Berkshire Hathaway 1994 Annual Meeting Transcript

Transcript of the 1994 Berkshire Hathaway Annual Meeting held on April 25, 1994 on Omaha, Nebraska:

(Click here to skip to the Q&A section)

(To see the full transcripts of all Berkshire Hathaway Annual Meetings on record, click here)

Meeting Start and Some Updates

Warren Buffett: 

Put this over here. Am I live yet? Yeah. Morning.

Audience:

Morning.

Warren Buffett:

We were a little worried today because we weren’t sure from the reservations whether we can handle everybody, but it looks to me like there may be a couple seats left up there.

But I think next year, we’re going to have to find a different spot because it looks to me like we’re up about 600 this year from last year, and to be on the safe side we will seek out a larger spot.

Now, there are certain implications to that because, as some of the more experienced of you know, a few years ago we were holding this meeting at the Joslyn Museum, which is a temple of culture.

And we’ve now, of course, moved to an old vaudeville theater. And the only place in town that can hold us next year, I think, is the Ak-Sar-Ben Coliseum where they have keno and racetracks.

We are sliding down the cultural chain… just as Charlie predicted years ago. He saw all this coming.

Charlie… I have some rather distressing news to report. There are always a few people that vote against everyone on the slate for directors and there’s maybe a dozen or so people do that. And then there are others that single shot it, and they pick out people to vote against.

And, this will come as news to Charlie, I haven’t told him yet. But he is the only one among our candidates for directors that received no negative votes this year.

Hold it… hold it. No need to applaud.

I tell you, when you lose out the title of Miss Congeniality to Charlie, you know you’re in trouble.

Meeting Guidelines

Warren Buffett:

Now, I’d like to tell you a little bit how we’ll run this. We will have the business meeting in a hurry with the cooperation of all of you, and then we will introduce our managers who are here, and then we will have a Q&A period.

We will run that until 12 o’clock, at which point we’ll break, and then at 12:15, if the hardcore want to stick around, we will have another hour or so until about 1:15 of questions.

So, you’re free to leave, of course, any time and I’ve pointed out in the past that it’s much better form if you leave while Charlie is talking rather than when I’m talking, but… 

Feel free anytime, but you can… if you’re panicked and you’re worried about being conspicuous by leaving, you will be able to leave at noon.

We will have buses out front that will take you to the hotels or the airport or to any place in town in which we have a commercial interest.

We encourage you staying around on that basis.

Introduction of Berkshire Directors

Warren Buffett:

Let’s have the… let’s get the business of the meeting out of the way. Then we can get on to more interesting things.

I will first introduce the Berkshire Hathaway directors that are present in addition to myself and… first of all, there’s Charlie, who is the vice chairman of Berkshire, and if the rest of you will stand.

We have Susan T. Buffett, Howard Buffett, Malcolm Chase III, and Walter Scott Jr. And that’s it.

Meeting Quorum

Warren Buffett:

Also with us today are partners in the firm of Deloitte and Touche, our auditors, Mr. Ron Burgess and Mr. Craig Christiansen (PH).

They are available to respond to appropriate questions you might have concerning their firm’s audit of the accounts of Berkshire.

Mr. Forrest Krutter, secretary of Berkshire. He will make a written record of the proceedings.

Mr. Robert M. Fitzsimmons has been appointed inspector of election at this meeting. He will certify to the count of votes cast in the election for directors.

The named proxy holders for this meeting are Walter Scott Jr. and Marc D. Hamburg.

Proxy cards have been returned through last Friday representing 1,035,680 Berkshire shares to be voted by the proxy holders as indicated on the cards. That number of shares represents a quorum and we will therefore directly proceed with the meeting.

We will conduct the business of the meeting and then adjourn to the formal meeting — and then adjourn the formal meeting. After that, we will entertain questions that you might have.

First order of business will be a reading of the minutes of the last meeting of shareholders.

I recognize Mr. Walter Scott Jr. who will place a motion before the meeting.

Moving to dispense the reading of the minutes of the last meeting of the shareholders

Walter Scott:

I move that the reading of the minutes of the last meeting of the shareholders be dispensed with.

Warren Buffett:

Do I hear a second?

Audience:

Seconded.

Warren Buffett:

Motion has been moved and seconded. Are there any comments or questions? Hearing none, we will vote on the motion by voice vote. All those in favor say aye.

Audience:

Aye.

