The 2022 Buffett Shareholders' Meeting has just ended. The 57th General Meeting, which has been held online for the past two years due to the pandemic, can finally be held offline. Berkshire Hathaway Chairman and CEO Buffett and Vice Chairman Munger reunited in Omaha, the hometown of the stock god, and had face-to-face exchanges with tens of thousands of shareholders, which shows that the charisma of the stock market is endless.
In a five-hour question-and-answer session with investors, the two “post-90s”, aged 190, answered ten questions from investors from all walks of life, covering various aspects such as macroeconomics, investment research and judgment, business operations, and life ideas. The most appealing questions included that reason is more important than intelligence in investment, and that the best investment in the era of high inflation is to invest in oneself.
The following is a transcript of the questions and answers of this conference
Part I Buffett introduces the company's first-quarter earnings report released in the morning of the same day
Berkshire's first-quarter revenue was $7.04 billion, and market expectations were $7.02 billion. Net profit for the first quarter was 5.46 billion US dollars, compared to 11.71 billion US dollars in the same period last year, down 53% year on year. Operating profit for the first quarter was US$7.04 billion, up 0.3% year over year. Berkshire Hathaway spent $3.2 billion in the first quarter to buy back the company's Class A and Class B shares.
Buffett: Once again, welcome to the 2022 Berkshire Shareholders' Meeting. Next, take a look at the schedule package. I don't know if you can see it or not. This package has a picture of a woman who was born in 1854, and today her picture has reached thousands of households. Her picture can be seen in more than 200 of our Heishi candy stores, and on every one of our candy boxes. She is Mrs. Marry C, born in 1854. Everyone thinks this is me. Actually, this isn't me. This is a lady. Although the two may look a bit like each other, it's really not me. This is a rumor, spread by our competitors, so don't believe it. This is a simple schedule for us today.
What else do we want to do? To our shareholders, owners, and our partners, and to give everyone the same information at the same time, I also hope everyone can return to the same competitive environment when the stock market opens. I actually don't even know how many shareholders we have now; this rule is always changing. So, it's really unclear. Sometimes we need a certificate or other proof, so it's hard for us to track it down.
More than ten years ago, we all had a list of shareholders, but we were told that these people who helped us send us information gave us some information, as if Brode Brage (voice), a company that sent us some emails and charged us $3.5 million. It helped our company send letters and also charged us $3.5 million. Charges are based on the number of our shareholder accounts. Do we think there are really that many people? We just discovered that so many people actually believed in us. I really think from the bottom of my heart that they are our partners; shareholders are our partners.
Many people will read our financial information, and many will say, “This is the money we saved, we trust you and Charlie”, which is a huge driving force for us. Trust us to help them take care of their assets, and we trust these people who use our financial information; you should have access to all of this information at the same time. The third paragraph of our shareholder letter also mentioned that we want everyone to get the same information, no one should have special treatment in getting this information, and we really want everyone to be fair in obtaining the information.
We just posted our 10Q report online this morning, which is our first-quarter 10Q earnings report, and I'd like to take a moment to make some brief comments on it. After that, we officially entered the Q&A session. In the Q&A (Q&A) section, CNBC's Becky Quick will ask us questions, which are also collected from the letters sent to us (questions). They will help us choose which are the best questions from shareholders. These are all questions asked by shareholders, not CNBC questions. We also take turns asking live questions and online questions. Of course, we also want to hear some surprising questions. Of course, not all of them will surprise us. We will have a lunch break at 12 o'clock and return at 1 o'clock until it ends at around 3:30 p.m.
I now want to print out my first slide for everyone to see. These are our numbers for the first quarter. This was just posted this morning. There aren't many surprises in these figures. Of course, some companies will do well, while others may not perform well. There are many reasons. The last thing you can see is that we like to use revenue figures, which are expenses amortized after tax, depreciation, and interest. Some companies like to report other numbers to you, but that's not the case with us. In the next 20 years, we also hope for more capital gains.
Our revenue for the first quarter was probably 7 billion dollars. This is the amount of cash we have after the quarter ends. Of course, this is not the case every quarter. 7 billion is actual money. From this point of view, these managers also include our operating managers in the movie we just watched today, that is, the people working on your investments, some of their achievements. After Charlie and I have planned anything, we will also invest in part ourselves.
However, in the past two years, including the first quarter we just showed today, we have made some different changes in our different businesses. When we met two years ago, around May, we didn't know that the pandemic would occur so suddenly in 2020, and the economy has surprised everyone. Today has already entered 2022. Here, I can tell you that Berkshire's current revenue is 7 billion dollars, and we still have many, many companies, including 360,000 employees, all of which are doing corresponding work with the money you have invested here. They still keep their original jobs, and they use your money at some level that is worth your benefits. Of course, there are risks in the middle, but I still feel very good about the results.
Our company has some very diverse tools. If there is a real permanent loss in work, if this happens to your fund, we will do our best to save it in the middle. You know how we work from the news and TV reports. Some companies have permanently lost all of the money you have invested. These are everyone's assets. I know you all believe in us and trust us. Charlie told me, “I want to know exactly which place will make me die faster, so I'm just not going.” The current situation is very solid. Charlie said, right, we all do this, right?
In terms of investment psychology, many people have actually died. If this money were to be lost, I shouldn't have done this in the first place. Of course, these are some crazy things. We feel very bad. If this were to happen, Berkshire wouldn't be able to really predict every investment, but we know what some economic trends should be, we know what we are doing, and we also know that when we wake up in the morning, we want to keep your money in the safest place, and we also hope to be able to place your investment in the most useful place. We want most of the money to be like this, because that's how you want to be our business partner. This is the purpose of our lives now, and it's also very fun.
Some of the indicators on the quarterly report, this is an interesting chart. When I wrote this chart, I wrote a letter to all of our investors. I remember that day was a Saturday; of course, I write letters all day long. I'm not saying that I write or don't send a letter or something. I'm sitting there preparing to write to our partners. I've already started writing next year's letter now. Think about what the characters are now? What should I tell my partners and investors? I was scratching my head at the time and didn't know what to write. My sister passed away, and she died not long ago. Should I write about our business? Would you like to write a little more about what else we're doing now? etc. The date on the letter, for example, I wrote it until February 26, but I didn't finish it on February 26. I also said that we bought some other stocks and some shares, but more than that, I didn't seem to see anything worth writing about. From January 1 to February 18, we probably spent more than 2 billion dollars. So, half of the quarter has already passed, and probably more than 30 trading days have passed. Basically, it seems like we're still doing nothing, we haven't done anything.
What happened next? We spent another 40 billion dollars in three weeks. Why did we spend 40 billion dollars? Because someone in our office said I have to spend this money, this is because of government funds and bonds. So that's what he did. I mean, he said I didn't just spend 40 billion dollars; it was actually 41 billion dollars. This is the job of this manager; he will do whatever he has to do. At Berkshire, he enjoyed some of the work he did, and he did it very well. That's the kind of person he is.
Therefore, in the first quarter, we have spent about 3 billion dollars or 3.2 billion dollars to buy a lot of shares, and everyone should have seen the figures in the annual report as well. Charlie said it would be nice if we protected ourselves from going to jail. But we didn't do anything bad. At Berkshire, we did something more engaging every time, and of course we didn't buy back at that time. None at the time of April (repurchase). But a lot of people are looking.
Talk about where your footprints actually remain, such as what you see when you walk in the woods. As you can see from this table, the 40 billion was deployed very quickly and went out within three weeks. For us, it's done based on the cash we invest.
In the second quarter, we often had a large amount of capital (so-called cash), not commercial paper. For example, in 2008 and 2009, when we experienced a financial crisis, everyone had a large number of commercial securities, but we didn't have these funds in this market at the time. All we had were some public debt, and we definitely believed in cash. In terms of all historical records, we know that if we don't have a few handfuls of money today, we won't be able to operate tomorrow, or we won't be able to afford it. This is like oxygen. Our cash dropped a bit on March 31, and its amount declined because we spent a large amount of money on some short-term investments of 40 billion dollars, but we made corresponding promises to ourselves, and we always want to keep a considerable amount of cash. Some companies buy some bank line products, but I don't know why they do this. Of course, there are times when local banks call these people every day and say what products we want to sell to you. Everyone thinks that the things in this kind of product are harmless and most beneficial, but there's no reason why all of their subsidiaries should be able to invest in their product line. Berkshire is better than these banks in this regard. Of course, I don't want to bully and abuse everyone; what I'm telling everyone is my feeling. We are all from the banking and finance industry, and we often talk about this stuff, and we may talk about this more later.
Money is one of the most interesting things, but people like to talk about money. Many people ask “money this, money that.” Figure 20-1. This is an image of a $20 bill. The top one shows a note issued by the Federal Reserve or the Federal Reserve Bank. You may see a different version on it. This bill has been in circulation for almost 100 years; it's just a Federal Reserve bill.
There is a signature in the lower left corner “...” (name of person) This official has signed all the banknotes more times than others. You have lived quite comfortably here, and you have been signing banknotes all day and night. It is written above that this bill is a legal exchangeable tool. For example, in a chocolate shop or candy store, you can buy a bucket of sugar or wheat, etc. for 20 US dollars. Of course, the IRS in the US also charges you some money from time to time. This is a normal transaction. This is just a normal transaction. This is the case in the US; this is the case in the US; this is the case in all of our lives. Therefore, you also often hear about different types of money. In my own personal opinion, this has been the case in my life or Charlie's. We see different types of money, which is a very interesting thing. Because it tells us that this so-called legal currency that can be traded is something we can always see in our money.
This is another version of the $20 bill. On this bill, of course, it's a picture of Jackson. This is also a 20 yuan bill. This is a bill with a face value of 20 yuan. This bank was printed in my lifetime. This bank is also the last bank Berkshire Hathaway bought, called the National Bank of Illinois. Moreover, we bought this bank in 1969. The person who signed it is called Jackson, and we still have banknotes issued at some time in our hands. They are not a single one; they are one-page printed banknotes. So, the National Bank of Illinois issued money at the time. However, everyone should remember that the US government said that it can become a legal tender that can be exchanged in the US; this is the definition of money. And now if its ability to spend declines, your cash may become worthless. When people can tell you that there are other forms of money being issued, I insist that only this kind of currency can help us pay.
There are a few days in 2008 where we may be very close to the situation we had in March 2020. Although we had a lot of cash on March 20, 2020, we almost had to repeat the 2008 and 2009 situation. We have a bookstore here, and they have published a book called “The Handling of Trillions of Dollars.” This book is something that many people want to read. It tells us about what happens every day in the Ministry of Finance and the Federal Reserve, and some basic information. However, you need to know that if the Federal Reserve did not take the measures they did at the time to help us reverse this situation in the short term, it is very likely that we will repeat our mistakes. So, I really want to take my hat off to Powell, who acted really quickly.
Previously, he was an operating bank. When we operated banks, in the 19th century, some banks might go bankrupt because of a line of business, so we were in Omaha, I remember in 1931, when the four state banks closed, and the national bank did not close, but it was on that day, during our economic recession. The Federal Reserve actually took measures at that time, so I want to tell you that Berkshire Hathaway also used this method. We would like to thank US Treasury Secretary Paulson, President Bush, and Federal Reserve Chairman Bernanke. They They have all taken measures. Without them, we would have had problems at the time. If the funds were electronic money or something else, the problem would be huge. For example, if you run a bank, I think your best way to compete, if you meet other people, you would hire a few people to line up at the door of other banks. I don't think the Fed would be like this. The competition between the two banks will cause one bank to fall, but the US Federal Reserve will never disappear. They will really help us do what is necessary, such as monetary policy and set rules. You can do this, you can't do that.
I remember in the 80s, Hull Walker (voice), a very honest person, told me, “There are actually limits to what you can do.” He is much taller than me. He told me at the time, “What are you talking about? We can just do what we need to do. As a result, there was such a big situation in 2008 and 2009, and almost the same mistake was repeated in 2020. Therefore, we also need to prepare for this situation in the future, but we hope Berkshire Hathaway will not fail and will always have its own advantageous position to operate. This is true even when the economy is stagnant, because there is a real possibility that economic stagnation will happen again. So, what I just said doesn't sound so optimistic.
Part II Q&A Session
Is it time to start our Q&A? Let's listen to everyone's questions. Our questions can be alternated between online questions and online questions. Becky Quick asks some online questions, and you can also ask questions directly to the four people on our stage. We will ask our on-site shareholders to ask questions, and both sides will take turns.
There are about 9 to 11 districts on site, and we can ask questions from every district. Charlie once went to a conference with me, and we also wanted everyone to help answer this question. Everyone originally thought it could be categorized, but so many people couldn't be separated, so we took turns. We'll take a break at 12 o'clock, have lunch, and come back at 1 o'clock.
Becky Quick: Your shareholder letter on February 26 mentioned that there seems to be a lot of east-west excitement for us in the current market, but on March 10, you bought Alleghany Insurance Company, and later increased its holdings in HP (36.63, -0.95, -2.53%). What happened on the day you wrote your shareholders' letter to the day you made such a big deal? Did you suddenly have that much handwriting in a month and a half?
Munger: We found something more attractive than bonds; it's that simple.
Buffett: Charlie usually tells everyone a complete answer; I don't even know how to add it. Our shareholder letter looks like it was written on February 26, but to be honest with you, this letter should have been on February 25 the day before. I received an email from my assistant David one day. He took a bunch of things on his desk at the time, and sometimes I collected these things he put on his desk. At the time, there was a note like this, just a few lines long. This note was written by a friend of mine from Berkshire Hathaway a few years ago, and it was February 25th. On that note, he wrote that he is now the president of Alleghany, and I have been following Alleghany for 60 years. Of course, not only this company, but all companies for me are actually interested in tracking them. However, I actually know quite a bit about Alleghany, a company that I have followed for 60 years. At the time, John mentioned in a note that this is my first annual report since I became CEO, so I wanted to send you this information. I'm writing this financial report, just like I'm writing a letter to you, so I wrote another note back to John. I said I'll read it during the weekend, and I'm really looking forward to reading it. I also mentioned, by the way, that I'm actually going to New York on March 7. Should we meet and have a chat? I actually had no plans to buy this company before that day, and I had no (acquisition) ideas, but I know the situation where I want to buy Alleghany, and if he hadn't sent me this note, it probably wouldn't have happened until he had sent me this note, or it wouldn't happen when I didn't meet him on March 7. As a result, John just sent it to me. Coincidentally, he sent me this annual report.
So, this is how it happened. This is one of our decision-making processes. I didn't call the investment banks and said I was going to see what their annual reports were like; it was just a coincidence.
