1996-05-06 Berkshire Hathaway Annual Meeting
Morning session
1. Welcome
欢迎
WARREN BUFFETT: Just a little early, but I think everyone’s had a chance to take their seats.
沃伦·巴菲特： 时间稍微早了一点，但我想大家都已经找到座位了。
I must say, this is the first time I’ve seen this program. They told me they’d surprise me, and they certainly did. (Laughter)
我必须说，这是我第一次看到这个节目。他们告诉我会给我一个惊喜，他们确实做到了。（笑声）
Marc Hamburg, our chief financial officer, who is now known around the office as CB, was in charge of putting all this together. And we — I want you to know, we have no multimedia (inaudible). (Applause)
马克·汉堡是我们的首席财务官，他现在在办公室里被称为CB。他负责组织了这一切。我想让你们知道，我们没有多媒体（听不清）。(掌声)
This entire meeting is handled by a regular staff. We have no public relations department, or investor relations, or multimedia department, or anything of the sort. So, everybody just pitches in. And Marc will, forevermore, be in charge of the pregame ceremonies. (Laughter)
整个会议都是由普通员工处理的。我们没有公关部门、投资者关系部门或多媒体部门，或类似的部门。因此，大家都积极参与。从今以后，马克将永远负责赛前仪式。（笑声）
We have a very large crowd today. I hope everybody has found a seat, either in this main room or in the three overflow rooms. I think we can handle around 5,400. And historically, 62 percent or just about exactly 62 percent, every year, of the people who request tickets have come to the meeting.
今天有非常多的观众。我希望每个人都已经在主会场或三个分会场找到了座位。我想我们可以容纳大约5,400人。历史数据显示，每年申请门票的人中，有62%，或者说正好是62%的人会来参加会议。
And if that percentage holds true today, we have just filled the rooms. And we will have a problem in the future, which we haven’t figured out the answer to yet. But we’ve got another year.
如果今天这个比例仍然成立，我们的场地就正好坐满了。而我们未来会面临一个问题，我们还没有找到解决办法。但我们还有一年时间来准备。
The way we’ll run the meeting is that we’ll get the business out of the way at the start. And we’ll talk about the Class B issuance, then, too. So, it’ll take a little longer than historically has been the case.
我们的会议安排是，一开始会先处理业务内容。我们也会谈到B类股票的发行。所以，这部分会比以往稍微长一些。
And, then, we’ll have Q & A for — until about noon. We’ll have a short break at noon. There’ll be sandwiches outside, which you can buy. (Laughter)
然后，我们会进行问答环节，持续到中午左右。中午会有一个短暂的休息时间。外面会有三明治出售，你们可以购买。（笑声）
And Charlie and I will have a couple of sandwiches up here at the podium.
查理和我会在讲台上吃几份三明治。
And, then, we will stay around until about 3 o’clock to answer more questions. And at that time, after noon, I’m sure everybody in the overflow rooms will be able to find a seat here in the main room.
然后，我们会一直待到下午3点左右回答更多问题。到那时，中午过后，我相信溢出会场的所有人都可以在主会场找到座位。
But people have come from great distances to attend this meeting. So, we really want to get a — give everyone a chance to get their questions asked. And Charlie and I are delighted to — but we’ll have to break it up at three, no matter what. But we’ll be delighted to stick around.
但是，有人从很远的地方赶来参加会议。所以，我们真的希望给每个人一个机会，让他们可以提问。查理和我很高兴这么做——但无论如何，我们会在三点结束。但我们很乐意待到那时。
You can leave anytime, obviously. As I’ve explained in the past, it’s much better form to leave while Charlie is talking. (Laughter)
当然，您随时可以离开。如我过去所说的，当查理发言时离开会更符合礼仪。（笑声）
But the — feel free to do that. And then at noon you’ll get a chance to do it en masse.
不过，请随意这么做。到了中午，您还有机会一起离开。
We have buses available to take you to — if you have any money left at all after yesterday — to take you to other business establishments of Berkshire, locally.
我们有大巴，可以带您去——如果您在昨天之后还有剩余资金的话——带您去当地伯克希尔的其他业务场所。
So that will be the plan. I hope everyone does get their questions answered.
所以，这就是计划。我希望每个人的问题都能得到解答。
We’ve got a system where we break this room into six zones. And we have a couple of zones in other rooms. And then this afternoon, everybody will be able to be here in the main room. So, that is the procedure.
我们有一个系统，将这个房间分为六个区域。在其他房间也有几个区域。到今天下午，所有人都可以来到主会场。这就是我们的流程。
I’m sure you recognize Charlie Munger, the vice chairman of Berkshire Hathaway, who also had not seen that movie before. (Laughs)
我相信您们都认识查理·芒格，伯克希尔哈撒韦的副董事长，他之前也没看过那个短片。（笑声）
And showed — we were — I think Marc was afraid to show it to us. But in any event — (laughter) — we will go on.
那短片展示了——我想马克之前可能不敢给我们看。但无论如何——（笑声）——我们会继续进行。
I thought you might be interested. This is a list of people that came in for tickets. And we had, in addition to 99 from Canada and, of course, the U.S., we had Australia, the Channel Islands, England, Greece, Hong Kong, Israel, Portugal, Puerto Rico, Singapore, Sweden, and Switzerland.
我想您们可能会感兴趣。这是申请门票的人名单。除了来自加拿大的99人和美国的观众之外，我们还有来自澳大利亚、海峡群岛、英国、希腊、香港、以色列、葡萄牙、波多黎各、新加坡、瑞典和瑞士的观众。
I’m not sure all of those people are with us today. But they did send for tickets. And I’ve met a number that did come in from a distance.
我不确定所有这些人今天都在现场。但他们确实申请了门票。我也遇到了一些从很远的地方赶来的人。
2. Election of directors
董事选举
WARREN BUFFETT: So, with that introduction, I will call the meeting to order.
沃伦·巴菲特： 那么，介绍完毕后，我宣布会议开始。
I’m Warren Buffett, chairman of the board of the directors. And I do welcome you to this meeting. I hope everybody has a good time this weekend.
我是沃伦·巴菲特，董事会主席。我欢迎大家参加这次会议。希望大家这个周末过得愉快。
And I’d like to introduce the directors, in addition to myself and to Charlie.
除了我和查理之外，我想介绍一下其他董事。
Now, you don’t get quite your money’s worth this year from our directors. They’ve — collectively, they’ve lost 100 pounds since last — our last meeting. I think they’ve been trying to live on the director’s fees. (Laughter)
今年，您们可能没有完全“物有所值”，因为我们的董事们——总共减重了100磅，自上次会议以来。我想他们可能试图靠董事费生活。（笑声）
We have with us Howard Buffett — let’s stand. (Applause)
我们这里有霍华德·巴菲特——请起立。（掌声）
Susan T. Buffett. (Applause)
苏珊·T·巴菲特。（掌声）
Malcolm G. Chace III. (Applause)
马尔科姆·G·蔡斯三世。（掌声）
And Walter Scott Jr. (Applause)
以及沃尔特·斯科特二世。（掌声）
Along with us today are partners in the firm of Deloitte & Touche, our auditors, Mr. Ron Burgess and Mr. Craig Christiansen (PH). They’re available to respond to appropriate questions you might have concerning their firm’s audit of the accounts of Berkshire.
今天与我们同在的还有德勤会计师事务所的合伙人，我们的审计师，罗恩·伯吉斯先生和克雷格·克里斯蒂安森（音）先生。他们可以回答您关于德勤对伯克希尔账户审计的相关问题。
Mr. Forrest Krutter is secretary of Berkshire. He will make a written record of the proceedings.
福雷斯特·克鲁特先生是伯克希尔的秘书。他将为会议制作书面记录。
Mr. Robert M. Fitzsimmons has been appointed inspector of elections at this meeting. He will certify to the count of votes cast in the election for directors.
罗伯特·M·菲茨西蒙斯先生被任命为此次会议的选举检查员。他将认证在董事选举中投票的计数结果。
The named proxy holders for this meeting are Walter Scott Jr. and Marc D. Hamburg. Proxy cards have been returned through last Friday representing, it says “number to come.” (Laughter)
这次会议的指定代理持有人是沃尔特·斯科特二世和马克·D·汉堡。代理投票卡截至上周五已经返回，其中写着“数字待定”。（笑声）
VOICE: There’s another script.
旁白： 还有一份脚本。
WARREN BUFFETT: Ah, OK, there’s another — oh, yeah. Here’s the script on that one: 1,041,567 Berkshire shares to be voted by the proxy holders, as indicated on the cards. That number of shares represents a quorum. And we will therefore proceed — directly proceed — with the meeting.
沃伦·巴菲特： 啊，好吧，还有一份——哦，是的。关于这份的脚本是：1,041,567股伯克希尔股票由代理人根据卡片上的指示投票。这个股份数量达到了法定人数。因此，我们将直接开始会议。
We will conduct the business of the meeting, then adjourn the formal meeting. After that, we will entertain questions that you may have.
我们将进行会议的业务部分，然后结束正式会议。之后，我们会回答大家可能提出的问题。
First order of business will be a reading of the minutes of the last meeting of shareholders. I recognize Mr. Walter Scott Jr. who will place a motion before the meeting.
第一个议程是宣读上次股东大会的会议记录。我请沃尔特·斯科特二世先生提议一个动议。
WALTER SCOTT JR.: I move that the reading of the minutes of the last meeting of shareholders be dispensed with.
沃尔特·斯科特二世： 我提议免去上次股东大会会议记录的宣读。
WARREN BUFFETT: Do I hear a second?
沃伦·巴菲特： 有人附议吗？
VOICE: I second the motion.
旁白： 我附议。
WARREN BUFFETT: The motion has been moved and seconded. Are there any comments or questions? We will vote on this motion by voice vote. All those in favor say, “Aye.”
沃伦·巴菲特： 该动议已被提出并附议。有没有任何评论或问题？我们将通过口头表决对此动议进行投票。所有赞成的请说“赞成”。
VOICES: Aye.
众人： 赞成。
WARREN BUFFETT: Opposed? Motion’s carried.
沃伦·巴菲特： 反对的呢？动议通过。
Does the secretary have a report of the number of Berkshire shares outstanding, entitled to vote, and represented at the meeting?
秘书是否有关于伯克希尔流通股数量、有投票权的股份以及参会股份数量的报告？
ROBERT M. FITZSIMMONS: Yes. I do. As indicated in the proxy statement that accompanied the notice of this meeting that was sent by first-class mail to all shareholders of record on March 8, 1996, being the record date for this meeting, there were 1,193,512 shares of Berkshire Hathaway common stock outstanding with each share entitled to one vote on motions considered at the meeting.
罗伯特·M·菲茨西蒙斯： 是的，我有。据代理声明中所示，该声明随本次会议通知一同通过优先邮件于1996年3月8日发送给所有登记在册的股东。作为本次会议的登记日期，当时共有1,193,512股伯克希尔·哈撒韦普通股流通，每股在会议讨论的动议中拥有一票投票权。
Of that number, 1,041,567 shares are represented at this meeting by proxies returned through last Friday.
其中，1,041,567股通过上周五返回的代理投票表代表本次会议中的股份。
WARREN BUFFETT: Thank you. If a shareholder is present who wishes to withdraw a proxy previously sent in and vote in person on the two items of business provided for in the proxy statement, he or she may do so.
沃伦·巴菲特： 谢谢。如果有股东希望撤回之前提交的代理投票并亲自对代理声明中列出的两项议题投票，可以这样做。
Also, if any shareholder that’s present has not turned in a proxy and desires a ballot in order to vote in person on those two items, you may do so.
另外，如果有在场的股东尚未提交代理投票且希望亲自投票表决这两项议题，可以领取选票。
If you wish to do this, please identify yourself to meeting officials in the aisles who will furnish two ballots to you, one for each item.
如果您希望这样做，请向过道的会议工作人员表明身份，他们会为您提供两张选票，每项议题一张。
Will those persons desiring ballots please identify themselves, so that we may distribute them?
需要选票的人员请表明身份，以便我们分发选票。
First item of business at this meeting is to elect directors. And I’ll recognize Mr. Walter Scott Jr. to place a motion before the meeting, with respect to election of directors.
本次会议的第一项议题是选举董事。我请沃尔特·斯科特二世先生提议一个关于董事选举的动议。
WALTER SCOTT JR.: I move that Warren E. Buffett, Susan T. Buffett, Howard G. Buffett, Malcolm G. Chace III, Charles T. Munger, and Walter Scott Jr. be elected as directors.
沃尔特·斯科特二世： 我提议选举沃伦·E·巴菲特、苏珊·T·巴菲特、霍华德·G·巴菲特、马尔科姆·G·蔡斯三世、查尔斯·T·芒格和沃尔特·斯科特二世为董事。
WARREN BUFFETT: Is there a second?
沃伦·巴菲特： 有人附议吗？
VOICE: I second the motion.
旁白： 我附议。
WARREN BUFFETT: Are there any other nominations? Is there any discussion?
沃伦·巴菲特： 有没有其他提名？有没有讨论？
I learned a lot in China. We did so — (Laughter)
我在中国学到了很多东西。我们做了——（笑声）
The nominations are ready to be acted upon. If there are any shareholders voting in person, they should now mark their ballots on the election of directors and allow the ballots to be delivered to the inspector of elections.
提名已经可以进行表决。如果有亲自投票的股东，请现在在董事选举的选票上作出标记，并将选票交给选举监察员。
Will the proxy holders please also submit to the inspector of elections a ballot on the election of directors, voting the proxies in accordance with the instructions they have received?
请代理人也将董事选举的选票提交给选举监察员，并根据收到的指示进行代理投票。
Mr. Fitzsimmons, when you’re ready, you may give your report.
菲茨西蒙斯先生，准备好后请报告结果。
ROBERT M. FITZSIMMONS: My report is ready. The ballot of the proxy holders received through last Friday cast not less than 1,040,667 votes for each nominee. That number far exceeds the majority of the number of all shares outstanding.
罗伯特·M·菲茨西蒙斯： 我的报告已准备好。截至上周五收到的代理投票中，每位提名者获得的票数不少于1,040,667票。这个数字远远超过了所有流通股的多数票要求。
The certification required by Delaware law regarding the precise count of the votes, including the votes cast in person at this meeting, will be given to the secretary to be placed in the minutes of this meeting.
根据特拉华州法律要求的关于票数的精确认证，包括本次会议上亲自投票的票数，将交给秘书记录在会议记录中。
WARREN BUFFETT: Thank you, Mr. Fitzsimmons.
沃伦·巴菲特： 谢谢，菲茨西蒙斯先生。
Warren E. Buffett, Susan T. Buffett, Howard G. Buffett, Malcom G. Chace III, Charles T. Munger, and Walter Scott Jr. have been elected as directors.
沃伦·E·巴菲特、苏珊·T·巴菲特、霍华德·G·巴菲特、马尔科姆·G·蔡斯三世、查尔斯·T·芒格和沃尔特·斯科特二世被选为董事。
3. Why Class B shares were created
为什么创建了B类股票
WARREN BUFFETT: The second item of business of this meeting is to consider the recommendation of the board of directors to amend the company’s restated certificate of incorporation.
沃伦·巴菲特： 本次会议的第二项议题是讨论董事会关于修订公司重述的公司章程的建议。
The proposed amendment would add a provision to the restated certificate of incorporation authorizing the board of directors to issue up to 50 million shares of a new Class B common stock, with each Class B share having economic rights equivalent to 1/30th of a share of the current common stock, and with 1/200th of the vote, and to re-designate the company’s current common stock as Class A common stock and to make each share of Class A common stock convertible into 30 shares of the new Class B stock at the option of the holder.
提议的修订将新增一项条款，授权董事会发行最多5000万股新B类普通股，每股B类普通股的经济权益相当于当前普通股的1/30，投票权为1/200，并将公司当前的普通股重新指定为A类普通股，同时允许A类普通股的持有人选择将每股A类普通股转换为30股新B类普通股。
I think, before we get into moving that motion — I think this would be a good time to have discussion and take your questions regarding the issuance of the Class B. And I should give you a little background.
我认为，在提出这一动议之前，这是一个很好的机会来讨论并回答大家关于B类股票发行的问题。我应该向大家介绍一些背景信息。
I think many of you know the background on this. But over the years, we’ve had probably half a dozen people, one time or another, propose that the creation of an all-Berkshire investment company or unit trust.
我想你们中的许多人都了解一些背景。在过去的几年里，我们可能有半打的人在某个时间点提议创建一个纯伯克希尔投资公司或单元信托基金。
In other words, an entity that would hold nothing but Berkshire stock, and then would parcel out its own shares in smaller denomination pieces to the public.
换句话说，这种实体将只持有伯克希尔股票，然后将其股份分割为较小的面额份额向公众出售。
And we have generally discouraged that because we felt that there was considerable potential for abuse in such an arrangement.
我们通常对此持反对态度，因为我们认为这种安排有很大的滥用潜力。
And our discouragement has been successful up until last fall, when there was one — there were two proposals — that went as far as submission to the SEC for clearance, that involved unit trusts.
而我们的反对意见一直是有效的，直到去年秋天，当时有一个——实际上是两个提案——涉及单元信托，并提交给SEC申请批准。
And these unit trusts would’ve owned nothing but Berkshire shares and, then, been sold to the public in small denominations, probably with a minimum investment of around a thousand dollars or so.
这些单元信托将只持有伯克希尔的股份，然后以小面额出售给公众，最低投资金额可能在1000美元左右。
And holders of those trusts would’ve bought into an entity that had a defined life, but that had considerable, in the way of costs and some tax consequences, that they might not anticipate when they came in.
那些信托的持有人将购买一个有固定期限的实体，但该实体可能会带来相当大的成本和一些税务后果，而他们在进入时可能没有预料到这些问题。
And Charlie and I were worried that a combination of Berkshire’s past record — which cannot be repeated — and high sales commissions, and a low denomination, and a lot of publicity about Berkshire and myself, which, as you’ve seen this morning, we attempt to discourage (Laughter) —
查理和我担心的是，伯克希尔过去的业绩（这种业绩不可能再现）、高额销售佣金、小面额股份、以及关于伯克希尔和我个人的大量宣传——如您们今天早上所见，我们试图避免这种宣传（笑声）——
The — that the — a great many people would end up buying these unit trust holdings without any idea, really, of what they were buying, and with unrealistic expectations as to the future.
这会导致许多人最终购买这些单元信托的份额，而实际上他们对自己买的是什么一无所知，并对未来抱有不切实际的期望。
And that that would, in turn, create a considerable demand — because these unit trusts would go out and buy Berkshire shares — that would create a considerable demand against a fixed supply, much of which is almost unavailable because people have a low tax basis and are reluctant to sell, and I hope they’re reluctant to sell for other reasons.
而这又会导致对伯克希尔股票的巨大需求，因为这些单元信托需要购买伯克希尔股票。这种需求将与固定的供应量产生矛盾，其中许多股份由于持有人有较低的税务成本基础且不愿出售而几乎不可用，我希望他们不愿出售还有其他原因。
And that the very action of the creation of these, and that push on the demand, would — might very well create some speculative spurt in the stock, which in turn, would induce people who had been approached about the trust to feel they were missing even more of a good thing by rushing in.
而这种信托的创建行为和需求的推动，可能会在股票中引发某种投机性飙升，这反过来会让那些接触到信托的人觉得自己错过了更大的好机会，从而匆忙涌入。
Rising prices in certain kinds of markets create their own kind of demand. It’s not a sustained demand. And it’s a demand that the reversal of which, later on, when people become disillusioned, can cause a lot of problems.
某些市场中的价格上涨会产生一种自身的需求。这不是一种可持续的需求。而当人们后来变得失望时，这种需求的逆转可能会引发许多问题。
But that potential was there with a flood of buyers with unrealistic expectations, high commissions, and a fixed supply. So, we attempted to dissuade both of the promoters.
但这一潜在风险确实存在，因为有大量抱有不切实际期望的买家、高额佣金以及固定的供应量。因此，我们试图劝阻这两个发起人。
One backed away and then came out a few months later with something that was a combination of Berkshire and some other securities, which were at least thought to be in our portfolio.
其中一位发起人退出了，但几个月后又推出了一种产品，将伯克希尔和一些其他证券（至少被认为在我们的投资组合中）结合在一起。
And we started hearing from people that it was clear had no understanding of what they were buying, or the costs involved, or the potential tax implications, or anything of the sort.
我们开始听到一些人显然对他们所购买的东西毫无了解，也不了解涉及的成本、潜在的税务影响或任何相关内容。
So, at that time, we faced — we had to make a decision, and we had to make it rather quickly, as to what would be the best solution to this problem that, in turn, wouldn’t create the same sort of thing that we felt had potential harm when being done by these promoters.
因此，当时我们面临一个决策，必须相当迅速地做出决定，找出解决这个问题的最佳方案，同时确保不会像这些发起人所做的那样，制造我们认为可能有潜在危害的情况。
Obviously, we considered a split of the stock. But we were worried that a split would send out signals to all kinds of people who want to believe in things that may not be too believable about future performance and that they would look at it as some grand chance to buy in at a lower price.
显然，我们考虑过拆股。但我们担心拆股会向所有希望相信未来业绩可能并不太可信的各种人群发出信号，他们会将其视为以更低价格买入的绝佳机会。
Of course, it wouldn’t really be a lower price in relation to value. But it would be a lower denomination.
当然，这并不是真正意义上的更低价格，相对于价值来说。但它会是一个更低的面额。
And that, again, against a fixed supply, might very well have created the same kind of problem, maybe even a greater problem, than would occur with the unit trusts.
而这，在固定供应的情况下，可能会再次引发同样的问题，甚至可能比单元信托引发的问题更大。
So, we came upon the idea of the Class B shares, which would create a supply that would match the demand for, in effect, split shares, and that would be offered in a way that did not create special inducements, or to create false inducements to people thinking of buying.
