Squawk Pod: Berkshire Hathaway 2026 annual meeting: part 3 - 05/02/26 | Audio Only

Hi everyone, this is CNBC's Becky Quick in Omaha, Nebraska, and you are listening to part three of our full coverage of the 2026 Berkshire Hathaway annual shareholder meeting. We pick up here with the second session of questions and answers hosted by Berkshire's new CEO, Greg Abel. With him on stage was Katie Farmer, CEO of the BNSF Railroad, and Adam Johnson, CEO of NetJets and new president of Berkshire's Consumer Products Service and Retailing Businesses.

Yeah. Thank you.

Okay, thanks Greg. This question comes from Chris Frerieded in Philadelphia, Pennsylvania, who wants to know, "How has the current geopolitical situation in the Middle East impacted Berkshire subsidiaries?"

Yeah, it's interesting and Warren has said this in the past before. You know, the railroad is a really good reflection of what's happening in the industrial and the consumer economies because our loadings really cut across all the various commodities. You know, we touch agricultural products, we touch coal, the industrial commodities like cement and steel and aggregates. You know, certainly our intermodal business which is such a big part of our business reflects what's going on with the consumer. And so we're seeing the impact from the conflict in the Middle East in a couple of different ways. First of all, I would say that if you look across our various commodities, it's created an opportunity for some of those commodities just because of the disruption in the supply chain. In addition to that, you know, we see commodities like aggregates and steel, things like that that are favorable and we're seeing an increase in those. But then some of the commodity areas that use energy in the manufacturing of those commodities are certainly being impacted by the increasing fuel prices. The largest segment of our business, as I mentioned, is intermodal. And so as fuel prices increase, our intermodal business becomes more competitive. And so we're seeing an increase there relative to what's happening in the Middle East. I would say in general though as we think about it if fuel prices stay too high for too long it has an impact on consumer demand and when that happens that cuts across all of our businesses.

Yeah, we're seeing some, we are starting to see that impact some of the businesses. I would also say Greg as we talk to some of our large intermodal customers what they are telling us some of the big retailers are the customers are having to make choices now. So as fuel prices go up they make choices about what they're buying. And so that's where I get back to if it is a prolonged higher fuel price environment, I do believe that we will see that customer impact across our businesses.

Yeah, I mean certainly, you know, when you see the increases that have occurred and the instant spikes in some cases that occurred certainly on the consumer product side, on the retail side, it has affected some of the demand on that side. I would also tell you that we have also faced multiple times at NetJets with $100 a barrel pricing. We see those spikes. We see the demand. Haven't seen it on the NetJets side. We went from really the last two years from about $5.40 a gallon. We're seeing spikes up to $7 a gallon. I would tell you if I see that kind of sitting at $7.40, $7.50 a gallon then you'll see it start impacting even in the higher end side on the NetJets side. So we're feeling it. It's not the first time we've had to deal with this. You know, we're prepared to deal with those things and make adjustments where we need to, but this certainly is affecting, I would say, some of the retail businesses and some of the consumer product businesses.

Good afternoon, Mjab Singh from MountainHouse, California. Warren has spoken very highly of both you, Greg and Katie. So, I'm grateful to have you both leading our company. And I'd like to ask each of you a question. Greg, as you know, the Berkshire system relies on decentralization. Each manager runs their own subsidiary. As CEO, which operating units do you think need more oversight and how will you handle a manager who underperforms? And Katie, as Greg highlighted, the BNSF's profitability lags its competitors. With eventual technology advancements and autonomous driving, trucking costs will continue to drop. How will BNSF maintain its competitive advantage from competitors and new technology?

