WARREN BUFFETT: (Applause) Thank you.

I don't hear anything from the index funds. Where are they? (Laughter)

It really feels good to get back and be doing this in person. It's been three years. And it's a lot better seeing actual shareholders, owners, partners. (Applause)

We — Charlie and I are now, combined, (unintelligible) round for fractions — the two of us are 190 years old. (Laughter)

And I really think you're entitled, if you're the owner of a company, and if you've got two guys, 98 and 91 running the company, you're entitled to actually see them in person, I mean. (Laughter)

It really shouldn't be too much to ask. I mean, for example, if we had a manager someplace that was 98, I might want to send somebody by occasionally to see whether he was cutting paper (Laughter) dolls or something.

So, we probably do things that are a lot more foolish than cutting out paper dolls, but we're having a lot of fun doing it.

And we really have a lot of fun when you come visit us.

Actually, we had — if you go back a few years — we've had a couple of managers that suffered from dementia. Probably many more but, I mean, just a couple of known ones, actually. (Laughter)

And there was one fellow that Charlie and I really loved.

And he ran a business for us. Charlie — it was out in California — Charlie would see him occasionally, and I didn't see him. But everything seemed fine. And then we found out that he'd really been suffering from dementia for quite a while. And he really was a wonderful friend of both of ours.

But the business had done fine, so that's become our test really, (Laughter) for new businesses.

We try to find something that a guy with Alzheimer's can run, actually. (Laughter)

And you don't have as much competition for businesses like that. (Laughter) The guy sitting there cutting out paper dolls and, you know, that's our man. (Laughter)

WARREN BUFFETT: I'd like to introduce two fellows who really work at Berkshire.

On Charlie's left, Greg Abel, who runs all the operations outside — (Applause) — yeah.

And next to him is — I ran the insurance business for about 15 years unsuccessfully. And then fortunately, the fellow on the far left came in one day — and I've written about it — but he came in on a Saturday. And I was opening the mail, and he said that he'd be happy to run our insurance business.

I said, "Have you ever run an insurance business?" And he said, "No." And as I've mentioned, I said to him, "Well, you know, I've never run one either, so I'm not doing so hot, so (Laughter) give it a try."

And, you know, he transformed Berkshire Hathaway. And Ajit Jain is here with us. (Applause)

WARREN BUFFETT: What we'll do today — and I have to remind myself from time to time that the people here, of course, saw that movie and everything, but, of course, we're webcasting this.

So, I'll probably make some references to the movie or something that'll puzzle (Laughter) millions of people out there, but you'll get it, so — (Laughter)

We're going to talk for a little while about what's happened in the last quarter and bring up a few other things that you might be interested in.

And we will then, whenever that's finished, we'll go on to questions. And we will take the questions until noon, break for an hour — that's Midwest time for those of you who are watching in other time zones — we'll go on until noon. And we'll break for an hour.

And then Charlie and I will come back, and we'll take more questions until 3:30. And then we'll convene the shareholders meeting at 3:45 — we'll take a break for 15 minutes — and then we'll do the shareholders meeting. And when that's done, we'll all go our various ways.

WARREN BUFFETT: I do want to report, incidentally, that you've been doing your part, in terms of the room we have adjacent to this location, where we've been — yesterday for five hours, from noon to 5, we had 12,000 shareholders come, and just spend money on everything we could think of to sell them. (Laughter)

We brought in 11 tons of See's Candy. And if we don't sell out, Charlie and I get the rest, so. (Laughter)

But you did your part. See's sold — they set a record yesterday for the Friday afternoon meeting. And it's (Cheering) pretty heartening. (Applause) Yeah.

Incidentally, I've got a box of See's Candy here, and it's very — it's sort of interesting.

On this cover, which I hope you can see, there's a picture of a woman who was born in 1854. And today, she probably gets her picture seen more often than just about any woman in America, in terms of a commercial product or something of the sort.

So, we've got her picture up in over 200 stores, and on every box of candy. That's Mary See, born in 1854.

A lot of people think this is me in drag, but that is not true. (Laughter) I mean —

There's a certain resemblance, but (Laughter) it's just not.

These rumors are started by our competitors. Don't pay any attention to them. (Laughter)

WARREN BUFFETT: So, we will — that's our schedule for the day.

And what we will do — we like to give all — we like to give shareholders — owners — partners — we like to give everybody the same information at the same time, and preferably do it when stock markets aren't open. It seems to us that that's — everybody ought to be on the same playing field.

It's very interesting — we don't know how many shareholders we've got. They've changed the rules over time as to registered holders and getting stock certificates and all that sort of thing.

So, we can't keep track of it like 50 or 75 years ago, where we had an actual shareholders list. But we're told — we're told by the people who mail out our information — it's a firm in, I think, New Jersey — let's see — Broadridge — and they pretty well do this for a very significant percentage of American corporations.

So, they actually mail things out for us. And they bill us for 3 1/2 million accounts. And I'll take their word for it. I mean, the more accounts they bill us for — we pay them by the account — so, you know, somedays, I feel like I'd like to count — but that is a — (Laughter) — that is a lot of people that trust us.

And they've — rightly in my view — overwhelmingly — feel that they're our partners.

And some of them will like reading the financial information they've given us — that we give you.

But most — a great many of them just say, you know, "We've saved this money. And we trust you and Charlie." And that's a great motivator, this trust.

"And, you know, take care of it and I'm not going to learn accounting and try to read all those statements or anything of the sort."

But we do believe that, for those who do use the information we release, they should all get it at the same time.

And we have a few institutions that, even though in the third paragraph of my letter every year I refer to the fact that we want to have everybody get the same information, and that we don't feel that anybody's entitled to special meetings — we can't hold 3 million special meetings with our partners —but we like the fact that everybody gets the same deal, everybody gets the same information.

This morning, on the internet, we put up our 10-Q for the quarter. And I'd like to take you through a few comments on that and a few other comments, and then we'll get to the questions.

When we get to the questions, we will alternate between those mailed in by shareholders, which Becky Quick at CNBC and people who've helped her, sort of curated, to get what they think are the most interesting questions from shareholders. They're not from CNBC itself, but they are from shareholders, owners.

And we'll alternate the ones sent in versus the ones that come here. And we don't get the questions ahead of time. And we enjoy getting surprised by, I'd say, almost all questions. (Laughs)

And we will keep doing that, like I say, with a break for lunch, until 3:30, when we'll have the meeting, so —

WARREN BUFFETT: I would like to start by putting up the first slide, which is Q1. And there we have it. That's what we published this morning. And there are really no great surprises in terms of the quarter.

I mean, there are always some companies that are doing very well, and there are some companies that aren't for one reason or another.

And in the end, as you can see, we prefer to use something called operating earnings. Now, that is after depreciation and interest and taxes, unlike other companies that prefer to tell you anything but what they earned.

But we do separate out capital gains. Now, over time, as I've said, over the next 20 years, I would expect us, net, to have more capital gains than not. But, you know, who knows? I hope you'll — you know, I'll report to you in 20 years whether that's (Laughter) happened or not.

But, as you can see, we made about $7 billion in the first quarter. And that's a real 7 billion. I mean, we basically have that income in cash when the quarter's over. That isn't true every quarter, exactly, but we are talking about 7 billion of real money in that.

And those managers who the people here saw in the movie, they're the people that work with your money to accomplish what Charlie and I never thought would — never really planned or anything to happen — but it just, sort of, came about just, sort of, putting one foot in front of the other.

Now obviously, the last two years in particular, including the first quarter, all kinds of unusual things happened in our various businesses.

I mean, when we had the meeting two years ago in May of — roughly the start of May of 2020 — we didn't know what was going to happen with the pandemic. We didn't know what was going to happen with the economy. And everybody that thought they did has gotten all kinds of surprises since.

But here we are in 2022 and Berkshire, like I say, had 7 billion of operating earnings. And we've got lots, and lots, and lots of companies. We've got 360,000 people out there that have taken your savings and go to work every day.

And they have jobs. We deliver products. And you put up the money for it and you deserve to — you took the risks, and we feel very good about how things have turned out. And we want to keep feeling good.

And we have a — we have a — extreme aversion to incurring any permanent loss with your funds.

You know, if I went broke, it wouldn't really make any difference. It'd keep doing what I do. I'd figure out a way to read a paper and watch a little TV (Laughter) and think about things and talk to Charlie.

But the idea of losing, permanently, other people's money — people who trust us — really, really — that's just a future I don't want to have. And as Charlie says, "All I want to know is where I'll die so I'll never go there." And — (Laughter) — that seems pretty sound. (Laughter)

CHARLIE MUNGER: It's worked so far.

WARREN BUFFETT: In case you missed it, Charlie says it's worked so far. (Laughter)

And we would die, psychologically, if we lost a lot of other people's money. We wouldn't take it in the first place. It'd be crazy to take people's money and lose it if you're going to feel terrible about doing it.

So, the one thing I can tell you about Berkshire — although I can't predict what our earnings will be, and I can't predict what the stock will do, and I can't — we don't know. We don't know what the economy will do and all of that sort of thing.

But we do know that we wake up every morning and we want to be safer, in terms of your eventual investment.

Now, whether you make the most money or anything, we do not want you to get a terrible result because you've decided to become our partner. And that's a pledge you can live by.

WARREN BUFFETT: Now, let's see what we have here.

In [slide] Q-2, it gives some indication of that, because we — and this is kind of interesting.

I wrote — I wrote a letter to our owners. And it was dated February 26th. And that was a Saturday — released. But I write the letter all through the year in my mind. I mean — I don't — you know, we don't have anybody that sits out and writes out the letter or anything like that. I mean, this is a letter between partners.

And I write the letter all year in my head. I'm writing next year's letter. I don't write out the words, but I have things I want to tell my partners.

My sister's a partner. And I'm writing to her in my head. My older sister died not too long ago, but I used to be writing to both of them, in effect.

And want to tell her, you know, what I think and about the business and what I think she ought to think about it, and so on.

So, the letter's dated February 26th. And I said, "Not much is going on." And actually, we might jump over to [slide] Q-3, if we will.

So, I sent out a letter on February 26th. But that wasn't written on February 26th. And I said basically, "Nothing much is happening around here." And I said, "We've repurchased some shares. And we just aren't seeing anything."

And between January 1st and February 18th, as you can see, we spent $2.2 billion, which is half the quarter, you know, so probably 30 trading days in there. And we sold —

So basically, we didn't do anything. And then in the next three weeks or thereabouts, we spent 40 billion.

And incidentally, when I say we spent 40 billion, there's one fellow in the office that does this all. I mean, he buys all the stocks. He buys the government bonds. He doesn't have an assistant or anything. But he spent $41 billion. (Laughter)

Yeah. He literally — I mean — and he does other things for me, too. He, you know, puts together totals. He just does what he needs to do. And he's worked in other jobs at Berkshire long ago.

But he likes doing what he does. And he does it very well, and we don't have a department for it.

And as you can see, it fell off after that. And we did also in the first — in the first quarter, we spent about 3.1 or 3.2 billion — somewhere in that — for repurchasing shares. And —

We didn't — you know, we talked about that in the annual report. And as Charlie would say, it's keeping us out of bars. I mean, you know, it gave us something to do.

And it — we never do anything that we don't think adds to the value of Berkshire Hathaway, though. So we only repurchase the shares when that is the most attractive thing.

We haven't repurchased any shares at all in April. So, it's —

People who are looking for all these, you know, footprints in the woods and all — that isn't what we're doing. We're just doing it day by day as it comes along.

And I think this table kind of illustrates that, that we spent 40 billion in a hurry there between — in three weeks.

And now we're back, somewhat, in our more lethargic mood. But that — anything could change at Berkshire.