因此，我们想出了B类股票的主意，这将创造一种与拆股需求相匹配的供应，同时以一种不会产生特别诱因或虚假诱因的方式向潜在购买者提供。
And one of the things we did was we stuck a commission on it, on the issuance of the Class B shares, that was about as low as any I’ve ever seen in many years in Wall Street, because we did not want salespeople to have a great inducement — we — to go out and sell the shares.
我们所做的一件事是对B类股票的发行附加了非常低的佣金，这是我在多年华尔街经历中见过的最低之一，因为我们不希望销售人员有很大的动力去推动销售这些股票。
We wanted anyone that was interested to read the prospectus, and think about it, and make their own decisions.
我们希望任何感兴趣的人阅读招股说明书，仔细考虑，并自己做出决定。
And we did another thing, which is quite counter to the normal commercial approach, which is that we said we would issue as many shares as people wanted to buy.
我们还做了另一件事，这完全不同于正常的商业做法，我们说我们会根据人们的需求发行股票，无上限。
And, you know, you do much better in this world if you’re selling something, to say “only one to a customer,” and “you have to get in early,” or “you have to know somebody in order to get shares.” And many new issues are sold that way, and it’s very effective.
您知道，如果您在销售某种产品，通常会更成功地说“每人限购一份”、“您必须早点来”或者“您必须认识某人才能获得股份”。许多新发行的股票就是这样销售的，而且这种方式非常有效。
I mean, you know, it’s like those old stories in Russia where there’d be lines, and people would get in them without knowing what they were going to buy when they got to the front of the line.
我的意思是，这就像以前俄罗斯的那些故事，人们排起了长队，而当他们排到队伍前面时，却不知道自己将买到什么。
And that’s a very effective selling tool. And it’s one that Wall Street is not unfamiliar with.
这是一种非常有效的销售工具，而华尔街对此并不陌生。
But we decided that, to reduce any of that feeling that you have to get in early, or only the big guy’s going to get it, or something of the sort, that we would announce loud and clearly that we would have shares available for everyone that wanted.
我们决定，为了减少那种“您必须早点参与”或“只有大人物才能买到”的感觉，我们会明确地宣布，所有想要的人都可以获得股份。
So, there was no reason to assume that — it couldn’t be a hot stock, in effect. And we’ve done various other things.
因此，没有理由认为——实际上，它不可能是一只“热门股票”。我们还做了许多其他事情。
So, I — our hope is that the Class B shareholders that we attract are of the same quality as the people in this room, that they have an investment attitude where they feel they are buying into part of a business, that they expect to stay with it for the indefinite future, maybe the rest of their lives.
所以，我——我们的希望是，我们吸引的B类股股东能和在座的各位一样优秀。他们应该有一种投资态度，认为自己正在购买一家企业的一部分，并期望长期持有，也许是一辈子。
And they do not think of it as a little piece of paper that may be hot because it’s a new issue or something of the sort.
他们不应该认为它只是因为是新发行的股票或类似原因而变成的一张“热门票据”。
It lets the people who are happy with the present shares stay in exactly the same position, which is what I’m going to do, what Charlie will do.
这使得那些对现有股票满意的人可以完全保持现状，这也是我和查理将要做的。
We have made the B very slightly disadvantageous, in two respects, to the A. It has a lower vote, and it will not participate in the shareholder contributions programs.
我们让B类股在两个方面相较于A类股略显劣势。它的投票权较低，并且不会参与股东捐赠计划。
There were reasons for both of those, but in addition to the — the explicit reasons, there also is the desire that the B not be made fully — it’s just a slight bit inferior —but it’s not fully as attractive as the A, because we did not want to do anything that pushed everybody into converting into the B.
我们这样做是有原因的，除了这些明确的理由之外，还有一个愿望，就是B类股不会完全等同于A类股——它只是稍微逊色一点——但不会完全像A类股那样有吸引力，因为我们不希望做任何事情促使所有人都转向B类股。
If that started in a big way, the B would then enjoy the better market, and it would create its own dynamic where it made sense for everybody to do it.
如果这种情况大规模发生，B类股将享有更好的市场环境，并且会形成一种自身的动力，让所有人都觉得这样做是有道理的。
So we have left it so there’s no reason for you, if you own the A, to convert to the B, unless you wish to sell or give away some portion of your holding that would be less than a full A share.
因此，我们设计的情况是，如果您持有A类股，除非您想出售或赠送少于一整股A类股的部分，否则没有理由转换为B类股。
And it will be convenient for that reason. But beyond that, there should be no incentive.
因此，从这一点来说会很方便。但除此之外，不应有任何额外的动机。
If the B should trade slightly above 1/30th of the price of the A, there will be arbitrage activity that will keep that from being anything other than a negligible amount.
如果B类股的交易价格略高于A类股价格的1/30，将会有套利活动将这一差距维持在可忽略的范围内。
It, of course, could trade well below 1/30th because the B is not convertible into the A.
当然，它的交易价格可能远低于1/30，因为B类股无法转换为A类股。
Charlie, would you like to add anything before we start taking questions on this? And I —
查理，在我们开始就此问题回答提问之前，您还有什么要补充的吗？我——
CHARLIE MUNGER: No. (Laughter)
查理·芒格： 没有。（笑声）
WARREN BUFFETT: — I encourage everyone to ask.
沃伦·巴菲特： ——我鼓励大家提问。
Charlie, as you will note during the meeting, does not get paid by the word. (Laughter)
查理，如您们在会议中会注意到的，他不是按字数拿工资的。（笑声）
But we — I encourage every — anyone to ask any question. There are no bad questions about this. I mean, it — last year, we talked about a preferred issue. And people had very valid questions.
但我——我鼓励每个人提问。关于这个问题，没有“坏问题”。我的意思是，去年我们讨论优先股时，人们提出了非常合理的问题。
I might take those two points of difference between the A and B, just to start with, on the shareholder-designated contributions program, which was $12 a share last year.
我可能会从A类股和B类股之间的两点差异开始谈起，关于股东指定捐赠计划，去年每股是12美元。
In addition to wanting the A to have a very small edge over the B, which would be a reason for not having the B participate, it also would get very impractical, in terms of taking $12, and dividing it by 30, and soliciting the names of charities and to designate contributions.
除了希望A类股比B类股略有优势——这是不让B类股参与的原因之一——将12美元分成30份，然后征集慈善机构的名称并指定捐款，在实际操作中也非常不切实际。
We can handle the present program fairly efficiently. But we would not want to be sending out checks for a dollar or two, and it would get very inefficient.
我们目前的计划处理起来相当高效。但我们不想寄出一两美元的支票，那样会变得非常低效。
So, we have told prospective B holders that that’s not going to happen. And so, they’re fully informed coming in.
因此，我们已经告知潜在的B类股持有人，这种情况不会发生。因此，他们在进入时是完全知情的。
捐的是所有股东的钱，事先约定有没有效力，但这个政策后面就没有了。
In connection with the vote, the issuance of the B does create more votes outstanding. So, absent any change in the situation, through the issuance of shares which we are not particularly eager to issue, the vote — my vote — will be diluted, somewhat, by this.
关于投票，B类股的发行确实会增加流通中的投票权。因此，在没有其他变更的情况下，通过发行我们并不特别热衷的股票，我的投票权会因此略有稀释。
And, frankly, I had no desire to create a lot more shares which would dilute the vote of the Buffett family. It will be diluted, somewhat, by this action because we will have all the present votes outstanding, plus some votes from the B.
坦率地说，我并不希望创造大量稀释巴菲特家族投票权的股份。由于这项行动，我们的投票权会有所稀释，因为现有的投票权仍将存在，同时还会新增一些B类股的投票权。
If there is a lot of conversion to the B, it is true that our holding will go up, percentage-wise. But I see no reason why people really should convert. So, I don’t think that’s likely. I think, in the end, it’ll stay very much the same.
如果有大量A类股转换为B类股，我们的持股比例确实会增加。但我看不出人们真的需要转换的理由。所以我认为这种情况不太可能发生。我认为最终会保持非常相似的状态。
And as I mentioned earlier, we want there to be a slight disadvantage to the B.
正如我之前提到的，我们希望B类股稍微处于劣势。
In all other respects, we will treat the B just as the A. We have a problem with numbers at this annual meeting. We’re going to have to do something next year. And we haven’t figured it out yet, either.
在所有其他方面，我们会像对待A类股一样对待B类股。在本次年会上，我们面临人数上的问题。明年我们必须做点什么，但我们还没有找到解决办法。
But the suggestion was made by someone that maybe the B would get second-class seating or something. We’re not going to have any of that. (Laughter)
有人建议，或许B类股股东应该得到“二等座位”之类的待遇。我们不会这么做。（笑声）
But from this point forward, with the point — with the exception of two things we put in the prospectus, the B shares will be treated, in every way, as equivalent to A. There —
但从现在开始，除了我们在招股说明书中提到的两点例外，B类股在各方面都将被视为与A类股等同。
So, with that, and with Charlie’s reluctance to elaborate, we have a six-zone system in here. And then we have another two zones in the overflow rooms.
好了，说到这里，查理不愿多说的情况下，我们这里采用了六个区域的系统。在溢出会场还有另外两个区域。
So, if there are any questions in zone 1, somebody — just raise your hand and somebody will bring a microphone.
因此，如果一区有人有问题，请举手，会有人把麦克风递给您。
Zone 1 is over there. Two is back in the corner. Three, four, five, and six. So it just goes right around clockwise. Just raise your hand and somebody will bring a microphone to you.
一区在那边。二区在后角。三、四、五和六区按顺时针方向依次排列。请举手，会有人把麦克风递给您。
4. Class B IPO price is the same for everyone
B类股票IPO价格对所有人相同
WARREN BUFFETT: We’ve got a question, I think, in zone 1.
沃伦·巴菲特： 我们在一区有一个问题。
AUDIENCE MEMBER: Good morning. I’m Marshall Patton (PH) from Bandera, Texas.
观众： 早上好，我是来自德克萨斯州班德拉的马歇尔·帕顿（音）。
And when the price is struck on the Class B shares, those of us who buy our shares through computer programs, do we have assurance that, whoever we buy from, that that will be the price that we pay for these shares?
当B类股票的价格确定后，对于我们这些通过电脑程序购买股票的人，我们能否确保无论从谁那里购买，支付的价格都是相同的？
WARREN BUFFETT: Yeah, the — well, the price — there’ll be a price established, probably, Wednesday night or thereabouts of this week. And everybody will pay the same price. And a very high percentage of that price, incidentally, will come to Berkshire.
沃伦·巴菲特： 是的——这个价格——大概会在本周三晚上或附近确定。所有人都将支付相同的价格。此外，这个价格的很大一部分将直接进入伯克希尔。
I mean, there is a very, very low underwriting spread, compared to any other offering.
我的意思是，与任何其他发行相比，承销价差非常非常低。
Now, once the initial offering is — everybody will pay the same price: large institutions, the buyer of one share will pay the same price.
现在，在初次发行时，所有人都会支付相同的价格：无论是大机构还是购买一股的人，价格都是一样的。
Subsequently, the stock will, we expect, will be listed on the New York Stock Exchange, probably, Thursday morning. And we have the world’s greatest specialist here, I believe, Jimmy Maguire, who handles the trading, now, of the common and will handle the trading of both the A and B.
之后，我们预计股票将在纽约证券交易所上市，可能是周四上午。我认为，我们这里有世界上最棒的专业交易员，吉米·马奎尔，他目前负责普通股的交易，并将负责A类和B类股票的交易。
Jimmy, are you here? Do you want to stand up? Just so — there he is. The world’s greatest specialist, Jimmy Maguire. (Applause)
吉米，你在这里吗？你愿意站起来吗？就是他。世界上最棒的专业交易员，吉米·马奎尔。（掌声）
I think he leads the singing of “Wait ’Till the Sun Shines, Nellie,” too, annually. You can see him on CNBC occasionally, and the Nightly Business Report. I want to give equal time here. The —
我认为，他还每年带领大家唱《等到阳光普照，内莉》。您可以偶尔在CNBC或《夜间商业报道》中看到他。我想在这里公平地提一下。
But Jimmy will be trading both classes of stock starting Thursday. As I say — as I said, the — it will be impossible, after the first few days, it would be impossible for the B to sell much above 1/30th of the A, because people would buy the A and sell the B if more than a very small — with even the smallest of arbitrage differentials.
但从周四开始，吉米将负责两类股票的交易。正如我所说——在最初几天之后，B类股的价格不可能远高于A类股的1/30，因为只要出现微小的套利差价，人们就会买入A类股并卖出B类股。
But there will be markets in two shares and — in two classes. They will both trade in 10-share lots. That will be the round lot — so-called round lot. Usually, the round lot on the New York Stock Exchange is 100 shares. But in the case of both Berkshire shares, the round lot will be ten shares.
两类股票将会有市场交易。它们的标准交易单位都是10股。这将是所谓的“标准交易单位”。通常，在纽约证券交易所，标准交易单位是100股。但对于伯克希尔的两类股票来说，标准交易单位将是10股。
Now, I read one or two press accounts that said, therefore, the minimum purchase is ten shares. That’s not true. The minimum purchase of each stock — each class of stock — is one share. I mean, you can buy one share or two shares. Or you can sell one share or two shares.
我看到一两篇报道说，因此最低购买量是10股。这并不是真的。每类股票的最低购买量都是1股。也就是说，您可以购买1股或2股。同样，您也可以出售1股或2股。
And you have an odd lot differential, just as you would if you were working with less than 100 shares of a company whose stock traded in 100-share round lots. But there’s no minimum size in the case of either share.
如果您交易的数量少于标准单位（如100股），您将面临“零股交易差价”。这与任何按100股为标准单位的股票交易情况类似。但对于伯克希尔的两类股票来说，没有最低交易数量限制。
And you will see, when they get mechanics straightened out, and they may have a little bit trouble with it, but you will see Berkshire A and Berkshire B in — quoted in the papers. And I think that you’re — that it’ll be quite clear after Thursday what is going on, on that.
当技术流程理顺之后——可能会有点小问题——您会在报纸上看到伯克希尔A类股和B类股的报价。我认为，到了周四之后，这一切都会非常清晰。
I don’t know about the computer purchases. But I don’t — that certainly, in terms of the initial offering, that will be through one of, I think, 137 people — or brokers — in the selling group. And it’s the same, no matter who you deal with.
至于电脑程序购买，我不太清楚。但可以肯定的是，在初次发行时，这将通过销售团体中的137个经纪人之一进行。而无论您与谁交易，价格都是相同的。
5. Downside of Berkshire unit trusts
伯克希尔单位信托的弊端
WARREN BUFFETT: Zone 2?
沃伦·巴菲特： 区域2？
AUDIENCE MEMBER: My name is David Hendel (PH). I’m from Boca Raton, Florida.
观众： 我是大卫·亨德尔（音），来自佛罗里达州博卡拉顿。
To your knowledge, will this program effectively discourage the unit trusts?
据您所知，这项计划是否能有效地遏制单位信托的出现？
WARREN BUFFETT: Well, it’s certainly designed to. And I think the answer to that is yes, because I see no way that a unit trust — either in connection with the initial offering or with the subsequent trading — I see no way that the unit trust could offer people as an efficient and inexpensive way of participating in Berkshire as direct purchase of the B.
沃伦·巴菲特： 嗯，这个计划的确是为此设计的。我认为答案是肯定的，因为我看不出单位信托无论是在首次发行还是后续交易中，都无法像直接购买B类股票那样为人们提供高效且低成本的方式来参与伯克希尔。
Bear in mind, if a unit trust were established, it would have to buy Berkshire shares in the market. So, it would have the costs that people have in buying shares. And, then, on top of it, it would superimpose these other costs. And in addition to the initial commission, they even had a valuation fee.
请记住，如果成立单位信托，它必须在市场上购买伯克希尔股票。因此，它会承担人们购买股票时的成本。此外，它还会叠加其他成本。除了初始佣金外，他们甚至还设有估值费用。
That was a job I wanted to have because every — (laughter) — three months or however often, maybe every day, somebody, their job was to evaluate this trust value which involved the great skill of being able to locate it alphabetically — (laughter) — in the newspaper.
这可是我想要的工作，因为每——（笑声）——三个月，或者更频繁一点，可能每天，某人的工作就是评估这个信托的价值，这需要极高的技能，比如能够按照字母顺序——（笑声）——在报纸上找到它。
The figure was left blank as to what the evaluator’s fee would be. But I had a feeling that it was one of the more cushy jobs available. (Laughter)
估值员的费用数字是空白的。但我感觉这可能是最轻松的工作之一。（笑声）
There was an added problem, too. I mean, if these unit trusts started and did not get off the ground very far, they could’ve become something in the way of orphans. And they certainly would’ve become expensive to operate.
此外，还有一个额外的问题。我的意思是，如果这些单位信托开始了，但发展得不够远，它们可能会变成某种意义上的“孤儿”。而且它们的运营成本肯定会变得很高。
And, then, with Berkshire paying nothing in the way of dividends, but with the trust incurring expenses, including this evaluator’s fee, among others — but with the trust incurring expenses, they would have to sell small amounts periodically to pay the expenses. And that would create tax consequences for every unit trust holder.
此外，由于伯克希尔不支付任何形式的股息，而信托却有各种费用，包括这个估值员的费用等——信托不得不定期出售少量股份来支付费用。这会为每位单位信托持有人带来税务后果。
I mean, people would not know what — we felt they would not know what they were getting into.
我的意思是，人们可能不会知道——我们觉得他们不会明白自己在参与什么。
The more serious problem is that somebody would flash our past record in front of them or show them some chart on Berkshire’s stock price and say, “You know, this is your chance to do the same thing.” And it, obviously, isn’t — wouldn’t have been.
更严重的问题是，有人可能会向他们展示我们的过去业绩，或者伯克希尔股价的某些图表，说：“你知道，这是你获得同样成功的机会。”而这显然不是真的——也不可能是真的。
And — but based on what we have seen, right now, we anticipate the offering being 350,000 shares. But the extent to which the number of tickets involved, that even seeking out informed purchasers only, there’s very substantial demand.
但根据我们目前的观察，我们预计此次发行规模为35万股。即便仅针对知情购买者，需求量依然非常可观。
So I think if you widen that circle to include uninformed, it might have been quite an experience.
所以我认为，如果将范围扩大到包括不知情的购买者，那可能会变成一次相当混乱的经历。
I think the answer is that we will not have a problem with the unit trusts in the future.
我认为答案是，我们未来不会再遇到单位信托的问题。
6. No plans for Class B secondary offering
没有计划进行B类股票的二次发行
WARREN BUFFETT: Zone 3?
沃伦·巴菲特： 区域3？
AUDIENCE MEMBER: I’m Adam Ingle (PH) from Boulder, Colorado.
观众： 我是亚当·英格尔（音），来自科罗拉多州博尔德市。
In terms of the number of shares that you’re going to issue, B shares, do you plan to just look at the book on Wednesday and issue enough to totally satisfy the demand? And do you have any plans to do a secondary if it starts becoming a hot number?
关于您将发行的B类股票数量，您是否计划在周三查看订单并发行足够满足需求的数量？如果它变成一个“热门股票”，您有计划进行二次发行吗？
WARREN BUFFETT: Yeah. Well, I think what we plan is to tailor the size of the offering to fit the demand that appears Tuesday night or Wednesday morning, or whenever the exact moment will be on that. But the offering will be designed to do that.
沃伦·巴菲特： 是的。我认为我们的计划是根据周二晚上或周三早晨（或确切时间）出现的需求来调整发行规模。发行将以此为基础进行设计。
Like most offerings, I would anticipate that the underwriter will — and this is a supposition at the moment — but I — it’s frequently done — would sell some more shares than the initial offering with the intention of creating some short position in the security.
与大多数发行类似，我预计承销商可能会——目前这只是一个假设——但通常情况下，他们会出售比初始发行多一些的股票，以形成该证券的空头头寸。
And, then, they have an option to take — from the company — for 30 days up to 15 percent of whatever we initially sell, which protects them on their short position. But the short position also helps in terms of having an orderly market in the stock, subsequently.
然后，他们可以选择从公司额外获得最多相当于初始发行量15%的股票，为期30天，以保护他们的空头头寸。而空头头寸也有助于之后维持股票市场的有序性。
But we will, essentially, tailor the size of the issue to the demand as it appears to us midweek.
但我们基本上会根据周中时显现的需求来调整发行规模。
We have no plans for any secondary offering. I think this has been sufficiently publicized. There’s a large network of selling group members. So that people that are interested, but wanted to buy in a smaller denomination, will have had their chance.
我们没有计划进行任何二次发行。我认为这一计划已经被充分宣传。有一个广泛的销售团体网络。因此，那些有兴趣但希望以较小面额购买的人将有机会参与。
I think there will be a — well, present indications, there’d be 350,000 shares out. There would be a fairly large — a large — number of holders based on what we’re seeing.
我认为，根据目前的情况，预计将发行35万股。从我们看到的数据来看，这将会有一个相当大的——一个非常大的——持股者群体。
So, the market should, starting Thursday morning on the exchange, there should be, in my opinion, a reasonable market based on that kind of quantity and the number of people buying. And so, I anticipate nothing subsequently.
因此，我认为从周四早上开始，基于这种数量和购买者数量，市场应该是合理的。因此，我预计之后不会有进一步的行动。
7. We don’t think Berkshire shares are “undervalued”
我们认为伯克希尔股票“不被低估”
WARREN BUFFETT: Zone 4?
沃伦·巴菲特： 区域4？
AUDIENCE MEMBER: Can you hear me?
观众： 你能听到我说话吗？
WARREN BUFFETT: Yep.
沃伦·巴菲特： 听到了。
AUDIENCE MEMBER: My name’s Tom Conrad (PH). I’m from McLean, Virginia, and I (inaudible) to this meeting and tell all my friends and family members to buy it last week. But I’ve been reading in some publications that you said that you would not advise your friends and family members to buy it at its current pricing.
