Watch CNBC's full interview with Berkshire Hathaway CEO Warren Buffett

We're here in Omaha, Nebraska, this morning with Warren Buffett, the chairman and CEO of Berkshire Hathaway. He just released his 55th annual letter to shareholders over this weekend, and this is actually the 13th year that we've been in Omaha talking to him afterward. that letter this is a program we call ask

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so people can write their own questions to mr. Buffett, after reading the letter to shareholders, but obviously this morning, given the news, there are a lot of other questions that people have about the stock market, let's start directly with mr. Buffett, who is here with us right now, and Warren, thank you for being here today.

I want to talk about the letter, obviously one of the things you mention at the letter level is when should people buy stocks, let's dig into it. on a lot of this, but when you look at the futures down about 818 points this morning, I think probably the first thing viewers want to know from you is your opinion on what's happening with the coronavirus, if this is a reason to panic and if you're worried about this, well, I don't know, I have any special thoughts on the coronavirus news. The first day I bought stocks was March 12, 1941 40 40 42 and the stock was down about 2% that day. unfortunately I bought in the morning so when I got home at night and my dad told me the strike price was down 2% if you're buying a business and that's what stocks are businesses in fact people it would be better if they say I bought a business today, not a stock today because that gives you a different perspective, so presumably it's good, so people buy a farm, if you buy an apartment building, if you buy a business, you'll own it for 10 , 20 or 30 years. and the real question is whether the ten or 20 year outlook for corporate America has changed in the last 24 or 48 hours and we'll notice that many of the companies that we part-own, American Express, we vote for 20 years coca-cola we've had it for 40 years with our businesses and you know, buy or sell your business based on today's headlines and if it gives you the opportunity to buy something you like and you can buy it even cheaper.

So it's your good luck, basically, although there are a lot of people who look at the market and say, look, I want to buy, but I don't want to buy when the markets are at new highs and have been hitting new records every day, maybe. This morning it is down 800 points, but perhaps there is a bigger drop to come because the effect of the coronavirus will have an impact on the global economy. The IMF said weakness will be seen over the weekend not only in China but in other countries. try to address this, you're right, I may not change things in five or ten years, but if I think I can buy something potentially ten percent cheaper, maybe more than that if I wait a week or a month , maybe it's what I'm sitting on, well if you believe that then you've got it, you'll become fabulously rich, if you're right, keep buying in ten day intervals, people take your 10 day prediction if they knew what they were going to spend in the market. obviously, but you don't know it.

I don't think anyone knows what the market is going to do. I think you do know if you're doing a smart person, they buy it at a certain price, everyone when they buy a stock. buy let's say General Motors, you have one thousand four hundred million shares, you should be able to take a yellow notebook like the one you have there and on one page let's say it sells for thirty, it's not that low, but it would be 42. billion you should say I'm buying the General Motors company for forty-two billion dollars because you should put it on a piece of paper and then if you want to have a piece of paper from Shepherd, since I think I know how the stock market is going. to do it, I know if it will be higher or lower, but it is not, it is not necessary.

I'm worried that the economy will slow down not only during the quarter but throughout the year, which would affect the number of cars I own. I think they could sell or even produce cars that will slow down someday. Yes, in 1932, General Motors had 19,000 dealers, that's more than all the automobile dealers in the United States. Today, there are only more than 25 million people, but they had. They produced or sold 19,000 dealers and I think there was a month where they sold less than a tenth of a car, right at 1/10 of a car per dealer, which was a great time to buy General Motors, forget the deal if you can . good market you don't read the balance sheet he certainly can't predict the market by reading the newspaper that's for sure and you really can't certainly can't predict the market by listening to me but you're buying businesses and if you're thinking of buying a local gas station yesterday and it was closing today I don't think so that you would tear your hair out or anything like that, you didn't already look at where it was located and the contract it had with the suppliers and they made a decision about the competition because they can make decisions every second in the stocks, while they can't with the farms, they think that an investment in stocks is different than an investment in a business or an investment in the farm or an investment or an apartment building, but it's not that if you get your money's worth in terms of future purchasing power over the next 10, 20 or 30 years are going to be a good investment and you can't choose them day by day.

I can't do that, well I haven't met anyone yet who knows how to do it. You stressed it in the letter this year in which you highlighted a book written by Edgar Lawrence Smith in 1924 and you said until it came out, no one really realized the compound interest effect of buying stocks, not just buying companies but buying stocks themselves. Edgar Lorenz has changed the world with that book and if people have completely forgotten about it now, although in the 1920s it would become more and more gospel as the boom went on, but the set of girls myths should write a book on bonds versus stocks and he said that if you went in with the idea that bonds would be a better investment in times of deflation and stocks would be a better investment in times of inflation and the first line of your book was to say that you were wrong , but he had enough common sense to look at the evidence about it.

I think Darwin said that if you found evidence that was contrary to what you already believed, write it down in 30 minutes or you're black and your mind will just block it out. I mean, people have a lot of resistance to new evidence and he said that if a stock yields 4% the bond yields 4%, which was what he was talking about, then the stock was going to outperform the bonds because there were gains. retained earnings that were accumulating beyond that, that has been the case for a long time, but no one paid attention to it oh, we don't get rich from our dividends that we receive completely happy to receive them we get rich from the fact that the retained earnings are They use to generate new buyback shares with purchasing power, which increases their ownership in the company and Berkshire is retained earnings since we started, that is the only reason Berkshires is worth so much more.

Because we retained the profits that led Keynes to say it was an important book, people paid attention to it, but you're right, it added to the frenzy that ran until 1929. Well, that's true because you can get my old boss Ben Graham. Absolutely, from the beginning you have more problems with a good idea than with a bad idea because the good idea works. I mean, it's a good idea to buy a house, for example, and then people go crazy, sometimes a good idea works and works and works. They perform better than bonds most of the time and after a while people forget that there were other limiting conditions in Edgar Lorne Smith's book: when bonds perform the same as the Sox, as was the case, stocks will have a outperformance because you had this to retain profits, so the shares started going up in the 20s and all of a sudden they were selling them five or six times more expensive than when you bought the book and the original correct perception on your part you had experienced changing conditions, but people just

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ed they got their confirmations of the stock prices and people, that's what happens in the ball markets, people start to think that the stocks are cheap and then they start to think that the stocks have risen and stocks can be a good buyer, a bad buy a bond can be a good buyer bad buy depends on the price, but that brings us to today.

I mean, if your premise was that stocks will always be a better investment than bonds, that's what you hear today and what we've been hearing for a while is Tina. There is no alternative, right, you have to buy stocks because bond yields are very low because interest rates are very low. Well, if you look at the current situation, we've talked about this before, you get more for your money in stocks than in bonds. I mean, it doesn't have to be that way, but it tends to be that way in America, and if you buy a 30-year bond today with a 2% yield, you're paying 50 times the earnings for an investment where the earnings can't. go up for 30 years now if someone says I want to sell you things, is it 50 times or easy or can you go up for 30 years?

You say that doesn't sound very good, I'm not sure it's much better than 30. one year bonds, I mean it's clear and that's one of the alternatives that people have, people really have three basic alternatives: cash short-term, which is an option to do something later, long-term bonds or long-term stocks, and stocks are cheaper than bonds, Charlie. Charlie Munger recently said, the vice president of Berkshire Hathaway had his daily meeting just a couple of weeks ago and in that meeting he said that there are a lot of regrettable excesses and that, as a result, there are a lot of problems coming up, right?

I agree that there will always be trouble coming, yes there was trouble coming in 1942 when I bought the first shares. All kinds of problems. The Philippines was going to fall very soon. I mean, there were all kinds of problems in 1949. There were problems, certainly, problems in 2008, when I wrote an article for the New York Times I said trouble is coming, but I said buy stocks, would I repeat it this time, if trouble comes Would you still say buy stocks now? I would say buy shares if you get enough for your money and you know we buy. some stocks but we don't look we're not buying the stock market we're saying I'm buying let's say American Express we own American Express there are 800 15 million shares insulted this morning 126 or something like that it's selling for about a hundred billion dollars now The real question is whether the company is worth more or less than a hundred billion, not what the stock will do tomorrow or next week or next month, you said just a few minutes ago when we asked you around the world.

Exchange right now Berkshire Hathaway has a net buyer of shares, you are in a net buy because we have been in that buyer of shares or actually I have been a personal net buyer of shares since I was 11 every year and there have been 15 Presidents Americans in my life more than a third I have lived under a third of the line I did not buy stocks Senator Hoover I was only about six months old, but after that there were seven Republicans and seven Democrats under whom I bought stocks each of them now I am what actions every day there have been a few times.

I thought the stock was really high and I even wrote an article once or twice, but that's very rare, but you concluded your partnership. I immediately ended my partnership because it was too expensive, yes, okay, but this is not a time like that, we own socks worth two hundred and forty billion dollars, now we consider it as businesses worth two hundred and forty billion dollars. all the parts are in order, but I love owning those businesses. You also have over one hundred and twenty-five billion dollars in cash lying around. Yeah, well, we'd like to buy more businesses.

We're here Warren with you at the Berkshire Hathaway headquarters building, this is it. upstairs in the room called the cloud room and this is a room where you often take students to talk to them about questions they have when they come to visit you. You also do other things up here, other presentations, yes, I had students. here for dozens of years and for many years 40 schools came, they came in groups of eight for five days, I spent a year and they came from all over the world, we don't have from Peru, León from China and from Israel and we had a good time, he said it all again .

I've stopped now but I started teaching when I was 21 and when I got to 88 I thought I'd take a break, well there are a lot of questions coming in. Viewers who have been here today wake up this morning looking at the stock market indicated by a nearly 800 point drop for the Dower, actually below our worst levels of the morning, which is something to say when you're still

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ing It went down about 786 points, but people have a lot of questions about the economy, they were wondering what is happening right now, particularly with the coronavirus, there is a lot of dataeconomics at your fingertips, because not only about the many companies that Berkshire owns but The companies that it owns in what you are seeing right now around the world.

Well, it affects several companies. I would say I received feedback. I receive some comments monthly, but from almost all companies and from many of them. I had some comments about how I was affecting them and how that was affecting them at that time. I'm sure it was accentuated, but they have been affected by a. They have been affected by terrorists. They are affected by taxes. They are affected. The most important thing is that they are affected by competitors. in supply and demand over time and I have no idea what our businesses will do in six months or twelve months.

