].

Warren Buffett: (04:12:45)
Well, we probably ought to wind this up maybe in 15 minutes. Can you select the best ones?

Becky Quick: (04:12:52)
Okay. Absolutely. I’ve got a couple more questions for you. This one’s from Lindsey Schumacher. She says, ” Warren, what’s your opinion regarding the Payroll Protection Plan?”

Warren Buffett: (04:13:04)
Well, I don’t want to get into politics generally, but I think that’s a very good idea to take care of the people that are having terrible troubles taking care of themselves in a period like this. I mean, if the government and surrounding conditions and whatever it may be. If you’re telling a lot of businesses essentially, quit doing business for a long time, and it’s one thing to tell me, but to tell somebody that’s living from paycheck to paycheck that way. I’m all for it. It must be hell to administer. I mean, any huge program. I’ll never get into criticizing on how people do this or that because I’ve had problems myself in running a few big things. It just isn’t that easy to inaugurate incredibly large problems.

Warren Buffett: (04:14:05)
There’s going to be a certain amount of fraud. Everything doesn’t go perfectly, but I am a 100% for taking care of the people that really get hurt by something that they’ve got nothing to do with. Who knows how long it lasts. You’ve got millions and millions of people that are worrying about something that they weren’t worried about a few months ago, and they didn’t do anything. They showed up for work on time and they pleased the people they dealt with, whatever it may have been. Now they don’t have a job, or they’ve been furloughed or whatever.

Warren Buffett: (04:14:50)
So, I’m totally for the basic idea, and I think it’s very difficult. We can’t carry it out perfectly. You do your best, and you do it promptly. I give real credit to both Congress for acting promptly on what the problem is. They’ve sort of caught on from what they learned in 2008 and ’09 I think, and I give credit to trying to do what I think is very much the right thing. I don’t sit around and think about how I could do it better. Greg?

Greg Abel: (04:15:25)
I agree with the comments.

Becky Quick: (04:15:32)
Warren, this question comes from Bill Murray, the actor, who’s also a shareholder in Berkshire. He says this pandemic will graduate a new class of war veterans. Healthcare, food supply, deliveries, community services. So many owe so much to these few. How might this great country take our turn and care for all of them?

Warren Buffett: (04:15:51)
Well, we won’t be able to pay, actually. It’s like people that landed at Normandy or something. I mean the poor, the disadvantaged, they suffer. There’s an unimaginable suffering. At the same time they’re doing all these things. They’re working 24 hour days, and we don’t even know their names. So if we go overboard on something, we ought to do things that are going to help those people. This country, said it a lot of times before. But the history of it. I mean, we are a rich, rich, rich country, and the people that are doing the kind of work that Bill talks about, they’re contributing a whole lot more than some of the people that came out of the right womb, or got lucky and things, or know how to arbitrage bonds or whatever it may be.

Warren Buffett: (04:17:07)
In a large part, I’m one of those guys. So you really try to create a society that under normal conditions with more than $60,000 of GDP per capita, that anybody that worked 40 hours a week can have a decent life without a second job and with a couple of kids. They can’t live like kings. I don’t mean that. But nobody should be left behind. It’s like a rich family. You find rich families, and if they have five heirs or six heirs, they try and pick maybe the most able one to run the business. But they don’t forget about… Actually, maybe a better citizen in some ways even than the one that does the best at business. But it just doesn’t have market value skills. So I do not think that a very rich company ought to totally abide by what the market dishes out in 18th century style or something was something of the sort.

Warren Buffett: (04:18:24)
I welcome ideas that go in that direction. We’ve gone in that direction. We did come up with social security in the 30s. We’ve made some progress, but, we ought to. I mean, we have become very, very, very rich as a country, and things have improved for the bottom 20%. I mean, you can see various statistics on that. But I’d rather be in the bottom 20% now than be in the bottom 20% a 100 years ago or 50 years ago.

Warren Buffett: (04:19:00)
But what’s really improved, the top 1%, and I hope we as a country move in a direction where people Bill was talking about get treated better, and it isn’t going to hurt. It isn’t going to hurt the country’s growth, and it’s overdue. But a lot of things are overdue. I will still say we’re a better society than we were a 100 years ago, but you would think with our prosperity we wouldn’t hold ourselves to even higher standards of taking care of her fellow man, particularly when you see a situation like you’ve got today where it’s the people whose names you don’t know that are watching the people come in and watching the bodies go out. Greg?

Greg Abel: (04:19:56)
Yeah. The only other group that I would highlight, and I think it’ll be very interesting how it plays out is with the number of home schooling and the children that are home. We’ve always had so much respect for teachers, but we all talk about how we don’t take care of them. It is remarkable to hear how many people comment that clearly we don’t recognize, or I have a little eight year old Beckett at home and plenty of challenges for mom, but all of a sudden you respect the institution, the school, the teachers and everything around it.