WARREN BUFFETT: But the one thing that won't change — going back to [slide] Q-2, if you'll — is we will always have a lot of cash on hand.

And when I say cash, I don't mean commercial paper.

When 2008 and 2009 — the national panic came along — we didn't own anybody's commercial paper. You know, we didn't have money market funds. We have Treasury bills. And, as I may get into it a little later, I'll explain to you why.

We would — we believe in having cash.

And there have been a few times in history, and there will be more times in history, where if you don't have it, you know, you don't get to play the next day. I mean, it's just —

It's like oxygen, you know? It's there all the time. But if it disappears for a few minutes, it's all over. So —

Our cash was down on March 31st because, as you saw, we spent that large sum there in that brief period during the quarter, 40 billion.

We've committed to buy Alleghany Corp for something over 11 billion.

But we will always have a lot of cash. We won't — we don't —

Some of our companies have bank lines. I don't know why they have the bank lines. We're better than the banks, and we'll give them the money if they (laughs) need it.

But, you know, the local bankers have been calling on them and they need something to do. Everybody else has bank lines, so it's harmless. But there's no reason for any of our subsidiaries — (UNINTEL). Berkshire is stronger than the banks, but — (Yell from audience)

I didn't hear exactly what he had — I don't know whether that was a banker screaming, or — (Laughter)

I don't — I don't really like to torture — I don't like to torture anybody, I mean. (Laughs)

But — and I'm all for banks, and we'll talk about that a little later.

In fact, we might even talk about it right now just for a minute.

Money's kind of an interesting thing. People seem to like to talk to me about it. I mean, they don't ask me how to dance or anything like that, but they do ask about money.

And so — if we'll put up [slide] 20-dash-1 — it's a photo of a $20 bill. And it says at the top, "Federal Reserve Notes." Now — Federal Reserve Note — we've done all kinds of things with money in this country. It's amazing, in a country only a couple of hundred years old, the number of different experiments we've made with banks and everything.

But we finally just decided to let the Federal Reserve do the issuing of money. And —

Down in the lower left-hand corner — incidentally, I think [former U.S. Treasury Secretary] Rosie Rios — who signed this note — I think she signed more U.S. currency than any other person in history.

So, if you see Rosie, you know, you cozy up to her. I mean, this is a woman who (laughs) has issued a lot of currency.

But it says, "This note is legal tender for all debts public and private." And that makes it money.

You can go into our candy store, and if you offer us enough bushels of wheat, we'll probably give you a box of candy.

But money is the only thing that the IRS is going to take from you. You can offer them all kinds of — you can offer them paintings — you can offer them — all — whatever — but this is what settles debts in the United States.

And I thought that — you'll hear a lot about various kinds of money — this is the only kind of money you're going to see, in my opinion, throughout your lifetime or even throughout Charlie's lifetime. This is —

And it's very interesting because it just says that settle — legal tender for all debts, public and private, and nothing else says that, except, I thought you might be interested in seeing another $20 bill.

And this one I own. And on that — it's got the same guy's picture — Andrew Jackson — and everything.

And that's a $20 bill. And that $20 bill was issued during my lifetime. And it was done by a bank that Berkshire ended up owning. So, you'll see the Illinois National Bank and Trust of Rockford.

And we bought that bank back in 1969. And if you look down in the bottom of that one, it's signed by a fellow named Eugene Abegg. And we bought it from Eugene Abegg.

So, we still have some $20 bills that came in sheets. And we can cut them out like paper dolls. And they're our money. The Illinois National Bank issued money.

But just remember, the United States government, in effect, said that this became exchangeable for lawful money in the United States. That's what money is.

It may turn out that it becomes worth dramatically less in purchasing power. It can become almost like paper money, as it has in many countries. But that is all — when people tell you that they're issuing new forms of money, this is the only thing that will pay bills, under some circumstances.

And there were days — a few days in 2008 — and we came very close to having a repeat in March, 2020 — and we had plenty of money on March 20th — but we were not very, very far away from having something that might have been a repeat of 2008 or even worse.

And we have a bookstore here: The Bookworm. It's in the other room. And they've got a book called Trillion Dollar Triage.

And for those of you who actually like to read about this sort of thing, it's a marvelous account of what took place day by day with the Federal Reserve and the Treasury.

And believe me, if the Federal Reserve hadn't done what they did, at least in my view, in a very, very, very short period of time, things could have stopped.

And I tipped my hat a couple years ago to [Federal Reserve Chairman] Jay Powell for acting as he did. He has to act with speed. I mean, in the old days when you had runs on banks back in the 19th century, you know, a line formed, you know, and a bank would go broke.

But the fellow would pay out as slowly as possible, you know, hoping something would happen — a Wells Fargo truck or a stagecoach would pull up with a bunch of gold or something and you'd sweet-talk the people in the line dispersing.

In Omaha, in August of 1931, four state banks — so-called state banks — they had those in that day — they closed and the national banks didn't. But they were all broke as of that day. No bank can pay off in one day all of its liabilities. But the Federal Reserve is the only one that stood at that time.

But I will tell you this. Berkshire Hathaway will be there (laughs) at that time.

We run it on the basis that if things had just behaved slightly — very — if [former U.S. Treasury Secretary] Hank Paulson, George H. W. Bush — or no, George W. Bush, I'm sorry — and [former Federal Reserve Chairman] Ben Bernanke and a few people hadn't taken action, we were at that point where the line was formed, except it comes in electronic funds — they push buttons — and it's all over very fast if there's a run on a bank.

If you ever buy a bank, and there are two banks in town, hire a few extras, and have them go over and start standing in line at the other guy's bank. (Laughter)

And there's only one problem with that. After a while, somebody will stand in front of your bank, you know, and then both of you are gone.

But the Federal Reserve is not gone. And the Federal Reserve in the United States can do whatever is necessary. They've got all kinds of rules about — they can do this or that, and this and that.

And at one time in the 1980s, [former Federal Reserve Chairman] Paul Volcker, who was a very honest man, said to me — I said, you know, "What are the limits of what you can do?"

And he said — he was a very unusual guy — and huge — looked down at me — and said, "We can do whatever we need to do." (Laughs)

And that's true. And that's what happened in 2008 and '09, and that's what happened in 2020.

And you hope it happens again next time. But you want to be — we want Berkshire Hathaway to be there and in a position to operate when — if the economy stops.

And that can always happen. That can always happen.

So, with those cheery words — (laughter) — let's see if we — I think — maybe if we can actually — it might be a good idea to start with some questions.

As I said, we will have the questions alternate between CNBC — Becky Quick — and those are questions that have come in from shareholders. And they can be directed to any of the four of us up here. And then we will alternate and go around the room here.

And we've got the auditorium broken into ten or 11 sections.

Charlie and I one time, we got out a form and it said, "Officers of the company broken down by age," and we just put all of us (laughs) as an answer to that question.

But we'll have it broken down by categories around here. And we'll keep alternating. And we will break for lunch at noon and reconvene at 1:00.

WARREN BUFFETT: So, let's start off and Becky, will you lead the way?

BECKY QUICK: Thanks, Warren. The first question comes from Jack Suselesky (PH). And he says, "In the annual letter that you wrote on February 26th, you mentioned that Charlie and you saw 'little that excites us in the market.' Yet around March 10th, the deal for Alleghany was announced, and then later the Occidental announcement, then the disclosure of the HP investment."

His question is, "What changed from the time you dated the letter to the time the investments were announced that the names suddenly become interesting in the space of a month and a half, or half a month?"

WARREN BUFFETT: Well, Charlie, you want to give your version? I'll give my version.

CHARLIE MUNGER: Well, my version would be we found some things we preferred owning to Treasury bills. (Laughter)

WARREN BUFFETT: And as usual, Charlie's given the total answer, but I'll talk longer and say less. (Laughter)

Actually, the letter's dated February 26th, when we were confessing our inability to find anything, which was a Saturday. But the day before that, February 25th, I got an email.

Actually, my assistant, Debbie Bosanek, gets it because I can't figure out quite how to handle the machinery.

So, she brought it in. Actually, she puts a bunch on the edge of her desk, and I collect them occasionally.

And there was a note, just a few lines long, from a fellow that is a friend of mine and that worked for Berkshire many years ago. And this was on February 25th, the day before the thing.

And he said he'd now become CEO of Alleghany Corp. I've been following Alleghany Corp for 60 years. Now, I'd read their annual reports. I had four big file drawers full of them because it was an interesting company. And all companies interested me.

WARREN BUFFETT: So, I knew a lot about Alleghany Corp. (Laughs)

And Joe [Brandon] said, you know, "This is my first annual report as CEO, and I just wanted to send it along to you. Just like you write for your sisters," he says, "I write this report as if I'm writing to you."

And I sent a note back to Joe. And I said, you know, "I'm going to read it over the weekend," or whatever I said to him on it, which was true. I mean, I looked forward to reading it.

And I said, "By the way, I'm going to be in New York on March 7th. And can we get together? I'd like to see you."

And, I think I may have said, "I've got an idea." Well, I didn't have that idea the day before. (Laughs)

This thing happened to come in on Friday the 26th. And I knew I'd buy Alleghany at a price. And if he hadn't sent me the note, it never would've occurred to me to write him and say, "Why don't we get together on March 7th?" or anything of the sort.

It just wouldn't have happened, except for the fact that Joe wanted to send me along this annual report that he'd just written.

So that's the orderly decision-making process. I didn't call up investment bankers and say, you know, "Will you prepare me a report on this? And, you know, what's your advice?" and all that stuff.

I knew we'd buy Alleghany at the price we offered. And if it was of interest to Alleghany, fine. If it wasn't —

But otherwise, if that email hadn't been sent, we would not have made an offer for Alleghany. So, give credit to the fact that Joe had written the annual report, and if he'd sent it a week earlier, well — you know, I wasn't going to make a special trip to New York, but I wanted to sit down with him and tell him what Berkshire would do.

But that explains the 11 billion. (Laughs)

WARREN BUFFETT: And what happened was that a few stocks got very interesting to us. And we also spent a lot of money.

What happened — the market — and this is really important to understand — in the last couple years, the stock market has probably — it's always been a combination of a casino and a — and when I talk about Wall Street, I'm talking about the whole capital formation market — but the — and trading market, et cetera.

But the market has been extraordinary.

Sometimes it's quite investment oriented. It's not like it — it's always what you've read about in the books and everything — what capital markets are supposed to do, and you study it in school and all that. And other times, it's almost totally a casino, and it's a gambling parlor.

And that existed to an extraordinary degree in the last couple of years — encouraged by Wall Street because the money is in turning over stocks. I mean, people say how wonderfully you've done if you bought Berkshire in, you know, 1965 or something and held it. But your broker would've starved to death.

Wall Street makes money on — one way or another — catching the crumbs that fall off a table of capitalism and an incredible economy that, you know, nobody could've ever dreamed of a couple hundred years ago.

But they don't make money unless people do things (laughs) and if they get a piece of them.

And they make a lot more money when people are gambling than when they're investing. It's much better to have somebody that's going to trade 20 times a day and get all excited about it, just like pulling the handle on a slot machine. You know, that's who you — you know —

You may not say that you want that person. You'd like the other kind of person, too, maybe, but that's where you make the money. (Laughs)

And the degree to which the market got dominated by that is shown on a slide some — I have it here somewhere. Yeah. Here's — on [slide] Oxy-one — if you'll put up the Oxy-one.

That shows how we bought what became — well, we bought in two weeks, or thereabouts, 14% of Occidental Petroleum.

