Berkshire Hathaway 2019 Annual Meeting Transcript
Transcript of the 2019 Berkshire Hathaway Annual Meeting held on May 4, 2019 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)
Welcome and meeting agenda
Good morning and welcome to Berkshire Hathaway.
And for those of you who have come from out of state, welcome to Omaha. The city is delighted to have you here at this event.
And for those of you who came from outside of the country, welcome to the United States.
So, we’ve got people here from all over the world. We’ve got some overflow rooms that are taking care of people. And we will just have a few preliminaries and then we will move right into the Q&A period.
We’ll break about noon for about an hour. We’ll come back and do more Q&A until about 3:30.
Then we’ll adjourn for a few minutes, and then we’ll conduct the meeting.
I understand that in the room adjacent, that Charlie has been conducting a little insurgency campaign.
I don’t know whether you’ve seen these, but these are the buttons that are available for those of you… you keep asking questions about succession. And Charlie wants to answer that question by getting your vote today. So, it says… this one says, “Maturity, experience, why accept second best? Vote for Charlie.”
I, however, have appointed the monitors who have… collect the votes, so I feel very secure.
Warren introduces Berkshire’s board of directors
The first thing I’d like to do… Charlie is my partner of 60 years, a director and vice chairman, and we make the big decisions jointly. It’s just that we haven’t had any big decisions. So, we haven’t… we’re keeping him available for the next big one.
But now at the formal meeting today, we’ll elect 14 directors, and you’re looking at two of them.
And I’d like to introduce the 12 that will be on the ballot at 3:45.
And I’m going to proceed alphabetically. And if they’ll stand. If you’ll withhold your applause because some of them get sensitive if certain people get more applause than others, and they’ll… and if you’ll withhold it till I’m finished, then you can applaud or not, as you see fit, having looked at these directors.
So, we’ll start on my left. Greg Abel, who’s both a chairman and a director. Greg? Yeah, oh, there we are. Right, OK. And going along alphabetically, Howard Buffett, Steve Burke, Sue Decker, Bill Gates, Sandy Gottesman… Charlotte Guyman, Ajit Jain, who is also a vice chairman, Tom Murphy, Ron Olson, Walter Scott, and Meryl Witmer. Now you can applaud.
Berkshire’s first quarter earnings
Now, this morning we posted on our website the quarterly, the 10Q that’s required to be filed with the SEC. We published it at 7 o’clock Central Time. And we also published an accompanying press release.
And if we’ll put slide one up… these figures as usual require some explanation. As we’ve mentioned in the annual report, the new GAAP rule of Generally Accepted Accounting Principles require that we mark our securities to market and then report any unrealized gains in our earnings.
And you can see, I’ve warned you about the distortions from this sort of thing. And, you know, the first quarter of 2019 actually was much like the first quarter of 2018, and I hope very much that newspapers do not read headlines saying that we made $21.6 billion in the first quarter this year against a loss of last year.
These… the bottom line figures are going to be totally capricious, and what I worry about is that not everybody studied accounting in school, or they can be very smart people but that doesn’t mean that they’ve spent any real time on accounting.
And I really regard these bottom line figures, particularly if they’re emphasized in the press, as doing… as potentially being harmful to our shareholders, and really not being helpful. So, I encourage you now, and I encourage all the press that’s here, focus on what we call our operating earnings, which were up a bit. And forget about the capital gains or losses in any given period.
Now, they’re enormously important over time. We’ve had substantial capital gains in the future; we have substantial unrealized capital gains at the present time; we expect to have more capital gains in the future.
They are an important part of Berkshire, but they have absolutely no predictive value or analytical value on a quarterly basis or an annual basis. And I just hope that nobody gets misled in some quarter when stocks are down and people say, “Berkshire loses money,” or something of the sorts. It’s really a shame that the rules got changed in that way, but we will report.
But we will also explain, and we will do our best to have the press understand the importance of focusing on operating earnings, and that we do not attract shareholders who think that there’s some enormous gain because in the first quarter the stock market was up.
There’s one other footnote to these figures that I should point out. It’s already been picked up by the wires from our 7 o’clock filing.
We report on Kraft Heinz, of which we own about 27 percent or so. We report on what they call the equity method. Now, most stocks, when you get dividends, that goes into our earnings account, and their undistributed earnings don’t affect us. They affect us in a real way, but they don’t affect us in an accounting way.
