Starting at 10:15 p.m. Beijing time on Saturday, May 4, Warren Buffett, the world's most famous investor and known as the "God of Stocks", will join CEO successor, Greg Abel, the head of Berkshire's non-insurance business, and Ajit Jain, the head of insurance business, to answer shareholders' questions, and is expected to answer 40 to 60 questions in at least five hours.
This is Berkshire's third in-person annual shareholder meeting since the pandemic, and the 60th time Buffett has participated in a lengthy Q&A session. The number of participants is expected to climb significantly to 40,000, returning to the pre-pandemic high level.
It is worth noting that Munger, Buffett's old partner, whom he called "Berkshire's architect, my brother and loving father", passed away in November last year at the age of 99. In addition to remembering Munger, shareholders are more concerned about when Warren Buffett, who will turn 94, will announce his retirement, Berkshire's leadership succession plan, and whether the company will split or pay dividends in the "post-Buffett era".
Wall Street News previously sorted out the key points of Buffett's shareholder meeting this year in detail. Investors also want to know if Buffett can reveal what the mysterious stock holdings that the SEC has kept secret for two consecutive quarters since the third quarter of last year.
Some expect it to be financials, and banks specifically, as Berkshire added $3.59 billion to its holding cost base in the second half of last year and was the only category to grow. For example, Schwab's share price, which was dragged down by the U.S. banking crisis early last year, fits well with Morgan Stanley's buying target.
Berkshire's U.S. domestic operations in many different industries, including railroads, insurance, energy, industrials and consumer goods, and a large equity portfolio of about $360 billion, make the company's performance a unique window into the state of the U.S. economy. Investors are also looking forward to how Warren Buffett explains the logic of investing when U.S. interest rates and inflation remain high and artificial intelligence is booming.
Before the Q&A session of the shareholders' meeting, Berkshire Hathaway also released its financial report for the first quarter of this year:
Berkshire's first-quarter revenue rose 5% year-over-year, beating expectations, driven by higher premiums and rail revenue. Investment income was nearly $1.9 billion, and net profit fell 64% year-on-year, but better than market fears.
The company's cash reserves further increased to $189 billion, hitting new highs for several consecutive quarters, and repurchased $2.6 billion of the company's shares in the first quarter, nearly halved year-on-year but up from $2.2 billion in the fourth quarter of last year, and reduced nearly $20 billion in equity investments.
On February 24, Warren Buffett Bar released an annual open letter to shareholders on Berkshire's official website, and Wall Street has translated the full text of the investment wisdom of the "stock god".
As with previous Wall Street events, the following will be the highlights of the 2024 Berkshire shareholder meeting, which are listed in reverse order of the latest update time, and the full text of last year's shareholder meeting.
The following is a real-time update of the Q&A session at Warren Buffett's shareholder meeting (based on EST)
16:00 Q&A session ends! Warren Buffett joked, I hope you will come next year, and I hope I will also attend next year
He also recommended that everyone buy "Poor Charlie's Book". Some participants mentioned that every checkout channel for selling books was full of people.
After the Q&A session, the Berkshire shareholder meeting will be officially held, and only shareholders will be able to attend. The research firm CFRA has listed a list of shareholder proposals that will be voted down.
Most of the proposals focused on climate change and diversity initiatives, with one proposal urging Berkshire to establish a rail safety committee, possibly in response to a train derailment.
The CFRA noted that Berkshire's board of directors did not support the proposals, and that Buffett had 31% of the voting rights, meaning that the proposals were unlikely to pass: "However, these proposals raise important issues that we believe Berkshire can better communicate and resolve with shareholders." ”
15:58 If Berkshire shareholders were to be asked, what would they be? and why?
Answer: This question is the same for rich and poor. If you're lucky, make sure to help those around you get that luck too.
15:50 The U.S. Treasury market is six times larger than it was in 2008, when will the supply of so many U.S. Treasuries no longer be absorbed by the market?
Buffett said that the best guess is that US Treasuries will continue to be accepted by the market for a long time, because there are no more and better alternatives. For a long time, the size of the US Treasury is not particularly large, because you have to take into account inflation, the crisis that threatens the global economic situation, and the dollar's status as a reserve currency:
"It is not the sheer amount of US debt that threatens the US financial system, but inflation and the future value of the dollar that threaten the entire system.
So I'm not worried about what the absolute amount of US Treasury supply is, but about the prospect of a fiscal deficit.
Right now, people like to focus on the Fed's actions, but the fiscal deficit is the most important topic to focus on.
Fed Chairman Jerome Powell is a very, very intelligent person, but he can't control fiscal policy, he's calling attention to fiscal policy/deficits, and that's the problem, that's what causes the crisis. ”
It was also asked how the situation is different from 2008 and '09.