Absolutely. So, thank you for the question and as I said, we absolutely know that it's critically important that we continue to drive an efficient operation, that we continue to have a competitive cost structure, and that we continue to close the gap with our competitor relative to our profitability. There's a couple of specific things that we're working on and it's really about operationalizing the improvement that we saw in 2025 into the first quarter of 2026 and making sure that we're really institutionalizing that. So the first thing that we really focused on in 2025 was we knew that we needed to improve our single car operational efficiency. And when I say single car unit operational efficiency, we run a couple of different networks. We run our intermodal network. We run our agricultural and our coal network, our bulk networks. And then the balance of it is what we call our carload network or our single car network. And that's where we have non-unit train. It takes a lot of operational focus. It takes a lot of work effort and it consumes a lot of resources. And so anything you do to improve that single car network is good for all of your customers. It frees up resources. It creates capacity. It allows you to handle the same amount of volume if not more with fewer assets. And that translates through then to the improvement that you're seeing in the profitability. An example of that is in the first quarter of this year, we handled more volume than we did in the first quarter of last year, but we did it with 260 fewer locomotives. That translates into a more consistent service product for our customers and it also translates into better financial results, which is what you saw in the first quarter of 2026. So we're spending a lot of time ensuring that we have operational excellence not in just all those other networks but in the network that frees up resources and drives improvement and operational excellence for all of our customers. The second area and you heard Greg talk about this earlier was around our technological transformation. We really believe that in addition to driving that operational discipline that you saw in 2025 and into 2026 that working with the new BNSF tech organization to drive that next step level of improvement. And so you saw units dwell in our terminals less time that translated through to the financial results that I talked about. You saw velocity improve as well. And so how do we leverage technology then to take the next step level improvement? So I'm excited about what we're doing there. We're literally attracting data scientists, operations research folks, and we're putting them alongside of our operators in our network operations center. We're looking at things like digital twins, which gives us the opportunity to model how we run the railroad before we actually run the railroad. We're looking at opportunities to do predictive ETAs for our customers, which allows our customers to have a better product. It allows us to turn the assets faster. And then last, what I would say is that we're just it's good old-fashioned going to work on attacking the largest structural cost buckets. We had a record for the first quarter in our fuel efficiency. That's the kind of thing we want to do because it makes us competitive with trucks. It is good for the environment and it's good for our financials. So those are the things we're doing to close the gap relative to profitability. Now your question about competing with trucks. I would say a couple of things with that. First of all, we have the largest intermodal franchise of all of the railroads. We have a unique relationship with JB Hunt and we have been extremely successful in converting over the road freight. We've done more of that than anybody. So, we know how to compete with trucks. But your question about technology is a good one. And I would say that we in the past have invested in a system called positive train control, which is a safety overlay that allows us to operate the railroad efficiently. As you know, we operate in a closed circuit. And so we have the ability to your point ultimately to run the train with fewer people than we operate with today. And in fact, if you go way back in time, we used to operate the trains with five people on the train. Now we're down to two people on most of our trains. So the technology will continue just like most industries will continue to evolve and we're continuing to look at that as well. The last point I would say with that though is that we also have to be allowed to innovate and so we need regulation that supports the ability for railroads to be able to compete with trucks. As you said, we know that there are trucks out there running today in our state in Texas along I-45. We just there was just a pilot with autonomous trucks. What we have to be able to do is to be able to compete with that and to be able to innovate. And so we're going to need regulations that allow the railroads to be able to do that. So that's how I think about competing, ensuring that we're closing the gap as well as maintaining our competitive advantage with trucks.

Yeah. Well, I one I will tell you you know the one of the I came back on June 1st of 2015 and that Monday afternoon and many of the team that's up here today we got in a room and I asked a question about how many people really understand sort of the bookends of our business. NetJets is complicated. We're ad hoc. We're unscheduled. We fly to thousands of airports. Commercial airlines will fly to 50 to 100 airports. We fly to 150 countries around so it's a very complicated business and I asked the question to the team how many people do you think really understand the bookends of our business and I didn't like the answer I won't tell you what the answer was but it was too few and it sort of started there and what we did was we really said you know to build this culture the way we want it if I understand what you're doing you understand what I'm doing at deeper and wider levels we're going to do good things together so it sort of started on that Monday afternoon and when we started building that back. I will tell you it was also a reinforcement from probably from Greg. I remember my first board meeting prep and I was excited and we were starting to kind of move and I was talking about growth and we're going to get this right. We're going to grow and Greg pulled me aside in a very kind way and he said, "Why don't you pay $1 back to Warren and work on getting your debt down?" That was a teaching lesson. I took that to heart. I heard it clearly. I actually already knew that. And so we just started really putting our blinders on and we said safety and service, safety and service. Warren bought NetJets after becoming a customer in 1995. Bought NetJets in 1998 and he did a video for us that we still use. And he said, "I want safety and I want service." And we've been really focused on making sure everybody stays in that alleyway. That in large part plus a lot of hard work is why we're able to pay our debt back. We're able to pay cash back to Berkshire Hathaway and move our way, as I said in the video, out of the other column and be first in the service business and I'm proud of that.

