Berkshire's 2024 annual shareholder meeting: Watch the full morning session

Yeah, don't wear out all your clapping on Charlie. I mean, in addition—well, we have, first of all, Greg Abel, a director, and Ajit Jain sitting next to him, runs insurance. And moving then to the back of this first section, if each of the directors there would remain standing till we finish, we'll go alphabetically down the line. And we've got Howard Buffett, we have Susan Buffett, Steve Burke, Ken Chenault, Chris Davis, Sue Decker, Charlotte Guyman, Tom Murphy Jr., Ron Olson, Wally Weitz, and Merrill Whitmer.

Okay. There are two people I would like to thank and then we'll get on to the brief description of the results of the first quarter. First of all, I'd like to thank Melissa Shapiro who put this whole event together. You can't imagine the work that goes into it. She just reported to me that we set a new record for See's Candy—I think they brought on six tons and they will sell out. And one thing I do want to mention: we have only one book at the Bookworm this year. Normally we have about 25, but we have Poor Charlie's Almanac, fourth edition, and I think we sold about 2,400 of them yesterday. And that will be the only book. Next year we'll go back to having our usual selection, but we thought we would just turn it over to Charlie this year. And then I would like to introduce one further person, and that's the person who put that movie together. You can't imagine the amount of work it is because, for example, on those scenes that we've used from the past—if they involved Hollywood stars or Berkshire people, we needed to get permission all over again to show it, because we told them originally we would only show it within the confines of our auditorium here. And of course it went out on CNBC, and you just can't imagine how much effort, but also the great cooperation we got from all those Desperate Housewives and Jamie Lee. And with the Desperate Housewives we had to get Disney's okay, and that was easy to get. But running down five Desperate Housewives—that one came on toward the end. But the job of putting this together has been handled by the same fellow that handles—has been doing these for years and years and years and years. And I just would appreciate it if you could just put the spotlight on Brad Underwood for just a minute.

Okay. We put out some results for the first quarter this morning at 7 o'clock our time, and some few sharp-eyed analysts and press people already picked up one or two items from it, which I'm sure we'll get some questions on later. But if we could start out with slide number one, which should be showing now, you'll see that in the first quarter—the way we talk about operating earnings at Berkshire, we've explained that many times as why we think these figures that we give you are the most descriptive of what's really going on in the business, and take out the wild swings in the market that otherwise just—you know, you end up reporting big earnings one quarter and big losses another quarter. We pay no attention to those at Berkshire. But you will see that we had a better than average quarter. And Ajit Jain wants me to point out to everyone that you cannot take the insurance earnings of the first quarter and multiply by four. It just doesn't work that way in insurance. While we insure storms around the world, the major storms, for example, that would affect our earnings would be probably—number one would be something that came in at the wrong place from our standpoint and then just kept going up the east coast, and that's our number one risk as we evaluate things. But we're in all kinds of risks. There can be an earthquake tomorrow, there can be an earthquake 10 years from now, and then, you know, we're in that sort of business. But the first quarter does hit the—should be our best quarter. Certainly shouldn't be our worst quarter. The most likely quarter to be the worst quarter is the third quarter. But anything can happen in insurance, but fortunately nothing much happened in insurance during the first quarter. So we had much improved earnings in insurance underwriting. And then our investment income was almost bound to—well, it was almost certain to increase, and I said that in the annual report because yields are so much higher than they were last year. And we have a lot of fixed short-term investments that are very responsive to the changes in interest rates, so that figure is up substantially. And I can predict that one will be up for the year. We've got more money to invest, as we'll get to in a minute, and that's fairly predictable, so that number will be up. When you get into the railroad, the railroad earnings were down modestly, but we should be earning somewhat more money than we are earning under present traffic conditions. And then traffic conditions can also hit the potential earnings of the railroad. If you want, every Wednesday you can get car loadings from the previous week, and I'll regress a little if you do get them, but I get them every week. They're available, and you'll see that car loadings have been running—for the industry, have been running down modestly. And these earnings were as expected, but we should earn somewhat more money than that on the equivalent amount of car loadings. And in the energy company, we had better earnings, but our earnings were distorted—well, they were affected by conditions that I wrote about in the annual report, and we'll undoubtedly discuss more this morning. But off a low base of last year, they were up somewhat. And so you get down to the final figure, and 11.2 billion is quite an improvement from last year. But we would expect our earnings should go up modestly from year to year because after all, we're retaining like 37 billion last year of earnings. So if we put 37 billion more, you left it with us, we should do something that's satisfactory. And the goal of Berkshire—economic goal—is to increase the operating earnings and increase the shares outstanding. It's that simple to describe; it's not quite so simple to pull off necessarily, but that's what we're attempting to do. And if we'll turn to slide two, please, I've got the history, and I just picked the pre-pandemic year of when we hit 24 billion, and then we fell off in the first year of the pandemic. And then as you see, we've moved up from 27 to 30 to 37 billion. And the interesting thing about these earnings is they're after depreciation and amortization and taxes and all that sort of thing, so you can figure that essentially Berkshire has a little over 100 million dollars per day, including weekends and holidays, coming in to deploy. And we've said many times what we're attempting to do—we're attempting to deploy that money. But we have that responsibility, and sometimes—if you'll turn to the next page—well, you'll see how that's built up, the shareholders' equity. So Berkshire had at March 31st 574 billion. And through retaining earnings—and we've been retaining earnings ever since we took control of Berkshire, except the way—except one day, as I remember. I think it was maybe 1968 or '69—the directors declared a 10-cent-a-share dividend, and I think I must have been in the restroom or something at the time. So if you leave out that period of madness, we've been retaining—we've been saving your money, putting it to work. And sometimes we've done things that were big mistakes, but we never get close to fatal mistakes. And every now and then we do something that really works. And as Charlie pointed out in the past, you know, it's really—there's probably been a half a dozen to a dozen over 57 or 58, or whatever it would be, really important big decisions, and there's been nothing close to fatal. So that continues to be the guideline. And we have accumulated 571 billion. And I couldn't help but look at who's second. And JP Morgan at 327 billion at year end, and they're up to 338 I believe on end of the quarter. But they pay significant dividends, they repurchase shares, they've got a business that earns better returns on equity, but they don't plow it—and they shouldn't—they don't plow it back exactly like we have. And it does show what can be done, really, without any miracles if you save money over time. And we have a group of shareholders—we had a group of partners originally, Charlie and I did—that wanted to save money and left their money with us. Like in that film you just saw, you saw Eddie and Dorothy Davis, and the Davis family and the children and the grandchildren periodically did some other things with the money, but they also basically left it with us. And we were a savings vehicle, and they were able to live very well, but they weren't trying to live like the kings and queens of earlier capitalism who used to build the houses in New England and, you know, have a servant standing behind everybody eating and all that sort of thing. So we've had very few what I would call 'look at me' type people that are attracted. There's nothing wrong with it, but they just go someplace else. And they are spending sort of unbelievable sums after a while by the standards of the past. And our people—nobody—we have nobody that's a miser or a hoarder or anything like that in our group. They live very well, but the math of compounding and a long, long runway have done wonders. And we will talk a little later—right before lunch, we'll give an illustration of that, of what can be done with that sort of philosophy.