We just want to buy Alleghany for a price we are willing to pay. If that email hadn't been sent, we probably never would have made this investment decision. So, if John hadn't sent us this annual report a week ago, I might still go to New York, but I probably wouldn't have met him and told him about Berkshire's plans. But you need to know, it was this event that ended up with this transaction worth over 11 billion dollars. Also, there are a few stocks that have become very interesting to us, and we have spent a lot of money on them.
Becky Quick: What happened during this time? The month and a half you just mentioned? I think it's important to understand this.
Buffett: In the past two years, I wasn't talking about Wall Street; it was the entire capital market, the entire environment of the big stock market, including the trading market, etc. In the past two years, this market was difficult to grasp, had great turbulence, and sometimes seemed to be investment-oriented. You've probably read it in the book, for example, what kind of performance the capital market will have, and you will also study it. But at other times, the stock market was like a casino, and everyone was gambling in it, and this phenomenon was particularly obvious in the past two years, and was also driven by Wall Street, because the stock market was really strong in the past two years. If you think about it, if you bought Berkshire in 1965 and kept this stock, but if you were a trader and kept this stock until now, you would starve to death. So, the way Wall Street makes money is speculation. Many people probably didn't think 200 years ago that capitalism would continue until now, so they can only make money when others want to take action, and these investment managers and traders can make money. They make more money when everyone speculates and gambles. Imagine if one person trades 20 times a day, just like on a slot machine in a casino. This is how they make money. They like to watch people trade, but the market is dominated by this situation, and this is reflected in one of my slides.
The first slide from Occidental Petroleum can show you how we bought it. Bought 14% of it in two weeks. Two weeks later, you later saw some different changes. The situation of Occidental Petroleum, some X funds, and index funds are all their standard names, as well as their other agents. This company owns about 40%, even though it hasn't done anything during this time. Then we saw that 60% of Occidental Petroleum can also be owned. It's a very big company, and it's been that way for a few years. 60% of common tradable shares. I went in at that time. I told MacMara (voice) that you are still 30 feet away from them now; you only need to buy 20% and keep the rest of this stuff
The first slide from Occidental Petroleum can show you how we bought it. Bought 14% of it in two weeks. Two weeks later, you later saw some different changes. The situation of Occidental Petroleum, some X funds and index funds, are all their standard names, as well as their other agents. This company owns about 40%, even though it hasn't done anything during this time. Then we saw that 60% of Occidental Petroleum can also be owned. It's a very big company, and it's been that way for a few years. At that time, I went in 60% of the common tradable shares. I told MacMara that you are still 30 feet away from them now. You only need to buy 20%, and wait here for the rest of these things. If you buy 14% of 60% for two weeks, this is not a good investment. This is a very surprising thing. Look at Berkshire-Hathaway. If we were to buy 14% of a company, it would take us a very long time to do that. But I think there are some overwhelming companies in the US, and they often don't do that; they become like chips on a gambling table, and after three or two days, they decide they want to buy it. More people feel like they are in a gambling machine.
This is what I meant. Obviously, with some overwhelmed or overwhelming actions like this, what is the direction of people? When these investors sit there, it is equivalent to seeing a group of companies he invests in begin gambling and buying 14% of the shares of a company in two weeks. This company already has a record of about ten years. Sometimes you think again. If you want to buy 14% of a farm, look at it in two weeks, or buy an apartment or car dealership with 14% of shares, etc., if we were to define anything, Charlie and I saw this situation, we have never seen many Americans do this kind of thing today. What kind of situation would it be if you wanted to make money from these gamblers? Therefore, situations of recession can sometimes be huge right away, and you will see it in a few weeks. You may have seen some of this phenomenon a few weeks ago, and it may have happened between you or around you.
This raises some better questions. What were you doing on February 20? I just talked about Occidental Petroleum on February 28th. One analyst gave a demo. I don't remember in which quarter, at the weekend, when our annual report was released, some things sounded unreasonable. It sounded like Berkshire Hathaway's money could be invested in this company. It was still OK after two weeks of tracking, but it wasn't a black letter or a move that wasn't black and white. We all know everything that this company has experienced, after some circumstances in operation. Who can guess how much it will actually be worth next year? So no one can predict these situations. We think we were able to observe 14% of shares after 2 weeks of observation, and we already had relatively good preferred shares at that time. We had paid about 10 billion dollars in stocks before, but at the end of March in the first quarter of 2020, at the end of March, we felt that its value was worth 20 billion dollars. In terms of our 10Q report, there was probably a difference of at least 500 million in the middle. As a result, the world's environment is often undergoing rapid changes.
Therefore, we are very happy. We are able to produce at least 11 million barrels of oil a day. If we need to find 11 million barrels of oil in the US, it is very valuable all over the world. We also hope that the US industry and industry can continue to operate continuously.
Charlie, do you have any comments? What do you think of the matter we're talking about now?
Munger: I think what is happening now is really, really surprising, and our computers can do the computation and speculation of so-called computational mechanisms. When it comes to investing in stocks, many people have to ask them to give you any information; sometimes computers can't calculate it. So, these situations are really, really surprising. If we can actually find a system that can actually calculate the activities done in casinos equally, that's unlikely. After such a long period of investment, we have seen it all. With all the stocks in your country, wouldn't it be crazy if you traded like playing games of shinny or roulette in a casino? But let me tell you, of course, I respect their thoughts, but this kind of thing is still happening. It's not us, it's other people.
Buffett: Our stock exchange was in 1992. The situation at that time seemed different from the current situation, but this is what happened. This system gets lost sometimes. It seems like in my life, this situation has happened three times, which is unbelievable. Of course, it can still work, and it will drive it on its own. In this country or other countries, some very, very unbelievable situations have already begun to occur in the US. It has happened three or two times in this life. Where we are meeting today, 1867 and 1789, ask Benjamin Franklin to know what the situation was like then. The prosperity of that time is compared to the present, and it is now in Nebraska. That is a very unbelievable result. People are encouraged to gamble and do gambling-related things. Charlie said this is a very volatile market. Charlie and I are also discussing this. We'll talk about how we won't do anything other than a casino.
What's our answer? I married my wife in 1952, and I remember it was April 19, when I was driving my aunt's car, and finally we went to Las Vegas. At that time, we met three people there. All of these people were from Omaha. They bought something at the Flamingo (voice) hotel at the time, but what happened a few years later? This is a very bad investment result. There were also three people from Omaha like us. At the time, in Las Vegas, where we lived, Sun Axe's uncle also lived nearby. Forty or fifty years later, this kind of thing actually happened. The Red Crane (sound) Hotel was not a big hotel at that time. Like a motel, I was 21 years old and my bride was only 19, so we looked east and west, walked and watched the flowers, and we didn't wear very good clothes. Some people flew thousands of miles to play there and did some very dramatic gambling there. They really traveled thousands of miles to this side to tell me what to do. They wanted to come back and forth soon, no matter how hot the weather was there. However, I watched it there at the time, and I think everyone knew that after math, many people still said I wanted to travel thousands of miles to play here. My wife came to me and said that we have arrived at the casino, and we are about to get rich. I said how could you think that way? It's just that we have this chance. Many people say this is the source of opportunity.
Later, we saw that the Flamingo Hotel was getting bigger and bigger. We still stayed in Omaha, and Jack Coke said the same thing. There is also a spiritual leader called Simon Jackman Sam Seckman, who is Son Jackman's nephew. Charlie invested with him in some blue-chip stocks, the Buffalo News Company. At that time, we also noticed some very strange people in the financial world. Operating some of the markets above (stock markets), sometimes you can see how they are written in books. At least if you read the economy or economic history, you can also see 1936... It describes some of the conditions in all markets in 1936. When he describes some of the markets in 1936, he talks about how some markets are very, very beautiful, and full of situations where flowers are in full bloom.
The March year, Occidental Petroleum's deal sounded very crazy. At that time, we considered 4 other different agencies, and we didn't make such a decision. At the time, we thought we could buy more shares, but we were wondering, if anyone was considering which investments were the best, if I could go back now, or if I could invest in more stocks, I could make more money now, but who would think that way at that time? So, even though you have the power to buy now or the ability to buy, sometimes you still have to follow the results in the book, and you have to default to some of your current spending conditions. When investments occur today, there are times when there is no way to predict it. This is because I am talking about some people who have bought farms, bought farms, but some people say that I will leave this plot of land to his children later, but children won't sit there every day to help you grow them, or observe the growth of these grains and crops; I don't know if they will grow 15 times in the future, etc. Will you call and say where it has sprung up and where it has grown today? None of this can be seen.
Everyone wants their farm to be more valuable, right? This is an investment, isn't it? Whether it's a car shop or building an apartment, this is an investment. All companies in the US now add up to about 40 trillion dollars, and many businesses already have their own systems. For example, if you trade a stock within three days, these traders will also teach you how to buy and sell it, but if you think about it, this may not be comparable to a farm. Farm trading should not be like this. This is also why the stock market is so volatile, and sometimes they do crazy things. Berkshire can play its part in this. It's not that we seem smarter than them, but we are qualified to do it; we are sensible enough. This is a characteristic that the industry needs to have.
Munger: We've never been in a crazy situation like now. We gamble like crazy, buy fast, sell fast, and don't look good. Nor do I think this is the glory of capitalism; that is, a bunch of people are just throwing colors there. After throwing color, close your eyes and see what will happen. Of course, getting rich isn't a bad thing, but you also need to find yourself inside and see how to fit yourself into such a system.
Buffett: I have a lot of Wall Street friends. Of course, if I keep speaking this way, these friends won't be friends. There are a lot of Wall Street people who make so many decisions every day, but I want to say what is the real meaning? The US system has actually been running relatively well for a long time. It may not be fair in many places, yet it has brought us a lot of differences and brought us a lot of benefits. Of course, I don't want to go back to the old days where there was no air conditioning, and the whiskey everyone bought wasn't pure enough; I don't want to go back to that era. The present era is very good with the development of capitalism.
Munger: Because of this insane gambling behavior, we have been able to stick to the way we have operated for so many years.
Buffett: Yes, we depend on that too, right? Of course, we will also rely on this difference in prices in this kind of business, but we are not responsible for this price difference or for improper prices. We just use the right attitude to persist for a long time; we don't need to think our IQ is too high.
Question: I'm from Hanover, Germany. This is my first time in Omaha. My question is that Berkshire Hathaway bought a company outside of the US and bought it in full. There were probably a few companies before, such as Louis in Germany. My question is, will you only answer phone calls from them if you are interested? Or will you be more proactive in reaching out to them? Are you passively waiting for them to call in, or are you actively contacting them?
Buffett: I've traveled a few times before. We want to stimulate this kind of interest and bring Berkshire to the world. We did that about 20 to 30 years ago. We did a lot of things at the time, and spent at least 5 billion US dollars during that period. In this field, we bought three German securities and integrated some of the holding companies there at the time. We were willing to buy them, but they felt that we were not moving fast enough. I don't need anyone to send me an email asking if I want to buy the company. For example, a company like Alleghany, I've been following it for 60 years, and I can cite some other examples. It's just that this situation is unlikely to happen outside of the US; after all, the environment is not the same. We will at least be a little easier on the mainland US side. It's not that we seem biased. There are some companies we may be able to buy in ten minutes. As long as we have people there who are willing to do business with us for ten minutes, this is also a very impressive business. However, the complete acquisition of a company in other countries is much more complicated than in the US, and there are rules that must be followed.
I remember a phone call like this coming in many years ago from a company in Germany. Two people were running this company at the time, and they might be sitting in the audience today. They are really amazing, they operate very well, and they operate with integrity. Also, in the short movie we just released, there are images of them. They are also managers of our company. However, it's really hard to find this kind of idea, and there's no way to ignore any of them. I would say that a company like this must be large enough. I really like the kind of company we bought in Germany, and I am optimistic about the way they operate. I am also very pleased to establish this kind of connection with them. Not only has it brought more financial impact and greater benefits to Berkshire, but I also want them to pay attention. We also really enjoyed buying this business back then, but there's no way we can keep doing it this way.
You also know that if we buy it, we won't buy it easily, and Greg should have his opinion too. But if we get a phone call tomorrow, it depends on the situation, and it is possible to make a deal. Even in Germany, France, the United Kingdom, and Japan, a deal of 10 to 20 billion dollars is possible. About a few years ago, we all bought some of the top five publicly listed companies in Japan, and did some integration, but I also told them we wouldn't buy too much; we might change our positions for a while, but you see, now they all add up to 5.85% of the total positions of these five companies. So, I also made this kind of investment. President Kennedy said that if you pay, you will also have to climb this mountain to find such a company. But we probably prefer these companies to take the initiative to give us a hug and fall into our arms. If you think about buying a company, if our board of directors also felt good, you wouldn't be likely to increase your debt or anything because of buying these companies. So, let's take a look at Alleghany's example. After we bought it that day, we lost 11 billion dollars in cash in one day. So, opportunities can come from anywhere.
Our operations in Israel are also excellent; they are operating very well, and the scale is impressive. Of course, we also hope to vote for this company again. Charlie, what do you think?
Munger: The key is to be able to find it, think about buying a company and spend 60 billion dollars on our own. Of course, we have to like this company, and we have to like this price, without too many other costs or human resources. But think about it, isn't this a waste of time?
Buffett: You might look at the stock repurchase figures we made. This rule is actually not complicated. For example, if you know someone who sells lemon juice, and someone wants to buy his business, their price is right, it is beneficial to both parties, so that both parties stay in this business, then this deal will happen. It's just that simple. But the interesting point for me is what exactly can you accomplish in the middle? Many people don't pay much attention to this. If you think about 1998, 1998 was over 20 years ago, and there were about 150 million American Express shares. In 1998, we bought our last stock and owned 11.2% of the company's shares. This is a great company, and they gave us dividend checks every quarter after that.
So, little by little, we're also collecting cash from them. We now own 20% of American Express's shares because they bought back shares and increased our shareholding. If they buy back stocks, although they won't solve any problems, the buyback is really a good thing, and they also have this sense of ownership. They are willing to do it. It is this that has brought our shareholding ratio from 11.2% to 20%. If you also use American Express today, 20% of this profit will contribute to our dividends. Moreover, we are not investing or spending more money in the middle.
Imagine if you have a farm, for example, this farm is about 640 hectares, and you work inside every year, enjoy the harvest the farm brings you, and earn a little money every year. After about 20 or 30 years, this area will even expand to 1100 or 1,200 hectares. So, over time, everything is possible. Of course, you suggest that this is probably how the US is doing, and the cost of any capital must be taken into account, but I want to say that as long as the price is right, buying back and investing in everything you own is a good thing.