Warren Buffett:

Opposed? The motion is carried and it’s a vote.

Does the secretary have a report of the number of Berkshire shares outstanding entitled to vote and represented at the meeting?

Forrest Krutter:

Yes, I do. As indicated in the proxy statement that accompanied the notice of this meeting that was sent by first class mail to all shareholders of record on March 8, 1994, being the record date for this meeting, there were 1,177,750 shares of Berkshire common stock outstanding, with each share entitled to one vote on motions considered at the meeting. Of that number, 1,035,680 shares are represented at this meeting by proxies returned through last Friday.

Election of Directors

Warren Buffett:

Thank you. We will proceed to elect directors.

If a shareholder is present who wishes to withdraw a proxy previously sent in and vote in person, he or she may do so.

Also, if any shareholder that’s present has not turned in a proxy and desires a ballot in order to vote in person, you may do so.

If you wish to do this, please identify yourself to meeting officials in the aisles who will furnish a ballot to you.

Would those persons desiring ballots please identify themselves so that we may distribute them? Just raise your hand.

I now recognize Mr. Walter Scott Jr. to place a motion before the meeting with respect to election of directors.

Walter Scott:

I move that Warren Buffett, Susan Buffett, Howard Buffett, Malcolm Chase, Charles Munger, and Walter Scott be elected as directors.

Warren Buffett:

Is there a second?

Audience:

Seconded.

Warren Buffett:

It’s been moved and seconded that Warren E. Buffett, Susan T. Buffett, Howard G. Buffett, Malcolm G. Chase III, Charles T. Munger, and Walter Scott Jr. be elected as directors.

Floor opened for additional motions and nominations

Warren Buffett:

Are there any other nominations? Is there any discussion? Motions and nominations are ready to be acted upon.

If there are any shareholders voting in person, they should now mark their ballots and allow the ballots to be delivered to the inspector of elections.

Seeing none, will the proxy holders please also submit to the inspector of elections the ballot voting the proxies in accordance with the instructions they have received.

Mr. Fitzsimmons, when you’re ready you may give your report.

Robert Fitzsimmons:

My report is ready. The ballot of the proxy holders received through last Friday cast not less than a 1,035,407 votes for each nominee.

That number far exceeds a majority of the number of all shares outstanding and a more precise count cannot change the results of the election.

However, the certification required by Delaware law regarding the precise count of the votes, including the votes cast in person at this meeting, will be given to the secretary to be placed with the minutes of this meeting.

Warren Buffett:

Thank you, Mr. Fitzsimmons.

Warren E. Buffett, Susan T. Buffett, Howard G. Buffett, Malcolm G. Chase III, Charles T. Munger, and Walter Scott Jr. have been elected as directors.

End of Formal Meeting

Warren Buffett:

Does anyone have any further business to come before this meeting before we adjourn?

If not, I recognize Mr. Walter Scott Jr. to place a motion before the meeting.

Walter Scott:

I move the meeting be adjourned.

Warren Buffett:

Second?

Audience:

Seconded.

Warren Buffett:

The motion to adjourn has been made and seconded. We will vote by voice. Is there any discussion? If not, all in favor say aye?

Audience:

Aye.

Warren Buffett:

Opposed say no, the meeting is adjourned. It’s democracy in Middle America.

Introduction of Berkshire managers

Warren Buffett:

Now, I’d like to introduce some of the people that make this place work to you. And if you would hold your applause until the end because there are quite a number of our managers here.

I’m not sure which ones for sure are here, some of them may be out tending the store as well.

But, first of all, from Nebraska Furniture Mart, Louie, Ron, and Irv Blumkin. I’m not sure who’s here, but would you stand please, any of the Blumkins that are present?

OK, we’ve… looks like Irv. I can’t quite see it.

From Borsheims, is Susan Jacques here? Susan? There she is. Susan had a record day yesterday. She just… Susan became CEO just a few months ago and she’s turning in records already. Keep it up.

And from Central States Indemnity, we have the Kizers. I’m not sure which ones are here, but there’s Bill Sr., Bill Jr., John, and Dick.

Kizers, stand up. I think I can see him… John.

Don Wurster from National Indemnity.

Rod Eldred from the Homestate Companies.

Brad Kinstler from Cypress, our worker’s comp company.

Ajit Jain, the big ticket writer in the East.

And Mike Goldberg, who runs our real estate finance group and also generally oversees the insurance group. Mike.