So our cash and treasury bills were 182 billion at the quarter, and I think it's a fair assumption that they're probably about 200 billion at the end of this quarter. We'd love to spend it, but we won't spend it unless we think we're doing something that has very little risk and can make us a lot of money. And our stock is at a level where it adds slightly to the value when we buy in shares, but we would really buy it in in a big way—except you can't buy it in in a big way because people don't want to sell it in a big way. But under certain market conditions, we could deploy quite a bit of money in repurchases. And as you'll see on the final slide, we have bought it in the last five years. We can't buy them like a great many other companies because it just doesn't trade that way. The volume isn't the same because we have investors—and the investors, the people in this room, really, they don't think about selling. They probably, I would hope, many of you don't even check the price daily or weekly. The people who check the price daily have not made the money that the people who have forgotten about it basically have over the years. And that's sort of the story of Berkshire. We'll try to increase operating earnings, and we will try to reduce shares when it makes sense to do so, and we will hope for an occasional big opportunity. And we're quite satisfied with the position we're in.

So with that background, I think we'll turn it over to Becky Quick, and we will alternate questions between Becky and those of you in the audience. And Becky, you want to start with the first question?

Sure, thanks Warren. Let's start just given what you mentioned—there was some news that came out in the 10-Q this morning. It shows that Berkshire sold another 115 million shares of Apple in this last quarter. That's Berkshire's largest holding. And I think in that vein we'll start with a question from Sherman Lamb. He is a 27-year-old Berkshire Hathaway Class B shareholder from Malaysia, and he asks: Last year you mentioned Coca-Cola and American Express being Berkshire's two long-duration partial ownership positions, and you spent some time talking about the virtues of both these wonderful businesses in your recent shareholder letter. I noticed that you have excluded Apple from this group of businesses. Have you or your investment manager's views of the economics of Apple's business or its attractiveness as an investment changed since Berkshire first invested in 2016?

No. I would—we have sold shares, and I would say that at the end of the year I would think it extremely likely that Apple is the largest common stock holding we have. Now, one interesting thing is that Charlie and I looked at common stocks or marketable equities, or the things that people love to look at as being businesses. And so when we own a Dairy Queen or we own whatever it may be, we look at that as a business. And when we look—own Coca-Cola, or American Express, or Apple, we look at that as a business. Now, we can buy really wonderful companies in the market as businesses. We can't buy all of them—I mean, all of their shares; we can't buy 90% or 80% or anything like that. But when we look at Coca-Cola and American Express and Apple, we look at them as businesses. Now, there's differences in tax factors, there's difference in management responsibility, a whole bunch of things. But in terms of deploying your money, we always look at every stock as a business. And we have no attempt made to predict markets. We have no attempt made to pick stocks. I went through many, many years doing the wrong thing. I got interested in stocks very early and I was fascinated by them, and I wasn't wasting my time because I was reading every book possible and everything else. But finally I picked up a copy of The Intelligent Investor in Lincoln, and there were a few sentences in there that said—much more eloquently than I can say it—but if you look at stocks as a business and treat the market as something that's not there to instruct you but it's there to serve you, you'll do a lot better over time than if you try to take charts and listen to people talk about moving averages and look at their pronouncements and all of that sort of thing. And so that made a lot of sense to me. And the way I—we have been allowed to deploy it, Charlie and I talked about this, of course, constantly. It's changed over the years as the amount of capital we have has changed and all of that, but the basic principle was laid out by Ben Graham in that book, which I picked up for a couple of dollars, and which basically said to me: you've been wasting your time, now, but maybe you can use what you've learned or been reading about and put it to better use. And then Charlie came along and told me how to put it to even better use. And that's sort of the story of why we own American Express, which is a wonderful business, we own Coca-Cola, which is a wonderful business, and we own Apple, which is an even better business. But—and we will own—unless something really extraordinary happens, we will own Apple and American Express and Coca-Cola when Greg takes over this place. And it's such a simple approach that it's almost deceptive. Most things, if you keep working harder and harder at it, you know, you learn a little more math or you learn a little more physics. But investments, you don't really have to do that. You really have to have your mindset properly. So we will end up—and unless something dramatically happens that really changes capital allocation strategy—we will have Apple as our largest investment. But I don't mind at all under current conditions building the cash position. I think when I look at the alternative of what's available in the equity markets and I look at the composition of what's going on in the world, we find it quite attractive. And one thing that may surprise you—but almost everybody I know pays a lot more attention to not paying taxes. And I think they should. We don't mind paying taxes at Berkshire, and we are paying a 21% federal rate on the gains we're taking in Apple. And that rate was 35% not that long ago, and it's been 52% in the past when I've been operating. And the government owns—the federal government owns a part of the earnings of the business we make. They don't own the assets, but they own a percentage of the earnings. And they can change that percentage any year. And the percentage that they've decreed currently is 21%. And I would say with the present fiscal policies, I think that something has to give. And I think that higher taxes are quite likely. And the government wants to take a greater share of your income or mine or Berkshire's—they can do it. And they may decide that someday they don't want the fiscal deficit to be this large because that has some important consequences, and they may not want to decrease spending a lot, and they may decide they'll take a larger percentage of what we earn. And we'll pay it. And we always hope at Berkshire to pay substantial federal income taxes. We think it's appropriate that a company—a country that's been as generous to our owners—it's been the place, you know, Berkshire was lucky was here. And if we send in a check like we did last year—we sent in over 5 billion to the US federal government—and if 800 other companies had done the same thing, no other person in the United States would have had to pay a dime of federal taxes—whether income taxes, no social security taxes, no estate taxes, no—up and down the line. Now, that's—I would like to—I hope things develop well enough with Berkshire that we say we're in the 800 club and maybe even move up a few notches. It doesn't bother me in the least to write that check. And I really hope with all of America's done for all of you, it shouldn't bother you that we do it. And if I'm doing it at 21% this year and we're doing it at a higher percentage later on, I don't think you'll actually mind the fact that we sold a little Apple this year.