Okay, this comes from Brian Simpkins in San Diego, California. The question is, has Berkshire Hathaway considered seeking any tariff relief or reimbursement programs for its wholly-owned operating businesses exposed to import costs? And how significant is that impact across the portfolio?

Not as far as the reimbursement, but I would say just as far as the impact of the tariffs and what we're seeing with our customers. I would say that in early 2025, we saw several of our customers pulling forward shipments in advance of the tariffs. And we certainly saw our volumes ramp up at the beginning of 2025 because people were trying to get ahead of the implementation of the tariffs. So we did see an increase in volumes through early 2025. That really stabilized then in the back part of 2025 and then into 2026. I would say that our customers have really adapted to the tariffs and adjusted to the tariffs. With that said, it does cause some uncertainty and I think where we see that really showing up is, you know, it's very difficult for our customers from a planning perspective and I think it's keeping some capital on the sidelines as far as investment in manufacturing facilities and it's just really the uncertainty of the tariffs that really is what we're seeing reflected with our customers.

Thank you, Adam. Yeah, I mean I would echo both those points. One I would probably use Berkshire Hathaway Automotive, Jeff Rachor who is an excellent CEO of that division, his new and used sales are slightly down in Q1 of this year compared to last year and part of that is this is sort of that same effect from the tariffing that occurred a year ago to today. I had to smile because we were collecting okay it's just it's changed every day as we know and you managed through that and just understanding the tariff bouncing ball was, you know, a job in itself. But I had to smile because I was actually calling our CEOs just to get their take on it. And the 32 companies in the portfolio, consumer product, services, and retail, it's a stat that I love. They've actually been around on average 88 years. And only 0.5% of American businesses have been around more than 80 years. Our average in that sector from a founding standpoint is 88 years. And several of the five of the companies specifically companies that were founded in the 1800s and when I called those CEOs they said we've been dealing with tariffs for 100 years you know kind of thing and so not being dismissive at all of tariffs the point is I look at the whole tariff conversation as you're always going to have a curveball. I think of the CEOs in the last seven eight years we've had to deal with a global pandemic the highest inflation four years and now this thing the bouncing ball of tariffs. So, the businesses have done an excellent job of managing through that. I wouldn't put it in the fun department of the things we have to deal with, but we're learning it and I think we're in a pretty decent spot moving forward.

Good afternoon. My name is Amir Rahani from Vancouver, Canada. Thank you for hosting us and thanks to everyone at headquarters that makes this weekend possible. Berkshire's investments in the five Japanese trading houses was passive. Good businesses at good prices financed by GPN. Your Tokyo Marine deal is fundamentally different. A 10-year joint M&A and reinsurance partnership. That's a level of operational integration Berkshire has never done internationally. What does that look like in practice? And does it signal a broader shift toward active international partnerships under your leadership? And to put you on the spot, Greg, Canada versus USA and hockey, who are you cheering for? Sorry.

I will say Greg and I had an Oilers Stars bet last year.

And we the losing person had to wear the jersey of the other and I now own Oilers gear.

This question comes from a shareholder who didn't want to be identified, but it's a variation of a question that I got from several shareholders. Is there any future circumstance that you could envision Berkshire divesting businesses or being broken up? If so, what are those circumstances?

The shareholder also writes, note, I don't want this to happen, but it's commonly discussed among followers of the company.

Yeah.

Greg, there's the second part of that question though that gets at is there a point where the sum of the parts or something, is there a point where it doesn't make sense for Berkshire to be a conglomerate where you would break up the company?