We are part of a control group at Kraft Heinz, so instead of reporting dividends, we report what they call equity earnings.
Kraft Heinz has not filed their 10K for the 2018 year with the SEC. And therefore, they have not released the first quarter of 2019 earnings. Now, normally, we would include our percentage share of those earnings, and we’ve done that every quarter up till this quarter. But because we do not have those figures, we’ve just… we’ve not included anything.
We received 40 cents times… $130 million of dividends in the first quarter from our shares, but that reduces our carrying basis and it is not reflected in the earnings. So, that’s an unusual item which we have mentioned, specifically pointed out in our press release as well as included in our own.
But there is nothing in here, plus or minus, for Kraft earnings, Kraft Heinz earnings this year, whereas there was last year. And when we have the figures, obviously we will report them. Let’s see what beyond that I want to tell you.
Announcement – Berkshire signs a 20-year lease for two-floors in Kiewit Plaza
I think… oh yes, I’d wanted to mention to you, the Kiewit Company, which has been our landlord since 1962… 57 years… has owned the building in which Berkshire is headquartered.
Kiewit Company is moving their headquarters and, in the process, will be doing something with the building. And they very generously, as they always have been, they came and said, “What kind of a lease would you like? Since we’re leaving, and we’ve always sort of worked these things out as we’ve gone along.” And so Bruce Grewcock, who runs Kiewit, said, “You just sort of… you name your terms and what you’d like. So, you… no matter with happens with the building, you’re all set.”
So, I was about to sign a ten-year lease for the present space, but Charlie said, “Ten years might be long enough for me but,” he said he would like me to sign one for 20 years, considering.
And… so we are entering a 20-year lease, and I confess to you that we now occupy one full floor, as we have for decades, and the new lease provides for two floors. So, I just want you to know that your management is loosening up just a little bit.
And whether or not we fill them is another question. But we will have that, and I would like to say to Omaha that I think the fact that Berkshire has signed up for 20 years is very good news for the city over time. It… OK.
Warren expresses his appreciation to everyone who helped organize the annual meeting
And now I would like to tell you something about the people that make all of this possible. This is totally a… this is a homegrown operation.
We started with a few people, meeting in the lunchroom at National Indemnity many years ago. And I think we will probably set another record for attendance today. Yesterday afternoon, 16,200 people came in five hours, and that broke the previous record by a couple thousand.
On Tuesday, the Nebraska Furniture Mart did $9.3 million worth of business. And if any of you are in the retail business, you’ll know that that’s the yearly volume for some furniture stores, and here in Omaha, the 50th or so largest market in the country, maybe even a little less, $9.3 billion (million) I think probably exceeds anything any home furnishing store’s ever done in one day.
And we have people pitching, and we have all the people, virtually all of the people from the home office, some of them, you know, are… they’ll take on any task. We have a bunch of people from National Indemnity, for example, that come over, and they’ve been some of the monitors around.
And in terms of the exhibit hall, more than 600 people from our various subsidiaries give up a weekend to come to Omaha, work very hard, and tomorrow, 4:00 or 4:30, or I should say today at 4:00 or 4:30, they will start packing up things and heading back home. And they come in, and I saw them all yesterday, and they were a bunch of very, very happy, smiling faces. And, you know, they work hard all year, and then they come in and help us out on this meeting.
And then, finally, if we could get a spotlight, I think Melissa Shapiro is someplace here… she runs the whole show. I mean, we… Melissa, where are you?
Melissa’s name was Melissa Shapiro before she got married, then she married a guy named Shapiro, so now she’s Melissa Shapiro Shapiro. So… but she can handle that sort of thing. She handles everything, and never… totally unflappable. Totally organized. Everything gets done. Everybody likes her when they get through. So, I… it’s marvelous to get a chance to work with people like this.
I think it’s a special quality that… at Berkshire. I think other people would hire some group to put on the meeting and all be very professional and all of that. But I don’t think you can get… I don’t think you can buy the enthusiasm and energy and help-the-next-guy feeling that you’ve seen out on that exhibition floor, and you’ll see as you meet people here at the hall, and as you meet the people around Omaha. They’re very, very happy that you’re here.