Hi, Mr. Buffett. This is Matthew Li from China Hong Kong. I'm running my last listed company called Foc-Phi, and we are so grateful that we learn from you, and you really inspire us. My question is: Besides the electric car company BYD, under what circumstances would you reinvest and reconsider investing in Hong Kong and China companies? Thank you.

Yeah. Well, our primary investments will always be in the United States. We do think—the companies we invest in in the United States, American Express does business around the world, and no company hardly does business around the world like Coca-Cola. I mean, they are the preferred soft drink, you know, something maybe like 170 or 180 out of 200 countries. Those are rough approximations from a few years back probably, but that degree of acceptance worldwide is, I think, almost unmatched. I can't really think of any company that has it. American Express has a position, and the credit card bill, which I think is extremely strong—and part of that was one of the direct reasons for that is one of the directors that I introduced a few minutes ago, Ken Chenault. But it is strengthened dramatically over the last 20 years for a lot of reasons. So the BYD investment was—and well, we made the commitment in Japan, which I did five years ago, and that was just overwhelmingly compelling. It was extraordinarily compelling, and we bought it as fast as we could. And we spent a year, and you know, we got a few percent of our assets in five very big companies, but that's the problem of being our size. But you won't find us making a lot of investments outside the United States, although we're participating through these other companies in the world economy. But I understand the United States—rules, weaknesses, strengths, whatever it may be. I don't have the same feeling for economies generally around the world. I don't pick up on other cultures extremely well. And the lucky thing is I don't have to, because, you know, I don't live in some tiny little country that just doesn't have a big economy. But I'm in an economy already that has, you know, after starting out with a half a percent of the world's population, has ended up with well over 20% of the world's output in an amazingly short period of time. So we will be American-oriented. I mean, if we do something really big, it's extremely likely to be in the United States. Charlie—in all those years, there's only two times he told me that, you know, this one is really—you know, he would always go along with me and say, well, when I was suggesting something, say, well, this is really not that great, but it's probably the best you'll come up with, so I'll go along with the idea. But Charlie twice has pounded the table with me and just said, you know, 'buy BYD'—and BYD was one of them, and Costco was the other. And we bought a certain amount of Costco, we bought quite a bit of BYD. But looking back, he already was as aggressive, but I should have been more aggressive in Costco. It wasn't fatal that we weren't, but he was right big time in both companies. I'm aware of what goes on in most markets, but I think it's unlikely that we make any large commitments in almost any country you can name, although we don't rule it out entirely. And I feel extremely good about our Japanese position, and we'll have that—I don't know how many years Greg will be sitting with that at some point, and we couldn't be happier with that. But you really have to—we really have a different outlook in looking at—we look at your money, which we couldn't bear to lose, and we feel that we're far less likely to make any truly major mistakes in the United States than in many other countries.

Okay. This next question comes from Stanley Holmes, who is a Berkshire shareholder from Salt Lake City. He asks: In his 2024 annual letter to shareholders, Chairman Buffett noted the severe earnings disappointment experienced at Berkshire Hathaway Energy last year and expressed concern about earnings and asset values in the utility industry. Recognizing that investors are worried about climate-change-related expenses and that new uncertainties cloud the regulatory environment, the Chairman suggested that some jurisdictions may adopt the public power model. There are now signs that policy makers in Utah, citing state sovereignty, may already be poised to move in that direction. The Utah legislature recently mandated the state's right to serve as sole purchaser of energy from an instate power plant and, under some circumstances, purchase the power plant before it can be retired. The state utility regulator will be legally bound to prioritize public purchases of power and facilities that could include assets owned by Berkshire Hathaway Energy subsidiary PacifiCorp—Rocky Mountain Power. Will Berkshire, through BHE, continue to invest resources in jurisdictions where corporate assets may be subject to confiscatory state policies and actions? And how is Berkshire Hathaway Energy working with officials in Utah to minimize potential corporate losses if and when state control is asserted over its electrical utility sector?

Yeah. I will—Greg will join with me in the answer on this. But I would say our feeling is that Utah is actually very likely to treat us fairly, whether the action is in granting appropriate rates that give us the return we generally expected in terms of our own properties, or if they decide for some reason to go to public power, I think they would compensate us fairly. In the 1930s, George Norris, the senator from Nebraska, just turned Nebraska into a public power state. And our experience in Iowa would indicate that free enterprise has its role and that we can run a privately-owned utility company that will be more efficient for society than, at least in most states, people can do with public power. But what has happened is that there's going to be an enormous amount of money spent on power, and we are—if you're going to do it with private owners, there's nobody better situated than Berkshire to satisfy a large portion of the needs of the country. And we will do it at a rate of return that is not designed to make us rich or anything like that—it's a sensible rate of return. But we won't do it if we think we're not going to get any return. It'd be kind of crazy. And we've seen actions in a few states where some of the costs associated with climate change are not being regarded as cost the utility shouldn't incur. Well, believe me, if it was publicly owned, they would have incurred it too. But we will—what society tells us, and we have got the money and we've got the knowledge to participate big in something that is enormously important for the country. But we're not going to—we're not going to throw good money after bad in the field. I don't worry about my understanding is—and Greg can elaborate on this more immediately—but I don't regard Utah as being unfriendly to the idea of utilities being treated fairly.