观众： 我是汤姆·康拉德（音），来自弗吉尼亚州的麦克莱恩。我参加了这次会议，并在上周告诉所有的朋友和家人去买伯克希尔股票。但我在一些报道中看到您说，您不会建议朋友和家人在目前的价格下购买。
And I’m just concerned, if I go out and run and tell them why you’re saying — what your feeling would be, should I go tell my friends and family members? — (Laughter)
我有些担忧，如果我出去告诉他们您的看法，我应该告诉我的朋友和家人什么？（笑声）
WARREN BUFFETT: I think I’ll leave that one up to you. What I said — (laughter) — I said, at present prices, Charlie and I do not think Berkshire stock is undervalued. And that, now that is not what’s gotten reported sometimes. I mean, sometimes people have said we thought it was overvalued.
沃伦·巴菲特： 我觉得这个问题还是留给您自己决定吧。我是说——（笑声）——我说的是，目前的价格下，查理和我认为伯克希尔的股票不被低估。但有时候报道并不是这样写的。有些人说我们认为它被高估了。
We did not — if you look at the prospectus or if you look at the — if you look at the prospectus, you will see that what we said was we do not think it’s undervalued.
我们并没有这么说——如果您查看招股说明书，或者仔细阅读招股说明书，您会看到我们说的是，我们不认为它被低估。
Now, I find it somewhat entertaining that people regard that as kind of an amazing statement by somebody making a public offering.
现在，我发现有些人认为在公开发行中这么说是一个惊人的声明，这让我觉得有点有趣。
But if you think about it a bit, can you imagine a management that goes out and says to the world, “We are selling you something — in a new stock — and it’s way undervalued.”
但如果您仔细想想，您能想象管理层向全世界宣布，“我们在卖给您某种东西——一种新股票——而它被大大低估了”吗？
What do you say to your present shareholders if you go out and say to the public, “We’re selling you something that’s worth a dollar, and we’re going to sell it to you for 80 cents?” Now, that would leave me very unhappy.
如果您向公众说，“我们要卖给您一件价值1美元的东西，但我们会以80美分的价格卖给您”，那么，您对现有股东怎么交代？那会让我非常不高兴。
So, I feel that any management that is talking about selling their stock and they say it’s very undervalued, either doesn’t know what’s good for their present shareholders or they may have their tongue in cheek.
所以，我认为任何管理层如果在销售股票时说它非常被低估，要么不知道什么对现有股东有利，要么就是在开玩笑。
We would not be selling — we would not sell a part of your interest in Berkshire at a price which we did not feel was adequate for the present shareholders. It’s that simple.
我们不会出售——我们不会以我们认为对现有股东不公平的价格出售您在伯克希尔的部分权益。就是这么简单。
If we sell 1 percent of the company, and 350,000 shares is close to that figure of B, we are selling 1 percent of your ownership in See’s Candy. We’re selling 1 percent of your ownership in GEICO. We’re selling 1 percent of your ownership in The Buffalo News. Those are all valuable assets.
如果我们出售公司1%的股份，而35万股B类股票接近于这个比例，我们实际上是在出售您对See’s Candy 1%的所有权，对GEICO 1%的所有权，对《布法罗新闻》1%的所有权。这些都是非常有价值的资产。
We have no intention of selling 1 percent, or 10 percent, or the hundred percent of any of those entities at a price that is not fair to present shareholders.
我们无意以对现有股东不公平的价格出售这些实体的1%、10%或100%的股份。
That doesn’t mean it’s unfair to new shareholders, but we’re not going to — we would not be selling the stock if we thought it was undervalued.
这并不意味着对新股东不公平，但我们不会——如果我们认为股票被低估了，我们是不会出售的。
I’m not sure what we would’ve done if we’d had that position when the unit trust came along. But we have — and put in the prospectus — but we are not selling any of our shares. Frequently, on a new offering you see present holders. But, you know, I have very close to 100 percent of my net worth in Berkshire and it leaves me quite happy.
我不确定如果当时单位信托出现时我们会怎么做。但我们已经——并在招股说明书中说明——我们没有出售任何股份。新发行股票时您经常会看到现有股东出售股份。但您知道，我的净资产中几乎100%在伯克希尔，这让我非常满意。
I’ve got a trust I run set up in 1964. I’m the sole trustee. I can do anything in that trust I want. And I’m freed by the person who set up the trust of responsibility for a concentration of investments. And I have some members of my family who are beneficiaries of that trust.
我管理着一个在1964年设立的信托。我是唯一的受托人。我可以在这个信托中做任何事情。而设立这个信托的人也免除了我对于投资集中性的责任。我的家族中有一些成员是这个信托的受益人。
That trust owns nothing but Berkshire Hathaway stock. That doesn’t bother me at all. That — I’m not recommending purchase. But I’m perfectly happy owning Berkshire.
这个信托除了伯克希尔哈撒韦的股票外，什么都没有。这一点都不让我感到困扰。我并不是在推荐购买。但我对持有伯克希尔感到非常满意。
But we do not want — (applause) — we do not want people to think, when they buy into Berkshire, that they’re buying something that’s undervalued, because it’s not.
但是我们不希望——（掌声）——我们不希望人们在购买伯克希尔时以为他们买的是被低估的东西，因为事实并非如此。
And we say in that fourth caveat on the prospectus that we want people to buy it only if they expect to be holders for a very long time.
我们在招股说明书的第四项说明中表示，我们希望人们只有在预计长期持有的情况下才购买伯克希尔。
Charlie and I expect to be holders for a very long time. And, in fact, you may see us up here sometime where we don’t know who the guy next to us is. (Laughter)
查理和我预计会长期持有。事实上，有一天您可能会看到我们站在这里，而我们可能都不知道身边的人是谁了。（笑声）
But we’ll put on an act, though. (Laughter)
不过，我们会演得很像样的。（笑声）
You know, that is our attitude toward Berkshire. We do not want people to come in who think it’s going to be a hot stock or selling for more a year from now, because we don’t have the faintest idea whether it’s going to be selling for more or less a year from now. Never have had.
这就是我们对伯克希尔的态度。我们不希望吸引那些认为这是一只热门股票或一年后会涨价的人，因为我们完全不知道一年后它会涨还是会跌。我们从来不知道。
We do think that to the extent that Berkshire attracts a special class of shareholder that really looks at themselves as owning a part interest in a business, like they’d own a part of a farm or part of an apartment house, and they expect to hold it, really, for the rest of their lives, we think that it’s a perfectly sensible thing to do because we’re doing it ourselves. But we don’t want to go beyond that.
我们确实认为，伯克希尔吸引了一类特殊的股东，他们真正把自己视为拥有一家企业的一部分，就像拥有一个农场或公寓的一部分一样，并计划一辈子持有。我们认为这完全合情合理，因为我们自己也是这么做的。但我们不想超出这个范围。
8. No plans for the Class B proceeds
对B类股票募集资金没有具体计划
WARREN BUFFETT: I’m not sure whether we got zone 4. Can we go back there?
沃伦·巴菲特： 我不确定我们是否已经覆盖了区域4。我们可以回到那里吗？
AUDIENCE MEMBER: My name is Gordon Shepherd (PH) from Montreal.
观众： 我是戈登·谢泼德（音），来自蒙特利尔。
I wondered whether you had any plans for what to do with the money? (Laughter)
我想知道您是否对这些资金有任何计划？（笑声）
WARREN BUFFETT: Well, the answer to that is in the prospectus, but the — we have no immediate plans for the money. But we’ve faced that situation a number of times.
沃伦·巴菲特： 嗯，这个问题的答案在招股说明书里，但——我们目前对这笔资金没有任何紧急计划。不过，我们多次面临这种情况。
I mean, the money — the inflow of money and outflow of money should not be, in our view, attempted to be matched too carefully in this world, because you get investment and business opportunities at times that differ from the times that funds come in.
我的意思是，资金的流入和流出，在我们看来，不应该被过于精确地匹配，因为投资和商业机会的出现时间往往与资金到位的时间不同。
And one of the most important disciplines in running a business or managing investments is that — is to not get your — not to try to coordinate your actions simply with the availability of cash.
而经营企业或管理投资最重要的纪律之一就是不要简单地根据现金的可用性来协调您的行动。
Over time, we found a way to use money. It’s much tougher for us to run 17 billion than it was when we had 20 million in the business. There’s no question about that. And we pointed that out many times. And it’ll get tougher still if we get larger, which I hope we do.
随着时间推移，我们找到了一种使用资金的方法。管理170亿美元比管理2000万美元要困难得多，这一点毫无疑问。而且我们多次指出了这一点。如果我们变得更大，这会变得更加困难，但我希望我们能做到这一点。
But the fact that, if 400 million comes in on this offering or whatever, that’s really no different than 400 million coming in in some other manner.
不过，事实上，无论这次发行筹集到4亿美元还是以其他方式筹集到4亿美元，这没有本质区别。
And when our float grows, we take in more money. When our earnings are retained, we take in more money. When we have — I forget what the check would’ve been on the Cap Cities transaction, but it was certainly well over a billion dollars that came in on a single day.
当我们的浮存金增长时，我们会获得更多资金。当我们的收益被留存时，我们会获得更多资金。当我们完成像Cap Cities这样的交易时——我忘记了具体金额，但那天的进账肯定超过了10亿美元。
So, money’s fungible, and we have to keep looking for bigger and bigger things as we go along. And that’s what we do focus on.
所以，资金是可替代的，我们必须不断寻找更大、更重要的投资机会。这正是我们关注的重点。
But it doesn’t bother me to take it. It wouldn’t bother me if we weren’t taking it. It wouldn’t bother me if we took in three times as much. It doesn’t make a lot of difference.
但是否接受这些资金对我来说并没有什么影响。如果我们没有接受，也无所谓。如果我们接受了三倍的资金，也没关系。这不会有太大区别。
And we will have — we — the constant challenge for Charlie and me is to allocate capital as we go along. And it’s a nice challenge. (Laughter)
查理和我一直面临的挑战就是随着业务发展分配资本。这是一个不错的挑战。（笑声）
9. Discouraging buyers with unreasonable expectations
劝阻抱有不切实际预期的买家
WARREN BUFFETT: Zone 5?
沃伦·巴菲特： 区域5？
AUDIENCE MEMBER: Hi there. Lee Debroff (PH), long-time shareholder, I think, going back a number of years now to when it was a little more intimate affair. Not quite sure whether I should look at you in the TV here or in real life, on stage. But anyway, I’m on the very right of you.
观众： 你好，我是李·德布洛夫（音），长期股东，我想可以追溯到多年前那种更私密的股东大会。不太确定我应该看电视屏幕上的您，还是舞台上真实的您。不过无论如何，我在您的右边。
And I see all the guards around you, and I see all the security and that sort of thing. And then, I see this offering of the Class B. And I sort of wonder whether, from your perspective, you feel you might be in the same boat that the pope and the president are?
我看到您周围的保安，还有这些安保措施。然后我看到了B类股的发行。我不禁想，您是否觉得，从您的角度看，自己可能和教皇或总统处在类似的境地？
And I mean this absolutely sincerely, because I don’t think that you have, perhaps, as good a handle as some of us do on the renown that you carry outside of Omaha, Nebraska. People who have no idea what investments are about are fully aware of who you are.
我真诚地说这句话，因为我认为您可能不像我们中的一些人那样了解您在内布拉斯加州奥马哈以外的名声。那些完全不懂投资的人完全知道您是谁。
And when they see this offering, I think you may find that there are substantially more people who are interested in just having a piece of you for the sake of saying they have a piece of you than having absolutely any idea what they’re doing.
当他们看到这次发行时，我认为您可能会发现，许多人只是想拥有一部分“属于您的东西”，只是为了说自己拥有了一部分，而完全不知道自己在做什么。
And I notice that on — I try to read the fine print here — on page 14, first paragraph, second line, that you indicate some 50 million shares of Class B common stock may be offered.
我注意到，在——我试图阅读这里的小字——第14页，第一段，第二行，您提到可能会发行大约5000万股B类普通股。
And so, I’d like you to comment on this situation that you find yourself in, where you may be, perhaps, out of touch with the popularity that you have.
因此，我希望您能对此情形发表看法，您可能已经与自己拥有的受欢迎程度有些脱节了。
WARREN BUFFETT: Well, my first reaction: maybe I should tell my barber we could save the clippings and sell them. (Laughter)
沃伦·巴菲特： 嗯，我的第一个反应是：也许我应该告诉我的理发师把剪下来的头发保存起来，然后卖掉。（笑声）
The — I don’t think it’s quite as extreme as you say.
我认为没有您说的那么极端。
But, you know, I — in relation to the 50 million first, we have to authorize enough shares, because we are going to allow every share of class A — or present common stock — but the class A, to convert to B.
但，您知道的，首先关于5000万股，我们必须授权足够的股份，因为我们将允许每一股A类股——或者说目前的普通股——也就是A类股，转换为B类股。
So we have to have the shares authorized to take care of 30 times the present one point almost two million shares. So, 36 million shares, in effect, are reserved for the present common stock. And, as long as we were authorizing it —
我们必须授权这些股份，以应对现有约120万股的30倍需求。因此，实际上有3600万股是为现有普通股保留的。既然我们已经授权了这些股份——
Well, we need that much, or we wouldn’t have the shares actually available if everybody came around to convert. That’s not going to happen. But we still have to be prepared for it.
我们确实需要这么多，否则如果所有人都来转换，我们就不会有足够的股份可用。虽然这种情况不会发生，但我们必须为此做好准备。
We have no plans to issue a lot of shares. The — but the point you mention, which I think you stressed a little more than I would’ve, but the — that is what we were worried about, in terms of the unit trusts.
我们没有计划发行大量股份。不过，您提到的问题，我认为您比我可能更强调了一些，但这确实是我们在单位信托方面所担忧的。
There are people that think that it can all happen again from this kind of a base which, you know, is mathematically a joke. And Charlie and I would settle for one whole lot less, you know, right today.
有些人认为，从这种基数出发，这一切可以再现，但这在数学上显然是个笑话。而查理和我今天都会满足于远远少得多的收益。
And we have done everything we can — I mean, if we hadn’t done this, the unit trusts would’ve moved forward. And I think they would’ve cashed in on that phenomenon you suggested.
我们已经尽了一切努力——我的意思是，如果我们没有采取行动，单位信托会继续推进。而且我认为，他们会利用您提到的现象牟利。
And in a few years, you know, it would not — I would’ve been in a somewhat different position because people can get very disillusioned if they have hopes that aren’t realized.
而几年后，我可能会处于一个完全不同的处境，因为如果人们的期望没有实现，他们可能会非常失望。
And we have done everything possible, I think, to filter out those who might have an unrealistic belief.
我们已经尽可能地采取措施，筛除那些可能抱有不切实际期望的人。
And everyone should read a prospectus before they buy shares, and —
每个人在购买股票之前都应该阅读招股说明书，而且——
I think we have tailored — we’ve designed what we’re doing about as well as we can to moderate that phenomenon you’re talking about. There may be a few come in but not too many.
我认为，我们已经尽可能地设计了我们的计划，以缓解您所提到的那种现象。可能会有少数人参与，但不会太多。
CHARLIE MUNGER: Well, if we only issue the amount we’re now talking about, it’s sort of a non-event around Berkshire. It’d be 1 percent —
查理·芒格： 嗯，如果我们仅发行目前讨论的数量，对于伯克希尔来说几乎算不上什么大事。这只占1%——
WARREN BUFFETT: Yeah. It’s 1 percent.
沃伦·巴菲特： 是的，只占1%。
CHARLIE MUNGER: — or something like that of the —
It solves the problem of these disreputable followers — (laughter) — and 1 percent, what does it matter? (Applause)
查理·芒格： ——或者类似这样的比例——它解决了那些不良追随者的问题——（笑声）——而1%，又有什么关系呢？（掌声）
WARREN BUFFETT: Wait, you heard that remark, referring to Charlie earlier, about all I want to know is where I’m going to die, so I’ll never go there. (Laughter)
沃伦·巴菲特： 等一下，您听过查理之前提到的那句话吗？“我只想知道我会在哪里死去，这样我就永远不会去那里。”（笑声）
Well, we think about that, in terms — we believe in reverse engineering.
嗯，我们确实考虑过这一点，我们相信“逆向工程”。
And how do we keep people from buying it, who really are going to be unhappy, you know, a few years later?
我们要如何阻止那些几年后可能会感到不满的人买入呢？
You know, it’s a little like singing country songs. You all — you should sing them backwards. That way, you get your home back and your auto back and — (laughter) — your wife back, and —
这有点像唱乡村歌曲。您们知道——应该倒着唱。这样，您就能找回您的家、车——（笑声）——还有您的妻子——
10. Almost like buying direct from Berkshire
几乎就像直接从伯克希尔购买
WARREN BUFFETT: Zone 6? Have we got —?
沃伦·巴菲特： 区域6？我们有没有——？
VOICE: There was a hand over here, wasn’t there? Here. Right here.
声音： 这边有一只手举起了，是吧？就在这里。
AUDIENCE MEMBER: Good morning. I’m Rena Lowie (PH) from Chicago, proud to be here. At mic —
观众： 早上好。我是来自芝加哥的瑞娜·洛伊（音），很高兴能在这里。在麦克风这边——
WARREN BUFFETT: Where are we? Oh, over here. OK.
沃伦·巴菲特： 我们在哪里？哦，在这里。好的。
AUDIENCE MEMBER: I have a question that’s been asked me, and I really don’t know. Several people wanted to know if they could buy directly from the company.
观众： 有人问了我一个问题，我确实不知道答案。有几个人想知道是否可以直接从公司购买股票。
WARREN BUFFETT: The answer to that is no. But Salomon Brothers is the underwriter of the issue. They have a hundred and, I think, 37-or-something broker-dealers, all — virtually all — the major ones in the country, in the selling group.
沃伦·巴菲特： 答案是否定的。但所罗门兄弟是此次发行的承销商。他们拥有大约137家左右的经纪公司，几乎包括了全国所有主要的经纪商，都在销售团体中。
The cost to the company of doing this are really very, very low compared to any issue I’ve seen. When AT&T had their spinoff — or sale of Lucent — which was close to a $3 billion deal — you know, their percentage costs were more than double what our costs will be, for example, on this offering of Berkshire.
与我见过的任何发行相比，公司为此付出的成本非常低。当AT&T进行Lucent的分拆或出售时，这是一笔接近30亿美元的交易，他们的百分比成本是我们此次伯克希尔发行成本的两倍以上。
So, it’s almost as if you’re buying it — a Class B holder — is buying it from us, in terms of the, what I would call the frictional costs involved of getting the issue done. In fact, if we handled it ourselves, it might cost more.
因此，从所谓的“完成发行所需的摩擦成本”来看，这几乎就像您直接从我们这里购买B类股票一样。实际上，如果我们自己处理发行，可能会花费更多。
But the company, itself, is not a broker-dealer. And it’s — it would require a whole group of different hoops to jump through in order to have a direct issue. It will be sold only through broker-dealers.
但公司本身并不是经纪商。如果要进行直接发行，需要跨越一系列不同的障碍。股票只能通过经纪商进行销售。
11. All-Berkshire mutual fund for retirement plans?
是否可能为退休计划设立全伯克希尔的共同基金？
WARREN BUFFETT: Zone 7?
沃伦·巴菲特： 区域7？
VOICE: There aren’t any questions in zone 7.
声音： 区域7没有问题。
WARREN BUFFETT: No questions in zone 7. Zone 8?
沃伦·巴菲特： 区域7没有问题。区域8呢？
VOICE: No questions from zone 8.
声音： 区域8也没有问题。
WARREN BUFFETT: OK. Then, we’ll go back to zone 1.
沃伦·巴菲特： 好吧，那么我们回到区域1。
AUDIENCE MEMBER: Mike Rocker (PH) from Flint, Michigan, God’s country.
观众： 我是来自密歇根州弗林特的迈克·洛克尔（音），上帝的国度。
I noticed in the press, when this issue of the unit trust was going on, that there apparently also were some people trying to form mutual funds to carry Berkshire stock, which I kind of thought was a good idea, because there’s one potential class of Berkshire owners that could only own Berkshire stock via either an open-end mutual fund or a closed-end mutual fund.
我注意到在有关单位信托的讨论中，似乎还有一些人试图设立包含伯克希尔股票的共同基金。我觉得这是个不错的主意，因为有一类潜在的伯克希尔股东只能通过开放式或封闭式共同基金持有伯克希尔股票。
And that is those thousands of teachers and hospital employees whose future retirement money is in 403(b) plans that are limited to investing in mutual funds only. And so, I wonder if, first of all, if you were aware of that? And if so, if you considered that? And if not, if you might?
这些人是成千上万的教师和医院员工，他们未来的退休资金存放在403(b)计划中，这些计划仅限于投资于共同基金。因此，我想知道，首先，您是否知道这一点？如果知道，您是否考虑过？如果没有，是否可能考虑？
WARREN BUFFETT: Well, the answer is I wasn’t aware of that. So it wasn’t considered.
沃伦·巴菲特： 嗯，答案是我并不知道这一点。所以我们没有考虑过。
There are, of course, some mutual funds that own Berkshire shares. But there’s no all-Berkshire fund, outstanding.
当然，有一些共同基金持有伯克希尔的股票。但目前并没有专门的全伯克希尔基金。
I would say this: that if the law was set up to, in some way, to restrict investments of this group you’re talking about to options that involve mutual funds but that don’t involve individual stocks, I would think it might even be regarded as a way around it, if a fund owned nothing but one stock.
我要说的是，如果法律某种程度上限制了您提到的这类群体只能投资于共同基金，而不能投资于个股，那么一个只持有单一股票的基金可能会被视为一种规避规则的方式。
Because, if you can’t buy General Motors directly under, I assume, the relevant rules or statutes on that, it would seem that a fund that owned nothing but General Motors might be regarded as a way of getting around that.