Our interest in Apple is also because repurchases continue to grow, and their annual revenue can even reach 100 billion dollars. As long as our dividend increases by 0.01%, it will bring significant benefits. They have also just made a first quarter report. They also have some of these stocks. Our shareholding on Apple's side is also growing. We also hope to own more of their shares. Regardless of whether their shares are higher or not, we are still interested in them. Some internal information and other things make us feel better because we've already bought these stocks on the market, and they've used their cash to buy shares in other companies. It's a very simple way to operate in the world. You've read it, but some people don't seem to understand it either. They own a farm, but on the farm next door, I'm wondering if I'm putting my money on other farms. If you use some of the profits you've earned, you feel really good, and you can explain it yourself, would you just do it? Isn't that right, Charlie?
Munger: When we were the president or company director, we all had some ideas. The chairman, or some executives in the board of directors, they would explain things differently. They think that in the US business, many things cannot be separated. However, as far as I am concerned, there are times when I hear some very nonsensical comments, and there are times when the war is lost, and there are times when we will definitely win. But in my opinion, if I can't win now, what will happen in the future? Some people don't know how to do business at all, will they win? Of course, I'm not going to criticize any more; you know what I mean, right?
Buffett: We finally got our annual report out. On page 9 of this report, I explained it to everyone, and I wrote something. Maybe this idea is crazy. For example, in 1960, 1970, or 1980, I left this matter to certain managers. Today's investors also trust us, in the same way they respect each other. Some people say that the salary of our manager today is based on what kind of recovery he can get from the business he can carry out; some say this policy is insane. Sometimes if you're really doing it too big, we of course have to make sure he's not playing too much or too crazy; we need to make sure the right person in our career is doing the right job. There are 3 million of our investors or shareholders. On March 25, one month after I wrote this letter, probably in the second or third section of the (announcement), 101 million B-shares. We hope to discuss Berkshire-Hathaway's vision and what we have in our management and support letter in this letter to you for the 2022 Annual Shareholders' Meeting. We're just a company, so let's write about these companies and tell everyone, do we want everyone to attend my shareholders' meeting? Of course, this was my original intention.
I grew up in a completely, very, very Democratic family. At the time, I felt that there were often people or things I really couldn't imagine. You can understand what I'm saying. But you know that when you pay him, of course, many people do. They hire people who specialize in public relations, or some very senior consultants, or some have been CEOs or chairmen of companies, or top executives, etc., CEOs, etc. However, in 90% of the parliament, for example, if this person is the CEO or has never been the chairman of the board, it is actually the same. In some organizations, every large company has 10% of people who can vote and have the right to vote. I think this is a good idea, as far as index funds are concerned. However, in so-called bureaucrats or similar situations, this person must be a very trustworthy person to be able to truly do the work he is currently doing. Anyway, sometimes we don't have special meetings for certain things. You know what I mean, you know what the facts are today.
Becky Quick: We are now able to maintain some of the profits combined with GEICO. In railways and Progressive, what kind of policies do Greg Abel and Ajit Jain face today?
Greg Abel: As far as BNX Railways is concerned, we have done a very good job. In terms of operation, including the ratio of our operation, as well as the mechanisms we do, it is all very precise and very accurate. Therefore, at BNX, our first priority is to target our customers, understand their needs, and hope to provide them with the best and best service, so that we can contribute the greatest profit back to our shareholders. We have also made different arrangements at different levels, in terms of operating mechanisms, and all policies, and we still carry out this way every day of operation. For example, we have connecting cars on trains or railway couriers, etc. We are very proud today. We have not ignored any facts. We have paid attention to the most important matters that our customers focus on. Our current leadership and all of our leaders, management, and employees are also among the best people BNX has hired. From the perspective of long-term transformation, we have had very accurate and valuable long-term results. This is the most important part of our current team that we want to focus on and build on our alliance.
I can tell you that we still have a long way to go, but we will continue to work very hard to do it.
Munger: You've provided a slightly better opportunity, and you've done the best in trading. All of our alliances today and our leadership are the best.
Greg Abel: Thanks Charlie for the guidance I gave me.
Buffett: Thank you Ajit Jain. Ajit Jain and Greg Abel are my best and most important partners. It's been about 20 years, more or less than 20 years. We originally bought an energy company too. Its owner is David Sogg (voice), and they really know how to run an energy company. I mean I'm not using numbers to tell us if they're doing a good job, but the way we work, we think we've found the perfect manager, so we leave everything they can do in their hands. So, really, we are now changing the results of BNX operations, and we have done a fantastic job. We have 21,000 miles of railroad tracks. The things you have to do in the middle are really tedious. You have to continue to maintain these railways, and this is a century-old undertaking. Of course, this railway is here, and it is not possible to change or move it to another city at any time. When I first arrived in Omaha, Omaha had this city since 1862. When the railroad was here, none of the rivers it passed through had changed.
So, in the Midwest region, after we opened up business in the Midwest, we actually made some arrangements for the century-old business. Other parts, our assets are also very important. The more important part is that Berkshire will deploy better, more precise, and more impressive combinations. Over 150 years of history, our world has undergone major changes, but we will try to accept these, but let's not forget that there are 100, 1000, and 10,000 of these railways, and they can't be changed anytime overnight. So, Berkshire shareholders, sometimes we do certain things over and over again.
Why would we do this? It is done for some of our country's or our local strengths, putting their interests above all else. This is true of us no matter who is in power today. After 100 years, the current railway system will be better. I can tell you that of course I can't completely promise you that we can do this, but this is our goal. These railways can cross different fields, make disruptive changes in cargo transportation, etc., and have amazing results. Therefore, railway transportation is undergoing major changes every day. I don't know how many bridges there are in our entire country. A few years ago, to maintain these bridges, it would cost about 34 billion dollars a year to operate all the railways, railway bridges, and transit expenses. I think I can handle this. Charlie thinks the same way I do; we can accept this kind of cost. But the next bridge needs to be built again, or this bridge is called the Charlie Munger Bridge, what do you think. Charlie asked me the same question ten years ago.
Ajit Jain: The most important question right now is about the insurance industry, an industry that is very following up. Alleghany and Progressive are two very successful contenders in this industry. Of course, these two companies have both disadvantages and advantages. We have also told you before. This goes without saying; every company has strengths and weaknesses. Regardless of its profit margin or other growth conditions, the most important thing is, as you all know, GEICO has many strengths, but Progressive has made a lot of changes over the past few years in the midst of changes in our environment. Therefore, for the past 20 years, GEICO has used so-called proprietary methods until now. This insurance business has a very long journey, and it is still trustworthy. We expect that after one or two years, Geke will catch up with Progressive, a company called Progressive. Under its own mode of operation, we also hope to bring us a growth rate and a stronger profit margin by improving them.
One point is very interesting. The auto insurance industry is really exciting. The biggest auto insurance company. If we talk about the situation in 2022 now, when did Ford invent the car? In 1903, the automobile industry was just starting out. It didn't take long for 2 million cars to be produced a year. How much of an industry has been disrupted by the power of one person? Therefore, car insurance has also become a very important part. One hundred years from now, when people think about insurance, they may think more about ships sailing at sea or protecting other parts of our community. Insurance products are already a very historic product, and so are automobile products. GEICO, a company founded in 1930, has taken us a long time to gather good ideas, and many companies have ups and downs. There are many large auto insurance companies in the US, and they actually don't want to do auto insurance. If you go to business school, you'll learn a lot about how to manage capitalism. Progressive is one of the biggest companies, but it hasn't made too many people rich. When LEGOOD (English) started 80 years ago, they wanted to get rich with this company, and so was Progressive. Many companies of this kind had this idea. But who won? It was this kind of mutual fund type company that eventually became rich. The current market capitalization is about 140 billion dollars. Progressive's owners are very, very smart, and have been running this company for a long time. Their market value is probably only 1/8 of the people in Irinoy who know that they have been selling the same products for a long time. We have also spent a long time doing this. There has been no change in the insurance policy policy. This kind of policy should not have survived under capitalism. If GEICO starts competing with Progressive today, who will give you capital? There are only mutual funds. I don't know how much Progressive's market capitalization is now; it's probably $230 billion, and this is no accident. They are very self-disciplined, and they are very self-disciplined when it comes to insurance policies. In terms of investment, their market capitalization in the first quarter exploded. Of course, because they had bonds, everyone did it that way. There are times when half of the companies do what everyone does, and the other half wants to do their own business separately from everyone else. Pete Lewis came to my office 40 years ago and sat down. He was a really smart person. I said at the time that this person is likely to be Berkshire Hathaway's main competitor. He knows a lot about insurance, but he ignored the investment aspect, including underwriting, etc. Therefore, how a company or organization operates and how it performs its functions is really interesting.
Charlie and I also have a lot of blind spots, so we have to be careful and cautious when criticizing others. The auto insurance industry must be studied well in business schools, but currently many schools do not teach this.
Thank you Ajit Jain for the answer just now. Ajit Jain is responsible for adding more value to Berkshire Hathaway, not just helping us compete with Progressive here. Everyone should understand this. He has done a lot alone. The value he has brought to Berkshire Hathaway has surpassed Progressive's market value.
Q: I'm very happy to see you, and many Berkshire Hathaway managers, and I also want to thank you for everything you have done. I'm from New Jersey, and my question is about market timing. You've always mentioned that it's sometimes very difficult to keep track of time, but if you look at your history, you've been very good at timing every time you make critical decisions. Stock market trends were captured in 1969 and '70. In '74 and '75, when the stock market was cheap, you also invested a lot. The same was true in '87, '99, and 2000. You have a lot of cash on your hands today, and the market is declining. How can you seize these market opportunities so well?
Buffett: Sorry, let's offer you a job first. You know our history so well, I want to give you a job. We actually don't have any idea about what the stock market actually looked like when it opened on Monday. Charlie and I, we've always been like this. I can tell you later about our story and how we learned from that time. But we never had to make a decision. One of the two of us decided to buy and sell because of what the market wanted to do. Or we don't trade based on economic conditions, because we don't know at all. Sometimes people say it depends on how good your previous investments were. We remained optimistic when the stock market plummeted in 2008. We spent a large part of ourselves investing during the recession period. About 15 to 16 billion dollars, we spent about 3 to 4 weeks in the past few weeks. This was also the case in 2008, when Goldman Sachs (305.49, -12.92, -4.06%) was in crisis. The overall situation at that time It is declining and declining. There is an article in the New York Times saying that we should trust the US and buy American goods. I just wanted to say that if we really knew about this timing, we might wait another 6 months. Actually, I completely missed this opportunity at that time, and I missed the chance that the stock market fell sharply in March 2020. We're not saying that we're particularly good at timing; we're probably fine, but we're not saying we're doing it with such precision. Of course, we also hope that the downturn will last a little longer, so we can invest more, because if the price is cheap, we will definitely buy more. This is a principle you can learn in the fourth grade of elementary school, yet such a simple principle has not been learned or taught much in school.
Now that you've said that, let's boldly admit that we are very good at timing. But to be honest, we didn't mean to seize the moment at all, and we didn't talk about so-called unique market insights. Was it March 11, 1942 or 12. The stock I bought at the time. The Dow Jones (32977.2109, -939.18, -2.77%) index was 90 in the morning on the day I bought the stock. It seemed like 99 when the market closed, but now it's over 34,000 points. Of course, today seems to be down 1,000 points from Thursday. But you need to know this. It's a simple decision; it's a decision you make when doing business in the US.
It's a good thing that you own a business in the US. If GM comes to me with these pensions, tell me what we want to do, bring together investment managers every three months. We are operating in the US, and we have been doing business in the US for 50 years. No matter what, I will do a good job in investing in stocks. This is the advantage that the American environment has given us. So, if everyone knows that this is a very simple game, as long as you stick with it in the US for a long time, many speculators will disappear. Because of human nature, sometimes some of the things they do don't bring much value.
I really don't want to use an example like this. Some monkeys have no idea what they're doing, or what they're doing, but I still want to invest in them because they don't have that much greedy humanity. Charlie, would you like to add anything?
Munger: In the wealth management industry, for example, if you go to your investment manager or investment advisor and ask, “What are you going to do? What's going to happen in the future?” I'll just ask if you want to give me 50,000 US dollars now. This is my contribution to your future. It's a really interesting industry.
Buffett: It's great to get rich here. If you have a kid who wants to make money, if he has enough intelligence and energy, then go to work on Wall Street, you don't have to let them go to school. If this is what you want to do, because that's what you want to do, because that's where the good and the bad are eliminated. Because human nature is like this, human nature is about acting in accordance with one's own interests. This may not be the case in the long run, but at least this is the case in the short term; they just want to make money. Some people present now also saw that we just released a video. I heard in Congress on Solomon's case. Jerry was the chairman of the New York Federal Reserve at the time, and the committee asked him a lot of difficult questions and criticized him. What was he saying at the time? Who is currently paying the most money for this room in Solomon last year? I can't figure out what his name is all of a sudden, but I remember that he apparently made about 20 billion dollars last year. At that time, when I was talking about 1991, this money was quite impressive. How old is this person? Looks like he's only about 26 years old. Colgan couldn't refuse. He said I couldn't catch even one football, and there was no way I could lose it far, but I think this amount of money is much more expensive than losing a football.
I had a hero in mind at the time. At that time, he only earned about 25,000 or 20,000 a year. So, at that time, you can imagine that you could have earned 2.24 million for so many years. These people should be grateful. There are about 30,000 to 40,000 people seated in one stadium. Many of them are investments you have contributed to them, and only then can they earn this money. Then, after we had about 30,000 to 40,000 people, we started to have television again, and capitalism began to flourish. Also, there are more other technologies, and radio, so Wall Street has also undergone major changes.
Some things seem to have been reversed now. Now they are developing TVs or other things, and the world is different now. Some things don't seem to be quite the same as before. Everyone seems crazy about everything, but the way they work still seems to be very ingenious. Some people will also seize the opportunity to seize better opportunities in these times of system change. But that doesn't mean you have absolutely some things that don't need to be changed; you need to know where your bottom line is and where is your human bottom line.
Charlie, would you like to add on the big package I just mentioned?
Munger: Some of the phenomena we have seen today are very, very interesting. In the wealth consulting business, many people think he has these skills, yet he is hiding in a so-called cabinet and not talking about it. I mean, even though many people invest, they lose money on consulting fees. A lot of people do it this way. Sometimes it's not serious, but it's a bit ridiculous and a little funny.
