Berkshire Hathaway 2003 Annual Meeting Audience Question # 10

Warren wants a business that is “going to have, if run well, some kind of competitive advantage… over many decades”

Warren Buffett:

Number 10.

Audience Member:

Hey, good morning, Charlie, Warren. Jerry McLaughlin from San Mateo checking in from the Music Hall.

You should see yourselves over here. We’re about 12 feet from wall-size images of both of you, which is interesting, but the See’s Candy box is so big, I understand what Tantalus went through now.

Warren Buffett:

How many people do you have in the Music Hall?

Audience Member:

We probably want to get a cop to estimate, but I’d say it’s a couple of thousand.

Anyway, moving right along… hoping I can get a twofer here.

One is, at Branders, small company we run, we’re seeing… we’re spending a lot more on employee benefits anymore.

Health insurance in particular is going up and up again. And lots of times, in the press years ago and now again a little bit, you’re hearing the drumbeat of a health care crisis and what it costs employers to provide health insurance.

I got to figure that’s on the minds of a lot of Berkshire operating company managers. I’m wondering whether both of you feel… I mean, is crisis the right word, with respect to cost?

Looks like bigger percentages of our GDP are going to health care. Is that because we think we’re getting better health care, or is it really just sort of inflationary?

Second thing is, at the risk of you thinking we’re all a bunch of kooks over here, a couple of people over on this side of the hall have asked me to ask you, Warren, whether you’re seriously considering being cryogenically frozen at some point… I think, hopefully, in the distant, distant future.

Warren Buffett:

What…?

Charlie Munger:

Cryogenically frozen.

Warren Buffett:

Oh, we had that last year.

Audience Member:

Yeah, and the guy who asked the question last year has put me up to a follow-up for him.

Hey, and finally, unrelated to those two…

Warren Buffett:

Do I look like I’m closer to where I need it?

Audience Member:

Last thing is, when you guys look at companies and you’re thinking about earnings into the future, just do you have any rule of thumb? How far in the future do you think you can look, typically, with a company you believe in, you think you understand the business?

Is it five years, 10 years? Do you really think you’ve got, you know, sort of the perpetual, into infinity income stream to calculate the value on? Thanks.

Warren Buffett:

Yeah, well we don’t project as far out as we might have to if we thought we could be successfully frozen. .

But we really… you know, we’re going to own these businesses forever. So, we want a business that we think is going to have, if run well, some kind of competitive advantage… over many decades.

I mean, we’re not going to resell them. And we better have something that is not only good now but that’s going to stay good.

So we don’t buy hula-hoop companies or pet rock companies, and we don’t buy companies in industries that we think will have great explosions in demand, but where we don’t know who the winners will be.

So we look a long… we try… we like to think we’re looking a long way into the future.

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