Greg Abel: (04:20:31)
Then when I think of our companies and the delivery employees we have, it’s absolutely amazing what they’re doing, and they’re truly on the front line. That’s where we have our challenges around keeping them health and safety. Then you go all the way to the rail. The best videos you see out of our companies are when we have folks that are actively engaged in moving supplies, food, medical products, and they’re so proud of it, and they recognize they’re making a difference. So a lot of it is we just sold them a great thanks. Warren, you touched on it. We can some way, maybe hopefully longer term compensate them, but there’s a great deal of thanks, and I probably just think an immense amount new appreciation for a variety of folks.

Warren Buffett: (04:21:19)
We’re going in the right direction all around the country, but it’s been awfully slow.

Greg Abel: (04:21:23)
Yeah.

Becky Quick: (04:21:28)
Gentlemen, I’ll make this the last question. It comes from Phil King. He says, “Many people in the press and politics are questioning the validity of capitalism. What can you say to them that might prompt them to take a look at capitalism more favorably?”

Warren Buffett: (04:21:40)
Well, the market system works wonders, and it’s also brutal if left entirely to itself. We wouldn’t be the country we are if the market system hadn’t been allowed to function. To some extent you can say that other countries around the world that have improved their way of life dramatically, to some extent have copied us. So the market system is marvelous in many respects. But it needs government, and it is creative destruction. But for the ones who are destroyed, it can be a very brutal game, and for the people who work in the industries and all of that sort of thing. So I do not want to come up with anything different than capitalism, but I certainly do not want unfettered capitalism. I don’t think we’ll move away from it, but I think we capitalists, I’m one of them. I think there’s a lot of thought that should be given to what would happened if we all drew straws again for particular market based skills.

Warren Buffett: (04:23:14)
Somewhere way back, somebody invented television, I don’t know what it was. Then they embedded cable, then they invented pay systems and all of that. So a fellow that could the bat .406 in 1941 was worth $20,000 a year and now a marginal big leaguer makes greater sums because in effect, the stadium size was increased from 30 or 40 or 50,000 people to the country, and the market system, capitalism took over. It’s very uneven and it’s only, I think the [inaudible 04:24:01] worth a lot more money than I ever should make.

Warren Buffett: (04:24:05)
But the market system can work toward a winner takes all type situation, and we don’t want to discourage people from working hard and thinking hard. But that alone doesn’t do it. There is a, a lot of randomness in the capitalist system, including inherited wealth. I think we can keep the best parts of our market system and capitalism, and we can do a better job of making sure that everybody participates in the prosperity that that produces. Greg?

Greg Abel: (04:24:48)
Yeah, no, I think it’s always keeping the best parts of it. I even think if we look at the current environment we’re in, i.e., in the pandemic and we have to do it only when we can do it properly and re-emerge. But in some ways the best opportunity for people is when we’re back working clearly, and that the system’s functioning again. But that’s the obvious. Then there’s, Warren, you’ve highlighted, there’s a lot of imperfections, but it’s definitely the best model out there that just needs some fine tuning.

Warren Buffett: (04:25:29)
Becky, at the end. [crosstalk 04:25:30] I could just say, oh, sure, go ahead.

Becky Quick: (04:25:36)
Can I just slip in one more quick question? I forgot this one. Someone sent it in earlier. Thanks. Anderson haxton wrote in, he said, “Warren mentioned that Ben Graham is one of the three smartest people he’s ever met. I’d like to ask him the names of the other two.”

Warren Buffett: (04:25:49)
Well, I may not be one of the smartest, but I’m smart enough not to name the other two. I’d make two people happy. Ben Graham is one of the three smartest people. I’ve known some really smart people. Smartness does not necessarily equate to wisdom either. Ben Graham, one of the things he said he liked to do every day was he wanted to do something creative, something generous, and something foolish. He said he was pretty good at the latter. But it was pretty good. It was amazing, actually at the creative. But it’s interesting that IQ does not always translate into rationality and behavioral success or wisdom. So I know some peoples that are extraordinarily wise that would not be in the top three on an IQ test. But if I wanted their judgment on some matter, even if I wanted to put them in a position of responsibility someplace, I might prefer them to, we’ll say one of the three. That’ll leave the other two feeling fine, of the three. Greg, do you have any thoughts on that?

Greg Abel: (04:27:18)
Nope, I agree with the person you named.

Warren Buffett: (04:27:24)
Yeah. Becky. I would just say again that I hope we don’t, but we may got some unpleasant surprises. We’re dealing with a virus that spreads its wings in a certain way, in very unpredictable ways. How Americans react to it. There’s all kinds of possibilities. But I definitely come to the conclusion after weighing all that sort of stuff. Never bet against America. So, thanks.

Greg Abel: (04:28:11)
Yep.

Becky Quick: (04:28:11)
Thank you. I appreciate your time tonight.

Warren Buffett: (04:28:13)
We’ll see you next year, and we’ll fill this place. Okay.