Buffett: Charlie, I know what you're saying. What you're saying is like what happened in a movie. In other words, when we first got married, we thought the girls I liked were all very, very beautiful, but then you expected everyone to show the same interest in ourselves. Of course we have weaknesses in married marriages, but some people don't show their weaknesses when dating.
Munger: I probably did a little better myself, especially when I was only 17 or 18, and I didn't feel the same.
Buffett: That's right, we're talking about luck, and sometimes if it comes to you, you can't resist it. Of course, you can't be too demanding, especially from people. If he is very fashionable today, does he also have a chance of winning the lottery today? Sometimes you find out how foolish you are, and the things you've done make you feel like you're about to laugh off your teeth. I'll say this for the second part of life. In the second half of your life, you can do basic work. Of course, I can't say that I have any so-called IQ tests that prove that I'm better than others, but you can learn while interacting with others. So, at age 2, there's probably no way to learn much. But now that we're talking about machine learning, it's now starting to develop in more parts of the world, but it's amazing what little minds who learn at age 2 can learn. In particular, with 40 years of experience, you will definitely get better and better when it comes to the behavior of humans and all animals. Therefore, the second half of life may not be the same as life. I'll say this, how can you make better choices in the second half of your life and forget everything you chose before, but you must enjoy the second half of your life. I mean you've been in the world for so long today and have seen more hope and real things. So, you need to be more hopeful for the rest of your life and respect the outcome of everything that happens. Of course, some people have a very happy life and are very sensitive, but I hope that when my life is criticized by everyone, the results in the second half of my life will be much better than the first half of my life.
Munger: I don't think about my confusing youth now; sometimes it's really embarrassing for me.
Buffett: If we want to give Charlie a short test today, we'll take them later.
Becky Quick: Ajit Jain, a few years ago Mr. Buffett mentioned that if we were to suffer a nuclear attack in the insurance industry, what would be the consequences? If a real nuclear attack were to occur today, what would the Berkshire insurers do?
Second question, Greg Abel, if your energy company suffered a cyber attack today, what would you do about some of the corresponding things? This is about the security of attacks.
Buffett: I already thought about it in August 1945. I think about these things every day. Of course, things are progressing dramatically fast. Some of the second-largest companies in the largest countries have been victimized as a result of millions of people being victimized. Therefore, risk exists every day. Of course, the risk is probably very minimal. Ajit Jain will show you a table he made. If a risk occurs today or something like this happens, if you throw money in a Las Vegas casino today, what are your chances of winning the lottery. We're talking about hope equal to one in eight million. If you keep throwing this color, what will happen in the end? Today, 330 million Americans do the same thing every day. Ten days from now, you'll find that about 330,000 people in the middle will do the same thing, but some people will have a higher rate, or 20 times more (the chance). We've all learned these results. If you really need to control a situation that turns over, or whether you invest this coin at the beginning or end, sometimes it's possible that our planet will all be destroyed. This is an insignificant outcome. Unfortunately, many people have bought some nuclear weapons stocks, such as ICBM. Some people will be very unhappy to hear about the original textile technology and the current weapon technology. There are probably thousands of people in the middle who are now starting to develop technical weapons. This is a very dangerous social event.
Munger: Of course, this is something we can't protect, and there's no way to predict it. Some people are still playing these dangerous games, so you can kiss my butt, and I still won't do it.
Buffett: If there's real danger, I'll get under the table, and I won't do it. Charlie's method of taking refuge is different from everyone else; Charlie is out of control.
Munger: We don't have a solution right now; we still can't find any solutions.
Buffett: This is a very, very huge question, if you have to talk about it. In August 1939, it was September 1. When this incident happened, no one knew. When you saw it on the news later, I still wanted to go to the movies that day because I knew the air conditioning in the movie theater could be turned on. It was August, and it was very hot, but in September, Poland's military action took place. Many people saw on the screen, and also saw what was happening in Germany, as well as the situation in Poland at that time. Many people are being slaughtered every day now, and we are very sympathetic. However, in August 1939, as I mentioned in my New Year's shareholder letter, why didn't President Roosevelt make some corresponding notices at that time, or why did he not know? However, some of the massacres had already happened at that time. Of course, Leo Szola was clearly involved in this incident. Leo Szola finally came to the US again. He wrote a letter telling President Henry Roosevelt that of course there were many campaigns in the middle. He wrote this letter to the then president. He said that many things will happen in May, and the US must pay special attention. I don't know why he wrote a letter to President Roosevelt all of a sudden; did Einstein also help him endorse it, so is this letter that our president will pay more attention? Or did Einstein and Leo Szola write it together and co-endorse this letter? This letter was sent to Roosevelt (telling him) about the massacre of Jews. Then the atomic bomb happened again. Nobody knew it was going to happen. Fortunately, Leo Szilard and Einstein also learned about this incident and notified the President. Fortunately, they moved to the US at the time. Indeed, in terms of the atomic bomb, they probably avoided several possible conflicts. Sometimes when geese were flying in the sky, we all felt like bullets were flying, the wind was loud, and the trees were all in the army. We were very alert at the time and thought what was going to happen to the Soviet Union.
In general, I would say that if this kind of atomic war or nuclear war were to occur, we would be helpless. Berkshire said that for everyone in the world, we don't want to think about these things this way, but it is undeniable that in these major countries in the world today, if there are any calculation mistakes or misunderstandings, we will all be very close to this situation. This was the case in the past. It almost wiped a margin several times, such as the Cuban Missile Crisis. Charlie and I both went through that time, and we all knew at the time that weapons of mass destruction were almost likely to be used in wars that broke out. So, in a potential sense, many bad things happen because of human desires, and we humans have yet to find a place where technology can fight back against it. If we wipe out guns and run into anti-social people, we will probably go back to the cave days overnight. Therefore, we are also constantly developing, and there are still many technological breakthroughs. We don't know what's going to happen. It looks like this development is OK now, but Berkshire doesn't have an answer to your question just now. There is no way for us to write an insurance policy for this situation. This situation has actually happened, and we are at our wit's end. This kind of risk is shared by everyone, and Berkshire has no way to protect you under such risk. So far, we've all been relatively lucky.
Ajit Jain: In the example Warren just mentioned, another issue that concerns me is the use of nuclear weapons. I probably really lack this ability to estimate how big our risk exposure really is. If a real nuclear war breaks out, it's hard to estimate how big our risk exposure will be. As with other natural disasters, I can at least make a reasonable estimate, to more accurately estimate how much our exposure is and how much we will lose. However, when a nuclear war does occur, I have to surrender by showing my hands. It's hard to predict how bad this situation will be, and there will be so many risk exposures that will affect us. We try to rule out situations such as nuclear weapons in all of our contracts, but if this happens, our regulators and courts will oppose insurance, and we will definitely write the insurance policy again under these conditions and not pay the losses as required. Therefore, we should have this kind of policy of redoing it. This policy excludes the risk of a nuclear war. For example, if it's a fire risk, what should you do if a nuclear war causes a fire risk? Some people would ask me that too. So, the question is still going to be very complicated, and we'll keep struggling with it. For the insurance industry, this is all a difficult problem. It depends on how to protest with our regulators and bankers. Exactly what can be borne and what cannot be borne.
Question: We are also always grateful that you have been able to keep coming. You also know that for the past 4 months in a row, we have all experienced inflation. Now this inflation has reached 7%, the highest since 1982. You actually experienced it from the 70s to 1975. At that time, your combination also suffered losses, yet you made the best investment decision of your life. So, through this situation, I want to ask, if you were to choose a stock to invest in now, which one would you choose? This is the moment right now.
Buffett: You're so crafty, you knocked me out of nowhere.
Question: In the current situation of inflation, what should you choose? Also, what are the factors that actually made the stock you chose perform so well?
Buffett: My answer is probably more than one stock. The best thing you can do here is that you have to be good at something. For example, you have to be good at something. For example, you are the best doctor and the best lawyer. No matter how much others pay you, it doesn't matter if they pay you several billion dollars or hundreds of yuan, they are all willing to give you some of the things they produce in exchange for the services you deliver to them. If you choose what you want to do, whether it's singing, playing baseball, or becoming a lawyer, whatever it is, your abilities cannot be taken away by others, nor can they be lost because of inflation. Other people will always trade with you. What you trade is your ability; this is the best kind of investment. Therefore, the best kind of investment is to develop yourself; developing yourself will not be taxed. That's what I'm going to do at this time.
Munger: I can also give you some advice. When you set up your own retirement account, if your friend suggests that you put Bitcoin in it, just turn him down.
Buffett: Right, no one else can take your talents, but the truth is that people in this world have always been willing to exchange contributions for your talents. Some people may not have many of these abilities. You must find what you want to be (the kind of person) you want to be, and what you want to be, it is likely that you will achieve it in the future. We also always want someone to tell us what we need to do, and you'll study Becky Quick to see what will make you better, and what you can naturally bring us. It may take time to do it.
Tyson spent at least 10,000 hours at the time and then became a boxing champion. If I do this, I probably won't be able to become a heavyweight champion. So, sometimes, you suddenly come across some of your strengths that you think you like to do and that you are amazing, and that are meaningful to society. So, no matter how much money you make, you still really enjoy this job. Whether it's an extra penny or half, or a dollar, you don't care if you want to be a better doctor, cook the best food, or what your wife says. However, if you can have five meetings today at once, it means that you are an amazing talent. This kind of thing is all self-chosen. So, decide for yourself which of the best investment stocks you want to buy today. If we can make 1 dime, you've already paid, but you've already made money, this is a great investment. Of course, we can get a 100% return, which is what we all hope for. At the time, we would spend a lot of money to watch a beautiful dancer dance. Once upon a time, a very famous dancer, Coconut Island, Omaha, came to see her dance performance. If you have to go in heels, you have to do it because she's a gorgeous girl.
Becky Quick: I'm from Israel, and my family are long-term shareholders of Berkshire. The current management considers long-term value issues. Maybe sometimes we can take some risks in terms of insurance, but in terms of balance sheets and all business reports, if you and Ajit Jain aren't around, how much trust do we have in the company?
Buffett: I don't currently have the best answer for the long-term predicted outcome of the future, but the culture of our company is, first, we are a hard working company. Second, we have your group of shareholders and all co-owners who have bought our shares. We care about you very much. Maybe we start every year at the beginning of the year and say that no matter what happens, I'll have to spend money. I've bought this stock now, and this stock is already in place. I have no way of managing what's going to happen. A company must understand its culture; it accounts for 99.9% of the company's chances of operating. In addition to that, we need to bring in a few more experts. I mean when it comes to operating, we have to accept a lot of different ideas. We're in business now, and Berkshire is no different.
So if you invest in our company, you have to trust us. We can really put our heart and soul into doing some simple operations today to fairly get you what you want to do. The resources I'm talking about today can still be difficult at times, but you are free to make more choices. The most worrisome thing is that if someone comes in later and says I can make you at least a few billion dollars, or if someone tells us that you are buying our business, or that we sell a certain business, this company is basically a pure partnership mechanism. We can't be more pure. What we can do is establish a very special relationship and establish a better relationship with our owners. If this relationship continues, no one can shake it.
Of course, if this culture is something you can better understand. I can tell you that over the next 100 years, our culture will continue to remain steadfast. Berkshire, a company, hopes not only to become a century-old store, but also to be a permanent company. Some people say if they already have a job, do I want to do another job? Or if someone offers you better treatment, you start to think left and right. Do you really need to choose this person, choose that person, or choose this job or that job? This kind of thing is bound to happen. Can we build another set of exactly the same company? But there's no way I can start another completely immutable company. At the beginning, we were involved in textiles. Of course, that was a very bad beginning. Later, we had many other partners of all kinds. At that time, we were running a business in the stupid textile industry for about 20 years, but we just wanted to move forward and move forward step by step. We felt like we were running a so-called listed company. We hope everyone can follow us step by step and act in sync with us, just like at the Flamingo hotel in 1952. We believe it. Our collaborations and Charlie are starting to cooperate with me. This is the same thing. We are not going to enter such an organization; we are not going to pay attention to these Situational. Of course, I bought some newspaper companies later. I hope everyone's footsteps and our ideals (22.43, 0.31, 1.40%), thoughts, and thoughts are the same. Of course, we will seize better opportunities.
I hope you are on the same page with us and are measuring whether we can actually meet your requirements. I hope that I and you will be able to treat everything we own, as well as our children, children, children, grandchildren, and grandchildren, all of whom are our future shareholders in Berkshire and are real partners. This is something I really think, and I will really find the right people to continue our work. Some people say whether I want to invest in Berkshire or S&P, it means that you want to buy short or sell short, whether it's a long or short investment, the same goes for the long term or short term. I don't want our position to change in any way. Of course, I later found some really great people, and sometimes I stepped on mines and found inappropriate people, but I all wanted me to put my money in their hands, and they were very happy to do these things for me. Any management or new management, or succession from generation to generation, is our true supervisor. There are also regulators in our culture that govern us, and some of the ideas we now firmly believe in. What kind of things can we do better, or what kind of things we can do better? Our current director also has shareholders, holders, and everything else. At this scale, of course, there are times when we want to fine-tune our culture, but if we discuss it again today or if our shareholders and board of directors do this, first, of course, we must abide by the law, abide by the laws of Delaware, and the procedures and content of Delaware legislation, which we must abide by. But when we do business, we definitely place these responsibilities in the hands of people we trust.
Munger: Our CPA is about 60%, very, very low. It was really hopeless and even hopeless at the time, but after 25 years, what do you think? Are we still investing money? We didn't do that. So, you need to really understand the current state of affairs and its facts. This isn't the worst thing; it's the most basic knowledge. You have to have this kind of common sense and feel. So, in New England, this is how our textile mills went at that time.
Buffett: At that time, we thought he was very nice, and he was really a 100% honest and trustworthy person. He also really understood every aspect of the textile industry, so there was no doubt about it, and he had no concerns about it. But we probably stepped on thunder at that time. We weren't as lucky at the time, but we found something better later, that is, the insurance industry. As we speak, these are all stupid decisions. In 1966, Hawkshielde Cohen, we still worked hard for our money.
What is the world thinking about? Charlie flew to Baltimore at the time. Louis was an amazing talent. Everyone had their own prominent views in that industry, and we also wanted to expand the company at that time, so how can you blame our idea of expanding the company? So, don't blame us. However, we have planned a lot of different new stores, but there are still other things. Maybe we are not at the right time or we are doing the wrong thing. Then we discovered that this idea was really crazy, and only then did we really understand it. But why did we do this in the first place?