因为，如果根据相关规则或法规，您不能直接购买通用汽车的股票，那么一个只持有通用汽车股票的基金可能会被视为规避这些规则的方式。
But the answer is that it was not considered. I don’t know where the rules are derived, whether there — whether they can be changed by some organization or they’re part of some statute.
但答案是，我们没有考虑过这一点。我不知道这些规则的来源，是否可以通过某个组织更改，或者它们是否是某些法规的一部分。
But if they’re part of some organization, by a vote of their directors, they might be able to allow purchase of individual stocks within those plans that you describe. But if not, it does seem to me that an all one-stock fund is — might be regarded as simply a way around the rules.
但如果它们是某个组织的规则，通过董事会的投票，可能可以允许在您描述的计划中购买个股。但如果不是这样，我觉得一个只持有单一股票的基金可能会被简单地视为规避规则的一种方式。
12. Suggestion for Class B symbol
关于B类股票代码的建议
WARREN BUFFETT: Zone 2?
沃伦·巴菲特： 区域2？
AUDIENCE MEMBER: Alan Rank, Pittsburgh, Pennsylvania.
观众： 我是来自宾夕法尼亚州匹兹堡的艾伦·兰克。
Have you determined what the symbol will be for the Class B?
您是否已经确定了B类股票的代码？
WARREN BUFFETT: The symbol? No, we haven’t.
沃伦·巴菲特： 代码？还没有。
AUDIENCE MEMBER: May I make a suggestion? As a broker, the stocks that have come out and given theirselves Class A and Class B cause massive confusion.
观众： 我可以提个建议吗？作为一名经纪人，那些设立A类和B类股票的公司通常会引起很大的混淆。
If there’d be any way to make symbol something like BRB and just keep it a simple, three-letter symbol, it aids people both in following it on the tape on CNBC. As brokers, four-letter symbols on the New York restrict a lot of things we can do as far as punching them in.
如果可以的话，将代码设置为像“BRB”这样的简单三字母代码，这不仅方便人们在CNBC等平台上跟踪，也对我们经纪人输入代码的操作大有帮助。在纽约交易所，四字母代码限制了我们在操作上的很多事情。
If there’s any way you could keep the symbol for the B a simple one, two or three-letter symbol, it would be greatly appreciated.
如果您能将B类股票的代码设置为简单的一至三字母代码，我们将非常感激。
WARREN BUFFETT: Well, thanks for the suggestion. Now, the exchange has generally been exceptionally cooperative in trying to work with us. I mean, a 10-share trading unit is no piece of cake for them.
沃伦·巴菲特： 好的，谢谢您的建议。目前，交易所一直非常配合，与我们合作。我指的是，10股为一个交易单位对他们来说也并不轻松。
And I’m sure, at times, that they have wished we were a little more like some of the other companies that list on the exchange. But they’ve been very cooperative and helpful. And we are — they’ll — they listen to things we suggest. We listen to things they suggest.
有时候，我确信他们可能希望我们能更像其他上市公司一些。但他们一直非常配合并提供帮助。他们会听取我们的建议，我们也会听取他们的建议。
So, we will try to do whatever facilitates things at the exchange and the reporting of prices. And it’s nothing we will try to impose on them, believe me.
所以，我们会尽力去做任何有助于交易所和价格报告的事情。相信我，我们不会强加任何要求给他们。
I have no favorite name that I’m looking for. So, we’ll see what they — what ideas they have. And we’ll include that suggestion.
我没有偏爱的代码名称。所以，我们会看看他们有什么想法，并将您的建议纳入考虑。
13. Not expecting big change in Class B offering size
不预期B类股票发行规模会有大变化
WARREN BUFFETT: Zone 3?
沃伦·巴菲特： 区域3？
AUDIENCE MEMBER: Paula Finster (PH) from Tulsa, Oklahoma. Very glad to be here. I’m one of those few second generation, finally finagled a ticket out of my dad. (Clears throat)
观众： 我是来自俄克拉荷马州塔尔萨的宝拉·芬斯特（音）。很高兴能来到这里。我是为数不多的第二代股东之一，终于从我父亲那里弄到了票。（清嗓子）
Three years ago —
三年前——
WARREN BUFFETT: Her dad has a soda fountain, incidentally. If you’re ever in Tulsa, be sure to see him. (Laughter)
沃伦·巴菲特： 顺便说一句，她父亲有一家汽水店。如果您去塔尔萨，一定要去看看。（笑声）
AUDIENCE MEMBER: He certainly does. And you’re certainly invited to come back. (Laughter)
观众： 确实如此。而且诚邀您再次光临。（笑声）
I was here three years ago for the movie theater. And considering the growth — I know you won’t leave your beloved Omaha — but maybe you could build a stadium with — that’s covered — (laughter) — considering the growth — (Buffett laughs) — with adequate parking. (Laughter)
我三年前在电影院里参加了会议。考虑到这几年的增长——我知道您不会离开您挚爱的奥马哈——但或许您可以建一个有顶棚的体育场——（笑声）——考虑到增长——（巴菲特笑）——并有足够的停车位。（笑声）
Here’s my question. You said there’s going to be unlimited offering, as much as they want. This question is not designed to get a rise out of Mr. Munger, however —
这是我的问题。您说发行是无限量的，想要多少就发多少。不过，这个问题并不是为了激怒芒格先生——
WARREN BUFFETT: That’s not easy to do. (Laughter)
沃伦·巴菲特： 那可不容易做到。（笑声）
AUDIENCE MEMBER: Understood, considering the bridge game of yesterday.
观众： 理解，尤其是考虑到昨天的桥牌比赛。
Anyway, my question is, you’re authorizing up to 1 percent. What happens if it goes bananas, as zone 5 suggested, and it goes greater?
无论如何，我的问题是，您说这次发行规模约为1%。如果像区域5所说的那样，需求超出了预期，会发生什么？
You said this 1 percent is yours. Is the next 1 percent yours? Is the next 1 percent ours? Do — I know we are limited partners. And you’re a controlling partner. But how far does this ballgame go?
您说这1%是您的。那么下一个1%呢？再下一个1%是我们的吗？我知道我们是有限合伙人，而您是控股合伙人。但这个游戏会走到什么程度？
WARREN BUFFETT: Well, in terms of the size of the offering, it — whatever the size of the offering, it affects everybody economically the same. I mean, our shares are no different than the ones than the people in this room.
沃伦·巴菲特： 关于发行规模的问题，不管发行规模是多少，经济影响对每个人来说都是一样的。我的股票和在场所有人持有的股票没有任何区别。
So, we do not care, from an economic standpoint, whether the issue turns out to be approximately 1 percent or whether it was 1 1/2 or 3/4 of 1 percent.
因此，从经济角度来说，我们并不关心发行规模是接近1%，还是1.5%或0.75%。
It simply — as long as we’re not selling the stock below its true value, we are not going to be hurt by it. So, that — it’s inconsequential to us. We’re not going to be helped in any significant way by a large sale.
只要我们没有以低于其真实价值的价格出售股票，这对我们来说就不会造成任何伤害。因此，这对我们来说无关紧要。大规模销售也不会对我们产生任何实质性的帮助。
The — it would appear, to me — we’re just a few days away from the offering, and it’s been out there awhile.
看起来，我们距离发行只有几天了，而且这个消息已经公布了一段时间。
So, I would doubt if there’s huge changes. But I don’t know the answer to that. I mean, that could depend on what happens in the general stock market.
因此，我怀疑是否会有大的变化。但我无法给出明确的答案。这可能取决于整体股票市场的表现。
But I don’t think you’ll see any huge change in the offering. If there were a big change, we, obviously, would very promptly let the SEC know. The SEC has wanted us, as we have seen changes in demand as we’ve gone along, promptly change the size of the offering. And the covering page gets modified.
但我认为，您不会看到发行规模有大的变化。如果确实出现重大变化，我们显然会非常迅速地通知美国证券交易委员会（SEC）。随着需求变化，SEC要求我们及时调整发行规模，并修改招股说明书的封面。
And we’ve done that. Every day as indications come along, we’ve tried to be responsive to their instructions on that. And the 350,000 shares is our best estimate, as of last Friday, and —
我们已经这么做了。每天根据需求的变化，我们努力响应他们的要求。截至上周五，35万股是我们最好的估计，——
We’ll look at it the next day or two. But I don’t think it’s going to change dramatically. I don’t know, though. I don’t want to — I’m giving you a definitive answer on that. But it’s just my — it’s a strong impression. Thank you.
接下来的几天我们会再看看。但我认为不会有显著变化。不过，我不能给出确切答案。这只是我的——我的强烈印象。谢谢。
14. Only Class B questions
仅限于关于B类股票的问题
WARREN BUFFETT: Zone 4?
沃伦·巴菲特： 区域4？
AUDIENCE MEMBER: Mike Assail (PH) from New York City with a question for Charlie —
观众： 我是来自纽约市的迈克·阿赛尔（音），有个问题想问查理——
WARREN BUFFETT: Good.
沃伦·巴菲特： 好的。
AUDIENCE MEMBER: — about his investment models.
观众： ——关于他的投资模型。
I’d like to know the most useful models on industry consolidation, vertical integration, and models which explain the special cases when it makes sense to invest in retailing stocks —
我想了解关于行业整合、垂直整合最有用的模型，以及哪些特殊情况下投资零售类股票是合理的——
WARREN BUFFETT: Ah, well, I think —
沃伦·巴菲特： 嗯，我想——
AUDIENCE MEMBER: — and if —
观众： ——以及是否——
WARREN BUFFETT: — I don’t want to interrupt you now, but I think we’ll save those to the general question and answer. This is only on the issuance of the Class B right now.
沃伦·巴菲特： ——我不想现在打断您，但我认为我们会将这些问题留到稍后的常规问答环节。目前的问题仅限于B类股票的发行。
AUDIENCE MEMBER: Oh. Sorry, sorry.
观众： 哦，抱歉，抱歉。
WARREN BUFFETT: But we’re glad to have that question later on.
沃伦·巴菲特： 不过我们很高兴稍后能收到这个问题。
AUDIENCE MEMBER: Sorry.
观众： 抱歉。
WARREN BUFFETT: It’ll give Charlie time to figure out the answer for one thing. (Laughter and applause)
沃伦·巴菲特： 至少这会给查理一些时间去思考答案。（笑声和掌声）
We’ll go through all of the questions regarding the Class B. And, then, we’ll have a vote on the class —authorization of the Class B. And, then, we’ll get into general questions and answers.
我们会先处理所有关于B类股票的问题。然后，我们将就B类股票的授权进行投票。之后，我们再进入常规问答环节。
15. Do B shares penalize Class A shareholders?
B类股票是否会损害A类股东的利益？
AUDIENCE MEMBER: Sir —
观众： 先生——
WARREN BUFFETT: Somebody over there — we’ll take another one from zone 4 if there’s somebody — monitor.
沃伦·巴菲特： 那边有人——如果有人提问，我们从区域4再来一个问题——请监控。
AUDIENCE MEMBER: Mark Findidi (PH) from Connecticut. I’ll apologize ahead. This isn’t meant to be an impudent question or — in any way, shape, or form.
观众： 我是来自康涅狄格州的马克·芬迪迪（音）。事先道歉，这个问题无意冒犯——绝不是以任何方式或形式。
Do you think that the issuance of the B, in any way, might — in an effort to protect the folks who might be out there suckered in by the trust, if you will — in any way penalizes the A shareholders, either, one — or might penalize them — either, one, financially or, two, philosophically in the BRK experience?
您是否认为，发行B类股票是否可能——为了保护那些可能被信托欺骗的人——在某种程度上损害A类股东的利益？无论是经济上还是在伯克希尔的理念上？
I don’t mean that in any kind of elitist fashion, because I don’t think you’ve ever propagated that. BRK doesn’t propagate that. But clearly, there’s a room full of people — or rooms full of people — who have made a commitment financially to show that their philosophy is with you. Does that get diminished?
我并不是以任何精英主义的方式提出这个问题，因为我认为您从未宣扬过这样的理念。伯克希尔也没有宣扬过。但显然，有一屋子——或多屋子的人——在经济上做出了承诺，以表明他们的理念与您一致。这种承诺是否会被削弱？
The other part of the question is the trusts, as you portrayed them, didn’t sound terribly attractive. In a longer term, would they, perhaps, have ultimately failed as folks realize that they hadn’t gotten into what they thought?
问题的另一部分是，正如您描述的那样，这些信托看起来并不是很有吸引力。从长期来看，当人们意识到他们没有得到他们所期望的东西时，这些信托是否可能最终失败？
WARREN BUFFETT: Well, they might’ve. But I think the rub off would’ve been on us rather than the promoters of the trust — might’ve been on the promoters, too. But in terms of the failure of the trust, I don’t mean failure in an absolute sense, but in terms of disappointing their investors.
沃伦·巴菲特： 嗯，这可能会发生。但我认为，失望的影响可能更多是对我们，而不是对信托的发起人——当然，也可能会影响到发起人。但从信托的失败来说，我不是指绝对意义上的失败，而是让他们的投资者感到失望。
I really think if tens of thousands or hundreds of thousands of people had come into something that was sold as being an all-Berkshire-type trust, if people came away disappointed in some years, I think they would tend to project that disappointment upon Berkshire fully as much as the promoter who sold the trust, who they might not even be able to find at that time.
我确实认为，如果成千上万甚至几十万人投资于某种被宣传为“全伯克希尔型”的信托，而这些人在几年后感到失望，我认为他们很可能会将这种失望归咎于伯克希尔，而不是那些出售信托的发起人，因为那时他们甚至可能找不到发起人。
The first question, you know, this — I don’t think — we wouldn’t be doing this if we thought it would hurt present shareholders, we — as much as we might detest something else that was going on. And we designed it so it — we felt that it wouldn’t hurt present shareholders.
至于第一个问题，您知道，我们不会这么做，如果我们认为这会伤害现有股东的利益——即使我们非常厌恶其他正在发生的事情。我们设计B类股票时的初衷是，我们认为这不会损害现有股东的利益。
In terms of them having a philosophy — the new shareholders having a philosophy similar to the present ones — we’ve tried to filter those out coming in.
至于新股东是否能拥有与现有股东相似的理念——我们试图在引入过程中筛选出合适的人群。
But I intend, after the offering, to send out a booklet, you know, kind of like freshmen at college, you know, orientation, greetings to Siwash U.
但我计划在发行结束后发出一本小册子，就像大学新生的迎新手册一样，“欢迎来到Siwash大学”。
And we’ll send it to everybody, new shareholders and the old shareholders, explaining our philosophy, just as an orientation course on the company. And we’ll get that out, probably, in a month or so after the offering settles down.
我们会将这本小册子发送给所有人，包括新股东和老股东，解释我们的理念，就像一门关于公司的入门课程。大概会在发行平稳下来后的一个月左右寄出。
I don’t see any reason that — you know, Berkshire has evolved over a long period of time. We had 12 shareholders at the annual meeting 15 years ago. And it — we seem to be able to retain the same class and group of shareholders, in terms of people who really understand the business. It’s a different group than you find at other companies.
我看不出有什么理由会影响——您知道，伯克希尔是经过很长时间演变而来的。15年前的年度股东大会上，我们只有12位股东。而我们似乎能够保持同一类型和群体的股东，他们真正理解我们的业务。这是与其他公司不同的一群人。
And I think we can — as long as we’ve had this filter in effect, operating as new people join us, I think we can keep it.
我认为，只要我们保持这一筛选机制，在新股东加入时有效运作，我们就能够保持这种股东群体。
Charlie?
查理？
CHARLIE MUNGER: Yeah. If the offering went wild and you issued 3 percent of the company, new, you’re also taking in a billion-odd dollars. It is a — it’s a non-event for us. (Laughter)
查理·芒格： 是的。如果发行需求极高，你新增发行了公司3%的股份，你同时也会收到十亿多美元。对我们来说，这根本不算什么。（笑声）
WARREN BUFFETT: He’s very excitable. Don’t say anything to him. (Laughter)
沃伦·巴菲特： 他很容易激动，别跟他说太多。（笑声）
16. Berkshire can’t match previous gains
伯克希尔无法再现以往的收益增长
WARREN BUFFETT: Zone 5.
沃伦·巴菲特： 区域5。
AUDIENCE MEMBER: Ed Johnson (PH) from Park City, Utah.
观众： 我是来自犹他州帕克城的埃德·约翰逊（音）。
As you receive the proceeds of the Class B sale and generate other cash, are you seeing opportunities out in the marketplace to continue to provide the kinds of returns that we’ve been fortunate enough to experience in the past?
随着您收到B类股票发行所得的资金并产生其他现金收入，您是否在市场上看到可以继续提供我们过去所幸运获得的那种回报的机会？
WARREN BUFFETT: With or without the sale of the B, we don’t see things to do that can maintain anything close to the average returns of the past. We’ve tried to convey that.
沃伦·巴菲特： 无论是否发行B类股票，我们都看不到能让我们维持接近过去平均回报率的机会。我们一直试图传达这一点。
And it becomes a mathematical absurdity. Money just won’t compound at that rate in this world, absent extraordinary inflation. It certainly won’t compound in real terms.
这在数学上已变得不切实际。在这个世界上，资金不会以那种速度复利增长，除非出现极端的通货膨胀。而实际上也不可能以这种速度复利增长。
So, absent the issue of the B, we are not looking at them. We’re not seeing things. We’re not hoping to find things that match some of the things that we have found in the past, relative to the capital base we’ve had in the past.
因此，与B类股票发行无关，我们并没有找到这样的机会。我们也不期望能找到与我们过去在较小资本基础上发现的机会相匹配的项目。
But we have that problem with or without the B. And it has not changed in any, even very minor degree, by the issuance of the B.
但无论是否发行B类股票，这个问题都存在。而B类股票的发行对此没有丝毫影响，哪怕是非常轻微的影响。
We are looking for things all of the time. Anytime we find anything that makes sense to us, we will do it.
我们一直在寻找机会。任何时候，只要发现合理的项目，我们就会行动。
The harder part is to make sure that we don’t do something when we don’t find something that makes sense. I mean, that’s the bigger worry.
更难的部分是确保当我们找不到合理的项目时，我们不会去做某些事情。我是说，这才是更大的担忧。
And when we find them, you know, they’ll come along. And you never have — you never know when it’s going to happen.
而当我们发现机会时，您知道，它们自然会出现。但您永远无法预测何时会发生。
We run into businesses — I described a little bit of that in the annual report — almost by accident that we’ve had — contracted to make one purchase this year. The people who run it are here today. And it came about because I was attending a birthday party. And, you know, I’ll go to more in the future. (Laughter)
我们有时几乎是偶然接触到一些业务——在年度报告中我提到了一些。今年我们已经签约收购了一家公司。它的管理者今天也在这里。这笔交易的缘起是因为我参加了一个生日聚会。您知道，我未来会参加更多聚会。（笑声）
So, things have not ended around here. We’ll find interesting things to do over time. But they can’t remotely be as profitable as the things we’ve found in the past, simply because of the large capital base.
所以，这里的事情并没有结束。随着时间推移，我们会找到有趣的事情去做。但由于资本基数变大，这些事情不可能像我们过去找到的机会那样极具盈利性。
17. Not expecting volume spike for B shares
不预期B类股票交易量会激增
WARREN BUFFETT: Zone 6?
沃伦·巴菲特： 区域6？
AUDIENCE MEMBER: Hi. I’m Matt Zuckerman from Miami.
观众： 你好，我是来自迈阿密的马特·扎克曼。
I don’t know, I think Charlie is the same class as Ev Dirksen. You know, $3 billion, we’ll soon be talking about real money. (Laughter)
我不知道，但我觉得查理和埃夫·德克森差不多，您知道，30亿美元，很快我们就会讨论“真正的钱”了。（笑声）
WARREN BUFFETT: Yeah.
沃伦·巴菲特： 是的。
AUDIENCE MEMBER: The two questions I have, basically, are, one — number one, referring to the gentleman over here before who commented on your popularity, which will definitely affect the stock, don’t you think —?
观众： 我的两个问题，首先，第一个问题是，刚才有位先生提到了您的知名度，这肯定会影响股票，您不这么认为吗？
And the second part of that is that even my wife’s beautician has put in for some shares of this stock, and he represents a small tip of a large group who are probably doing the same thing on the one hand, so that there’s going to be a large popular demand for the stock, which probably is not reflected in the numbers that the selling brokers are getting from institutions.
第二部分是，我妻子的美容师甚至也申请购买了这只股票，他可能只是一个更大群体中的一小部分，而这群体中很多人可能也在做同样的事情。因此，可能会对股票产生巨大的民间需求，而这些需求可能没有反映在承销商从机构那里获得的数字中。
And number two, mutual funds themselves, in order to lend some panache or glamour or whatever to their portfolios will certainly be sucking up Berkshire stock after this.
第二个问题是，互惠基金为了给其投资组合增加一点光彩或吸引力，无疑会在此之后吸纳伯克希尔的股票。
And have you taken all of this into consideration when you decided upon the number of shares to go — that you’re sending out, number one?
第一个问题是，当您决定发行的股票数量时，是否将这些因素考虑在内？
And number two, that the reaction, at least in the first 14 days, of the public to the shares, which will probably be in the range of $1,100, might not send the B shares up high enough to make a very, very interesting spike in the price of the A stock.
第二个问题是，公众在最初14天内对股票的反应可能会使B类股票价格上涨到1100美元左右，这是否会导致A类股票出现非常有趣的价格飙升？
WARREN BUFFETT: Well, I — we’ve considered what you’re talking about. I think that the issue has been well enough publicized that the demand will largely be reflected on the books of the underwriter in a day or two.
沃伦·巴菲特： 嗯，我们确实考虑过您所说的这些。我认为这个发行已经被充分宣传，需求在一两天内基本上会体现在承销商的记录上。
And I see no reason at all for a spike in the stock. I mean, the way we’ve designed it should really prevent that. We — and we tell people not to expect it.
