Berkshire Hathaway 2001 Annual Meeting Transcript

Transcript of the 2001 Berkshire Hathaway Annual Meeting held on April 28, 2001 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)

Formal Meeting, Introduction and Election of Board of the Directors

(The video starts with the annual meeting already in progress)

Warren Buffett:

And… Andy, if you’re here, you could stand up, I think the crowd would like to say thanks.

We have one other guest, too. After doing an incredible job for all Berkshire shareholders and particularly for Charlie and me, Ralph Schey retired this year. But Ralph and Luci, I believe, are here. And Ralph and Luci would stand up, the shareholders and I would like to say thanks.

Scott Fetzer was one of the best acquisitions we ever made, but the reason it was among the very best was Ralph. And a great many of the other companies that we own now, our ownership was made possible because of the profit that Ralph delivered over the years. So, thanks very much, Ralph.

Now we will come to order. I will go through this fast. I’m Warren Buffett, chairman of the board of directors of the company, and I welcome you to this 2001 annual meeting of shareholders.

I will first introduce the Berkshire Hathaway directors that are present in addition to myself.

First of all, of course, is Charlie, on my left. And if you’ll… the directors will stand when I give your name.

Howard Buffett, Susan Buffett… she was the voice on the songs, the ones that were sang… sung well… Malcolm G. Chace, Ronald L. Olson, and Walter Scott Jr.

Also with us today are partners in the firm of Deloitte and Touche, our auditors. They are available to respond to appropriate questions you might have concerning their firm’s audit of the accounts of Berkshire.

Mr. Forrest Krutter is secretary of Berkshire, and he will make a written record of the proceedings. Miss Becki Amick has been appointed inspector of elections at this meeting. She 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. We will conduct the business of the meeting, and then adjourn the formal meeting. After that, we will entertain questions that you might have.

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 2, 2001, being the record date for this meeting, there were 1,343,041 shares of Class A Berkshire Hathaway common stock outstanding, with each share entitled to one vote on motions considered at the meeting and 5,505,791 shares of Class B Berkshire Hathaway common stock outstanding, with each share entitled to 1/200th of one vote on motions considered at the meeting.

Of that number, 1,116,384 Class A shares, and 4,507,896 Class B shares are represented at this meeting by proxies returned through Thursday evening, April 26.

Warren Buffett:

Thank you. That number represents a quorum, and we will therefore directly proceed with the meeting.
First of 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.

Walter Scott Jr.:

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?

Voice from Audience:

Aye.

Warren Buffett:

The motion has been moved and seconded. Are there any comments or questions? We will vote on this motion by voice vote. All those in favor, say, “Aye.”

Voice from Audience:

Aye.

Warren Buffett:

Opposed, say, “Bye, I’m leaving.”

The motion is carried. The first item of business of this meeting is to elect directors. If a shareholder is present who wishes to withdraw a proxy previously sent in and vote in person on the election of directors, he or she may do so.

Also, if any shareholder that is 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?

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

Walter Scott Jr.:

I move that Warren E. Buffett, Susan T. Buffett, Howard G. Buffett, Malcolm G. Chace, Charles T. Munger, Ronald L. Olson, and Walter Scott Jr. be elected as directors.

Voice from Audience:

I second the motion.

Warren Buffett:

It has been moved and seconded that Warren E. Buffett, Susan T. Buffett, Howard G. Buffett, Malcolm G. Chace, Charles T. Munger, Ronald L. Olson, and Walter Scott Jr. be elected as directors. Are there any other nominations? Is there any discussion?

The nominations are ready to be acted upon. If there are any shareholders voting in person, they should now mark their ballots on the election of directors and allow the ballots to be delivered to the inspector of election.

Would the proxy holders please also submit to the inspector of elections a ballot on the election of directors, voting the proxies in accordance with the instructions they have received?

Miss Amick, when you are ready, you may give your report.

Becki Amick:

My report is ready. The ballot of the proxy holders, in response to the proxies that were received through last Thursday evening, cast not less 1,126,480 votes for each nominee.

That number far exceeds a majority of the number of the total votes related to all Class A and Class B shares outstanding.

The certification required by Delaware law of the precise count of the votes, including the additional votes to be cast by the proxy holders, in response to proxies delivered at this meeting, as well as those cast in person at this meeting, if any, will be given to the secretary to be placed with the minutes of this meeting.

Warren Buffett:

Thank you, Miss Amick.

Warren E. Buffett, Susan T. Buffett, Howard G. Buffett, Malcolm G. Chace, Charles T. Munger, Ronald L. Olson, and Walter Scott Jr. have been elected as directors.

The next item of business was scheduled to be a proposal put forth by Berkshire shareholder Bartlett Naylor. On April 20th, 2001, Mr. Naylor advised us he was withdrawing his proposal. Accordingly, we will not have the proposal presented at this meeting.

At the adjournment of the business meeting, I will respond to questions you may have that relate to the business of Berkshire, but do not call for any action at this meeting.

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 for the meeting.

Walter Scott Jr.:

I move this meeting be adjourned.

Warren Buffett:

Motion to adjourn has made and seconded. We will vote by voice. Is there any discussion? If not, all in favor say, “Aye.”

Voice from Audience:

Aye.

