2020 年股东大会 · 上半场

"Doesn't feel like an annual meeting"

WARREN BUFFETTWell, it's 3:45 in Omaha and this is the annual meeting of Berkshire Hathaway. It doesn't look like an annual meeting. It doesn't feel exactly like an annual meeting. It particularly doesn't feel like an annual meeting because my partner of 60 years, Charlie Munger, is not sitting up here. And I think most of the people that come to our meeting really come to listen to Charlie. But I want to assure you, Charlie at 96 is in fine shape. His mind is as good as ever, his voice is as strong as ever, but it just didn't seem like a good idea to have him make the trip to Omaha for this meeting. Charlie — Charlie is really taking to this new life. He's added Zoom to his repertoire. So, he has meetings every day with various people. And he's just skipped right by me technologically, but that really isn't such a huge achievement. It's more like, you know, kind of like stepping over a peanut or something. But nevertheless, I want to assure you, Charlie is in fine shape. And he'll be back next year. And we'll — we'll try to have everything in the show that we normally have next year. Ajit Jain, also, who is the vice chairman in charge of insurance, is safely in New York. And again, it just did not seem worthwhile for him to travel to Omaha for this meeting. But on my left, we do have Greg Abel. And Greg is the vice chairman in charge of all operations, except insurance. Greg manages a business that has more than 150 billion in revenues and crosses across dozens of industries, and has more than 300,000 employees. And he's been at that job a couple of years. And frankly, I don't know what I'd be doing today if I didn't have Ajit and Greg handling the duties that I was doing only about a quarter as well, a couple of years ago. So, I owe a whole lot of thanks to Greg and you'll get exposed to him more as this meeting goes along.

Meeting will be in four parts

WARREN BUFFETTThe meeting will be divided into four parts. And in a moment or two, I will talk — sort of a monologue with slides. I've never really used slides before. I've taught college classes intermittently, but pretty steadily, from age 21 to age 88. And I never recalled using a single slide. You know, who says can't teach an old dog a new trick. So — (Laughs) We'll see whether you can or not. And I've got a number of slides and I would like to take you through those in the first section, which will start in just a minute. And then we'll move on to the — a brief recap of Berkshire's first quarter results. Now, we put those up in the 10-Q, which was posted on the internet, on berkshirehathaway.com, this morning. And there's lots and lots of detail in there. So, I'm not going to go through. I'll just have a point on one or two things that may be of interest to you. And actually, I'll talk a little bit about what we did in April, which is something that is new to Berkshire, to be that current. But — I'll give you that. Then we'll have the — the formal meeting, which will take maybe 15 or 20 minutes. And from there we'll go to Becky Quick, who, for a couple of hours, will grill me and Greg on questions she's selected from a huge batch that I'm told she's received that went to Carol Loomis and Andrew Ross Sorkin, as well as to Becky. But to simplify things, we consolidated all those questions that Becky will ask. And like I say, we'll go for a couple of hours. And there's no specified cut-off time at present. We'll just see how things develop.

COVID-19 health uncertainty

WARREN BUFFETTNow what's, of course, on everybody's mind the last two months or so, is, you know, what — what's going to be the situation in terms of health in the United States and what's going to be the situation in terms of the economy in the United States in the months, and perhaps, the years to come. And I don't really have anything to add to your knowledge on health. I — in school I did okay in accounting, but I was a disaster in biology. I — I'm learning about these various matters the same way you are. And I think, personally, I feel extraordinarily good about being able to listen to Dr. (Anthony) Fauci, who I'd never heard of a year ago. But I think we're very, very fortunate as a country to have somebody at 79 years of age who appears to be able to work 24 hours a day, and keep a good humor about him, and communicate in a very, very straightforward manner about fairly complex subjects and tell you when he knows something and when he doesn't know something. So, I — I'm not going to talk about any political figures at all or politics generally this afternoon, but I do feel that I owe a huge debt of gratitude to Dr. Fauci for educating and informing me — actually along with my friend Bill Gates — as to what's going on. And I know I get — I get it from a straight shooter when I get that from either one of those. So, thank you, Dr. Fauci. The — when this hit us — and as I sit here in this auditorium with 17 or 18-thousand empty seats — the last time I was here, it was absolutely packed. Creighton was playing Villanova. And there were 17- or 18-thousand, whatever it holds, it was full. And there wasn't one person in that crowd — this was in January — there wasn't one person in that crowd that didn't think that March Madness wasn't going to occur. It's been a flip of a switch in a huge way, in terms of national behavior, the national psyche. It's dramatic. And when we started on this journey, which we didn't ask for, it seemed to me that it was an extraordinary wide variety of possibilities on both the health side and on the economic side. I mean, it was — in other words — DEFCON 5 on one side and DEFCON 1 on the other side. And nobody really knows, of course, all the possibilities that there are, and they don't know what probability factor to stick on them. But in this particular situation, it did seem to me that there was an extraordinary range of things that could happen on the health side. And there was an extraordinary range in terms of the economy. And of course, they intersect and affect each other. So, they're bouncing off each other as you go along. And I would say again, I don't — I don't know anything you don't know about health matters. But I do think the range of possibilities has narrowed down, somewhat, in that respect. We know we're not getting a best case and we know we're not getting the worst case. The — the possibility, initially, of the virus was hard to evaluate and it's still hard to evaluate. There's a lot of things we've learned about it, and other things we know we don't know. But at least we know what we don't know. And some very smart people are working on it and we're learning as we go along. But the virus, obviously, has been very transmissible and it's — but on the good side — it's not — not that good — but it is not as lethal as it might have been. We had a — we had a Spanish flu in 1918. And my dad and four siblings and his parents went through it. And they had a terrific story in the March 15th edition of the Omaha World-Herald, that you can go to omaha.com and look up. It's also on the first page, I believe, of Google if you put in "Spanish flu Omaha." And during that particular time, in maybe four months or so, Omaha had 974, I believe, deaths. And that was a half of one percent of the population. And that figure wasn't greatly different around the country. So, if you think about half of 1 percent of the population now, you're talking a million-7, or thereabouts, people who, unfortunately, in terms of the worst case, which does not appear to have impacted — I think you can almost rule it out it's being as lethal as the Spanish flu was — but it's very, very transmissible. And of course, we have the problem we don't know the denominator, in terms of exactly how many (inaudible) it is because we don't know how many people have had it and didn’t know they had it. But in any event, the range of probabilities on health have narrowed down somewhat.

COVID-19 economic uncertainty

WARREN BUFFETTI would say the range of probabilities — or possibilities — on the economic side are still extraordinarily wide. We do not know exactly what happens when you voluntarily shut down a substantial portion of your society. In 2008 and '09, our economic train went off the tracks. And there were some reasons why the roadbed was weak, in terms of the banks and all of that sort of thing, but — This time we just pulled the train off the tracks and put it on a siding. And I don't really know of any parallel of a — in terms of a very, very — well, the most important country in the world — the most productive — huge population — in effect, sidelining its economy and its workforce. And obviously, and unavoidably, creating a huge amount of anxiety and changing people's psyche, and causing them to somewhat lose their bearings — in many cases understandably. This is quite an experiment. And we may know the answer to most of the questions reasonably soon, but we may not know the answers to some very important questions for many years. So, it still has this enormous range of possibilities.

"Nothing can basically stop America"

WARREN BUFFETTBut even facing that, I would like to talk to you about the economic future of the country. Because I remain convinced, as I have — I was convinced of this in World War II, I was convinced of it during the Cuban Missile Crisis, 9/11, the financial crisis — that nothing can basically stop America. We faced great problems in the past. We haven't faced this exact problem. In fact, we haven't really faced anything that quite resembles this problem. But we faced tougher problems and the American miracle — the American magic — has always prevailed and it will do so again.

