Berkshire Hathaway Annual Meeting Extensive Notes

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you can ask your friends for criticism

CM: I don’t think it’s too hard. If youre 5-2, you probably won’t make it in the NBA. Competency is a relative concept.


BRK paid a much higher pretax profit multiple for the rest of Marmon vs what it paid for the original stakes. Why?

The multiple for ISCAR was determined for part 2 based on what was paid in part 1. It was both a put and call option. Our style would not be to call the rest from the family even though it was our option. The family elected to put their stake to us.

The Marmon deal was different. It was an installment sale. The family would not have sold the original 64% unless they had the higher multiple for the rest. It was a package deal.

CM: The more we looked at these two companies, the smarter we thought these two families looked (Wertheimer, Pritzker). Marmon’s tanker business originally belonged to the first John Rockefeller.

WB: I first met Jay Pritzker in the cocoa arbitrage deal in 1960s.


If you were 23 years old with entrepreneurial tendencies, what non-tech area would you get into?

WB: Probably same thing I did (investment business). When I was 23, if I was interested in the coal business, I just went to see the CEOs of 8-10 coal companies. I rarely made appointments. I just dropped by. I always asked them a few questions. 1) if they had to put all their money in one competitor for 10 years and go away, which would it be and why? 2) Which would you sell short? By the end of the 8-10, I probably knew more about coal companies on an economic basis than any of the CEOs.

CM: Larry Bird asked all agents “why should you be picked and if you don’t get picked, who should be picked instead?” All the guys picked the same #2 so he picked that one.

WB: We did this when Salomon was in crisis.

WB: You can certainly learn a lot just by asking. This sounds like a Yogi Berra quote. But if you ask people about things they know a lot about, you will learn. People like to talk. Here we are talking. You need to keep an open mind. You will find something very interesting.

CM: When it’s a very competitive business, if you lack requisite characteristics, you should probably not do it. I took thermodynamics at Caltech and I immediately knew I would not be as smart as the professor. I did this in field after field and only a few things were left.


We like having the meeting in Omaha. Airbnb is flexible supply for rare instances where there is a lot of demand but not a lot of flexible supply. We are trying to reduce demand outstripping the supply too much


GEICO continues to gain mkt share while maintaining best margins. GEICO is at 10% market share. State Farm is at 19%. Will GEICO pass State Farm?

WB: We passed Allstate this year. State Farm is a great company. It was started by a farmer in his 40s in 1920 or so. I think if I live to 100, I think we will make it to #1. Since Nicely took over in 1993, mkt share went from 2% to 10%. State Farm has a net worth of 70bn, a strong presence in homeowners’ insurance, and many happy customers.

CM: GEICO is a lot like costco. They feel a holy duty to have a wonderful product at a great price. Many companies talk about this but not many companies carry this out to the bone of the company.

WB: I think this is true of Costco as well. Many people who come to work at Costco don’t leave

CM: Costco is unbelievable. It is against the nature of many entrepreneurs to get the price down and the service level up but it works.


Has WB’s frugality ever hurt Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)?

CM: WB is more frugal than I am on personal consumption.

WB: I bought my house in 1958

WB: I have everything in life I ever wanted. If there were anything I wanted that money could buy, I’d do it this afternoon. I have no problem with that. My life would probably be worse if I had 6 or 8 houses. Having everything you want – you can’t have more than that. X is a cutoff, but when you get to 10x or 1000x it just doesn’t matter much.


BRK paid 8.9bn in taxes in 2013. PFE is thinking about a tax inversion. If this something you would ever consider?

WB: No. We could not have made Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) without the US

WB: We don’t pay more taxes than we owe. We pay what we are due. We do some transactions which are tax driven, like some wind energy deals and solar deals.


BNSF’s main Western competitor makes about 10% of revenue from Mexico loads. Would it benefit BNSF to own KSU?

WB: UNP has a big edge in Mexico route. They cross the border at 6 places. KSU does have a very significant Mexico presence. It doesn’t make sense for us. The math does not work. Maybe one day something will happen.

CM: It’s awfully easy to imagine combinations that make you rich with sleight of hand. At larger sizes, you can’t really do this. BNSF mostly has to get ahead on its own now.


What differences do you have in calculating IV vs Graham? Which company do you fear the most?

WB: Graham didn’t get too specific about IV wrt precise calculations. IV is commonly associated with what is called private business value. IV is the PV of all cash to be distributed from a business between now and forever. Phil Fisher would want to look a lot harder at the qualitative factors to determine how many birds are in the bush. Graham was more focused on quantitative factors; Fisher was more focused on qualitative factors. Munger told WB to focus more on qualitative factors.

If I had a silver bullet, what competitor would I shoot? PE buys a lot of businesses and can borrow very cheap. But I see anybody that has a model that really goes after what BRK tries to achieve.

CM: I think the BRK model will go a long time. None of the big businesses of yesteryear stayed big over time except Standard Oil. But I think we will be like Standard Oil and keep

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