“Woodstock for Capitalists”

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On May 5th, I had the pleasure of attending the 2018 Berkshire Hathaway Annual Shareholders Meeting. It was an incredible experience, to say the least. Here are some of the highlights from Warren and Charlie:

 

Berkshire Hathaway – Management Style, Culture, Operations, & the Future

“The reputation of Berkshire is that of being a good home for businesses… it’s not dependent upon me and Charlie… the reputation belongs to Berkshire now.” -W

“[Our] company culture gets reinforced by the shareholders that we have.” -W

“We want people on our Board who are business savvy.” -W

“We have great managers with strong, positive, optimistic culture… not 100% buy-in, but close to it.” -W

On HQ’s relative inactivity over past year:

  • “I don’t worry about the so-called ‘deal flow’, which is a term that I hate.” -W
  • “It’s already happening… subsidiaries are buying companies from people who we don’t know.” -W
  • “I’ve been ‘half-retired’ for decades.” -W

[On making pricing decisions at certain subsidiaries, such as See’s Candies and Buffalo News]: “We haven’t been involved in those decisions in a very long time.” -W

“The reinsurance business will continue to be important going forward.” -W

“We don’t do unnecessary things at Berkshire.” -W

  • 30 people at HQ, approximately half are internal auditors
  • Low overhead, diversified method
  • Believe that better decisions are made without bureaucracy, which acts like a “cancer” -C)

“To the younger shareholders… those of you who decide to sell your shares after we are gone to do something else with [the money], will do worse… keep the faith.” -C

 

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International Relations & Trade

“The U.S. and China are going to be the two world super-powers for a long, long time.” -W

On the trade negotiations with China:

  • “It’s a win-win situation.” -W
  • “I don’t think either country will dig in and perpetuate a trade war.” -W
  • “Every President needs to be an ‘Educator in Chief’.” -W
    • “No one thinks about the positives of trade… but the negatives are very apparent.” -W
    • [A President needs to do two things]: “1) understand and explain the negative, and 2) take care of the people who become ‘road kill’ for the good of collective society.” -W

 

 

Cybersecurity

[On cybersecurity insurance underwriting]:

  • “Very, very early days… unchartered territory” -W
  • “We don’t know what we’re doing [and neither does anybody else].” -W
  • “…things are going to get worse, not better… the offense is beating the defense.” -W

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Wells Fargo

“People make mistakes… we do a lot of dumb things in this world.” -W

  • Cited prior mistakes made at American Express, GEICO, and Salomon Brothers

“Wells Fargo proved the efficacy of incentives… they just had the wrong incentives.” -W

“We know that someone is something bad at Berkshire right now, as we speak.” -W

“I like the investment, I like Tim Sloan.” -W

“I see no reason to think that Wells Fargo is nothing but a large, very well-run bank.” -W

“Wells Fargo is going to be better going forward for having these things come out… who’s to say that Wells Fargo won’t be the best bank going forward? Out of all of them.” -C

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Apple / Stock Repurchases

[In response to a question about the announced stock repurchases]: $100 billion is a lot of money – “I used to think so!” -W

“We are delighted to see them purchasing shares.” (noting that their 5% stake could increase to 6-7%) -W

“Some people buyback shares simply to keep the price up. And that, of course, is insane. And immoral. Other than that, it’s fine.” -C

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New GAAP Accounting Policy (adding unrealized gains/losses to the income statement)

“…doing a great disservice to run these through the income statement… enormously deceptive.” -W

 

Healthcare (partnership with Jamie Dimon & Jeff Bezos)

“We are not going to start healthcare companies… the system may have a moat against intruders, but that doesn’t mean that each company does.” -W

“Hugely uncompetitive medical costs in the U.S.” -W

“It is a tapeworm in terms of American business.” -W

“The motivations [of the partnership] are not primarily profit-making… there is a chance that we can do something significant.” -W

“[We are] making a lot of progress… might have a CEO [selected] in a couple of months.” -W

“If it were easy, it would’ve already been done.” -W

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America, Politics, & Ethics

Very high on America: “always presses on… this country really, really works.” -W

GDP per capita has grown six times since Warren was born

“We tend to forget how bad our politicians were in the past.” -C

[On gun control / the NRA]: “Should it just be my view or that of the owners of the company?” -W

“My political statements represent my views as a private citizen… I do not believe in imposing my political views on the companies that we operate.” -W

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Investing in Emerging Markets

“If you can’t find it in America, China, Britain, and a few other places, then you probably can’t find it.” -W

“Markets move towards efficiency as they age.” -W

 

Stock Picking

“I can’t give you a formulaic approach because I don’t use one.” -C

“If you want a formula, you should go to business school.” -C

“[We] always prefer businesses with fantastic returns on capital… the fact that we buy stuff like BNSF reflects that we can’t find more of these capital-light companies at a reasonable price.” (2nd best choice) -W

  • It would be “perfection” to do this 100% of the time. -C

[On the importance of business fundamentals versus high-quality management]: “If it can’t stand a little mismanagement, it’s no business.” -C

“Generally, I think that it’s easier to make money if you stay narrowly-focused.” -C

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Changes in Payment Systems

Noted that they should’ve bought more American Express, MasterCard, Visa, etc.

“Nobody knows how this will go.” -W

Payments are changing and some “very smart people are working on it” -W

 

Newspapers & Print Media

“No one has come up with a digital product – except the Wall Street Journal, the New York Times, and probably the Washington Post – that can replace the revenue lost in circulation and advertising.” -W

“[We are] surprised that the rate of decline has not moderated over recent years.” -W

“It’s difficult to see how the print product will survive in this country.” (noting that losing local newspapers is a bad thing for society) -W

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Cryptocurrencies

“Non-productive assets tend to stay that way.” -W

“Checks and wire transfers are wonderful, but they don’t have inherent value.” -W

“In the end, you make your money on productive assets.” -W

“Cryptocurrencies will come to bad endings.” -W

“I like cryptocurrencies a lot less than you do. To me, it’s just dementia… professional traders that go into trading cryptocurrencies – it’s just disgusting. It’s like somebody else is trading turds and you decide I can’t be left out.” -C

 

Tax Reform

“It’s very difficult to examine anything in economies that is a single-input variable” -W

“I think it’s human nature to believe that when something benefits you, that it is good for everyone.” -W

“We will see the consequences of tax reform.” -W


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