I think not just our businesses but In general, American companies are doing fabulously better in thirty years than they are in twenty years now, and in my opinion the long term is very easy to predict in general terms, but in an important way , I don't think there is any way to predict what the action will be. The market will do it in ten minutes, in ten days, or in ten months, so I work on what I think I can do, and as desirable as it is to know what will happen in ten minutes, that's simply not something I can do. can do.

I'll never be able to master it, so fortunately I can come to a pretty firm conclusion that 20 or 30 years from now business in the United States and probably around the world will be much better than it is now. What are the momentary implications that you have seen in coronavirus, what is a business example? Well, an example of who isn't. We have maybe a thousand Dairy Queen franchises in China here and there, we just treated them to be the old type, not with food, but a lot of them were closed. but those that were open are doing any business to speak of and an apple, is what I mean, they are much larger stakes like Apple will do and 5.6 percent of Apple and and the company came out and said that it is affecting not only to your stores, but all kinds of supply chain things and I find that some of our companies have supply chain agreements that are being affected by this that I didn't even know, like the one I bought the other day from Johns Manville, For example.

Normally you wouldn't think they have a big supply chain, but Shaw Carpenter, whatever. I guarantee you that a very significant percentage of our business is affected by one layer, but they are also affected by many other things. and the real question is: where will those businesses be in five or ten years? They will have ups and downs. Our candy business is a wonderful business, but it loses money seven months of the year, but the good thing is that Christmas comes every year. year when you look at the economy and how things were moving forward, let's say earlier this year, yes, when things first got better, but how would you measure the US economy?

Well, it's strong but a little weaker than it was six months ago. does, but that refers to a wide range of businesses. You look at the carloads, the railroad carloads that move goods and there again they were also affected by the tariffs because people buy all kinds of things in advance, there are always many variables, but business is down. and and but it's come down from a very good level, so I would say that if we look at our seventy businesses and they actually represent hundreds, they are also a little bit softer and then I was with the folks at Nebraska Furniture Mart on Saturday night. and their business increased quite a bit in February, but that is because the weather was good, so there are many variables that play a role.

Why do you think business was down, let's say in the last six months, is it a decline in confidence or is it coming from levels where there was unusual activity before that, well it wasn't really down, it's just the level and a little bit more soft it may be now, but hey, tariffs, the tariff situation was a big question mark for all types of companies and still is for some. degree, but that was front and center for a while now coronaviruses front and center something else will be front and center six months from now and a year from now two years from now the real question is where are you? and where are these businesses going to go In five, ten, twenty years, someone will do it sensationally, some of the mold will go away, and overall, I think America will do very well, you know, that's how it was in 1776, but still You see things like the wagon, look very closely, I observe everything, but I don't. making specific investment decisions, but I enjoy it, I mean, I don't know what's going on, but I also don't think I can make money predicting what's going to happen next week or next month.

I think I can do it. money predicting what will happen ten years from now okay we'll tell you more about what's happening just because you like to know about it like I said you know certain businesses are highly dependent on whether they are retail for example in months determined. but the big trends that you see are happening, I mean in terms of the movement towards online commerce and I mean the big things are still moving, but we have to make an investment in the airline business and I just heard that you know that they cancel even more flights and all that, but the flights get canceled because of the weather, all this happens in this case, they will cancel them for longer because of the coronavirus, but if you own an airline for 10 or 20 years, you will have some ups and downs in the current business and some related to the weather, it can be all kinds of things, the real question is: do you know how many passengers they can carry ten years from now 15 years from now and what the margins will be and what the competitive position will be?

But still look at the numbers all the time. I admit you mentioned airlines and you own stakes and all the major airlines, but not as much as Delta. I believe he owns or is north of 11% of Delta in Dortmund at the moment. Well, right? I know the largest position is at Delta, three of the four positions are mine, one of the positions is one of the other colleagues in the four positions, but we own about ten, close to ten percent, of the four largest airlines. big. There has been a lot of speculation, in fact, some of the questions that came up this weekend were questions about those airlines, wondering if I would buy any of them outright.

Have you considered purchasing any of those companies? It would be highly unlikely that we would do so. To say that it is impossible but it is complicated because well, to begin with, they are regulated and there is an interaction. I'll just give you an example, it wouldn't be like that, but with Delta we own 18% of American Express, an emergency press is a bank holding company. and bank holding companies have limits on what they can do and we are passive holders of a bank holding company with American Express, but if we own an airline that is linked to them, they have many agreements.

Complications because it is a regulated industry. Every time you enter a regulated industry, you have more complications in transactions. So is it fair to say that you like these stocks and would own more if you didn't? If it weren't complicated, well, if to go beyond 15% in any company we would have to go into Hart-scott-rodino. I mean, there are a lot of rules as you increase your property, obviously almost anything we own we would like to have more of. Are you buying more? Any of those bets right now I'm pretty tight lipped when it comes to what we're buying to say that everything we own we like, you know, and there are very few stocks that we own and I view them as part ownership and businesses there.

There are very few that are selling at any price where I would sell them a little higher. Well, let me ask a question that came from Tony Dickinson. He said that in the fourth quarter Berkshire sold 55 million shares of Wells Fargo in case shareholders see this as a lack of confidence in the planned new CEO change and what Warren's future outlook is for Wells Fargo. Well, I won't give much advice specifically on Fargo, but it is absolutely true that we have sold our position, some of it was sold to avoid. be above 10% because then you have some presentations to the feds and so on, but more than that is asked for, yes, we have sold, we have sold well, more than that, I think 8.4 percent was the last, yes , that sounds good and now Come on, we sold at least all of Wells Fargo in the fourth quarter and we sold before.

Can I ask why? Just because I received several questions. Yeah, well, I can understand it, but we just don't, we don't want to. give some advice about what we are doing because it might change what I do tomorrow no, no, we talk about everything except we don't give stock advice. I'm trying one more guys, Dickinson, just because I think I have 15 or 20 different ones. questions about this Berkshire owns between 30 and 0.58 billion of Bank of America and 17.3 9 billion of Wells Fargo 1. The positions have been increasing while the others have been decreasing. There are Warrens like Bank of America twice as many as Wells Fargo and how should shareholders be with me all day?

Yes. Well, I think you saw that we bought, we bought Bank of America, we sold Wells Fargo, okay, let me ask you a broader question that is just about interest rates or the impact that that could have. Varun Jane writes on Facebook. Hello. I am a great admirer and student of Mr. Buffett, please ask him what impact the zero interest rate environment in places like Japan and Europe is having on his banks, whether business is still good, and whether the prolonged low interest rate regime in the United States hurts the outlook for American banks such as JP Morgan. etc. and in such circumstances do Indian banks having high return on equity look attractive to Mr. boffin I can't comment on that but generally speaking with a lot of that but there are a lot of other variables too but banks are going to make more money if there are higher rates with a steeper curve, there is a curve that makes it more important that, in other words, 10-year rates versus short-term rates can make more differences than the level Absolutely, but US banks have made a lot of money from very low interest rates around the world if you look at the UK, Europe or even Japan. the lower rates have made it quite difficult for the banks, the returns on equity are high or not and they have to use more leverage, they even get the same returns and I don't like that either if you're talking about the curve we're on If we look this morning, the five years a year is reversed, so it's not now, but the ten years below 1.4 percent this morning and we think about the ten years at 14.4 percent, which means you're paying 70 times the profits for something you can't. increase their earnings for ten years they say we could use a stock and they said, you know, this is a great stock, it sells for 270 times earnings, earnings can't grow for ten years, yes, yes, you would say, well, explain that It was necessary Me again, true, but no, the interest is that we have literally never seen a situation like this in the world.

I mean, you can go back and read Keynes and you can read Adam Smith and you can read, you know all the greats and they don't. I'm not talking about negative entropy and never about costs, there could be a supply in the band, all these marginal costs, but the brilliant economists never anticipated that there would be 13 trillion or something around the world of negative interest rates and I don't know what it means that and yes we have a lot of people to speculate about what it means, but in 10 years or 15 years we will look back and say, well, it's obvious what we will see.

But it is not a normal situation and interest rates are the basis of all value. I mean, if you knew that interest rates were going to be zero for a hundred years, you'd think one percent was a big percentage. rate of return, but you would also know that if you want something to return one percent or that's what a bat is and rates go up to eight percent, you would lose virtually all of your capital, so it's a huge factor and we don't know The answer, central banks. We don't know the answer, all we know is that it has been useful in stimulating things and particularly asset prices for ten years and what we thought was temporary in 2008 and nine in the sense of monetary policy to stimulate, we just put our foot on the accelerator even more, the entire world has made it clear in the letter that they do not know how long these interest rates will last, you and Charlie never tried to solve these things, but we did have st.

Louis Fed President Jim Bullard spoke about the program last week and said he expects to see these interest rates low for a long time, which raises many questions about what this means for the stock market and what means for the banks. What does that mean for insurance companies? What you mentioned in the letter: It's bad for insurance companies, but it's good for stocks, bad for insurance companies, and what happens to insurance companies as a result? Will more companies getof insurance, except those who actually obtain? What hurts us are life or annuity companies that have promised returns, the property casualty business doesn't promise returns, they still hold money, so it hurts them, but if you promise someone an annuity, they're closer to paying you. three or four percent and now you find that you're reinvesting your money at one percent or something that you know you're going to disappear our insurance company is being forced to make riskier and riskier bets, well, they shouldn't, I mean to the answer yes, if you need it, you get three percent and you are only getting one percent the answer is to stop giving three percent it is not to try to get one to three and do more dangerous things you should always adapt your consumption to your income you shouldn't try to adjust your income to your consumption, which is a basic principle for individuals, companies and everything else, and looking for performance is really stupid, but it's very human, I mean, I understand it and people say, Well, I have saved all this money in my life and I can only get 1%.

What I do? The answer is that unfortunately you learn to live on 1% and you don't go and listen to a salesman come and tell you I have a magic way to get you 5%. Do you believe that? That's what should be happening, do you think? There is more risk in the domestic market and you see that and you see that in what they call leveraged loans and weaker agreements there are no people looking for yield, there is no doubt about it and that It's stupid and it has consequences over time. But they are very human consequences that could have a great impact on the market, that is as far as it goes, yes, yes, it is something that the things that are billed and little by little people go crazy and the technology companies at the end of the 90 can take a lot longer than you think, but eventually you get to midnight and everything turns into pumpkins and mice, you know, that's the downside of yellow interest rates, pension savers, anyone left in a crude position of that on the alternative side of things whether rates were to rise rapidly or not. maybe not even that fast, what does that mean for the federal debt?