Yeah, when you touched on it initially in your letter relative to the challenges in the industry, and then you've just alluded to the significant investment that has to go into the energy industry, the utility sector for many years to come—and I think if we start there, if I think of our different utilities, and we'll definitely come to Utah and PacifiCorp, but if you look at the underlying demand that is building in each of those utilities and the amount of dollars that are going to have to go in to meet that demand, it's absolutely incredible. So when you raised it in your letter, it's a really important issue. We have to have a regulatory compact that works between—if it's a public utility, it has to work in concert with the state, Utah being an example—or it ultimately becomes potentially a public power entity. So just to set the frame a little bit, if I think of Iowa, which you mentioned, and the underlying—we've made substantial investments there. It's been very consistent with both the public policy that the state and legislature wanted, and they enacted very specific laws to encourage that. But that utility is more than 100 years old right now. And if we look at the demand that's in place for MidAmerican Iowa—Iowa utility—over the next, say, into the mid-2030s, associated with AI and the data centers, that demand doubles in that short period of time. And it took 100 years plus to get where we are today, and now it's going to double. And that will require substantial amounts of capital from MidAmerican and its shareholders. And how that will function is if we have a proper regulatory compact in place, which you've highlighted. If we then go to, say, Nevada—where we own two utilities there and cover the lion's share in Nevada—if you go over a similar time frame and you look at the underlying demand in that utility, say, going into the later 2030s, it triples the underlying demand. And billions and billions of dollars have to be put in our rate base. We'll literally go from—it's not a modest level now, but you're talking probably an incremental 6 to 10 billion at least of rate base going into that type of entity, which requires, again, alignment with the state and their policies and a proper recovery of our underlying both capital and a return on capital. So when we come to the wildfires, that's been a substantial challenge because it's the first time—there's been a lot of discussion around one of our utilities, one experienced significant losses associated with the wildfires. What portion of those costs will be recovered, and that's really the dialogue we're in, and does that properly work. When I think of the wildfires, there have been many claims, and a recent additional claim last week for 30 billion dollars. And we don't take that lightly, but it is an incremental claim to an already existing lawsuit that's in place. And when I think of PacifiCorp, we're in a place where, first and foremost, all the litigation will be challenged because the basis for it—at least we believe there are places where it's unfounded, and we'll continue to challenge it. And it will take many years to be resolved, as Warren highlighted in the letter. But if you think of PacifiCorp and the litigation there—number one, how we think and operate those assets have to change. Because we have worked with the states across all our states for many years with the fundamental goal to be to keep the power on. And our teams and our employees worked incredibly hard to keep the power on day in, day out, through storms. Unfortunately, through the 2020 fires, the instincts were not to turn off the power. The instinct was to keep the power on, to keep hospitals, fire stations responding. It's not in their mind—or at least culture, it wasn't in our minds to de-energize. So the first thing we had to do was step back and say we've got to fundamentally change the culture, not just at PacifiCorp but across all our utilities. The first thing we have to recognize is that there's now going to be situations where we prioritize de-energizing the assets, and that's completely different than how we've operated those assets, as I've highlighted, for 100-plus years. So we start with the culture; we had to change that. The second thing is we've now changed our operating systems so that we can turn off the power very quickly. If there's a fire that's encroaching, we will turn off our systems now, and the minute the conditions are safe again, we'll re-energize it. But we've had to do that. And then the third thing is continuing to invest in a way that allows us to try to minimize the risk of the fire. But when you get back to Utah and PacifiCorp, the challenge we do have is within PacifiCorp, as we go through both litigation and through continuing to operate that entity—it generates a certain amount of capital and profits that will remain in that entity and be reinvested back into that business. But fundamentally, as we go forward, we need both legislative and regulatory reform across the PacifiCorp states if we're going to deploy incremental capital, make incremental contributions into that business. As Warren said, we don't want to throw good capital after bad capital, so we'll be very disciplined there. But the reality is there are opportunities to both solve the legislative and regulatory solutions, and the best example we actually have—and I think it's the gold standard across the country—is Utah. So as Warren touched on, it's a state we're happy we're investing in. It is part of PacifiCorp, so there's a certain amount of balance there as to how we do it. But in the last legislative session that existed, Utah actually passed a bill that does a couple very important things. One, it caps non-economic damages on wildfire claims. So if you go back to the wildfires we have in Oregon and the claims you're hearing filed for—there's economic damages associated with them, and those harms should receive the economic damages associated with that. But unfortunately, and even though there's legislature and case law in Oregon that says wildfire non-economic damages should not be awarded, there's very substantial non-economic damages being awarded there. Utah took a very proactive position to say we will cap those non-economic damages, and it creates an environment—again, it's back to that: is there an environment where you want to invest in? Yes. And then incrementally, they've created a very substantial fund—it's literally called the Wildfire Fund—for fires in Utah that will help facilitate both liquidity and the ability to resolve the situation. So Utah, we believe, including the legislation that—a lot of other things came out of it—is the actual gold standard as we go forward. So very important issue for Berkshire Hathaway Energy, but at the same time it is a PacifiCorp issue. The risk of regulatory compacts not being respected is a much broader one that we'll always evaluate and be careful how we deploy our capital. But both PacifiCorp will manage through it, and I see other very good and significant opportunities in Berkshire Hathaway Energy.

The return on equity investment that has been promulgated and been achieved over the years has been, particularly in recent years, well below the return on equity that has been achieved by American industry generally. And so, whether you earn X or X plus a half a percent or X minus a half a percent—that differs by state, and some states are more attractive than others. But whether you earn X or go broke is not an equation that works. And, you know, we won't put our shareholders' money—they didn't give it to us to lose it all. And we might like it if it's better when it's X plus a half percent than X minus a half percent. But the electric utility industry will never be as good as—I mean, just remotely as good as—the kind of businesses we own in other arenas. I mean, you look at the return on tangible equity at Coca-Cola, or American Express, and to really top it off, Apple—it's just a whole different game. But in utilities, the trade has been and the compact has been that you get a modest return. And climate change comes along and it causes way more fires—that's just the cost of doing business. And it doesn't mean that we can't do things to mitigate fires in the future, and you can make different policies on when you turn off the lights. But somebody's going to put up many, many hundreds of billions—maybe in the trillions—and climate change enters into that. And it can be done through public power or it can be done through private enterprise, to quite a degree. And we would be certainly good for 100 billion or more, but we're not going to throw good money after bad.

Hi, I'm Joe, visiting from San Francisco. How do you think about the role of technological advances, especially generative AI, on more traditional industries? Thank you.

