1995 Berkshire Hathaway Meeting Highlights | Summary and Q&A

Transcript

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Summary

Warren Buffett and Charlie Munger discuss various topics including media perception, succession planning, the newspaper industry, fundamental rules of economics, and investment strategy.

Questions & Answers

Q: How can you assure us that you're still focused on your business despite media attention?

Warren Buffett's longtime partner, Charlie Munger, believes that worrying about Warren changing is needless. He compares the likelihood of both of them changing to be equally low, adding humor to the situation.

Q: Do you have a succession plan in place if something were to happen to either of you?

Berkshire Hathaway is designed to require little continuing intelligence from corporate headquarters. Even if both Warren Buffett and Charlie Munger were no longer involved, the company's structure is built to succeed without them, making a succession plan less critical.

Q: You mentioned being willing to buy parts or all of businesses. Could you elaborate on this advantage?

Unlike most investors who can only purchase partial ownership, Berkshire Hathaway is open to acquiring parts or entire businesses. Many managers prefer the ownership and control that comes with running a whole business, which gives Berkshire a unique advantage in acquiring attractive opportunities.

Q: How do you currently feel about the newspaper industry and its future?

While the newspaper industry has faced challenges with the rise of the electronic revolution and the decreasing interest from the younger generation, it still generates exceptional profits compared to most businesses worldwide. However, there are some signs of paranoia among newspaper owners, which indicates their concerns about the industry's future.

Q: You mentioned people caring more about whether the elevator is going up or down than the specific floor they are on. Could you explain this concept?

Warren Buffett highlights a fundamental aspect of human psychology. People generally feel better when they are experiencing upward momentum rather than a decline. This applies not only to elevators but also to various aspects of life, including investment performance.

Q: What are the key factors you consider when evaluating an investment?

Berkshire Hathaway looks for businesses with a wide and enduring competitive advantage - a "wide and long-lasting moat." They analyze what factors contribute to the business's sustainability and if they depend on the management's expertise. Additionally, they assess whether the management is likely to act in the best interest of the business or make poor decisions.

Q: What is the first question you ask yourself when considering a potential investment?

The first question Warren Buffett asks himself is whether he can understand the business. If he cannot grasp the underlying operations and how the company generates profits, he will likely not pursue the investment further. The second question is whether the business has historically earned high returns on capital.

Q: Would you consider making a video recording of this meeting available to shareholders?

Warren Buffett is hesitant about making a videotape of the meeting available to shareholders as it might discourage attendance. He jests about having only two people attending if the meeting is publicized to tens of thousands.

Q: Have you noticed any impact on sales at the jewelry store when prices decrease?

Warren Buffett mentions that when prices go down at the jewelry store, there is no noticeable impact on sales. This suggests that customers are not particularly price-sensitive and are more focused on the value and quality of the product.

Takeaways

Warren Buffett and Charlie Munger provide insights into their investment philosophy and approach. They emphasize the importance of understanding businesses, identifying sustainable competitive advantages, and evaluating management's decision-making. Additionally, they discuss the challenges faced by the newspaper industry and highlight the psychological aspect of investors' preference for upward momentum. Overall, their analysis centers around long-term thinking and the pursuit of businesses with enduring qualities.