America is an "extraordinarily young country"

WARREN BUFFETTAnd I would — I would like to take you through a little history to essentially make my case that if you were to pick one time to be born and one place to be born, and you didn't know what your sex was going to be, you didn't know what your intelligence would be, you didn't know what your special talents or special deficiencies would be, that — if you do that one time, you would not pick 1720, you would not pick 1820, you would not pick 1920, you'd pick to — you'd pick today. And you would pick America. And of course, the interesting thing about it is that ever since America was organized in 1789 when George Washington took the oath of office, people have wanted to come here. Can you imagine that? For 231 years, there's always been people that have wanted to come here. Now — my friend, I think, has jumped the gun just a shade — I'm putting up slide one — but I'm going to call for some slides as we go along. But the interesting thing about this country is what is on slide one. Let's put it up. This is an extraordinarily young country. Now I'm comparing it to a couple of guys that are pretty old. But when you think about the fact that my age, Charlie's age, or our life experience — and then we'll throw in this young guy over here, Greg Abel — and if our life experiences combined, exceed the life of the United States, we are a very, very young country. But what we've accomplished is miraculous. Now just think of this — this little spot in history. And if we'll go to slide two, I've tried to estimate — Well, let's go back. Stay with slide two, but the population in 1790, you know, we had 3.9 million people here. Incidentally, when you look up census figures, you find out that the — they had a big fire in the Department of Commerce building in 1921, so they lost a lot of the census records. So, these are not quite as — there's some things where there's a few gaps, but there were 3.9 million people in the United States. And actually — I've got point-six million — it's closer to point-seven million — there were 700,000 of those people who were slaves at the time. But those 3.9 million people were one half of 1 percent of the population of the planet. And if you'd asked any of those 3.9 million people — any of them — to imagine what life would be like 231 years later, even the most optimistic person — and they could have been drinking heavily and even had a little pot — and they still could not in their wildest dreams have thought that in three lifetimes — Charlie's, mine, and Greg's — that in that period, you would be looking at a country with 280 million vehicles shuffling around its roads, airplanes — maybe not today so much but they'll be back again — flying people at 40,000 feet, coast to coast in five hours, that great universities would exist in one state after another, great hospital systems, and entertainment would be delivered to people in a way nobody could have dreamt of in 1790. This — this country, in 231 years, has exceeded anybody's dreams.

America's wealth has grown 5000-for-1

WARREN BUFFETTI went to the internet in trying to prepare for this, and I tried — if you'll move to the next slide — I tried to find out what was the wealth of the country in 1790 — 1789 — our starting point. And I punched in "United States wealth." I tried 1789. I tried 1790. I thought it might be a little easier in terms of a round year, and I think 4 million or so references came up. And I didn't look at all 4 million. But I can tell you the data collection in those early days on many, many fronts was not — and even not today — you really can't — you can't find what I would consider reliable figures. You can find out how many mules there were in the country, and a few things like that and add — try to add them up. But in real estate, you know, when you find — when you're looking at houses or apartment houses or office buildings, that, you know, they're each slightly different than each other. But they look to comparable sales, so it's hard to find a lot of countries that have been sold where the wealth has been estimated. But it was interesting to go back and think about the fact that in 1803, we purchased for $15 million — we made the Louisiana Purchase. Now that's a little later than 1789, but — but that's the — that's the best comp, as they say in real estate — that's the best copy we could find for land mass anyway, and — When we purchased — made that purchase — that was equal, incidentally, to about a quarter —800,000-plus square miles — but it was about a quarter of what the lower 48 states now contain. So, we bought about a quarter of the lower 48 for those $15 million back in 1803. And if you live in Texas, and your grandfather is close to dying, and he calls — he calls the grandchildren, children around him, and in his final words, he always says, "Don't sell the mineral rights." Well, the French sold us the mineral rights on that $15 million deal as well. So, we — we got that whole strip there — we got all of Kansas, and essentially all of Oklahoma. They've produced 21 billion barrels of oil for us and a lot of natural gas since the purchase. One of the sidelights is that we paid our 15 million for the Louisiana Purchase — we paid 3 million of it —20 percent of it — we paid with a — with 200,000 ounces of gold, valued at 15 bucks an ounce. And that 3 million to the French took — and we got South Dakota as part of the Louisiana Purchase, and the Homestake mine up there, before it closed, produced, well over 40 million ounces of gold. And 40 million ounces of gold comes to about $60 billion worth. And like I say we 20 — 200,000 ounces took care of 20 — 20 percent of our purchase price. So, the Louisiana Purchase was a bargain, but it's what the going price was for 800,000 square miles, I guess, at the time and — three cents an acre. And so, I decided, by playing around with various numbers such as that, that it as a — as a reasonable estimate of the worth of the country, in 1789, a billion was not a crazy figure. Now if I'd been an academician or something, I would have put $1,107,400,000 or something like that — or it's a —I would have made it look respectable — but it's a wild guess. But it's not — it's not a crazy figure. So, what has happened — let's move on to the next slide — to the wealth of that country since then? And here we have some figures that come out pretty regularly — well, they do come out regularly — where the Federal Reserve estimates the net household worth of people in the United States — all the households in the United States. And you can look these up and you'll — you'll see that, you know, there's 30 trillion of stocks. And I think maybe single-family homes — what are there — there's 82 million or so owner-occupied single families and maybe 45 million rental apartments and so on. So, you start adding all these up. And the Federal Reserve tells us — and I invite you to look at the — the data — it's kind of interesting — that we now in the United States, 231 years later, we have 100 trillion— we have more than 100 trillion — of household wealth, even though the stock market's gone down somewhat since the last quarterly report. So, you say, well, you know, we've had a lot of inflation, everything. We actually, in the United States, for the first half of our existence roughly, we didn't really have that much inflation. We had inflationary periods and deflationary periods, but the general price level did not change that dramatically. But I will assume again for this calculation that — that there's been 20-for-1 inflation that's — it's way less than that in many commodities, but — and it's very hard to measure and to talk about equivalent benefits from different kinds of products and so on — and cost — but I think it's reasonable to say that the United States, in real terms, has increased in wealth at something in the area of 5000-for-1. Which is really — its mind blowing — 5000-for-1 — in real terms — in a country that had a half a percent of the — and a bunch of raw land — but a vision that — to accomplish that in 231 years. There's just no denying that — that's beyond what anybody could have dreamt earlier.

America's bumps in the road: The Civil War

WARREN BUFFETTBut it was not done — and this is important — because we've now hit a bump in the road — it was not done without some very, very serious bumps in the road. It was not 231 years of steady progress. And matter of fact, we had been in the — in this birth of this country — we had been, what, into it 72 years — and if we go to the next slide — In 1861, we now had about 31 million people — the 1960 [1860] census showed around 31 million people or thereabouts — in the country, and 4 million of them were slaves and we had never really resolved the very much unfinished business of what was involved in compromises in 1789, and we'll have more to say about that later. But we had something that not too many countries experienced — and if you'd told people in 1789, that in 17 — in 72 years, you were going to have a division that caused the president of the United States, at Gettysburg, to say that "testing whether that nation, or any nation so conceived and dedicated can long endure." Imagine the president of the United States wondering aloud whether the country that he was presiding over could long endure only 72 years — or 74 years at Gettysburg — had taken place. So, while this marvelous dream was being played out, roughly a third of the way through it, we face this — this really moment of decision. And we entered into a contest that — if we'll go to the next slide — I made an estimate — that literally killed roughly 6 percent of the males in the country who were between 18 and 60 —I'm assuming that there were more than 600,000 deaths in the war. I think it's a reasonable estimate that — that — that 18 to 60 group of males were, by far, the great proportion. So, imagine 6 percent of your working prime-age males in a country are wiped out in four years. So, when we look at the progress of this country, and we think of our own problems — and now I just ask you to ponder — we'll move to the next slide — that would be equivalent today to having 4 billion males in that same age group similarly wiped out. So that was one incredible interruption, which this country nevertheless worked through, while compiling this American dream that is one of the wonders of the world, perhaps the wonder of the world in many senses.