Yeah. I made a mistake in calling on four, but I'll get back to two later on. I don't know anything about AI. But I do have—I don't—that doesn't mean I deny its existence or importance or anything of the sort. And last year I said, you know, we let a genie out of the bottle when we developed nuclear weapons, and that genie has been doing some terrible things lately. And the power of that genie, you know, scares the hell out of me. And I don't know the only way to get the genie back in the bottle. And AI is somewhat similar—it's out, it's partway out of the bottle, and it's enormously important, and it's going to be done by somebody. So we may wish we'd never seen that genie, or it may do wonderful things, and I'm certainly not the person that can evaluate that. And I probably wouldn't have been the person that could have evaluated during World War II whether we test the 20,000-ton bomb that we felt was absolutely necessary for the United States and would actually save lives in the long run, but where we also had Edward Teller, I think it was, it was on a parallel with Einstein in terms of saying you may, with this test, ignite the atmosphere in such a way that civilization doesn't continue. And we decided to let the genie out of the bottle, and it accomplished the immediate objective. But whether it's going to change the future of society—we will find out later. Now, AI—I had one experience that does make me a little nervous, and I'll just explain it. Very recently, fairly recently, I saw an image in front of my eyes on the screen, and it was me, and it was my voice, and wearing the kind of clothes I wear. And my wife or my daughter wouldn't have been able to detect any difference. And I was delivering a message that no way came from me. So when you think of the potential for scamming people, if you can reproduce images that I can't even tell—let's say I need money, you know, it's your daughter, I've just had a car crash, I need $50,000 wired. I mean, scamming has always been part of the American scene, but this would make me—if I was interested in investing and scamming, it's going to be the growth industry of all time, and it's enabled in a way. Now, obviously AI has potential for good things too, but I don't know how you—based on the one I saw recently, I practically would send money to myself over in some crazy country. So I don't have any advice on how the world handles it, because I don't think we know how to handle what we did with the nuclear genie. But I do think, as someone who doesn't understand a damn thing about it, that it has enormous potential for good and enormous potential for harm. And I just don't know how that plays out.

I'd like to mention to Becky that Ajit will not be in the afternoon session. So if you could focus on any insurance questions you want to ask, that would be a good one.

Yeah. This next question is for both Warren and Ajit. It's from Ben Null, who's a Minneapolis shareholder who's been a shareholder since 1995. And he says: In an interview this past year, Todd Combs said that in his first meeting with you in 2010, he told you Geico is better at marketing and branding, but Progressive is a data company and data is going to win in the long run. But it appears you did not prioritize data analytics at Geico until a decade later when you made Todd CEO. As business units like Geico age and need new strategic direction, I wonder if Berkshire's hands-off management approach is a source of vulnerability. Will you please review your thinking on changes made at Geico and explain how Berkshire is structured to react if the Berkshire CEO sees that a business unit is strategically off track? And Ajit, I hope you will continue to update us on yours and Todd's progress at remedying the data analytics shortcomings at Geico.

I would add that equating rate with risk, obviously, is important in every line of insurance business. I mean, that's what you're involved with us—deciding whether a given rate offers us the chance of the probability that we will make a little money on it, and that sometimes we're only risking losing a little and sometimes we're risking losing huge amounts. But Geico—and Progressive has done a better job in that recently—but our fundamental advantage at Geico, of course, is that we have lower costs than virtually anybody, and that cost advantage has been dramatic. We've driven our underwriting expense ratio below 10%, and there's just very, very, very few companies that can compete with that. So it isn't in the least a survival question, and it isn't even exactly a profitability thing. But we would rather have X% of the market than a half of X%. But roughly, I think in the month of March we were just—we didn't lose policyholders, and we've got 16 million or whatever it is of them, and we've got the lowest-cost operations. So it's not remotely a threat to survival, it's not a threat to even profitability. But on the other hand, we would like to be growing with something that is the best model around in the insurance business of delivering at a low cost. And we now have a recognition that we didn't have back when Leo Goodwin started in 1936, but the same principle that worked then is that if you can offer somebody a good product cheaper than the other guy, and everybody has to buy it, and it's a big business, you know, it's very attractive to be—and Geico is a very attractive business and has got its lowest-cost thing. And it does have to do a better job of matching rate to risk, but our low costs have masked the fact that for a while we could do without progressing as much as we should have been on the matching of rate to risk. And now Todd has been working intensively at that, and he's made a lot of progress, but there's still work to be done. But in the meantime, we're not going to shrink, and we should make better underwriting profits than most companies in the insurance business.

Good morning. My name is Sebastian Zar. I'm from Munich, Germany, but I have very high respect for this company in Germany. And my question is: Who are your most trusted advisors today? Is it Ted and Todd? Is it Greg and Ajit? Is it your wife, your children? And what do you value about them? Thank you.

Well, it depends whether they're advising me on money or on other things. I trust my children and my wife totally, but that doesn't mean I ask them what stocks to buy. But, you know, I—in terms of managing money, there wasn't anybody better in the world to talk to for, you know, many, many decades than Charlie. And that doesn't mean I didn't talk to other people, but if I didn't think I could do it myself, I wouldn't have done it. I mean, so I, to some extent, I talk to myself on investments. And I think my children have gotten a whole lot wiser over the years, and so I listen to them on a lot of things. I'll listen to my daughter on who to vote for locally because she knows a lot more about that than I do. And I'll listen to my wife on a lot of things, and I won't get into details. So it is important—if you don't live a life where you surround yourself and limit yourself to people you trust, it won't be much fun. I mean, I literally have been in the position ever since I was in my 20s of being able to have people I trusted around me. And I've made mistakes occasionally, but they filter out over time—you learn. And when I found Charlie, for example, in all kinds of matters, not just investment, you know, I knew I'd have somebody that—well, I'll put it this way: you can think about this, Charlie and all the years we worked together—not only never once lied to me, ever, but he didn't even shape things so that he told half-lies or quarter-lies to sort of stack the deck in the direction he wanted to go. He absolutely—he considered it of utmost importance that he never lied. Now, that occasionally got him in trouble at dinner parties or something, if he said to the woman, 'I really prefer the way you used to do your hair the way that somebody across the room does.' I mean, he was—but in terms of having a partner, I simply cannot think of a conversation I ever had with Charlie that in the least he misled me or shaped it his way or anything of the sort. So when you get that in your life, you know, you cherish those people and you sort of forget about the rest.