Well, it depends on the average maturity of the debt, but our maturities are pretty short, they've gotten a little bit longer, but if you take 22 trillion or and and you're borrowing at 2%, you have 400, what do you have? A guy that is actually up to 200 billion. I mean, you have 40 billion expenses, but if it gets to 5%, you have a billion expenses. I'm serious, I know what. 5% you have, you have a billion expenses. Sorry, but we are benefiting Lee greatly in our national budget from the fact that interest rates are very low and therefore interest costs have not increased as you would have anticipated if you were.

Looking at the scene 20 or 30 years ago, was the increase in the national debt, you know, Austria issued 100-year bonds, you know, two percent or something like that and then it went very far, but yeah, and I think maybe they yield 1.1 or something like that? I don't know where they are now, but it's great if you're a borrowed item that Jake could have had everyone refinance his mortgage, it's an argument for the Federal Reserve, or I'm sorry for the treasury department issuing longer bills. Yes, but I would not have been wrong like five or six years ago, but if we are under the president's slope, it would still cost more to extend it, but you are extending very, very low rates, and that would be what I would do.

I'd be inclined to do it if I were secretary treasurer, but I would have missed a lot of bets over the last ten years with Warren again for people who are just waking up to you and want to know what you think about this selloff. This morning I saw the Dow Jones drop 700,800 points in the morning. What's your reaction when you see something like that? Well, my reaction is that I like buying stocks, so I wouldn't wish it on anyone else, but I like it if they want. selling them could be cheaper. I prefer it, so if that's about a 3% decline or something like that, I don't know how many three percent declines I've had in my life, but there have been a lot and I can't. think about one that you shouldn't have bought, you know, basically, that doesn't mean the stock is going to go up or down next week or next month or next year, but if there's one thing if you like owning American businesses, you are getting a chance to buy 3% cheaper.

I don't consider it to be much cheaper, I mean, but how can it be bad news unless you have to sell shares now? If you have to sell them for some reason, that's what you are worse for. discount if you don't have to sell them, I mean, someone can come and overprice your house today and it might be 2% less than what they offered you yesterday, but if you like the house, it might not make any profit . Does that mean Berkshire will buy shares today? Okay, we certainly won't sell them and, yes, we did, we could easily buy some, sure, let's talk a little about Barron's cover story that came out last week.

The good news. on the cover is that they believe Berkshire is worth more than what it is selling for right now, the bad news is that they said they believe that is partly because it has a deep conglomerate discount and they think that if you weren't running it, could dissolve, what is your response to that line of logic? Well, conglomerates have had a bad reputation and for good reason over the years, I think I closed my partnership in the late 1960s and there was some very abusive conglomerate management where they played with numbers and did dirty pooling, like they called it accounting, they wanted to increase their shares and publish stories to do so so they could issue more shares, they were kind of chain letter agreements, there have been many of them.

There have been a lot of bad conglomerates and probably disproportionately so, compared to honest single-industry companies over time, we don't think we're that kind of conglomerate that we've certainly never wanted to issue stock that we've never wanted. In our case, the interesting thing is, of course, that the American public has gone crazy with its enthusiasm for bourgeois conglomerates in recent years, if you think about it, I mean, it's been the incredibly popular area, but they call them funds indexed, you buy 500 companies, 500 companies together and that is the definitive conglomerate, right? I mean, I've recommended index funds to a lot of people and when they do, they buy 500 companies and they're going to have 500 companies a year from now and five years from now and they think that group of companies will do very well and I think our group will do well, the difference with an SP 500 index is their 500 different companies managed by 500 different management teams that are all focused on their business they may not have a centralized operation that flexibly runs all those balances that we have our businesses are run by separate people I mean we just finished Valentine's Day and I didn't really like what pieces are wet in the boxes and it's probably been at least ten years since I've been to See's Candies Factory , you know, I get the figures every month, but I don't have them, I don't know. how to make chocolate, yeah, think about that kind of thing.

I don't select the new locations that we have managers for our businesses that are very similar to the managers that we have for the businesses that we own, like American Express or Coca-Cola and There are a couple of things we can do, we can determine the dividend policy of our subsidiaries, we can control their capital allocation to a certain extent, but in most capital allocations, whether it's buying new equipment or something like that, they make the decisions about what BNSF railroad is going to spend. three and a half billion dollars and I don't, I don't approve a single dollar of that in terms of capital expenditures, they know what they need to do or they need to determine how many locomotives and whatever so that our managers are, I would say, in a sense, almost more independent than the managers, the 500 or so who go out and report to Wall Street week after week, might have investor relations meetings and are always explaining what they're doing and trying to get approval from analysts and all that kind of stuff and we just tell our managers to do what makes sense, outside of the idea that they don't have to tell individual shareholders or the investment community what the advantage is of having it there. the capital allocation part, well we couldn't, yes we can move capital in if you move capital from one stock to another and you get a play, but I mean, you pay a tax and that can be a dividend tax if you sell, but there are a lot of taxes incurred when moving from one business to another, whether at the corporate level in some cases, but certainly at the individual level, and we can move capital in spades, again it exceeds the candy we bought in 1972, we have moved several thousand of millions. dollars from the candy business to other types of businesses and we would love to be able to use them all in the candy business, but it's just not that kind of business and we free our managers from having to deal with a Wall Street that deals with baggers , they own all kinds of things that are what I consider a less productive use of their time, however, there is also a situation where there are some activists who have been interested in the stock, including Bill Ackman, who has created .

The stake hasn't said much about it, but I think he has made some comments about how maybe Burlington Northern Santa Fe has improved marginally. You can look back on Bill Ackman's experience with Canadian Pacific Railway and wonder if he is getting better. a position because you would like to see him take a more active role there, well, we notice that one of the railroads wins when his margins are better, I mean, and we certainly put a lot less pressure on him than on Wall Street, which would like a next week or but We, our managers, are very aware of what is happening in other industries and have made changes where we do not believe that some companies are doing as well as they should, overwhelmingly we have managers who are very, very good.

We have capital available to them for anything that makes sense and we decide how much they distribute where the capital moves and sometimes it moves from one industry to another and in certain industries a consolidated tax position really is very helpful for us. There is one viewer question that The answer was consistent and question: Bill Ackman recently noted that some subsidiaries like Geico BNSF pointed out their peers in some areas. Would you agree with that and how can your success or drive improvements in subsidiaries while maintaining a decentralized management structure well? As Geico we bought control in 1995, we had about two and a half percent of the auto insurance market and we're at about 13.7 percent of the market, so we've gone from two and a half billion by premium volume or there's a premium of about 35 billion, we're number two for State Farm now, we were number six or seven at the time, so I'd say it's not at all due to Berkshire, but Tony Knicely for almost all of those years, Geico has been the envy. of all the other companies and the auto insurance business except the progressives, but they've done a good job too, but I like, oh, it's worth tens and tens and tens of billions more than one that we water, plus all the profits, we are only left with the good will. value, so it's been extraordinarily well managed and with Burlington I think we paid a five billion dividend last year and we paid thirty-five billion for it, so it gained market share and its business, its operating margins have improved, but they have not improved.

As much as other railroads, do you believe in accurate railroad scheduling? Well, we'll see, I mean we saw it a lot and and for those who don't know what that is, it's something that irritates customers because it makes things more complicated. a little more rigid, but it doesn't, yes, it makes the customers adapt to the railroad more than the railroad adapts to the customers and practically everyone has done it with a fellow named Hunter Harrison had enormous success. We worked with Bill Ackman at Canadian Pacific at NSF. If you go back far enough, he and there's a book on the variants of him, but he's at Illinois Central, Canadian National, Canadian Pacific and then he moved on to CSX, he developed a method of rail transportation where the customer doesn't adapt. more to rail and improve margins dramatically our margins are close to what the best railroads well only a few get from precision rail other than we have gained share because because the railroads are apparently very old customers like us better and more In the long term we will see, but it is not something we cannot do.

Here's the latest on the coronavirus. China reported 150 additional deaths and 409 new cases overnight. South Korea raised its coronavirus alert to the highest level afterwards. the number of cases in its globe from 31 to more than 750 in less than a week stocks in Asia fell overnight Hang Seng FL ofHong Kong 1.8% South Korea's kospi fell almost 3.9 percent Shares in South Korea's two largest airlines fell as they canceled flights to the city of Daegu, where many of the new cases were detected, Meanwhile Italy's government is struggling to cope with the largest outbreak of the corona virus outside Asia, stocks decreased overnight, the government put at least 10 cities in northern Italy under quarantine and canceled the last few days of Carnival of Venice elsewhere, at least in schools, museums, universities and cinemas, were closed and major football matches were canceled at this time.

I mean Boris Johnson came out today and ER said the risk to UK citizens there remains low, I would say. that our officials would say that here to the U.S. Citizens are still low, but there is a significant difference between supply chain disruption slowing down dozens and dozens and, in fact, hundreds of companies at all and that is slowing down global growth. What worries me is that we don't know three three months six months nine months if it will ever get to the point where we start to see in many countries around the world these outbreaks where we don't even know the origin of some of them and if they multiply like this is when I think I could really get to this point.

It remains a slowdown in global growth. No one in most of the world is worried about getting the coronavirus and they can't go out and they can't, you know, go to the movies or the gym or a restaurant, but I wonder what we don't know, they're a major trip. which is changing right now, conferences are being cancelled. There was an article in Time magazine that speculated about when the Olympics in Japan will be canceled over the summer. There are real implications here that could reverberate having said that the closer we get to spring, the better it gets, it was a weather, there's everything a type of flu, you know, you know, I was looking at gyms, someone tweets gyms before yeah If you go too far with fear and panic, they accuse you of one thing, if you don't go far enough, they accuse you of the other, so We really need to sit here and every day report the facts and I try to stay attached, but there's something about a pandemic that's just different from other black swans - it's a terrifying prospect, let's get back to our morning guest Warren Buffett joins to Becky in Omaha after the release of her annual letter to shareholders over the weekend Becky, you took a plane, I mean, we, it's in the back of our minds, it's in the background, there's no where and this goes back to 1918, it goes back to 1980 if you look at the numbers of what happened.