America's bumps in the road: The Great Depression

WARREN BUFFETTLet's move on to the — another crisis of a different sort that hit the country. And this, of course, is the 1929 crash which led to the Great Depression. And here, the Dow Jones average, which we'll use for this — at that time that's the one everybody paid attention to — actually the second most important average at that time, if you look at the papers, was the New York Times average which has disappeared. And of course, the Standard and Poor's has probably, regardless, is a superior yardstick, but the Dow Jones is a perfectly adequate yardstick. And on September 3rd, 1929, the Dow Jones average closed at 381.17, and people were very happy buying stocks on margin. It worked wonderfully. And the roaring '20s had a good feeling to it with the auto coming of age, and the day of air travel coming along, and all kinds of new appliances, and the telephone getting wider use. Believe it or not, that hadn't really caught on that much prior thereto. But the movies were coming on. It was a happy place. And then, of course, if we'll move to the next slide, we'll look at what happened in the couple of months after September 3rd. And the Dow Jones average almost got cut in half. And that was pretty impressive until we had this recent situation where in a shorter period of time, we lost about a third. But the — the — the crash — and there's a great book about it called "The Great Crash" by John Kenneth Galbraith. I may interject one little plug here. There's a small business in Omaha — and I hate what this —what truncating this meeting or changing it so dramatically has done to many of the businesses in Omaha because I think small business is beneficial — were the beneficiaries of — of a really — they got a lot of business with the Berkshire meeting and they're going to get it in the future but — but they suffer during a period like this, and they just had a story about the Bookworm. Well, the Bookworm — if you buy any books that come out of anything I recommend, think about just put in, "Bookworm" — "Bookworm in Omaha." And "The Great Crash" is a wonderful book, and John Kenneth Galbraith describes it. And I would like to get into a bit of a personal note which will have some relevance. Not too much, but some relevance, to the story of the Great Depression, because in 1929 my dad, who was 26 years of age then, was employed as a security salesman by a local, small bank. And he sold stocks and bonds, but he mostly sold stocks. And when stocks fall 48 percent and you were selling them to people a few months ago, you really don't feel like going out and facing those same people. So, I think my dad probably elected to, as they say now, shelter-in-place, which means stay at home. And there really wasn't that much in our house. We just had a small yard. It was wintertime anyway. My dad wouldn't have been puttering around the yard anyway. And there really wasn't — you know, television wasn't there. And he and my mother got along very well. So, under those conditions, if you'll turn to the next slide, I was born about nine months later, so — But at that time — I was actually born on August 30th, but the stock market was closed that day, and so I'm using the previous day's figures — but the — it wasn't — I didn't notice at the time that the market was closed — but the stock market had actually recovered over 20 percent during that 9 1/2 month period or thereabouts. People did not think in the fall of 1930 — they did not think they were in the great — a great depression. They thought it was a recession very much like had occurred at least a dozen times, although not always when stock markets were important. But we'd have many recessions in the — in the United States over the time, and this did not look like it was something dramatically out of the ordinary. But — and for a while — actually for about ten days after my birth — that (inaudible), and the stock market actually managed to go up all of 1 or 2 percent there in those 10 days. But that's the last day — well, from that point — if you'll turn to the next slide — the stock market went from a level of 240 to 41, which was a noticeable decline, because if somebody had given me a thousand dollars on the day I was born and I'd bought stock with it, and bought the Dow average, my thousand dollars would have become $170 in less than two years. And that is something that none of us here have ever experienced that — we may have had it with one stock occasionally — but — but in terms of having a broad range of America marked down 83 percent in two years, and marked down 89 percent of the peak that was September 3rd, 1929, was extraordinary. And in that intervening period less than one year after I was born — the slightly less than one year — my dad went to the bank where he worked and had his account. And of course, the bank had a sign on it, "Closed," and so he had no job. And he had two kids at that point. And his father had a grocery store but — Charlie and I both worked for my grandfather — Charlie worked there in 1940, I worked there in 1941, so we didn't know each other — but — but my grandfather said to my father that don't worry about your groceries, and Howard, he says I'll just let your bill run. (Laughs) That was — my grandfather was not exactly — he was — he cared about his family, but he wasn't going to go crazy. And —

FDIC: "A very, very, very good thing"

WARREN BUFFETTOne of the things, as I look back on that period is — and I don't think economists, generally, like to give it that much of a point of importance, but — but if we'd had the FDIC 10 years earlier, we'd — the FDIC started on January 1st, 1934 — it was part of the sweeping legislation that took place when (President Franklin) Roosevelt came in — but if we'd had the FDIC, we would have had a much, much different experience, I believe, in the — in the Great Depression. People blame it on smooth — Smoot-Hawley. I mean, they — there's all kinds of things — and the margin requirements in '29 — and all of those things entered into creating a recession. But if you have over 4000 banks fail, that's 4000 local experiences where people save and save and save, put their money away and then someday, they reach for it and it's gone. And that happens, you know, in all 48 states. And it happens to your neighbors and it happens to your relatives. It — it has to have an effect on the psyche that's incredible. So, one very, very, very good thing that came out of the depression, in my view, is the FDIC. And it would have been a somewhat different world, I'm sure, if the bank failures hadn't just rolled across this country and — and with people that thought that they were savers find out that they had nothing when they went there and there was a sign that said "Closed." Incidentally, the FDIC — I think very few people know this — but — or at least they don't appreciate it — but the FDIC does not cost the American taxpayer a dime. I mean, its expenses have been paid, its losses have been paid, all through assessments on banks. It's been a mutual insurance company of the banks, backed by the federal government, and associated with the federal government. But now it holds a hundred billion dollars and that consists of premiums that were paid in, and investment income on the premiums, less the expenses and paying of all the losses. And think of the incredible amount of peace of mind that's given to people that were not similarly situated in — when the Great Depression hit.

Depression's long-term effect on stock prices

WARREN BUFFETTSo, the Great Depression went on. And it lasted a very long time, but it lasted a lot longer in the minds of people than it did actually in its effects. World War II came along. And on sort of an involuntary manner, we adopted Keynesianism, we started running fiscal deficits, of course, that were absolutely huge and took our debt up to a percentage of GDP which we'd never reached — had never reached before — and have never reached since. So, we had an enormous economic recovery. But the minds of people had been so scarred — the memories. Parents told their children. Nineteen-twenty-nine became a symbol in people's minds. I mean, if you said 1929, it was like saying 1776 or 1492. I mean, everybody knew exactly what you were talking about. And it affected stock prices in a rather remarkable way to the point — if you'll change to the next slide — it was January 4th of 1951 — that the kid who was born on August 30th in 1930 had finished college — before the stock market got back to where it was at that earlier time. So, take the years from 1920 — 1930 — or 1929 (inaudible) — to 1951 — or take the year from my birth — 20 years — and bear in mind that, you know, the country was only 140 years old when this started at. That's 20 years out of this amazing 231-year lifetime of our country that was flat out, you know, a time of — for a long time — of no economic growth and no feeling by people, in terms about the wealth of the country, about what American economy was worth, but all these corporations that were doing far, far, far better than they were (inaudible). But it took all of that time to restore in the market a price level that was equal to what it was when I was born 20 years earlier. So, if you think about the fact that we're enduring a few months, and we'll endure some many more months, but — and we don't know how it comes out — and people in the '30s didn't know how it was going to come out — but they endured, persevered, prospered, and the American miracle continued. But it's interesting in that — I actually don't have a slide for the next one because last night, I was thinking after all the slides have been prepared, I was actually thinking about this a little late, a little bit, and I remembered that in 19 — at the start of 1954, the stock market was — the Dow was only at about 280. And I remember 1954 because it was the best year I've ever had in the stock market. And the Dow went from, essentially, what — 2 — 280 or thereabouts at the start of the year to a little over 400 at the end of the year. And when it went to 400, as soon as it went across 381, that famous figure from 1929, when it went to 400 — and this will be hard for some of you to believe — but everybody wondered, is this 1929 all over again? And that seems a little farfetched, because it was a different country in 1954. But that was the common question. And it actually achieved — it was, you know — it achieved such a level of worry about whether we were about to jump off another cliff, just because the 381 of 1929 have been succeeded — exceeded — that they held — Senator Fulbright — Bill Fulbright of Arkansas, who became very famous later, in terms of the Foreign Relations Committee — but he headed the Senate Banking Committee, and he called a special — for a special investigation and he called it the — what did he call it? — the stock market study, but it really is — if you read through it — he really was questioning whether we had built another house of cards again. And on this committee — it's interesting to see the Senate Finance Committee — one of the members was Prescott Bush, the father of George H.W. Bush, the grandfather of George W. Bush — and had some illustrious names. And his committee, in March of 1955, with the Dow at 405, assembled 20 of the best minds in the United States, to testify as to whether we were going crazy again, because the market was at 400 — the Dow was at 400, and we'd gotten in this incredible trouble before. But that was the mindset of the country. (Inaudible) incredible. We didn't really believe America was what it was. And my boss — the reason I'm familiar with this thousand-page book that I have here — I found it last night in the library — I'd never — was that I was working in New York for one of the 20 people that was called down to testify before Senator Fulbright. And he testified right before Bill Martin, who was running the Federal Reserve, testified and right after General (Robert) Wood, who was running Sears, testified. Sears was very, very important then. And Bill Martin, of course, is the fellow that — the longest running chairman in the history of the Fed, and he's the one that gave the famous quote about the function of the Fed was to take away the punchbowl just when the party started to get really warmed up. But Ben Graham, my boss, sent me over to the public library in New York and — to gather some information for him — something you could do in five minutes with the computer now — and I dug out something, and he went to testify — and on page 545 of this book — I knew where to look, I didn't have to go through it all — but he had the quote, which I remember. And I remember because Ben Graham was the — one of the three — smartest people I've met in my life, and he was the dean of people in the securities business. He wrote the classic "Security Analysis" book in 1934. He wrote the book that changed my life, "The Intelligent Investor," in 1949. He was unbelievably smart. And when he testified, with the Dow at 404, he had one line in there right toward the start in his written testimony, and he said the stock market is high — looks high — it is high, but it's not as high as it looks. But he said it is high.