Warren Buffett refers to former Federal Reserve Chairman Paul Volcker, who faced high inflationary pressures in the late '70s and early '80s, and who received death threats when Volcker was trying to bring inflation down. Warren Buffett said that we can't fully predict what the Fed is deciding. Fed Chairman Jerome Powell is a very smart man, but the financial system and decision-making of the United States are not up to him.
15:44 Now that the AI genie is out of the bottle, which Berkshire business has the biggest risk in front of AI?
Answer: Any labor-intensive industry is threatened by AI. Of course, there are more hours of entertainment under this. There are a few more problems in between. Artificial intelligence is discussed at a more in-depth level. When it comes to elves, I have a lot to share. If we use these on a social level, there may be a better advantage. But if you use this to use an atomic bomb or something inappropriate, there is a problem. AI is in all jobs, in all industries, in every company, what can be done more safely? It's impossible to predict now, and it's too early to make the right prediction. Of course, AI is absolutely incredible. The atomic bomb project was also discussed with great excitement.
15:34 Warren Buffett said in the past that he would invest 90% of his wife's legacy in the low-cost S&P 500 index, and now that technology companies account for a quarter of the S&P's weighting, will he consider shifting the allocation of his legacy to investments such as equal-weight index funds?
Warren Buffett said that his investment advice has not changed during the process of regularly revising his will. He revised his will every three years and still advised his wife to allocate 10% of her estate to short-term government bonds and 90% to low-cost S&P 500 index funds. Given the size of the trust that his wife will inherit, it doesn't matter if her portfolio will outperform the S&P 500. Mainly, she felt that her financial situation did not need to be taken into account.
Buffett said he wants to find a better way to put the best resources where they need to be used to solve the world's most problematic problems. He said, "I feel that the legacy funds can be used where the world needs them most. I think all of you in the United States need a will, you know, all four former U.S. presidents died without a will, imagine how terrible it is to leave these people without a will. For example, Lincoln, who was assassinated, it is hard to imagine how regrettable it is that such a great man did not leave a will after he died. People have their own weaknesses and flaws, don't be too yourself, and you can't be completely lax because you can change the future.
15:28 Investors from China ask, how to maximize compound interest investment?
Warren Buffett: Luck plays a very important role. My best skill right now is to run away from risk and doom. When you're lucky, be sure to use it to the maximum, of course, this luck is not always available in real time. If I lived again, my choices might not have been the same, but I wouldn't miss out on these things that worked. In the second half of my life, a lot of things changed. When my sister was still in school, she was told by her family that she must get married when she went to school, otherwise all good men would be robbed. It's truly unparalleled to see how far we've come. There are certainly better expectations now than there were 100 years ago.
15:21 Divergence over investment in Pilot, a chain of trucks and gas stations. Berkshire was charged with an investment in Pilot and nearly went to court, but a settlement was reached.
Warren Buffett said that our investment in Pilot is still good, but he is reluctant to mention more. Later he referred to the features of the Pilot gas station, saying that it was a feature of the American environment.
15:16 How to find a true idol/life coach in life, how to make good friends, etc
Warren Buffett said that it is important to have a suitable life idol, and he and Munger have:
"It's important that someone continues to love you, even if you break some of the rules, Munger and I have both been loved so much. You need to have the right hero to worship, depending on what kind of person you want to become, and if you choose the right idol, you're on the right track, not just in terms of making money, but about the whole life. ”
15:09 Munger mentioned that a person who has ownership of property will be better managed. Many pension asset managers do not have the strength of Berkshire, and the decisions they make are not in line with the rights and interests of shareholders.
Warren Buffett: Berkshire has a good man at the helm. Look at it as a national asset first, so that more solutions can be found. This is something to think about in the minds of our directors. The human mind influences many kinds of behaviors. There are some things that you don't want to do next time, and there have been acquisitions like this.
15:03 Someone asked Warren Buffett: At the end of '08, you mentioned that investing $1 million can guarantee a 50% annualized return, how to invest $1 million now
WARREN BUFFETT: Moody's book on transportation, I was in my twenties when I read it, and it's hard to imagine that young people knew about railroads like that. I don't know of anything like Moody's handbook back then. Now it would be great if you could get a 50% annual return if you invested 1 million. Some people find investment opportunities because they are willing to explore and expand their knowledge in different fields. The human brain is complex. When we understand what our brains are suited to, we can reach our full potential. If you can't find a suitable area to invest in your interests, the return may not be very good.
14:50 The board letter mentions that BNSF has slipped and has invested in more freight and construction, so what's going on with the slump in the rail business today?