And you'll say, "Well, how can you buy 14% of a company in two weeks?" And it's more extreme than that, because if you look at the Occidental proxy, you'll see that — the standard names — BlackRock index funds, State Street index funds, basically, Vanguard index funds, and then one other firm, Dodge & Cox.

If you take those four entities — and they're not going to buy and sell stock — they may get their own little — so they own 40% of the company, roughly, those four firms.

And they didn't do anything during this period. So now you're down to 60% of the Occidental Petroleum Company that's even available for sale.

Occidental's been around for years, and years, and years. Big company, all kinds of things.

And with 60% of the stock outstanding, I go in and tell Mark Millard, this fellow that is 30 feet away from me or so, and I say in the morning to him, you know, "Buy 20% and take blocks, or whatever it may be."

And in two weeks, he buys 14% out of 60%. That's not investment. (Laughter)

I mean, you're not buying from — I find it just incredible.

You wouldn't be able to do that with Berkshire. I mean, you can't — literally buy it. You can say you want to buy 14% of the company. It's going to take you a long, long time.

But, overwhelmingly, large companies in America — well, all of them — they became poker chips. And people were buying and selling like three-day calls or two-day calls. And the more people — times people pull the handle on the machine, the more money the machine makes. I mean, it's very clear.

And overwhelmingly — I mean, where did the people go? The investors just were sitting around and there weren't very many, and the money was being made, essentially, by a bunch of people gambling on things. And that enabled us, in a two-week period, to buy 14% of a business that's been around for decades.

Imagine trying to buy 14% of the farms in two weeks in this country, 14% of the apartment houses, or 14% of the auto dealerships, or just anything, when already 40% were locked up some other place.

It is — it defies anything that Charlie and I have seen, and we've seen a lot.

But I've never seen that percentage of the American public — essentially, it was a gambling parlor.

And the people that were making money were people that worked with gamblers. (Laughs)

And then it declined very significantly a few weeks ago. You can feel it if you're around it.

So, when somebody asks a very good question, this, "Why weren't you doing anything on February 20th, and why were you doing it on — starting, well, in the case of Occidental, on February 28th?" — you know, it's because things developed in a way —

And in the case of Occidental specifically, they'd had an analyst presentation of some — I don't know whether it was a quarterly one or what it was exactly — but I read it over a weekend — and that was the weekend when the annual report came out — I read it over a weekend.

And what [CEO] Vicki Hollub was saying made nothing but sense. And I decided that it was a good place to put Berkshire's money.

And then I found out in the ensuing two weeks — it was there in black and white — there was nothing mysterious about it — but Vicki was saying what the company had gone through and where it was now and what they planned to do with the money.

And she'll do what — she says she doesn't know the price of oil next year. Nobody does.

But we decided it made sense. And two weeks later, we had 14% of the company.

And we also already had a preferred stock and warrants. And the story of the preferred stock is we paid 10 billion — preferred stock and warrants — we paid 10 billion for it — and at the end of the March quarter of 2020, we valued that 10 billion — for our 10-Q — we valued it at 5 1/2 billion. So, we had a 4 1/2 billion loss. And it would have — you know —

The world changed. Oil sold for minus $37 a barrel (laughs) one day, and —

Now it's quite apparent, I think, that we want — we're very happy — we should be very happy — that we can produce 11 million barrels a day, or something of the sort, in the United States, rather than being able to produce none and having to find 11 million barrels a day somewhere else (laughs) in the world to take care of keeping the American industrial machine working.

Charlie, have you got any comments on that as to how something this crazy could've happened?

CHARLIE MUNGER: Well, it happened — it's almost a mania of speculation that we now have.

We have computers with algorithms trading against other computers. We've got people that know nothing about stocks being advised by stockbrokers, who know even less. (Laughter)

WARREN BUFFETT: They understand the commissions, though.

CHARLIE MUNGER: It's just an incredible, crazy situation.

And it's weird that we ever got a system, where all this equivalent of a casino activity is all mixed up with a lot of legitimate long-term investment.

I don't think any wise country would've wanted this outcome.

Why would you want your country's stocks to trade on a casino basis to people who are just like the people that play craps and roulette in the casino? I think it's crazy.

But it happened. And it's respectable. Not with me, but with other people. (Laughter)

WARREN BUFFETT: Yeah — well — and look at — look at what — the country — I mean, they formed the New York Stock Exchange in 1792 under a buttonwood tree. And it really didn't seem like that was the eureka moment in America.

But just look at what's happened, using the system for less than — you know — well — you know — three of my lifetimes.

I mean, (laughs) it's unbelievable. So —

It's worked. Now, maybe it's worked in spite of itself — maybe the country — but one way or another, America has worked in an incredible manner.

Nobody could've dreamt it. Nobody.

You know, they'd have hauled you away if you said — you know — in three lifetimes — you know — that — you know — this place where we're meeting — I mean — it became a state in 1867.

But in 1789, if you'd asked Ben Franklin or somebody that was walking out of the Constitutional Convention, "What do you think the prospects are for Nebraska?" (Laughs)

It's just — it's unbelievable what's been accomplished. And it's been accomplished — the people who encouraged the gambling — they would like to say it's been accomplished because of the — we've got these liquid markets and all these wonderful things.

Charlie would probably say it's in spite of that. Who knows? (Laughter) But —

The answer is that — well, there isn't an answer. (Laughter) The —

My wife — when we got married April 19th, 1952 — we got in my aunt's car and we started driving west. And we ended up — we drove all over the west — but one night we ended up in Las Vegas.

And there were three fellows out there. Eddie — it was Eddie Barrick, and Sam Ziegman, and Jackie Gaughan. And all three of these guys were from Omaha. And they'd bought little pieces of the Flamingo.

Bugsy Siegel had had his career ended rather abruptly — (laughs) — a few years earlier.

CHARLIE MUNGER: By a bullet.

WARREN BUFFETT: But it was a stray bullet, undoubtedly. (Laughter)

In fact, there were probably five or six stray bullets. But in any event, Bugsy was gone.

And some people, including three guys from Omaha, were in the group. Sam Ziegman lived about two blocks from where I live now. He was Stan Lipsey's uncle. Stan Lipsey ran — for those of you who follow Berkshire — ran The Buffalo News and was our partner for 40 or 50 years later on.

So, all kinds of things intersect.

But I walked into this casino, aged —the Flamingo — it was kind of a motel-like arrangement — and I was 21. And my bride was 19.

And I looked around the room and there were all of these people — and they were better dressed then — it was a more dignified group than, perhaps, currently — but they had flown thousands of miles in some cases — you know — in planes that weren't as fast as the current ones and were more expensive, probably, on a per-mile basis, adjusted, then.

They'd gone to great lengths to come out to do something that was mathematically unintelligent, and they knew it was unintelligent.

And, I mean, they couldn't do it fast enough, in terms of rolling the dice, you know, and trying to determine whether they were hot or whatever they may be.

And I looked around at that group. And everybody there knew that they were doing something that was mathematically dumb, and they'd come thousands of miles to do it, and they were —

And I said to my wife, I said, you know, I'm going to get rich. (Laughs) I mean, how can you miss? (Laughs)

If people are willing to do this, you know, this is a land of opportunity.

Well, it's the way it still is, you know.

And the Flamingo grew to be much bigger. And in Omaha, we're very proud of Jackie and the things he did. He only died a year or two ago.

He became sort of the leader — spiritual leader — of Vegas.

And, like I say, Sam Ziegman's nephew went on to save my and Charlie's investment that we made in Blue Chip and The Buffalo News. (Laughs)

And it's a very accidental society that occurs.

But there's nothing stranger than what has happened in finance.

On the other hand, if you go back, perhaps the greatest chapter ever written on the operation of markets, particularly the stock market, is in a book, probably one of the most famous books in economic history, The General Theory, written by John Maynard Keynes. I think it was 1936.

And I don't know whether it's chapter — I think it was chapter 12 — but whatever it is, he describes what markets are all about in 1936. And he describes something, in beautiful prose, that explains why the whole country in March of this year was sitting around trading Occidental in some crazy way that enabled us to buy a quarter of what wasn't owned by four other institutions that weren't going to sell.

But we could buy a quarter of it. And we could've bought a lot more. I mean — you just wondered if there was anybody that really was thinking about investment. If you —

Going back to investing, I mean, investing is laying out money now with the hope of getting back more later on. It's really laying out purchasing power now with the hope of getting more purchasing power back.

But that's the reason you'd — and, you know, that's the way you learn in the textbooks, that you defer consumption now so you can consume more later on, so that you can take care of your family — all these things about how investment takes place.

And that is what happens with farms. I mean, if somebody buys a farm and they, generally, they ultimately leave it to their kids or they got it from their parents.

And, I mean, they don't sit there every day and, you know, get quotes 15 times a day and say, you know, I'd like to get a call — I'd like to sell a put, you know, on the guy's farm next to me. And you can have a call on mine. And then I'll have something called a straddle or a strangle, or whatever it may be. And, you know, they just —

They go about making the farm worth more money. And they do the same thing if they've got an auto dealership. And they do the same thing, you know, if they've got an apartment house. They look to improve it and attract tenants, all those kind of things. And —

Forty — what would it be? — 40 trillion at least, you know, of the ownership of all of the American business — people treat it as poker chips or pulling the handle.

And they've got systems set up so that if you want to buy a three-day call on a stock, you can do it. And they make more money selling you calls than if you buy stocks. So, they teach you on calls. (Laughs)

Nobody's going around selling calls on farms or anything of the sort.

But that's why markets do crazy things. And occasionally, Berkshire gets a chance to do something. And it's —

It's not because we're smart. It's because we're — the only thing I can say we're qualified on —and sometimes I wonder about that — but I think we're sane. You know, I mean, and that's the main requirement in this business.

And — Charlie?

CHARLIE MUNGER: Well, I don't think we have ever had anything quite like what we have now, in terms of the volumes and pure gambling activity that go on daily, and the people lathering the gamblers up so they can rook them.

And it's not pretty. And I don't find it rich in glory for capitalism or anything, anymore than a bunch of people throwing dice at a table. What good does that do the rest of the world?

WARREN BUFFETT: It's a great way to become rich, though, just figure out ways to insert yourself into the system somehow.

And, you know, jobs to some extent self-select. And many years ago — and I've got all kinds of friends on Wall Street — not as many as I had before I had started talking this way an hour or so ago. But I really do. I know —

People make — they make lots of decisions in life. And the truth is that, overall, the American system has worked extremely well. It's may be very unfair, in many ways.

But it has produced incredible difference in the goods and services available to me versus what my grandfather had available, you know.

I do not want to go back to pre-air conditioning and people pouring whiskey down me while they drill my teeth or something of the sort, or any of that. I mean, this is a lot better world. And —

CHARLIE MUNGER: Well, I think we've made more because of the crazy gambling. I think it's made it easier for us, net, over the decades we've been operating.

WARREN BUFFETT: Well, I mean, and we've depended on it.

CHARLIE MUNGER: Yeah. (Laughter)

WARREN BUFFETT: I mean, we depend on mispriced businesses through a mechanism where we're not responsible for the mispricing of them. And overall, we learned something a long time ago, that it doesn't take a high IQ. It doesn't take anything. It just takes the right attitude.

We may talk more about that later, but I think we ought to prove that we've got an audience here by going to section one. (Laughs)

OLA POLEM: Good morning. My name is Ola Polem (PH). I live in Hanover, Germany. This is my first time in Omaha.

My question is on Berkshire buying entire companies outside the U.S. There were a few, Iscar, probably the first one. Louis, in Germany.

My question is, would you only answer calls from them if you're interested in? Or would you proactively approach them if they would like to sell their company?