我完全看不到股票出现飙升的理由。我们的设计方式实际上应该可以防止这种情况发生。而且我们告诉人们不要期望这种情况会发生。
If any institution wants to buy it, if any individual wants to buy it, they’re going to have a chance to do it.
如果任何机构或个人想买，都将有机会买到。
And I don’t see any reason why there should be some huge influx of people immediately subsequent to the offering that didn’t hear about it during the offering period.
而且我看不出发行结束后为什么会有大量新买家涌入，这些人不可能在发行期间没有听说过这个消息。
It’s interesting. I think most of the demand will be retail and smaller holdings, not so much institutional.
这很有趣。我认为大部分需求将来自于散户和小额持股，而非机构投资者。
The — most new offerings are done in a manner where the idea is to have far more demand than supply, and therefore cause people to, maybe, order stock they didn’t even want, and just on the idea that this restricted supply will cause a big jump the first day, whether, you know — you’ve seen Yahoo or a number of other offerings.
大多数新发行股票的做法是人为制造供不应求的局面，从而让人们可能订购他们根本不需要的股票，仅仅是因为这种受限供应可能在第一天带来大幅上涨，例如，您可能看到过雅虎或其他一些发行。
I think — I don’t personally like that sort of distribution arrangement because you’ll find that 30 to 40 percent of the issue will, perhaps, trade the first day. Well, I think — and, perhaps, at a lot higher price.
我认为——我个人不喜欢这种分销安排，因为您会发现30%到40%的股票可能在第一天就被交易。而且可能价格还高出不少。
I think there’s something a little wrong with that kind of an offering, because the company obviously isn’t getting the proceeds that are equivalent to what people are willing to pay. And favored customers get the chance to flip the stock and really are getting paid an exorbitant underwriting fee themselves, even though they’re called purchasers, because they sell it the first day.
我认为这种发行方式有点问题，因为公司显然没有获得与市场愿意支付的价格相等的收益。而某些被优待的客户有机会快速转手这些股票，尽管他们被称为“购买者”，但实际上通过第一天的转售获得了高额的“承销费”。
We will be very interested in seeing the volume in the B stock the first couple of days, relative to the amount of the issuance.
我们非常感兴趣的是，在前几天B类股票的交易量相对于发行量的比例。
And I will be disappointed and I’ll be surprised if the trading volume in the B stock the first couple days, related to whatever the size of the issue is, turns out to be anywhere near as high as with most new issues.
如果B类股票在头几天的交易量相对于发行规模接近大多数新发行股票的水平，我会感到失望和惊讶。
I think that we will have a better success in finding people who really want to own it and who did not buy it to flip it, I think, by this method of distribution. But we’ll have a test of that. We will see what happens in trading volume.
我认为，通过这种分销方式，我们能够更成功地找到真正想持有它的人，而不是那些买了就想第二天转售的人。但我们会对此进行检验，看看交易量会如何表现。
And I invite you to look at the volume and compare it to the amount we issue and, then, look at that relative to other new issues this year and just see how successful we were in finding real investors rather than people who were buying it to sell it to somebody else the next day.
我邀请大家观察交易量，并将其与我们的发行量进行比较，再将其与今年其他新发行股票进行比较，看看我们在找到真正投资者方面的成功程度，而不是吸引到那些第二天就打算卖给别人的人。
18. Buffett’s visibility and safety concerns
巴菲特的知名度与安全问题
WARREN BUFFETT: Let’s see, was that zone 6? I guess we go to zone 1.
沃伦·巴菲特： 我们看看，是不是区域6？我想我们现在去区域1。
(Long pause)
(长时间的停顿)
CHARLIE MUNGER (quietly to Buffett): Maybe we can vote.
查理·芒格（小声对巴菲特）： 或许我们可以开始投票。
WARREN BUFFETT (quietly to Munger): Yeah, but I don’t want to cut off —
沃伦·巴菲特（小声对芒格）： 是的，但我不想打断——
VOICE: Uh —
声音： 嗯——
WARREN BUFFETT: Charlie says maybe we can vote, but I do — I want people to have their questions — (Applause)
沃伦·巴菲特： 查理说或许我们可以开始投票，但我确实——我希望大家能提出他们的问题——（掌声）
It just encourages him when you do that. (Laughter)
当你们这么做时，这只会鼓励他。（笑声）
I want to be sure people get their questions answered on this. I don’t want to prolong it beyond —
我想确保人们能就这个话题得到答案。我不想让这个过程拖得太久——
If you feel your question has been 95 percent answered by an earlier question, I hope you’ll skip asking it.
如果您觉得您的问题在之前的问题中已经95%得到了回答，我希望您可以跳过。
But we do want to have people that have questions about it answered, because I can tell by commentary and letters I’ve received that some people have genuine concerns. Yes?
但我们确实希望解答所有对此有疑问的人，因为从我收到的评论和信件中可以看出，有些人确实有真切的担忧。请说？
AUDIENCE MEMBER: My concern — oh, my name is Jan Anglin (PH). I’m from Southern Indiana. And this is my first Berkshire meeting.
观众： 我的担忧是——哦，我的名字是简·安格林（音），我来自印第安纳州南部。这是我第一次参加伯克希尔会议。
WARREN BUFFETT: Good.
沃伦·巴菲特： 很好。
AUDIENCE MEMBER: I did have a concern about the B shares that’s less business and more — I guess it would be concerned with your and Mr. Munger’s personal safety.
观众： 我确实对B类股票有一些担忧，但这更多与商业无关，而是关于您和芒格先生的人身安全的担忧。
I often see your picture in the newspaper. And I certainly don’t mind seeing it on financial magazines, but now, it’s kind of, like, proliferating. I don’t like the idea that you are so visible. (Laughter)
我经常在报纸上看到您的照片。当然，我不介意在财经杂志上看到，但现在，似乎这种曝光在增加。我不喜欢您如此显眼的这种想法。（笑声）
That bothers me. It’s — I mean, do you understand what I’m saying?
这让我感到困扰。我是说，您明白我的意思吗？
WARREN BUFFETT: No. I understand exactly.
沃伦·巴菲特： 是的，我完全明白。
AUDIENCE MEMBER: This isn’t —
观众： 这并不是——
WARREN BUFFETT: It’s occurred to me. (Laughter)
沃伦·巴菲特： 我想过这个问题。（笑声）
I appreciate that, and I — but the answer is there’s no other way, I mean, if —
我很感激，但答案是别无他法，我是说，如果——
AUDIENCE MEMBER: OK.
观众： 好的。
WARREN BUFFETT: — over time —
沃伦·巴菲特： 随着时间的推移——
AUDIENCE MEMBER: But can —
观众： 但是能不能——
WARREN BUFFETT: — in terms of what happens. And —
沃伦·巴菲特： 从实际发生的事情来看。并且——
AUDIENCE MEMBER: So —
观众： 所以——
WARREN BUFFETT: — as it grows, you get more visible, basically.
沃伦·巴菲特： 随着它的发展，你的曝光度会越来越高，基本上就是这样。
AUDIENCE MEMBER: Oh, I know. But along with the B shares and things, can you, kind of, like, be quotable but less available for photos? (Laughter)
观众： 哦，我知道。但随着B类股票的发行，您能不能，比如说，发表言论时被引用但尽量少出镜拍照？（笑声）
WARREN BUFFETT: Well, I normally am. I — if you’ve noticed, in terms of interviews or anything of the sort, I do not do them. I’ve been invited to go on all of the news shows. And I, basically, don’t do it.
沃伦·巴菲特： 通常我确实是这样的。如果您注意到，在采访或类似的事情中，我基本上都不参与。我曾被邀请参加所有的新闻节目，但我基本上都拒绝了。
Frankly, with the shareholders, I feel differently about this group. I’m delighted to see everybody come here. And I enjoy getting together with the shareholders. (Applause)
坦白说，对于股东，我的感受是不同的。我很高兴看到大家来到这里。我也很享受与股东们的交流。（掌声）
I think the real protection is, if we’d done something that had caused the stock to balloon way up and then come way down, I might have had to be a little more careful. (Laughter)
我认为真正的保护是，如果我们做了什么导致股价大幅上涨然后再大幅下跌，我可能就需要更加小心了。（笑声）
CHARLIE MUNGER: I think she has a very good idea. Having seen that acting — (Laughter)
查理·芒格： 我认为她的建议非常好。看了那些表演之后——（笑声）
I think hereafter, maybe you should be the voice of Mickey Mouse. (Laughter)
我想今后你或许可以去做米奇老鼠的配音。（笑声）
WARREN BUFFETT: I do appreciate the sentiment out of everybody. And there is a — it is unavoidable, to a fair degree. Although, Charlie may have thought I wasn’t pushed into those acting jobs.
沃伦·巴菲特： 我非常感谢大家的关心。这在很大程度上是不可避免的。尽管查理可能觉得我并没有被强迫去做那些表演。
19. Class A “forever” convertible to Class B
A类股票可“永久”转换为B类股票
WARREN BUFFETT: Zone 2.
沃伦·巴菲特： 区域2。
AUDIENCE MEMBER: This Joe Greer (PH) from Omaha, Nebraska of all places. (Laughter)
观众： 我是乔·格里尔（音），来自所有地方中的内布拉斯加州奥马哈。（笑声）
Regarding the conversion privilege, is there a time limit on the converting from the A to a B?
关于转换权，A类股票转换为B类股票是否有时间限制？
WARREN BUFFETT: No. That’s a good — I’m glad you asked that question.
沃伦·巴菲特： 没有。这是个好问题——我很高兴你问了这个问题。
The first five days or so after issuance — business days — there’s no conversion. But after that, you’ll be able to convert until judgment day. It’s forever convertible from A to B. But it’s not convertible from B to A.
在发行后的前五个工作日左右，无法转换。但之后，您可以一直转换，直到审判日为止。A类股票可以永久转换为B类股票，但B类股票不能转换为A类股票。
So there’s no need to convert it until you have a reason to do so. It — and as I’ve pointed out, there’s a very slight disadvantage in converting. And I wouldn’t — until I had a need, I would not convert it.
所以，除非您有理由，否则没有必要转换。而且正如我指出的，转换有一个非常小的劣势。所以，除非有需要，我不会进行转换。
20. How to convert Class A shares to B
如何将A类股票转换为B类股票
WARREN BUFFETT: Zone 3?
沃伦·巴菲特： 区域3？
AUDIENCE MEMBER: Scott Dowling from Redmond, Washington.
观众： 我是斯科特·道林（音），来自华盛顿州雷德蒙德。
Kind of related to this question, as an A shareholder, I can only see really two reasons to convert A shares into B shares, one of them being gifting reasons.
与此问题相关，作为A类股东，我认为只有两个理由将A类股票转换为B类股票，其中一个是出于赠与的原因。
In regard to that, how does one convert A shares into B?
关于这一点，如何将A类股票转换为B类股票？
WARREN BUFFETT: Yeah. That — yeah, there are instructions on that in the proxy statement as to how that — I guess it’s in the annual report, too, that it describes how to do it.
沃伦·巴菲特： 是的，这——是的，在代理声明中有关于如何进行转换的说明。我想在年度报告中也有提到如何操作。
But, basically, you get in touch with the Bank of Boston to do that and proceed from there. Or if you have your shares with a broker, you would instruct your broker to do it.
但基本上，您可以联系波士顿银行来处理此事并从那里开始操作。或者，如果您的股票在经纪商那里，您可以指示您的经纪商进行转换。
21. Class B price meant to discourage unreasonable expectations
B类股票价格旨在打消不切实际的期望
WARREN BUFFETT: Zone 4?
沃伦·巴菲特： 区域4？
AUDIENCE MEMBER: Good morning. I’m Ruth Owades from San Francisco.
观众： 早上好，我是露丝·欧瓦迪斯（音），来自旧金山。
I wondered, how did you decide that the ratio of the Bs should be 30-to-1 instead of 300-to-1 or something in between?
我想知道，您是如何决定B类股票的比例为30:1，而不是300:1或介于两者之间的某个值？
WARREN BUFFETT: Yeah. We wanted to have something that was roughly — would trade, initially, at least, in the thousand-dollar range.
沃伦·巴菲特： 是的。我们想要一个大致能够在初期至少交易于千美元范围的比例。
We thought it very unlikely that anyone would find it commercially feasible to set up a trust that offered units that were denominated much below that.
我们认为，任何人都不太可能会发现建立一个单位价值远低于这个价格的信托在商业上是可行的。
So, that’s as low as we felt we had to go. And we did not want to signal, in any way, that, you know, some sort of last chance, or something like that, to get in for some very low sum for people that, you know, just had some wishes that they could turn a hundred dollars into 100,000 or something.
因此，这是我们认为必须达到的最低水平。而且我们不想以任何方式传递这样的信号，即某种最后的机会，以非常低的金额让那些怀有将100美元变成10万美元愿望的人参与进来。
I get letters from people that, you know, think that somehow that can be done. It can’t be done.
我收到过一些人的来信，他们认为可以通过某种方式实现这种愿望。但那是做不到的。
And we don’t want to appeal subliminally or any other way to people who harbor those hopes.
我们不希望以潜意识或其他任何方式吸引那些抱有这种希望的人。
I’m sympathetic with them. But we don’t have the answer to that. So, we went down to the level to match the unit trusts.
我对他们表示同情，但我们无法解决这个问题。因此，我们选择了一个与单位信托相匹配的水平。
22. B shares will increase book value, but not intrinsic value
B类股票将提高账面价值，但不会提升内在价值
WARREN BUFFETT: Zone 5?
沃伦·巴菲特： 区域5？
We’ll try and do — we’ll try to end the questions on the B fairly soon. But I don’t want anybody that feels that they’ve got a — got some reservations about this — not to have a shot at asking their question.
我们会尽快结束关于B类股票的问题。但我不希望有任何人心存疑虑却没有机会提出他们的问题。
AUDIENCE MEMBER: My name is Bob McClure (PH). I live in Singapore.
观众： 我是鲍勃·麦克卢尔（音），住在新加坡。
And the way I figure it, the sale of the B shares at the price they will probably be sold, will give an immediate boost to the book value of Berkshire Hathaway. So, as far as I’m concerned, the more the merrier.
据我推测，以他们可能的出售价格发行B类股票，将会立即提升伯克希尔·哈撒韦的账面价值。所以对我来说，越多越好。
Can you give us your thinking on that, the accounting treatment, how this will affect the book value of Berkshire?
您能否谈谈您的看法，以及会计处理方式，这将如何影响伯克希尔的账面价值？
WARREN BUFFETT: Well, any sell — shares we sell at the equivalent per A share of in the range of 33,000 or thereabouts, where the stock is selling now, will increase the book value per share.
沃伦·巴菲特： 好的，任何以目前A类股票大约33,000美元左右价格出售的股票，都将提升每股的账面价值。
But that does not mean it increases the intrinsic value per share.
但这并不意味着它会提升每股的内在价值。
I’ve said many times in the report, we use book value as a proxy in tracking movement of intrinsic value. But it does not represent anything like intrinsic value per share.
我在报告中多次提到，我们使用账面价值作为追踪内在价值变动的一个参考。但它并不代表每股的内在价值。
And the key is not what it does to book value per share, but what it does to intrinsic value per share. And, you know, we believe the intrinsic value is materially higher than the book value.
关键并不在于它对每股账面价值的影响，而是对每股内在价值的影响。我们认为内在价值远高于账面价值。
We don’t spoil your fun by ever giving you a number. But — (laughter) — we do not regard the fact that it increases the book value per share as being any kind of a determinant in deciding to issue the shares.
我们不会通过给出一个具体数字来破坏您的乐趣。（笑声）但我们并不认为提升每股账面价值是决定发行股票的任何决定性因素。
But it will have that consequence mathematically. The key is the relation to intrinsic value.
但从数学上讲，它确实会有这样的结果。关键在于与内在价值的关系。
23. “The facts are out on what we do”
“我们所做的事情事实已摆在明处”
WARREN BUFFETT: Zone 6?
沃伦·巴菲特： 区域6？
VOICE: I think there was a question over here.
声音： 我想这边有一个问题。
WARREN BUFFETT: Any questions in six?
沃伦·巴菲特： 区域6有问题吗？
VOICE: Behind you.
声音： 在您身后。
AUDIENCE MEMBER: Your problem seems to be that you’ve attracted a fair number of potential shareholders that don’t have a way of estimating intrinsic value or developing expectations about what Berkshire’s future prospects are.
观众： 您的问题似乎是吸引了相当多的潜在股东，他们没有办法估算内在价值或对伯克希尔的未来前景建立预期。
Now, do you have any suggestions about how they might do that, short of the general guidance that you can’t continue to compound your intrinsic value at the same high rate that you have in the past because of your asset base, and that you don’t believe the share is undervalued?
现在，您是否有任何建议，关于他们如何做到这一点，除了您之前提到的总体指导，即由于资产基数，您无法继续以过去的高增长率复利增长内在价值，以及您认为股票没有被低估？
WARREN BUFFETT: Yeah. Well, we’ll probably talk more in the general question and answer period about our various businesses, but we simply try to give you all of the information about our businesses in a large, general way that Charlie and I consider important and that we would want if our positions were reversed.
沃伦·巴菲特： 是的。我们可能会在一般的问答环节中更多地谈论我们的各种业务，但我们只是尝试以一种整体和广泛的方式向您提供我们业务的所有信息，这些信息是查理和我认为重要的，也是如果我们的位置调换，我们希望得到的信息。
I can assure you that if all Charlie and I knew about our businesses, what we’ve publicly disclosed, it would not change our estimates from what they might be from being intimately involved with the businesses. The facts are out regarding what we do.
我可以向您保证，如果查理和我对我们的业务所知道的所有事情就是我们公开披露的内容，这并不会改变我们对业务的估计。关于我们所做的事情，事实已经摆在明处。
So, you are in the same position to the extent that you have followed our kind of businesses and understand industry conditions and all of that.
因此，如果您一直关注我们的业务类型并了解行业状况等等，您就处于相同的地位。
And we’ll continue to do that. We essentially regard you as our partners. And we tell — we try to tell you exactly what we, as partners, would want to know if you were running the place. And we’ll continue to do that.
我们将继续这样做。我们本质上把您看作我们的合作伙伴。我们会告诉您——我们试图告诉您，如果您在管理这家公司，作为合作伙伴我们想知道的确切内容。我们将继续这样做。
We won’t tell you a number because we don’t know the number. We have a range in our mind. Things change that range over time. And we’d probably get in all kinds of trouble if we tried to put out that range.
我们不会告诉您一个具体的数字，因为我们不知道那个数字。我们脑海中有一个范围。随着时间的推移，这个范围会发生变化。如果我们试图公开这个范围，可能会惹上各种麻烦。
And Charlie and I would not come up with exactly the same range. But they’d be pretty close. We’ll talk more about that a little later.
查理和我不会得出完全相同的范围，但它们会非常接近。我们稍后会对此作更多讨论。
24. Shareholders approve Class B shares
股东批准发行B类股票
WARREN BUFFETT: We do have questions now from zone 7 and 8 in the other room. So, we’ll take on zone 7, please.
沃伦·巴菲特： 我们现在收到来自另一个房间7号和8号区域的问题。那么，我们先回答7号区域的问题。
VOICE: I guess you’ve answered our questions in seven.
声音： 我想您已经回答了我们7号区域的问题。
WARREN BUFFETT: Oh, took care of zone 7. How about zone 8?
沃伦·巴菲特： 哦，解决了7号区域的问题。那么8号区域呢？
VOICE: No questions from zone 8.
声音： 8号区域没有问题。
WARREN BUFFETT: Oh, OK. (Applause)
沃伦·巴菲特： 哦，好吧。（掌声）
I think, at this point, we can move on to general questions after we have this vote.
我想，现在我们可以在投票后转入一般问答环节。
And then, if you have another question or two that comes up during the general question and answer period, I’ll be glad to — we’ll be glad to work those in at that time.
如果在一般问答环节中还有其他问题，我们很乐意解答。
So, we are now at the point: is there a motion to adopt the board of directors’ recommendation?
现在到了这一环节：是否有人提出动议通过董事会的建议？
WALTER SCOTT JR.: I move the adoption of the amendment to the fourth article of the restated certificate of incorporation that’s set forth in exhibit A of the company’s proxy statement for this meeting.
沃尔特·斯科特二世： 我提议通过修改公司修订后的公司章程第四条的动议，此修订在本次会议的公司委托书声明附件A中列出。
VOICE: I second the motion.
声音： 我附议。
WARREN BUFFETT: The motion has been made and seconded to adopt the proposed amendment to the certificate of incorporation. It says here, “Is there any discussion?” but I’m not going to say that. We are ready to act upon the motion.
沃伦·巴菲特： 该动议已被提出并附议，内容是通过拟议的公司章程修订。这里写着“是否有讨论？”不过我就不问了。我们准备对该动议进行表决。
If there are any shareholders voting in person, they should now mark their ballot on the proposed amendment to the certificate of incorporation and allow the ballots to be delivered to the inspector of elections.
如果有任何股东亲自投票，他们现在应该在提议的公司章程修订案上标记选票，并将选票交给选举监察员。
Would the proxy holders please also submit to the inspector of elections a ballot on the proposed amendment, voting the proxies in accordance with the instructions they have received?
请委托书持有人也向选举监察员提交关于提议修订案的选票，并按照他们收到的指示投票。
Mr. Fitzsimmons, when you’re ready, you may give your report.
菲茨西蒙斯先生，您准备好后可以发表您的报告。
ROBERT M. FITZSIMMONS: My report is ready. The ballot of the proxy holders received through last Friday cast not less than 970,495 votes in favor of the proposed amendment. That number far exceeds the majority of the number of all shares outstanding.