"Nothing can stop America"

WARREN BUFFETTAnd since that time — if we'll turn to the next slide — of course, we felt the American tailwind at full force. And the Dow — now let's see the — yeah, the Dow was down Friday, but when we made the slide it was about 24,000. So, you're looking at a market today that has produced a hundred dollars for every dollar. All you did was have the belief in America — just buy a cross section of America. You didn't — you didn't have to read The Wall Street Journal, you didn't have to look up the price of your stock. You didn't have to pay a lot of money and fees to anybody. You just had to believe that the American miracle was intact. But you'd had this testing period between 1929 and — and well, really — certainly 1954, as indicated by what happened when it got back up to 380 — you had this testing period. And people really had lost faith to some degree. They just didn't see the potential of what America could do. And we've found that — that nothing can stop America when you get right down to it, and — It's been true all along. It may have been interrupted, with the scariest of scenarios, when you had a war with one group of states fighting another group of states. And it may have been tested again in the Great Depression, and it may be tested now to some degree. But in the end, the answer is, never bet against America. And that, in my view, is as true today as it was in 1789. And even was true at the — during the Civil War and in the depths of the Depression. Now —

America is a better country than it was in 1789

WARREN BUFFETTI'm now about to say something but that — don't change the slide yet. Now I'm about to say something that some of you will be tempted to argue with me about, but I would make the case that we are imperfect in a great, great, great many ways. But I would say — and if you'll put up the next slide — that we are now a better country, as well as an incredibly more wealthy country, than we were in 1789. We're far, far, far from what we should be — will be — but we have gone dramatically in the right direction. It's interesting, we said in 1776, we said, "We hold these truths to be self-evident, that all men are created equal, endowed by their — are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and pursuit of Happiness." And yet, 14 years later, a year after we — we really officially began the country in 1789, adopted a constitution — we found that more than 15 percent of the people in the country were slaves. And we wrestled with that. But when you say the word "self-evident," that sort of sounds like you're saying any damn fool can recognize that, and you certainly say — you can argue maybe a little bit about "life" and "pursuit of happiness," but I don't see how in the world anybody can reconcile "liberty" with the idea that — that 15 percent of the population was enslaved. And it took us a long time to, at least partially, correct that. (Inaudible) took a Civil War. It took losing 6 percent of those people that — males that were between 18 and 60 years of age. But we've moved in the right direction. We've got a long ways to go, but we've moved in the right direction. Now — in addition, going back again to that 1776 statement, that all men are created equal and endowed by their Creator, etc. — I think it was self-evident to the 50 percent of the population that they were getting a fair deal for over half the lifetime of the country. It took 131 years of our country's 231 years — it took 131 years until women were guaranteed the right to vote for our country's leaders. And then what's even more remarkable is that after we adopted the 19th Amendment in 1920, it took 61 more years until a woman was allowed to join those eight males on the Supreme Court. I grew up thinking that the Supreme Court, you know, it must have said it had to be nine men. But it, at 61 years, so, it took 192 years before Sandra Day O'Connor was appointed to the court. And now you can say that — that there was a pipeline problem. Half the population may have been women in 1920 but they weren't half the lawyers, or they weren't 10 percent of the lawyers, probably. So, you can understand some delay, but 61 years is a long time to go and to pick 33 males in between — if that was entirely by chance, the odds against that, if we were flipping coins, is about eight billion to one. Now like I said that was a pipeline problem. But it took us a long, long time. And it's not done yet. But I think it does give meaning to the fact that we are a better society with a lot of room to go. We are a better society than existed in 1789. When you go to Colonial Williamsburg, you know, you have that — I've been there a couple of times — a matter of fact, I watched the debate between Jimmy Carter and Gerald Ford there, that's in 1976. And, you know, it was not a great time to be black. It was not a great time to be a woman. And both of those categories still have certainly got potential for significant improvement in terms of fulfilling that pledge made in 1776 about how we believe that it's "self-evident all men are created equal." But we have made progress. We are a better society. And we will, as the years go by — if you'll move to the next slide — and I believe that, and I think — let's see if I can get these slides in the proper order. I believe that when you get through evaluating all of the qualitative facts, what we have done toward meeting the aspirations of what we wrote in 1776 — what we wrote in 1776 wasn't a fact — but it was an aspirational document. And we have worked toward those aspirations. And we have a long way to go. But I'll repeat — if you move to the next slide — that never, never bet against America.

Bet on America, but "be careful how you bet"

WARREN BUFFETTNow — let's move on now to a broad, much broader, subject: what I don't know. And I don't know — and perhaps with a bias, I don't believe anybody knows — what the market is going to do tomorrow, next week, next month, next year. I know America is going to move forward over time. But I don't know for sure — and we learned this on September 10th, 2001 — and we learned it a few months ago, in terms of the virus — anything can happen in terms of markets. And if you — you can bet on America, but you got to have to be careful about how you bet, because — simply because markets can do anything. On October, whatever it was, in 1987 — October 11th, I believe — Monday — markets went down 22 percent in one day. In 1914, they closed the stock market for about four months. After 9/11 closed the market for four days, we hustled to get it going again. But nobody knows what's going to happen tomorrow. So, when you — when you bet — when I tell you to bet on America, and I tell you that that's what's really gotten me through ever since I was — I bought my first stock when I was 11 — I mean this — I caught a huge, huge, huge tailwind in America. But it didn't — wasn't going to blow in my direction every single day and you don't know what's going to happen tomorrow.

Sam Nunn's pandemic warning

WARREN BUFFETTI would like to, in the context of the present news, point out something you may find kind of interesting. If you go to You Tube, you'll find on June 17th of 2015— four-plus years ago — you'll find Sam Nunn, who is one of the people I admire the most in the United States — in the world — enormous patriot, tremendous senator. And he's carried on thankless work since leaving the Senate of the United States and heading something called the Nuclear Threat Initiative, which most of you haven't heard of, but I've been slightly involved in it. Sam Nunn founded that. And the Nuclear Threat Initiative is simply organizations devoted to trying to reduce the chances of something of a nuclear, chemical, biological, and now cyber, nature from either malevolent or accidental or whatever it may be, from causing deaths to millions of Americans. Among the things in — Sam co-founded it, and — but he's been the heart and soul of the organization subsequently — and he's talked about — worried about — pandemics among — along with the nuclear threat — for decades. And he's participated in wargames where they play out various scenarios, including malevolent pandemics that could be started by the same kind of nut that sent the anthrax letters around 9/11 and a little after. And Sam appeared on this You Tube presentation — and I'm sure he's been on many others, I just happened to look this one up — and talked about the dangers of a pandemic. And anybody should listen to Sam Nunn anytime he talks. So, I — he said at that time, "Germs don't have borders," which we certainly learned in the last couple of months. And I — when I clicked on YouTube — if you'll go to the next — I found out that recently it had 831 views and this was only two days ago I looked it up — and maybe — I don't know whether most of those views have just been the last few days because of — the last few months I should say — because of the interest in pandemics. But it is hard to think about things that haven't happened yet. So, we can experience when something like the current pandemic happens — it's just — it's hard to factor that in. And that's why you never want to use borrowed money, at least in my view, buy on margin to buy into investments. And we run Berkshire that way. We've run it so that we literally try to think of the worst case of not only just one thing going wrong, but other things going wrong at the same time, maybe partly caused by the first, but maybe independent even of the first. And you know, you learned in — I don't know what grade now — probably earlier than when I went to school — in fifth or sixth grade that anything — you can have any series of numbers times zero, and just need one zero in there, and the answer is zero. There's no reason to use borrowed money to participate in the American tailwind, but there's every other reason to participate. Now, I can't resist pointing out that in October of 2019, a large 300-page — I got it right here — book was brought out, and Johns Hopkins, one of the most respected institutions in the country, the Nuclear Threat Initiative, NTI, and the intelligence group at The Economist — collaborated to evaluate the problems of the worldwide preparedness for pandemics, essentially. And I think in November, Sam came out to see me with Ernie Moniz, former secretary of energy, who now is the CEO of the — of NTI. He and Sam are co-chairman. And Beth Cameron, who did a lot of work on this report — came out to see me. And they gave me — in November, I believe, of last year — they gave me this appraisal. And the opening line — if you'll turn the page — this is the opening line of this 300-page tome. "Biological threats — natural, intentional or accidental — in any country can pose risks to global health, international security, and the worldwide economy." And this book was prepared in order to evaluate the preparedness of the various countries and rank them. We ranked pretty well, but all of us got a failing — all of the countries — got a failing grade, basically. Now, you would think that the prestige of Johns Hopkins and The Economist, along with people like Sam and Ernie, etc., that this would have gotten some attention. And again, Sam — turn to the next page — to Sam and the others went on YouTube on October 24th, 2019, and they have racked up, as of a couple days ago, 1498 views. Now my friend Bill Gates was delivering the same warning at a TED talk some years back, and he's gotten a lot more views, but it just says something about the fact that you're going to get bolts from the blue, and you can read papers about them, and you can talk about what will happen if some, as they used — the fellows at Salomon used to tell me some 25 sigma event comes along and they'd say this — that that'll happen once in the life of the universe, you know, and at happens to them a couple of times in a month and they go broke. You just don't know what's going to happen. You know, at least in my view, you know, that America's tailwind is not exhausted. You're going to get a fine result if you own equities over a long period of time.