In that pandemic, when it spread throughout the world, up to 50 million people died, since a third of the planet's population was infected, 500 million people were infected at that time, 675 thousand Americans died at that time. moment, so inevitably your mind goes back to what happened in the past because, as human beings, we always look back to history to try to predict the future. It doesn't always work, it's not always prophetic, but it gives you something of what will happen if this happens. are getting worse and worse now Andrew brought up the idea that it's hot, we're approaching spring and in many parts of the country or many parts of the planet that may be good news, but we don't know if this weather, if this is one of those viruses that die in warmer weather, wait and see and with some hope, I actually think from what I've heard from people who know a lot more about viruses than I do, unfortunately this We'll get there by summer and in terms to have a vaccine, you know there's a long way to go so you know it's a scary thing that I don't think should affect what you're doing, but in terms of the human race, it's scary when you have a pandemic, yeah , I guess this one is particularly scary because it's new, so there's no built-up natural immunity in any of the populations and you wonder what's going on particularly in areas where there isn't. the same health care structure that we have in the United States or in some of the developed nations, I guess that's a big part of the question for him, yeah, it's, well, I think about the nervousness of our annual meeting, I mean what is done in a second.

I mean seriously, it could affect at that time, it could affect, oh, we have questions from viewers asking just whether the annual meeting will be different this year, especially since there is a large Chinese contingency of shareholders. I don't think so. so that will certainly be affected and, by the way, I mean the flow is particularly difficult for older people, we will have two guys on the stages with combined ages of 185 so well that we will not look for people or show any signs of contagion, but that's one of The problem with this is that it has a long gestation period and it's highly transmissible and, again, you talked about it before, it's something that you see and the results of businesses, even some of their own ovens, that I had not anticipated.

Well, we have airlines, for example, it infects companies. Now, actually, my father used to tell me a story that he was 14 years old in 1918 and he told me what happened in Omaha, you know, during the great Spanish flu epidemic. days and there will be pandemics in the future, now what they hope to obtain is a universal flu vaccine, but that is very far away, it is not impossible. I mean, I asked my own scientific advisor, Bill Gates, so I talked to him. I called him, I talked to him the last few days about this and he's optimistic about the long-term prospects for universal prevention, but they're not coming, you know, not being here in ten years, what are they?

What are Bill's concerns as someone who spends a lot of time traveling the world and trying to help medicine in some of the world's least developed arts? However, the Gates Foundation is very active and trying to help with this and and Bell says the CDC is the best in the world and I mean we have fantastic resources in this country, but a pandemic is a pandemic and there is just no evaluation, but I have heard that summer is not likely to bring about the end. about this, do you know why, but I don't know and you know you shouldn't ask?

I shouldn't offer my opinion on that because I pass on stuff right here from people who I think are smart, but I actually am. ask for Bill's opinion, not yours, well I shouldn't and really shouldn't quote it, but he's the guy I asked and didn't talk to anyone just a few days ago and he loves talking about science and he could do it so he can understand it, which is quite a trick at the Gates Foundation, they are taking it very seriously. I'll put it that way, the Gates Foundation is going to try and I'm sure we're spending human resources and financial resources have, I mean, maybe this is more than you know, but do you know if they've sent human resources to China or other places, I don't know, I don't want to comment on that spectrum.

Bob din as human health. and even particularly this bill knows a lot about vaccines, let's talk a little bit about Berkshire Hathaway, we were in the middle of a conversation when we had to take a break before, but this question has come up not only from Baron in the cover story there , but also elsewhere, about whether Berkshire Hathaway would be worth more if it were broken up, that's a good question, I'll tell you that if you said, say, the stock market didn't change for two years and interest rates didn't change, then He had a two-year period and said we would sell all the businesses.

I don't think I mean you would have the expense of selling them now if you sold to all the people who took advantage of the leverage. If you raised them to their maximum, you could get a little more than what the shares sell for, because it would be very tax efficient, very tax inefficient, interestingly until 1986 it would not have been. I mean, there was a general public utility doctrine that governed corporate spinoffs. and then you could get rid of businesses or securities if you did it right, you could get rid of depreciating securities or businesses without a tax at the corporate level, which was done regularly in various ways until 1986, they overhauled the tax code in a big way and killed. general utilities, you can't do that now, now you can go up, you can have referrals in this or that business, you probably have to lie a little bit in terms of your purpose to get the best tax resolution and it takes time, but it can't be divided, You cannot dispose of the entire business, business by business, without having a very substantial tax.

I thought it would never produce again, on the other hand, having them together produces, there are some very valuable synergies, now we do not use leverage as much as the people who would buy and piece by piece would do it so that we could leverage Berkshire to the sky, they I promise people that we won't because we have insurance promises to people for 50 or 100 years and we have shareholders that they We will own the shares for 50 years and they don't want us to say leverage to the sky, but there would be no profits if we just announced that for the next 24 months you can go in and buy any business. we had them and we would sell them to the highest bidder you intended to talk about this in the annual letter you said that the key to my only Berkshire or the key to my only Berkshire institutions is my faith in the future judgment and fidelity of the directors of Berkshire .

Wall Streeters will test them regularly, barring fees, and many companies the super seller could win. However, I don't expect this to happen. That's not exactly true. I think it helps a little when writing it to know that there's no doubt that Wall Street would love it. come and sell whatever we have, I mean, although there is a V every time there is a transaction and there are high fees and there are fees for a response, you have to be this, so we have had all kinds of people snooping around. Around that, then they know that they are not going to do it with me, but they will not do it, nor will they do it later.

I'm going to let every part of every tribe go to charity and it's 99 percent of my net worth, so I have no one cares more than me about getting the most money for those philanthropies in the years after. to my death and that's going to take place for 15 years and I say keep it all in Berkshire, but if I thought it was going to be Run Wall Street in a responsive way. Instead, I would do something else and spread the money across these philanthropies and not tie it all to Berkshire, but Berkshire has a very unusual shareholder base.

I mean, we have people who own Berkshires and a lot of them are just 50 years old, just the way they are, but people buy them to own them for life and we're going to manage them in a way that they won't be disappointed. Do you think that people who are relatively new shareholders of Neuer buying the B shares have the same mentality as people who have been in this for fifty years at the time, well, we try because that's who we encourage. I mean, in effect, we don't want everyone to buy our shares. I mean, there are only so many seats.

There are about one million six hundred thousand shares outstanding, all seats are occupied. I love the shareholders we have. I don't want to go to Wall Street and try to get new shareholders. They will replace the people we have. What we want to have is people in those seats who are in sync with us. You can run a French restaurant or a hamburger stand and if you serve good hamburgers you will do good business. stutters and you on the fries shouldn't do it. You don't do the same thing there, but you can't run the French restaurant and serve burgers inside and you can't run the burgers to serve French food inside, so we advertise in our deeds and our words and in every way possible. we are about and we are looking for the seats in our church to be filled with people who are in sync with us and we have them there, we receive the same people every Sunday and I see no advantage in going out and telling everyone and we will also do wonderful things and we will have those seats as a place because the only way to get a seat is to put someone else in that seat.

There are a limited number of seats and they are all

full

and you want them to be

full

of people who are in the sink with the company policies and therefore you have to explain those policies and you have to live up to those policies and for 55 For years we've been trying to make it so that you get exactly the shareholders you deserve, okay, not to mix metaphors, but can you have a decentralized head office that manages both the French restaurant and the burger joint? Well, they are not trying, we are not trying to have the railway administration run the hotel of the year in a decentralized way.

That's what I mean, a decentralized headquarters. that is run by a conglomerate in charge of all those different businesses, well, we could function well, we have a decentralized administration, as it is, we could have someone in charge of all the small companies, it is another one, not the big one, andwe could have divisional eyes on all kinds. In many ways I think we would have more overhead. I think we would have a different type of manager or managers who would run their own and they like that they never have to finance their businesses. I mean, they'll never have to go to Wall Street.

They've never, probably saved 25 percent of their time and I want them to feel like they own their business and that's all they're responsible for. If we make a mistake in some other way, they still get paid based on how they do. Again, we attract managers who like to operate on that basis, we don't particularly attract managers who think they're going to keep moving step by step through various divisions and eventually run the whole place, one of the things those people wrote about a lot. of people had questions about the bank about what's happening with banks, but you've changed with some of your investments over time.

Jason Goldberg writes in and says please ask Warren about his opinion on banking stocks in general and Wells Fargo in particular. in recent quarters it sold almost a quarter of its long-held stake in Wells Fargo and in the fourth quarter it dumped a third of its Goldman shares, Goldman Sachs stock, although it still owns more than seventy-five billion dollars in bank stocks, so what do you do? If you think about the banks, not necessarily the sell-offs today because you don't look at the day-to-day well, banking is a good business if you don't do stupid things on the outside and I mean, basically, and it's a business that the banks Own earnings among commercial banks earn between 12 percent and 16 percent roughly tangent to tangible assets, that's a good deal, that's a fantastic deal versus the long-term bond, you know, two percent. , they can choose between a two percent and a twelve percent instrument. net percent, so which one is going to gain over time?

So if you ask me if I think banks are going to go down to where they only make three or four percent on tangible assets, I don't think that's going to happen, the question is really whether to do something enormously stupid, I mean, which periodically a number of people have done banks and I feel very good about the bank wheel and they are very attractive.compared to most other stocks that I look at and most of them buy a lot of Bank of America shares each year so our ownership of Bank of America America this year will probably go up seven or eight percent without spending a cent, I think.

I would like to do any business, any good business where my ownership percentage increases by seven or eight percent every year without me having to spend any money and I also get a dividend, so they are very attractive compared to the rates of interest. and against or against bonds and against other stocks in my group, you say that occasionally they do stupid things, maybe you are talking about Wells Fargo with the scandal that it just resolved on Friday with several of the regulatory institutions that were looking into this, the researcher implications that were taking place for three billion dollars, does this mean that they are finally past that and can move forward?

I don't know the answer to that, I know because I don't know what else is exceptional, but the Wells Fargo classic in terms of a lesson, my partner Charlie was martyred, he is, you know what he says, every time we have a problem , you attack him, he immediately says: announcing a perversion is not an ounce of prevention, it is not worth a pound of cure. An ounce of prevention is worth a ton of cure and we've seen it time and time again and the interesting thing is I don't know the details at all but the original thing was a bunch of fake accounts, now I don't know.