Warren Buffett:

Opposed say, “No.” Meeting’s adjourned.

I ask you, am I getting slower in my old age? No, I’m…

Meeting Guidelines

Warren Buffett:

Now, the first… we’re going to go…

We have eight microphones strategically placed. We have the first two on my right. Far back, three and four, and over to this back area, over here, and then up front for the seven and eight.

And if you have a question, just go to the microphone, and queue up at the microphone, and we’ll keep rotating, like I say, until noon. Then we’ll have a break, and then we’ll start again around 12:30, or thereabouts, and go until 3:30.

Q&A – Morning Session

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

1. What Berkshire will be investing in.
2. The future of the pharmaceutical industry was easier to predict than the future of the high-tech industry.
3. Being regulated by states has not slowed down Berkshire.
4. Warren explains what he calls “pain today, gain tomorrow” or good losses-type insurance deals.
5. The most extreme mistakes in Berkshire’s history are mistakes of omission.
6. Warren is “not worried at all about product liability” of companies producing products with a lot of sugar.
7. The proper use of cash.
8. Every business has different characteristics.
9. Why Executive Jet is doing well while airlines are experiencing trouble.
10. Berkshire’s significant advantages and disadvantage.
11. Value and growth are opposite sides of the same coin.
12. The best investment you can make, at an early age, is in yourself.
13. Warren: The internet looks like it is now less of a competitive threat to most retailers than it did a couple of years ago.
14. Berkshire doesn’t have a master plan on how it will operate and grow.
15. Warren talks about his cholesterol level.
16. It is unlikely that corporate profits in the United States will get much larger than 6 percent of GDP.
17. Executive Jet will not be a mature business for decades.
18. Berkshire has grown its float and purchased businesses to add to the float.
19. GEICO’s international expansion plans and Coke’s advertising strategy in Japan.
20. Asbestos exposure of Berkshire’s insurance companies.
21. State Farm is a relatively low-cost operator but not anywhere near as low-cost as GEICO.
22. Don’t worry about the dumbest competitor in a business that’s service.
23. Calling something a “hedge fund” or an “asset allocation firm” doesn’t make anybody in it smarter.
24. How Warren would invest if he is still working with a small amount of money.
25. Why stock options are still not expensed on income statements nor reported as a liability on the balance sheet.
26. It’s a mistake for any company to predict 15 percent annual growth.
27. The probability of Berkshire achieving 15 percent growth in earnings over an extended period of years is close to zero.
28. Warren and Charlie prefers not to give any kind of stock advice.

Q&A – Afternoon Session

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

1. The float from the insurance businesses has been very useful and will continue to be a huge asset to Berkshire.
2. The absence of honest accounting for option costs is a factor for American returns being higher than other developed countries.
3. Warren’s advice to young people: save money and just keep accumulating knowledge.
4. Factors affecting retention rates at GEICO.
5. There is “true synergy” in General Re and Cologne Re being married to Berkshire Hathaway.
6. Warren’s criteria in picking a car.
7. What Warren think about the concrete, cement and aggregates business.
8. Charlie: “If you go to business school you will learn a lot of things we don’t believe”.
9. Warren: It’s “crazy to get in debt because it’s so hard to get out of debt”.
10. Warren thinks running a long term trade deficit is “a significant minus for the country”.
11. Berkshire has certain advantages when it comes to convincing private business owners to sell to them.
12. Risks in Freddie Mac and Fannie Mae.
13. It’s very hard to evaluate the moats around businesses of rapid change.
14. Derivatives is a hard business to understand.
15. The qualifications of Lou Simpson that made him a great manager.
16. Why Berkshire invested in Finova.
17. An example of Lou Simpson’s complete autonomy and Charlie’s advice when buying jewelry for the “lady you love”.
18. Why GEICO doesn’t take their current preferred risk status into account when determining whether to accept a customer.
19. Volatility as a measure of risk is “nuts”.
20. Did Zen Buddhism contributed key ideas to Warren’s investment Tao?
21. On cost of capital and opportunity costs.
22. How to tell that you just had a big idea.
23. Why Kellogg’s and Campbell’s doesn’t have the same economic moat as Coca-Cola.
24. Short selling is “the sort of thing you can go broke doing”.
25. Warren and Charlie thinks Berkshire’s loyalty to the private companies it acquires is “a plus in our life”.
26. How Berkshire will be like when Warren and Charlie is no longer around.
27. Warren and Charlie declines to comment about silver.
28. Would regulation and deregulation put investments in the electric utilities market at risk?
29. Owners should try to persuade management to change their course if they are doing unintelligent things.
30. The importance of nominal experience in the business of investing.
31. Warren thinks it would be a big mistake for them to either recommend buying or selling Berkshire stock.
32. You’d “probably do all right buying” a group of “cigar butt” stocks. To learn more about what Warren calls “cigar butt” stocks, click here.
33. Warren and Charlie’s book recommendations.
34. Warren’s expectations for the passage of the repeal of PUHCA. To read more about PUHCA, click here.
35. Did Charlie apply the principles of intrinsic investing to real estate?

End of Q&A

Warren Buffett:

OK. It’s 3:30. We’re going to have a directors meeting here, we do that once a year, following this meeting. And so I’ll ask the directors to stick around.

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

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