Warren Buffett replied: Railways are very necessary for a country. The U.S. government once nationalized the railroads, conducted many rounds of negotiations, and even stopped operating the national railroads in the United States. It's almost impossible to build railroads now, like in California, because they're worried about the environmental impact, and how loud is the opposition if such a thing is done across the United States. It may not be the best business, but it is definitely a very necessary presence, and his replacement value is too high. We hold the relevant railway business in a very tax-efficient manner. Buying BNSF is still a good investment. We hope to find more reasonable investment targets in other industries. The decision to buy BNSF was made by Abel.
Abel said: "There are some aspects of the rail business that disappoint our shareholders, but it is okay compared to its peers. If you go back to 2021, the situation was completely different. In 2022, supply chain problems in the western region were discovered. In 2023, all business costs and architecture were improved accordingly, and the team worked hard, reallocated the cost and resources of the architecture, did a lot of things, and recognized the need to rethink requirements. We also have the truck industry as our competitors, and the truck industry is structured so that we can compete with it. We need to find a way to solve the structural problem. Our team has invested in the right architecture.
14:37 Buffett was asked what your favorite period of ownership was during the decades when you owned American Express and Coca-Cola, or something else?
Warren Buffett: There are a lot of factors that go into making these investments. I started buying stocks in 1942. Munger and I sometimes make quick decisions, and we think about what makes us make decisions quickly, and we feel like those factors are obvious. One of the things Munger taught me about why he invested heavily in Apple is that consumer behavior is important. If we are going to buy a furniture store, we may quickly realize that this is a mistake, but this mistake will make us better consider what the asset allocation process looks like. We're slowly learning how consumers behave.
Warren Buffett mentioned the investment in Joy Candy, saying that we don't know how to do a candy business, but we learned about consumer behavior in the process of investing. In the process, we continue to learn about consumer behavior. Investing in Apple too. You can observe that customers are interested in your product. This is a preference of consumer psychology. At the time, I saw that the value of Apple's stock was lower than its actual value. For example, if you buy a second iPhone, you will not be the same as buying a second car, and the value of your second car may be twenty times higher than that of a second iPhone. I didn't know how the iPhone worked at the time, but I knew that consumers loved it and that its value was far undervalued. And I know that Apple's CEO, Tim Cook, is just as good as Jobs.
Speaking about the iPhone, Buffett said, "It's one of the greatest products, and probably the greatest of all time." ”
Warren Buffett says that if you have experience in a certain business, then you may have an idea and invest. And some things don't happen all at once, but you can do a lot of preparation. The same is true for Occidental Petroleum, which soon decided to invest. Warren Buffett said that he had been learning about the research industry and had done a lot of research on the oil and gas business, and sometimes he didn't fully understand the tricks, and sometimes he thought of some ideas and kept them in his heart until he ran into Vicki Hollub, the CEO of Occidental Petroleum. Warren Buffett said, at the moment I am satisfied with the investment in Occidental Petroleum. For the media stock Paramount Global, Buffett said that he was responsible for this investment, which lost a lot of money, and he was solely responsible.
14:32 Earlier I mentioned that Berkshire was reducing its stake in Apple to increase cash, where do you see the investment opportunities in the future? How do you compare the current market conditions to the return on investment in 1999?
Warren Buffett said that sometimes I feel like I am full of opportunities to invest everything when night falls, and sometimes a year has passed, as if I have not found a meaningful and opportune investment opportunity to invest in, and there is a better time than now:
"Munger and I missed out on a lot of investment opportunities, but we didn't particularly regret it, at least we didn't regret missing out on things we didn't understand, and we really regretted missing out on some opportunities that turned out to be very big.
I don't remember 1999 very well, unless there was something particularly dramatic at the time, like 1987, 2008 or 2015, I just see what I can do every day. ”
14:25 Warren Buffett and Abel discuss the criteria for evaluating acquisition targets
Answer: When you have an amazing person to manage things, there are a lot of self-choices. We'll meet people who do their best for us. We just don't have enough talent to make smaller acquisitions. Given our experience at TTI, we have a good understanding of the distribution business. TTI is the way to do business. We're going to do some small acquisitions as well, but only if it's in line with what we're structured right now, not for the sake of investing. We can also buy more TTI for shareholders, but we are more inclined to buy back.
14:15 On Berkshire's future capital allocation decisions
Buffett said Berkshire's board already has the power to brainstorm. When he is no longer at the helm of Berkshire, Abel will have the final say on Berkshire's investment decisions.
"If I were a board member and I were going to make a decision, I would probably leave the capital allocation to Abel, depending on his situation," Buffett said. He knows businesses very well. If you know business, you know common stock. ”
Buffett said that Berkshire's two investment managers, namely Todd Combs and Ted Weschler, have clear responsibilities and know what they do. If you want Berkshire to achieve more benefits. Strategic considerations are important. Abel has the ability to deploy strategically.
