Berkshire Hathaway 2017 Annual Meeting Audience Question # 50

What could cause the Berkshire enterprise to not work aside from a massive insurance loss

Warren Buffett:

OK. Becky.

Becky Quick:

This question comes from Tom Spanfelner. And he’d like to be called Tom Span from Pennsylvania.

He says, “In life, business, and investing, strategies often work until they don’t work. Other than a massive insurance loss, any thoughts on what could cause the Berkshire enterprise to not work?”

Warren Buffett:

I think the only…

Charlie Munger:

Good question.

Warren Buffett:

Yeah. Well, if there were some change, if we got some infection… outside agent of some sort that changed the culture in some major way, an invasion of different thought.

But as a practical matter, I don’t think anything… you know, and it’s the things you can’t think of… but I can’t think of anything that can harm Berkshire in a material, permanent way except weapons of mass destruction. But I don’t regard that as a low probability.

It would take a recession, a depression, a panic, you know, hurricanes, earthquakes. They all would have some effect. And in some cases, it might even be that we would do better because of them.

But if there were a successful… as measured by the aggressor… nuclear, chemical, biological, or cyber-attack on the United States… and there are plenty of people that would like to pull
that off or organizations and maybe even a few countries… it could disrupt society to such an extent that it would harm us.

But I think… with the variety of earning streams, with the asset positions, with the general philosophy at play… the culture… I think that we would be close to the last one affected.

But if somebody figures out how to kill millions of Americans and totally disrupt society, then, you know, then all bets are off.

Charlie?

Charlie Munger:

Well, I agree. It would take something really extreme.

Warren Buffett:

Yeah.

Charlie Munger:

And just take the question like… British Petroleum took a huge loss with one oil well blowing.

And Berkshire has all these independent subsidiaries. And they really are independent. And the parent company is not (the sound in this part of the video is inaudible) if there’s one horrible accident somewhere.

We would tend to pay, of course, maybe more than our legal liability, but we are not… one accident in one subsidiary that caused a big lot of damage, we’re better protected than most companies.

Warren Buffett:

Yeah.

Charlie Munger:

In every way, Berkshire is structured to handle stresses.

Warren Buffett:

It’s the kind of thing we think about all the time. We’ve thought about it ever since we started.

But I really don’t know any company that can take more general adversity or even some specific adversities.

But if you get into the “what could happen with weapons of mass destruction?” that is something we can’t predict about. But if that ever happens, there will be more to worry about than the price of Berkshire.

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