2017 Berkshire Hathaway Annual Meeting (Full Version) | Summary and Q&A

Transcript

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Summary

Warren Buffett and Charlie Munger welcome attendees to Omaha and introduce Carrie Silva, who manages the annual meeting. They also introduce the directors of Berkshire Hathaway. Buffett discusses the company's earnings report, emphasizing the importance of intrinsic value over realized investment gains or losses. Munger adds that they have a slight preference for taking losses rather than gains, due to the tax effect. They then address questions about Berkshire's decentralized structure, driverless trucks and cars, their investment thesis for specific companies, and the profitability of their reinsurance deal with AIG.

Q: How does Berkshire's decentralized structure compare to Wells Fargo's decentralized corporate structure?

Berkshire operates on a more decentralized plan than any company of a similar size. They rely on principles of behavior rather than strict rules, and they believe that establishing the right culture and selecting the right managers and directors will result in better behavior and outcomes. They have a hotline and anonymous letter system in place for employees to report any issues or concerns, and they take prompt action when necessary.

Q: Are driverless trucks a threat to Berkshire's Burlington Northern railroad business?

Buffett and Munger believe that driverless trucks pose a greater threat than driverless cars to the railroad industry. They acknowledge that there are driver shortages in the trucking industry and that autonomous technology could improve truck safety and efficiency, which could narrow the cost advantage of railroads.

Q: How much time is spent reviewing Berkshire's stock holdings?

Buffett and Munger review Berkshire's stock holdings daily. They acknowledge that some of their core holdings, such as Wells Fargo, American Express, Coca-Cola, and United Airlines, have faced challenges and issues in recent years. However, they focus on the long-term competitive advantage, financial policies, and management of these companies, and they believe that their theses for holding these stocks remain intact.

Q: How confident are Buffett and Munger that Berkshire's reinsurance deal with AIG will be profitable?

Buffett and Munger express confidence in the deal, which involved Berkshire taking on liability for a portion of AIG's excess reserves in exchange for a premium. They note that every deal carries some level of risk and uncertainty, but they have a track record of successful transactions in this area. They project their payouts and expected returns conservatively, but acknowledge that their projections may be wrong.

Q: Which negotiation or business dealing stands out as notable or memorable in Buffett's career?

Buffett does not have a favorite negotiation, but he highlights the C's Candy acquisition as a significant learning experience. He emphasizes the power of a strong brand and the continuous learning that comes with making investment decisions. Munger adds that the pain of being in a lousy business can make one appreciate a good one, and that continuous learning has been crucial to Berkshire's success.

Takeaways

• Berkshire Hathaway operates on a decentralized structure, relying on principles of behavior and a hotline system to address any issues or concerns.
• Driverless trucks are seen as a greater threat to the railroad industry than driverless cars, with potential to narrow the cost advantage of railroads.
• Berkshire spends time reviewing its stock holdings daily, looking for companies with durable competitive advantages, strong financial policies, and trusted management teams.
• The reinsurance deal with AIG is viewed as a profitable opportunity, although there are uncertainties and risks involved.
• Continuous learning has been key to Berkshire's success and has informed its investment decisions.