罗伯特·M·菲茨西蒙斯： 我的报告已准备就绪。截至上周五收到的委托书持有人的选票中，不少于970,495票赞成提议的修订案。这个数字远远超过了所有已发行股份的大多数。
The certification required by Delaware law regarding the precise count of the votes, including the votes cast in person at this meeting, will be given to the secretary to be placed with the minutes of this meeting.
根据特拉华州法律要求的选票精确统计认证，包括本次会议中亲自投票的选票，将提交给秘书，并归档于本次会议的记录中。
WARREN BUFFETT: Thank you, Mr. Fitzsimmons.
沃伦·巴菲特： 谢谢您，菲茨西蒙斯先生。
The amendment to the certificate of incorporation, as set forth in exhibit A to the proxy statement for this meeting, is approved.
此次会议委托书声明附件A中所列的公司章程修订案已获批准。
After adjournment of the business meeting, I will respond to questions that you may have that relate to the business of Berkshire but do not call for any action at this meeting.
在业务会议结束后，我将回答您可能对伯克希尔业务的任何相关问题，这些问题不涉及本次会议需要采取的任何行动。
Anyone have any further business to come before this meeting before we adjourn? If not, I recognize Mr. Walter Scott Jr. to place a motion before the meeting.
在我们休会之前，是否有人对本次会议还有其他业务事项需要提出？如果没有，我请沃尔特·斯科特二世先生提出动议。
WALTER SCOTT JR.: I move this meeting be adjourned.
沃尔特·斯科特二世： 我提议休会。
VOICE: I second the motion.
声音： 我附议。
WARREN BUFFETT: The motion to adjourn has been made and seconded. We will vote by voice. Is there any discussion? If not, all in favor say, “Aye.”
沃伦·巴菲特： 休会动议已提出并附议。我们将以口头表决方式进行投票。是否有讨论？如果没有，赞成的请说“赞成。”
VOICES: Aye.
声音： 赞成。
WARREN BUFFETT: All opposed say, “No.” The meeting’s adjourned. (Applause)
沃伦·巴菲特： 反对的请说“反对。”会议休会。（掌声）
25. Berkshire is more than its breakup value
伯克希尔不仅仅是它的分拆价值
WARREN BUFFETT: Now we’ll move to general questions. And we’ll do it by the same zone system.
沃伦·巴菲特： 现在我们将进入一般问答环节。我们仍然使用相同的分区系统。
As I said earlier, any of you are free, obviously, to leave at any time. We will break formally at noon and reconvene about 15 minutes later, after you’ve all had a chance to buy a sandwich, and you can — (Laughter).
正如我之前提到的，您随时可以自由离开。我们将在中午正式休会，15分钟后重新开会，届时您可以去买个三明治——（笑声）。
Those in the other rooms can come in here. And we will go from then until about 3 o’clock.
在其他房间的与会者可以进到这里。从那时起，我们将持续到下午3点左右。
So, we’ll start in with zone 1.
那么，我们从第一区开始。
AUDIENCE MEMBER: I’m Will Jacks (PH) from Chicago. I’m sort of representing Benjamin Graham today, the question he might ask.
听众： 我是来自芝加哥的威尔·杰克斯（音）。今天我有点像代表本杰明·格雷厄姆，问他可能会问的问题。
You talked earlier about how you — about the value of your shares, the A shares, let’s say, because the B is tied to the A.
您之前提到过关于您股票的价值，特别是A类股票，因为B类股票与A类股票挂钩。
But — and I know it — I don’t expect a complete answer, but generally, how would you go about placing a value on the A shares?
但是——我知道——我并不期待一个完整的答案，但一般来说，您如何为A类股票估值？
WARREN BUFFETT: Yeah. Well, that’s obviously a key question. As I’ve said, we try to give you the information.
沃伦·巴菲特： 是的，这显然是一个关键问题。正如我所说，我们尽力为您提供相关信息。
But I think people, to the extent they’ve made a mistake in the past in valuing Berkshire — and they have made this mistake over time, including many commentators, including some institutions — is to look at it as simply a breakup value to our businesses.
但我认为，过去人们在对伯克希尔估值时犯的一个错误——而且随着时间的推移，人们确实犯过这个错误，包括许多评论员和一些机构——就是仅仅把它看作是我们业务的分拆价值。
I mean, you know, you can — you could do the same with General Electric, we — a magnificently run operation by Jack Welch. But I don’t think the way you should look at a business like General Electric is to think about what would happen if they sold each division today, paid the taxes, and then distributed the proceeds.
我的意思是，您可以用同样的方式看待通用电气——这是杰克·韦尔奇经营得非常出色的一家公司。但我不认为您应该通过假设他们今天出售每个部门、缴税然后分配收益的方式来看待通用电气这样的企业。
And that has tended to be the case with many people looking at Berkshire, looking at it on a static basis. And that is not the way that Charlie and I have looked at it over time.
而对于伯克希尔，许多人倾向于以这种静态的方式来看待它。但这并不是查理和我一直以来看待它的方式。
It lends itself a little more to that kind of analysis because we have a lot of money in marketable securities. But we have a lot of money in other things, too.
伯克希尔确实更容易被用这种方式分析，因为我们在可交易证券上有大量资金。但我们在其他领域也有很多资金。
And the question of Berkshire, in valuing the intrinsic of any business, of course, is what is going to be the stream of cash over many years in the future — in fact, all of the years in the future, discounted back at an appropriate interest rate. I’ve talked about that in the past in the annual report.
关于伯克希尔的估值问题，实际上是在评估任何业务的内在价值时，关键在于未来多年（事实上是未来所有年份）的现金流，并以适当的利率折现。我在过去的年度报告中谈到过这一点。
Berkshire is a collection of businesses. And some of which we own in their entirety, some of which we own part of. And some of those businesses have very interesting dynamics to them.
伯克希尔是一个业务组合。其中一些是我们全资拥有的，一些是部分持股的。这些业务中有一些有非常有趣的动态特性。
And they — the value of our insurance business, for example, if you go back 26 — what was it? Twenty-eight years or so since we — 29, I guess — since we bought it from Jack Ringwalt. We paid 8.7 million, I believe, 8.4 — 8.7 million for two companies that Jack controlled.
比如说我们的保险业务。如果回顾26年——不对，大概是28年或者29年前——自我们从杰克·林格沃尔特那里购买这部分业务以来。我们为杰克控制的两家公司支付了870万美元，我相信是870万美元左右。
If you had the foresight at that time to — and I didn’t, but — if you had the foresight at that time to see what that would develop out of that insurance business, you would’ve come to the conclusion that their value to us was going to be far, far greater than the value at which they were then carried on our balance sheet. They were part of a business which had enormous potential.
如果当时你有远见——我当时并没有——能预见到这项保险业务的发展，你就会得出结论，这些业务对我们的价值远远高于它们当时在资产负债表上的价值。它们是一个拥有巨大潜力的业务的一部分。
And that’s been, probably, the most significant asset that’s been developed at Berkshire. But right now, we have over seven — right at 7 billion — over 7 billion — of float that’s been developed from our insurance business.
这可能是伯克希尔迄今开发出的最重要资产。但现在，我们从保险业务中获得了超过70亿美元的浮存金。
We couldn’t foresee that 25 or 30 years ago. But it would’ve been a big mistake to think in terms of the book value of that business being representative of its actual value to us over time, if it was run right.
25或30年前我们无法预见这一点。但如果当时认为该业务的账面价值能够代表其长期对我们的实际价值，那将是一个巨大的错误，前提是经营得当。
And that situation probably prevails today.
这种情况可能在今天依然成立。
So, it’s a — Berkshire is a group of, on balance, very fine businesses to which we hope to add.
所以，总的来说，伯克希尔是一组非常优秀的业务，我们希望在此基础上增加更多。
The intrinsic value will be affected by the job we do in allocating capital. It’ll be affected by the job our managers do in running their businesses. It’ll be affected by some items that we don’t foresee now and, perhaps, have no control over.
内在价值将受到我们资本分配工作的影响。也将受到我们的管理者经营业务能力的影响。还会受到我们目前无法预见、甚至可能无法控制的一些因素的影响。
But it is not measured, essentially, by what we could sell each separate business for and pay the tax on now. We haven’t run it that way. We’ve run it so that we get the use of a lot of capital at very low cost.
但其价值并不是由我们现在可以将各个独立业务出售并缴纳税款的价格来衡量的。我们并不是以这种方式运营的。我们的运营方式使我们能够以非常低的成本使用大量资本。
Between deferred taxes and our insurance float, we have some 12 billion or so on the liability side that we think will be a very low cost. And that’s — doesn’t show as an asset, but it can be quite valuable.
在递延税款和保险浮存金之间，我们在负债方拥有大约120亿美元的资金，这些资金的成本非常低。这并不作为资产体现，但它可能是非常有价值的。
Charlie, you want to —?
查理，你想补充些什么吗？
CHARLIE MUNGER: No. I don’t think I’ve got anything to add to that.
查理·芒格： 不，我认为我没有什么可补充的。
WARREN BUFFETT: Oh. I was all set to write it down, too. (Laughter)
沃伦·巴菲特： 哦。我刚才还准备记下来呢。（笑声）
26. Buybacks at what appear to be high stock prices
以看似高的股票价格进行回购
WARREN BUFFETT: Zone 2, please.
沃伦·巴菲特：请二号区域提问。
AUDIENCE MEMBER: Mr. Buffett, Mr. Munger, I’m Tim Medley from Jackson, Mississippi.
观众：巴菲特先生，芒格先生，我是来自密西西比州杰克逊的提姆·梅德利。
My question is an allocation of capital one. You’ve indicated that one thing you like in companies is a willingness on the part of management to repurchase its own shares.
我的问题是关于资本分配的。您曾表示，您喜欢公司管理层愿意回购公司股票这一点。
I wonder if you would talk for a minute about your own frame of reference on repurchases when it appears that the current price of the stock is rich in relation to its intrinsic value.
我想问问，当股票当前价格似乎高于其内在价值时，您对回购的看法是什么？
And some have said that, with the right company, ongoing repurchases of stock should be made, irrespective of the price.
有些人认为，对于合适的公司，应该不管价格如何继续回购股票。
So, would you speak for a moment, as to how you think it pencils out when the current price of the stock is rich in relation to its intrinsic value?
那么，您能否谈谈，当股票当前价格高于内在价值时，您认为这样的行为如何计算其合理性？
WARREN BUFFETT: Yeah. If you’re repurchasing shares above a rationally calculated intrinsic value, you are harming your shareholders, just as if you issue shares beneath that figure, you are harming your shareholders.
沃伦·巴菲特：是的，如果你以高于合理计算的内在价值的价格回购股票，你是在伤害你的股东。就像如果你以低于这个数值发行股票，你同样是在伤害股东。
That’s a truism. Now, the tough part of that, of course, is coming up with the intrinsic value.
这是一个显而易见的道理。当然，困难之处在于如何得出内在价值。
And, for example — a good example might be Coca-Cola.
例如，可口可乐就是一个很好的例子。
I think a number of people might have thought Coca-Cola was repurchasing shares at a very high price, because they’ll look at book value or P/E ratios. But there’s a lot more to intrinsic value than book value and P/E ratios. And anytime anybody gives you some simplified formula for figuring it out, forget it.
我认为很多人可能会认为可口可乐以非常高的价格回购股票，因为他们只看账面价值或市盈率。但内在价值远远不止这些。任何时候，如果有人向你提供一个简单的公式来计算内在价值，忘了它吧。
You have to understand the business. The people who understood that business well, the management, have understood and been very forthright about saying so over the years, that by repurchasing their shares, they are adding to the value per share for remaining shareholders.
你必须了解这项业务。真正了解这项业务的人，比如管理层，多年来一直直言，通过回购股票，他们为剩余股东增加了每股价值。
And like I say, people who didn’t understand Coca-Cola, or who thought mechanistic methods of valuation could — should take precedence, really misjudged the value to the Coca-Cola Company of those repurchases.
正如我所说，不了解可口可乐的人，或者认为机械化的估值方法优先的人，确实误判了这些回购行为对可口可乐公司的价值。
So we favor — when you have a wonderful business — we favor using funds that are generated out of that business to make the business even more wonderful. And we favor repurchasing shares if those shares are below intrinsic value.
我们更倾向于，当你拥有一家优秀的企业时，利用该企业自身产生的资金使其变得更加优秀。我们也支持在股票价格低于内在价值时回购股票。
And I would say that if it’s a really wonderful business, we probably come up with higher intrinsic values than most people do.
我想说，如果这是一个真正出色的企业，我们可能会得出比大多数人更高的内在价值评估。
We have great respect, Charlie and I with — I think it’s developed over the years — we have enormous respect for the power of a really outstanding business. And we recognize how scarce they are. And if a management wishes to further intensify our ownership by repurchasing shares, we applaud.
查理和我对卓越企业的力量有着深刻的敬意，我认为这是多年来形成的。我们也认识到这样的企业是多么稀缺。如果管理层希望通过回购股票进一步加强我们的持股比例，我们会表示赞赏。
We own — we just went over 8 percent of the Coca-Cola Company, probably, in the last three or so months, by a very tiny fraction. But we had a second purchase one time.
我们拥有可口可乐公司超过8%的股份，这可能是在过去三个月左右通过很小的比例增长实现的。但我们有一次是直接进行了额外购买。
But our percentage interest in the Coca-Cola Company has gone up significantly through their repurchases. And we are better off because they have bought those shares at what looked like, to some people, perhaps, high prices. And we thought they were wrong at the time, and I think now it’s been indicated or proven.
不过，通过他们的回购，我们在可口可乐公司的持股比例大幅增加。因为他们以一些人认为的高价回购股票，我们的情况反而变得更好。当时我们认为这些看法是错误的，现在看来也得到了证明。
So, I urge you, if you’re trying to decide on the wisdom of repurchases, or of share issuances, that you don’t think in terms of book value. You don’t think in terms of specific P/Es. You don’t think in terms of any little model.
所以，我建议你在判断回购或股票发行的明智性时，不要考虑账面价值、特定市盈率或任何简单的模型。
But you think in terms of what would you really, A, pick businesses you can understand and, then, think what you really would pay to be in those businesses. And that’s what counts over time, is whether the repurchases are made at a discount from that figure.
而是要思考，首先选择你能理解的企业，然后想想你愿意为参与这些企业支付的真正价格。这才是长期来看真正重要的事情，即回购是否以低于这个数值的价格进行。
And I would say with the companies that we own shares in, we — our interest in GEICO went from 33 or so percent to 50 percent over a 15-year or so period, simply through repurchases. And we benefitted significantly.
以我们持有股份的公司为例，我们在GEICO的持股比例从约33%增长到50%，这大约是在15年的时间里通过回购实现的。我们因此受益匪浅。
So, did every other shareholder, I might add, that stayed with the company. And we benefited in no way disproportionate to them.
我还想补充一点，其他一直持有公司股票的股东也同样受益。而我们获得的好处并没有超过他们的比例。
But that was a very wise action on their part. And there too, they were all — usually buying that stock at at least double book value. And you could compare it to other insurance stocks and say, “Well, that’s too much to pay.”
但这是他们非常明智的举措。而且，在那些时候，他们通常以至少是账面价值两倍的价格回购股票。你可以将其与其他保险股票相比，并说“这价格太高了。”
But GEICO wasn’t an insurance company that was comparable to other insurance companies. It was a very different sort of business. And they were very wise, in my view, to be following that course of action.
但GEICO并不是一个可以与其他保险公司相比的保险公司。它是一种非常不同的业务模式。在我看来，他们遵循这样的做法是非常明智的。
Charlie? No?
查理？没有意见吗？
27. B shares won’t dilute value of A shares
B股不会稀释A股的价值
WARREN BUFFETT: Zone 3?
沃伦·巴菲特： 三号区域？
VOICE: That’s you.
观众： 是你。
AUDIENCE MEMBER: Oh, sorry. I’m Elaine Cohen (PH) from San Diego.
观众： 哦，对不起。我是来自圣地亚哥的伊莱恩·科恩。
I’m a little confused about how the B shares are going to be moving if they’re at 1/30th of the A shares when they get out on the market.
我对B类股在市场上以A类股1/30的比例交易的情况有点困惑。
Are they always going to be 1/30th of the A shares? And if they are, is that going to dilute the earnings of the A shares? Could you just explain that?
它们是否总是保持在A类股的1/30？如果是这样，这会不会稀释A类股的收益？您能解释一下吗？
WARREN BUFFETT: Yeah. It won’t dilute the earnings or value of the A shares as long as we use the money reasonably effectively that is produced.
沃伦·巴菲特： 不会稀释A类股的收益或价值，只要我们合理有效地使用产生的资金。
As I mentioned earlier, if it happens to be 1 percent, you’ll own 1 percent less of all these other things — on the other hand, will have close to $400 million more of cash. So, it will not — in our view, it will not dilute the value of the A.
正如我之前提到的，如果它是1%，你将少拥有这些其他资产的1%，但另一方面，我们会多出接近4亿美元的现金。因此，在我们看来，这不会稀释A类股的价值。
I expect, over time, that the B, a very large percentage of the time, will be selling very close to a 30th. But it could sell for less than that ratio. It can’t sell for any significant amount more than that ratio, or arbitrage will eat away at any slight premium. I think that takes care of that.
我预计，随着时间的推移，B类股在绝大多数情况下的交易价格会非常接近1/30。但它的交易价格可能会低于这一比例。它不可能以明显高于这一比例的价格交易，否则套利活动会消除任何轻微的溢价。我想这就解决了这个问题了。
28. No “secret formulas” for Wells Fargo
没有“秘密公式”适用于富国银行
WARREN BUFFETT: Zone 4.
沃伦·巴菲特：第4区。
AUDIENCE MEMBER: Mr. Buffett, my name is Hugh Stephenson. I’m a shareholder from Atlanta, Georgia.
观众提问：巴菲特先生，我叫休·史蒂文森。我是来自乔治亚州亚特兰大的股东。
My question involves the company’s interest in Wells Fargo. As you know, Wells Fargo, like most banks, has a very expensive branch system for deposit-gathering and servicing their customers.
我的问题涉及公司对富国银行的兴趣。如您所知，富国银行与大多数银行一样，其网点系统用于吸收存款和服务客户的成本非常高。
As I guess you know, they also have moved more into branches in supermarkets and in online banking that seems to have the potential to very significantly reduce their costs, relative to the branch system.
我想您也知道，他们还在超市设立更多网点，并拓展在线银行业务，这似乎相较传统网点系统具有显著降低成本的潜力。
Would you comment on how you think that might play out and how significant it might be?
您能否评论一下您认为这将如何发展，以及它可能带来的重要性？
WARREN BUFFETT: Well, the question — you’re right. Wells Fargo has been a leader in moving into supermarkets. They’ve got a couple different formats they’ve used. And they’ve been a — they’ve certainly been a leader in the online banking services.
沃伦·巴菲特：嗯，这个问题——您说得对。富国银行在进入超市这一领域一直是领先者。他们采用了几种不同的形式。在在线银行服务方面，他们无疑也是一个领导者。
Unfortunately, in banking, you know, it’s a little hard to have any secret formulas. Coca-Cola has 7X down there in the vaults of the, what used to be the Trust Company of Georgia, now SunTrust. But in the banking business, anything you do, your competitors can copy.
但遗憾的是，在银行业，很难有什么“秘密公式”。可口可乐的“7X”配方藏在以前的乔治亚信托公司，现在的阳光信托银行的金库里。而在银行业，无论你做什么，竞争对手都可以模仿。
Nevertheless, there’s a — there is an advantage. And sometimes it can be a quite — a significant advantage in being first and learning more about different distribution methods. And I think Wells Fargo has done a terrific job in learning that.
不过，这确实存在优势。有时候，率先行动并了解不同分销方式可能带来相当显著的优势。我认为富国银行在这一点上做得非常出色。
I think they’ve got some advantages. They — but they aren’t advantages that other people can’t work at copying and chipping away at.
我认为他们确实有一些优势。但这些优势并非其他人无法通过模仿和逐步侵蚀来追赶的。
But it’s a good management. They’ve done a very good job of seizing on that particular trend in supermarkets.
不过，他们的管理很出色。他们很好地抓住了超市这一特定趋势。
And as such, they are — they have the potential, perhaps, for having a relatively low-cost deposit-gathering operation. And every other bank in the world will be looking, noticing how that works, not only there but at other banks, to figure out whether they can copy it.
因此，他们可能有潜力建立起相对低成本的存款吸收体系。而全球的其他银行都会关注并研究这种模式的运作方式，不仅仅在富国银行，也包括其他银行，看能否进行模仿。
Charlie? OK.
查理？好的。
29. GEICO benefits from being entirely owned by Berkshire
GEICO 完全归伯克希尔所有带来的益处
WARREN BUFFETT: Zone 5.
沃伦·巴菲特：第5区。
AUDIENCE MEMBER: My name’s Alan Parsow from Omaha.
观众提问：我叫艾伦·帕尔索，来自奥马哈。
Berkshire has increased the rate of growth in its insurance float in excess of 20 percent a year since 1967.
自1967年以来，伯克希尔的保险浮存金增长率每年都超过20%。
In regards to GEICO, its rate of growth, what is its historic rate of growth been in its insurance float? And what impact will it have on the rate of growth in the overall Berkshire insurance float?
关于GEICO，它的增长率如何？其保险浮存金的历史增长率是多少？对伯克希尔整体保险浮存金增长率会产生什么影响？
WARREN BUFFETT: Well, I would say that GEICO is a huge plus to Berkshire. Now, we owned 50 percent of it before. I mean, we’ve had a — we’ve benefitted from our GEICO investment in a big way, ever since 1976. So, it’s not entirely a new benefit that’s coming in.
沃伦·巴菲特：嗯，我想说GEICO对伯克希尔来说是一个巨大的优势。我们以前持有它50%的股份。自1976年以来，我们就已经从GEICO的投资中获益颇丰。所以，这并不完全是一个全新的收益来源。
We paid a good price for GEICO, but it is a terrific company. It has outstanding management. It has a low-cost method of distribution, which is very difficult for people to — I mean, everybody wants to have that. But they — very few come close to it.