This question is for Ajit. It comes from Mayer Baruca: Climate change seems to be impacting the insurance industry heavily, with major players pulling out of markets like California because of wildfire and flooding risks. Combined with payouts increasing, how does Mr. Jain see this risk expanding to other regions, and how has the thesis on insurance investments changed because of it?

Yeah. Climate change increases risks, you know. In the end, it makes our business bigger over time—but not if we misprice them, we'll also go broke. But we do it one year at a time, overwhelmingly. And I would say this: I would rather have Ajit assessing this than any thousand underwriters or insurance managers in the world. I mean, the factors aren't—you know, well, we'll take Atlantic hurricanes, which would be our probably our biggest risk. You know, there's no question that you can measure the temperature of the water in the Atlantic and you know what more water does to hurricanes, but you don't know necessarily whether that's good or bad, because it may cause them to turn further, you know, it may change the path as well as the intensity and frequency of losses. But we'll write it one year at a time, and we'll have Ajit underwriting it. And, you know, we don't have to tell you what's going to happen five years from now or 10 years from now. And people who don't have sort of analytical insurance minds that comment on this subject really don't expand our knowledge. It's—we get a lot of letters from people that I'm sure have good IQs, but they don't really—they don't understand the insurance business, and they're not wrong, I don't think, in my mind, about climate change. But if there was no risk, there'd be no insurance business, and we're in the business of evaluating it, and we do it one year at a time. And there's some exceptions where you can't do it, where your decisions extend for a long time in the future, and we try to avoid those. But again, you don't need a thousand people analyzing water currents. You need one very, very, very smart guy, and we've got him.

Hello. Hi everyone. I'm Liam. I'm 27, from Newark, Ontario, Canada. I got invested in Berkshire thanks to my dad who brought me down to this meeting. I'm so excited to be here. Most 27-year-olds had idols who are rappers, but instead my idols are Warren, Charlie—who we will miss forever—and also your cousin Jimmy, who unfortunately had to go this year too. It's been a tough year. As a Canadian, similar with Greg, I always wonder about our Canadian economy and what you think about the Canadian economy. We got some beat-down bank stocks right now, and I don't know what your opinions are on these. And I also wonder, in your 90s, if the rumors are true and you're still able to eat McDonald's. I like fast food myself, but I always wonder at 93 he's still able to eat those and enjoy the Coca-Cola. Thanks, Warren.

Okay. Well, we've got a Canadian here, so we'll let him answer the first part, and if you watch me, you'll see what I like to eat. I mean—but go to it, Greg.

Yeah, well, we're—we are fortunate to have a number of operations up in Canada. It goes across many of our operating entities, and then, as Warren touched on, all the businesses that we have a piece of that we're invested in are up in Canada. So the presence is significant. We're always looking at making incremental investments there because it's an environment we're very comfortable with. Warren touched on understanding the US business environment, and I would put Canada equally in that bucket that we understand it and would be comfortable. And I would say the economy moves very closely to the US, so the results we're seeing out of our various businesses that report both the US and Canadian operations aren't drastically different. And there's a few that—we're on the energy side, for example. We make very substantial investments up there in Alberta. But again, it's very consistent with how that economy is growing, and I would see it being very consistent with what we see here.

Yeah, no. We, in Canada—when, obviously there aren't as many big companies up there as there are in the United States. But when we get a—I got one from Canada just the other day that I sent over to Greg too—that when we see anything that's suggesting an idea that's of a size that would interest here and meets other requirements, we don't have any hesitancy about putting big money in Canada. And there are things we actually can do fairly well that Canada could, you know, benefit from Berkshire's participation. We did it some years ago—not that many years ago—but there was a financial institution up there, and they had a problem. And they had, as I remember, 30-plus, you know, various other people that were kicking it around, and meanwhile the place was getting close to the edge for not a fundamental problem. And Ted Weschler from our office went up there—I heard about it on a Monday or something—and Ted Weschler went up there, and we offered a solution in a couple of days to something that was getting close to the brink. So we do not feel uncomfortable in any way, shape, or form putting our money into Canada. In fact, we're actually looking at one thing now. But, you know, they still have to meet our standards in terms of what we get for our money. But we don't have any mental blocks about that country, and of course there's a lot of countries we don't understand at all. So Canada—it's terrific when you've got a major economy, not the size of the US, but a major economy that you absolutely feel confident about operating there.

Warren, you just said that you'd rather have Ajit running risk assessment at the insurance operations than any thousand insurance adjusters in the world. So I'd like to follow up with a question that came in from Mark Blackley in Tulsa, Oklahoma. He said: Warren, for years you have spoken about the incredible impact Ajit has had on Berkshire. You've often joked, 'If you and Ajit are in a sinking boat and we can only save one of you, swim to Ajit.' While we often discuss plans for the next CEO of Berkshire, little is mentioned on who will one day replace Ajit. How should we think about the future of the Berkshire insurance operations, given how challenging it may be to find another Ajit? And I'd like to hear Ajit's thoughts on this as well.

Well, I would say we won't find another Ajit. But fortunately, he's a good bit younger than I am, so I hope you have to worry a little bit about me first before we start worrying about Ajit. We won't find another Ajit, but we have an operation that he has created, and that—at least part of it—it's there. Certain parts of it that are almost impossible for competitors to imitate. And if I was in their shoes, I wouldn't try to imitate them. And so we've institutionalized some of our advantages, but Ajit's—well, all his presence allowed us to do it, and he did it. But now we've created a structure that didn't exist when he came in in 1986—nothing close to it existed with us or with anybody else. And insurance is the most important business at Berkshire. Marketable securities are important, but they're not in the class exactly as our insurance business. And Ajit—we won't have the same business if Ajit isn't running it, but we'll have a very good business, and again, thanks to Ajit. You know, I'd been in the business when he came in in 1986—I first went to Geico in 1950, we first bought National Indemnity in 1957—and it was something that we'd made quite a bit of money in the stocks of insurance companies. But we needed Ajit. Fortunately, he came into the office on a Saturday and he was tired of working at something where he really—it just didn't challenge his intellect. And I said, 'Well, we've got a lot of challenges, so, you know, nobody's perfect, so you've never seen an insurance policy own an insurance stock—but here are the keys.' And that's worked out very well.