Gary Heldman from Fechheimers.

Chuck Huggins from See’s, the candy man.

Stan Lipsey from the Buffalo News.

Chuck’s been with us, incidentally, twenty-odd years. Stan’s been working with me for well over 25 years.

Frank Rooney and Jim Issler from H.H. Brown.

Dave Hillstrom from Precision Steel.

Ralph Schey from Scott Fetzer.

Peter Lunder, who is with our newest acquisition, Dexter Shoe. And Harold Alfond, his partner, couldn’t be with us because his wife is ill.

And finally, the manager that’s been with Charlie and me the longest, Harry Bottle from K&W. Harry, you here? There’s Harry.

Harry saved our bacon back in 19… what?… 62 or so, when in some mad moment I went into the windmill business. And Harry got me out of it.

That’s our group of managers and I appreciate it if you give them a hand.

More flights to Omaha

Warren Buffett:

I have one piece of good news about next year for you.

In addition to moving to larger quarters, they’re going to add nonstop air service from New York, Washington, and Los Angeles here in the next few months, Midwest Express.

So, I hope they do very well with it and I hope that makes it easier for you to get into town.

Q&A Guidelines

Warren Buffett:

Now, in this… for the next two hours and 15 minutes or so, we’ll have a session where we will take questions.

We have seven zones, three on the main floor. We’ll go start over there with zone one and work across.

On the main floor, if you’ll raise your hand, the person who is handling the mic will pass it to you and we’ll try to not repeat any individual in any one zone till everyone in that zone has had a chance to ask one question. So, after you’ve been on once, let other people get a shot.

When we move up to the loge, we have one person there and in the case — and then we have three in the balcony, which is essentially full now.

And we would, up there, we would appreciate it if you would you leave your seat and go to the person with the mic. It’ll be a little easier in both the loge and the balcony to handle it that way.

And if you’ll go a little ahead of time, that way if there’s a line of two or three you can you can line up for questions in both the loge and balcony.

So, whatever you’d care to ask. If you want an optimistic answer you’ll, of course, direct your
question to Charlie. If you’d like a little more realism you’ll come to me and…

Q&A – Morning Session

(Click on a link below to skip to a particular topic)

1. On the use of derivatives.
2. Why Berkshire sold one million shares of a “permanent” holding.
3. Minimum after tax free cash flow yield Warren would look for when buying a business.
4. Why the intrinsic value of the insurance business exceeds book value by a large amount.
5. Why Berkshire will never split its stock.
6. Warren and “The Indefensible” (Warren’s private jet).
7. Warren’s next goal in life after becoming the richest man in the United States.
8. How to judge a company’s management.
9. How Warren (and Berkshire) keeps great managers like Ajit Jain.
10. The long term economics of Guinness.
11. What will happen to Berkshire if something happens to Warren.
12. On whether the Berkshire board has considered doing a reverse split of the stock.
13. On whether Berkshire has considered hiring a commodity broker, or a lawyer, or both, like Hillary Clinton (she managed to get 530% return on her capital in just one day).
14. What happened to Blue Chip Stamps.
15. Warren prefers Berkshire stock to be rationally priced over time.
16. Warren comments on Fed chairman Alan Greenspan’s policy decisions.
17. The importance of making your own judgment of a stock.
18. How to judge bank stock buy backs.
19. Warren explains why one should focus on the economics of a transaction rather the accounting treatment.
20. Why Salomon Brothers is an attractive investment despite its 30-to-1 debt-to-equity ratio.
21. Charlie explains why Wesco Financial sold its shares on Mutual Savings and Loan.
22. On the economics of the shoe industry and why Warren invests in it.
23. A shareholder asked if Berkshire will invest in tobacco companies.
24. How Buffett looks at the usefulness of a product when considering an acquisition.
25. The impact of multiple disasters that have taken place in LA on the cats (catastrophe) insurance business of Berkshire.
26. Warren and Charlie shares their book recommendations.
27. The future prospects of Nike and Reebok.
28. You don’t have to hire out your thinking if you keep it simple.
29. How USAir could resolve its financial problems.
30. When Warren and Charlie plans to retire.
31. Why Berkshire sold a portion of Cap Cities. (This question is similar to question # 2)
32. How Berkshire’s structured settlements business is going.
33. Warren is asked if he is planning to invest on Wrigley.
34. Warren’s view on global diversification.
35. Difference of natural disasters and the LA riots in terms of insurance losses.
36. Why Warren and Charlie never had any opinion about the market.
37. Berkshire prefers to buy entire businesses, but will not pass up a chance to buy pieces of a business if the price is right.
38. Why Charlie chose to share his calculated intrinsic value of Wesco on its recent annual report, something he doesn’t usually do.
39. How Warren views and calculates risk.
40. Warren explains his personal preference on tax rates.
41. Is Berkshire a “Rich Man’s Mutual Fund”?
42. Why Warren invests in industries perceived as interest rate sensitive, despite not paying attention to the trend of interest rates.
43. Warren talks about the retroactive policies of Berkshire’s insurance businesses.
44. Does Berkshire follow a specific asset allocation strategy?
45. On the future market share of Fannie Mae and Freddie Mac.
46. How the increased speed at which information disseminates in the modern era has affected Warren’s business-buying decision process.
47. Warren explains the odds of Berkshire buying back its own shares.
48. Warren and Charlie declines to share what they think Berkshire’s current intrinsic value is and then explains why.
49. How Warren sees Peter Lynch.
50. How Berkshire writes insurance policies.

