Berkshire Hathaway 2015 Annual Meeting Transcript
Transcript of the 2015 Berkshire Hathaway Annual Meeting held on May 2, 2015 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)
Thank you. Thank you. Thank you.
I’m Warren; this is Charlie. He can hear. I can see. We work together.
In just a couple of minutes we’ll move onto the questions and answers and follow the same procedures as in previous years.
Appreciation for John Landis
But first, there’s just a couple of special introductions I’d like to make. And I’d like to start it off with John Landis. Do we have a spotlight that we can pick out John?
John is the man that directed, conceived, et cetera, of the Floyd Mayweather fight.
And John, as you know, directed “Coming to America,”″ Animal House,” and the one I particularly like is “Trading Places.”
If you haven’t seen “Trading Places,” by all means get it. It has Dan Aykroyd, and Eddie Murphy, and Charlie’s favorite, Jamie Lee Curtis.
And it’s a truly great movie.
It brought back Ralph Bellamy and Don Ameche.
Don Ameche had disappeared. Have we got a light on… can we get a light on John? Where’s John? He should be right down here.
We’re going to find… over here? Come on.
Well, John, thank you, thank you, thank you. He did all that and now came to the meeting. We really appreciate it.
Appreciation for Carrie Sova
The other person I want to say… have a special thanks for… is a young, 30- year-old woman who has a 1 1/2-year-old baby at home and manages to put on this whole event with the help of hundreds that come from our various companies, and that’s Carrie Sova.
I hope Carrie is here, that we can give her a thanks.
Carrie, a few months ago, while she was already working on this meeting, I said to Carrie, “I think it would be kind of nice if we had a commemorative book, sort of a retrospective on the 50 years.” And I said, “Would you mind turning out a book, you know, in your spare time during these couple months while you’re putting together the meeting?”
And she put together what I think is an absolutely terrific book (you can try to get a copy of the book here), which we have outside. We printed up… we thought we printed 15,000 copies, but I think there’s not quite that many. We sold 5,000 yesterday and then held back copies.
But it’s really a nice history of Berkshire Hathaway. And the credit, 100 percent, goes to Carrie for putting that together. So I’d just like to thank her personally and I hope you’ll thank her.
The attendance may have outrun the number of seats
Now, we’ll have the annual meeting at 3:30, and at that time we will be voting on directors, but many of you won’t be here at that time, although we’ll have a full house in here.
I should mention all of the overflow rooms in… here at the CenturyLink… are full now.
There may be seats… we’ve got the grand ballroom and the second ballroom over at the Hilton… and there may be some seats left over at the Hilton. So if you can’t find a seat here at the CenturyLink, either here or in the overflow… rooms, at least give it a try over there at the Hilton.
We’ve got all the rooms we could possibly get, but I think the attendance may have outrun the seats this time.
Warren introduces Berkshire’s board of directors
I’d like to introduce the directors, and, like I say, you’ll vote on them at a little after 3:30.
And if they’ll stand… and we’ll get a light down here… and withhold your applause until the end, and you can withhold it then, if you would like.
And we’ll do this alphabetically.
You’ve met Charlie, of course, but we’ll start with Howard Buffett, Steve Burke, Sue Decker, Bill Gates, Sandy Gottesman, Charlotte Guyman, Tom Murphy, Ron Olson, Walter Scott, and Meryl Witmer. They’re a great bunch of directors.
We’re missing one of our great directors, Don Keough, my neighbor from over 55 years ago.
He was a coffee salesman, then, for Butter-Nut Coffee, for those of you around Omaha.
He broadcast Nebraska football games and around 1950 had a radio show on WOW, for 15 minutes.
He was followed by a fellow named Johnny Carson, who had another 15-minute program. And Don, when I would see him in later years, he’d always say, “What happened to that Carson fellow?”
And Don died a few weeks ago, but we are very grateful that his wife, Mickie Keough, has joined us together, so let’s have a hand for Mickie Keough. Mickie, will you stand?
Mickie practically raised our kids, so if they have any faults, talk to Mickie about it.
Berkshire’s first quarter earnings
OK. We have just… we have one slide that relates to our quarterly earnings that… if we could put up.
We released these yesterday afternoon, and nothing particularly remarkable.
The railroad, BNSF, did dramatically better last year, not only in earnings, but in all kinds of performance measures, in terms of train velocity, and on time, and you name it, so that the…
You know, we got behind last year, early in the year, and there’s been lots of money, and more important, lots of effort, spent to get the railroad operating like it should be.