Yeah. We know what we'll do. We know it's a good answer, but we know it isn't—we won't have another Ajit.

Hi. My name is Andre Necas, and I'm wondering: If you had one more day with Charlie, what would you do with him?

Well, it's kind of interesting because, in effect, I did have one more day. I mean, it wasn't a full day or anything. But we always lived in a way where we were happy with what we were doing every day. Charlie liked learning, he liked—as I mentioned in the movie—a wide variety of things, so he was much broader than I was. But I didn't have any great desire to be as broad as he was, and he didn't have any great desire to be as narrow as I was. But we had a lot of fun doing anything. You know, we played golf together, we played tennis together, we did everything together. And this you may find kind of interesting: we had as much fun, perhaps even more to some extent, with things that failed, because then we really had to work and work our way out of them. And in a sense, there's more fun having somebody that's your partner in digging your way out of a foxhole than just sitting there and watching an idea that you got 10 years ago just continually produce more and more profit. So it wasn't—you know, he really fooled me, though. He went to 99.9 years. If you'd pick two guys, you know, he publicly said he never did a day of exercise except where it was required when he was in the Army, he never did a day of voluntary exercise, he never thought about what he ate. You know, we started every day, and Charlie—he was interested in more things than I was—but we never had any doubts about the other person, period. So if I had another day with him, we'd probably do the same thing we were doing in the earlier days. But we wouldn't have wanted to know that we only had one day. There's a great advantage in not knowing where you're going to die. And Charlie always said, you know, 'Just show me where I'm going to die so I'll never go there.' Well, the truth is, you know, he went everywhere with his mind, and therefore he was not only interested in the world at 99, but the world was interested in him. It's remarkable. He—I told him in the last few years, I've never seen anybody that was peaking, you know, in 99, and where the world wanted to come and see him. I mean, they actually wanted to go out to 351 North June Street. And whether it was—I could name a whole bunch of names, but I'll start with Elon Musk—they're all good on the list, and they all wanted to meet Charlie. And Charlie was happy to talk with them. The only person I could think of otherwise was the Dalai Lama. I don't know that they had a lot else in common. But he lived his life the way he wanted to, and he got to say what he wanted to say. He, like I, loved having a podium. And again, I can't remember any time that he was mad at me or I was mad at him—it just didn't happen. And calling him was fun back when long-distance rates were high. And we didn't talk as often in recent years as we used to be on daily for long periods. And we did keep learning, and we liked learning together. You know, I—that we tended to be a little smarter as the years went by because we had mistakes and we had other things where we learned something. And the fact that he and I were on the same...

Charlie Munger said he'd already met everyone from the past 2,000 years through books, preferring Ben Franklin to anyone else. The question is, who do you want to spend your last day with? Start meeting them tomorrow and don't wait for the last day.

Becky: This question comes from Carol Deand in Switzerland, Europe, for both Mr. Buffett and Mr. Jain. As political instability grows with armed conflicts and trade tensions, there's increasing risk of cyber attacks. What are your views on cyber security insurance for retail, small businesses, and large companies including critical infrastructure? Do you see profit potential, and what are the key challenges?

Warren Buffett: Ajit is invaluable. When insuring, you must consider potential losses. The first time was in 1968 with riots after Bobby Kennedy or Martin Luther King's death. A policy has limits, but what constitutes one event? If an assassination causes losses to thousands of businesses, is that one event or thousands? This dilemma is more pronounced in cyber insurance. If one event affects a thousand linked policies, you might not have priced properly and could break the company. Many companies get excited about fashionable insurance like cyber, but it could be rat poison.

Becky: Okay, let's go to station six.

Good morning, this question is for Warren Buffett and Greg Abel. My name is Maria from Las Vegas, Nevada. I'm here with Chispa Nevada, representing low-income Latin families struggling with utility bills and wanting affordable clean electricity. Why is NV Energy, owned by Berkshire Hathaway, building new gas plants instead of investing in solar energy? Can I expect future leadership to take dangerous investments in fossil fuels more seriously?

Becky: Thank you, Maria. Greg, you want to start?

Greg Abel: Thank you. Solar is a great opportunity for NV Energy, and we continue to invest in it. The energy transition from carbon to renewables won't happen overnight; it takes many years. Renewables like solar and wind are intermittent, and while we use batteries, we can't fully transition yet. In Nevada, our last coal units will retire soon, but we're replacing them with a new gas unit needed for reliability. In Iowa, we sometimes get 100% energy from wind, but when it's not blowing, gas plants fill the gap. We'll continue transitioning to renewables combined with batteries, but gas remains important for reliability and affordability.

Warren Buffett: We have the capital to do whatever makes sense. The Public Service Commission decides what can and should be done to transition without messing things up. They want what you want, Maria, but it can't happen tomorrow due to intermittency. Their job is to keep lights on and move to better sources. Solar will never be the only source without breakthroughs in storage. My friend Bill Gates is working on longer-lasting batteries, but it won't happen overnight. It takes money, ideas, and smart people. There are certain laws of nature; you can't create a baby in one month by getting nine women pregnant.

Becky: This question comes from Rich McClosky in Dunedin, Florida. Warren and Ajit, what do you think about the car and property insurance situation in Florida? Both seem out of control. Is this an opportunity for Berkshire?

Becky: Okay, station seven, please.

Hi Warren, my name is Christine from Agoura Hills, California. Thank you for being an excellent teacher. What advice would you like to share today that everyone needs to hear?

Warren Buffett: If I had one piece of advice, use Charlie's advice: think how you want your obituary to read and start selecting educational, social paths accordingly. The opportunity in this country is limitless. We're lucky to be born now in the US, entering the best world ever. Find people and activities that fit you. Take the job you'd want if you didn't need a job. Figure out how you'd want to look back on your life and start on that path, expecting difficulties along the way.

Becky: This question comes from Axel Mayor Seek in Hamburg, Germany. What has changed for Berkshire's operating CEOs since Greg Abel and Ajit Jain became vice chairmen? Can operating CEOs still reach out to Warren Buffett directly?