I don't know how if you open a couple million fake accounts you can make money from them. I don't know, the shareholders didn't make any money. People say that the Santa structure was created so that some of them are almost a system that you can think of and as soon as you learn, you can come up with silly incentive systems that we've made ourselves. I mean, you can get people to do the wrong thing because they will do what you incentivized them to do and they obviously had a very silly incentive system that people started. playing in various ways and the most important thing is that they ignored it and when they found out, I mean, you're going to do stupid things in business and we do them every day, you know, but yeah, they absolutely have to attack a problem as soon as possible . as it happens and yet you know it and if that had happened, well, Fergus is older he would be a lot better off, but what Fargo shareholders did not benefit from was opening accounts that were fake accounts that had nothing in them , I mean.

Someone was getting paid so much, Burke, that the practice spread, because bad practices spread if they're allowed to spread and ignored, which is a total disaster and look at the consequences two or three years later, who it's paying? the shareholders are paying for something that didn't do them any good that's why you sold some of the shares no, that's not specifically, I know you don't want to be specific when recommending what stocks people have to fill out their Outside of that, but oh well , I want to ask you a question about Todd Combs and his new role at Geico.

I received several questions that came out of that and let's use this one from Peter Lam Paris during last year's

interview

on CNBC after the 2018 letter was published. He was asked about the succession at Geico and he mentioned that in a recent meeting at Geico he met about 40 of its top executives and after each introduced themselves, they said their time with the company was the shortest: 19 years. Please explain. Why were none of these 40 top executives qualified to take over as CEO after Bill Roberts retired again? That's Pete Lam Paris from Chicago. Bill Roberts took over not even two years ago and was the last one and he's done a great job working with Tony.

I mean, Geico is my first love. I tell the other companies that they can't compete for my second love, but they can't compete for my first love. It was just Geico because it goes back sixty sixty-nine years and it did wonders for me. Anyway, Geico Bill Roberts took over the lesson two years ago and then in October, November of last year he said he would like to retire in a year, he would adjust it in any way that would make it easier for us and not we did it. In my opinion, I have the person who will replace him at that time and Todd Combs, who has been with Berkshire for 10 years, was actually a product manager at Progressive in the past and knows a lot about insurance.

Insurance is probably the only business I know. about the world, okay summer, no confusion, but I understand the insurance business to a certain extent. Todd understands it very well at the operator level, so Todd is there and I very much hope that he is not there for too long because I would like to get him in house, uh-huh, but our intention is always to promote them within and we hope we have chosen the person right at Geico, it's not if there's no one there, you just want to have the right person because when you put Somebody in you it's going to keep him there for a long time and that suggests that Todd's not going to be there for long.

I don't think you know, no, the plan is not for him to be me. It means you haven't made a permanent career change and I don't know how long you'll be there, we have a major problem that all insurance companies have, but progress has done a better job of managing the risk correlated with the rate and that's what we're focusing on now is correlating the rate, in other words, having the right rate, charging the right amount, charging correctly, if you were in the life insurance business and you thought that 80-year-olds They had the same life expectancy.

At 20 you would have a big problem and what happened is you would write to all the 80 year olds and someone would write to all the 20 year olds, so the same thing happens in car insurance, there are a lot of insurances, I'm not sure. You might prefer 80 year olds to 20 year olds, well you could and yes he would certainly prefer 80 year olds to 16 year olds. I mean yes and you would prefer the 16 year old woman to the 16 year old man. . There's a whole There's a whole bunch of things, so you have a core, you really have to segment the risks and that's hugely important and every company is trying to do better all the time.

We do it much better than 50 years ago. We have room for improvement in that. We are focused on that and in the meantime we are growing faster, they were gaining market share with Geico. It's great, since Todd's job is to focus on that, but it's also to become out of work very quickly and, preferably, work. He would definitely rather be out of a job with someone from Geico Eric Lafont writes a follow up question and says Warren, why did you and Ajit decide to name Todd Combs as CEO of Geico? You already answered that part, but how will you do it? he'll be able to run Geico, manage a thirteen billion dollar investment portfolio, oversee Haven, and be on the board of directors of JP Morgan, yeah, well, let's keep him busy and we have totally unlimited use of him, that judge, oh right, I mean we wanted to. being efficient, that's what it is and and you know, I'll work 70 hours a week.

The portfolio question is interesting most months, not even bidder Todd makes a single change to his portfolio. I mean, portfolio management is something you learn over decades and when I ran Salomon, you know I was managing a scholarship portfolio, it's not something where you have to sit there day in and day out and new people do it that way. way, but there are many years in which I would just leave the portfolio completely. The same thing didn't make any changes that we would be better off, so it's not about that, but you're right in terms of the JP Morgan frontier.

He will be a very busy guy. Geico is the top priority, but it's not like that. I'm not going to say top priority for a long time, let me move on to another question that Max Oh wrote 205. Todd Combs and Ted Weschler have outperformed the S&P 500 since they started working at Berkshire. Why don't you reveal your history? Why not? Why don't you reveal his history? They said, well, we won't reveal it. I think it would be a very unusual way to find out all the sales from last year among your sellers or something. I think they have the right to work and relative anonymity our directors know how they do it, I know how they do it, we make a lot of money with them, I feel very good, I mean, I feel very good about it, Ben always, but we're not going to say, we are not going to tell you. how much each candy store sells their candy See's r who was the best the person who anywhere generated the sales or whatever well, let's jump to Berkshire's overall record against the S&P a Berkshire has now outperformed the S&P 500 in a year three year five years and the marks of permanence is because it is too big and will it ever be able to overcome it, it is certainly too big as part of it and, but I would say that this during the same time, I mean, last year we managed, not now No I really like a profit gap, but we achieved the highest profit gap of any company in the world that is ever owned by investors and we have the highest net worth of any company in the world.

I would say that relative to the security of capital over time, I feel good about it and I feel good about the fact that 99% of my money is there and that it will be the source of all the philanthropic contributions that are made. do for fifteen or twelve years afterwards. I die like this, but I don't believe. I don't think it will be in the top 10 percent of stocks over the next ten years. I don't think it will be in the top 15 percent of stocks over the next 10 or 15 years, nor do I think it will be in the bottom 10% or 20% or 30%, but our ability to have a big advantage over the market in general with a market value of 550 billion dollars and it will simply be less but it will be done in a very, very safe way it is an investment in the sp500 a better investment could be it could be unbalanced I think we will do a little better but it will be less depending on the type of workers in the market who are in a falling market, we will overcome it.

I mean, it's that simple and the times we will be the last ten years we haven't been, but for 55 years it has worked and it will continue. It's working, but it's not going to work at all like it did when we were dealing with a hundred million dollars or a billion dollars, there's no doubt about it, but we have good business and we won't be in the bottom quartile for long. For a period of time, there were people like there were in 1999 who said maybe you'd lost your edge. It was a similar thing in 1999, when you saw the technology stocks that were the big companies that people were investing their money in. the dotcom companies and many others associated with that, if we look at the markets again, it is the technology companies that have the big streaks.

This time you are participating in Apple, which is one of those pioneers, but is this something cyclical? Do you think there will be another market crash and then it will become a diamond? Okay, Berkshire is outperforming at that time or Oh, a little bit better in a market atdown, but that may not be satisfactory for people, but we will do it because we have these companies that are making money and I mean, weird, we're not weird, kind of away from full market share in either direction, but that's okay. , we are owners, if you think about it, we have 80 percent in shares, yes, we can show two hundred and thirty or forty. billion in shares and that seems like we are against our market capitalization, we are 40 percent, but we own one hundred percent of these other businesses, those are shares too, I mean, we have a right and we own insurance companies and those are stocks. so we have about 80 percent in rough inequalities and about 20 percent in cash and I would rather have that 20 percent and other good deals, but that is to some extent a curse of size and it is to some extent the fact that it's very difficult if interest rates stay at this level wish we had done it for the next 10 or 20 years who wish they had been one hundred and twenty five percent in stocks I mean did you know that stocks are a lot cheaper? that bonds, long-term bonds, you know something is going to change in a major way, I just don't know what and I want to be prepared for anything, obviously, that's why you have so much cash on hand, you want to be able to be prepared for a downturn and you want to be prepared for a crisis we want to be prepared for anything we want to be prepared for pandemics we want to be prepared for anything that comes yes, that's the main job I have, I have people's money, they gave it to me fifty or sixty years ago , some of them still have 100 percent of their money here essentially in it and and the only thing is that I have responsibility for five foundations that are currently going to receive 80 billion and I think we will get a lot more over time, we probably don't want to lose money permanently and you don't want to get that to sit in a shell and do nothing, but we have obligations to people in workers' compensation and auto claims. accidents have to go out 50 years and you know we have to manage the place so that every check clears under any circumstances and that's why we own treasury bills, we don't know commercial paper, we don't know. rely on bank lines or anything when people get terrified and occasionally everything freezes, you know, and you're going to have to fend for yourself at a time like that, it won't happen very often, but it will happen occasionally, I know.

You've developed a thick skin over the years, but does it bother you when people start asking you if you've lost it, if you can still do it? I'm sure I've lost all kinds of things I'm lost, that happens, but we haven't lost Geico or the railroads. Berkshire without me, this is worth essentially the same as Berkshire with me. I mean, my added value is not high, but I don't think so. I'm subtracting value, but the most important thing is how our businesses work and what we can add in the form of businesses over time and we can add them through marketable securities.

I mean, we own five and a half or a little over one percent of Apple is probably the best business I know in the world and we own five and one percent of it and that's a bigger commitment than we have in anything except insurance and railroads, making it our third largest business. Yes, I pointed out that it was. bigger than your biggest acquisition, a precision, no, it's our third largest business, okay, let me try it on your thick skin, okay, here was the kickoff of that. Barron's cover story said there is reason to think the company will be a market leader when he comes in.

In the meantime, happy number 90, yes, well, it's iio, but as the market leader I count on, I will tell it to my estate and then to the trustees who succeed my executor Xin of the estate. I tell you to keep all the Berkshire stock that you have until you have this pattern, they are giving it away, I mean, look, I want you to look back and say, gee, we should have made this change sooner because it will determine how much we use the vaccines and you know, and all kinds of education things and all these things and I feel very good about Berkshire after I leave.

I want to talk about another topic that we haven't touched on yet and that is politics here in the United States, we just saw Nevada with the Nevada caucus that Bernie Sanders won. the most delegates after that, he appears to be McClure's favorite for the Democratic nomination this time you have been a supporter of the Democratic Party for a long time, what do you think? Well, I guess I'll wait and see who gets the nomination. but I'm a Democrat but I'm not a card-carrying Democrat and I voted for him. Wait against. I have contributed a Republican seat.