And with that, I would like to start on the questions. We’ll do it just as we’ve done it in recent years. We’ll start with the press group. They’ve received emails from a great many people… perhaps they can tell you how many… and selected the questions they think would be most useful to the Berkshire shareholders.
Yahoo is webcasting this as they’ve done for several years now, they’ve done a terrific job for us.
So, this meeting is going out, both in English and in Mandarin, and I hope our results translate well, or our… our comments translate well. Sometimes we have trouble with English. But we’re going to… we’ll start in with Carol Loomis, my friend of 50 years, but you’ll never know it by the questions she’s going to ask me.
I’m going to start, very briefly… this is for the benefit of people who send us questions next year. There are kind of two things that you get wrong a lot of the time. You can’t send two-part questions or three-part, et cetera. We need a one-part question. And the other thing is the questions all need to have some relevance to Berkshire, because Warren said when he started it that his hope was that shareholders would come out of the questions with a further education about the company. So, keep those in mind for next year.
Q&A – Morning Session
(Click on a link below to skip to a particular topic)
- Berkshire’s criteria in making share repurchases.
- Will BNSF adopt precision-scheduled railroading?
- BNSF is “generally” energy efficient but would want to become even more energy efficient.
- Warren on the Wells Fargo fake accounts scandal: When you find a problem, you have to do something about it. To read more about this scandal, click here.
- Why Warren said Berkshire could buy back as much as $100B of its shares.
- Warren’s most interesting personal investment.
- How the recent talk about socialism versus capitalism among Democratic presidential candidates might affect Berkshire.
- Warren: No other master plan in making share repurchase other than buy aggressively when we like the price.
- The world will change in dramatic ways, some of the changes will hurt Berkshire but the company will adjust to the changes.
- Warren admits he paid too much for Kraft.
- The future outlook of Berkshire’s home-furnishing retail operations in the face of competition willing to take huge current losses as long as they can increase sales.
- Warren is not excited about the so-called alternative investments.
- Berkshire’s investment in Amazon is also a value investment.
- Berkshire “got a very good insurance business”.
- Don’t go overboard on delayed gratification.
- An update on Berkshire’s succession planning.
- Why Berkshire is trying to avoid holding more than 10 percent of some company’s stock.
- How to know when you are ready to manage other people’s money.
- Berkshire doesn’t disclose its foreign stock holdings because it doesn’t have to.
- Warren expects the earnings of Precision Castparts to improve significantly.
- You can, and should, understand human behavior better as you get older.
- Ajit and Warren on how they price unconventional insurance contracts.
- Berkshire could still partner with 3G on a future transaction despite the recent problems at Kraft-Heinz.
- Warren thinks Kraft-Heinz is still a terrific business.
- Warren’s problem with Apple: the stock price has gone up.
Q&A – Afternoon Session
(Click on a link below to skip to a particular topic)
- Why Union Pacific has a higher profit margin than BNSF.
- What Warren values the most in life.
- Why Warren refuses to explain and elaborate on Berkshire’s stock holdings.
- FlightSafety’s competitive position and growth prospects.
- Warren still doesn’t think evaluating technology companies is within his circle of competence and prefers to focus on industries he knows more about.
- Warren on the chances of Berkshire being targeted by activist investors: “It’s a low probability”.
- How GEICO plan on responding to competitive threats from Progressive, which Warren calls, “a very well-run business”.
- Focus on having as big a circle of competence as you can but more importantly focus on knowing the boundaries of your circle and stay inside it.
- Berkshire measures up well on the environment, social and governance metrics but doesn’t participate in preparing reports about it.
- Berkshire Hathaway Energy is in “marvelous shape” and Warren “really hope(s) to spend a lot of money in energy”.
- Why Berkshire puts its excess cash on treasury bills and not on an index fund.
- Warren on the prospect of Fannie Mae and Freddie Mac doing more loans for manufactured housing: good for America, bad for Clayton’s financing business.
- American ingenuity will find ways to replace jobs lost to technological advancements.
- Warren likes the fact that there is regulation in the insurance and banking business.
- Why there’s been less and less details about Berkshire’s subsidiaries in the last few year’s annual shareholder’s letter.
- The investment climate in China is getting better.
- Warren would like Berkshire to be better known in both the UK and Europe.
