Berkshire Hathaway 2017 Annual Meeting Audience Question # 13

Why Warren wanted to put the majority of her wife’s inheritance on an index fund

Warren Buffett:

Becky?

Becky Quick:

I’d like to ask a question that can serve as a follow-up to the question that Carol had asked.

And Charlie, in that response, said that he thinks that Berkshire’s businesses on the whole will do better than the S&P 500.

Clark Cameron from Birmingham, Alabama, who owns 281 shares of Berkshire B, writes in and asks, “Why have you advised your wife to invest in index funds after your death rather than Berkshire Hathaway? I believe Munger has counseled his offspring to quote, ‘Not be so dumb as to sell.’”

Warren Buffett:

Yeah.

She won’t be selling any Berkshire to buy the index funds. All of my Berkshire, every single share, will go to philanthropy.

So the… I don’t even regard myself as owning Berkshire, you know, basically… it’s committed.

And so far, about 40 percent has already been distributed.

So the question is, somebody who is not an investment professional will be, I hope, reasonably elderly by the time that the estate gets settled.

And what is the best investment, meaning one that there would be less worry of any kind connected with and less people coming around and saying, “Why don’t you sell this and do something else?” and all those things. She’s going to have more money than she needs.

And the big thing, then, you want is money not to be a problem. And there will be no way that if she holds the S&P… or virtually no way, absent something happening with weapons of mass destruction… but virtually no way that she won’t… she’ll have all the money that she possibly can use.

She’ll have a little liquid money so that if stocks are down tremendously at some point, there’s
…they close the stock exchange for a while, anything like that… she’ll still feel that she’s got
plenty of money.

And the object is not to maximize. It doesn’t make any difference whether the amount she gets doubles or triples or anything of the sort. The important thing is that she never worries about money the rest of her life.

And I had an Aunt Katie here in Omaha, who Charlie knew well, and worked for her husband, as did I. And she worked very hard all her life. And had lived in a house she’d paid, I think, I don’t know, $8,000 for at 45th and Hickory all her life.

And because she was in Berkshire, she ended up… she lived to 97… she ended up with, you know, a few hundred million.

And she would write me a letter every four or five months. And she said, “Dear Warren, you know, I hate to bother you. But am I going to run out of money?”

And… I would write her back. And I’d say, “Dear Katie, it’s a good question because, if you live 986 years, you’re going to run out of money.” And… then about four or five months later, she’d write me the same letter again.

And I have seen there’s no way in the world, if you’ve got plenty of money, that it should become a minus in your life. And there will be people, if you’ve got a lot of money, that come around with various suggestions for you, sometimes well-meaning, sometimes not so well- meaning.

So if you’ve got something as certain to deliver… you know, it was all in Berkshire, they’d say, “Well, if Warren was alive today, you know, he would be telling you to do this.” I just don’t want anybody to go through that.

And the S&P will be a… I think actually what I’m suggesting is what… a very high percentage of people should do something like that. And I don’t think they will have as… I think there’s a chance they won’t have as much peace of mind if they own one stock.

And they’ve got neighbors and friends and relatives that are trying to do some… like I say, sometimes well-intentioned, sometimes otherwise, to do something else. And so I think it’s a policy that’ll get a good result and is likely to stick.

Charlie?

Charlie Munger:

Well, as Becky said, the Mungers are different. I want them to hold the Berkshire.

Warren Buffett:

Well, I want to hold the Berkshire, too.

Charlie Munger:

No, but I mean I don’t like the… I recognize the logic of the fact that that S&P algorithm is very hard to beat. You know, diversified portfolio of big companies. It’s all but impossible for most people. But, you know, it’s… I’m just more comfortable with the Berkshire.

Warren Buffett:

Well, it’s the family business.

Charlie Munger:

Yeah.

Warren Buffett:

Yeah. But it… I’ve just… I’ve seen too many people as they get older, particularly, being susceptible and just having to listen to the arguments of people coming along.

Charlie Munger:

Well, if you’re going to protect your heirs from the stupidity of others, you may have some good system. But I’m not much interested in that subject.

Warren Buffett:

OK.

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