Thank you.

Okay. Station seven.

Hi, Greg.

Hi, Greg. Katie and Adam. My name is Bori Wong. I'm here from Chengdu, China. On behalf of myself and my investment partner, Shui, thank you very much for this opportunity and congratulations, Greg, on surviving your first year as CEO. I'm sure the seat feels a bit warmer than it used to be. As you lead Berkshire into this new chapter, what would you say is the most significant evolution in your personal framework for assessing cash flow certainty and margin of safety compared to Warren's? And specifically, are you more inclined towards technology companies that exhibit the same robust cash flows? Thank you for continuing the legacy of Mr. Warren Buffett and Mr. Charlie Munger.

This question comes from Joseph Matas and he said Warren had Charlie's partnership for most of his tenure as CEO which naturally reduced the risk of subpar investment decisions. Who will serve as the Charlie for Greg?

There you have it. The 61st Berkshire Hathaway annual meeting is in the books. That was Greg Abel's first time running the show, but he did get a little help from the chairman, Warren Buffett. Buffett sat down with Becky ahead of the afternoon session and delivered a number of newsy comments. He kicked things off by saying that he is staying cautious with his own investments.

I think it's all working. It's all working. It isn't our ideal surrounding area or environment I should say in terms of deploying cash for Berkshire.

Okay.

But in terms of how we got the right management, we got the right arrangement and you know we can pick our spots and nobody can tell us what to do exactly and so sometimes we're doing nothing but other times we get quite active.

But with stocks sitting at record highs and at elevated valuations, Becky pressed him on the overall valuation picture and whether he sees opportunities anywhere. Here's what he said.

That's compared to the markets to a church with a casino attached and people can move between the church and casino and I always said there are more people in the church and more people in the casino. But the casino's gotten very attractive to people. You know, if you're buying one day options or selling them, I mean, that's not investing. It's not speculating. It's gambling, you know, just totally. There's nobody that can explain why they're buying an option for one day unless they have maybe the fellow that made the $400 and some thousands from knowing when we were going into Venezuela could do it. But I mean that's free and the quantity of those things is just incredible. So we've never had people in a more gambling mood than now. But that doesn't mean that investing is terrible.

That's of course been a persistent theme of Warren Buffett for a very long period of time. He's always been skeptical of short-term traders' ability to outperform the market or certainly outperform a longer-term shareholder, the church attached to the casino and the attendance varies between those. So when asked about the impacts, just to get to Greg Abel's Q&A, of the Iran war on Berkshire, Abel said, while it impacts businesses in a variety of ways, he echoed Buffett's emphasis on long-term thinking.

Abel was also asked about his willingness to divest holding companies, invest subsidiary companies and whether Berkshire will remain a conglomerate under his leadership.

Thank you.

As you can see, our Becky Quick is back with us. You know, I thought that was an interesting answer and you pressed him on this idea. Do you envision down the road there'll be any kind of a breakup, some kind of a big spin-off or something like that. Pretty much swatted that away. However, before that, he did express a willingness under some circumstances to sell some businesses. It seemed pretty narrow in terms of what it would take, but I did think that was relevant. He seemed to want to get on the record with that.

Yeah. Because I think in some ways he said, look, this is the same way I've been looking at things for a while. That's not necessarily the way it was seen, I think, under Warren and Charlie originally. The deal was if we buy you, we buy you. You're forever. And that was something that brought you in. Back again to the idea of Greg's roots as an operator. If a business is losing money, we're not going to continue to sustain that. If we can find somebody else who can run that business better, we'll sell it off. We're going to do what's best for our shareholders, also for the employees of that company, as he said, to not want to wind something down. But he said if we have to, we'll wind something down.

Yeah. I mean, as the questioner said, I get this from a lot of investors in Berkshire that the curiosity around that. Now, on one level, it's like, what are you going to do? Sell a business for cash and just add to the cash you're not doing anything with. But in the general capital allocation, you don't want capital to be eroded on one end of the business, even if it's relatively small.