Stocks do better than bonds

WARREN BUFFETTAnd the idea that equities will not produce better results than the 30-year Treasury bond, which yields 1 1/4 percent now — it's taxable income. It's the aim of the Federal Reserve to have 2 percent a year inflation. Equities are going to outperform that bond. They're going to outperform Treasury bills. They're out — they're going to outperform that money you've stuck under your mattress. I mean, there's — they are a enormously sound investment, as long as they're an investment, and they're not a gambling device or something that you think you can safely, you know, buy on margin or whatever it may be. It's interesting that stocks offer which — and stocks are a —we always look at stocks as just being a part of a business — I mean, stocks are a small part of a business. If in 1789, you'd saved a small amount of money — and it wasn't easy to save — you might have bought with those savings — you might have bought a tiny, tiny plot of property. Maybe you bought a house that could be rented to somebody. You didn't really have the chance to buy in with ten different people who were developing businesses and who were putting — presumably putting — their own money in and that would have the American tailwind behind. And — and of the ten, a reasonably high percentage would succeed in a way and earn decent returns. But what — those are the choices you might have had to do with savings. And they started offering bonds originally — and there again you've got a limited return — but the return may have been in those days, may have been 5 or 6 percent, or something of the sort. But you can't buy risk-free bonds. I mean, the yardstick for me is always the U.S. Treasury. And when somebody offers you quite a bit more than the U.S. Treasury, there's usually a reason — there's much more risk.

Why buying a stock should be like buying a farm

WARREN BUFFETTBut going back to stocks, people bring the attitude to them too often that because they are liquid and quoted minute-by-minute, that it's important that you develop an opinion on them, minute-by-minute. Now that's really foolish when you think about it. And that's something Benjamin Graham taught me in 1949. I mean, that single thought, that stocks were parts of businesses and not just little things that moved around on charts or — charts were very popular in those days — whatever it may be. Imagine for a moment that you decided to invest money now. And you bought a farm, and the farmland around here — let's say you bought 160 acres and you bought it at x per share — or per acre. And the farmer next to you had 160 identical acres, same contour, same quality — soil quality. So, it was — it was identical. And that farmer next door to you was a very peculiar character. Because every day that farmer with the identical farm said, "I'll sell you my farm" — or "I'll buy your farm" — at a certain price which he would name. Now, that's a very obliging neighbor. I mean, that's got to be a plus to have a fellow like that with the next farm. You don't get that with farms. You get it with stocks. You want a hundred shares of General Motors. On Monday morning, somebody will buy your hundred shares or sell you another hundred shares at exactly the same price, and that goes on five days a week. But just imagine if you had a farmer doing that. When you bought the farm, you looked to what the farm would produce. That was what went through your mind. You're saying to yourself, I'm paying x dollars per acre, I think I'll get so many bushels of corn or soybeans on average, some years good, some years bad, some years the price will be good, some years the price will be bad, etc. But you think about the potential of the farm. And now you get this idiot that buys a farm next to you and — and on top of that he's sort of a manic depressive and drinks, maybe smokes a little pot, so his numbers just go all over the place. Now, the only thing you have to do is to remember that this guy next door is there to serve you and not to instruct you. You bought the farm because you thought the farm was — had the potential. You don't really need a quote on it. You know, if you bought in with John D. Rockefeller, or Andrew Carnegie, there were never any quotes — well, there were quotes later on, but — but basically, you bought into the business, and that's what you're doing when you buy stocks. But you get this added advantage that you do have this neighbor, who you're not obliged to listen to at all, who is going to give you a price every day. And he's going to have his ups and downs. And maybe he'll name a silly price that he'll buy at, in which case you sell, if you want to. Or maybe he'll name a very low price and you'll buy his farm from him. But you don't have to. And you don't want to put yourself in a position where you have to sell. Stocks have this enormous inherent advantage of people yelling out prices all the time to you. And many people turn that into a disadvantage. And of course, many people can profit in one way or another from telling — telling you that they can tell you what this farmer is going to yell out tomorrow or next — your neighboring farmer — is going to yell out tomorrow or next week or next month. There's huge money in it. So, people tell you that it's important and they know and that you should pay a lot of attention to their thoughts about what price changes should be, or you tell yourself that there should be this great difference. But the truth is, if you owned the businesses you liked prior to the virus arriving — it changes prices and it changes — but nobody's forcing you to sell. And if you really like the business, and you like the management you're in with, and the business hasn't fundamentally changed — and I'll get to that a little when I report on Berkshire, which I will soon, I promise. Stocks have an enormous advantage. And you still can bet on America. But you can't bet unless you're willing, and have an outlook, to independently decide that you want to own a cross section of America, because I don't think most people are in a position to pick single stocks. A few may be, but — but on balance, I think people are much better off buying a cross section of America and just forgetting about it. If you'd done that — if I'd done that when I got out of college, it's all I had to do to make 100-for-1 and collect dividends on top of it, which increased — would increase substantially over time. The American tailwind is marvelous. American business represents — and it's going to have interruptions and you're not going to foresee the interruptions, and you do not want to get yourself in a position where those interruptions can — can affect you, either because you're leveraged or because you're psychologically unable to handle looking at a bunch of numbers. If you really had a farm, and you had this neighbor and one day he offered you $2,000 an acre, and the next day he offers you $1200 an acre, and maybe the day after that he offers you $800 an acre, are you really going to feel that at $2,000 an acre, when you had evaluated what the farm would produce, are you going to let this guy drive you into thinking I better sell because this number keeps coming in lower all the time? It's a very, very, very important matter to bring the right psychological approach to owning common stocks. But I will tell you if you bet on America and sustain that position for decades, you're going to do better than — than — in my view — far better than owning Treasury securities. Or far better than following people who tell you what the farmer is going to yell out next. There's huge amounts of money that people pay for advice they really don't need and for advice where the person giving it can be very well meaning and believe their own line. But the truth is that — that you can't have — you can't deliver superior results to everybody by just having them trade around a business. A business is going to deliver what the business produces. And the idea that you can outsmart the person next to you, or that the person advising you can outsmart the next — the person sitting next to you — is — well, it's really the wrong approach. So, find businesses — get a cross section. In my view, for most people, the best thing to do is to own the S&P 500 index fund. People will try and sell you other things because there's more money in it for them if they do. And I'm not saying that that's a conscious act on their part. Most — most good salespeople believe their own baloney. I mean, that's part of being a good salesperson. And I'm sure I've done plenty of that in my life, too. But it's very human. If you keep repeating something — often that's why lawyers get — have the witnesses keep saying things over and over again that by the time they get on the witness stand, they'll — they'll believe it whether it was true in the first place or not. The—

"I hope I've convinced you to bet on America"

WARREN BUFFETTYou are dealing with something fundamentally advantageous, in my view, in owning common stocks. I will bet on America the rest of my life. And I hope my successors at Berkshire do it. Now we do it in two different ways. We do it by buying entire businesses, and we buy parts of businesses. And I would like to emphasize that — well, I'd like to give you a few figures that will tie in from our activities in the first quarter. And also, what we've done in April. We are not right about — we do try to pick the businesses that we think we understand. We don't buy the S&P 500. And we like to buy the entire businesses when we buy them. But we don't get a chance to do that very often. Most of the best businesses are not available for sale in their entirety. But we don't mind in the least buying partial interests in businesses, and we would rather own 6 or 7 or 8 percent of a wonderful company and regard it as a partnership interest, essentially, in that company. And we get an opportunity to do that through marketable securities and sometimes we get more opportunities than others. And with that, I hope I've convinced you to — to bet on America. I'm not saying that this is the right time to buy stocks, if you mean by "right," that they're going to go up instead of down. I don't know where they're going to go in the next day or week or month or year. But I hope I know enough to know — well, I think I can buy a cross section and do fine over 20 or 30 years. And I think that's kind of, for a guy of 89, taking an optimistic viewpoint. But I hope that, really, everybody would buy stocks with the idea that they're buying partnerships in businesses and they wouldn't look at them as chips to move around, up or down.

