Berkshire Hathaway Annual Meeting Extensive Notes

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going. The momentum is in place. The ethos is in place.

WB: Why don’t we get more copycats?

CM: It is just very hard to copy. It’s just extremely hard to do. There is nothing in American business school that teaches us. A famous urologist (Eddie Davis) developed a new way to do an operation. It was very detail oriented, hard and had a 2% death rate vs 20%. Other doctors saw it and decided not to copy it bc it was too hard

WB: It takes a long time. I think that deters people the most

CM: When something is very slow, you’re dead before it’s over


You said Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) is not immune to inflation. Today it seems like every CB is desperate to create inflation. Should investors and business owners think more about inflation? How would BRK behave differently if inflation picked up?

WB:  Let’s imagine a drone drops $1mm into every household. BRK would be worse off at this point because this would be wildly inflationary. The trick here is to realize you have $1mm before anyone else does. You can make a lot of money if you know this. But inflation itself does not create wealth.

CM: In Weimar Germany, the people who owned stocks got through eventually. Everyone else basically got wiped out (cash, life insurance policies). We can handle a bit of sub par growth, but we should not forget about Weimar Germany.


CM: you will never have perfect behavior when you have a bunch of individuals living in a miasmi of easy money. I think a few criminal prosecutions will change behavior a lot.

WB: I favor prosecution of people more than prosecution of companies.


There have been many rail accidents in the last year. Rose wanted to set up a collective insurance fund for railroads. How would a worst case accident impact BRK?

WB: Ajit has offered the rail industry some very high limits but they don’t like his prices. The 4 major rails have financial capacity to pay a huge amount if something big happens. The rails are common carriers and are forced by law to carry things like hazardous materials.

WB: The govt decided the nuclear risk was too big to be borne by private industry. I don’t think the rails face a risk this big but it can be huge relative to their net worth.

CM: BP was of course the big surprise. No one thought an accident in one well could cause a loss of 10s of billions of dollars. In the largest rail accident ever, NSC maybe lost 200mm dollars.

WB: I don’t think rails will ever get paid enough to carry things like Chlorine. But they have to carry them.


Why is Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) increasing insurance in Commercial P&C when pricing has peaked?

WB: Peter Eastwood runs the group that came over from American International Group Inc (NYSE:AIG).

CM: It’s a long term play. We won’t not do something we think is logical because we think the business cycle is a bit better.


Would you ever buy a sports team?

WB: No would not. Sports equipment has not been a great business. We own Spalding and Russell. This industry has not been a great business. We don’t want to own a helmet company. It makes BRK vulnerable bc if anything wrong happens, Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) has a ton of money. BRK used to own Pinkerton, which provided guards at airports. We passed on buying the whole place.


You have long disapproved of greenmail. Ackman is saying his purchase of AGN is like WB’s purchase of KO, in that he did it covertly and got special treatment from the SEC. Also, how do you feel about activism?

WB: We never used a derivative and we bought stock in the open market. On activism, I don’t think it will go away. There are certainly cases where some managers should be changed. Activist funds are getting bigger and more powerful. Anything on wall st that looks successful generates a funds flow until it stops working.

CM: Activists are causing a stir among managers. An activist can cause 20-30% of the stock to change very quickly, and an entrenched mgmt can look vulnerable quickly. Sometimes you see activist you don’t want marrying into the family going after companies you don’t want to buy in to. Like Oscar Wilde’s description of foxhunting: the pursuit of the uneatable by the unspeakable.


“Dream Big” – book about 3g

Why is Lemann organization so successful?

CM: The way to get a good spouse is to deserve one. The same is true of business partners


If Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) gets much bigger, what will it look like?

WB: At some point, we will have more cash than we have uses for. If the stock can be bought in at a price that makes sense for ongoing shareholders, I probably would do that.


CM: I think retailing in particular is going to be very threatened by technology. Extremely powerful computing power all over the world is going to change many industries.

See full notes in PDF format here: Berkshire Hathaway Annual Meeting Extensive Notes

Berkshire Hathaway Annual Meeting Extensive Notes by ValueWalk

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