13:00-14:00 Q&A session enters a one-hour lunch break
12:54 Zero-emission vehicles, which may have been fully accepted, ask Warren Buffett what he thinks?
Warren Buffett: Autonomous driving may reduce the occurrence of car accidents, or reduce costs, and some people will start using it, and future data will also show what the future holds. It has been discussed a lot over the past few years. In the insurance industry, there was also talk of it when Uber began to rise. For some things, the past estimates were wrong. You think insurance is an easy business, but it's not. The insurance business "is very interesting because you get the money in the beginning, and then you find out that you did something stupid." But when someone hands you money and you hand them a small piece of paper, it's a very tempting business. "If you can reduce car accidents by 50%, that sounds good. We are looking for opportunities. Some people die in car accidents even after driving a car for many miles. This is not an easy number to estimate.
Jain: Tesla's technological improvements sound like they're going to reduce car accidents. However, the mean number of crashes does not necessarily fall. It won't be so easy to completely transform the field of auto insurance. Tesla has been considering the idea of directly underwriting insurance – but it hasn't been too successful.
12:48 Tesla's self-driving technology, which claims to dramatically reduce car accidents, how does this technology affect car insurance, and what will be the benefits in the future?
Warren Buffett: Autonomous driving may reduce the occurrence of car accidents, or reduce costs, and some people will start using it, and future data will also show what the future holds. It has been discussed a lot over the past few years. In the insurance industry, there was also talk of it when Uber began to rise. For some things, the past estimates were wrong. You think insurance is an easy business, but it's not. If car accidents can be reduced by 50%, that sounds good. We are looking for opportunities. Some people die in car accidents even after driving many miles. This is not an easy number to estimate.
Jain: Tesla's technological improvements sound like they're going to reduce car accidents. However, the mean number of crashes does not necessarily fall. It won't be so easy to completely transform the field of auto insurance.
12:38 What will be the impact on the real estate industry if the 6% commission standard for home sales in the United States is going to be abolished?
A month ago, the National Association of Realtors (NAR) reached a settlement with a group of homesellers, agreeing to end a landmark antitrust lawsuit by paying $418 million in damages and eliminating commission rates.
Abel said the industry will go through a transition period, and Berkshire Real Estate Services and the industry as a whole will have to adapt to the new reality. However, real estate agents are still an important part of the transaction, and the advice and guidance services they provide are still important:
"The future change in commissions is that the commission percentage will be negotiable rather than a fixed percentage, and [not that commissions will be eliminated entirely,] and the settlement will only be limited to Berkshire Real Estate Services' subsidiary. ”
It was previously reported that at the end of April, American Home Services Berkshire, Berkshire's real estate agency, said it would pay $250 million to settle a lawsuit alleging excessive commissions, the largest payment ever made by a single brokerage firm.
Warren Buffett said that in his experience of buying and selling houses, as a seller, he has never refused to pay the commission of the real estate agent, no matter how expensive the house is, and has never asked the agent for a commission discount. When I bought an established company as a real estate agency in Berkshire, the price was reasonable. And real estate agency is a very basic industry in the economy and is not going away.
Buffett said he was indeed surprised that the settlement was reached, "but as with so many surprising decisions in the insurance industry, we need to accept the facts." It's like the 911 terrorist attacks, which no one would have imagined to happen, but it happened anyway. Reality needs to be accepted. ”
Abel adds that the model of the real estate agency industry may change, but he has also bought a house in the UK and buying a house outside of the US is a completely different experience: "Our agents invest time and capital to make sure your sale is smooth and satisfying. The US may not be the most budget-friendly model, but the value for money is good (you get what you pay for). ”
12:36 Berkshire now has more than $180 billion in cash, what are they waiting for?
WARREN BUFFETT: That's an easy question to answer. The people present on the stage did not have a good idea, how to use this money well, we will not use this money at the current interest rate of 5.4%, now the interest rate is so high (don't tell the Fed about this), we are only swinging at the right time, but now many people are swinging at any time, because they feel that they have been shorting their swings before, and they feel that they will always hit the right target. We don't need to go as much as we used to in returns, and we can't find as many opportunities now. There are not enough attractive targets for me to allocate so many assets to see if there is any change after that.
12:26 What do you think your team is doing best in terms of business and asset allocation, especially after the pandemic.
Warren Buffett: If someone retires at 65, they can't be the CEO of Berkshire. Over the next 20 years, we will be delivering a number of projects, and the Board of Directors and our management will make different decisions going forward. Regarding whether the director will continue to succeed and who is the most suitable manager to succeed, Buffett mentioned that he used to do the textile business because, I think the manager who manages it is a good person. I think there's a good chance we'll find a good manager like Tom Murphy, [former director of Berkshire]. It depends on the people of the future company, what they think. When I leave Berkshire, maybe the company has to make the right decision every 20 years, or maybe it's wrong and it has to be reversed. That's why there is a board of directors. We have the right people on the board, they can make the right decisions, and they don't take themselves too seriously and don't use Berkshire as a springboard.