我们为GEICO支付了一个合理的价格，但它是一家非常出色的公司。它拥有卓越的管理团队，并采用了一种低成本的分销方式，这种方式是大家都希望拥有但很少有人能够接近的。
The management is focused on bringing costs down even further and widening that competitive moat.
管理层专注于进一步降低成本并扩大其竞争护城河。
GEICO — I personally think that, just from what I see, that GEICO — I would think GEICO’s growth rate is likely to be greater, at least, in the future, that I can see, over where it has been in the past. But it’s been perfectly satisfactory in the past.
GEICO——就我个人观察来看，我认为GEICO的增长率至少在我能预见的未来会比过去更高。不过，它过去的表现已经非常令人满意了。
I think there are some advantages to it being part of Berkshire, in that there are costs attached to bringing new business on the books. And we care not at all about reported quarterly earnings.
我认为成为伯克希尔的一部分有一些优势，因为新增业务会带来一定的成本。而我们对季度财报的盈利并不在意。
GEICO was relatively insensitive to those before. And that’s a compliment when I say that. But they had some more pressure on them in respect to reported earnings than they will have, as part of Berkshire.
过去，GEICO对此相对不敏感。而我说这是一个赞美。不过，相较于现在成为伯克希尔的一部分，过去他们在盈利报告方面承受的压力稍大一些。
And I think there’s some really big opportunities, in terms of what can be done with GEICO as part of Berkshire.
我认为，GEICO作为伯克希尔的一部分，可以实现一些非常重大的机会。
So, I think five years from now, you’ll be very happy with the fact that we own a hundred percent of GEICO.
因此，我相信五年后，你会对我们完全拥有GEICO这一事实感到非常满意。
And I think you will see that as marvelous a company as GEICO was independently — as an independent company — it will flourish maybe even a bit more as being part of Berkshire.
而且，我认为你会看到，尽管GEICO作为一家独立公司已经非常出色，成为伯克希尔的一部分后，它可能会发展得更好一些。
Not because we bring anything to the party. I mean, the management will continue to run it autonomously. But there’s — there are some advantages for it in being part of a larger enterprise.
这并不是因为我们为它带来了什么。我是说，管理层会继续独立运作。但作为一个更大企业的一部分，它确实有一些优势。
30. Berkshire businesses worth more than book value
伯克希尔的业务价值超过账面价值
WARREN BUFFETT: Zone 6.
沃伦·巴菲特：第6区。
AUDIENCE MEMBER: Mr. Buffett, my name is Steven Tuchner. I’m a shareholder from Toronto, Canada. And my question concerns the valuation of Berkshire shares.
观众提问：巴菲特先生，我叫史蒂文·塔克纳，是来自加拿大多伦多的股东。我的问题涉及伯克希尔股票的估值。
Given the large number and dollar size of the private businesses recorded at historic cost, which Berkshire owns, shouldn’t the multiple to book that the stock trades at, essentially, expand over time to reflect the increases in intrinsic value of the private holdings?
考虑到伯克希尔所拥有的大量私营企业是按历史成本记录的，其价值规模庞大，伯克希尔股票的市净率是否应该随着时间的推移扩大，以反映这些私营企业内在价值的增长？
And I cite Buffalo News on the books at, essentially, I think around zero. And even GEICO now will be on the books at, probably, between 3 and 4 billion — worth more than that — as examples of the disparity between intrinsic value and book value?
我以《布法罗新闻》为例，其账面价值基本为零。即便是GEICO，现在的账面价值可能在30到40亿美元之间，但它的实际价值高于此。这是否说明了内在价值与账面价值之间的差异？
WARREN BUFFETT: Most of the businesses that we own all of, or at least 80 percent of, are carried on the books at considerably less than they’re now worth.
沃伦·巴菲特：我们所完全拥有或至少持有80%股份的大多数业务，其账面价值远低于它们当前的实际价值。
And with some of them, it’s dramatic, although it’s not dramatic compared to a $40 billion total market valuation for Berkshire. It’s dramatic relative to the carrying price.
其中一些业务的价值差异非常显著，尽管与伯克希尔400亿美元的总市值相比，这种差异并不算特别惊人。但相较于账面价值，这种差异是显著的。
Because when we bought See’s Candy for an effective $25 million in 1972, it was earning 4 million, pretax. It earned over 50 million, pretax, last year.
比如，当我们在1972年以2500万美元的实际价格收购See’s Candy时，它的税前利润是400万美元。而去年，它的税前利润超过了5000万美元。
When we bought the Buffalo News, it was making nothing. Paid 30 and a fraction million. And it’s now earning, maybe, 45 million.
我们收购《布法罗新闻》时，它没有任何利润。我们支付了3000多万美元。而现在，它的年利润可能达到4500万美元。
And we’ve got a number of businesses. And GEICO’s worth more than we carry it for because of the accounting peculiarities of the first 50 percent.
我们还有许多这样的业务。由于前50%股份的会计处理特殊性，GEICO的实际价值也高于我们在账面上记录的价值。
So, it is true that, overwhelmingly, our businesses are worth something more than intrinsic value — than book value — and, in many cases, very substantially more, although that’s reflected in the market price of our stock.
因此，确实，我们的业务整体价值远高于其内在价值或账面价值，而且在许多情况下，这种差异非常显著。尽管这些差异已经在我们的股票市场价格中得到了反映。
I don’t think you can go from year to year and trace the intrinsic value precisely by changes in book value. We use changes in book value as a very rough guide as to movement, and sometimes I comment.
我认为你无法通过逐年变化的账面价值来精确追踪内在价值。我们将账面价值的变化作为一种非常粗略的指引来观察趋势，有时我会对此发表一些评论。
There have been certain annual reports where I’ve said our intrinsic values grew more than the proportional change in book value, and there’s been others where I’ve said I thought it was roughly the same.
在一些年度报告中，我曾表示我们的内在价值增长超过了账面价值的比例变化，而在其他时候，我也曾说过两者大致相同。
So, I don’t think you can use it as a — stick some multiplier on it and come up with a precise guide — a precise number. But I do think it’s a guide to movement.
因此，我认为你不能给账面价值加上某种倍数，试图得出一个精确的指引或精确的数值。但我确实认为它是观察趋势的一种指引。
Our insurance business, though, is the most dramatic case of dollar difference between book value and intrinsic value. I mean, the number has gotten very big over time there. I personally think it will tend to get bigger, because I think GEICO will grow, and I think our other businesses will do well.
不过，我们的保险业务是账面价值与内在价值之间美元差异最显著的例子。我的意思是，随着时间推移，这个差距已经变得非常大。我个人认为这种差距还会进一步扩大，因为我认为GEICO会增长，同时我们的其他业务也会表现良好。
The trick, of course, is to take the new capital as it comes along — and not from the issuance of the B, because that’s relatively small compared to the amount of capital we will just generate from operations.
当然，关键在于如何运用新增的资本——而不是通过B股的发行，因为与我们通过运营产生的资本相比，发行B股带来的资本相对较少。
Our float will grow from year to year. Our earnings will be retained. And we’ve got to go out and find things to do that three or five years from now that people say, “Well, that’s worth more than the book value.” And that’s a job. It’s a tougher job than it was. But it’s kind of fun.
我们的浮存金会逐年增长。我们的利润将被保留。而我们必须找到能够让人们在三到五年后说“这比账面价值更有价值”的事情。这是一项任务，也比过去更难了。但这也挺有趣的。
31. Not expecting B shares to affect price of A shares
不指望B股会影响A股价格
WARREN BUFFETT: Zone 7?
沃伦·巴菲特：第7区？
AUDIENCE MEMBER: Yes. My name is Jim Elliot (PH). I’m from Minneapolis.
观众提问：是的，我叫吉姆·艾略特（音），来自明尼阿波利斯。
I wonder if you could help me with an upside scenario where the B shares, after they’re issued, are limited and there’s not a significant reissue afterwards. The A shareholders are somewhat reluctant to convert. And you have a run on the B shares where, let’s say, it goes to $2,000 a share.
我想请您帮助想象一种情况：B股发行后总量有限，并且不会有大规模的后续发行。而A股的股东又不太愿意转换。假设B股大受追捧，价格涨到每股2000美元。
Do we then have the tail wagging the dog, where the 2,000 command a $60,000 price on the A shares? And, you know, what — does the — this arbitrage take care of that? Or —
那时是否会出现“尾巴摇狗”的情况？也就是说，B股2000美元的价格会不会推高A股到6万美元？那么，这个套利是否会解决这个问题？还是——
WARREN BUFFETT: Well —
沃伦·巴菲特：嗯——
AUDIENCE MEMBER: — what do we do in that case?
观众提问：——在那种情况下我们该怎么办？
WARREN BUFFETT: If there is demand for the B that pushes the price up somewhat, it will produce conversion from the A. I mean, the only way the B will be able to get — we’ll just pick a figure — if it were to get to $1,200 — there is no way that the A could be selling appreciably below 36,000.
沃伦·巴菲特：如果对B股的需求将价格推高，那么肯定会有A股转换成B股。我的意思是，假设B股涨到1200美元，那A股就绝不可能显著低于3.6万美元。
And I don’t think — I think that introducing the B into the equation, may mean — it will mean — that there will be some people who like a lower denomination stock and come in.
我也不认为——我的看法是，引入B股可能意味着，确实会有一些喜欢低面值股票的人进场。
But it takes a lot of that to, in an appreciable way, affect $40 billion worth of what is now A stock.
但想要对目前价值400亿美元的A股产生明显影响，需要相当大的资金量。
So, you know, if there were incremental demand of a hundred million dollars a year or something like that, that’s a little more than the demand that might otherwise go into the A. But I do not see it producing anything in the way of a big movement.
也就是说，如果每年多出1亿美元之类的需求，可能会比原本流向A股的需求稍多一些。但我不认为这会导致A股出现什么大幅波动。
But you’re quite correct in that there’s no way that the B stock can go up and not really force some conversion from the A. It’ll — I think it’ll be minor.
不过，你说得对，B股涨上去肯定会逼出一部分A股的转换。我认为规模会比较小。
32. World Book Encyclopedia business won’t be sold
《世界图书百科全书》业务不会被出售
WARREN BUFFETT: Zone 8?
沃伦·巴菲特：第8区？
AUDIENCE MEMBER: Hello. This is Rick Merliof (PH) from Oakland, California.
观众提问：你好，我叫里克·默里奥夫（音），来自加利福尼亚州的奥克兰。
I wanted to ask you about World Book Encyclopedia. World Book seems to me to be an example where Berkshire has invested in technology without necessarily intending to.
我想问一下关于《世界图书百科全书》的问题。在我看来，世运百科是一个伯克希尔不知不觉中投资于科技的例子。
I would expect that in five or 10 years it’s going to be real tough to sell a paper encyclopedia, because at that time, you’ll probably be able to buy the computer and the electronic encyclopedia for less than the paper encyclopedia.
我想，再过五到十年，要卖一本纸质百科全书恐怕会非常困难，因为到那时，电脑加电子版百科全书的价格可能都比纸质百科全书还要便宜。
Up till now, I haven’t had the impression that World Book has been as aggressive as its competitors in marketing and developing its electronic product.
到目前为止，我并没有感觉到世运百科在营销和研发电子产品方面像它的竞争对手那样积极。
It’s been the highest price that I have seen of the competition. It’s — it asked at least — a year ago, its list price was 600 and the competition was 8,200.
这是我见过的所有竞争对手里价格最高的。一年前，它的标价至少是600美元，而竞争对手的价格是8200美元。
You sold as low as a hundred on special promotions. But it — I don’t think that was the list.
你们在一些特别促销时曾把价钱降到过100美元左右。但我认为那不是它的定价。
A year ago, you were still selling by direct sales. I have not yet seen it in a mass market software store. I’ve never seen it bundled with a computer.
一年前，你们还在通过直销方式卖。我还没在大众软件商店里见过它。我也没见过它和电脑捆绑销售过。
And I have seen one newspaper review of electronic encyclopedias that mention the World Book print version but didn’t seem to be aware that a World Book electronic version was available, which it was at that time.
我在一篇报纸上看到过对电子百科全书的评论，提到了世界百科的纸质版，却似乎不知道它还有电子版——当时明明就已经有了。
In terms of the product itself, we have both the World Book and the Grolier’s at our house. The Grolier’s came with the computer. And both encyclopedias, in this last year, solicited us to buy an upgrade. World Book was asking $85. Grolier’s was asking 30.
就产品本身而言，我们家里既有世界百科，也有格罗利尔百科。格罗利尔是随电脑附带的。过去一年里，这两家百科全书都邀请我们购买升级版。世界百科要价85美元，格罗利尔要价30美元。
But in addition, I ended up buying only the Grolier’s, because it addressed my biggest disappointment on the original version of both of them, which — it’s sort of a — in a way, a minor issue. But I thought it was relevant for kids doing school reports.
不过，最终我只买了格罗利尔，因为它解决了我对这两家百科最初版本的最大失望之处——从某种角度看，这算个小问题，但对于孩子做学校报告却很重要。
Neither one allows you to print out a very big percentage of the pictures in the encyclopedia. They have a lot of pictures. But you can’t print them. And you can get a color inkjet printer for under 200 bucks these days, so it’s real practical to print things out.
这两个百科都不允许你打印出其中很大一部分图片。它们有很多图片，但就是不能打印。而现在几乎只要不到200美元就能买到一台彩色喷墨打印机，所以打印图片实际上很方便。
The World Book made no mention of having any improvement in this area. The Grolier’s said you can print out almost all the pictures. And I have found — since we got the upgrade — I found that to be true.
世界百科没有提到在这方面做任何改进。格罗利尔则说几乎所有的图片都能打印。自从我升级以后，我发现确实如此。
So, I’m concerned that — I’m not an expert on this, but I don’t think World Book is as aggressive in either developing or marketing its electronic encyclopedia.
所以，我有点担心。我并不是这方面的专家，但我觉得世界百科在研发或营销它的电子百科方面都不够积极。
So, my question is, do you plan to become aggressive in this area and a leader in the electronic technology? Or have you considered selling your electronic business and just getting out of it?
我的问题是，你们是否打算在这一领域更加积极，成为电子技术方面的引领者？或者说，你们有没有考虑过把自己的电子业务卖掉，干脆退出这个领域呢？
WARREN BUFFETT: Yeah. We won’t sell the electronic business. That, I can tell you. You’re quite correct. Some of the technical stuff I’m not very good at. I have a little trouble turning on the light switch.
沃伦·巴菲特：是的。我们不会卖掉电子业务。这点我可以肯定地告诉你。你说得很对，我对某些技术性的问题并不精通。我甚至有时候连开灯都觉得有点麻烦。
But the — (laughter) — in terms of the bundled product, which is the encyclopedia that is offered with the purchase of a new computer, there’s no question that that’s become a large business in units. It’s not so large in terms of dollars, because those units, bundled with an original equipment sale, are very low. Actually, Encarta’s probably — well I’m sure has sold, you know, many, many millions of units bundled with a new encyclopedia. It doesn’t necessarily produce a lot of dollars. But it produces a lot of units out there.
但是——（笑声）——就捆绑销售而言，也就是随新电脑一起提供的那种百科全书，在销量（台数）方面毫无疑问已经成为一个大生意。但从金额上看就不算大了，因为那些随原装设备销售的版本价格非常低。实际上，Encarta 可能——我可以肯定地说——已经以捆绑新百科全书的形式卖出了数以百万计的份额。但这并不一定产生可观的收入，不过它确实在市场上投放了大量份额。
We, at World Book — Encyclopedia — some of you may not have noticed, but Encyclopedia Britannica has, within the last couple of weeks, announced the cessation of direct distribution of the print product. And unit sales of encyclopedias — print encyclopedias — in the country have gone down very significantly in the last few years, as they have at World Book.
我们在世界百科这边——有些人也许没注意到，然而不久前不列颠百科全书（Encyclopedia Britannica）刚刚宣布停止通过直销方式销售纸质版本。过去几年里，美国市场上纸质百科全书的销量——包括世界百科在内——都大幅下滑。
We changed the — we are in the process of changing, and have already changed in some parts of the country — the distribution system because we are going to see what can be made to work, if anything, in the direct distribution. There are some indications that we may be able to make money in that business but with a different cost structure than before. And it — well, we’ll know more about that. We’re not that far along, because we changed the distribution within the last — or partially changed it — within the last few months.
我们已经改变了——或者说正在改变——在美国部分地区的分销体系，因为我们想看看在直销方面，是否还有机会找到能运转下去的模式。有一些迹象表明，我们也许能在这块业务上盈利，只是需要采用不同于以往的成本结构。至于具体情况如何，我们还得再看看。我们目前进展并不算太远，因为这些改变都是在过去几个月里才开始——或部分开始——实行的。
We — it’s not easy to figure out how to make money in either the electronic or print encyclopedia end of the business. And we have some ideas in the electronic end that we’ll know a lot more about in about six months or so, but I can’t really — I don’t want to go into any detail on those at present.
无论在电子版还是纸质版的百科业务上，想要盈利都不容易。对于电子版这边，我们有一些想法，大约再过六个月左右就能有更多结论。但现在我还不想，也不方便详谈这些。
I’ve got the electronic product myself. It’s a first-class product. We’ve got ideas about how to make it an even better product. And we have taken a lot of costs out of the print end of the business. We’ll be putting some of those into the electronic end. But we’ve taken a lot of costs out.
我自己也有电子版的产品。我认为这是一个很优秀的产品。我们也有一些改进它的思路。我们已经在纸质业务方面削减了不少成本，其中一部分要投入到电子产品这边。但总之，我们减掉了很多成本。
It may well be that it’ll be a workable business for us, even though it isn’t for anybody else, but the jury’s still out on that.
或许这对我们来说仍然能成为一个可行的生意，尽管对其他人来说未必如此。但这方面还需要继续观察。
It is not the business it was five years ago. And I don’t think it will be the business that it was five years ago, because the world is changed in some ways on that.
现在的情况和五年前已经大不相同了。我也不认为它能回到五年前的状态，因为世界已经在某些方面发生了变化。
But we’re — we will not sell World Book. That I can just — I’ll state that unequivocally. We will not sell electronic World Book. We are in the business to stay. But we are groping a bit in terms of figuring out a configuration that will produce decent profits for us and sell a lot of World Books in the process.
但是——我们不会卖掉世界百科。这点我可以非常明确地告诉你。我们也不会卖掉世界百科的电子业务。我们会一直做下去。只不过，在如何找到合适的模式，既能为我们带来合理的利润，又能让世界百科卖得多这方面，我们还在摸索。
Charlie?
查理？
CHARLIE MUNGER: We don’t have any way of avoiding declines in some of our businesses some of the time.
查理·芒格：我们无法避免有些业务在某些时候出现下滑。
Blue Chip Stamps once sold stamps at the rate of $120 million a year. Now, it’s about $200,000 a year. So, we lose some. (Laughter)
蓝筹邮票公司曾经每年能卖出价值1.2亿美元的邮票。现在，每年只有大约20万美元。所以，我们也会有损失（笑声）。
WARREN BUFFETT: We were in the windmill business many years ago. (Laughter)
沃伦·巴菲特：我们很多年前还干过风车生意（笑声）。
We try to make — you know, we think plenty about the problems. But there are industry problems.
我们一直在努力——你也知道，我们非常重视这些问题。但行业本身确实存在一些问题。
I was in anthracite coal at one time, too. Street railways. I’ve seen them all.
我以前也做过无烟煤生意。还有有轨电车。我都见过。
But World Book is a first-class product. It’s a product I use, a product Charlie uses. And there is — through an electronic means, you can deliver information at costs far, far less than — I mean, unbelievably less — than was the case not that many years ago.
不过，《世界图书百科全书》是一款一流的产品。我自己用，查理也用。而且通过电子方式，你能以远远低于——我的意思是低得令人难以置信——几年前的成本来传递信息。
And the world, in many forms, will be adjusting to that, not just in encyclopedias. And it affects some of the businesses we’re in. And it’s something we think about. But it’s very unlikely that Charlie and I are going to be smarter than the rest of the world, in terms of the electronic world.
世界将从许多方面适应这一变化，不仅仅是百科全书领域。它也会影响到我们所从事的部分业务，这的确是我们会去思考的问题。不过，在电子领域，查理和我不太可能比全世界其他人都更聪明。
I mean, we are looking at it as something where we’re looking for the obvious, and something that is within our capability of doing something about. But we’re not trying to beat people at their own game, where we’re not very good at the game.
我的意思是，我们更关注那些显而易见、并且在我们能力范围之内可以去做的事。但我们不会尝试在别人擅长的领域与之较量，因为我们并不擅长那个游戏。
33. Protecting public shows “tremendous integrity”
保护公众体现了“极高的正直”
WARREN BUFFETT: Zone 1?
沃伦·巴菲特：第1区？
AUDIENCE MEMBER: Mr. Buffett, Richard Charlton from Canada. One of the highlights of — good afternoon, Mr. Munger, also. (Laughter)
观众提问：巴菲特先生，我是来自加拿大的理查德·查尔顿。今天下午好，芒格先生。（笑声）
One of the highlights, for me, in coming to the annual meeting for the past seven or eight years was the way that you dealt with the question that was inevitably asked by a new shareholder as to why you will not split your shares.
在过去七、八年中，我每次来参加年度股东大会时，最让我印象深刻的事情之一，就是您如何应对新股东们必然会问到的一个问题：为什么您一直不拆股？
I know how much it has meant to you to keep the shares trading in an exclusive way. And you have been my mentor for the last 17 years.
我知道，让股票保持这种独特的交易方式对您来说意义重大。这17年来，您一直是我的导师。
And I think that what you’re doing in splitting these shares in order to protect the public, and indirectly, Berkshire shareholders, but mostly to protect the public, is just another expression of your and Mr. Munger’s tremendous integrity.