In fact, I have only run for two offices in my life. head of the Young Republicans at the University of Pennsylvania and was on the ballot last time as a delegate to the Republican National Convention in 1960, but I normally vote Democrat and we'll see what happens. Wow, it's the first time I've done it. Have I ever heard you say something like that, well, I've kept it a secret all these years, but now it comes to light that you just said that you're not a card-carrying Democrat, it's true, you're a card-carrying capitalist, actually. you have one of those in your wallet yes, I've seen it I don't know if I'm a card-carrying capitalist, right, I don't think that's consistent or inconsistent with what I said about politics, yes, here it is, you can't see it.

I'll show you on this camera, are you a caring capitalist and this is what you carry in your wallet? Yeah, and I think we'll have some of those available from the annual meeting. I think Andrews has a question he wanted? Jump here, Andrew. I was going to follow up on that question, Warren, which was about a year ago, we had asked you about Michael Bloomberg and you said that if he ever got into the race, he would be someone you would support. Would you support it? he is his candidate, well, I would, certainly, I would certainly vote for him.

I don't think, I don't think another billionaire would support him, it would be the best thing he could announce, but he would surely do it. I would have no problem voting for Mike. Bloomberg, well, I don't think he wants to be at a disadvantage in the race, but he would say this in terms of Sanders. I actually agree with him in terms of certain things he would like to achieve. I don't agree with them on many aspects, but in terms of the fact that we should do better on the part of the people to stay behind our capitalist system, I don't think we should have killed the capitalist system in the process.

I think we should make sure the goose that lays the golden eggs stays laid. more eggs and it has worked wonders since 1776, but it doesn't work as well for people whose talents aren't really geared toward a market economy, and I don't think anyone should be left behind in an economy that has more than $60,000 GDP. per capita, so I'm a big supporter of increasing the Earned Income Tax Credit and I think some changes should be made, but if I had the choice, I certainly wouldn't vote for Mike Bloomberg as opposed to Sanders, let's talk about some of Sandra's plans.

You said that she agrees with some of her intentions, but let's talk about some of those actual plans. One of those plans would be to give 20% of the company's shares to employees and put workers on the board. What do you think about that would be for any public company that has more than a hundred million dollars in annual revenue or a balance of 100 millions of dollars? Well, I don't want Baba to evaluate his entire plan, but I think it would be a particularly bad idea because I just don't think putting in 20% of the capitalist auto workforce is relatable and I think the market system works very, very well. in terms of developing more goods and services.

I mean, when you flew here to Omaha, if you had gone there and could fly in 1776, you wouldn't have seen anything. Everything you see is the product of a system that worked as if nothing had worked in the world. history of the world, so I don't believe in messing up our production development system. I do believe that anyone who is willing to work 40 hours a week and has a couple of kids shouldn't have to have an extra, there is a second job and I believe in having a higher income for people not necessarily a higher minimum wage The fact that Senator Sanders believes that many people are being left behind and through no fault of your own and there are all sorts of aspects of capitalism that may need to be regulated in some way, but I don't believe in giving up on the capitalist system, okay, let me slip in some questions that viewers have written in this forehead.

Michael Blank writes, Please ask Warren if he thinks the market will sell off if it becomes clear that Bernie Sanders will win the Democratic nomination. I think he normally would. I never made a comment on anything like that, but I would say that if you had Sanders and a Democratic House and Senate or if you had Trump with a Republican House and Senate, there would be a significant difference, but I don't think he would necessarily vote. on which in fact I know that I would not vote on what I thought would necessarily affect the market, I better believe that it is a very poor criterion.

I wouldn't want to cast my vote in a presidential election based on what would be best for the market. in the next 30, 60 or 90 days after the election, but I suppose your reservations with Bernie Sanders come with your concerns about what it means for the economy no more than 30 69 is over a much broader period certain aspects of the economy just certain things that you know I would like to see done. I would like to see the Earned Income Tax Credit shift dramatically upward. Allen Bucky writes in a letter saying that if Michael Bloomberg becomes the Democratic nominee, would he consider buying his company?

Not because of the price. We'd have to pay more Warren, we've talked this morning about the corona virus, but there are people waking up all over the country right now like tuning in at this time, so maybe we should address this again with the market. We syndicated 750 points with concerns about the spread of the coronavirus and now we're worried about what that will mean for the global economy this year. I know this is not something you look at day to day, but how do you wake up and read this and think carefully. I don't think it makes any difference to our investments.

I mean, there will always be some good or bad news every day and in fact, if you go back and read all the newspapers from the last 50 years, probably most of the headlines tend to be bad, but if you look at what As it happens with the economy, most of the things that happen are extremely good. I mean, it's amazing what will happen over time, so if someone came to me and told me that the global growth rate was going to be down 1% instead of 1/10th of a percent I would still buy stocks if I felt like the business and I like the price at which they and I like the price today better than last Friday.

Do you like today's prices better? Will Berkshire buy shares today? Well, we'll certainly be more inclined to buy stocks today than we were on Friday, yeah, yeah, everything that we were buying on Friday we were behind and we feel better about buying them, you know, one of the things that was talked about in the annual letter was the Berkshire Hathaway stock buyback and for the first time he told people to call Marc Maillard directly at his office if they had $20 million in Berger stock and were ready to sell it, that's really something unusual. Move, why didn't you do so well?

We did this because it is very difficult to buy blocks in the Berkshire market. We'll probably never see blocks, except we see it in properties or occasionally, but if someone is going to sell millions of honest shares. Berkshire worth a hundred million dollars and we want to buy it, we would like you to call us and if so, if we are buying at that price level, we will buy Leviathan. Dan Mahoney actually wrote in with a very similar answer. The question he just said is that it is difficult to buy back the shares. It is more difficult to buy back Berkshire shares and says Bank of America.

He was buying back his shares. Bank of America bought back eight or nine percent of its stock last year and they can really do it. without moving the market, I mean, apples have been buying back a ton of shares, they were buying shares at the same time we were buying shares, but it was easier for us to buy Apple shares even though Apple itself was buying a lot shares than buying them. buy Berkshire Berkshire is fine, it's in people's hands, but I really plan to keep it there. I think the amount of speculation and Berkshire stock is relatively low compared to most stocks, so it's good, we bought five billion dollars last year, but that's only one percent of themarket capitalization and I would say that with many companies you can buy four or five percent of the company quite easily a year without disturbing the market.

The announcement in the letter to shareholders basically means that you are eager to buy more shares at the end of the price, but we will let anyone know if they and we told you to call us before the open or after the close, but but and just. of only with blocks and only if they are ready to do business now there will be some people who will probably try to call just to see if we are buying or not, I mean, we won't show much. very patient with those, let's talk about Apple stock, since you only mention it with the share buybacks, since it is such a large stake of yours that you have more than 5.3 percent of the company right now in these five six , but it goes up every Well, we have seen it with the slowdown of the coronavirus because Apple is one of the companies that has said that it is going to have an impact not only on the stores that have closed there with the behavior of Chinese customers but also on what let it happen. with the supply chain, sure, how do you read all that?

What are you listening? Do you know more than us? Okay, no, I don't know anything else. I see. You might see Tim Cook at the annual meeting. I see. he in Sun Valley once a year no, I don't think, I don't think he's made a phone call to Tim Cook in two or three years, I'm serious, no, all kinds of things are going to happen over the next ten years. The real question is: do you know how ubiquitous and strong that product is in five or ten years? I don't think of Apple as a stock. I think it's our third largest business, it's also a high-flying technology company.

It's one that's been at the forefront, but you've said in the past that you didn't buy it because it's a technology company. I think it's a consumer product, so I actually think I said this on the show a couple of years ago. I mean, obviously it's a consumer products company that uses this technology, but we have a lot of pieces that use technology than Berkshire, but it's an amazing company and I should have appreciated it sooner. I guess a question came up. the identifier is GPG. This is a question that appeared on Twitter and the writer asks: "You said you can make fair value estimates for the companies you follow at any time in your head, so make one now for Apple.

What went wrong with your estimate for IBM and how is that wrong how is that miscalculation different from Apple's IBM two completely different businesses than Apple? I mean, Apple doesn't look like IBM Arizona anymore, but it looks like C not even that much more. I want I mean, it's incredibly useful. people that become more useful as the number of people increases, I mean, it's really interesting, you know, we call them smartphones, if you go back and look at the old phone that was an incredibly IP useful, it changed my mother's life and I changed my father's life. lives in every way and it took a long time for them to become widespread and it was very expensive at first but it changed the world and the smartphone is part of everyone's life hundreds and hundreds of millions of people in all aspects of their lives for which it is used as every type of utility is a consumerproduct.

Are you a consumer of your products right now? He's always had a lot of fun. Oh. Now I don't use it very often. I'm using the latest model and I'll give you a little preview of our movie. We haven't done it yet on NE, but they'll probably show me crushing my old phone with my foot. When did you get the smartphone? They gave me several of them, but including Tim Cook, one finally got stuck, another finally got stuck, yes, absolutely not. I I my flip phone is permanently gone the numbers have been changed by yeah yeah.

I mean, you're looking at an 89-year-old guy who's just starting to use it, what do you like most about the phone and what do you like least? no I don't use it all, it's for someone like most people I'm in, most people live their lives and I use it as a phone and no I don't like what investment bankers talk about, evidence of which I read translate his earnings. Charlie Munger, vice chairman of Berkshire Hathaway, about a week and a half ago, when he was speaking at the annual shareholder meeting of his other company, The Daily Journal, he was answering questions and giving his usual direct answers when things come up. a war and that was Charlie talking about EBIT da Ernie yes, calling them earnings although you said it a little more explicitly you and your letter to shareholders for Berkshire Hathaway you also wrote about how you don't believe in gapped earnings, how do you?

Come on, what do you think you still have to report these numbers, but you're basically telling shareholders not to listen to them properly? Yes, they are two different principles, I mean the gap numbers that show us earning eighty billion, which is more than any company has earned in history, aha, and we explain why then that is not really the relevant statistic because a lot Of that was just the rise of the stock market, which is now counted in our profits and Charlie was expressing an opinion, we both have a chance. Charlie is the shy and reticent one, but one of the two, but Charlie is the best partner anyone could have.