12:19 What will Berkshire do if a new architect joins?
WARREN BUFFETT: If the board were to find a new director, some people might retire at 65, although that doesn't happen very often. Our managers have to make decisions frequently. This is a very difficult job in our existing system. Some people have told us not to fly the same plane or the same car. For example, Abel's job responsibilities, he has to tell the directors what they have done and what things are going to happen. All of our directors have to decide whether Abel has made the right decision. We're looking for experienced and inspiring managers. We're now diverse, we're the best, and we've got the best group of managers at Berkshire. Berkshire's culture ensures that it attracts the best managers.
12:13 The Indian economy has performed well over the past five to two decades. Is Berkshire actively looking for opportunities in the Indian equity market? What will drive you to invest big in India
WARREN BUFFETT: I believe there are a lot of opportunities in India. The question is, what are the advantages of our insights into India, and is it possible that our investment is something that India wants us to be involved in. There may be areas that we haven't explored or noticed, and certainly not by me. In the future, there may be more opportunities to emerge, and of course there may be opportunities now. The question is whether Berkshire has the advantage to pursue these opportunities, or make them a reality. Japanese investment is good, and India may have such opportunities, but I don't know. Because the cultures are different, I can't tell the difference.
12:05 What do you think of Buffett's retirement, and the management of its subsidiaries has reported to Abel and Jain
Buffett said that because of his advanced age, his reading speed, physical strength "and operational efficiency" are declining, much lower than 30 years ago, and he doesn't know many of the management of subsidiaries anymore, "If there is a better person to report, why come to me?"
Warren Buffett believes that the current way of operating "couldn't have been more perfect." Abel is more aware of the difficulties of his business and can give advice, and Jain's wisdom in the insurance industry is unmatched. The two vice chairmen also have better energy and the way the message is conveyed appropriately.
Jain said that after announcing that Abel would succeed as CEO, the whole transition period was very smooth, and the management of some subsidiaries would call Buffett to report the business, but now Buffett will deliberately direct the call to Abel and Jain to deal with it.
12:01 Could Warren Buffett share today, what do we most need to hear?
Now you live in the United States, where there are many opportunities that many countries can't find. I want to use Munger's advice, first of all, to do a good job in education, to deal with the right people for my own personal situation, and I hope to find someone who can help me find the right direction in life. In the past 200 years, we have had the Industrial Revolution, and then we have made great progress in science, medicine, and education, and we are fortunate to be born in such an era. The world you live in is the best it has ever been. Finding your own interests, finding the job you want, and finding people you can share your life with, sometimes you have to look for a long time, but don't forget your original intention.
11:58 How to see the situation in Florida vehicle insurance getting out of hand
Jain: In Florida, there has been a big shift in car insurance, which has led to a sharp increase in premiums, and the frequency of wind disasters in the region has become more frequent and costly. This results in a loss of insurance business. Florida is a big market. Local legislators are passing laws to lower rates, and we hope that the local insurance industry will return to normal. Florida has its own problems, losses will increase, but in the end there will be checks and balances.
11:51 Question from Latinos in Nevada: We are struggling to pay our electricity bills. Why doesn't Berkshire open a new gas plant or invest in natural gas? Because I have sunlight here all the time. Is it possible to invest in new energy instead of petrochemical investment?
Abel said that we used to use carbon energy, and now we are switching to renewable energy, which is all under consideration, sometimes we have to integrate battery and other issues, but we can't switch to other renewable energy sources immediately at the moment, but after that, it will reduce the possibility of thermal power generation, which is already happening quickly, to understand whether the existing system can be trusted, and whether existing customers can continue to use it. We also use a corresponding percentage of wind energy, but if the wind is gone the next day, we need to have something else to replenish.
Warren Buffett said that what can be done, what can be done, and what meets our standards is a very complex business that has to be decided. Is it possible to actually do that by moving from one place to another? Maybe thinking about it today will cause problems tomorrow. The company needs to confirm that there is lighting every day. Fossil crude oil is definitely the oldest way to generate electricity, storage is also a problem we consider, batteries are now a more economical way, but a battery may only have 4 hours of power, there are also economic and technical considerations and advancement, to seek reliability and balance. Bill Gates is also doing this kind of work.