WARREN BUFFETT: I would — we actually made a few trips. I think maybe Charlie went with me on one of them. We tried to stir up interest and all that sort of thing in Berkshire around the world. We probably did that 20 years or 25 years ago.

During that period — that I showed you — that burst of action we had, we probably spent — we probably at least 5 billion of that — yeah, maybe pretty — in the area of 5 billion of it — we bought three German securities.

We bought two — well, we bought one — in Japan. We rounded up on some of the holdings we already had there.

We would love them to buy, but we — they don't think of us as quickly there. I mean, I don't have somebody that's going to send me an email about a company that I've been following for 60 years and I know I can see them in New York and, you know, I can name a number to them, and if he likes it, he can take it to his board and so on.

It just doesn't happen that way. We haven't had that experience in — well, anywhere outside the United States.

Now, you can say with 40 trillion here, you know, we should be able to find something here (laughs) a little closer to home.

But we don't have any bias against doing it. We —

There are companies, you know, we'd buy in 10 minutes if we had somebody on the other end that could do business in 10 minutes.

It's much more complicated in certain countries than in the United States to purchase businesses, and there are certain rules.

But obviously this — you know, we got a call — whenever it was — many years ago, on our company in Germany. And actually, the two fellows that run it are probably here in the audience. I saw them yesterday. And they're marvelous. And they run the business. And, you know — they're as trustworthy as — well, all the pictures were up on the movie we showed before this meeting started here. You know —

We have so much trouble finding good ideas that we can't afford to ignore any. But they do have to be sizable now. I mean, there really isn't — there isn't a lot of —

I love the operation we bought in Germany, and it's just a pleasure to be associated with the people there. I just wish we could add another zero to all the figures and it was a much larger deal.

It's not going to have an economic impact on Berkshire. But they love it. They care. You can see it. You can feel it. And that's the kind of business we'd like to have, and we're very happy we've got it in Berkshire. But we can't do it one (unintelligible) of Louis at a time.

And we would never, never sell an operation like that, ever. I'm looking at you, Greg. (Laughs)

The — you know — but if — if we get a call tomorrow and we could make a deal that involves 10 or 20 billion dollars that was in Germany or France or Britain or Japan — or name a whole group of countries — we'd do it.

We bought the interest in the five leading trading companies in Japan a couple years ago. And I rounded them up a little bit. But I told them originally we weren't going to but a lot of — we weren't going to change our positions materially without their OK.

So, we actually, I think, rounded the 5.85% — based on the latest figures we had then — of all five of them. And that was a good many hundreds of millions, or maybe a billion or two, to work. So, we will, you know —

President Kennedy said we'll pay any price, climb any hills, you know — (laughs) — whatever it may be — to find businesses.

But we actually prefer it when they fall into our lap, like getting a letter from somebody you hadn't heard from for a couple of years, and you know what you'd pay for the business. And you know if the board of directors of that company regards it as attractive, they'll be happy to buy it. And they know you're going to show up at the closing and that you're not going to pile debt on it or change things or anything.

They've got an answer, and then you have to see if they've got the question in their mind is what's the best thing for Alleghany Corp? And in that case, we had $11 billion less at the end of the day — or the end of the dinner — than we had at the start of the day.

So, opportunity can be any place. And we do have a terrific operation, for example, in Israel, I mean, just terrific. And it's pretty good size.

Would we like to have another one like it? Yeah, I just don't know where the other one is. Charlie?

CHARLIE MUNGER: Well, but think in the scheme of things, imagine buying in $60 billion worth of our own stock. We like the businesses. We like the price we're paying. No overhead, no cost, no nothing, just more interest in what we already owned. It isn't that we're totally wasting our time.

WARREN BUFFETT: Yeah, and if you look at it, there are — you can read hundreds of thousands — maybe millions of words — written on stock repurchases, and what this is and what that is and all this kind of thing. It's not very complicated. (Laughs)

I mean, if you had a partner in a lemonade stand and they wanted to sell out — sell their interest — or two partners and one of them wanted to sell their interest — I mean — and the business had the money to buy it — our little lemonade stand — and they were offering at a price that was good for the other two people who are going to remain, you'd buy it.

Now, the thing that's fascinating to me is what you can accomplish, and still — people don't pay any attention to it.

We owned — in 1998, you know — this was more than 20 years ago — we owned about 150 million — I don't know whether they've split — whatever it is — if they've split, it's split-adjusted — but we owned 150 million shares of American Express.

I think we bought our last share in 1998 or something like that.

And we then owned 11.2% of the American Express company — wonderful company.

And since then, they've sent us a check every quarter as a dividend. And so, we've taken some cash a little bit as they've gone along.

And now we own 20% of American Express. Now, that's what's happened because they repurchased shares. That happens to have worked out extremely well. If they overpaid for the stock and all that — it doesn't solve every problem — but it's a wonderful thing if you've got an asset you like and they take your ownership interest up.

And like I say, we've gone from 11.2% to 20%. And if you're using your American card — or whatever it may be — 20% of whatever earnings — contribute a little to our interest that used to be 11.2%, and we've done it without putting up any money.

Now, imagine — imagine if you owned a farm, and you had 640 acres, and you farmed it every year, and you made a little money on it, and you enjoyed farming.

And somehow, 20 or so years later, it had turned into 11-hundred or 12-hunred acres. I mean, you'd say, you know, how long has this been going on? You know, what could possibly be? — you know, is this un-American? — or whatever it may be. I mean, is it, you know, sensible use of the (unintelligible) cost of capital? Blah, blah, blah, blah, blah.

If you do it at the right price, there's nothing better than buying in your own business.

We owned — I mentioned and used Apple as an example of how our interest in Apple, you know — every time a company that earns a hundred billion a year — you know — it means that our interest in it goes up a tenth of a percent. You know, we've added another a hundred million to earnings.

Well, I mean, it takes a lot of work (laughs) — a hundred million in earnings. And, you know, in the first quarter they just reported — they're on a fiscal year — but they just reported their March quarter — and, you know, they earned more money and they had fewer shares outstanding.

And we actually bought a little more Apple, in the first quarter or so. We decided we wanted to own a greater interest. And on top of that, we knew that we would own an even greater interest if they kept buying in their shares, which — we didn't have any insider information or anything — but certainly, it would seem the way to bet.

And, you know, we feel better because we bought the shares we bought in the market. And we feel (laughs) just as good as the fact — by the fact — they used their cash to buy out some of the other people.

It is the simplest thing in the world, and then I read all this stuff.

It is unbelievable how people can't figure out something that, you know, if they owned a farm and the guy next to them had a farm and somehow you were getting more of his farm all the time without putting up any money while you farmed your own farm — that at least, you know, you're using some of the earnings for that — you'd feel very good about it.

Have you got any explanation for it, Charlie?

CHARLIE MUNGER: Well, I have another thing that interests me in the present scene.

We get all these suggestions from index funds, a letter saying we — the chairman and the chief executive officer are the same person, and that they have some professor somewhere that thinks that American business would work better if it had a separate — if Warren could split — we could split him in two and have each half work.

And to me it's the most ridiculous criticism I've ever heard. It would be like — it would be like — Odysseus would come back from winning the battle in Troy and so forth, and some guy would say, I don't like the way you were holding your spear when you won that battle. (Laughter)

And it's some guy that's never run any business and doesn't know anything. I don't think too much of this activity. (Applause)

WARREN BUFFETT: Well, let's see. Somewhere in here — I may find it at some point. Ah, here it is.

We wrote in the annual report — in the third paragraph of a nine-page report — we said, "We're going to treat everybody the same." It may be a crazy concept we have, but we really feel that somebody that gave us their savings in 1960 or 1970 or 1980 and just left them with us, and trusted us, we feel that they're entitled to the same sort of respect and attention that somebody that, you know, is accumulating, like crazy, assets under management and gets paid based on assets under management, that knows that they just need to have policies that essentially are popular in Washington.

The only thought they have is that Washington sometimes says that, you're getting too damn big and we're going to do something about you.

So, they try to be very sure that they're doing things that people will cheer.

So anyway, I say, "Well, we're going to treat you all alike." We've got three million people — or shareholders — out there. We're going to treat you all alike.

And on March 25th, about a month after I wrote that letter — it's in the third paragraph, you'd think that they would get that far — that they had 101 million B shares — i mean, now, somebody ought to read to the third paragraph.

But anyway, we get a letter that says, "We would like to meet with you in advance of Berkshire Hathaway's 2022 Annual Meeting of Shareholders to discuss Berkshire Hathaway's perspective on governance and sustainability."

Well, I have written probably more on that that's been honestly written by the guy that runs the company. But why in hell would they think that we should meet with them and not you people all individually (laughs) that come here? (Applause)

I grew up in a very, very, very Republican household, but I feel like, you know, some raving populist or something.

But I just can't imagine — well, anyway. You've heard it. (Laughter)

And, you know, somebody gets paid to — well, there's a lot of people I'm sure in public relations and they hire advisors, because it looks better if they have advisors that tell them whether the chairman and the CEO should be the same person or not, and those people get paid for it. And then they discuss it at their board meeting and then, you know —

In the end, believe me, if 90% of Congress for some reason felt it was better to have the chairman and the CEO be the same person, the index funds (laughs) would not be writing those letters, because all they have to worry about is whether for some reason people start wondering why some institution should have 10% of the votes in every major corporation in the country.

And I like the idea of index funds. But it is interesting to watch where incentives and bureaucracy, and whatever it may be, lead people.

The guy that wrote me the letter's probably a very nice guy. That's his job.

Well, anyway, they didn't get a special meeting. And you people are here, and we appreciate the fact you're here. (Applause)

WARREN BUFFETT: OK. Back to Becky.

BECKY QUICK: This question's for Ajit and Greg. It comes from Ben Nall (PH), who's a shareholder of 30 years. He's a Nebraska native, and he says he'll be attending the meeting here today.

"BNSF and GEICO appear to be losing ground to their two primary competitors, Union Pacific and Progressive.

"Over the past several years UP's operating ratio has been about 400 basis points better than BNSF's.

"And Progressive has grown faster while maintaining a lower combined ratio than GEICO. On an operating basis, UP's [Union Pacific] precision scheduled railroading and Progressive's telematics appear to have jumped ahead of the Berkshire businesses."

He wants to know what Greg and Ajit are doing to address those business challenges.

GREG ABEL: Want me to go first? OK. Thank you, Becky.

Let me just start by saying when we think of BNSF, we have an exceptional franchise here and a great business.

And we do compete with other railways, and we're very well aware of how they operate, including their operating ratios and the metrics they operate to and precision railroading.

And it's all part of it. But what I would share with is when I think of BNSF, we start with focusing on our customer, understanding how we can best service them, and, yes, we want to do it in an efficient and effective way that delivers great results back to our shareholders.

And that will continue to be our focus. So, yes, we learn from all the metrics they report and how they operate their rail, and we observe it. But I would put our team up right beside them on any operating day. And we're going to move our rail cars as well as any other rail company in America. And we're going to do it on behalf of our customers.

So, we're very proud, but we're not ignoring the fact that there's more to be done, both operationally and for our customers.

So, we'll continue to see improvement there. We've got a great leadership team there. We've got a great employee group within BNSF. And what I like is we're just going to see long-term improvement there.

We have an exceptional inner-modal franchise out of the west. It's incredibly valuable to our shareholders long term, our partners.

And that's what our team is focused on, building that franchise out.

So, couldn't be more proud of where we're at, but we also know we have a journey ahead of us. And we're going to continue to get better and better.

CHARLIE MUNGER: Greg, if we were offered the opportunity, would you trade our operation for theirs?