And in the first quarter those efforts paid off. We gained share. Our earnings, relative to other railroads, improved dramatically, so, you know, we got the trains running. We’re going to spend a lot of money making sure we get even better.
But the improvement has been huge, and I want to thank Matt Rose and Carl Ice for a really extraordinary performance and having our railroad running the way it should be running. So thanks, Matt and Carl.
Voice from Audience:
(the sound on this part of the video is inaudible)
I didn’t quite get, it but I’ll assume it was complimentary.
OK. I think we’re ready to move on to our questioners.
We’ll handle it the same way as before. We start with the journalists, we move to the analysts, and then we move to the audience, and we keep doing that until about noon.
And at that time, we take a break for about an hour, and then we come back and we repeat the procedure.
After we get through a… I think it’s either 48 or 54 questions, then we just take them all from the audience. We have various zones where people have been selected, by drawing, to ask questions personally.
Carol Loomis makes her customary speech
But we start off the first one with a woman who retired after 60 years, setting a longevity record for all of Time Inc…. she retired at Fortune… been my friend for many years, and in my opinion the best print business journalist in the world, Carol Loomis. That doesn’t soften her up at all, folks.
I’ll make my customary, very short speech.
The three of us have been getting questions for two months, and there have been a lot of them.
Warren and Charlie have no idea what our questions are going to be, and some of them are very tough. Warren is right that I don’t normally soften them up.
And we’re sorry, we got hundreds of questions, literally, many hundreds, and we’re sorry if we didn’t pick yours, which doesn’t mean it wasn’t a good question. It’s just that the… our ability to ask as many as you’d like… as you would like to get yours in… was limited.
Q&A – Morning Session
(Click on a link below to skip to a particular topic)
- Warren explains Clayton’s lending practices.
- What Warren thinks of 3G’s job cuts.
- Is a change in the mode of selling required in Van Tuyl?
- Warren and Charlie don’t have a one-size-fits-all system for buying businesses.
- Charlie didn’t try to talk Warren out of investing in IBM.
- Warren’s three extraordinary pieces of luck in the insurance business.
- Berkshire’s culture runs as deep as any large company’s could be.
- Coca-Cola will continue to grow despite the growing trend of consumers avoiding too much sugar consumption.
- What Warren liked about Van Tuyl.
- How Warren built the culture and values at Berkshire.
- Warren and Charlie haven’t made any kind of investment decision based on macro factors.
- How BNSF will be affected by the new standards introduced to improve the safety of the crude-by-rail infrastructure.
- Do the best you can playing the hand you get.
- How a large railroad-type accident will affect Berkshire.
- Why Warren moves subsidiaries around the Berkshire organization.
- Warren thinks the US dollar will still be the world’s reserve currency 50 years from now.
- Warren is fine with subsidiaries using the Berkshire Hathaway name as long as it is not abused.
- How distributed generation might affect Berkshire’s utility business.
- Warren’s most memorable failure and how he dealt with it.
- Warren admits he is very wrong on his prediction that there will be “an onslaught of inflation”.
- There’s two forms of float from deferred taxes.
- What Warren and Charlie learned from Henry Singleton. To read more about Henry Singleton, click here.
- Berkshire’s insurance operations is not “too big to fail”.
- Berkshire is experimenting with online workers compensation.
- The question Warren and Charlie has never been asked before that they would like to answer now.
- A lot of Berkshire’s subsidiaries, including its headquarters, is run just as efficiently as 3G would run it.
- There will always be a fight between the retailers and the brands.
- Investment principles do not stop at borders.
- Warren thinks the risk of chemical, nuclear, biological and cybersecurity problems are the greatest threats to the United States.
- It is unlikely that Warren’s successor will handle both investments and operations, although that “would be conceivable”.
- Both Ted Weschler and Todd Combs are “very, very smart about businesses and investments”.
An update on Warren’s bet against hedge funds
We’re approaching noon. We’ll come back at 1:00.
I promised… seven years ago I made this bet, which was originally to produce a million dollars for the charity of the winner, and another fellow who was in the hedge fund business… and I offered this bet to anybody. Only one person took me up on it.
And we made this bet where a million dollars goes to the winner’s charity, as to whether a group of five hedge funds, the funds would beat the S&P Vanguard fund.
And my point being that the fees would not overcome… would not be overcome… by managerial brilliance and that the hedge funds would fall short.