Munger: At the time, we were probably just too stupid. When we bought this stock at the time, it was 6 yuan per share. If the department store was very successful, it might be 30 yuan a share now, but some of the reasons for our failure are that we began to integrate other Berkshire things into it at that time, so there's no need to talk about it later.
Buffett: At that time, we earned 6 yuan a share, but we invested more money in the middle. It was only after investing so much money that we learned the truth. We're always pushing, pushing, always learning. Why are we looking for someone who hasn't studied this long enough to start this business?
When should I start buying stocks? When I was 11 years old. I read a lot of books in the library, and I like to invest in stocks. I also like to go to my dad's office to read his books. I also saved money. I finally saved enough when I was 11, so I was able to invest in stocks. I was taken to the New York Stock Exchange to take a look at it when I was 9 years old. My dad took every child to New York once a year and brought me to the New York Stock Exchange. I was deeply shocked at the time. I was actually also able to tell you a lot about the history of financial and securities trading. I also slowly fell in love with stock trading, technical analysis, etc. I spent a lot of time reading various articles every day, and decided to save money to buy some stocks, go short, etc., I'm really trying everything. I was probably 19 or 20 years old, and I don't know what I was doing at the time. I remember one day I suddenly came across a book like this. This is not a textbook. I was in Lincoln, Nebraska at the time, and I read one of these passages. That passage made me understand as if I had done everything wrong before. I have just summed up my methodology and hope to start choosing my own stocks to increase the value of stocks. But when I think of it as that passage, it suddenly makes me think that everything I've done before has been foolish. I wonder if I can find the passage I saw at the time, which is a very interesting passage.
What will some people see in this picture? Two faces; some people see one face; some people look at it for a long time and still think it's two faces. But this way of thinking can be changed; this is called a vague illusion. There are also other so-called epiphany moments, as well as previous circus performances. It seems like a light bulb pops out of the back all of a sudden, and it's an epiphany. I'd like to say I had this illusion at the time.
From this picture, what can you see on one side? Seen like a rabbit. Seen from the other side, it looks like a duck. So, the way people think is very interesting. Why is it commonly called? It's your own acceptable mask, the so-called “acceptable mask” theory. Suddenly, where you might see a difference, it's different from everything you've seen before. This is the moment I experienced at the time. I think my IQ is pretty good. I read a bunch of books every day, and I'm still constantly thinking about how I can make some money every day. But when I suddenly read this passage, it's a passage from chapter 8 of “How to Become a Smart Investor.”
This was what was called the moment of epiphany of truth at the time, and it happened to me at the time. It was this epiphany that changed my whole life. I've read a lot of knowledge here, but all of the information I've read before is useless; it just happened to me in an instant. Charlie must have experienced moments like this in his life, and probably so many times in your life, when you suddenly saw what was really important in front of you. Why am I mentioning this here? Maybe a week ago, a year ago, or five years ago, maybe you were learning how to get along better with others, and whether you should give people the greatest kindness. Overall, you're just learning what you need to do to make the world around you love you more. Maybe you haven't seen this in ten years, but suddenly one day you have an epiphany. When you encounter situations like this, you'll discover that doing business is the same.
I've been following a company for ten years, but suddenly something happened that changed my whole way of thinking drastically and restructured everything. I ask myself why didn't I see this five years ago? I've been in this situation a few times in my life, and I'm sure everyone is the same. It is possible to encounter it in different fields and at different stages of life. You might be asking yourself, “Why was I so stupid back then?”
Charlie must have experienced this kind of situation when he was a lawyer. Every smart person has problems and setbacks, especially when these people come to the office, and his face is broken, especially when he married his wife. He thought getting married was a great idea at the time, but what is happening now? We all meet people like this all around us, right? This is what we call the mask of acceptance in our internal mind. But it is at times like this that it will bring us more insight, let us adjust our behavior, and let us have this kind of insight to make money. However, there are people who have never made good use of this. They don't know why their children hate them, why the world around them has no way to care about them, and they can't figure it out.
These are all very simple facts, Charlie, what do you know about acceptable mask theory?
Munger: Actually, this is how the brain works. Sometimes it's easy to make mistakes, but it also allows you to automatically correct mistakes.
Buffett: We've actually done a lot of things like this, made mistakes and then corrected them, but sometimes we go too far and make up for it; it's probably too late. Are we at least doing a good job of correcting errors?
Munger: Yes. This is especially true now, when some good ideas are probably being pursued too much by you.
Buffett: Can you tell me a slightly more positive example?
Munger: If you take a look at the Robin Hood platform, it suddenly soars this high. Do you think this is an obvious one? Look, after it went public, everyone was allowed to participate in short-term gambling and speculation. I think this is a very disgusting act.
Buffett: Yes, that's right. Last year, they made a lot of money by selling stocks through speculation. Do you think they're getting retribution now?
Munger: Now there's retribution. Many internal traders are traders on their platform.
Buffett: Now we're watching them get retribution.
Munger: Yes, I have to agree with that. We can't seem to make enemies everywhere; why are we always criticizing others here? I don't think we should criticize, but I really can't help it.
Buffett: The 98-year-old wise old man next to me still hasn't been able to put up with his aggressive remarks even now. We all gave up. OK, we want to have lunch first and come back after lunch. I hope we can answer everyone's questions more intelligently. Thank you again for being here today.
Question: I am a shareholder from San Francisco. Currently, these companies in the US are already taking a more active role. In these fields of politics, especially when it comes to boycotting certain plans or promoting any other different social factors, for example, some are about employees and labor groups, taking the position of CEO in employee-based business. If such companies engage in politics and their own intentions, how do you think these companies should go?
Buffett: That's a great question. It's a great question. I'm not going to place my citizenship on blindly believing in any company right now. My idea is that I have to keep making many people angry, and you have to talk to them honestly rather than please these people, so as not to cause harm to these companies. The fact that these companies hire us means we can truly promote this company. I mean if these shareholders are not hurt, one of the most important things is certain topics or topics. People will be very angry when they hear it, but these people will have to pay some price. Why would we hurt some people in the next room? This is my idea. Moreover, in some of the work Berkshire has done, if it is because I have said these things, 20% of people in the country disagree with my views. Because of this, I have taken these remarks back. At the level of boycotting these companies, speaking at the level of boycotting these companies, because I do different things at these levels. I can tell you that I might come up with my own position; I won't talk about what Buffett said; I might talk about Berkshire Hathaway or Warren Buffett about something. I mean if I want to do that, I can do it. If I did, I might be able to walk right now. Because from my point of view, what people say today is very important, and it is their right to be able to speak out. Sometimes I take a step back. In Berkshire's position, I don't want what I say; some people have to bear the consequences later. Most of the companies I'm talking about today, and many, many others, are unfair to them. Today, maybe the CEO of this company spoke about his own ideas, or what kind of decisions he made with his board of directors, or expressed his views, which means that social views are acceptable to everyone. Sometimes you have a slightly different point of view and show a different, more intense reaction. In this group of shareholders, if my position is different from that of the board of directors, of course, I will be under a lot of pressure, but I will not say it in a particularly deliberate manner.
Charlie, what do you think?
Munger: When I speak, I think I'm more careful than you.
Question: Thank you Warren and Charlie. My name is Cong Yao and I'm from China. I'm currently attending the University of Chicago, and I really adore all of you, especially Charlie. You were my idol before, and I've always adored you since I was a kid. Today's question is also addressed to Charlie. My question is, “How exactly can you use this so-called multi-intention or multi-approach structure to engage in your willingness to invest? Although you invest in different fields, can it still be a way to make more money?”
Munger: Of course it's best if you know different fields; you can actually study in different fields. One person has a hammer, but a lot of nails. So, when you're making a lot of decisions, there are times when majoring in multiple fields is helpful. If you suddenly say you want to get involved in other majors across fields, you pretend to be experts, and some people will hate you very much, very much. I have experienced this myself.
Buffett: True Chinese culture, for example, when it comes to age, I will never be able to match Charlie.
Becky Quick: In the 70s, how could inflation affect our capital investors? The current situation, because inflation has actually happened, is it still the same?
Buffett: Yes, of course it is. Today's bonds also have some funds and equity capital. Inflation will cause your work to fluctuate and affect investors. The problem now is that if the business in this company doesn't need to use any capital, but if it has to do a lot of things, it may take ten times more energy, but it won't shake your capital, but most businesses will have to spend capital. For example, this is the case in the public utilities industry; you need to invest some capital. 1/10 of a US dollar. After a few years, I think we need at least ten times more investment; we need this kind of return on investment to do so. We need to make this kind of capital investment.
I've written articles on this topic before. I'll tell you a famous story that you can synthesize. I wrote an article for “Fortune” magazine before, about 7,000 words. “Fortune” didn't want to publish such a long article. A friend of mine explained the problem to me and said that 7,000 words were too long, but I was very stubborn at the time, and I was still a man. I was macho. I said every word in it was like gold and could not be deleted. They called an editor to Omaha at the time to explain it to me. He said it was really bad to write that many words. I said no problem; if you don't want to post it, I'll post it to other media. I had a very bad attitude at the time. I sent this article to my friend McGonagall at the time. He is a very good editor, a reporter for the Washington Post, and we are also very good friends. McGonagall is a really powerful person. He is very strong with many authors, but he doesn't want to hurt my feelings. I told him McGonagall, what do you think of the article? Warren, you really don't need to explain everything you know so clearly in one article. I think he was right in saying this. I later actually shortened this article. Although the meaning was still the same, I shortened its word count. Therefore, if you can have a completely stable monetary position over the next 100 years, it will be a good thing for our industry and for our investors.
Charlie, what's your opinion?
Munger: No comments.
Buffett: We need to understand how serious inflation is, but no one is completely clear about this situation. Many people fully understand its severity and what stage will inflation reach in the next ten years. People talk about this all the time because you really want to know the answer to this question. A lot of people talk in unison to tell you how much inflation will rise later, as if you give them enough money, they can help you manage your finances. There are people who don't tell you anything. The answer is that they don't know at all, and we don't know; we just seek truth from the facts. So, the best way to protect inflation is to invest in yourself, your own income benchmark. If your ability is strong enough, for example, if you play the violin better, your talent won't run away in any situation, and it will protect you, so your abilities and talents won't be pressured by inflation or affected by inflation. Your money may probably be, and your talent will never be.
Q: I live in Nashville, Tennessee. Thank you Warren and Mr. Charlie for educating us with your lifetime experience, and thank you for hosting another shareholders' meeting in Omaha and inviting us back.
Buffett: Thank you.
Question: You mentioned before that any kind of company has any kind of shareholders. Your letter this year also mentioned that your most satisfied and happy place is being able to serve these individual long-term shareholders. As the influence of institutional index funds increases, how can you continue to encourage the current shareholder culture in Berkshire?
Buffett: We are very lucky to have this kind of shareholder culture and are willing to maintain it. I think what you mentioned is very interesting. We now have more than 147,000 Class A shares. These positions are all occupied by you. We have so many excellent shareholders, and we really like these people we own. Our shareholder positions are limited. Why should we go out and recruit more people to replace them? Because the shareholders we have now are very good people. If we had a church, we would all like these people to come back for weeks on end. If there are some vacant positions, of course, we want new people to come in, but we won't replace all the others; we won't seem to let 50 to 100 people go out and recruit 50 to 100 people on our behalf; we won't do that. Every company seems to be constantly bringing in new people. It seems like only when newcomers come in can they improve and change us. But I think this is crazy behavior; we don't like this; we like our current shareholders. We're not going to be like these index funds; we want shareholders like you. They always think we have 10 good neighbors. They are all good neighbors. Why should you go out and promote it on the street, why aren't you satisfied with the house next to me? The neighbors are all so nice, why would you kick them out? Right? But now many people are doing this kind of thing, and I really think they have a big problem. I really want to ask the analysts at these companies. They do it every week and every month. I think which shareholders do you really want to kick out, and who do you want to replace them? I know you don't have too many places for new shareholders to come in every year, so why are you still frantically recruiting new hires?
Think about your stocks. Many companies now have this crazy process. They communicate with analysts and so-called financial experts. Many companies even do it very frequently, several times a month. Imagine if you work for a company like this, and they keep repeating what they are doing every month. The most important point is that we must provide every customer with the corresponding service they deserve. Sometimes, for example, the CEO says this, and their executives talk about it again. It's all just this kind of loud voice. None of these people will admit mistakes, but we need to admit mistakes from time to time. Many times, some CEOs succeed the person before them and say I want to reach my earnings figures. This actually brings up a very serious problem, and it's definitely hard to avoid some fraud issues. If you discover that your predecessor had this kind of fraud, would your successor be willing to take the initiative to say that the company has this problem? Do you want to influence your own earnings after becoming CEO? So, this creates a vicious cycle. They are unable to do this, due to human nature.
Therefore, we also hope to always be able to find all kinds of problems, and hope to bring sufficient growth and sufficient service to our shareholders. However, if every month we promote that we need to do this and that, if we want new people, what do we need, and promote this kind of information, I think it will greatly interfere with the operation of your company and the growth of the company.
According to GAAP's accounting standards, I can actually play a lot of games and do a lot of tricks. At least we've done some stupid things in the past, but we've never told others what level this number must reach or falsify; we've never done this. If you think about the first time you cheated, you first took 5 yuan out of my account, and then put it in. But if you do too many bad things like this, and the snowball gets bigger and bigger, you won't be able to stop.
Therefore, this kind of behavior will always lead to the destruction of your company one day. So, it's really hard for me to imagine this situation. My company has tens of thousands of people, and I can't let them be harmed by my actions. They're all listening to the messages we send out every day telling them that if you start lying, you're going to have a big problem. It's that simple. You need to be responsible for your team, and the relationship with shareholders is your responsibility. I want to tell them that our stock is their best choice compared to thousands of other stocks, so we need to lead by example. You have to tell them where the wind is and know what you want to tell them. For example, if you tell them how much money you want to make in one share, or even if you say you want to earn 3.59, but you can make 5.59, which is a good thing. Sometimes they are also audited. We need to make this process healthier, and we have a culture where we can't allow lying in our company.
Charlie, let me tell you a few words.
Munger: Berkshire's culture will stay long after we leave, and it will continue to prosper. I don't know about other US companies. Feelings are very different every decade, and now I have a lot of doubts. Soon they will hold all of their shareholders' meetings online, and shareholders won't be there for on-site meetings. This situation makes me feel that it is difficult for me to accept this situation, yet I feel that index funds are also becoming more and more important now, and many things are changing.