GREG ABEL: Never. Never. And we love our--

CHARLIE MUNGER: He knows a lot about it, Phil. (Laughs)

GREG ABEL: We have a great franchise, and we have a great leadership team running it. So well said, Charlie. Thank you.

WARREN BUFFETT: And just before we go to Ajit — and Greg, you know, was a major partner for 20 years, more or less, a little over that, since we bought the energy company. And his boss was David Sokol. And the two of them, I mean, they knew how to run businesses.

It isn't like we don't read what other numbers are and all that. But we've got the perfect person running in Katie Farmer. We've got the perfect person running BNSF. And, you know, she'll do a great job.

Changing around a railroad in various ways, you know — if you've got 21,000-or-something miles of owned track and all kinds of other — that doesn't count sidings and double tracking — and you've got a lot of things to do from something that they started building a couple of hundred years ago — not quite a couple hundred — and you can't move things around very (Laughter) easily. And towns grew.

You know, when you came into Omaha in 1862, well, the railroad didn't even go across the river, I mean, even though we'd become a major rail center for the West, or the opening to the West.

And we're going to be here a hundred years from now. We will be an important, a really vital, asset of the country. And it will be a very big part — very important part — of Berkshire.

And we will take what is an incredible assemblage, I think, of 300-and-some railroads or something over time.

And, you know, the tracks got laid, and the routes laid out, you know, 150 years ago. The world changes, but we have to adapt to it.

But you don't put an order out to change a thousand miles of track in hours, or how it's operated or anything of the sort.

So, we're running it to have that asset for Berkshire shareholders, and it will redound to the benefit of the country that we do it.

No matter who ran it, it would be important — obviously enormously — to the country. And the UP will be here at that time, too.

And it'll be a better railroad a hundred years from now than it is now. But I can't promise you what will happen if we get flooding or something in the next few months.

You know, it can wipe out a lot of the plans you have and disrupt lots of lives and disrupt lots of shipments.

And there are no magic wands in railroading to make great changes. On the other hand, you ought to be working at it every day to make it better.

I forget how many bridges we have, but some years ago we were spending 3 or 4 billion dollars a year on capital expenditures. And [former BNSF CEO] Matt Rose — I said, this is a lot of money to spend, you know, keeping up a railroad. And then he said, well, we're going to have to do that more, and so on.

And I said, well, I said, I can handle this part. I'm not sure if Charlie can. (Laughs) I have to explain these numbers to him.

So, the next bridge they bought — they built — they called the Charles T. Munger Bridge. So, you can actually (laughter) go see, our railroad has the Charles T. Munger Bridge, because Charlie kind of was asking similar questions 10 years ago.

WARREN BUFFETT: Ajit?

AJIT JAIN: OK. Thank you, Becky.

There's no question that the personal automobile insurance business is a very competitive business.

Having said that, both GEICO and Progressive are two very successful competitors in this segment. Each one of them have their plusses and minuses.

But having said that, there's no question that more recently, Progressive has done a much better job than GEICO, as you point out, both in terms of margins and in terms of growth rate.

There are a number of causes for that, but I think the biggest culprit as far as Geico is concerned, and again, you rightly pointed out, is telematics.

Progressive has been on the telematics bandwagon for, I don't know, more than 10 years, probably closer to 20 years.

GEICO, until recently, wasn't involved in telematics. And it's been only the last two years that they've made a very serious effort, in terms of using telematics for segmentation and for trying to match rate and risk.

It's a long journey. But the journey has started, and the initial results are promising.

It'll take a while, but my hope and expectation is that hopefully in the next year or two, Geico will be in a position to catch up with Progressive, in terms of telematics. And hopefully that'll then translate into both growth rate and margins.

WARREN BUFFETT: Charlie, you got anything? (Applause)

WARREN BUFFETT: It's very interesting. I mean, the auto insurance industry is a fascinating one to study, in that the largest auto insurance company now — and we're talking 2022 — and, you know, Henry Ford — I mean, it was 1903, you know, or something when — when cars really got started.

And it wasn't too many years after that that he was turning out two million cars a year. Imagine that. You know, one guy, two million cars a year is a lot of cars.

So, car insurance became very important after hundreds of years of when people thought about insurance, it was ships at sea and fire, where they had protective societies.

And insurance is a product that's been around a long time. But auto insurance has been pretty much the same thing since Leo Goodwin started GEICO in 1936.

And we came along with a good idea, and lots of big companies and all that.

But the largest auto insurance company in the United States was started over in Illinois by a guy that didn't know anything about insurance, particularly.

And it's a mutual company. It's not supposed to succeed in capitalism. I mean, you know, if you go to business school, they teach you that only because you have incentives and compensation, and all kinds of things, can a company succeed.

Well, nobody's really gotten rich off State Farm. They're just out there —

And they are the largest insurance company. While Leo Goodwin started 80-some years ago, and he probably wanted to get rich. And probably at Progressive, you know, people wanted to get rich. And at Travelers and Aetna — and you can name off dozens and dozens of companies.

And who wins? You know, a mutual company.

In terms of present size, they still are the largest company. They have — if you leave out Berkshire — they've got the largest net worth, by far. I think they've got 140 billion or something like that of net worth. You know, and —

Progressive had a very, very, very smart guy running it for a very long period of time. They got very smart people running it now.

But they have a net worth that's 1/6 that of what some people over in Illinois that nobody knows the name of (laughs) have after years. And they've had the time to sell the same product, and they advertise like crazy.

We spend $2 billion a year telling people the same thing we've been telling them for 70 or 80 years, you know.

The policy doesn't change. But when we get all through, State Farm's still doing more business than anybody. And it shouldn't exist under capitalism, you know.

If you went there with a plan to start a State Farm today and have it compete with Progressive, you know, who would put up the capital? (Laughs)

I mean, a mutual company that you're not going to get the profits from? It doesn't make any sense at all, except they've got 140 billion or something like that of net worth.

And Progressive, I don't know what their net worth is, but it must be somewhere around 20-or-so billion, and I haven't looked for a long time. Their net worth in the first —

Incidentally, I mean, they are very, very, very disciplined in underwriting. And of course, on the investment side, their net worth dropped in the first quarter, because they own a lot of bonds.

And they say, well — probably everybody in the insurance business would say — that well, we own bonds because that's what people do. (Laughs)

And here's half the business where you do what people do and the other times — the other half — the businesses, you spend all kinds of time trying to analyze in every county and every single way you can segregate and properly rate business and all of that.

And, you know, basically [former Progressive chairman] Peter Lewis sat in my office 40 years — yeah, 40 years ago — and he's smart as hell. And, you know, this guy was clearly going to be a major competitor of Berkshire's. And he knew insurance backwards and forwards and very bright and everything.

But he just ignored the investment side, and that was as important as (laughs) the underwriting side.

And it is interesting how organizations function and have — what I would say are, to some extent — blind spots.

And of course, Charlie and I know we've got all kinds of blind spots ourselves.

And so, we have to be kind of careful of criticizing other people for having them. (Laughs) It is —

The auto insurance business ought to be studied in business school, because it essentially refutes so many of the things they're presently teaching. So that's my suggestion today to business schools. OK. (Laughs)

And thanks, Ajit. You couldn't — Ajit is responsible for adding more value to Berkshire than the total net worth of Progressive. That's not to knock Progressive, I'm just saying one guy. (Applause)

WARREN BUFFETT: OK, station two.

RAJID ERDUWAL: Hello, Warren and Charlie. It is great to see you both and the wonderful Berkshire managers. Our thanks for everything that you do.

My name is Rajid Erduwal (PH), and I am from New Jersey. My question is on market timing. You have always said that it is impossible to time the markets.

Yet if we look at your track record, you have had amazing timings with some of your key decisions.

You got out of the stock markets in 1969 and 1970. You got back in 1972, '74, when the markets were really cheap. You did the same thing in '87, '99, 2000.

And today we are sitting on a significant amount of cash when the markets are going down.

My question is how do you time the big market moves so well?

WARREN BUFFETT: We'd like to offer you a job first. (Laughter)

RAJID ERDUWAL: I will take it. (Laughter)

WARREN BUFFETT: The interesting thing is, you know, obviously we haven't the faintest idea what the stock market is going to do when it opens on Monday. We never have had. We have never made —

Charlie and I — I don't think in all the time we've worked together — and I'll tell you something later on maybe about how learning takes place — but we have never — I don't think we've ever made a decision where either one of us has either said or been thinking, we should buy or sell based on what the market's going to do.

CHARLIE MUNGER: No.

WARREN BUFFETT: Or for that matter, on what the economy's going to do. We don't know.

And the interesting thing is, sometimes I get some credit some place for the fact that, you know, how wonderful it was that we were optimistic in 2008 when everybody was down on stocks and all that sort of thing.

You know, we spent a big percentage of our net worth at a very dumb time. (Laughs)

I shouldn't say we, it's I.

We spent about 15 or 16 billion dollars — which was a lot bigger to us then than it is now — we spent it in the last few weeks, over a period of three or four weeks — between Wrigley and Goldman Sachs and generally — at a terrible time, as it turned out.

I mean, I didn't know whether it was going to be a good time or a bad time, but it was a really dumb time.

And I wrote an article for The New York Times, "Buy American," and all these things.

Well, if I'd had any sense of timing and waited six months until — I think the low was in March — and in fact I think I was on CNBC maybe that day, or something.

But I totally missed that opportunity. I totally missed, you know, in March of 2020.

We have not been good at timing. We've been reasonably good at figuring out when we were getting enough for our money. And we had no idea when we bought anything — well, we always hoped it would go down for a while so we could buy more, and we hoped even after we were done buying and ran out of money that if it was cheap the company would keep buying, in effect, taking our interest up.

I mean, that's stuff you can learn it in fourth grade. But it's not what's taught in school.

And so never give us any credit. Well, actually, give us all the credit. I mean, go out and tell everybody how smart we are, but we aren't. (Laughter)

We haven't ever timed anything. We've never figured out insights into the economy.

I mean, when I was 11 years old, March 12th, I guess, 1942 — or March 11th — you know, I bought stock when the Dow was 90 — well, it was 101 in the morning — It was 99 at the end of the day I think — and, you know, now it's 34,000, or maybe it's 1,000 less than it was on Thursday. (Laughter)

But, you know, it's one decision that it's a good thing to own American business.

And, you know, if the Harvard endowment had come to see me as an 11-year-old, (laughs) you know, or General Motors' pension fund or something and, you know, they say, well, no, but we have to have a balance. And we have to maybe have 60%. And then we have to sit around every three months and listen to a bunch of managers.

They'd have just done better if they'd just taken some darts and thrown them and just said, we're going to be in America 50 years from now and 100 years from now, and we'll do better in stocks than we will in bonds.

It's amazing how hard people make what a simple game it is.

But of course, if they told everybody what a simple game it was then 90% of the income or more of the people that were speaking would disappear.

So, it's really a little too much of us to expect of human nature that people will explain why they really aren't adding any value to what you can do by yourself.

Or actually, you're, you know — I hate to use the example — but you can have monkeys throwing darts at the page. And, you know, take away the management fees and everything, I'll bet on the monkeys.

But I don't consider them a superior species. And I don't want them to move next-door instead of my next-door neighbor or (laughs) anything, but it's just the way it has to be.

Charlie, do you have anything cheerful to say? (Laughter)

CHARLIE MUNGER: Well, frequently in the wealth advisory business, the way it used to be, you go to your investment advisor, you say, what should I do to protect myself for the future?

And he says, why don't you give me $50,000 of your net worth now? That's my contribution to your future. (Laughter)

It's a peculiar business. (Laughter)

WARREN BUFFETT: Yeah, and it's a great play because you (unintelligible) rich. It's still a —

If you have a son or daughter that really wants to make money per point of IQ, and per erg of energy, and all of that, well, tell them to go to Wall Street. I mean, don't have them enter the priesthood or anything.

