Berkshire Hathaway 2006 Annual Meeting Audience Question # 19

Berkshire doesn’t invest based on trends like demographic trends or “anything of that sort”

Warren Buffett:

How about number 4?

Audience Member:

Good morning. My name is Bill Gurn. I’ve traveled from the United Kingdom.

And I would like to ask if you think it’s a good investment strategy to invest in regions of high resources per capita?

In particular, I should like to ask if you think that the analysis per capita should lead to higher growth for businesses in that region, plus the bonus of a relative exchange rate growth? Thank you.

Warren Buffett:

I’m not sure about the per capita part, Charlie.

Charlie Munger:

My understanding is he was talking about investing in a region with high resources per capita. I think he means natural resources.

Warren Buffett:

Yeah. Are you thinking of places like Canada or something of the sort where the…

Audience Member:

I can clarify. Yes, high natural resources, but also good infrastructure. Thank you.

Warren Buffett:

And whether there would be relative currency strength in those as well and…

Charlie Munger:

No. Whether it’s a good area for us to be operating in.

Warren Buffett:

Well, that would be a little macro for us. We really just zero in on, you know, whether people will keep eating candy and whether we can charge a little more for it next year.

We don’t play big trends. You know, we don’t think about demographic trends or anything of the sort. We think about our own age as getting older.

But other… big trends, they just don’t mean that much. There’s too much money to be made from year to year to think about things that take decades to manifest themselves.

So I can’t recall of a decision we’ve ever made on a purchase of a business or a stock or a junk bond or a currency or anything else based on a macro.

Charlie Munger:

Not only that, we’ve recently failed to profit much from one of the biggest commodity booms in history.

Warren Buffett:

Yeah.

Charlie Munger:

And we’ll probably continue to fail in the same way.

Warren Buffett:

But we’ll search for new ways to fail. I mean, we’re not trying to limit ourselves.

It’s probably true, incidentally, in a country like Canada, where you’ve got, probably, millions of barrels of oil of… millions of barrels a day… of oil production coming on and where there’s, you know, relatively few people and where there’s already a surplus.

When they’re running a significant current account surplus, that… you know, it’s not strange that their currency should be strong relative to a country like ours where we’re running a huge current account deficit and we don’t have that same natural… the gain in natural exports coming on that they do.

But that… there’s so many more important factors that are going to hit us immediately that that’s what we really think about day-to-day.

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