We have been partners for 60 years and you couldn't have a better partner. He is 96 years old and has been a woman since that meeting. In fact, in the last one. A couple of weeks a woman said to him: Is it for Mr. Munger says you have eight children and Charlie's response was so far Charlie Charlie is a very active partner we'll put it like this next time I see them I'll get an update on that he does well so far you know we look. quite closely charlie's shareholder meeting for the newspaper or do we send cameras we look at it I was outside myself do you look at that meeting too to see what it is?

I watched the whole thing on YouTube after saying word after word, but my sister and my good friends and my niece are all there and no, I end up watching it and I actually end up reading it normally. I wouldn't, but I'm not going out because there was something he said that surprised you. This time I'm just looking at a few of which, actually, nothing Charley says can surprise me. Is there anything that enlightened you or changed your opinion about something? Maybe something like that, but you learned it from Charley every time I talked to him.

Charlie. the best 30 second mind in the world, so I can come to him with a new question, there is no problem whatsoever and it goes through about eight filters in his mind in ten seconds and gets to the essence of any problem, there is no one better. who to talk to than Charley at 96 years old, is there anything you've talked to them about recently that you can share? I don't know if you want to share the conversations you guys have in private, but anything where you bounce off something. They, my mom, we talk about a lot of things and we talk a lot, we talk particularly about things that we don't know the answer to and, you know, we find the whole scene very interesting, whether it's politically or economically in the world.

I mean it, it's incredibly interesting to us and we're particularly interested in each other's opinion, although I think I'm more interested in their views. He said it would be a right decision for someone here. I guess it's something. you don't understand right now oh, we don't understand at all what the result will be in a world where thirteen trillion is borrowed at less than zero and even Greece opted for the short term. I think Greece, the ten-year bond, is one of them. percent for example and at the same time in this country we are having very good commercial and market conditions, we have a federal deficit of four and a half percent and nobody is worried and at least and we are talking about massive new programs and so on, all the The world talks about how they will pay for them, but they really know that the deficits will widen, so we don't know what world results from something where you start with extremely low interest rates and high rates. of growth and then what is done as a stimulus later, but the whole game, I mean, the game always develops differently than expected and that is what makes it so interesting, you know, the ten years that spoke of these low rates just a moment ago came to an end.

Lowest performance since July 2016 this morning. I think it was one point three seven seven percent. We're back at one point three nine six percent, but ten-year rates are below one point four percent. Have you anticipated it? There is no point in lending. money at one point four percent to the US government when it is government policy to change to have two percent of your inflation, I mean, you have, you have, the government is telling you that we are going to give you one point four percent and tax it and, on the other hand, we're presumably going to devalue that money at two percent a year, so these are very unusual conditions and, according to classical economics, it doesn't seem like you know what people do in such circumstances: everyone buys. a mattress and stuff your money under the mattress or what, and it seems particularly unusual when the world is prosperous in general and you know, that's the game that's always changing, but it always seems logical in retrospect and it always seems like a puzzle again in perspective , but there are always things to do that make sense that I like, well, I hope that's what we're doing, is buying good businesses at decent prices, whether they're all businesses or parts of businesses through the stock market .

You know, you told me a year and a half ago. It's been maybe longer than when you were going out and trying to buy entire companies, now it seems too expensive, so you started buying parts of companies, more shares, but like Apple, that's still the case, it's still a huge premium to try to buy. . For a company, there is a large premium and part of the premium is because you can borrow a lot of money at a very low price by buying those businesses, obviously you can pay more for a business that you can borrow a very high percentage of the purchase price and committed future cash flow and you can borrow a small run with very few restrictions, restrictive covenants or anything like that.

I mean that will generate higher prices and the demand for that is huge and people look at those thirty or ten year careers and say to themselves, I can't live with that, so they stretch out and buy poor credit, but that's just part of the human cycle over time and that leads to something. more and that leads to something more in the end if you have good deals at the right price you will do well. You are often quoted as saying that you don't know who goes skinny dipping until the tide goes out and who swims. naked, yes it goes out, maybe you get the feeling with the high tide right now that there is a lot of skin, well we certainly are, we are allowing people to borrow money on much weaker terms than five or ten ago years. not borrow money at all or for ten years, I mean literally, Berkshire couldn't borrow money.

I mean, everything stopped and now the pendulum has swung dramatically and yet we still have, you know, we have very, very, very well, it's hard to believe that 10 or 20 years from now we will have a substantial continuation of rates of negative interest, but I have already seen things that I did not think could happen. Moving on, who knows what could happen, that's what makes it interesting, let's get back out there. to Omaha, where Becky Quick is with Warren Buffett and a lot of big things are happening, but don't forget that March Madness is right around the corner, Becky and you should see what she's doing right now.

Joe was rubbing his hands when I said that. Now you're speaking his language, yeah, well, Creighton, at one point it was 72 35 and yesterday I had Creighton. I don't know if you were paying attention to that. Were you watching that? Warren Nebraska plays tonight. We pay attention to Creighton. We talked about that here this morning. I think they are peaking. I mean, they're getting better and better compared to the three-point shot. I think a guy had seven four seven at one point yesterday, which would be like seven for Todd bad for triples. I think let's get back to it anyway.

I just said that I expect a warning and I know that we always have our own personal bet if I do them right. me, Berkshire Hathaway, which would be great for me. I'll tell you if you get it all the way. I'll give you my Berkshire Hathaway shares up to 64 against, we'll give them to you, yeah, that's how I'm sure you won't be able to do it, Andrew, I heard you, I heard you have a question for Andrew. I hope to have a pair and I thought I read the letter like everyone else over the weekend.

He was fascinated. A lot of your comments, Warren specifically, I wanted to ask you, you talked about board diversity in this letter and one of the things I wanted you to weigh in on if you could is I don't know if you saw David Solomon, the CEO of Goldman Sachs. on our air announced a couple of weeks ago that they won't take any companies public that Goldman won't do unless they have at least one diverse board member and we're probably going to take that to two, you know in the In the state of California,They implemented a law that said it was necessary to have a female board member, and I'm curious to know what you think of not only the push toward more diversity on boards, but also the requirement, because I also note in your letter that I have ideas. very specific about what it means to be a member of the board of directors.

What it means to be an independent member of the board of directors. How wealth is involved in all that. What are your thoughts? Well, at Berkshire for decades we have given all three factors in addition to integrity. but for the board members and we want people with business knowledge, we want them to have a strong personal interest in Berkshire and we have directors who really represent the shareholders basically in Berkshire and I think they do a great job now, that doesn't mean that Do not think that we must please our clients, that we must treat our associates well, but that we must be the Abe in our community, both local and national, but we are sure that our directors represent the shareholders.

So Warren just wants to follow up, but what is his view on requiring banks and other investors to force companies to have diverse candidates on their boards, as I mentioned in California? Yes, in fact, maybe it is there. A proposal has been sent to us which, unless withdrawn, will be in our possession. I can't tell you precisely what it says, but publish this issue and we will have our shareholders' opinion on it. I personally and observe the shareholders I love. directors representing shareholders, even you know, in terms of my wealth, you know, with maybe currently $80 billion in shares, did they have to fall to be?

I hope that we have a group of directors who I think will be very conscious of doing the right thing, the reason I ask the question is because the other point that you raised, which I think is very smart and is often misunderstood on the ground of corporate governance, is that an independent director today is not always largely independent and you point out that those who don't come to the table with some kind of wealth often need the job, need the money, want the money and So that makes them less independent and the reason I ask this is one of the things as we've been trying to get more diverse candidates on boards, more women on boards, as you know, there are fewer CEOs, fewer people who have made huge amounts of money and therefore people who may question their independence, it becomes a very complicated situation and that is what I was hoping you would have an opinion on, yes Andrew I have been on 21 publicly on the boards of publicly owned companies and I've seen them in operation and I would say people I've seen often and that's perfectly understandable.

I have often seen people who apply to be classified as independent directors and receive three hundred thousand dollars a year for a job that takes them a couple of days maybe six times a year maybe four times a year and the company flies them to their office and it's very nice that the company is good and who wouldn't want a job like that. I mean, it's an amazing job and the people I get calls from, I get calls from headhunters, I get calls from CEOs and they ask me, you know? who I think would be a good final listing director and what they are asking is for you to know who is not going to cause too much trouble and who is going to reflect who your name is going to reflect the credit of the institution and they are not looking for someone that I would really consider independentand I don't blame them, I mean, if I had spent my life being a teacher or whatever, I mean, my IQ is as high as average or higher than people on forums and all that, but for On the other hand, I want to be on a board of directors, I mean, three hundred thousand dollars a year would be great and you're about to retire, it's probably sixty-five or something in most cases, so calling them independent is ridiculous and Yes If you're on a board like that, you really want to go to a board other than mine and make six hundred thousand a year and you're not going to do things that will irritate your current CEO and he or she will get a call. and says: would this guy be a good director?

The answer is no, I hate it, it's just ridiculous to ignore the compensation factor with board members, okay, let me ask a follow-up question that is similarly related, yes, Warren. and that just has to do with sustainability, all these issues that are out there, guys in the control room, sorry, not where I told you I was going, but check vara wrote in a question that Larry Fink said recently Our investment conviction is that integrated sustainability and climate portfolios can provide better risk-adjusted returns to investors. What is your opinion on sustainable investing? Well, III. I don't make that decision when I buy stocks in our portfolio.

What are your individual policies? I believe that we are all prosocial. I mean, obviously, okay, you have to be in tune with your society, but if you think I look at a bunch of stocks and decide whether to buy Apple or whether to buy JP Morgan or me. No, I'm not using the factors and delays, okay, I want to go over a number of questions that have been on these, they're all over the map, so forgive me, they'll bounce around, but these are questions that came up from viewers who I thought were good Lucas writes and said: Did Justin's son change his mind about cryptocurrencies?

Anyone who doesn't know Justin's son bought the dinner or lunch you just had at the Glide Foundation's latest fundraiser. He is actively involved in Bitcoin. After that meeting, his PR people posted some notes saying that you know you heard about cryptocurrency and that maybe now you're a little more in tune with the idea of ​​Bitcoin. Well I would say this when Justin and four friends came over it was perfect and we had a nice three and a half hour dinner and it was all a very friendly exchange of ideas but cryptocurrencies are basically worthless and produce nothing so you can look at your little ledger to see the next 20 years and it says you have is that someone else comes and pays you more money later, but then that person has the problem, but in terms of value it is not zero, so it seems that it did not change your current change, since I also did not have a very nice dinner and Those people behaved more than well and gave four points there.