Virus will affect Berkshire's operating earnings

WARREN BUFFETTWe will just now take a quick look — and I see we've got the — Becky's email address — so if you have questions on what I've said or other things, you can email these questions and she is back there, probably, sort of a madhouse trying to handle questions coming in and pick out the ones she's going to prioritize. But feel free to — anything I've talked about so far — to send along to her. And we'll keep her address up when I later hold the formal part of the meeting, too. Very briefly, in terms of Berkshire in the first quarter. If you'll put up — we have the slides on that? There we are. We — our operating earnings were — and there's much more about this in the 10-Q, and it's really not worth spending any real time on — but the operating earnings for the first quarter have no meaning whatsoever in terms of forecasting what's going to happen the next year. And I don't know the consequences of shutting down the American economy. I know eventually it will work, whatever we do. We may make mistakes — we will make mistakes — and I'm not — during this talk and later on — I'm not going to be second guessing people on this because nobody knows for sure what any alternative action would produce or anything of the sort. But what we do know is that for some period, certainly during the balance of the year, but it could go on a considerable period of time, who knows. But our operating earnings will be less — considerably less — than if the virus hadn't come along. I mean, that's just — it — it hurts some of our businesses a lot. I mean, you shut down — some of our businesses effectively have been shut down. It affects others much less. Our three major businesses of insurance and the BNSF railroad — railroad and our energy business, those are our three largest by some margin — they're in a reasonably decent position. They will — they'll spend more than their depreciation. So, some of the earnings will go — along with depreciation — will go toward increasing fixed assets — but basically these businesses will produce cash even though their earnings decline somewhat and —

Why Berkshire will always have "plenty of cash"

WARREN BUFFETTAnd if we'll go to part two — we at Berkshire, we keep ourselves in an extraordinarily strong position. We'll always do that. That's just — that's fundamental. We insure people — we're a specialist to some extent, and the leader — it's not our main business — but we sell structured settlements. That means somebody gets in a terrible accident, usually an auto accident, and they're going to require care for 10, 30, 50 years. And their family or their lawyer is wise enough, in our view, that rather than take some big cash settlement, to essentially arrange to have money paid over the lifetime of the individual to take care of their medical wills — bills — or whatever it may be. And we're — we're a large — we've got many, many, many people that, in effect, have staked their wellbeing on the promises of Berkshire to take care of them for, like I say, 50 years or longer into the future. Now, I would be — I would never take real chances with money under — of other people's money — under any circumstances. Both Charlie and I come from a background where we ran partnerships. I started mine in 1956 for, really, seven, either actual family members or the equivalent. And Charlie did the same thing six years later. And we never — neither one of us, I think — I know I didn't — I'm virtually certainly the same is true of Charlie — neither one of us ever had a single institution investment with us. I mean, every single bit of money we managed for other people was from individuals, people with faces attached to them — or entities — or money with faces attached to them. And so, we've always felt that our job is basically that of a trustee and, hopefully a reasonably smart trustee, in terms of what we're trying to accomplish. But the trustee aspect has been very important. It's true for the people with the structured settlements. It's true for — up and down the line. But it's true for the owners very much, too. So we always operate from a position of strength. Now, I show on — on the slide that's up, I show our — well, let's go back one. Yeah. I show our net — our cash and Treasury bill position on March 31st. And you might look at that and say, well, you've got 125 billion or so in cash — in Treasury bills. And you've got, at least at that point, we had about 180 billion or so in equities. And you can say, well, that's a huge position, having Treasury bills versus just 180 billion in equities. But we really have far more than that in equities because we own a lot of businesses. We own a hundred percent of the stock of a great many businesses, which to us are very similar to the marketable stocks we own. We just own them all. They don't have a quote on them. But we have hundreds of billions of wholly-owned businesses, and so they are — 124 billion, that's not a — not some, you know, 40 percent or so. The cash position is far less than that. And we will always keep plenty of cash on hand and for any circumstances. If a 9/11 comes along, if the stock market is closed as it was in World War I —it's not going to be, but you know, I didn't think we were going to be having a pandemic when I watched that Creighton-Villanova game in January either, so — We want to be in a position at Berkshire where — well you remember Blanche DuBois in "A Streetcar Named Desire" — that's goes back before many of you — but she said she didn't want to — she, in Blanche's case, she said that she depended on the kindness of strangers. And we don't want to be dependent on the kindness of friends, even, because there are times when money almost stops.

Fed's Jerome Powell praised for unfreezing credit

WARREN BUFFETTBut we — money was — investment grade companies were essentially going to be frozen out of the market. CFOs all over the country have been taught to sort of maximize returns on equity capital. So, they finance themselves to some extent through commercial paper because that was very cheap. And it was backed up by bank lines and all of that. And they — and they — they let the debt create — creep up quite a bit at many companies. And then of course, they had the hell scared out of them by what was happening in markets, particularly the equity markets, and so they rushed to draw down lines of credit. That surprised the people who had extended those lines of credit, and they got very nervous. And the capacity of Wall Street to absorb a rush to liquidity that was taking place in mid-March was strained to the limit, to the point where the Federal Reserve, observing these markets, decided they had to move in a very big way. We got to the point where the U.S. Treasury market, the deepest of all markets, got somewhat disorganized. And when that happens, believe me, every bank and CFO in the country knows it, and they react with fear, and fear is the most contagious disease you can imagine. It makes the virus look like a piker. And we came very close to having a total freeze of credit to the largest companies in the world who were depending on it. And to the great credit of (Federal Reserve Chair) Jay Powell — I've always had (former Fed chair) Paul Volcker up on a special place — a special pedestal — in terms of Federal Reserve chairmen over the years — we've had a lot of very good Fed chairmen, but Paul Volcker, I had him at the top of the list. And I'll recommend another book. Paul Volcker died about — here — I don't know, less than maybe a year ago or a little less. But not much before he died, he wrote a book called "Keeping At It." If you call my friends at the Bookworm, I think you'll enjoy reading that book. Paul Volcker was a giant in many ways. He was a big guy, too. He and Jay Powell couldn't see more in temperament or anything. But Jay Powell, in my view, and the Fed board, belong up there on that pedestal, because — with him — because they acted in the middle of March — probably somewhat instructed by what they'd seen in 2008 and '09 — they reacted in a huge way and essentially allowed what's happened since that time to play out the way it has. March, when the market had essentially frozen — could— a little after mid-month — ended up — because the Fed took these actions on March 23rd — it ended up being the largest month for corporate debt issuance, I believe, in history. And then April followed through and was even — was even — with even a larger month, and you saw all kinds of companies grabbing everything coming to market and spreads actually narrowed and — and every one of those people that issued bonds in late March and April ought to send a thank you letter to the Fed, because it would not have happened if they hadn't operated with really unprecedented speed and determination. And we'll know the consequences of swelling the Fed's balance sheet — you can look at the Fed's balance sheet, they put it out every Thursday — it's kind of interesting reading if you sort of a nut like me — but it's up there on the internet every Thursday, and you'll see some extraordinary changes there in the last six or seven weeks. And like I say, we don't know the consequences of that. And nobody does, exactly. And we don't know the consequences of what, undoubtedly, we'll have to do. But we do know the consequences of doing nothing. And that's — would have been the tendency of the Fed in many years past — not doing nothing — but doing something inadequate. But (former European Central Bank President) Mario Draghi, you know, brought the "whatever it takes" to Europe. And the Fed, in mid-March sort of did whatever it takes squared. And we owe them a huge thank you. But we're prepared at Berkshire. We always prepare on the add — on the basis that maybe the Fed will not have a chairman that acts like that. And we really want to be prepared for anything. So that explains some of the 124 billion in cash and bills. We don't need it all. But we do never want to be dependent on, not only the kindness of strangers, but the kindness of friends.