11:45 Political changes have created attacks and dangers on the web
Jain: The cyberattack involved a market worth at least $10 billion. We are very cautious about whether to do cyber security insurance. It is difficult to understand how losses are calculated, and when it comes to what operational criteria there are, the amount of calculation is huge. The cost of loss is difficult to calculate, and it is not necessarily that there is damage after a single attack, and the loss spans time and has a long-term impact. It can't be simply calculated. How to understand the rate calculation of the policy. It's a huge business, and sometimes it's a very profitable business, and sometimes it's a big loss.
Warren Buffett mentioned that there were riots in 1968 when Kennedy was in power. He said that if you're going to write a policy, you have to limit the coverage, and the question is, if someone is assassinated, because of one such incident, and it causes thousands of business losses, how do you underwrite. Today, if you offer 1,000 insurances, this alone has a lot to do with it, and sometimes it needs to be decided by the court. Cyber insurance agents can earn high commissions, but it is essential to be clear about what the risks are when writing a policy.
11:37 A child asks what he would like to do if he had the chance to spend another day with Munger.
Buffett said that he and Munger do things that make them happy every day. Munger loves to learn, he's interested in a lot of things, he's more interested than I am, and we're like-minded together, and we're happier to spend more time together than alone:
"It's also fun for us to make mistakes together, to correct mistakes together, to learn from them, and that seems to be more enjoyable because your partner will help you get out of it, and then you see that the decisions you made 10 years ago are still making money. ”
Warren Buffett admits that if he had the opportunity to spend another day with Munger, "it wouldn't be much different from all the days we've had before":
"I've never seen anyone like Munger, who lived to the pinnacle of his life at the age of 99 and the whole world wanted to come to you. Munger once said, "If only I knew I was going to die one day, so I would never go to that day."
Warren Buffett also said that people always get smarter the older they get, because they can learn and grow from their mistakes:
"We still think the world is interesting, and when we're that old, I asked Munger who you'd most like to have dinner with in the last 2,000 years, and Charlie said I've met them all. Everyone should ask themselves who you want to spend the last day of your life with, then meet them now and do things with them. ”
11:31. The importance of Jain's insurance business and his successors
WARREN BUFFETT: Jain's emergence has allowed us to do what the insurance business is now. Berkshire is now building an insurance business structure that would have been unthinkable before Jayne came along. Insurance is one of Berkshire's most important lines of business. Investment is also important, but it is not at all comparable to insurance.
Jain: There's no one who can't be replaced, like Cook who did a great job when he took over from Steve Jobs. Our Board of Directors is focused on succession. We'll pay attention to what we'll do if one day I get hit by a truck. We also have the image of future candidates. In the future, I will slowly find a replacement that gives me confidence.
11:27 Warren Buffett says the next big deal could be in the US, but the "mystery investment" might be in Canada?
Buffett says he understands America's rules, weaknesses and strengths, while he doesn't feel the same way about many other countries around the world by and large. BYD and Costco are the two stocks that Munger has most strongly advocated buying in the years he has worked with Munger. He believes there are plenty of opportunities in India, but the question is what are the advantages of Berkshire's views on India. Warren Buffett revealed that Berkshire is evaluating investment opportunities in Canada, and there is speculation that this may be Buffett's mysterious investment.
11:20 Environmental changes are important in the insurance industry, what are the changes in expanding the insurance business, such as the California floods?
Jia Yin, head of insurance business, said: "Liability insurance or some catastrophe insurance are important topics, and at the end of last year, we were seizing the opportunity to reprice, and some factors made us consider all possibilities when we think about it every year. How much does it cost to change the environment? Sometimes it is necessary to raise prices to maintain the status quo. Regulators don't make our lives easier, there are a lot of regulations, and there are many things to refer to when changing prices. Environmental change will definitely increase our risk, and ultimately we need to consider whether the business can become larger. There were also typhoons in the Atlantic. It is impossible to say whether the same situation will happen in 5 or 10 years. It is necessary to understand the situation of water, rainfall, etc. The cost of vehicle repairs is getting higher and higher, the impact of inflation.
11:16 What advice do you have for your wife and children?
Buffett said that I fully trust my wife and children, but that doesn't mean I'm going to ask them for advice on what stocks to buy. Munger has been the best person to talk to for decades when it comes to managing money, and that doesn't mean I don't refer to the opinions of others. My wife and children have also gotten smarter over the years, and sometimes I listen to them a lot. Sometimes I overlook the details.
When it comes to business decisions, Warren Buffett says, "If I think I can't do it, I won't do it." So, in a way, I'm talking to myself about investing. ”
Warren Buffett called Munger absolutely honest, which is part of the reason why Munger has become a valued partner. He said that I had worked with Munger for many years, that he never lied, that he didn't force me to do anything, that he definitely made me think about a lot of things, and of course he made small mistakes at dinner or party. On the partner side, I can't think of anything I had to talk to about Munger that didn't matter.