Buffett: Moreover, they will also have all kinds of tricks in choosing their own CEO. They won't actually find a good CEO successor. The successor they are looking for won't say bad things about their predecessor. This is a big problem. If there is a problem with the predecessor, people in the future are unwilling to point it out. So, once you start lying, this snowball will get bigger and bigger, and it won't stop, and I don't even know where the end is. If you set a bad example, especially at the upper echelons, such as changing numbers, etc., we would never do it this way. If someone actually changed the numbers on our books, we'd already have a lot of problems. Because I know what you mean, or this person is doing this today, and the person below is doing the same, this is definitely getting more and more messy, but from time to time, we see this phenomenon. Every board of directors must have a correct process, and some problems may arise in the middle. For example, the judges in Delaware face some of the problems they face are not the same. We all know these, but these are all very, very important, and special. Some of the principles emphasized in this way, as well as organizational processes, must have rules formulated by it. Therefore, these foundations cannot be shaken. If this is not done, the phenomenon of foundation shaking will definitely happen eventually.
I should keep a record here. You came here on a long walk today, but sometimes you see it, sometimes you can't see it, because it's very likely that I bought something. I'll tell you now that we're going to buy different things for different purposes. What kind of things did we buy? For example, for 50 million different stocks, you might see reports from within the company. On January 17 and 18, Microsoft announced that it would use $75 to buy Activision Blizzard, but as a result, the company Activision Blizzard became some stocks of a different nature. Activision is building their muscles, and these things are probably weird. However, speaking of this stock today, after these events, how much is it actually worth today, or something just happened suddenly. Today, Microsoft wants to buy Activision. Later, they said 95 US dollars/share. They have money, so of course they can do this, but as we talk about merging large IT companies and technology companies today, there are some problems all over the world. In particular, the US Department of Justice will also conduct different observations and analyses.
Fifty years ago, Charlie and I also knew about some of what the Department of Justice is doing and what they are doing now, such as Columbia Electric Power Company, etc. We are all analyzing the changes that have occurred in the power company during the merger. If there is any transaction in the middle that is about to happen, we will work harder to begin our research. What we have been doing for so many years is not always our correct observation. Sometimes I talk about what I might hope to do in this industry, but I often talk about whether today's earnings are too limited. If one share is 95 US dollars today, then 96 yuan, of course it's not that big of a change. For example, Monsanto Feed Company or what happened for the rest of my life six years ago, of course, it turned out to be a very bad merger and acquisition, but it has already been passed. This matter has already been discussed, so it has to be Monsanto. No one understands why it happened at that time. On January 17, 18, and 19, Microsoft already announced that it was preparing to carry out such an initiative. At that time, Activision was only 60 yuan, and the results rose to 80 or 81 or 82 yuan. For me, it is not surprising that this amount of money has increased over the past few days. More than 20 yuan is actually not surprising. This is already an increase of about 9-9.5%, and later over 10%, so we will submit a report.
Some people who run the news think this is no big deal, but I think that if it exceeds 9% or more than 10%, the FCC investigation will begin. When I was constructing it, when these managers went out to buy something, I had already started doing more research a few months ago. If a deal like this goes through, we'll be able to make some money. Of course, there's no big problem. However, in the past, we had to let everyone know very clearly. Don't forget that this was not Buffett's own decision, and Buffett wouldn't have more contact with the Department of Justice; it's just that all of this stuff has already been written and recorded in documents. At one point, we sold a few shares, and the selling price seemed to be quite high. It wasn't a very bad sales move, but at that time, it caused fluctuations in the press and seemed to be making headlines. Of course, other news also began to say that this was not the case; adjustments should be made in the middle. Later, I saw an error report, and I made a correction. Both reporters and editors have presented their apology remarks and published them. We don't expect everyone to make a mistake at all, but if you misinform the public about everything, and millions of people have been notified, this kind of thing is very important. I'm trying to tell you that if this kind of thing is 10% or more, no matter what, the final sale price is 95 yuan, we still don't know the 30% jurisdiction or what kind of content it has, but this is what happened.
Charlie, do you have any new news you'd like to announce to us? Charlie said no. Sometimes I wouldn't talk to Charlie about this, because he knows what I mean, and once in a while we look at the opinions that are more divided in the middle. Fifty years ago, when we started doing general sales, there were times when we needed to know who did the wrong thing and what kind of people gave what kind of explanations. At this point, we wouldn't be dissatisfied with each other. However, if we lose money at a very strange time, it is probably because we made a mistake in our assumptions at the time, and this is what happened. But going back to Microsoft today, of course they wouldn't want to do anything wrong or act badly.
Becky Quick: Stock index ETFs. Today, we see that these investment tools now control at least 50% of the US stock market. These owners have begun to make some so-called negative investments, and now index funds have become one of the biggest and most dynamic market trading tools in the market. Can Warren or Charlie tell us today about banning the management of so-called trading instruments and being able to control so-called passive investment customers during voting.
Munger: What these people might have done just happened, but it had some negative effects on the country as a whole. Therefore, proper regulation and governance for passive investors, none of these phenomena we have seen agree with; this is not a good development trend. If the market share of the special stock index becomes 90%. Everyone should probably pay attention to this moment.
Buffett: The things we are seeing now. If the public's opinions resolve existing problems, a decision like this won't necessarily work every time. As far as the US is concerned, if three people cooperate, it doesn't necessarily mean that they are some evil people. Many times when we vote, we care about the results of our own choices. If the decisions made today will affect some public opinions, and what these politicians say will affect others, then we should be able to lead the opinions of the masses. The American public sometimes dislikes that a certain three person has control over everything, but they hope to be able to make this matter bigger and more powerful. These things do not happen suddenly. They hope that their investors will get better results. Of course, they are not able to really influence some results that hurt others later. It is tantamount to him deceiving this outcome, and they also hope to get some appropriate results. What are some of the best decisions for them, and what do they have to do? These matters must all be accepted in terms of political correctness. Maybe a certain deal is very good for them, but we still have to abide by these rules. Maybe the previous rules, for example, really changed in 1940, and people have different attitudes about their governance of these matters. In the long run, we can also see that the US federal government may take the wrong step or be defeated. This is also possible. We can vote for some of the rights we have in our own shares. The so-called passive investors and index funds probably influence our country's mentality. Some people buy about 3% or 4% of the investment in a relatively small percentage. Maybe the case value will be quite large, but it's not that it won't happen.
Question: We live in the state of Mexico. Thank you for giving us a lifetime of knowledge and wisdom to guide us. You have so selflessly shared your thoughts with us, and at the same time, you have repeatedly told us millions of different people how to actually be more rational and smarter to make your life better and more satisfying. First of all, I want to really thank you here, and I hope you too.
Berkshire Energy is very unique in terms of structure, because Berkshire only owns 1%. The first problem is related to Greg Abel's equity position, because we don't own 100% Berkshire Energy. There is a wise person named Charlie who mentioned in his speech at Harvard in 1995 how important incentives are to people's behavior. I'll say conservatively, Greg, among Berkshire Energy, the current amount may reach 100 million. Is there any way to convert Berkshire Energy's shares into Berkshire shares? If it can be done, why shouldn't Greg's incentive framework be a cause for concern?
Second, you often mention how to leverage an asset. You mentioned that BHE Energy has strong leverage, and its ratio of debt to earnings is very large. It feels like it has become a common practice in Berkshire. If Berkshire had 100% of the shares in Energy, would you still use the same level of leverage to run a company?
Buffett: The second question is better answered; I'll answer it. Charlie will answer the first question later.
Berkshire Energy actually acts in accordance with requirements and regulatory requirements; they are still subject to these regulatory requirements now. According to regulatory requirements, it must operate in different forms with different regulatory agencies in different states, and they also have different levels of debt. For example, choose any state, Iowa, etc. These regulators will say that if you can get cheaper bond capital, which is cheaper than your equity capital, that is the best. Since we need to make money on stocks, you can select one data, such as a 9% return rate, we can buy it at 3%, and the return rate will be higher on the customer's side. Of course we want this situation. Of course, we want to have 100% ownership, but there is no way for regulators to tolerate us doing this. Prices in traditional industries will rise for consumers; this is determined by the system. There is no way for our regulators to allow us to do this; we can get the same kind of return on equity investment; the equity structure has no way to allow us to do this.
In the state of Iowa, we just recently got an approval to invest 3 billion US dollars. However, Iowa has this kind of history. Unlike Nebraska, all electricity generated in Nebraska is public utilities. Unlike Edward, they hope that a certain percentage of the electricity in this utility will go through debt, because this will be relatively cheap and beneficial to consumers. Therefore, if we own 100% of Berkshire Energy's shares, we will also relatively say that the extent of operation is still the same as what these public works commissions have told us, and we have to meet the requirements of regulators.
Munger: Another simple answer is a historical coincidence. It didn't cause so much conflict, nor did it cause any problems. We both have this problem with Walter Skold. This is a historical coincidence; I don't think it's a big problem.
Buffett: Greg doesn't have any behavior on his side. His actions have always represented Berkshire's best interests. We have a large share of Berkshire Energy's shares, and this has always been the case since 2020. For example, if I go to my sister's house and she's having a party at her house, there are probably 20 to 30 people. Walt told me at the time that you have one or two minutes and I'll talk to you about some things. He said that we have this company now, and it doesn't seem to be very suitable for the current public operation situation. Do you want to buy it and privatize it? I said OK, tell me about the price and see how much it is. After we returned to Omaha, I met David Soko again. He is also a relatively large shareholder of this company. We agreed on a price at the time. Walt told David not to negotiate with Warren, and later we actually decided to buy this company. At first, the structure was quite strange. There was a public utility company that held a lot of shares in it, but more than 20 years have passed, and now the situation is very different. We now have 91% of the controlling shares. On Walter's side, I don't know how much his equity is now, nor has Walt discussed this with me again.
But it is this interest that binds us together and allows us to make this kind of investment. Greg has 1% of the shares on his side. We made this kind of deal, and Skoder is also interested in this aspect, and we will do the same thing as Greg. So, from our point of view, we didn't make any abrupt decisions; we just felt he was the right operator. Of course, there will be many processes involved in this, and there will be many internal traders, but this is not the case myself; I have 100% interest and interest in Berkshire. The board of directors said that if Warren felt there was no problem with the deal, then there was no problem, and this has always been the case. So, I can actually do this kind of transaction with many people without being affected by the process. But if I'm not there in the future, what is this pressure? That is, many of our managers need to listen to the opinions of the legal side and the opinions of lawyers. This process will become very complicated, it will become more expensive, and it will also take longer. So, it would be best if this happened while I was alive here and it would make the process a little easier. However, I don't think there is any difference between 100% and 91% holding. All we want is to bring more profit to Berkshire. We don't seem to want Greg or Skoth in this process to be unfavorable to Berkshire for their own interests.
We don't know what it will be in the future, but Berkshire shareholders will benefit from it. If I'm wrong, you can sue me later. But overall, if I were still there, it would be relatively easy to do these things. I hope we can have more than 20 companies like this, and the more the better.
I think the logic of your question is completely fine. I want to tell you that there is no problem. We understand some of your concerns, but I can reassure you that I actually have no idea where the shares in Skoder stock went before. This is not my problem; it was decided by them. Walter is our partner. What we want to pay attention to is that everyone is treated equally like our partners; they don't need to worry about us taking advantage of them. It would be great if they could understand this, this is a great question.
Becky Quick: Last year, Warren said that inflation will affect all businesses, especially Berkshire businesses. Inflation is still happening now. Can you talk about how the current time of inflation is different from when inflation occurred in 1970 and 1980? How is it affecting our people and what are some of the other negative effects?
Buffett: How will it affect you, and what areas will it attack? Some people say I'm only willing to pay for certain things, especially when exchanging or trading. When it comes to the impact of inflation on our own business and our company (), these things are very, very unique. If you go to a furniture store, you'll see that the price of some furniture is getting higher and higher. We sell these things, and the rich have made a lot of money, but they will continue to buy these more luxurious furniture. However, during World War II, families had no money, couldn't buy cars, refrigerators, and sometimes they couldn't even afford sugar or coffee, let alone gasoline. However, now people still have a lot of money in their hands. Even if the price of these products has gone up and you tell him not to buy them, now there is inflation, but the situation of these two inflations is not the same. The first time they affected a wide range of people, but the second time it changed people's buying behavior. So, this is a rather interesting situation. When many people write textbooks, their previous experience and their purchasing and consumption behavior may produce different results than now, because these two things are completely different.
We have now sent out many signals, and the US government has also told us some (signals) that the government has distributed a lot of money or relief to many people, but at one point of view, this money is not worth much compared to its previous value. This is a very interesting number. The Federal Reserve also has to make its own balance sheet every year, which is a very complicated way of operating in terms of institutions. Every year, the Federal Reserve must consider how it can balance under effective conditions, especially in the face of inflation. Fifteen years ago, the Federal Reserve had a lot of records, so we can mention this in a good way. They once published a report. They found about a dozen people and wrote that all cash has died; now there is a society where no one has cash. However, back to the situation of 800 billion dollars 10 to 15 years ago, now 2.2 trillion dollars of cash is in circulation. I also saw this figure in Thursday's records. This situation is completely different.
2.2 trillion yuan is the 800 billion we talked about before. If there were 130 million households in the US, and now we see trillion dollars of money in circulation, everyone should have 7,000 yuan in their hands, and it's men, women, and children. As a matter of course, is this not true? Are these people keeping the wrong accounts or what's going on? I can't figure out exactly what's going on, or if it's because I'm in Russia or South America. I really can't figure out what's going on. With the sum of these overlapping amounts, is cash dead? The US now calculates that each person should have 7,000 yuan. But if you want to absorb this part of the money and think carefully, what kind of things will happen? We can privately say, I'm not talking about the Federal Reserve anymore. If I talk about the Federal Reserve and Washington, now every household in the US is OK. There are 130 million households in the US, and they have 1 million US dollars in their hands. Of course, there are some conditions. One of these is that if you talk about it within 30 days, this money will disappear. It feels like the plot of a TV drama, and (money) is gone right away. After 30 days, you can spend it. Suddenly, the total wealth of all American households is 130 trillion dollars. In fact, through this level, the wealth of American households has doubled.
But you don't want to tell everyone how this money came from. You could say that they won the lottery or something. Many people's household wealth has doubled during this period, and now it's 130 trillion more, and they won't be able to spend it after a month. What would happen if this were to happen? There is a good chance that the price will rise. Will it rise soon? In this case, you only know that you have this money; no one else has it; you will run out and buy something right away. However, when this story spread, just as we now see the federal government sending out this resource, we were actually talking about the amount they paid; it would definitely affect the price. If your own wealth doubles or even more than that of others, it will definitely affect our economy. This wealth will definitely rise; the value of the cash you have in your hands will decline; you won't be able to buy what you want to buy today tomorrow.