- Would Berkshire benefit if it has more “boots on the ground” on overseas markets to look for potential investment opportunities?
- Warren’s primary motivation when he wakes up everyday.
- Which is better: investing in Berkshire or investing in a low cost S&P 500 index fund?
- Greg Abel explains why several casinos in Nevada cut the cord with Berkshire Hathaway Energy’s NV Energy subsidiary.
- How Ted Weschler and Todd Combs is doing and their contributions to Berkshire.
- Warren is still bullish on American Express despite the recent entry of new competitors.
- Warren talks about the deal providing Occidental $10B in financing for their proposed acquisition of Anadarko.
- There are no formulas around Berkshire.
- Warren shares two examples of dishonest business proposal he had received.
- The probability of success of auto companies getting into the insurance business is similar to the probability of success of insurance companies getting into the auto business.
- Warren has “a lot of confidence in the ability of the Berkshire culture to endure”.
- How Warren and Charlie deals with conflicts between the two of them.
- Try to expand you circle of competence if you can, but don’t force it.
- What Warren would be doing if he only had a million dollars to invest.
- See’s Candies tried to expand outside California “many, many, many, many times”, “but it doesn’t travel that well”.
End of Q&A
Well, on that happy note…… we will conclude the meeting.
Thank you. Thank you.
Thank you, but save of it for next year. We may need it then.
Just give us a carry-forward on the rest of it, and thank you.
We’ll come back at 3:45. We will conduct the business meeting, and it doesn’t… we have no… nothing on the proxy to vote on, but we will be back here in 15 minutes.
And if you enjoy a process, you can stick around and watch us reelect our board.
Thank you. Thanks for coming.
Start of formal business meeting
The meeting will now come to order.
I’m Warren Buffett, chairman of the company and I welcome you to this 2019… 2019 annual meeting of shareholders.
This morning I introduced the Berkshire Hathaway directors who are present.
Also with us today are partners in the firm of Deloitte and Touche, our auditors.
Jennifer Tselentis is the assistant 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, and she will certify to the count of votes cast in the election for directors and the motions to be voted upon at this meeting.
The named proxy holders for this meeting are Walter Scott and Marc Hamburg.
Does the assistant 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 6, 2019, the record date for this meeting, there were 724,765 shares of Class A Berkshire Hathaway common stock outstanding, with each share entitled to one vote on motions considered at the meeting, and 1,371,697,551 shares of Class B Berkshire Hathaway common stock outstanding, with each vote entitled to 1/10,000th of one vote on motions considered at the meeting.
Of that number 503,181 Class A shares and 839,707,642 Class B shares are represented at this meeting by proxies returned through Thursday evening, May 2nd.
Thank you. 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, and 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?
I second the motion.
Motion has been moved and seconded. We will vote on the motion by voice vote. All those in favor say aye.
Opposed? The motion’s carried.
Election of Berkshire’s board of directors
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 for the election of directors and other matters to be considered in this meeting.
Please identify yourselves to one of the meeting officials in the aisles 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, Greg Abel, Howard Buffett, Stephen Burke, Susan Decker, William Gates, David Gottesman, Charlotte Guyman, Ajit Jain, Thomas Murphy, Ronald Olson, Walter Scott, and Meryl Witmer be elected as directors.
Is there a second?
I second the motion.
It’s been moved and seconded that Warren Buffett, Charles Munger, Greg Abel, Howard Buffett, Steve Burke, Susan Decker, Bill Gates, David Gottesman, Charlotte Guyman, Ajit Jain, Tom Murphy, Ron Olson, Walter Scott, and Meryl Witmer be elected as directors.
Are there any other nominations? Or any discussion? The nominations are ready to be acted upon. If there are any shareholders voting in person they should now mark the ballot on the election of directors and deliver that ballot to one of the meeting officials in the aisles.
Miss 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 543,703 votes for each nominee. That number 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, Miss Amick. Warren Buffett, Charles Munger, Greg Abel, Howard Buffett, Steve Burke, Susan Decker, Bill Gates, David Gottesman, Charlotte Guyman, Ajit Jain, Tom Murphy, Ron Olson, Walter Scott, and Meryl Witmer have been elected as directors.
End of formal business meeting
We now… we now have a motion from Walter Scott.
I move the meeting be adjourned.
Is there a second?
I second the motion.
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.
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