And the other fellow betting, essentially, that paying people 2-and-20, and having an override to the fund of funds, was nothing to pay for the brilliance of getting Wall Street to manage your money.
And I promised that every year I would report the update.
And the first year I fell far behind, but we reported it then.
So we’ll put that slide up. And as you can see, seven years into it, it’s interesting that just buying Vanguard fund, you know, with no… nothing but putting the S&P 500 in there, has now given a cumulative return of 63 1/2 percent, and the hedge funds are at 19 percent.
The interesting thing is, some of that is under performance, but the hedge fund managers have done very well during that period. If they were managing a billion dollars, for example, at 2- and-20, you get $20 million a year just for coming to the office.
It’s… you know, it’s been… the hedge funds haven’t done bad. It’s the investors in the hedge funds have paid a very big price. And the…
We originally funded this with zero-coupon bonds. We each bought about 350,000 of zero- coupon bonds that would be worth 500,000 at the end of the period.
We converted it to Berkshire Hathaway stock… so… a few years ago, the fellow on the other side of the bet did it with me. So now it now looks like the winner will get appreciably more than a million dollars.
And if you want to entertain yourself, you can go to Long Bets… on search, just put in Long Bets, and you’ll find this organization out in Washington that sort of acts as the stakeholder, sets the rules for these long bets.
And now there’s hundreds of them up there, and they’re on all kinds of predictions, and you can go there, and if you want to disagree with one of the parties on there, you can make these bets that pay off in 50 years or 25 years.
Warren assures everyone that the panelists have never tipped him off on any question that they would ask
OK. Everybody will settle down, we’ll move right along.
I want to clear up one thing. My daughter told me that because we had all those… I had… all those slides that were in answer to Carol’s first question, that Carol and I had discussed it ahead of time.
I will guarantee you that I’ve discussed no questions with anyone on the panel, and they will tell you the same thing.
But I knew I was going to be asked questions about Clayton, so I prepared the slides.
It was an accident that it turned out to be the first question, but it was certain to be in the first few.
So, Carol did not… Carol in 60 years has never tipped me off on anything, nor have the other panelists.
And everything… but we were… but I was… prepared for the fact that people would be asking questions about Clayton.
OK. Let’s move right along, and we’ll go to Becky.
Q&A – Afternoon Session
(Click on a link below to skip to a particular topic)
- The best businesses during a period of inflation.
- It’s almost certain that Berkshire will not take over a large commercial insurance company.
- You just have to get the best reputation you can in the years you’re allotted and the time available.
- Why Warren said global warming has not increased Berkshire’s payouts for weather-related events.
- Berkshire is constantly looking for opportunities for Berkshire Hathaway Energy to spend big money.
- What can be done to bring about a simpler, more rational tax code in the United States
- How Adam Smith’s book “The Wealth of Nations” contributed to Warren’s business and investment philosophy.
- Warren and Charlie believes Berkshire’s investments, regardless of whether they are public or private businesses, are focused on the long term.
- What Warren and Charlie thinks of German companies.
- No company is going to be the lowest in price in all cases.
- The reinsurance business is not as good as it was, and it’s unlikely to be as good as it was.
- How to make lots of friends and get people to like and work with you.
- Warren thinks NetJets is a very decent business and he didn’t make a mistake buying it.
- Tax code benefited both Berkshire and Proctor & Gamble in the Duracell deal.
- How to balance leaving an inheritance to your family and giving to charity.
- Would Warren consider distributing Berkshire’s long-term stock holdings to shareholders?
- The future trend and rate of household formation in the United States.
- Why Warren prefers individual philanthropy.
- The Euro had a noble motivation but it’s a flawed system.
- No plans to take advantage of the supposed synergies of GEICO and Van Tuyl.
- Warren haven’t paid much attention to the silver market for a “long, long time”.
- Will activist take over Berkshire once Warren’s shares are given to charity?
- Warren shares a little bit of the history of American Express.
- Encouraging good habits in children early on can change their lives.
- No plan to deleverage Berkshire.
- Berkshire won’t get significant benefits of scale by buying more auto dealers.
- If asked to choose only one, Warren would choose the internet over his private jet.
- Warren thinks reforming and enlarging the earned income tax credit is better than raising the minimum wage.
- Warren and Charlie rejects the argument that people do better in life because of college education.
- Warren and Charlie thinks China is going to do very fine over a period of time.
- How to figure out the operating metrics of a new industry.
- How Warren got his first investors.
- Rationality is a moral duty.