We are now in a very strange period. Very, very much money is being sent to people. No matter how it is sent to people, many people do not have as many places to spend as before because of supply chain disruptions and other problems. But they can go to, say, a furniture store in Nebraska, and buy a lot of things. They can finally spend it. It's just that this way of spending money would be very strange. They could go to a jewelry store, but it's not a good business.
Two years ago, people who rented land and opened jewelry stores wanted to talk about how they could get their rent back. Now, basically, all jewelry stores are doing better than before, and stocking up less, because everyone has started spending after the pandemic, and there will be consumers entering the store one after another because they have money on their hands and are willing to spend. One of the situations we are seeing now is when people have more money in their hands, their spending power is released. This is what is happening now.
I also want to assure you that if we send 1 million to every household, but you still don't know if other people get the money like you, or if you can get this money slowly every month later, everyone's consumption will also rise according to your expectations and expectations, but because of this kind of money being sent to people, this inflation is unavoidable. I don't think it's a bad thing to send money. The Federal Reserve is the one who prints money. If they don't send money to people, the current situation may be worse. So, this is a very important decision, but it also inevitably brings about inflation.
If a country is in recession, you can do many things, and every country cannot avoid experiencing some recession situations. For example, if you are reading a newspaper today, at this time next year, you are wondering why I am reading newspapers back then, but this is the situation. I bought my first stock in 1942, did I know at the time what would happen later? Of course I don't know; I just wanted an idea that wasn't mature at the time. However, as a child, everyone had this kind of dream and had great hopes for the country. We just entered the war at the time, and we had great confidence in America's victory. At that time, interest rates on deposits and bonds all rose because of this war. At that time, they were all called national defense bonds; in fact, they were all kinds of savings bonds, with the same meaning. If you print a lot of money and put it on the market, its value will always drop.
I've said this before on CNBC, and I said the value of money will decline. I want to make this clear. Value and price need to be separated. This is my addition to macroeconomics.
Munger: We are now seeing the scale of inflation and the scale of spending money on an unprecedented scale. Many people say I have my own business, I have my own employees, and I get money. This has actually put our country in an unfavorable situation. Maybe you have to do it, but the country has never taken such measures before.
Buffett: But this is a problem we haven't faced before, and the current outbreak is unprecedented. So, I want to say that Fed Chairman Powell is really a hero; he really did what he needed to do. If he doesn't do anything, there's a good chance that a little baby with a thumbs up and doesn't do anything will become a person who doesn't achieve anything, but he takes steps, and the world around him falls apart.
Munger: At that time, everyone blamed each other, blamed India, blamed China. The Japanese side too, and the Japanese side has also begun stock repurchases.
Buffett: No one could have predicted that this would happen at the time. No one was accurate in this kind of prediction at the time, and our predictions weren't accurate, but what do we know? We at least deserve everyone's trust. We had no way to resist a nuclear bomb attack at the time, but we were able to withstand most other risks and other attacks, at least within our capabilities. So it made us at least feel good. It's certainly not a perfect feeling, but we can at least give you some basic promises, which is a very simple truth.
Q: I'm from Montreal, Canada, and I want to thank you for everything you've done for us and for our shareholders. My question is related to GAAP standards. If you want to change GAAP's accounting standards, how would you like to change it? What would it look like?
Buffett: I'm quitting. Charlie, what are you going to do? I don't think this is a problem that can be solved.
First, you have to decide what GAAP should reflect. I don't think the current GAAP standards reflect value. Sometimes you might say this is value, but I can only shrug it off; it's just a common practice. If there is a slight problem in this country, there will be complaints and lawsuits. Therefore, the current accounting standards are designed for these people who want to write small reports. I don't know how to write this rule if it were me. For example, a neighbor who lives next to me. If I want to leave for two weeks, I will let my child stay there. If I feel at ease, I need this kind of environment. Or if I drop my wallet and my neighbors will return the money to me, I just want this kind of environment.
However, now this accounting standard is very embarrassing. Everyone is playing with numbers. If you stand out a little bit in it, there will be a lot of problems. There was a question like this a few years ago. I was actually expecting you to ask this question 15 years ago. I wrote 4 suggestions on this subject at the time, and some suggestions for the Audit Committee. I wrote 4 points. I don't know who is on this audit committee. Then there was Coca Cola (64.61, -1.58, -2.39%). You need to know that you may encounter many problems in this area, so I brought this up, and I want to know the answers to the questions. None of these were particularly logical questions, but then no one did it. The system as a whole is OK, but the auditors have been sued, and the SEC has many rules. I think the SEC is still useful to us; it has done a lot of good things for us. What's the problem? They will make some rules, but no one understands where its legitimacy is, and they don't know why there are such rules.
A friend of mine is a writer. He said that it's not these illegal things that make people angry, but that these law-abiding matters are too difficult. They really need an agency like the SEC, but they have no way to stop people who really want to do bad things. Sometimes the rules they make make you feel very bizarre. Auditors also ask the same questions. They want rules, they want processes, and they want them to be able to operate such rules. Charlie used to have millions of contracts on Solomon's audit committee, and these figures are listed by everyone. But then he discovered that there was a company that is now all gone, but at that time it was one of their big audit firms, but you discovered that there were 20 million errors and omissions on the books. They mentioned a so-called lid to cover water, but if one company said it had a lid, this company would definitely be dead.
The time I heard in the National Assembly was August, and I wanted to answer all the questions. I was sitting in front of these people in Congress and told them what I knew and what I didn't know. One thing I said was definitely my truth. I was only in Solomon for 10 days, and I hadn't seen everything you wanted to know, but there were so many things that surprised me because it was really bad. I only did it for 10 days, and I found out that this person did so many bad things. I really don't know anything about it. So, those deals were really, really outrageous. What I saw was this, which shocked me very much. A month later, I was also very happy to be able to serve as a witness. Their CFO is a relatively high-level person, and he once wanted to say, “Warren, when Solomon merged with F (England) 12 years ago, this was a very, very big merger and acquisition.” When we merged with F (English) 12 years ago, we couldn't find out how they would flatten this account on the basis of coordination between traders or two people. It seemed impossible to do it. This is a big problem; audit firms cannot do it in the US. Something like this happened to this company. They just said that we turn this into an asset and a liability, OK? Today, there are probably 173.45.6 million results. A few months later, I was called to testify again. I'll tell you what happened. In a nutshell, these things don't happen every day, but can't you see them after 12 years? What kind of character is this. So, you must equalize your assets and liabilities now; everyone should know that. Strange things often happen all over the world.
Munger: We now have a sieve with running water; why don't we just block it?
Buffett: Right, that's right, Charlie, you said to their audit committee at the time that no one could do this. You have to understand that there are trillion-dollar contracts and contracts in the middle, and you have to go through these numbers every day. There are banks, investment banks, futures, and more in the middle. In addition, there are hedging, etc., and other expenses and miscellaneous expenses such as utilities, etc., so many large and small figures. If you want to do something interesting, find someone younger, give them a few weeks, and find out the top 100 hardest long-term ones with the most words, and there are derivative contracts for them to read. What results they see, and what the other party thinks, let them do a report. There are hundreds of operations, 20 million and 30 million, and I have done it at the same audit firm. I'm not going to talk about which company has done this. I hope to find out the problem. This is the first thing I'll do. In the accounting world, this is probably what happened. If you want to dig a pit and find out these reasons, you have to do this.
There are many, many lawsuits in the middle, and some stories have been reported in the newspapers. I really can't stand it. Who would idiot that the proposed price was 848.2 yuan. Alaheni's company, looked like a very strange number when we issued this price. We later said that the price was rounded, 850, no matter which investment banker it was paid, if they were selected, all of Alahani's supervisors or directors would have protected the experience of these experts. No matter who made a mistake, outside of Delaware's legal system, if you're willing to pay 850 yuan for a share, whether it's consulting fees or 10 million or 40 million, it's no different for some people. For us, this game seems a bit odd.
This is a small history I saw, and I went back to it later. Some people may not have noticed this, but there have been two such incidents in Berkshire in the past 57 years, so we need everyone to give Berkshire some fair opinions. We hope to have a reasonable understanding of some fair opinions. We want to seek everyone's opinions on the two incidents.
One is a retail company, and the other is an M (English) company. The projects of these two companies can get a big gap in beneficiaries. We want to seek fairer advice when investing. I went to Charlie back then, and now I have this question for you. I hope you can give me the fairest and most correct proposal. I said you know what fairness is and what is fairness. Ten minutes later, I told Charlie Sandy that it was not right to act like this. One of the two projects I just mentioned, on December 27, 1978, I told my shareholders that I believe in diversification or diversification (for) the interests of Berkshire shareholders, and I would not vote in favor of this merger and acquisition. Other committees, no matter what, I did it. It was very important for me to adhere to fair, fair, and correct opinions at that time. At the same time, I also told Charlie that there is a funding gap of about 1 million or 2 million for this matter. Of course, this is not a big deal, but if we don't do anything, there will be a gap of 1-2 million, and one or two million won't make our company rich, nor will it have a greater impact.
What do you think we should do? I often ask Charlie the more puzzling kind of question. Charlie said, “You choose the ten best and best performing investment banks, that's all.” I said, “OK, Charlie, what should I do? How should I choose these ten?” He said in order of 1 to 10. First on the list, you have to pay 60,000 yuan for it to give me the fairest opinion report. This is a somewhat ironic price. I think at that time you had to give one person 60,000 yuan, and many people would wait in line to give you this chance. I'm asking if they want to pay 2 million yuan to buy this company or something. If they think you still want to buy it, you say “OK, I'll find a second person”, and you tell him the same idea. I'm paying you 60,000 yuan now. You can help me make an assessment, from 1 discussion to 10, and finally you have to go back to the first person.
You told him again, I'll pay you 80,000 yuan, and you can evaluate it for me again. So, I chose 10 investment bankers. The first one is Jack Xiang (voice). He is a very famous investment banker in the business world. I also know him through my friends. I told him, Mr. Jack, I have a very crazy request today. Everyone adores you very much, and my friends have all recommended you very much. I want you to do something for me now. I want you to do something for me today. Of course, this is not something you are most interested in, but I have to ask you like an idiot. He said you should talk about it, so I explained it to him. I found another Vivier person, and I told him this again. If you tell him 75,000 is OK, 80,000 is OK or not, if they don't want to do it, you keep raising the price code. Later, I said that 60,000 yuan will not affect your own business, but in the future, every customer will say, “Wow, you are now making so-called diversified allocations and being able to raise interest rates in the retail industry is probably a very good thing.” Jack told me, “I don't care what you say; I'll still do it for you; I'll give you a very fair opinion. I later told Webb the same story and told him the same story.
This is probably a very stupid thing; part of it is necessary to pay him 60,000 yuan. I don't know what I'm actually doing. Weber then told me, what did the other person say? If you have to pay another person 60,000 yuan. We explained this process to him, and as a result, they got this money. They all made people very respectful. They did it for 60,000 yuan. So, can 60,000 yuan do what you want? No, no, everyone is just as fair and consistent. Later, Jack, in 1978, he wanted to become the chairman of the FCC. Jack likes to do business with us, and it won't hurt him. He gave him 60,000 yuan. With these results, he was able to charge another 2 million yuan. What's wrong with that? In the end, we got the stamp of a real high-performing stock, and later we went back to the same two people. There was still a lot of inflation happening, so there was no way around 60,000 yuan, so there was no way to go up to 110,000 yuan. Don't worry about anyone else; we have other stories to tell you one by one, no matter what.
It is quite interesting to tell you about this matter. At some points, this money is not the real focus, but some people are willing to pay for it. This is the so-called rule of the game. Delaware's regulation could be prosecuted if it did certain things in a different way. I decided that at some point today some person would definitely point out what exactly he wanted to do; that's what I did back then. How do we educate the world about the facts about financial projects, and how to become the best bankers or electricians, all this is true.
This is something a good chairman can do for you, Charlie, what do you think?
This is what you thought at the time.
Munger: We're all weird people, but these unusual, weird places aren't all bad places, they have their good points, they also have their advantages.
Buffett: Charlie gave me a total of four ideas before. These ideas were all very practical. These four ideas changed everything. So it's really easy to listen to you talk. Do you want to tell everyone about something that happened to an insurance company before? How did things in the 1960s make everything fair.
Munger: I've forgotten everything. Do you remember why I asked you to talk about it, I've already forgotten.
Becky Quick: Have you guys changed your mind about Bitcoin and cryptocurrencies? I have struggled a lot in this area because over the past two years, Bitcoin has been called a waste, a type of fraud, and a lot of speculation. But isn't it useful?
Buffett: I shouldn't be answering this question any more, but I'd like to say a few words today. A lot of different people are watching our conference today. Some people bought bitcoins, but I'm not going to buy them. I want to talk to everyone present. If you own all the farms and ranches in the US, you are offering a 1% interest rate, and the 1% interest rate on all US farms to pay us, for example, if you give you a price of 25 billion dollars, how much would it be if you took 1% of that? Or if you own 1% of all apartments in the US and you give me 1% of the profit, so I own 1% of all apartments in the US, and I'll write you this check.
But if you tell me that you own all the bitcoins in the world, and if you say I sell them to you for $25, I'll say I don't want them because someday I'll sell this money back to you. These currencies are nothing to me. If you have a farm or an apartment, they are productive and will bring you rent and output. However, if the money I have in my hand is Bitcoin, there will be many myths behind this Bitcoin. Everyone will create this kind of mysterious story, and people will ask me why I want to buy Bitcoin and why not call it Buffett. There can be any kind of myths.
Bitcoin is not a productive asset; its value depends on how much the next person pays to the previous owner of Bitcoin. Now a lot of commissions have been paid. Many people have come to participate in this gambling game and hype game. This money is moving back and forth between different people. They only change who owns it and who it belongs to. There are people who profit and lose here, but in fact, you can use this money for many things, yet there is no way to produce tangible assets with the value of some things.
For example, a great painting may have some value in 500 years. Indeed, I reluctantly agree. If it was painted by a good painter, indeed, this is true, you can at least find a buyer. People are willing to pay attention, but essentially, for an asset to have its own value, it must be able to deliver productivity and deliver its value. Currently, only one type of currency is accepted. Like virtual currency, you can invent all kinds of coins, and Berkshire can also issue its own coins. Sorry, it might be troublesome to say that here.