I mean, if that's what they want. It self-selects. And it always will be the case.

I mean, there's no reason to despair about humanity because they behave in their self-interest. They may not actually be behaving in their self-interest over time, but they — you know, are they happier? Who the hell knows?

But if they just want to make money —

Well, people here in the auditorium saw a little session from the Salomon [Brothers] episode.

And Gerry Corrigan was then the head of the New York Fed, and that same committee was grilling him. And they said, Mr. Corr — they were giving him a hard time — and they said, who was the highest — they said something to this effect, that — who's the highest paid guy at Solomon last year?

And he said, well, and he named him — maybe he named him — and he just said he got — I forget whether it was 20 million last year — and we're talking 1991 now, too — he said, maybe he got 20 million.

And the guy says, well, how old is he? And, you know, he said, well, I think he's — Corrigan said —something to the effect of, he's, you know, 26, or something like that.

And then Corrigan couldn't resist saying, and he can't even throw a football. (Laughter)

And the truth was, you know — now, there's a lot more money in throwing a football now than there used to be.

You know, one of my heroes was Ted Williams. You know, I think he was making 20 or 25 thousand dollars a year.

You know, just imagine today some guy that bats .230 or .240, you know, and if he makes it to the bigs, I mean, the money flows in.

And of course, those peoples should sit down and thank the fact that the stadium that could hold 30,000 or 40,000 people and was the source of revenue for the people who pay their paychecks, that stadium went from 30,000 to 40,000, because somebody first invented television and they came up with cable television and they came up with pay and all that sort of thing.

And nobody knows the names of those people. But capitalism is very, very, very peculiar in how it dishes out rewards.

And for a while it was better to be in Wall Street than be a .220 or .230 hitter in the bigs.

And, you know, it is now reversed because of the development of TV, et cetera.

So, it's a crazy world. Rewards seem very, very, very, very capricious, and they are.

And they don't seem to any theologian, or even to Charlie and me in our spare time, the whole thing seems kind of crazy.

But it's worked awfully well. And even the people who don't take advantage — get short-changed by the system — are doing far, far better than if the system hadn't gotten changed.

Doesn't mean that you necessarily shouldn't work for change, but you should recognize the limitations of what you can do with humans, put it that way.

OK. Charlie, is there any way you'd like to close the sermon? (Laughs)

CHARLIE MUNGER: Well, I do think we have a very interesting phenomenon, in —

I would argue that in a lot of the wealth advisory business, people are charging for skill and delivering closet indexization.

In other words, nobody can stand being that different from the crowd and results. They're afraid they'll lose their fees. So, everybody does the same thing. It's mildly ridiculous.

The world is mildly ridiculous. (Laughter)

WARREN BUFFETT: Yeah. But as Charlie pointed out in the movie, which only the people here saw that, that before we were married, you know, we tried to convince a couple of young women that we were really more attractive than we were. I mean — (Laughs)

You can't expect people not to behave in their self-interest. And that was very important, that we didn't disclose all of our weaknesses before the marriage. So —

CHARLIE MUNGER: Warren and I are trying to be a little better. (Laughter)

WARREN BUFFETT: Yeah, that was true--

CHARLIE MUNGER: We may fail a little. And I don't know about you, but I've slightly improved since I was 17. (Laughter)

WARREN BUFFETT: Yeah, well — (Laughter)

That's a really interesting point, because if fortune has just showered you with all kinds of good things you ought to be a better person in the second half of your life than the first half. I mean, that really should not be asking too much of people.

If they've won the ovarian lottery, and they're born in the United States, and all kinds of good things have happened to them, and you've had a chance to see how stupid you were and all kinds of things you did, you know, why not have the second half of your life be better than the first half?

I would say — working from a very low base — but, I mean, I'm not nearly, you know, by any intelligence test or ability to do any of that, you know, I haven't learned anything. But you do learn certain things only by interacting with people.

And you don't know, when you're two years old, no matter how much you're picking up all kinds of knowledge from the world, the learning machine that's going on in a two-year-old's head is just unbelievable.

But it's not the same as having 30 or 40 years of experience with actually how the human animal behaves, which is really, you know, you're learning all the time about it.

But that should make you a better person in the second half of your life than the first half.

And I would say that if you say you're a better person in the second half and have got reason to say it in the first half, you know, forget about the first half. (Laughs)

Enjoy the second half.

And both Charlie and I have had the luxury of A, living a long time so we get to play, what we would regard as the hopeful and respectable second half.

And we have had enough sense to figure out — well, we figured out what makes us happy. And we've gotten somewhat more sensitive to what can make other people unhappy and all that sort of thing.

And I'd rather be judged by the second half of my life than the first half, and so would Charlie.

CHARLIE MUNGER: Yeah, of course.

WARREN BUFFETT: OK.

CHARLIE MUNGER: I'm very — I don't even look at what I did when I was young because it would embarrass me. (Laughter)

WARREN BUFFETT: Yeah. OK.

Any of you who wish to quiz Charlie on specifics can do so later. (Laughter)

WARREN BUFFETT: Becky.

BECKY QUICK: This question is, there's a two-part question. It's for Warren and Ajit on the first part and for Greg on the second. It comes from Roger Cleffman (PH).

He says, "Several years ago Mr. Buffett was quoted that a nuclear attack is the greatest risk to Berkshire Hathaway Insurance.

"Given the present circumstances, what would the fallout be on Berkshire Hathaway Insurance if a nuclear event occurred in the populated world?

"And then secondly, for Greg, has Berkshire Hathaway Energy suffered any physical or cyberattacks? And irrespective of that, has any special hardening of security been put into place?"

WARREN BUFFETT: Yeah. Well, the first half, every day since August of 1945 — and accelerating dramatically when a second large country had the ability to kill millions of people — which has been magnified by an incredible factor through this, that there is a risk every day.

It's a very, very tiny risk. Nut as Ajit will, or anybody at this table could tell you, if you roll — well, they had a pair of dice out at the Desert Inn in Las Vegas for a while under a glass thing. And some guy had thrown 32 passes in a row. And I don't know, maybe the odds are eight million to one against that or four million to one — four billion to one against it.

But, you know, if you just keep rolling the dice, you know, everything will happen. I mean, if you get 330 million Americans out tomorrow, every American says, heads or tails, and they do it every day, after 10 days, you know, you've got 330,000 of them that have called the flip 10 times in a row.

And if you do it 10 more days, you've still got a bunch of people who've done it 20 times in a row. And they really think they have learned how to control the flip.

Well, the answer is the world is flipping a coin every day as to whether people who can literally destroy the planet as we know it, you know, will do it.

And unfortunately, the major problem is with people that have large stocks of nuclear weapons and ICBMs.

And when they talk about using tactile [tactical] nuclear weapons because somebody will be upset because they're losing a war, I mean, does anybody think that somebody that's willing to kill, you know, hundreds of thousands of people with tactile weapons, you know, why do they stop?

It is a very, very, very, very dangerous world. And —

CHARLIE MUNGER: But we don't have any way of —

WARREN BUFFETT: No —

CHARLIE MUNGER: — protecting —

WARREN BUFFETT: There's no way to pro —

CHARLIE MUNGER: — against a big nuclear attack.

I know a man who said, I know what I'm going to do if there's a nuclear war. I'm going to crawl under the table and kiss my ass goodbye. (Laughter)

WARREN BUFFETT: Well, yeah. And Charlie's in charge of loss control at Berkshire. (Laughter)

We have no solution for it.

CHARLIE MUNGER: No, we don't.

WARREN BUFFETT: And there isn't any solution for it.

And, you know, it's extraordinary when you think about it, in August of 1939 — September 1st is, you know, when Hitler moved into Poland — but nobody really knew that much about it here. I mean, you know, the news you got you got from the news reel you went to because the theater was air conditioned, you know, or something.

So, if I went to the movies — which you wanted to do in the summer because it was air conditioned in August of — well, September 1st in the case of the actual movement into Poland — but, you know, it was a few people on a screen and some guy with an authoritative voice telling you that German forces just moved into Poland and a picture of a few tanks, maybe. And it was over in a minute.

Now of course all day, every day you see people dying who you very much empathize with, and it could be you instead of them. And it's just so different.

But in August of 1939, there was a letter sent to President [Franklin] Roosevelt about a month ahead of time.

And why did he get that letter? He got the letter because Hitler was so anti-Semitic, basically.

He drove all the Jews that could see it coming out of Germany. And among them were some great scientists.

And Leo Szilard, who was obviously from Hungary, from somehow he got driven out. Einstein got driven out.

And Leo Szilard lands eventually in the United States. And he writes a letter to tell the president of the United States, Franklin D. Roosevelt, that there's a bunch of uranium moving different ways or whatever it may be. I don't know anything about physics, zero. I don't know about the off and on sign of it.

But in any event, I know what the letter did. Because he writes a letter and says, you know, something big may happen in physics and America better get to it first.

But then he has the problem of, how do I get it to Roosevelt? You know, Leo Szilard, who's he to the president of the United States?

So, he figures if he gets Einstein to cosign it that the president will pay attention. And he's right. So (laughs) he goes and gets Einstein and the two of them send the letter.

And they send it to Roosevelt. And they wouldn't necessarily have been in the United States if Hitler hadn't had the crazy views about Jews, basically.

And so anyway, that letter went, and we developed the atom bomb before anybody else did.

And it was a very, very fortunate development that Leo Szilard and Einstein happened to end up in the United States rather than perhaps be someplace else. Who knows?

But the accidents of history — and there's going to be more accidents in connection with atomic weapons.

You know, we've come close for various times. I mean, we had the geese flying over, you know, somewhere up north and NORAD gets a crazy signal.

And we've had wrong training tapes placed over in the Soviet Union or some, you know, and it looks like things are going on.

We can't do anything about it. And that is one risk that Berkshire absolutely has no interest in, even though you can say everybody in the world should have an interest. But it doesn't do us any good — you know, the feeling is that it doesn't do us any good to think about it.

But that doesn't stop the fact that there are two powers in the world that, through miscalculation of the other's intentions, through all kinds of things, you know, have come close in the past. And Charlie and I lived through the Cuban Missile Crisis.

And, you know, we knew there was some chance that weapons of mass destruction would be used.

And believe me that there's a lot more bad that can happen.

And humanity has not really come up with a counterforce to technology. I mean, back in the caveman ages, if you were a sociopath or something, you threw a rock at the guy in the next cave, you know, or something. I mean, it was sort of proportional.

And we kept developing, and there was this breakthrough where technology has totally outrun humanity. And we'll see what happens. But so far so good.

And Berkshire does not have an answer, though. There are certain things we don't write policies on because we wouldn't be able to make good on them anyway, you know, for that matter.

And everybody would know we wouldn't be able to make good on them.

You have that risk, and there's nothing Berkshire can protect you against. And we've been very lucky so far.

Ajit, do you ever get any questions, in terms of —

AJIT JAIN: In addition to all what Warren has said, in terms of the chance of something like this happening, the additional thing that concerns me about a nuclear situation is my — my lack of ability to really estimate what our real exposure is in the event of a nuclear event.

When you're talking about, you know, other big exposures we have: earthquake and hurricane and cyber, I can, with some reasonable degree of accuracy, have a point of view in terms of how large our exposures can be, and how big our loss can be.

When it comes a nuclear thing, you know, I sort of surrender.

You know, it's very difficult for us to estimate how bad "bad" can be.