Warren Buffett: The operating executives overwhelmingly prefer to talk to Greg or Ajit, which is understandable. I don't operate at the same efficiency as 30 or 40 years ago. With Greg and Ajit, it works extremely well. Greg accomplishes more, sees more managers, understands their problems, and has incredible energy. No one has more wisdom on insurance than Ajit. The transition has worked well because Warren skillfully redirected calls without answering, making managers feel good while conveying the message.

Greg Abel: I'd add that we have exceptional managers across insurance and non-insurance. Warren made it easy, but so did they, caring deeply about Berkshire's culture and wanting success.

Warren Buffett: What Greg is talking about is that managers wanted more direction than I gave. I just sat there reading the Wall Street Journal. Greg covers more ground than I can imagine. If anything happened to me, Berkshire would work extremely well the next day. I don't get phone calls; we could rig an answering machine.

Dear Warren, Greg, and Ajit, thank you for having us. My name is Rajiv Agarwal from New Jersey. I run an India-focused fund. Indian equities have done well; it's the fifth-largest economy and will be third soon. Is Berkshire actively looking for opportunities in the Indian equity market, and what will allow you to buy anything meaningful there?

Warren Buffett: Good question. India has loads of opportunities, but do we have advantages in insights or contacts? A more energetic management could pursue it, as Berkshire is known globally. Our Japanese experience was fascinating. There may be unexplored opportunities, but I'm not the one to do it. The question is whether Berkshire has an advantage against others using other people's money. We'll see how the next management plays it. I shouldn't take on four-year employment contracts given my age.

Becky: This is a question from Rafael from Spain. Berkshire has grown thanks to its architect Mr. Munger and general contractor. You have a talented bench of subcontractors like Mr. Abel, Mr. Jain, etc. How will Berkshire overcome the loss of advantage when the contractor bench needs renewal, and what are potential renovation works requiring a new architect?

Warren Buffett: Great question. We've talked a lot about it. We won't need to attract people often. It would be crazy for the board to pick anyone who thinks retirement at 65 is good; they might retire the next day. Directors will act against conventional wisdom but will pick the right CEO, 99% of the job. The other 1% is correcting wrong decisions, which is hard in our system. We have the problem solved for 20 years unless something untoward happens. If something happened to Greg, he must tell the directors what to do. We need luck on manager longevity. Berkshire offers something special; the right person would want to 'marry' it. If the wrong person is chosen, directors must act.

Becky: Okay, station nine.

I'm Sherman Lam, a Berkshire shareholder from Kuala Lumpur, Malaysia. Happy to see you, Warren and team. You've transformed many lives. Question: What have your teams learned about capital allocation, stock picking, and portfolio allocation during the COVID pandemic? Warren, please share your views and those of Ted, Todd, Greg, and Ajit.

Warren Buffett: I don't want to give individual appraisals. In capital allocation, we're clear on our mission. Anyone wanting to retire at 65 is disqualified as CEO. The odds are good for the next 20 years, but we must provide for contingencies. The job of directors is to pick the right CEO, like Tom Murphy, who was the best manager. He started with a pathetic operation and built an incredible company. The key is finding another Tom Murphy and handing him good businesses. We have something to offer the right person. If we get the wrong one, directors must act.

Becky: This question from Johan Halen: You're sitting on $168 billion of cash, now over $182 billion. What is Buffett waiting for, and why not deploy some of it?

Warren Buffett: I don't think anyone at this table knows how to use it effectively, so we don't. We wouldn't use it even at 1%. We only swing at pitches we like. If we had $10 billion, we wouldn't see many more opportunities. Japan could have been done with a smaller company. If I saw one now, I'd do it. Things aren't attractive, and we'll see if that changes.

Becky: Station ten, please.

Mr. Buffett, my name is Shan Colie, a real estate agent with Berkshire Hathaway Home Services. My family sells real estate. Home Services recently settled a class-action lawsuit for $250 million. What are your thoughts on buying/selling a home with this settlement? Would you consider a Berkshire agent for your next home?

Warren Buffett: I don't buy homes often, but I'd consider a Berkshire agent, though the probability is low. I appreciate you joining us. I'll let Greg handle the settlement.

Greg Abel: Thank you. The settlement sets the ground for the industry to move forward. Real estate agents remain important for guidance. Commission structures may change, but realtors will continue to be relevant. The obligation resides with Home Services.

Warren Buffett: I've sold two houses and bought one. I haven't negotiated down commissions, even for a $7 million sale. The system has worked well. I like our agency group and have encouraged expansion. There was a court decision; I told Greg to handle it. We'll keep doing sensible things.

Becky: This question is for Warren and Ajit from Jeff Oyster. As a Berkshire and Tesla shareholder, what are the financial effects on Geico if Elon Musk delivers on fully autonomous driving? If accidents reduce by 50%, wouldn't auto insurance rates fall, impacting Geico's revenues and float?

Warren Buffett: If accidents reduce significantly, costs will decrease, and prices will come down. Many have talked about this before, like GM and Uber. Insurance is tempting but tricky. If accidents reduce 50%, it's good for society but bad for insurance volume.

Becky: We're breaking for lunch at noon. Please be in seats by 1:00 PM for a short video. We'll talk more about it then.

My name is Humphrey Lou from Charlottesville, Virginia. I asked last year and wish to follow up. Zero-emission vehicles may be reaching massive adoption. Do you see opportunities in manufacturers or related technologies? Note Berkshire's interests in energy, Pilot Flying J, and BYD.

Warren Buffett: I hope you're right about adoption, but it's been a moving target. Berkshire wouldn't bring special talent; we're not manufacturers and can't pick winners. I'll be delighted if there are winners, but don't count on us for predictions. Climate change is a fascinating problem; population has grown from 2 billion in 1930 to 8 billion now, causing consequences. The developed world benefited, and now we ask others to change. I want to introduce Carol Lumis, who has edited the Berkshire annual report since 1977. She dated Ty Cobb, and I asked if she would have dated him if his batting average were lower. She indicated she would have been happy to go either way. Carol is the best business writer, coming from Cole Camp, Missouri, and never took an accounting course. Let's show a video about Ruth Gottesman's $1 billion donation to Albert Einstein College of Medicine, making tuition free perpetually.