If you think about the fact that the US has issued 2.3 trillion dollars of these banknotes, everyone can share 7,000 yuan of them, but not all Americans would be willing to let this kind of Berkshire coin or any other currency replace their assets, just because they have some shortcomings. No matter how many years from now, what is one thing I can confirm? I don't think virtual currency has its own production capacity. Maybe it's being hyped up behind the scenes and has a lot of magical appeal. It can help you create magic. Many people will say whether I'm an insurance company or a technology company, but after that, they lost a lot of money, and you can't go to the sky to create such a thing to help others make money.
Munger: I don't have the same opinion on this, I'll sell you some bitcoins, OK? I've also experienced some things in my life. I need to avoid some very stupid, very evil things, and things that will hurt others. I think Bitcoin accounts for all three points. First, obviously, the final value may change to 0. Second, why is it evil? It has really reduced the capacity of our national currency and the Federal Reserve system, which we all need; it is a key to maintaining the credibility of our government. Third, it makes us look like we are really stupid compared to China's leaders. China's leaders are smart enough to ban Bitcoin, yet we are still making all kinds of assumptions. I think we are much more foolish than them.
Buffett: Think about the whole country. Because of what we said today, 25% of people are angry and angry at us. Keep in mind that the last comment was from Charlie Munger, don't look for me. There are times when it's hard to prove what I just said, but in general, everyone's behavior is fine even if there is a dispute between the two parties, but everyone is very barbaric like people in tribal culture, and now everyone is acting so barbaric. I've had this kind of behavior before, and I've experienced this before. I'll be honest with you that University of Nebraska football is also this kind of very barbaric, very wild, and I feel this when I watch TV. If they take the wrong step and replay 6 times, it seems like this kind of problem has happened, but I still think that your behavior on the field is wild and barbaric. Although it is very interesting to participate, it will become a dangerous trend.
Some people will tell me that 2+2=3, but what's the interesting point? It's probably because of my age that I'm this way. If I consider my memory, the last time my country saw differences between different ethnic groups, no one would say I hate Roosevelt or anyone else. There are pictures of Roosevelt everywhere, plus Truman and others. As far as the country is concerned, there are tribes. As a result, the Roosevelt tribe and ethnic group are probably quite large, but I feel that my tribe is quite good because the family I grew up in was a relatively open and liberal family, so everyone can accept it no matter how bad I say it. So if I were to curse Roosevelt, no one would say anything. This is true of everything; I grew up in this kind of environment.
I've also seen that this wasn't the case for a while. Eisenhower or Stephenson, whoever they are, have the belief that they are active partisans. In a society, if partisanship is particularly strong, it's not a good situation. This is my opinion. Charlie, which tribe do you belong to now?
Munger: I have California legislation in this part of California. Everyone knows that you have to agree to their legislation or the same Congress. About every 6 or 10 years, these people in office are kicked out. This is the California governor's system, and so is their government.
Buffett: So you're still living there, and you're going back to California today? Isn't it?
Munger: Yes, I probably prefer living in Russia right now.
Buffett: Now who hasn't made a verbal mistake? I just talked about Roosevelt, and about so many people.
Question: Mr. Buffett, Mr. Munger, I'm from New Jersey, and now I'm a first-year student at Walker University. You mentioned before that you have to be able to learn to be an investor since you were a child. This is a very, very fascinating thing for me. If a person wanted to do this, what things should they focus on or what should they know, and what should they do to do better?
Buffett: This is a very interesting question because I started investing at a young age; I was actually quite lucky, and I found what I love the most. Because I don't have much interest in books, but I read one, and this book sparked my interest, and I'm really happy. I didn't read a so-called major (book) in college or a book about actually being a professional boxer; I came into this industry by chance. When you see something, it doesn't mean you have to fall in love with it. I often give speeches to some students and write them in my reports. Why are you doing this, and what is it that you are willing to do for the rest of your life? How unhappy it is if you have to work with someone you hate and hate so much. Whom you respect the most and who you adore the most, you work with him. One day I was giving a speech at Stanford University, and someone came to my office and asked me. I told him that my favorite job was working for Ben (Graham), the old professor before me. I like to work with him whether he paid or not, and I told him once, can I work for you? So I worked there for three years. Ben is a kind of person just like me. I haven't applied for a job with anyone since I started working with Ben, and I've always worked for myself. I've only had 4 bosses in my life, one in Lincoln and one in Omaha, but I'm still very happy to work for myself today. Of course, my dad is too, and Charlie. My grandfather and I also worked, but one of the most interesting things is how do you decide to work in my grandfather's store. It was 1940.
Munger: I went there to find work experience, so I went then. I was at your grandfather's store at the time, working 12 hours a day.
Buffett: Is it really worth investing 12 hours to do these jobs in the grocery store?
Munger: I've never done it before; I'm just making a fuss here, and I haven't done anything.
Buffett: I'd like to suggest to the girls at Walker University that you should find a job you like as Mr. Buffett did, stop being like me, someone I adore, so I'll work with him. My advice is to find someone you adore, then go find this person and ask him to work with you. There's nothing embarrassing about that. This isn't a bad suggestion, because Charlie and I were in 1940, we didn't have many choices at that time, and there were some things you wanted to do but didn't seem to be able to do. Charlie, right?
Munger: I'll think about it again.
Buffett: Think about it carefully.
Munger: Seems like both things didn't work. First, if we don't have interest, we won't do anything, and we won't be able to do it. Another thing, you're interested, but you don't have the right attitude, and you won't be able to do it.
Buffett: There's nothing wrong with that. I've enjoyed what I do my whole life.
Munger: There are some things you do really well and are fun to do, but you can't do them, right?
Buffett: That's right, it's definitely true; I'm an example of this.
Becky Quick: At the 2008 Berkshire-Hathaway Annual Conference, we talked about the issue of global oil production at that time. Later, we talked about the equivalent of about 8,500 barrels in 25 years, but now, 14 years later, when it comes to today's oil storage, is the US doing something different now? The results now are in ten years from now. What will happen if we stop actively reforming?
Munger: Are you an oil and gas expert?
Buffett: When it comes to petroleum, which of us is less capable of making this comment? Why are the two of us starting to fight again. I may have a different opinion on this matter. I hope to have more oil stocks; I will not use my current reserves. This is my opinion. Moreover, I will keep all of our resources; oil will be a very precious resource in the future. But no one agreed with my idea before, and I don't think I mind. I think there's nothing wrong with that. Anyway, the current view is probably not very normal.
This is a very flexible view. In fact, our current federal government can store 1 billion barrels of storage, and for our economy, 1 billion barrels may not last long, because when everyone talks about how many barrels, some people say it's only 11 million barrels? Actually, the 11 million barrels will probably be used up tomorrow, and they will disappear. Everyone has different ideas about this aspect. So, if you just ask this kind of question, many different ethnic groups will have different ideas, which is not a bad thing. At the moment, everyone's thinking is that this country has this much oil storage, which is of course a good thing. But if you think about it carefully, there aren't enough of them. If we were to change now immediately, in three to five years, these reserves would be gone. You don't know what kind of problems will occur in the next three to five years; maybe this stock will become very, very low. Charlie, your speech was quite dramatic, and it was up to you to post this part of the forum.
Munger: If you think about it carefully, the current situation is quite negative. At a time when more people in the financial industry are designing, it seems that everything they come up with is untrustworthy, especially when it comes to oil supply in the US. I think this is an evil and crazy field.
Buffett: The world's work is probably focusing on oil companies right now.
Question: I am a shareholder from New York. This is my 20th annual conference in Berkshire. You two have really brought us a very high level of joy, and your wisdom has really made us a happier person who can enjoy life more. First of all, I would like to thank Mr. Buffett and Mr. Munger for the joy you have brought me. When it comes to the repurchase issue, about 1 billion dollars or 300 million dollars a month and 300 million dollars a month, the intrinsic value of accepting it makes a huge difference. You mentioned the value of 0.1 percent. There are about 20 different factors in the middle that will affect future equity and repurchases. What was your original intention? Why would they do this?
Buffett: If someone were to tell me that you offered me 50 billion dollars to buy my stocks, of course this is a very important point of view, but the past 3, 4, and 5 months have been very simple; I'll explain it to you. We now have more stocks to buy back. If we have the ability to do it, when the time comes, we will do it too. The chances of buying back are still very high, but it depends on our stock valuation and our own investment. We are now making improvements for all shareholders to improve their equity and interests. If it is appropriate, we will buy back and not buy if it is inappropriate. We are deciding whether to buy back stocks or other companies. If we look at these factors, we are more likely to buy other companies than stocks. Sometimes we don't talk about what kind of company this is and what kind of formula it is; we actually don't do that.
If there were such a stall, Charlie and I had this stand. This stall might help us earn one yuan a week, and we would do a distribution. How are we going to distribute this company and this small stall? If we like this price, we'll buy that portion of your shares; if we don't like it, we won't buy it. This is our principle; it's very simple. But we don't have a so-called obligation to do anything. Of course, we're not saying that everything we do is risk-free or completely intelligent; there are many situations we can't predict, for example, one day a nuclear war will break out? There isn't a single factor as big as you said for us to consider.
Charlie bought 89% of a company's stock back because the stock price was rising, but there are always people who think we did it wrong. Some other companies also bought a lot of stocks. Berkshire should also have this opportunity to buy back its own shares, because our shareholders are also reasonable and rational, and this concept is very easy to evaluate.
The second stock I bought at the time was a trust stock company in Texas. It operated a railway in Texas and later went bankrupt. They also had a lot of land, but the quality of the land was very poor. They wrote a charter at the time on how to use the money from the sale of this land. So, we buy some stocks from them every year. I was about 13 or 14 years old at the time, and I said if I lived to be 100, I would buy this whole place. I haven't lived to be 100 years old yet, and I don't know if I'll buy all of them. This is a very good company. They will talk about how to increase expenses every year, for example, to 6,7,000. At that time, the entire area is about 3 million hectares, and they will continue to find more oil on their land. Every month I buy this stock little by little, and I don't know how long it will take for me to own all of this company. This is obvious to me. They have 3 million hectares of land, which is a very good idea. They also have all the qualifications to extract mineral resources, and the price to buy them was also very cheap at the time, so it was beneficial to all of us. But at first, many people didn't know if they could find a lot of oil from there. There were probably no people for tens of miles at the time, but the land had a lot of oil.
So, many of the reasons are actually very simple, but people usually seem to want to get a PhD, write a bunch of articles, and read a bunch of books. It's actually very simple. Either you have to buy your partner's shares at a very attractive price, buy them, or you don't buy them. The focus is on what kind of opportunity you have. The focus is on whether you want to do it and when. If you think there are other smarter investments, don't do it.
Does Charlie have anything to add?
Munger: What were you doing in 1940? You're in the military, aren't you? We are really lucky to have a long-term service with such a good company. I almost certainly said on Monday that if anyone were to trade Berkshire shares, we wouldn't sell them. But maybe one day, our shareholders are all very smart. We don't want to squeeze everyone's profits, but we also hope that what we do here can help these people who have been with us for a long time and increase their value. What you can do is buy back stocks or invest in other places. We don't have a formula; it's just that the principles just now have been explained clearly to you.
Buffett: My guess is that my successor will have some of the same calculations in this area, act rationally, and be able to contribute a lifetime to Berkshire. Thank you all for coming.
Becky Quick: Wouldn't it be a good thing if Greg was able to make this kind of decision without a board of directors with the kind of attitude you mentioned?
Buffett: I think the board of directors responds based on people's behavior. They may post some inquiries and restrictions. They don't need to do anything with me. Maybe some people don't have much experience and don't read much, and maybe they think that laws in other states will better protect our customers. Every company listed on the New York Stock Exchange has an insurance to protect themselves. If on this board. One point is very interesting. Some museum boards, and we all hope that the board of directors of these museums and the board of directors of universities can use financial support. Everyone feels very honored at this kind of board meeting, and they think these people should raise money for both universities and museums. Our boards are actually more interesting than the boards of universities and hospitals. Everyone discovered that you can earn, for example, 300,000 a year. For many people, this income is very important; for some, this income is insignificant. However, if our directors don't make any income, then no one wants to become a director. I have also made many independent records of this kind. The idea of independent directors should be unreasonable. His kind of independence meant the independence of slaves back then; in fact, no one is independent.
What I have in front of me is the text of the law, all word-for-word. I'm going to use a male pronoun to read this text here, and I've selected a sentence from a letter I read many years ago. He said that I am writing this letter to you with a very embarrassed attitude, and I don't want to write it; I have tried all other current traditional methods (this person has raised millions; I probably see him on the street now, and I can't recognize who he is; he wrote this letter). He raised millions of funds, and I have kept this letter here until now. He said 100% of my salary was paid at the board's expense. I looked up who this person is and found that he has served as a director of 5 very famous companies and is also a director of many other small and medium-sized companies. He is really short of money. He said that it would be great if he could get 100% of the directors' fees, and he is a so-called independent director. His status is an independent director, and he has this status in every company. For me, this is a truly spectacular phenomenon.
Our formal shareholders' meeting will also be held in the next few minutes. We held 9% of Coca Cola's shares in 2006, and they might give me some free Coca Cola. However, if we have 9% of Berkshire's shares, of course, we also need to be concerned about the performance of Coca Cola and other companies. Some companies also objected during the voting, and two companies voted against it. They said that we are not doing what independent directors should do here. The Ice Queen also bought some Coca Cola stocks at the time. I think the idea of “I'm not an independent director” is crazy. At one point, when the approval rate for my vote dropped from 98% to 84%, they felt like I wasn't qualified to take on these responsibilities. I always think this kind of thinking is very nonsense. One person thinks their income is a very important part of their income. How much income do they really want? They may want a lot, but that doesn't mean they aren't good people. The problem is the way you live your life. In this example, if this person doesn't get directors' fees, he will go bankrupt. Walter and Scott, none of them are independent directors. I think these ideas are really nonsensical. Rules are rules. We will actually follow all the rules, and now it's impossible to abruptly abandon all of the rules.
Munger: Warren, you're right; we have to be independent. Every horse and cow have their own rules.
Buffett: If we want to earn 100% of our income now, it's enough to be the most valuable, best, and most famous director in the country. If your CEO calls you, this director is good, and doesn't make any mistakes or cause any trouble in the board of directors, then you can become a permanent director, right? These are some crazy ideas, but I can tell you that some people get rich and become millionaires.
Moderator: This concludes the Q&A session for today's meeting. Next, we will have a business meeting with our board of directors. If you like it, everyone is welcome to stay. Thank you all!
edit/irisz