Very many different lines of exposures will be affected by it. And even though, in almost all our kind of contracts, we try and exclude nuclear as a covered peril, nevertheless, if something like that were to happen, I'm fairly positive that the regulators and the courts will hold it against the insurers, and they'll rewrite the contract and we'll be required to pay.

For example, one thing which is already being talked about: we issue what are called "fire policies." And these fire policies try and exclude nuclear as a covered peril.

But there are several regulators who feel that, gee, if it's a fire policy, and if the nuclear attack causes a fire, then how can you exclude fire? And you better include fire.

So, you know, debates like that we will have to live with, and it'll be very difficult for the insurance industry to fight back with the regulators and the court systems in terms of what is covered and what is not covered.

WARREN BUFFETT: And there won't be any regulators or anybody else. So — (Laughter)

We'll leave it to a million years of reconstruction. (Laughs)

Einstein said that, "I know not what the weapons will be for World War III. But I know the weapons for World War IV will be sticks and stones."

You know, there's a lot of things that — I mean—

If you're worried about the effect of nuclear attacks, you got other things to worry about than the value of your Berkshire, I'll put it that way. (Laughter)

And what other cheerful things can we have?

Station —

GREG ABEL: Warren, do you want me to touch on the cyber?

WARREN BUFFETT: Oh, yeah, sure.

GREG ABEL: Yeah, I'll just touch on the cyber because it was raised.

And when you do think of Berkshire and they use Berkshire Hathaway Energy as a reference.

But cyberrisk, and managing that risk, both at Berkshire, really falls across all of our subsidiaries.

And it's a constant risk that's there. It's one of our greatest risks we're always evaluating and trying to literally defend against.

And if we use Berkshire Hathaway Energy as an example, we would receive billions of attacks every day against our various operating systems.

So that's basically what our team is in place for: both-- they harden the assets to deflect it, and then evaluating the underlying attacks we have, you know, every second of the day.

And, by the way, that would — we'd have a number of operating subsidiaries that experience that. But, obviously, it's the rail, and the energy, and a few others that we spend a lot of time on, a lot of effort, a lot of resources.

And the good news is that through to today, our teams have done an exceptional job, we really haven't had a significant event. We've had some minor events at small businesses, but across our major businesses, across our major operating systems, we've had the proper security protocol in place to avoid events.

But, again, it never stops. Our team would tell you that, every day, that's a risk they recognize and a risk they're addressing within the businesses.

So, a significant risk, but a significant priority for all of our operating teams.

WARREN BUFFETT: Yeah, and I would add one thing, I think. Greg knows way more about this than I do, but my impression, from everything I've seen, is that, you know, you always have — you know, historically, the private industry has always said the government can't do anything right, and government always says that private industry is just thinking about itself, all these things.

The truth is, from everything I've seen, is that the cooperation between government and business in terms of trying to minimize the threat of cyber problems, I think, has been magnificent, basically.

GREG ABEL: Yeah, excellent point. When it comes to cyber, the collaboration between a variety of U.S. agencies and our individual businesses, it's incredibly strong.

Including down to certain agencies will submit basically a lot of our operating data on a daily basis, where they're helping us go through it to identify if we have a bad character, a bad individual who's maybe penetrated into our system.

So, it's a strong collaboration. And Warren, you're absolutely right, it's very unique to see how both the industry and the government is working so closely. But I think we both recognize it as such a significant risk, we have to stay strongly aligned on the approach.

WARREN BUFFETT: It's a real partnership.

It's a real partnership. And we can do better because the government is helping us, and the government can do better because we're helping them, and there's no lack of will on either side.

And cyber, I mean, it blows your mind. And nuclear is the number one threat, but it's a very, very, very low probability, you know?

Someday, the sun will burn out, too, you know.

But there's really no place for two countries with large ICBM possibilities, and who knows what else and everything — but we haven't figured that out yet. You know.

It's easy to go around and say, this is the solution or that's the solution.

But, you know, if you have two people with loaded guns facing each other, and, you know —

CHARLIE MUNGER: And not everybody is likely to be totally rational.

WARREN BUFFETT: Oh, we see so much irrational — irrationality in where people's self-interest is involved, you know, they're doing all kinds of things to destroy themselves, in terms of how they live their lives, and everything.

And, you know, it doesn't stop with — (laughs) — as you move up the ladder.

You know, people — some people do terrible things. And you just have to very much hope that they aren't in a position where they can do it all by themselves with the rest of the world as their supposed prize.

WARREN BUFFETT: OK. If station 3 will please ask something about motherhood and apple pie, or something like that. (Laughter)

DAPHNE: Dear Mr. Buffet and Mr. Munger. My name is Daphne, I'm from NYC, and this is my fifth annual shareholders meeting. (Applause)

WARREN BUFFETT: Well, we appreciate you coming. We do, sincerely.

DAPHNE: As you know, for the past four consecutive months, we've been going through inflation, with an inflation rate north of 7% for the first time since 1982.

You both have experienced this before, from 1970 to 1975, at a time where your portfolio took paper losses and yet you made some of the best investment choices of your life.

Reflecting on that, my question is, if you had to pick one stock to bet on — (Laughter)

WARREN BUFFETT: You kinda sneaked up on us there for a second. (Laughter)

DAPHNE: — and be resilient in the inflation, which would you choose? And what specifically enables that stock to do very well in what might very likely be a difficult market?

WARREN BUFFETT: Well, I'll tell you something even better than that one stock. (Laughter)

Maybe we'll get to one stock.

But the best thing you can do is to be exceptionally good at something. If you're the best doctor in town, if you're the best lawyer in town, if you're the best whatever it may be, no matter whether people are paying you with a zillion dollars or paying with — they're going to give you some of what they produce in exchange for what you deliver.

And if you're the one they pick out to do any particular activity, sing, or play baseball, or be their lawyer, whatever it may be, whatever abilities you have can't be taken away from you, they can't actually be inflated away from you.

Somebody else will give you some of the wheat they produce, or the cotton, or whatever it may be, and they will trade you for the skill you have.

So, the best investment by far is anything that develops yourself. And, again, it's not taxed. (Applause) So that's what I would do.

CHARLIE MUNGER: I got some advice for you, too. (Laughter)

When you have your own retirement account, and your friendly advisor suggests you put all the money into bitcoin — (laughter) — just say no. (Laughter) (Applause)

WARREN BUFFETT: Yeah.

Nobody can take away from you the talent you have. And the truth is that the world will always be willing. They'll need to do something, and some people will not have skills, and they will get less of a the product of the society than somebody who has other skills.

And sometimes that has something to do with education, but a good bit of the time it doesn't have anything to do with education.

But, just figure out what you'd like to be, and figure out how — and what you'd like to be is what you're going to likely be good at, and, you know —

The world will always need somebody on that tube to tell us what's going on. So, you know, study Becky Quick or somebody and (laughs) figure out, you know, what makes her good. And what you sort of naturally bring to the game.

I mean, I could have — who's the guy that says you've got to spend 10,000 hours doing this or that, and then? Malcolm Gladwell.

Malcolm Gladwell, you know, would say, just spend 10,000 hours on something. Well, I could have spent 10,000 trying to become a heavyweight boxer, but (laughs) I don't think would have felt very good at the end of the 10,000 hours. I mean —

And, you know, you stumble into what you really like doing, what you're good at, what is useful to society. And then it doesn't make any difference what the dollar bill, you know, is now worth, in terms of the purchasing power, a cent, or a half-a-cent, or a hundredth of a cent.

If you're the best doctor in town, you know — they'll bring you chickens, whatever they may do — but they can't take it away from you.

And my guess is that — if you've come to five meetings, you know, you've got a very good future ahead of you. I mean, that shows — (Laughter)

It self-selects, I mean —

So, if you want to sell a piece of yourself, you know, we'll buy that as the best investment we can make. We'll take 10% of your future earnings, and we'll give you a cash payment now. (Laughter)

And, you know, we'll have a terrific asset. And you can have 100% of your future earnings. And if you develop your talent — maybe you'll be a great dancer — people pay money to watch great dancers. We had Fred Astaire and his sister, Adele, that came from Omaha, you know.

Their name was Austerlitz then, but they could dance. And Adele did whatever she did with him, moved to England. And Fred Astaire went on to do a whole bunch of other things.

And Ginger Rogers had to do it all the same, backwards, in high heels, and she didn't get paid as much because she was a woman.

But you're going to do just fine. I'd bet a lot of money on you. (Laughs)

WARREN BUFFETT: OK. Becky?

BECKY QUICK: This question is for Warren and Ajit. And it comes from someone named Modi, in Israel, who writes, "My family and I are long-term shareholders of Berkshire and we plan to hold it forever. We like that the current management thinks in the long term to increase shareholder intrinsic value.

"But we aren't sure that, at the time of the management change, the new management will act the same way you do.

"It might take risks in the insurance field where it's hard to find on the balance sheet, and that might take years to realize.

"We would like to know how we can assess the insurance risk today and in the future, or to know in time, when you and Ajit are not here anymore."

WARREN BUFFETT: Well, I would say that the future, for a long time, is about as assured as you can have in the world.

We don't have an answer for the nuclear problem or anything, but we have a culture that a), has worked; b) has the shares, and the shareholders, that will carry it a long way.

And, you know, the first year — let's say I die tomorrow — the first year, you know, everybody says, you know, what's going to happen? Are they going to spin it off? They can do all these things.

You've got the shares held in a place that it can't happen. You've got a board of directors that understands that our culture is 99.9% of running the business.

They don't think that having meetings of the committees, and bringing in outside experts, or anything like that, mean a thing.

I mean, it's a process that the world has adopted, and they've done it for reasons we understand. But Berkshire's just plain different, you know.

We are a business that exists for people to trust us. And all we have to do to fulfill that trust is fairly simple things.

We've got the people to do it. We've got unbelievable resources to do it.

And it isn't that difficult, as long as you've got the freedom, essentially, to do it.

And the world will write stories a year after, "So a year later, what has happened at Berkshire?"

You know, the railroad will be run the same way.

The big worry, of course, is that somebody comes in, figures they can make billions if, as a group, or, you know, people that sell the businesses and say, it's better to be private, you know, or it's better to be 'pure' this, or something like that.

Well, you know, we're a pure partnership, is what we're pure at. (Laughs)

And we do have what we think is a special relationship with our owners. And I don't think the relationship changes, and the ownership doesn't change that much.

And, true, there's nobody can take us over for a long, long time. And, by that point, we would hope that maybe the superiority of this culture might be somewhat better understood by the world.

And we will be here— if we have the same culture, we'll be 100 years from now — assuming that, you know, we haven't had a nuclear exchange or something.

But Berkshire is built for forever. There is no finish point.

Nobody's waiting to retire, or have their options vested, or thinking about — we don't have anybody that's thinking about, should I take another job? You know, they're doing what they want to do in life.

And it isn't because, you know, we're topping somebody else's offer, or that headhunters come around and say, we want this person or that person, and what'll it take to get him? Well, they can't get him.

Now, I don't know whether we could build it again, but we've got it. And we didn't know we were building it, exactly, when we took over.

You know, we had a lousy textile mill. I mean, it isn't like Charlie and I sat down — he didn't happen to be in Berkshire, but he was my partner and everything, and so we were mental partners — we didn't sit down and work out some plan that said, well, we'll run the dumb textile business for 20 years, and then we'll finally have to fold it, and then we'll do this and that and everything. We just kept putting one foot in front of the other.

But we did know how we felt about running a public company.

And one thing we wanted to do, always, was we wanted to have people that were in synch with us. We don't really want that group I saw in the Flamingo, you know, in 1952. We wanted people who trusted us.

And we started, in my case, in the partnership, we started with seven. And Charlie started a partnership, but this is the same thing.

We didn't go to institutions. And we didn't pay fees to people to bring in money or anything like that.

