Full Q&A afternoon session from the 2005 Berkshire Hathaway Annual Meeting with the world’s richest man and most successful investor, Warren Buffett and his partner, Charlie Munger.
Charlie Munger: Invert And Use “Disconfirming Evidence”
PM 2005 Berkshire Hathaway Annual Meeting With Warren Buffett, Charlie Munger - Full Q&A
OK we're going to start in just a minute or two if you have a chance to sit down. OK let's let's go to Station 9 I'll we will go till 3:00 o'clock. We'll break until 315. When will convene the business meeting. No one has submitted any proposals for that meeting. So it may be relatively short at 4 o'clock. Charlie and I will meet in another room here. I'm not sure where with any of those of you from outside North America that are here we would like to especially thank you for coming this long distance. So with that we'll go to Area 9. Good afternoon. My name is Ken Goldberg from Sharon Massachusetts Massachusetts. Having the distinction of being the birthplace of Benjamin Franklin and thanks to New Jersey the only state in the union where one cannot buy Geico auto insurance. Earlier this morning you discussed policies that have eroded and that threaten to continue erode the U.S. dollar in some of your earlier letters to shareholders. You warned about the dangers of inflation and cautioned that shareholders should fully take inflation into account when evaluating the performance of a business. To what degree do you expect a large decline in the value of the dollar to trigger inflation that would adversely impact Berkshire's equity holdings and its businesses. And to what extent should we calibrate Berkshire's overall performance against the backdrop of a weakening dollar. Well we think by and large we have businesses that will do pretty well on inflation but inflation destroys value but it destroys it very unequally.
The best business to have during inflation is one that retains its earning power in real dollars without commensurate investment. To in effect fund the inflation produced nominal growth. The worst kind of business is where you have to keep putting more and more money in to a lousy business in effect. The airlines have been hurt by inflation over the last 40 years because now they have to put a whole lot of money in a lousy investment which is a plane compared to 30 or 40 years ago and they have to stay in the game they have to keep buying new planes and the new planes would cost far more now and the returns continue to be inadequate. So the best the best protection is is a very good business that does not require big capital investment and the best investment at all of all I mean if you are the leading brain surgeon in town or the leading lawyer in town or whatever it may be you don't have to keep reeducating yourself to be that in current terms you bought your expertise when you went to medical school or law school and old dollars and you don't have to keep reinvesting and you retain your earning power and current dollars. Buia Charlie and I are always suspicious that inflation will will regained some of the momentum it had a couple of decades ago. We always think it's in sort of remission. We thought the talk about deflation was total nonsense and certainly the trade picture is one that you would think would accentuate any inflationary trends that might otherwise be experienced.
I mean obviously the price of oil in euros has gone up far less than the price has gone up in dollars and you and I are buying gasoline and dollars so we have seen a bigger increase in our fuel costs because of the decline of the dollar even if we lived in Europe or some other or Australia for that matter.