Buffett also said that this applies to his work and personal life. "When you encounter something like this in your life, you value those people and you forget about other people.
11:10 Warren Buffett defends Geico car insurance for lower operating costs
Some shareholders asked about buying Geico instead of Progressive because the latter did a better job in data analysis.
Warren Buffett defended Geico, the third-largest auto insurer in the United States, saying that its insurance costs are the lowest in the industry, which is irreplaceable, and it is also better than its competitor Progressive, that is, it can operate at a lower cost.
"It's not a matter of survival or profitability, what we want most is the best model in the insurance industry and the ability to continue to serve our customers at a low cost," Buffett said. These are what I want. Geico will continue to improve its business, but it will not shrink. In the future, we will be one of the best companies in data analysis in the insurance industry. ”
"Unfortunately, technology is a bottleneck, but we are making progress. I recognize that we are still lagging behind and are taking steps to close the gap, and by the end of 2025 we should be playing alongside the best players in data analytics. ”
11:06 The impact of generative AI on traditional industries, and how many advantages does Warren Buffett think AI can bring?
Warren Buffett admits that "I don't know anything about AI (laughs)", but that doesn't mean that the technology isn't important. Last year I mentioned, let the genie jump out of the bottle. Let it jump out, the elf is very useful to many people, but I hope that this kind of elf can do good in the future.
I can't evaluate it. With the advent of nuclear technology in World War II, we felt it was necessary to end the war. The development of AI makes me nervous, especially with the recent developments, and some of the phenomena I have witnessed are somewhat scary. AI can cause fraud problems, such as the difficulty of distinguishing the real from the fake of an image, and the fraud market will grow rapidly. Of course, AI may also do good.
10:48 Warren Buffett accidentally blurts out "Munger, it's your turn to answer"
Warren Buffett wanted CEO successor Abel to answer the question, and it turned out to be "Charlie". He said, "I'm used to it, and I'll probably talk about it later." ”
Abel said it would be "a great honour" to be treated as Munger. This is the first year that Munger has been absent from Berkshire's shareholder meeting due to his passing.
The third question: In the latest annual report, Berkshire's energy business is disappointing, and investors are worried about environmental changes and regulatory measures, such as the recent regulatory action in Utah, how do you see Berkshire's investment in energy.
Warren Buffett: Some states in the U.S. are starting to control power investments, like Utah. These are fair moves, their work pays off, and in the case of public electricity, in the 1930s, some privately owned utilities or utilities may have been more efficient than state-owned, but now companies in this area have to invest a lot of money, so sometimes private investors can't do it. We're happy with Berkshire's investments in the energy sector, and we're going to have a return, but the rate of return may not make us rich, and of course, we won't do it if it doesn't return at all. The current work may be related to the current environmental change, and the current investment cost is surprising, but we have some funds, and the support of some big projects is very important, and we will not let the investment go to waste. In Utah, the environment is not very friendly.
During this period, Warren Buffett made a slip of the tongue and misnamed Abel as Munger. Warren Buffett said "I'm used to it," and he admits that there may be such slips of the tongue in the future. Abel said it was a great honor.
Abel: The challenge today stems from the fact that we have a lot of investment in utilities. Berkshire is mindful of investing in public utilities. Berkshire has development in AI. At least $1 billion or more in change. Wildfires are happening in many places. Claims for wildfires are numerous. So the legal challenges that Berkshire is facing such as litigation, this is a huge challenge. Berkshire will respond to all lawsuits. Fundamentally, we need legislation and reform so that we can contribute with incremental capital investment, and we don't want to waste investment. We see some opportunities. At Utah, we feel comfortable investing. They recently passed a bill that caps the damage from non-economic wildfires.
Investments in electricity certainly won't pay off as much as other businesses. Investments in utilities, especially energy, have yielded modest returns at best, and now there are threats such as wildfires, some policy changes, climate change. We're definitely spending more than $100 billion, but we're not going to simply let those investments go to waste.
10:42 Investor question from Hong Kong: Warren Buffett previously invested in BYD but now reduces his position, will he have the opportunity to invest in Hong Kong or other Chinese mainland stocks?
Warren Buffett said that our main investment will be in the United States, and some of the companies we invest in such as Express and Coca-Cola have global businesses, which are the beverages or means of payment that consumers around the world will prioritize.
BYD's investment is similar to that of five years ago in Japan, which is a rare large investment outside of the United States. I am still satisfied with the position of investing in Japanese companies. There are many other countries around the world that do not understand enough, so the United States is the main one. There is no tolerance for situations where money can be lost.
Buffett also revealed that Berkshire's next big deal may not be an investment in a business outside the United States.