Justin gave four point six million crashed and that will buy a lot of meals and provide a lot of beds for people in San Francisco, so I appreciate him giving you some Bitcoin, what is it? I'm sorry I'm a Bitcoin. I don't have any Bitcoin. You do not know. No, you don't know one bit because I know I don't own any cryptocurrency. I never will be and in the end you know it. I can start a war on the currency, you know, maybe I can create one and I'll say there's only going to be 21 million of them and you can have a little ledger sheet from me and everything that says you have it and you can have it. after I die and you, but you can't do anything with it except sell it to someone else and the interesting thing, of course, is that bitcoins have been around for a long time and people were talking about how they would be used in various types of exchange. but none of our companies are doing business with Bitcoin or anything like that.

Yes, that currency has been used, I think, to move a good amount of money illegally, so the logical step from the introduction of Bitcoin is to go with short suitcases because the money that was taken is likely to be from one country to another lose demand. I mean you can look at it as the economic contribution of a Bitcoin to society. Alright? Let's talk about a question that comes from Rusty Thomas and he has a question about baseball, he said, given Warren's love of baseball and the contrast between his deft handling of the Solomon brothers scandal and the inexplicable mishandling of the Major League Baseball of the Astros sign-stealing debacle, what advice would Warren give to MLB Commissioner Manfred to restore trust and integrity? in the game yeah well it survived the 1920 Black Sox game and people will still love baseball but it was one thing to steal signs if you were on second base but it's bad baseball we'll get over this baseball fanatic , where you, I mean, you.

They are a big baseball family surprised to hear it, yes, I was surprised to hear it, yes, but then I found out that at Bobby Thompson's house someone just stole the sign. I think I'll break it or someone ate it, so people were going to come in. In any game, including the stock market game, you know that a certain number of people cheat and generally we have people who manage things to try to minimize cheating and I'm sure Major League Baseball will address the problem that the Astros players are free. -free, oh I'm not going to pass judgment on that, but Joe Jackson certainly isn't, yeah, let me ask you a question that came up from several viewers and it's about Mosely's management of the ETF, he wrote this version of the question and News agencies have reported that Berkshire Hathaway bought two ETFs, so can you talk to us about whether this purchase was made and whether the purchase occurred?

Who bought the ETF for Berkshire Hathaway and how was the decision to buy it made? Yes, it wasn't me or not. They didn't teach me or they weren't educated and yes it happened in some pension fund and we have some pension funds that are not actually managed by this, but all I can tell you is that no one, no one who manages money in the Berkshires buys ETS or Do I see any chance of them making another purchase that came up recently? Kroger and Jason Escamilla write that one of theirs or the lieutenant's spec was one of the others and you know the topping covers did a good job, but you're in a It's a very difficult business, I mean, when you have Amazon and Walmart struggling and Costco taking a special share, it's all a tough business, but they've done a good job and one of our managers decided to buy it and then Kraft Heinz this is coming from David Hall, says Mr.

Buffett, as Kraft Heinz continues to reduce its total debt, do you think the current dividend payment is appropriate or should it be reduced further to free up more cash flow and reduce debt more quickly? I think Crab should pay for his death and that should I think under the current circumstances it looks like he transferred the dividend and paid the debt at a reasonable rate and he has too much debt but he doesn't have debt that he can't pay and these are the debt holders. They will receive the interest and then the debt should be reduced year after year and I think it will and I think it can be achieved with the president's dividend, but who knows for sure in the future, you know feel those rights in a similar question and say: I still believe in the company and the management, it is still a great business in the sense that it makes, say, five billion dollars after pre-tax depreciation on seven billion of tangible assets that uses about seven billion of fixed assets, you don't know that it works well.

I mean, it's a very valuable business, but we paid too much for a furniture craft and we went into more debt than that and, but we paid too much, another question comes in from Bo again about Kraft Heinz and this person writes in private labels. They performed very well against brands like Kraft Heinz, but haven't made a dent against other brands like Coca-Cola or C's. Why do you think that is and how do you think about brand modes given your experience with Kraft? Brands will always be in a fight with the retailer and it varies by country huge Lee, it varies by product category if the people he worked with in a grocery store in 1941 that Charlie worked with let's say one in 1940 the people I would call him and they would ask for a can of peas and I would write a can of peas, they would call and ask for Heinz ketchup and I better get it given the ketchup in mine.

They didn't care what brand the peas were. They didn't care much about whether the two quarts of milk said I'm worth this brand or that brand, but they cared if it was Heinz ketchup, that was, you know, 1941, some brands are terribly strong, you can't put out a private label: it suits you. very good with and people have been trying it for a long time, on the other hand, you can mention private brands and a lot of products and they saw it very well and you know you take Costco with their own Kirkland brand. I mean that taste will grow dramatically. it cuts across categories, you know, it's been done since 1992 or whatever, it's been pushed into what other people spend for years, you know, with huge amounts of advertising and special displays, all kinds of things to keep the battle going.

I would say that the retailer has gained ground against the brands to some extent, but the brands are still terribly important. I mean, try giving me a budget of ten thousandmillion dollars and ask me to release another one called Co love, it puts a dent in Coca-Cola and I can't do it. One of the questions that came up was something you wrote about in the annual letter and that was the role that Gregg and Ajit play. Gregg able AG Jane, the two vice presidents who were recently added as vice presidents, the role they will play. will be playing at the annual meeting with shareholders, you said they will play a bigger role at the shareholders meeting, how will that work well?

It will mean that any shareholder or any of the journalists who are submitting shareholder questions have been sent to them can direct those questions to a gene or to Gregg, so if they were questions about insurance, they might want a direct analogy, not questions about sure for Gregg, but they will be there and they will have questions from 60 years ago, we don't know what they will be. and if someone says I'd like Gregg to dance to this or Ajit to answer this, then they'll be right there listening, they'll be sitting on the stage with you and Charlie, well, yeah, there's no one sitting in front of the crowd, there's two. different levels and levels, again you said you did this because you received a lot of questions from directors, shareholders, other people who had advised you who thought it was good for them to play a bigger role, well, from everyone I heard. to quite a few other people, we didn't ask questions where they were sitting with the directors in front and then the spotlight went off, but this may encourage more questions directly from them and that will be great, okay, writes Jim Beam in a question that says that In the past both you and Bill Gates have stated that half of board meetings are spent discussing succession, how has this changed since Ajit and Gregg are on the board?

You leave the room, you leave the room, but if I die tonight, will you put it together tomorrow? tomorrow you know exactly what they are going to do, I hope they are polite about it, let the body cool down, they basically know what they are going to do and the interesting thing about this is that we own Apple and JP more than everyone. those things I don't know who will succeed the CEOs of either company. I think we have shares, but we are well prepared to accept succession. The calm is going to be embarrassing. That's great, let's reach out to some more shareholders. questions, Chip Crook writes in a note and says that Boeing was reported to be seeking a large cash loan.

Were you ever approached about Berkshire lending the money, kind of like the Goldman Sachs deal from yours? Exact theft from you you do not know. I think Boeing has raised about thirteen billion, but that's bank-type money; In other words, as I recall, maybe what they're looking for is 1% of men, they're looking for traditional bank loans and we don't do traditional bank loans. the letter about how Berkshire Hathaway has the energy Berkshire Hathaway, I should say, has the ability and the talent to manage large investments of a hundred billion dollars and more. I think you wrote: we are ready, willing and able to take advantage of those opportunities.

California Governor Gavin Newsom asked him in One point for bidding for PG&E is that that opportunity PG&E obviously, I mean, we worked with them for decades, we're familiar with them, but that doesn't fit with Berkshire, but if there were a hundred thousand millions of transmission lines or whatever it is, Berger could do it, I mean, and we would love to, that turns out to be a very difficult thing to do because in all these states and not all of them do it in my backyard and all that, but there may be a great smart investment that maybe. the utility energy area and no one is better equipped to do it than Berkshire and both the talent and the resources why PG&E doesn't meet those requirements is too difficult I don't know, I mean reorganize that utility and I think that I know Governor Newsom, I think he's a very, very, very smart guy and in terms of solving this problem, it's just not easy, there are so many voters and they're fighting each other and there's a lot of money involved and I don't want to be the guy no.

I know how to solve all of that okay let's move on to a question that is posed by Ken Ducey, he says that you sold 31 newspapers after buying them for 40 years as a self-proclaimed newspaper addict, you recently said that most of the newspapers were toast, I know that's not exactly, that's not true, this is not his question, you can answer it. Of course, do you think the problem with local newspapers is the lack of demand or the lack of innovation and a new business model? Well, bomb, that's right. Going back to the toast comment, Andy Serwer is actually an intern since he was

interview

ing me and I repeated.

But the problem is that even every day, the circulation of newspapers in every print circulation decreases and the interesting thing about this, of course, is that the three survivors so far that look promising online in the New York Times in The Wall Street. Journal and The Washington Post, all three newspapers sold their smaller papers, the New York Times sold, I think, 11 newspapers about seven or eight years ago, the Dow Jones, which owned the Wall Street Journal and which was owned by News Corp , sold the Ottawa newspapers. eight Washington Post newspapers sold the top of the hair, so they all saw the writing on the wall before me and they all sold their papers, that was their reaction, they didn't, they didn't try to figure out the online solutions they got from them . and unfortunately I bought some and we're still, I mean, we're funding Lee and we think Lee has by far the best chance of continuing to print as long as anyone and finding an online solution for these newspapers, so we invested new money in newspaper industry here or we have committed to closing a little bit in a month or two and finally, very quickly, we are in the Berkshire Hathaway headquarters building here in Omaha.

Strom writes a question and says: why did you decide to rent it? for all these years instead of buying the building or building your own office building, well, we only use 1/4 of the 15 floors here, but we haven't signed a lease for the next 20 years on one more floor, which which shows how flexible we are thinking about the future, we don't want a big head office if we had a big head office and we would fill it, believe me, I mean, if we had 15 floors of our own, we would have 15 floors of people. We warned you before we let you go, let's go back to the futures again this morning because right now it is indicated that the Dow Jones will open again about a hundred or 830 point weakness due to concerns about the coronavirus and what that means.

What is your mindset today? go out and look at the stock market and decide what you are going to do we are buying companies for 20 or 30 years we buy them in whole we buy them in part they are called stocks when we buy them in part and I think the 20 and 30 year perspective has not changed by the coronavirus. Warren wants to thank you for your time today. We really appreciate his generosity with his time and hope to see him again soon. They come every year.