- No answer for the “most intelligent question”.
- How Warren was able to succeed in investing.
- The unrealized, “very significant” competitive advantages of the Wall Street Journal.
End of Q&A
OK. 3:30 has arrived. We’re going to go to the annual meeting in about five minutes. We’ve got a certain amount of formal business to take care of. And I thank you all for coming.
Start of formal business meeting
Let’s reassemble and we’ll conduct the business of the meeting.
The meeting will now come to order. I’m Warren Buffett, chairman of the board of directors of the company, and I welcome you to this 2015 annual meeting of shareholders.
This morning I introduced the Berkshire Hathaway directors that are present.
Also with us today are partners in the firm of Deloitte & Touche, our auditors. They are available to respond to appropriate questions you might have concerning the firm’s audit of the accounts of Berkshire.
Sharon Heck is secretary of Berkshire Hathaway, and she will make a written record of the proceedings.
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 and the motion to be voted at this meeting.
The named proxy holders for this meeting are Walter Scott and Marc Hamburg.
Does the secretary have a report of the number of Berkshire shares outstanding, entitled to vote, and represented at the meeting?
Yes, I do. As indicated in the proxy statement that accompanied the notice of this meeting that was sent to all shareholders of record on March 5, 2015, the record date for this meeting, there were 824,920 shares of Class A Berkshire Hathaway common stock outstanding, with each share entitled to one vote on motions considered at the meeting, and 1,227,069,442 shares of Class B Berkshire Hathaway common stock outstanding, with each share entitled to one ten-thousandth of one vote on motions considered at the meeting.
Of that number, 592,750 Class A shares and 736,403,387 Class B shares are represented at this meeting by proxies returned through Thursday evening, April 30.
Thank you, Sharon. That number represents a quorum, and we will therefore directly proceed with the meeting.
First order of business will be a reading of the minutes of the last meeting of shareholders. I recognize Mr. Walter Scott, who will place a motion before the meeting.
I move that the reading of the minutes of the last meeting of shareholders be dispensed with and the minutes be approved.
Do I hear a second?
Voice from Audience:
I second the motion.
The motion has been moved and seconded. Are there any comments or questions?
We will vote on this motion by voice vote. All those if favor say “Aye.”
Voice from Audience:
Opposed? The motion is carried.
Election of Berkshire’s board of directors
The next item of business is to elect directors.
If a shareholder is present who did not send in a proxy or wishes to withdraw a proxy previously sent in, you may vote in person on the election of directors and other matters to be considered at this meeting. Please identify yourself to one of the meeting officials in the aisle so that you can receive a ballot.
I recognize Mr. Walter Scott to place a motion before the meeting with respect to election of directors.
I move that Warren Buffett, Charles Munger, Howard Buffett, Stephen Burke, Susan Decker, William Gates, David Gottesman, Charlotte Guyman, Thomas Murphy, Ronald Olson, Walter Scott, and Meryl Witmer be elected as directors.
Is there a second?
Voice from Audience:
It has been moved and seconded that Warren Buffett, Charles Munger, Howard Buffett, Stephen Burke, Susan Decker, William Gates, David Gottesman, Charlotte Guyman, Thomas Murphy, Ronald Olson, Walter Scott, and Meryl Witmer be elected as directors.
Are there any other nominations? Is there any discussion? The nominations are ready to be acted upon.
If are there any shareholders voting in person, they should now mark their ballot on the election of directors and deliver their ballot to one of the meeting officials in the aisles.
Ms. Amick, when you are ready, you may give your report.
My report is ready. The ballot of the proxy holders in response to proxies that were received through last Thursday evening cast not less than 657,744 votes for each nominee. That number far exceeds a majority of the number of the total votes of all Class A and Class B shares outstanding.
The certification required by Delaware law of the precise count of the votes will be given to the secretary to be placed with the minutes of this meeting.
Thank you, Ms. Amick. Warren Buffett, Charles Munger, Howard Buffett, Stephen Burke, Susan Decker, William Gates, David Gottesman, Charlotte Guyman, Thomas Murphy, Ronald Olson, Walter Scott, and Meryl Witmer have been elected as directors.
End of formal business meeting
Does anyone have any further business to come before this meeting before we adjourn?
If not, I recognize Mr. Scott to place a motion before the moving.
I move that this meeting be adjourned.
Voice from Audience:
A motion to adjourn has been made and seconded. We will vote by voice. Is there any discussion? If not, all in favor say “Aye.”
Voice from Audience:
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