10:32 Although reducing its holdings in Apple for several quarters, it will hold Apple, Coca-Cola and American Express for a long time
Q: Last year, Warren Buffett said that Coca-Cola and American Express were Berkshire's longest-owned companies, and that these businesses were generating good returns, but they did not include Apple, and did he find Apple less attractive than he was when he first bought it in 2016?
We still hold a lot of Apple stock, and by the end of the year, we're likely to be the largest holder of Apple's common stock, and we think it's not just about holding stock, it's about seeing it as a business, and Coca-Cola is a company, and so is American Express, Buffett said. When we allocate capital, we look at each company, we don't predict the market, we don't just pick stocks. I was interested in buying stocks for a long time and found them fascinating, but a savvy investor told me to look at stocks as companies, not stocks. I was inspired by this that when we allocate assets, our most basic principle is Graham's philosophy, and if it's just stock picking, it's a waste of time.
Buffett said Berkshire will still hold shares in the three companies for the long term, and these investments have been very successful in the past. Apple will be a big investment for Berkshire for a long time.
Warren Buffett called Apple a better company than Coca-Cola and American Express. "We have American Express, which is a great business, we have Coca-Cola, which is a great business, we have Apple, which is a better business," he said. ”
Buffett also said that unless there is a "dramatic" situation, Apple will be Berkshire's biggest investment. "Unless there's a dramatic event that really changes the allocation of capital, we're going to have Apple as our biggest investment," he said. But in the current situation, I don't mind opening a cash position at all. ”
As for why he reduced his holdings of Apple, Buffett said that this is due to tax reasons after the investment has obtained considerable returns, not his judgment on Apple's individual stocks in the long run.
Buffett said, almost everyone I know is focused on how not to pay taxes, tax avoidance is certainly reasonable, we don't mind paying taxes, and we now have a federal tax rate of 21%. Apple, on the other hand, faces a tax rate of 35 percent or even 52 percent. I think we're going to raise our tax rates right now, and we're probably going to raise them very quickly, and the government is going to want to take a bigger chunk of Berkshire's revenue. We pay taxes, and we want Berkshire to contribute more to that. We are fortunate to be part of an American company. Last year we paid $5 billion in taxes. I want every U.S. company to be like that, and I wouldn't mind if the tax rate goes up.
Some media noticed that Apple CEO Tim Cook once again attended the Q&A session at Berkshire's shareholders' meeting.
10:20 Warren Buffett explains Berkshire's Q1 earnings report
Warren Buffett praised the first quarter of insurance underwriting profits and the benefits of insurance investments, and expects the results to be better in the coming quarters, "the first quarter may be the worst", and the operating profit will increase slightly next year. Short-term investment income such as short-term U.S. bonds will rise in the future, which is linked to interest rates. When it is reasonable, we will buy back shares to increase shareholders' equity.
Buffett also said that the operating profit of his insurance business in the first quarter was $5.2 billion, which was satisfactory, but "the head of the insurance business, Jain, wants me to point out to everyone that you can't multiply the insurance business earnings in the first quarter by four to get the full-year results, and the insurance industry doesn't operate like that." ”
Berkshire's insurance exposure is spread across regions and across multiple hazard types, and Buffett said a major storm on the U.S. East Coast could be the biggest risk for the company, with the Atlantic hurricane season running from June to November each year.
Buffett also said that by the end of the second quarter of this year, Berkshire's cash holdings could further increase to the $200 billion mark:
"We're happy to spend money, but it has to be something [the business that's being acquired or invested in] is doing something that is very risky and can make us a lot of money. ”
10:15 Opening remarks of the Q&A session at the 2024 General Meeting of Shareholders
Buffett said that in honor of Munger, the latest edition of "Poor Charlie's Book" will be the only book to be sold at Berkshire's shareholder meeting this year, and about 2,400 copies have been sold on Friday. According to Buffett, in previous years, 25 books were usually sold on-site at annual meetings.
09:45 A historical video of Munger's Q&A session will be played
Some analysts say that in this touching and somewhat humorous film, Buffett pays tribute to his long-time friend and business partner, reiterating that Munger is "Berkshire's architect".
The video details Munger's life, including his life in Omaha, Nebraska, where Munger and Warren Buffett were both born and raised, just two miles from Berkshire's annual meeting. The video also showcases Munger's famous collection of incisive commentaries over the years. At a conference in 2015, he said, "If people didn't make mistakes often, we wouldn't be so rich." ”
In the film, Munger says at a shareholder meeting in his early years: "If I can remain optimistic when I am dying, then the rest of you can definitely deal with a little bit of inflation." ”
There's also a video showing Munger saying, "The right way to make a decision in real life is based on your opportunity cost." When you get married, it is essential to choose the one that suits you best. It's the same way for the rest of your life. ”
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