Berkshire Hathaway Annual Meeting Extensive Notes

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and then it went broke. He bought that company out of BK and rebuilt it and sold it to Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) about 10 years ago. I have never been to Forest River. We made a deal on incentive comp and base comp when we did the deal. It will do over $4bn in sales in 2014. I have probably talked to him 3-4 times in the entire period. I don’t know about the FR/Thor situation, but I think it would be tough to compete with Pete at all. It’s a tough business and you work on narrow margins. Only 11-12% gross margins and 5-6% SGA. I’d think most of our holders don’t even know we own FR.


Can you share your views on oil sands industry and their impact on Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)?

WB: It’s not a huge impact on BRK. We have a crane business at Marmon that does a lot of business in oil development including sands. We will soon have a power transmission operation that will cover 85% of Alberta. We own some XOM who is partly in the oil sands. We move 700k barrels per day of crude oil. 9 unit trains or so. Rail moves oil about 2x faster than pipelines. We recently bought a company from PSX that is a specialty chemicals company. It’s main product moves oil about 10% faster through pipelines. I think the oil sands are an important asset for mankind but I don’t think it will dramatically change anything at BRK.

CM: A lot of the oilsand production uses NG to produce the heavy oil. It is economic only if oil price stays high and gas stays low.


Energy Future. What assets held in Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) portfolio might be disrupted by technology? IBM, AXP, DTV

WB: All businesses should think about what can mess up their business model. With Energy Future, the wrong assumption was that gas prices would stay flat to go up. That was wrong. We look at all of our businesses as subject to change. GEICO is a classic case. It began in 1936 and they originally corresponded with customers by mail. They switched from US mail, to phone, to internet, to social media. They stumbled once when they expanded and almost went broke. Our businesses generally start from strength and are not subject to rapid change. Sometimes slow change can lull you to sleep.

We bought a department store in 1960s in Baltimore. We put in $6mm but sold it before it went broke. That 6mm became 45bn in Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) value.

CM: Ignorance removal is big. So is scrambling out of mistakes. BRK began as a textile mill. BRK owned a department store. We owned a stamp businesses. Out of this came Berkshire Hathaway.


H.J. Heinz Company (NYSE:HNZ). Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)’s 50% in HNZ is included in BRK’s results. What is HNZ’s current normalized earnings power and future earnings power?

WB: HNZ will file its own 10-Q. HNZ was actually a reasonably run company with about 15% pretax margins. That is not an unusual OM in food. I would watch for the next several quarters. I think they will significantly improve.


WB: When we are right about stocks, it shows up in market value and net worth. When we are right about businesses, it shows up in future earnings power. One is more easy to see than the other. Both are good; one requires going from flower to flower to some extent.

WB: We bought a fair amount of WFC over the last few years. More money was made buying banks of lesser quality as the economy has recovered. They were like a marginal copper producer going up when copper prices go up. But we felt 100% comfortable buying WFC but perhaps only 50% comfortable buying the others.


Can you and Tony Nicely talk about usage based pricing and how it will impact the auto insurance industry? How about the impact of self driving cars?

WB: Usage based pricing is popular with some companies, most notably Progressive with its Snapshot product. It is certainly valuable to know more about driver habits to figure out the propensity to get into an accident. GEICO has a pretty good system. For self-driving cars, it is a real threat to the auto insurance industry. If it is successful, it will be great for society and very bad for auto insurance businesses. It certainly could succeed.

CM: 30 years ago I went to Harvard saying color movies would come to the house on demand and it was just around the corner. It took 30 years. I think self-driving cars will probably take longer than expected.

WB: But we could be wrong


A few years ago, you made an effort to increase awareness of BRK for countries outside the US. Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) has not deployed a lot of capital outside the US

WB: We’ve never turned down a chance to do a big deal outside the US. We have not had as much luck getting on the radar of owners around the world as we have had in the US. Our best chance to buy a business is to buy from the founder. In the US, anyone like this who has a big company is aware of BRK. I don’t think there is nearly as much recognition outside US.

This year, we have not been contacted by any significant companies outside the

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