Berkshire did "very, very little" on stocks in Q1

WARREN BUFFETTNow, in the next slide we have the — what we did in — in equities. And these numbers are tiny when you get right down to it. I mean, for having 500 billion or so in net worth — I mean, not net worth — but in market value at the start of the year, or something close to that. You know, our — we bought in 1.7 billion of stock and our purchases were a couple of billion more than our sales of equities. But as you saw in the previous slide, we had operating earnings of 5, almost 6 billion. And so, we did very, very little in the first quarter.

Buffett: Buying airline stocks was a mistake

WARREN BUFFETTAnd then I've added another figure, which I wouldn't normally present to you. But I want to be sure that if I'm talking to you about investments and stocks — more than I usually have — I want you to know what Berkshire is actually doing now. You'll see in the month of April that we net sold 6 billion or so of securities. And that's basically — that isn't because we thought the stock market was going to go down or anything of the sort, or because some — somebody changes their target price, or they change this year's earnings forecast. I just decided that I'd made a mistake in evaluating — it was an understandable mistake. It was a probability-weighted decision when we bought that we were getting an attractive amount for our money when investing across the airlines business. So, we bought roughly 10 percent of the four largest airlines. And we probably — this doesn't — is not a hundred percent of what we did in April — but we probably paid 7 or 8 billion — somewhere between 7 and 8 billion — to own 10 percent of the four large companies in the airline business. And we felt for that, we were getting a billion dollars, roughly, of earnings. Now, it wasn't — we weren't getting a billion dollars of dividends. But we felt our share of the underlying earnings was a billion dollars and we felt that that number was more likely to go up than down over a period of time, that it would be cyclical, obviously. But — but it was — it was as if we'd bought the whole company, but we bought it through the New York Stock Exchange and we can only effectively buy 10 percent, roughly, of the four. And we didn't — we treat it mentally exactly as if we were buying a business. And — and it turned out I was wrong about that business because of something that was not in any way the fault of four excellent CEOs. I mean, believe me, no joy being a CEO of a airline, but the companies we bought are well managed. They did a lot of things right. It's a very, very, very difficult business because you're dealing with millions of people every day and if something goes wrong, for 1 percent of them, they are very unhappy. So, I don't envy anybody the job of being CEO of an airline, but I particularly don't enjoy him — being in a period like this where essentially nobody in — people have been told, basically, not to fly. I've been told not to fly for a while. I'm looking forward to flying. I may not fly commercial, but that's another question. But the — but the airline business — and I may be wrong, and I hope I'm wrong — but I think it changed in a very major way. And it's obviously changed in the fact that there are four companies — are each going to borrow perhaps an average of at least 10 or 12 billion each. Well, you have to pay that back out of earnings over some period of time. I mean, you're 10 or $12 billion worse off if that happens, and of course, in some cases are having to sell stock or sell the right to buy a stock at these prices. And that takes away from the upside on — And I don't know, whether it's two or three years from now, that as many people will fly as many passenger miles as they did last year. They may and they may not. But the future is much less clear to me about how the business will turn out through absolutely no fault of the airlines themselves. It's something that was a low-probability event. It happened and it happened to hurt particularly — you know, whether it's the travel business, the hotel business, cruise business, theme park business — but the airline business in particular and of course, the airline business has the problem that if the business comes back 70 percent or 80 percent, the aircraft don't disappear. So, you've got — you've got too many planes. But it didn't look that way when the orders were placed a few months ago and when the arrangements were made. But the world changed for airlines. And I wish them well, but it's one of the businesses we have — we have businesses we own directly that are going to be hurt significantly. The virus will cost Berkshire money. It doesn't cost money because our stock, and various other businesses, moves around. I mean, if XYZ, which is — say it's one of our holdings, and we own it as a business, and we like the business — if the stock goes down 20 or 30 or 40 percent, we don't feel we're poor in that situation. We felt we were poor, in terms of what had actually happened to those airline businesses, just as if we owned a hundred percent of them. So that explains those sales, which are relatively minor. But I want to make sure that nobody thinks that that involves a market prediction. And that pretty well wraps it up for Berkshire.

Formal corporate meeting begins

WARREN BUFFETTSo now we move into the formal part of the meeting, which will be followed by a fairly extended question and answer period, if there are a lot of questions with Becky. And while we're doing this formal part of the meeting — it's not too exciting — so feel free to leave your — whatever you're viewing this through. And if you want to send questions to Becky, we'll keep her contact information up on the screen. Or if you want to fix yourself a sandwich or do anything else, we will now move — or you can pay attention to the formal part of the meeting. But we will do this and it won't take too long, and then we will move on to the question and answer meeting. So, with that, I will call the meeting to order. And this follows the script, if you can't tell by what I'm saying. I'm Warren Buffett, chairman of the board of directors of the company and I welcome you to this 2020 annual meeting of shareholders. Marc Hamburg is secretary of Berkshire Hathaway and he will make a written record of the proceedings. Dan Jaksich has been appointed inspector of elections at this meeting. He will certify to the count of votes cast in the election for directors and the motions to be voted upon at this meeting. The named proxy holders for this meeting are Walter Scott and Marc Hamburg. Does the secretary have a report of the number of Berkshire shares outstanding, entitled to vote, and represented at the meeting?

MARC HAMBURGYes, I do. As indicated in the proxy statement that accompanied this note — the notice of this meeting — that was sent to all shareholders of record on March 4th, 2020, the record date for this meeting, there were 699,123 shares of Class A Berkshire Hathaway common stock outstanding, with each share entitled to one vote on motions considered at the meeting, and 1,382,352,370 shares of Class B Berkshire Hathaway common stock outstanding, with each share entitled to 1/10,000 of one vote, on motions considered at the meeting. Of that number, 472,037 Class A shares and 834,802,274 Class B shares are represented at this meeting by proxies returned through Thursday evening, April 30th.

WARREN BUFFETTThank you. That number represents a quorum and we will therefore directly proceed with the meeting. First order of business will be a reading of the minutes of the last meeting of shareholders. I recognize Miss Debbie Bosanek, who will place a motion before the meeting.

DEBBIE BOSANEKI move that the reading of the minutes of the last meeting of shareholders be dispensed with and the minutes be approved.

WARREN BUFFETTDo I hear a second?

UNIDENTIFIED VOICEI second the motion.

WARREN BUFFETTThe motion is carried.

Berkshire directors elected

WARREN BUFFETTThe next item of business is to elect directors. I recognize Miss Debbie Bosanek to place a motion before the meeting with respect to election of directors.

DEBBIE BOSANEKI move that Warren Buffett, Charles Munger, Gregory Abel, Howard Buffett, Stephen Burke, Kenneth Chenault, Susan Decker, David Gottesman, Charlotte Guyman, Ajit Jain, Thomas Murphy, Ronald Olson, Walter Scott, and Meryl Witmer be elected as directors.

UNIDENTIFIED VOICEI second the motion.

WARREN BUFFETTIt has been moved and seconded that Warren Buffett, Charles Munger, Greg Abel, Howard Buffett, Steve Burke, Ken Chenault, Susan Decker, David Gottesman, Charlotte Guyman, Ajit Jain, Tom Murphy, Ron Olson, Walter Scott, and Meryl Witmer be elected as directors. The nominations are ready to be acted upon. Mr. Jaksich, when you're ready, you may give your report.

DAN JAKSICHMy report is ready. The ballot of the proxy holders in response to proxies that were received through last Thursday evening, cast not less than 543,203 votes for each nominee. That number exceeds a majority of the number of the total votes of all Class A and Class B shares outstanding. The certification required by Delaware law of the precise count of the votes will be given to the secretary to be placed with the minutes of this meeting.

WARREN BUFFETTThank you, Mr. Jaksich.

WARREN BUFFETTWarren Buffett, Charles Munger, Greg Abel, Howard Buffett, Steve Burke, Ken Chenault, Susan Decker, David Gottesman, Charlotte Guyman, Ajit Jain, Tom Murphy, Ron Olson, Walter Scott, and Meryl Witmer have been elected as directors. And Ken, if you're watching, or listening — Ken Chenault, our new director, actually got the highest vote of all the directors. Well ahead of me, I might add. So, congratulations, Ken.

Advisory compensation votes

WARREN BUFFETTThe next item on the agenda is an advisory vote on the compensation of Berkshire Hathaway's executive officers. I recognize Miss Debbie Bosanek to place a motion before the meeting on this item.

DEBBIE BOSANEKI move that the shareholders of the company approve, on an advisory basis, the compensation paid to the company's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the compensation discussion and analysis, the accompanying compensation tables, and the related narrative discussion, in the company's 2020 annual meeting proxy statement.

