1994 Berkshire Hathaway Meeting Highlights | Summary and Q&A

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November 2, 2020
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1994 Berkshire Hathaway Meeting Highlights

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Summary

In this video, Warren Buffett discusses various topics, including voting against candidates for directors, finding and keeping good managers, the nature of the reinsurance business, the potential risks of derivatives, the importance of forming your own opinion on a business's future, stock splits, attracting shareholders, the decline of the trading stamp business, and Buffett's humorous response to being the richest man in the country.

Questions & Answers

Q: How do some people vote for directors' positions at Berkshire?

Some individuals vote against everyone on the slate for directors, while others single out specific individuals to vote against. However, Charlie, one of the candidates for directors, did not receive any negative votes this year, much to the surprise and humor of Buffett.

Q: What are the two main jobs Berkshire has?

Apart from playing bridge, Berkshire's two main jobs are identifying and retaining good managers and allocating capital. They focus on finding talented individuals and giving them autonomy, rather than micromanaging their decisions.

Q: What are the potential risks of the reinsurance business?

Buffett mentions that the reinsurance business is prone to occasional foolish decisions and misallocations of capital. These mistakes may not become apparent until a significant loss occurs. Therefore, identifying who has made poor decisions is akin to discovering who has been "swimming naked" once the tide goes out.

Q: What might be the significant financial story of the 90s according to Buffett?

While Buffett admits he cannot predict the future, he suggests that derivatives could be a major financial story in the 90s. He highlights their potential for leveraging large amounts of money and emphasizes that combining ignorance with borrowed funds often leads to interesting and unintended consequences.

Q: Why does Buffett believe relying solely on a seller's projections is naive?

Buffett expresses skepticism towards buyers who solely rely on a seller's projections when acquiring a business. He believes that buyers should have their own understanding of the future prospects of the business instead of blindly accepting the seller's perspective. Buffett compares this to asking a barber whether you need a haircut, emphasizing the importance of forming an independent opinion.

Q: Would Berkshire consider stock splits in the future?

Buffett expresses his skepticism regarding splitting stocks into small, affordable pieces. He finds the idea almost insane, highlighting that Berkshire has no plans to split their stock. Instead, they prefer to maintain a strong constituency of shareholders, which they have carefully cultivated over the years.

Q: How did Buffett and Charlie handle the trading stamp business?

Buffett and Charlie entered the trading stamp business in the late '60s, and at one point, it reached a value of around $120 million. However, since they took over, the business has experienced a decline of 99.5%. In a humorous manner, Buffett advises anyone who has stamps to save them as collector's items, considering their diminishing value under Berkshire's management.

Q: What is Buffett's next goal in life?

In jest, Buffett responds to the question by saying his next goal is to become the oldest man in the country. His lighthearted answer showcases his sense of humor and humility despite his immense wealth.

Takeaways

During this video, Warren Buffett touches on various aspects of business and investing. He emphasizes the importance of independent thinking, caution when dealing with financial instruments such as derivatives, and finding talented managers whom you trust. Additionally, Buffett's self-deprecating humor shines through, demonstrating his down-to-earth nature, despite being one of the wealthiest individuals in the country.

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