Sandy Gottesman conveys Berkshire shareholders’ appreciation of Warren and Charlie

Warren Buffett:

Zone 3.

Audience Member:

David Gottesman from New York.

It’s no wonder that this meeting draws stockholders from all over the country. And despite the talk about age today, I’m happy to say this meeting gets better every year.

Berkshire stands unique in American business as a company whose name has become synonymous with management excellence.

Unlike many American corporations, we, as stockholders, don’t have to worry about reorganizations, large write-offs, massive restructurings, overstated earnings, and overpaid executives with strategic visions.

Instead, year in and year out, we enjoy the benefits of the common sense and brilliance of Charlie and Warren.

Warren Buffett:

What did you say your name was?

Audience Member:

I want to add to that, to say nothing of your good humor.

It’s easy to take such consistently outstanding results for granted, but we in this room are the direct beneficiaries of their efforts.

By our presence here today, we show our appreciation to them for their exceptional performance. But we can also demonstrate in another way. I would like to suggest we give them a rousing hand of applause for a job well done. Thank you.

Warren Buffett:

Thank you. That was Sandy Gottesman. We’ve worked together for 30-odd years, and he’s finally got that down. I appreciate that, Sandy.

End of morning session

Warren Buffett:

With that, we will adjourn. And anyone who wants to stay around, we’ll reconvene in 15 minutes, and then we’ll be here till about 1:15.

Q&A – Afternoon Session

(Click on a link below to skip to a particular topic)

1. Warren explains why he won’t comment on anything that Berkshire owns.
2. What is being done to get World Book back on track.
3. Why breaking up Berkshire won’t improve results.
4. Warren is asked why Berkshire sold its stake in General Dynamics.
5. The less volatility on Berkshire’s stock price, the better.
6. Berkshire will be better off if the stock market goes down.
7. What Warren thinks of Salomon’s compensation model.
8. Will Warren use puts again to increase his position on an investment?
9. Don’t trust reports and speculations of what Berkshire is buying and selling.
10. Warren doesn’t think Berkshire will be included in the Dow or S&P 500.
11. Invest in businesses that you understand.
12. The importance of coming up with your own conclusions on a company.
13. On whether Berkshire’s deal with Allianz was a good deal or not.
14. Berkshire’s size is a disadvantage.
15. There’s no key man insurance for both Warren and Charlie.
16. On the restructuring of Guinness and Louis Vuitton Moet Hennessy.
17. Berkshire doesn’t hedge its currency.
18. The insurance business’s intrinsic value exceeds its book value in terms of absolute dollars.
19. Warren is not concerned about the succession in Coca-Cola.
20. On Salomon CEO’s $24m bonus.
21. Salomon is now a better business than it was before.
22. How to calculate a company’s intrinsic value.
23. Warren is willing to buy a company that doesn’t grow at all.
24. Warren and Charlie will never delegate Berkshire’s capital allocation to any staff.
25. Best investment lessons Warren learned from John Maynard Keynes. To learn more about who John Maynard Keynes is, click here.

End of Q&A

Click here to see the full transcripts of all Berkshire Hathaway Annual Meetings on record.

To share this article, click on the buttons at the right (or below if you’re viewing this using a mobile phone or tablet).