UNIDENTIFIED VOICEI second the motion.

WARREN BUFFETTIt has been moved and seconded that the shareholders of the company approve, on an advisory basis, the compensation paid to the company's named executive officers. Mr. Jaksich, when you are ready, you may give your report.

DAN JAKSICHMy report is ready. The ballot of the proxy holders, in response to proxies that were received through last Thursday evening, cast not less than 519,750 votes to approve, on an advisory basis, the compensation to the company's named executive officers — the compensation paid to the companies named executive officers. That number exceeds a majority of the number of the total votes of all Class A and Class B shares outstanding. The certification required by Delaware law of the precise count of the votes will be given to the secretary to be placed with the minutes of this meeting.

WARREN BUFFETTThank you. Mr. Jaksich. The motion to approve, on an advisory basis, the compensation paid to the company's named executive officers has passed. The next item on the agenda is an advisory vote on the frequency of a shareholder advisory vote on compensation of Berkshire Hathaway's executive officers. I recognize Miss Debbie Bosanek to place a motion before the meeting on this item.

DEBBIE BOSANEKI move that the shareholders of the company determine, on an advisory basis, the frequency — whether annual, biannual, or triennial — with which they shall have an advisory vote on the compensation paid to the company's named executive officers, as set forth in the company's 2020 annual meeting proxy statement.

UNIDENTIFIED VOICEI second the motion.

WARREN BUFFETTIt's been moved and seconded that the shareholders of the company determine the frequency with which they have — they shall have an advisory vote on compensation of named executive officers with the option being every one, two, or three years. Mr. Jaksich, when you are ready, you may give your report.

DAN JAKSICHMy report is ready. The ballot of the proxy holders, in response to proxies that were received through last Thursday evening, cast 131,443 votes for a frequency of every year, 2228 votes for a frequency of every two years, and 419,984 votes for a frequency of every three years of an advisory vote on the compensation paid to the company's named executive officers. The certification required by Delaware law of the precise count of the votes will be given to the secretary to be placed with the minutes of this meeting.

WARREN BUFFETTThank you, Mr. Jackson. The shareholders of the company have determined on an advisory basis that they shall have an advisory vote on the compensation paid to the company's named executive officers every three years.

Proposal for board and management diversity

WARREN BUFFETTNow we're through with sort of the boilerplate resolutions, and this next item is of more importance. And we have put up on the berkshirehathaway.com site, some material relating to this motion, which I hope shareholders and others read, because it's important and it's — well, I'll describe it as to — The script says, the next item of business is a motion put forth by the boards of trustees of the New York City Employees' Retirement System, the New York City Teachers' Retirement System, the New York City Police Pension Fund, the New York City Fire Pension Fund, funds collectively called "the Systems." The motion is set forth in the proxy statement. The motion requests that the company adopt a policy for improving board and top management diversity. The directors have recommended the shareholders vote against the proposal. I'd like to interrupt the script here just a second to point out that we — when we saw that it would be impossible to have shareholders attend this meeting and traveling to Omaha, and gathering in gatherings, which really neither the governor, the mayor, or the public safety people, thought would be advisable. We were hoping to have somebody from the comptroller's office come and present the motion and then have a good discussion at the meeting of the pros and cons, because it's a very — it's a serious, important subject and — I can tell you on a personal basis, I think I'm in sync with the comptroller, in terms of how he wants the world to evolve. But I'm not — I disagree on the specifics of this motion as applied to — more generally and to Berkshire's board in particular. And we've been very outspoken over the years. We've probably written more on qualifications for directors, than probably, any public company I can think of. And we've been consistent over the years and we've explained the reasons for our position. And we know a great many people disagree with that position. So, I was — I welcome the idea of really presenting to our meeting and having our shareholders hear what they had to say, and evaluate what we had — what our thoughts were. And when we had to, essentially, not allow shareholders at the meeting, we immediately got in touch with the comptroller's office. And we said we'd make an exception, if anybody from the comptroller's office wanted to come out and present the proposition — or the proposal — and engage in our discussion of pros and cons. And as you might expect, they were not in a position to send somebody. And we — so we offered — we may have made it even in the first place — we'd be glad to have somebody introduce the motion on their behalf. And that we would also, if they would send along a supporting statement, we would be glad to have the person that was their proxy, in effect, present the motion — we'd be happy to have them read the supporting statement. And we said we'd appreciate it if they keep it to five minutes or less. And they wrote back immediately and — or emailed back immediately — and said that they'd be delighted to do it that way. And they'd even try and keep it down to three minutes. So, they've — they have sent a supporting statement, which is going to be read to you in a minute, and I'm glad they did it. I do hope shareholders will, or have already, and others, will read — will listen to what the supporting statement says. And we'll also read the original arguments that they made in the proxy for their proposal. And then we'll read our reasons for voting against the — suggest voting against, because it's an important topic. And I really hope that next year that if somebody from the comptroller's office wishes to come out, we'd be glad to have even a more fulsome discussion of the subject. So, with that, I will now recognize Mr. Hamburg to read a statement prepared by the comptroller of the City of New York in support of the motion.

MARC HAMBURGThank you. Mr. Chairman, members of the board, fellow shareholders. I'm Marc Hamburg from Berkshire Hathaway and I'm here to present Proposal Four, on behalf of the New York City comptroller, Scott Stringer, and the New York City pension funds. The funds have approximately $211 billion in assets as of February and are substantial long-term Berkshire Hathaway shareowners with 2.5 million shares. Our proposal requests that Berkshire Hathaway's board adopt a diversity search policy requiring that the initial candidates from which new director nominees and external CEOs are chosen include qualified female, and racially or ethnically diverse, candidates. First of all, we would like to commend the directors for the addition of Mr. Kenneth Chenault, and the fact that 21 percent of the board is made up of women. We would also like to recognize that the executive pipeline includes diverse candidates, including Mr. Ajit Jain, another board member. Secondly, we applaud Mr. Buffett's recognition that women in the boardroom have historically been rare. And even more importantly, that although women won the right to have their voices heard in a voting booth a century ago, attaining similar status in a board room, remains a work in progress. With our shareowner proposal, what we are seeking is to nudge this particular process forward. Thirdly, one of the things that Mr. Buffett mentions is that he only buys businesses that have three criteria, the second of which is able and honest managers, and that the most important duty for a board is to find and retain a talented CEO. We would note that in reviewing Berkshire Hathaway's largest stock market holdings of businesses, all 10 of these companies have boards that meet our board diversity requirement. In essence, the companies that Berkshire Hathaway has found fit to invest in are those that have more diverse boards. Fourthly, we would like to clarify that through this shareholder proposal, we are not asking for the Berkshire Hathaway board, our guardians, to have a quantifiable end result in terms of its composition, but that an initial pool of candidates for a board seat include a woman and another individual who is racially or ethnically diverse. We believe these candidates, if qualified, would also have very high integrity, business savvy, shareholder orientation, and a genuine interest in the company. According to a 2016 Harvard Business Review study, including more than one woman, or a member of a racial minority, in a finalist pool helps combat the unconscious biases amongst interviewers and increases the likelihood of a diverse hire. What we are requesting is a small step in that direction, to include diverse candidates at the beginning of the search. Finally, we would like to applaud Berkshire Hathaway's robust internal CEO succession plans. Our proposal states that a CEO diversity policy should only apply in the case of an external search. The New York City comptroller's office is disappointed that we never had the opportunity to discuss our proposal with directors or management but remain open to constructive engagement. In the interim, we strongly urge Berkshire Hathaway shareholders to support Proposal Four. Thank you.

WARREN BUFFETTOK. Thanks, Marc. And thank you to the comptroller for the — for presenting that supporting statement. The motion is now ready to be acted upon. Mr. Jaksich, when you are ready, you may give your report.

DAN JAKSICHMy report is ready. The ballot of the proxy holders, in response to proxies that were received through last Thursday evening, cast 65,925 votes for the motion, and 485,824 votes against the motion. As the number of votes against the motion exceeds a majority of the number of votes of all Class A and Class B shares properly cast on the matter, as well as all votes outstanding, the motion has failed. The certification required by Delaware law of the precise count of the votes will be put — will be given to the secretary to be placed with the minutes of this meeting.

WARREN BUFFETTThank you, Mr. Jaksich. The proposal fails.

DEBBIE BOSANEKI move that this meeting be adjourned.

UNIDENTIFIED VOICEI second the motion to adjourn.

WARREN BUFFETTThe motion to adjourn has been made and seconded. The meeting is adjourned. So, thank you.