Warren Buffett Celebrates 50 Years Of Berkshire Hathaway | March 2, 2015 | Summary and Q&A

Transcript

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Summary

In this video, Warren Buffett discusses various topics including the 50-year anniversary of Berkshire Hathaway, the success of National Indemnity, the succession plan for Berkshire Hathaway, his long-term investing strategy, and his thoughts on specific stocks like IBM and Deere. He also talks about the importance of understanding accounting and the impact of climate change on insurance rates.

Questions & Answers

Q: How did Warren Buffett pick the location for the annual shareholders meeting?

Warren picked the location because it was larger than his office at the time and he wanted something grand to impress the shareholders. It had vending machines to supplement the income of the company.

Q: How did Warren Buffett grow the net worth of National Indemnity to $111 billion?

Warren grew the net worth of National Indemnity through a combination of adding on to the business, hiring good people in the insurance business, taking advantage of compound interest, and making successful investments. The addition of a reinsurance operation developed by Ajit Jain also contributed significantly to the growth.

Q: Why is the net worth of National Indemnity higher than reported due to the ownership of Burlington Northern?

Warren bought stock in Burlington Northern through National Indemnity, making it a significant investment for the company. By owning the railroad within National Indemnity, they carry it at a lower price compared to its actual worth, which increases the overall net worth of National Indemnity.

Q: Who is the successor of Berkshire Hathaway?

Warren Buffett and Charlie Munger have a precise plan in mind for the succession of Berkshire Hathaway. The board has discussed it at every meeting for many years. While it has not been officially announced, both Ajit Jain and Greg Abel are considered excellent managers and potential successors.

Q: Did Warren Buffett change his letter based on what Charlie Munger wrote?

Warren and Charlie each wrote their own letters about the last 50 years and the next 50 years without changing a word based on what the other had written. Charlie mentioned Ajit Jain and Greg Abel in his letter, which was news to Warren. However, they both think highly of each of them.

Q: Are both Ajit Jain and Greg Abel aware of who the next successor is?

No, neither Ajit Jain nor Greg Abel knows who the next successor is. The board has a precise plan in mind for the succession of Berkshire Hathaway, and it has been discussed at every meeting for many years.

Q: How long has Warren Buffett been working with Charlie Munger?

Warren and Charlie have been business partners since they met in 1959. Charlie officially joined Berkshire Hathaway when they merged in 1982, but they had been discussing business and shared a close relationship for many years before that.

Q: Why did Warren Buffett sell all of ExxonMobil?

Warren sold all of ExxonMobil because he believed he could better deploy the money elsewhere. While he considers ExxonMobil a wonderful company, its earning power has been significantly diminished due to the decline in oil prices.

Q: Why is Warren Buffett buying more IBM shares despite its declining revenue?

Warren likes IBM because it has been doing what he likes over the years. The company has been reducing its outstanding shares through buybacks and the stock has gone down, allowing for more shares to be purchased at a cheaper price. IBM's revenue decline was expected, and Warren believes in the company's ability to adapt and make progress over time.

Q: Is Warren Buffett a better investor in his 70s to 80s compared to his 40s to 60s?

Warren acknowledges that he has a different investment problem now compared to when he was younger. The universe of investments that can significantly impact Berkshire Hathaway's net worth is more limited now. He focuses on buying large positions in companies where the investment can have a significant effect on Berkshire's net worth over time.

Q: Why does Warren Buffett recommend a five-year time horizon for owning Berkshire shares?

Warren recommends a five-year time horizon because he believes that, over time, the value of Berkshire's businesses will increase as they continue to make sensible investments. He admits that he does not know what the stock will do in the short or intermediate term, and people should make their own decisions based on their own analysis.

Takeaways

Warren Buffett discussed various topics including his 50-year anniversary at Berkshire Hathaway, the success of National Indemnity, the succession plan for Berkshire Hathaway, his investing strategy, and specific investments like IBM and Deere. He emphasized the importance of understanding accounting and making investment decisions based on individual analysis. Warren also mentioned how climate change has not had a significant adverse effect on insurance rates in the past five years.