We sat down with people. In my case, I handed them a little sheet of paper, and it set the ground rules. I wanted to be sure we were on the same page.

I said, you don't have to read the partnership agreement. I mean, there's no way in the world I would be taking advantage of you. I shouldn't be here if you think I'd take —

But I do want you to be on the same page, and measuring me by the same yardsticks I measure myself.

And those people stayed with me, and they're still— they, or their children, or their children's children are shareholders of Berkshire. But they're partners.

And it would be hard to do that again, but I would do it with — if I were going to be in this field, I would try and do the same thing. I would try to find people to trust me.

And I don't want to be with people that are saying, how'd you do versus the S&P, you know, last month? Or, you know, what's your long/short position? Or anything like that.

I sold securities for three years. And I just didn't want to be in that position, where essentially, they thought maybe that I could do things that I couldn't do. So, I finally found a way to get a few people — I mean, I didn't — actually, I stumbled into it — but a few people that trusted me, and they just gave me their money. And we've lived happily-ever-after.

So, the new management — and the management after them, and the management after them — (coughs) — they're just — excuse me — they're just custodians of a culture that's embedded. The owners believe in it. People that work there believe in it.

And we're not saying other things can't do better, or anything of the sort. We're just saying, this is what we've got. And we have got the directors, we've got the share ownership and all of that to — and the size that, essentially, can ward off any attempts to change the culture.

And, you know, it's silly to talk about, if our board members did this, and did that, and they, you know —

In the end, obviously, we're always going to follow the law. We're a Delaware company and we follow Delaware law.

But that doesn't mean that we have to do what every other Delaware corporation does, and how they look at the Delaware statues. We will follow the law, and then we'll run it as a group of people who trust us. And we appreciate that trust. Charlie?

CHARLIE MUNGER: Well, I remember when you had a textile mill —

WARREN BUFFETT: Oh, god.

CHARLIE MUNGER: — and it couldn't —

WARREN BUFFETT: I try to forget it. (Laughs)

CHARLIE MUNGER: — and the textiles are really just congealed electricity, the way modern technology works.

And the TVA rates were 60% lower than the rates in New England. It was an absolutely hopeless hand, and you had the sense to fold it.

WARREN BUFFETT: Twenty-five years later, yeah. (Laughs)

CHARLIE MUNGER: Well, you didn't pour more money into it.

WARREN BUFFETT: No, that's right.

CHARLIE MUNGER: And, no — recognizing reality, when it's really awful, and taking appropriate action, just involves, often, just the most elementary good sense.

How in the hell can you run a textile mill in New England when your competitors are paying way lower power rates?

WARREN BUFFETT: And I'll tell you another problem with it, too. I mean, the fellow that I put in to run it was a really good guy. I mean, he was 100% honest with me in every way. And he was a decent human being, and he knew textiles.

And if he'd been a jerk, it would have been a lot easier. I would have probably thought differently about it.

But we just stumbled along for a while. And then, you know, we got lucky that Jack Ringwalt decided to sell his insurance company [National Indemnity] and we did this and that.

But I even bought a second textile company in New Hampshire, I mean, I don't know how many — seven or eight years later.

I'm going to talk some about dumb decisions, maybe after lunch we'll do it a little.

It is incredible how many dumb decisions we made. Charlie and I bought that — and Sandy Gottesman — we bought that department store, and that was in 1966.

And, you know, we were working with our own money. And why in the world did we think —

And Charlie flew to Baltimore, and I'd fly — I mean, we used to really work in those days. (Laughs)

And, there again, we had wonderful people. Louis Cohen couldn't have been a better guy.

But everybody in that business had a different reference point. You know, they wanted to expand their company. Well, who can blame them for that? And, you know, they were planning a couple of new stores. And each department — the shoe department said, well, we'll do it better this time, and all that kind of thing.

But the whole idea was crazy. And we got there for a little while, and we figured it out, finally. And —

CHARLIE MUNGER: We reversed course.

WARREN BUFFETT: Yeah. But why the hell did we do it in the first place? (Laughs)

CHARLIE MUNGER: Well, because we were stupid.

WARREN BUFFETT: Yeah, OK, well — (Laughter)

That's important to realize. We paid $6 a share for that stock, and if the department store had succeeded, it might be worth, you know, $30 a share now and we'd have — and it failed, so.

But we did other things, and we merged it into Berkshire, and we'll talk about that a little later.

And, you know, now I don't know whether it's — $150,000 a share now, or something like that, from the six bucks. So, if it succeeded, we would have maybe made a few dollars. And because it failed, we made hundreds of thousands of dollars per share.

But that's the way life is. (Laughs)

You just keep going. And —

CHARLIE MUNGER: And keep learning, that's the secret.

WARREN BUFFETT: Keep learning.

CHARLIE MUNGER: Keep learning.

WARREN BUFFETT: Keep learning.

WARREN BUFFETT: And you can say, why would it take guys that long to learn?

And — well, we've got a few minutes before lunch. We should — let's address that problem. Because I did bring something along on that.

I started buying stocks when I was 11. I'd been reading every book in the library on it. I loved it. My dad loved — you know, it was his business and I'd get to go down to his office and I'd read the books down there.

And I saved the money, and finally, by the time I was 11, I could buy a stock. And I could tell you, at that time — I went to New York Stock Exchange when I was nine. My dad took us to New York — each kid to New York once — and he took me, and I went to the New York Stock Exchange, and I was in awe of it.

I could tell you how the specialist system worked, and the odd lot arrangements, and I could tell you the history of finance, and all of these things.

And then I got very interested in technical analysis, and charted stocks, and did all kinds of crazy things. Hours and hours and hours. And saved money to buy other stocks. And tried shorting. And I just did everything.

And then, when I was either 19 or 20, and I can't remember exactly where I did it or something, I picked up a book someplace.

It wasn't a textbook at school, but it was in Lincoln, Nebraska. And I — you know, I looked at this book, and I saw one paragraph, and it told me I'd been doing everything wrong. (Laughs)

I just had the whole approach wrong.

I thought I was in the business of trying to pick stocks that would go up.

And, in one paragraph, I saw that that was totally foolish.

And I've brought something that is really interesting. Let's put up — what did we call this chart?

Oh, here we are, yeah.

Let's put up [slide] illusion one. Done. There we have it.

You know, now if you look at that, some people will see two faces, some people will see a vase, and some people will look a long time and only see two faces. But the mind flips from one side to another, and there's some name for it that — they call it "ambiguous illusions" or something of the sort.

There's other things that talk about aha moments — or, in the old comic strips with Popeye, Wimpy would have a little balloon over his head, and the lightbulb would go on.

There's this point where all of a sudden you see something you haven't seen. Well, it took me — I had an illusion that I was looking at, we'll say in that one, two faces.

Go to the — let's go to the one labeled two.

And if you're looking at it from one side, it looks like a rabbit, and if you look the other way, it looks like you're looking at a duck.

And, you know, the mind is a very funny place.

And I think people call it an apperceptive mass, when you have all kinds of things going on in your mind. And they go on for years, and they sit there and get lost (laughs).

And then, all of a sudden, you see something different than what you were seeing before.

Now, it took me, in stocks, which I was intensely interested in, and I had a decent IQ, and I was reading and thinking, you know. And it was important to me to make some money on it. I had every motivation in the world. And then I read a chapter — I read a paragraph, actually — in chapter 8, I think it was, of the Intelligent Investor, and it told me that I wasn't looking at the duck, I was looking, you know — now it was the rabbit — whatever it may be.

And whether you call it a lightbulb" — whether you call it, you know, a moment of truth — whatever it may be — and that happened to me in Lincoln. I mean, it changed my life.

If I hadn't read that book, I don't know how long I would have gone on looking for head-and-shoulders formations, and 200-day moving averages, and the odd lot ratios, and a zillion things. And I love that kind of stuff. Except it was the wrong stuff I was looking at.

And I've had that happen — and Charlie's had it happen, I'm sure. It happens a few times in your life. And all of a sudden, you see something important that, why in the hell didn't I see this in the first place? Maybe it's a week ago, maybe it's a year ago, maybe it's five years ago.

Maybe it's learning how to get along with people, you know. I mean, whether, actually, it's better to be, you know, kind, or not, you know.

Or whether —I mean, they're just — learning how — if you want the world to love you, what you have to do, or whatever.

You know it when you see it, but you didn't see it for ten years before.

And I don't know whether Charlie's got some thoughts on that or not, but that's happened in a few situations in business, where I've looked at a company for a decade. And then there's something that just all gets rearranged in your mind, and, you know, you can say, well, why didn't I see this five years ago?

But I've had it happen a few times, obviously — and everybody here has — just in different areas of their lives.

And you think, how could I have been so stupid?

Well, that's what Charlie's — when he was in the law practice, he had a partner, Roy Tolles. And every smart guy that would get in trouble — usually it was guys, and usually it was with women — and, you know, they'd come into the office, and they'd look, you know, down-faced and everything. And they'd say, it seemed like a good idea at the time, you know. I mean — (Laughter)

And their lives unraveled, you know, in many cases.

So, there is that apperceptive mass that's sitting in there inside somehow, and every now and then it produces some insight.

It's better, actually, if it produces insight into your behavior than whether it produces insight to make money.

And some people never get it. And they wonder why — you know, whether their kids hate them, or whether there's nobody in the world that would give a damn whether they live or die.

In fact, they prefer they die because they've been courting them for their art collection, or whatever it may be. It's just —

Charlie would say, you know, just write your obituary and reverse engineer it.

And not a crazy idea, but, Charlie, I don't know. What do you know about apperceptive masses? Which are (laughs) you know, optical illusions.

CHARLIE MUNGER: Well, I know that that's the way the brain works. And that it's easy to get it wrong. And part of the trick is to get so you correct your own mistakes. And we've done a lot of that.

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: Frequently way too late.

WARREN BUFFETT: Yeah. We've done better with the mistakes than we have with the good — the reasonably good ideas.

CHARLIE MUNGER: Well, it's so easy to overdo a good idea.

That's what's going on now. You have a lot of good ideas that are being grossly overdone.

WARREN BUFFETT: Well, just tell me about one that hasn't been, but tell me later, when the crowd isn't listening. (Laughs)

It — I mean, that's where —

CHARLIE MUNGER: But look what happened to Robinhood, from its peak to its trough.

Wasn't that pretty obvious, that something like that was going to happen?

WARREN BUFFETT: Tell me again? What should —

CHARLIE MUNGER: Robinhood. Remember, it came out, and it went public, and —

WARREN BUFFETT: Oh.

CHARLIE MUNGER: — it lured everybody into all this short-term gambling, and big commissions, and hidden kickbacks, and so on and so on. It was disgusting.

WARREN BUFFETT: Yeah. And you said so last year, and they got mad at you, and they sold a bunch of their stock, and they've got the money, and —

CHARLIE MUNGER: Yeah, but now it's unraveling. God is getting just.

WARREN BUFFETT: I love the insiders of great — no, but they've gotten a lot of money from it. I mean, they were big sellers, as I remember.

CHARLIE MUNGER: That may be —

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: — but there's been some justice.

WARREN BUFFETT: Well, I happen to agree with that. (Applause)

Whether it's a good idea to go around making enemies of people, though, that — that's another question, which we do.

Is it wise to criticize people at all?

CHARLIE MUNGER: Probably not, but I can't help it.

WARREN BUFFETT: (Laughs) (Applause)

Well — and here's the smartest guy I know, and he's 98 and he hasn't figured it out yet, so — (Laughter)

Give up. Enjoy it.

Well, with that we'll go to lunch, and we'll try to come back wiser at one o'clock.