It's the definition of capitalism, right? The idea of a profit motive. That is what drives things to be more efficient. And he's basically saying, we're capitalists. We believe in that idea when it comes to it. I think the question of the conglomerate was an important one though because it's a question that I got several times in the shareholder questions that were sent in and you probably get this all the time too just in talking to people who follow the company. That's the question. Will the conglomerate make sense? Because conglomerates over time don't tend to make sense. Berkshire has been the standout that says we're going to stand alone on this. There's always been the question is will there be some sort of activist who tries to come in and break things up and tries to say is it more valuable if you break these things apart than the sum of the parts by putting them together and that's part of the reason I wanted that answer on the record too.

Yeah. Exactly. And his characterization of it's an efficient conglomerate or an effective conglomerate. And what Warren and Charlie always said was well we let the businesses run. They have to be profitable. They give us the cash because we have a great track record of actually getting returns on newly invested cash that works really well even if there's no supposed coherent strategy as to why these businesses should be under one roof.

Right. And Greg laid that out again, the idea that this is a really tax-efficient way of taking capital from one business and putting it in other businesses. Now in the past under Warren Buffett that's always meant that you can take that money and invest it in stocks because he was such a great stock picker. I think the evolving idea of this company is you could take that money and use it to do huge capex in, you know, maybe Berkshire Hathaway Energy, maybe if you're looking to do something, maybe it's with the railroad, maybe it's one of the other businesses, you can buy and acquire other bolt-on businesses for some of those and let them expand, increase your operations. So, I think we have to look at that idea of capital allocation more broadly and differently than we have under Warren Buffett as the CEO. And there was that other question from the room that gave Greg the opportunity to create any differentiation between his approach.

Yeah. To capital allocation and what kind of margin of safety you look for and the cash flow metrics and would you look at technology more closely.

Right.

He declined the opportunity to point to any daylight between him and Warren on that. Basically there's a Berkshire Hathaway way and that's the way we're going to keep going.

Very thin layers. Kept coming back to the idea of we're not building a bureaucracy with a lot of layers. We want to make sure that we operate efficiently and that's why this conglomerate works versus others.

Yeah. And then the question of who is your Charlie was kind of fun at the end. No individual yet appointed to that role.

A lot of people. But I will say again back to that idea of when he and Ajit were on stage together. It was a very natural flow to watch some of those things happening too. But the reason that you're seeing people like Katie Farmer and Adam Johnson who's now running 32 companies is because he's relying more heavily on someone like Adam to do a lot of that lifting.

Fascinating nugget. Adam highlighted which is that the average age of the companies now under his purview is 88 years and that's 30-some consumer companies right, quite remarkable and they use that as a way of downplaying these kind of near-term challenges like tariffs and like the Iran war.

Like we've seen this before kind of the idea that comes through.

Somewhere in the culture we've seen this before even if we personally haven't seen it before. Yeah.

Right.

What about Warren's comments? Anything, what most struck you about those?

You know, the idea, I think you guys played some, I didn't hear the sound because I was walking back from the stage but I think he played some of the ideas of he's still looking around and things don't look all that cheap in the market, not huge opportunities and by the way he's looking, you know, like he comes to the office 5 days a week he's still pretty involved in that. He told us when we last sat down with them last month that yeah he had made a small purchase at that point so he's still playing every day looking for these things and they're active but I think he and Greg both would love to get a phone call at any point if there's a seller of a business they might be interested.

Even a year ago when he first announced that he was going to be stepping down as CEO at the end of this year, you could actually perceive his eagerness to get that call over the course of the next year or so while he was still going to be day-to-day involved as he still is.

Right. Anyway, that concludes things for CNBC's coverage of Berkshire's 61st annual shareholder meeting. Mike, it's been a pleasure. Been great hanging out here with you. Got lots more to come. Mike and I are going to be reunited on Monday morning, in fact, on Squawk Box. I'll still be on the ground here in Omaha, and we'll be bringing you more information from what we've been learning all weekend. Mike and Melissa Lee are going to be holding down the fort back at the NASDAQ. That program starts, of course, at 6:00 a.m. Eastern time. Don't miss it. Bye, everybody.

That does it for us.

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