2014 Berkshire Hathaway Annual Meeting (Full Version) | Summary and Q&A

Summary

In this video, Warren Buffett introduces special guests and then proceeds to introduce the board of directors. He discusses the company's earnings, including the decline in insurance underwriting and the importance of not focusing on short-term gains or losses. Buffett also shares the results of a shareholder resolution for a dividend, highlighting the overwhelming vote against it. The video concludes with Buffett and Charlie Munger answering questions from journalists, financial analysts, and shareholders.

Questions & Answers

Q: Who are the special guests introduced by Warren Buffett at the beginning of the video?

Warren Buffett introduces his friend Paul Anka and Carrie Silva, a woman who organized the event.

Q: How does Warren Buffett describe the performance of the company's insurance underwriting in the first quarter?

Warren Buffett explains that insurance underwriting may vary from quarter to quarter due to factors such as foreign exchange rates, but overall, it is a favorable business for Berkshire Hathaway. He mentions that their underwriting profit was down from the previous year but emphasizes the importance of the float, which is the funds available for investment.

Q: Why does Warren Buffett advise against focusing on quarterly or annual realized gains or losses in securities?

Warren Buffett explains that Berkshire Hathaway does not try to time the sales of securities to produce earnings in any given period. Their goal is to manage the money well over the long term and let the gains or losses fall wherever they may. While short-term gains may not always be favorable, they hope to achieve significant gains over the years.

Q: What voting results does Warren Buffett share regarding the shareholder resolution for a dividend?

Warren Buffett reveals that the shareholder resolution to pay a dividend was overwhelmingly rejected by the shareholders, with the vote being approximately 90 plus to one against the dividend. He explains that the vote was even stronger among the non-tainted shareholders, with a ratio of about 40 to one. Moreover, even among the B shareholders, who are potentially less privileged, the vote against the dividend was 45 to one.

Q: Why did Warren Buffett abstain from voting against Coca-Cola's excessive stock option program proposal?

Warren Buffett shares that a shareholder who owned shares for a long time proposed the option program, and although he believed it to be excessive, he did not want to get into a debate about it. He abstained from voting and communicated directly with Muhtar Kent, the CEO of Coca-Cola, explaining his concerns about the plan being excessive. Warren Buffett believes that their abstention, along with public statements about the plan's excessive nature, made a more significant impact than simply voting against it.

Q: How does Warren Buffett respond to the question about President Obama's effect on the economy?

Warren Buffett acknowledges that there are different opinions about President Obama's impact on the economy. He remarks that American businesses have been doing well, and while the circumstances may not be favorable for all individuals, he believes that Obamacare has provided necessary benefits to many people. He also highlights the significant growth of corporate profits and the decline in corporate taxes.

Q: How does Warren Buffett explain the difference in investment approach between Berkshire Hathaway and 3G Capital?

Warren Buffett articulates that while Berkshire Hathaway focuses on buying and holding successful companies, 3G Capital has a more hands-on approach with zero-based budgeting to improve margins. He states that the two strategies do not blend well together but adds that Berkshire Hathaway is open to partnering with 3G Capital in certain opportunities, as they admire 3G's management capabilities.

Q: How does Warren Buffett explain the difference in stock performance between Berkshire Hathaway and the market index?

Warren Buffett elaborates that Berkshire Hathaway is likely to underperform in very strong up years, match in moderate up years, and outperform in even or down years. He reiterates that over any cycle, they expect to overperform the market but acknowledges that individual years may deviate from this expectation. Additionally, he points out that Berkshire Hathaway's stock performance reflects the net worth after full corporate taxes, while market indexes do not pay any taxes.

Q: How does Warren Buffett respond to the question about narrowing the discount between Berkshire Hathaway's share price and intrinsic value?

Warren Buffett emphasizes that Berkshire Hathaway has been undervalued compared to the intrinsic value of its businesses for quite some time. He mentions the company's willingness to repurchase shares at 120% of book value and how this indicates a significant discount to intrinsic value. However, he does not provide an exact figure for the intrinsic value, explaining that it changes over time and can vary among individuals' calculations. He also mentions that an IPO of individual operating units is not something they would consider.

Q: How does Warren Buffett explain gaining the trust of founders or owners of acquired companies?

Warren Buffett explains that Berkshire Hathaway keeps its promises to the founders or owners of acquired companies. While they do not promise to never have layoffs or never sell a business, they do promise to keep a business unless it encounters significant losses or labor problems. Berkshire Hathaway puts these promises in the annual report to create trust, and they have a track record of maintaining their commitments to the business and its employees.

Q: How does Warren Buffett address the question about his son Howard's role in defending the culture of Berkshire Hathaway?

Warren Buffett clarifies that the non-executive chairman's role, which his son Howard will assume, is not to set compensation or select the CEO but to oversee any necessary change if the board of directors decides it is needed. He mentions that Howard and his other children have a dedication to the culture of Berkshire Hathaway, which is reinforced by their behavior and results. Warren Buffett also highlights that the non-executive chairman role provides an extra safety valve but is unlikely to be crucial for Berkshire Hathaway.