我认为，这次您决定通过分股来保护公众，当然也间接保护了伯克希尔的股东，但主要还是为了保护公众。这正是您和芒格先生“极高正直品格”的又一次体现。
And you’re setting a fantastic example for corporate America. And I salute you, sir. And I thank you very much. (Applause)
您为美国企业树立了一个绝佳的榜样。我向您致敬。非常感谢您。（掌声）
WARREN BUFFETT: Thank you. Thank you.
沃伦·巴菲特：谢谢。谢谢。
34. “The fairer, the better” for Berkshire’s stock price
对于伯克希尔的股价而言，“越公平越好”
WARREN BUFFETT: Well, I hate to leave Zone 1 after that, but we’ll go on to Zone 2. (Laughter) Thank you.
沃伦·巴菲特：嗯，刚刚那位发言后，我真有些舍不得离开第1区，但还是让我们继续前往第2区吧（笑声）。谢谢。
AUDIENCE MEMBER: Wesley Jack from Oklahoma City, Oklahoma.
观众提问：我是韦斯利·杰克，来自俄克拉荷马州的俄克拉荷马城。
As a stock broker, I can say I definitely don’t like UITs and I appreciate your plan for the B shares. But as long — with the rest of the shareholders, what we hope — that the shares go up in value in the future. Don’t you see a problem with them coming back with this idea in the future?
作为一名证券经纪人，我可以说我真的不喜欢单位投资信托（UIT），所以我很赞赏你们关于B股的计划。可是和其他股东一样，我们当然希望股票未来能升值。您是否认为那些提出卖UIT想法的人以后还会卷土重来呢？
WARREN BUFFETT: On the unit — you mean on the issuance of unit trusts?
沃伦·巴菲特：你指的是单位信托——也就是发行类似 UIT 的东西吗？
AUDIENCE MEMBER: Yes.
观众提问：对。
WARREN BUFFETT: Oh, I don’t see any problem because the B will be out there. And it is a superior product, whatever its absolute merits may be. On a relative basis, it is a superior product to anything that is going to carry a big commission to a salesperson and a lot of annual costs.
沃伦·巴菲特：哦，我认为不会再有问题了，因为B股已经上市了——不管从绝对角度怎样，就相对而言，它一定优于任何需要向推销员支付高额佣金并附带高年费的衍生产品。
So, I think — my guess is we’ve taken care of that problem. I wish it hadn’t come up, but it — I would think that it would be very difficult for anyone to honestly offer a product — a derivative-type product — through a unit trust that would be superior to buying the product that will be available.
所以，我想我们已经把那个问题解决了。说实话，我真希望一开始就没碰到这个事。但我想，要是有人还想通过发行某种衍生品或单位信托——试图提供比直接买到即将上市的B股更好的选择——那恐怕并不现实。
CHARLIE MUNGER: I think he’s afraid that the B will go up to the place where the whole story comes again. And I must say that if that were to happen, we’d like it. (Laughter)
查理·芒格：我想他的担心是，如果B股涨到一个很高的价位，可能还会再出现同样的故事。对此我只能说，如果真那样的话，我们倒乐意看到。（笑声）
WARREN BUFFETT: Well, we’d like it, only if it reflected underlying values, but — (Laughs)
沃伦·巴菲特：嗯，我们只会喜欢在B股反映基本内在价值的前提下价格上涨。（笑）
CHARLIE: Yeah.
查理：对。
WARREN BUFFETT: Yeah. We have a very strange attitude on that. I mean, most managements feel that the — on the price of their shares — that the higher, the better. And that’s an understandable feeling. But the trouble is the game isn’t over at any time.
沃伦·巴菲特：是的。在这方面，我们的态度可能有点奇怪。大多数管理层都觉得自家股价越高越好，这种想法可以理解。但是问题在于，游戏永远不会“结束”。
We really feel the fairer, the better. Our goal is that every shareholder participates in the progress that Berkshire makes, during — as a business — during their holding period. In other words, we don’t want one party getting wealthy off the other. We want them to share based on the gain in value of the business.
我们的想法是：股价越接近公平价值越好。我们的目标是，每位股东在持股期间，都能够合理分享伯克希尔作为一家企业所获得的进步。换句话说，我们不希望有一方通过剥夺另一方而获利，而是希望大家都能按照企业价值增长的比例来分享收益。
And to the extent that the stock got way overvalued or way undervalued, you know, that may make one party — in the first case, the seller, in the second case, the buyer — very happy. But there’s somebody on the other side of the transaction.
如果股价被严重高估或严重低估，那么前一种情况（高估）就会让卖方高兴，而后一种情况（低估）则会让买方高兴。可是在每笔交易当中，总有一个对手方的存在。
In economics, you know, the most important question — maybe important beyond economics, too — but whenever somebody tells you something, you know, the first question to ask yourself is, “And then what?” And we tend to do that around Berkshire.
在经济学中，可能不仅仅是在经济学，最重要的问题之一是：当有人告诉你一件事，你首先要问自己，“然后会怎样呢？”在伯克希尔，我们一直以来都习惯这样思考。
And so, the stock going up is not an end of itself, because it’s — the next question is, “And then what?”
因此，股价上涨并不是我们追求的终极目标，因为接下来的问题就是，“然后呢？”
And to the extent that the stock goes up because the intrinsic value goes up, everyone is getting their fair share of the pie as they go along.
如果股价的上涨是由内在价值的增长所驱动，那么股东们都会在这个过程中获得自己应有的回报。
To the extent it exceeds that in some way, the selling shareholder gets a benefit. But the entering shareholder is at a disadvantage. And we really like the idea of the price tracking intrinsic value over time.
如果股价以某种方式超越了内在价值，那么卖出股票的股东就会受益，而买入股票的股东则会吃亏。所以，我们非常希望股价能够尽可能地与内在价值保持一致。
And we think that, by having the right kind of shareholders and by communicating with them properly and following the right kind of policies, that we can come as close to that as is attainable in a world where markets, essentially, are fairly volatile. And so far, I think it’s worked out pretty well that way.
我们相信，通过吸引合适的股东、通过良好的沟通，并且坚持正确的政策，可以尽量使股价在这个波动性相当大的市场中与内在价值保持一致。到目前为止，我认为我们做得还不错。
But the intention is to — and the goal — is to keep it that way.
而我们的初衷和目标，就是将这一点一直保持下去。
One thing to remember: in the end, the owners of businesses, in aggregate, cannot come out anyway better than the businesses come out.
有一点要记住：从整体来看，企业的所有者，不可能获得比企业本身更好的回报。
I mean, you can — the businesses are the — and not just our businesses, I’m talking about all American business — the profitability of American business determines the profitability of what the owners of American business have, and you can forget all about the little ticker symbols and everything else.
我的意思是，不仅仅是我们的企业，所有的美国企业都是同样的道理：美国企业的盈利能力决定了美国企业所有者的盈利能力，你可以把所有的股票代码以及其它细枝末节都抛到一边。
The owners suffer to the extent that they have some extra costs imposed in broker’s commissions, fees, all kinds of things. That diminishes the return from the business. But no one has figured out yet how to perpetually have owners do better than their businesses.
如果在持股过程中，还有额外的经纪佣金和各种费用，投资者的收益就会因这些成本而受损。但没人能找出一种方式，让企业所有者永远比企业本身更赚钱。
And our idea is to have them do it as they go long in proportion to the gain that occurs during their tenure as a shareholder. And that isn’t easy to do. And it’s not attained perfectly. But that’s the goal as we go along.
而我们的理念是，让股东们在持股期间，根据公司所取得的增长来获得相应的收益。这件事并不容易做到，也不可能做到完美。但这是我们在前行过程中一直追求的目标。
35. Insurance float: “Above all, get it cheap”
保险浮存金：“最重要的是，要获得廉价资金”
WARREN BUFFETT: Zone 3?
沃伦·巴菲特：第3区？
AUDIENCE MEMBER: Maurus Spence. And I have a serious question and, then, a less serious question first.
观众提问：我是莫鲁斯·斯潘斯。我有一个严肃的问题，以及一个不太严肃的问题要先提。
The less serious: you said that you and Charlie had lost, between you, a hundred pounds. I was curious who had lost more?
先说不太严肃的：您说您和查理两个人一起减掉了100磅。我想问一下，谁减得更多呢？
WARREN BUFFETT: No, no. I said the board had lost a hundred pounds. (Laughter)
沃伦·巴菲特：不，不。我说的是董事会成员合计减掉了100磅。（笑声）
I have some members of the board who would take umbrage of the fact that they weren’t included in that total. (Laughter)
我们董事会有些成员会因为自己没被算进那个总数而生气的。（笑声）
AUDIENCE MEMBER: OK, Who lost —?
观众提问：好的。那么——谁减掉——？
WARREN BUFFETT: Charlie and I, we’re pretty close at the moment, aren’t we? Modesty prevents — (Laughs)
沃伦·巴菲特：我和查理现在都差不多，不是吗？谦虚使我无法明说……（笑）
AUDIENCE MEMBER: I must say you’re both looking very good, anyway.
观众提问：不管怎样，我必须说你们两个看起来都很好。
WARREN BUFFETT: We’re feeling good.
沃伦·巴菲特：我们感觉不错。
AUDIENCE MEMBER: I was wondering who lost the most and what your diet secrets were. (Laughter) And, then, the more serious question was about float.
观众提问：我想知道谁减掉的最多，以及你们的减肥秘诀是什么？（笑声）然后，我的那个更严肃的问题与浮存金有关。
You touched on this a little bit earlier. But you’ve often said that your insurance business is probably the most important business that you own.
这个话题你们之前稍微提到过。可你们经常说，保险业务大概是你们最重要的业务。
On page 12 of the annual report, you said, “We have benefitted greatly to a degree that has not been generally understood, because our liabilities have cost us very little.”
在年报的第12页，你们说“我们获得的好处非常大，但一般人都没怎么意识到，因为我们的负债成本非常低。”
I was wondering if you could describe this a little bit better so we can understand it.
我想请你们进一步解释一下，让我们更好地理解这一点。
WARREN BUFFETT: Yeah, the — Charlie and I have lost about the same amount, at about 20 pounds each.
沃伦·巴菲特：是的，我和查理各减了差不多20磅。
The insurance business provides us with float. And float is money that we hold that doesn’t belong to us.
保险业务给我们带来了浮存金。所谓浮存金是我们持有但并不属于我们的资金。
It’s like a bank having deposits. A bank has deposits. The money doesn’t belong to it. But it holds the money.
这有点类似银行持有存款。银行有存款，而这些钱并不属于银行，但银行却保管着这些钱。
Now, when a bank holds deposits, on everything except demand deposits, there’s an explicit cost, an interest rate attached to it. And, then, there are the costs of running the system and gathering the money which is — also must be attributed both to demand and time deposit.
当银行持有存款时，除活期存款外的所有存款都需要付出显性的成本，也就是利率。除此之外，还有运营体系和吸收资金的成本——这些也得算在活期和定期存款中。
So there’s a cost to getting what they would call deposits and we could call float.
因此，他们所谓的存款、而我们称之为浮存金，都是有成本的。
In the insurance business, a similar phenomenon takes place in that policy holders give us their money at the start of the policy period. And therefore, we get the money paid in advance for the product.
在保险业务中，也存在类似的现象：保单持有人在保单生效之初就将保费交给我们，因此我们预先收到了这笔产品费用。
And secondly, it takes time to settle losses, particularly in the liability area. If you bang up a fender on your car, you — it’s going to get settled very quickly, so there’s — but if there’s a complicated injury or something, it may take some years to settle. And during that period, we hold the money.
其次，理赔需要时间，尤其是在责任保险领域。如果你只是把车的保险杠撞坏了，理赔会很快结案。但如果是复杂的人身伤害或其他问题，可能需要几年才能结案。而在这段时间里，钱都由我们来持有。
So, we have, in effect, something that is tantamount to the deposits of a bank. But whereas the deposits of a bank, it’s quite easy to calculate the approximate cost, in the case of the float that the insurance company has, you don’t really know what the cost of that float is until all your policies and losses — policies have expired and your losses have all been settled. Well, that’s forever, in some cases.
因此，实际上我们拥有了一种类似于银行存款的资金。然而，与银行存款不同的是，银行存款的成本很容易计算，而保险公司所持有的浮存金，你并不知道它的成本到底是多少，除非所有保单都到期并且所有理赔都结清。有时候，这几乎是个没有尽头的过程。
So, you’re only making an estimate, as you go along, of what that float is costing.
因此，你只能在进行中估算这一浮存金的成本。
To date with Berkshire, in the 29 years we’ve been in the business, it appears — never certain, because you don’t know for sure what’s going to happen — but it appears that our float has not cost us anything, in — on average.
对伯克希尔而言，到目前为止，我们做保险生意有29年了。现在看来——当然不能完全确定，因为谁也不知道将来会发生什么——但看上去我们的浮存金平均来说几乎没有成本。
There’s been years when we’ve had an underwriting loss when there’s a cost. There’s been years when we had an underwriting profit. And so, we had a reverse cost.
有些年份我们承保亏损时确实会出现成本，有些年份我们承保盈利，于是成本就会倒挂。
So we have obtained that float on very advantageous terms over the years. Far more than — fully as important as that— it’s important to get it at a low cost, in our case, no cost. But the other important thing is that we’ve grown it dramatically.
多年来我们以非常有利的条件获取了浮存金。比“以极低甚至无成本获得浮存金”更重要或者同样重要的是，我们的浮存金规模还大幅增长了。
And so, we’ve gotten more and more money without having any cost attached to it. And if we still had our 16 — or 17 million, I guess — of float that we had in 1967 and it was no cost, it would be very nice.
也就是说，我们获得了越来越多的资金，却不需要支付成本。如果我们现在还和1967年一样，只有1600万或1700万美元的浮存金，且没有成本，虽然不错，但毕竟规模有限。
But 17 million of free money is worth something, but it’s not worth a ton.
1700万美元的无成本资金当然有价值，但也没大到让人瞠目结舌的程度。
Having seven billion, if we can achieve that as free money, it’s worth a lot of money. And that growth has not, probably, generally, been appreciated fully in connection with Berkshire nor has the interplay of how having zero-cost money, in terms of affecting our gain in value over time.
如果我们能把那70亿美元当成无成本的资金，那么它的价值就非常高了。而且，就伯克希尔而言，人们大概并没有充分认识到这种增长的意义，也没有充分理解在我们价值增长的过程中，持有零成本资金所产生的作用。
People have looked at — always looked at our asset side, but they haven’t paid as much attention to the liability side. Charlie and I pay a lot of attention to that.
人们往往只关注我们的资产端，却没有那么关注负债端。而我和查理对此非常重视。
And, I mean, this — it’s not entirely an accident that the business has developed in this manner. And we have intentions of trying to make it continue to develop in this manner, and in that manner, in the future. But we’ve got competitors out there, too.
也就是说，我们能够这样发展并非完全是偶然。我们也希望未来能继续以这种方式、或者类似的方式发展。不过我们在市场上也有竞争对手。
Float, per se, is not a blessing. We can show you many insurance companies that thought it was wonderful to generate float. And they have lost so much money in underwriting that they’d be better off if they’d never heard of the insurance business.
浮存金本身并不一定是好事。我们可以给你看很多保险公司，他们曾经觉得获得浮存金很美好，结果却在承保业务上赔了大量的钱，如果他们从没涉足过保险业务，或许会更好。
But, you know, the job is to get it, get it in increasing quantities, but above all, get it cheap. And that’s what we work at.
但是，你要知道，我们的工作就是争取拿到浮存金，而且数量越来越多，不过最关键的是要拿到便宜的浮存金。这就是我们努力的方向。
And you do that in the business through having some kind of competitive advantages. You won’t do it just by having an ordinary insurance company. The ordinary insurance company is not a good business.
要想在这门生意里做到这一点，就必须拥有某些竞争优势。仅仅是办一家普通的保险公司，你是做不到的。普通的保险公司并不是什么好生意。
We have it, in certain respects, because of our attitude toward the business. We have it because of our financial strength gives us certain competitive advantages, and we have it in the case of GEICO, because of a very low-cost operation.
我们能够做到这一点，部分原因在于我们对待这项业务的态度。我们能做到，是因为我们的财务实力给我们带来了某些竞争优势；在GEICO的案例中，则是因为它的运营成本非常低。
And it’s us — up to us — to try and figure out ways to maximize each one of those competitive advantages over time.
而我们要做的，就是设法在时间的推移中，将这些竞争优势最大化。
We’ve built those advantages. I mean, in 1967, we were not looked at that way in the insurance business. We were — we’ve built a position of competitive strengths. And in the case of GEICO, they had it without us. But we have bought into it over time.
这些优势是我们一点点建立起来的。要知道，在1967年，我们在保险业并不是以这样的形象示人的。我们一步步建立了自己的竞争实力。至于GEICO，它自己就已经拥有这样的优势，而我们是逐步买入这家公司并与之结合的。
It’s a very important asset. And you ought to pay a lot of attention over the years as to what is happening in — with that asset as to both growth and costs. And that will aid you in calculating intrinsic value.
浮存金是一项非常重要的资产。你需要长年累月地关注这项资产的发展状况，包括规模的增长以及成本的变化。这样做能帮助你更好地评估我们的内在价值。
Charlie?
查理？
CHARLIE MUNGER: Nothing to add.
查理·芒格：我没有补充的。
WARREN BUFFETT: OK.
沃伦·巴菲特：好的。
36. Intrinsic value isn’t above current stock price
内在价值并未高于当前股价
WARREN BUFFETT: Zone 4 is the next.
沃伦·巴菲特：接下来是第4区。
AUDIENCE MEMBER: Henry Neuhoff (PH), shareholder, Dallas, Texas.
观众提问：我是亨利·纽霍夫（音），达拉斯德州的股东。
My guess is that you consider the intrinsic value of the shares to be more than that represented by the price.
我猜想您认为股票的内在价值高于其当前价格所体现的水平。
WARREN BUFFETT: By more than represented by what?
沃伦·巴菲特：您说的高于什么水平？
AUDIENCE MEMBER: More than represented by the current price of the shares.
观众提问：也就是，高于目前的股价水平。
If that be the case, what would be your thoughts about Berkshire repurchasing its own shares?
如果情况确实如此，您怎么看伯克希尔回购自己股票这件事？
WARREN BUFFETT: Yeah, no. We have said we do not consider Berkshire undervalued at this price. We didn’t say we thought it was overvalued. But we said we did not consider it undervalued.
沃伦·巴菲特：嗯，不是这样的。我们曾说过，我们不认为伯克希尔在这个价位是被低估的。我们并没说它被高估了，但我们说过不认为它被低估。
So, a repurchase based on our estimate would not be in the interests of shareholders.
所以，基于我们的判断，回购股票并不符合股东的利益。
It’s conceivable it could be at some time, but we do not think that’s the case. We think intrinsic value far exceeds book value, but we do not think it exceeds present price.
以后某个时候或许会出现这种可能，但我们目前并不这么看。我们认为内在价值远高于账面价值，但并不认为它高于现在的股价。
We’re not selling any shares, though, either. (Laughter)
当然，我们也并没有在卖出任何股票。（笑声）
(Break in tape)
（录音中断）
37. Complications from “street name” shareholders
以“街名”持股的股东所面临的复杂情况
WARREN BUFFETT: Zone 6?
沃伦·巴菲特：第6区？
AUDIENCE MEMBER: My name is Carlos Lucera (PH). I’m from Idaho. And my question relates to street names.
观众提问：我叫卡洛斯·卢塞拉（音），来自爱达荷州。我的问题和“街名”持股有关。
Our stock at Berkshire Hathaway is in a family limited partnership. And in addition to that, it’s in a street name.
我们在伯克希尔哈撒韦持有的股票属于一个家族有限合伙企业，而且还以“街名”形式持股。
Now, what is the reason, and the rationale behind the reason, for street name shares not being able to participate in the charitable contributions by Berkshire Hathaway?
那么，为什么以街名持股的股票无法参加伯克希尔哈撒韦的慈善捐赠计划？这背后的原因和考量是什么？
WARREN BUFFETT: Yeah. We submitted a request for ruling to the IRS — I don’t know, 15 or so years ago, in connection with the shareholder-designated contribution program.
沃伦·巴菲特：好的。大约在15年前，我们曾就股东指令的慈善捐赠计划向美国国税局（IRS）提交过一次裁定请求。
And the ruling we received specifies record holders and not street name holders. Now, that doesn’t mean that a different ruling might not be obtained.
我们当时收到的裁定明确适用于正式登记的股东，而不包括以街名方式持股的股东。当然，这并不意味着我们将来无法获得不同的裁定。
But frankly, when we get into the multitude of indirect holdings and the problems we have with those indirect holdings in other respects, I think it would be a bit of a nightmare for us to attempt to get that program extended through — into street name holders.
但坦率地讲，当涉及到数量庞大的间接持股和其他与间接持股相关的各种问题时，如果我们试图将这一计划扩展到街名持股，我认为对我们来说将是一场噩梦。
I think the costs would far exceed the benefits. And I think that it is the situation, and anybody with it in street name can move it into their own name if they want to.
我认为，所付出的成本将远远超过所获得的益处。现实的情况是，任何以街名持有股票的股东如果希望参加，就可以把股票过户到自己名下。
So I think, with very small amount of effort on the part of an individual shareholder, it would offset an enormous set of problems that we would encounter at Berkshire.
因此，我认为，个人股东只需付出一点点努力，就能免去伯克希尔可能要面对的一大堆麻烦。
We can handle the present system. We’ve got 12 people there. And they run the annual meeting. They make movies. They do all kinds of things. (Laughter)
我们现行的系统可以应付。我们有12个员工处理这些事。他们主持年度股东大会，拍摄影片，处理各种各样的事项。（笑声）
And it would be — it would be very tough and — you know, if an extra 10,000 shares participated, it’d be $120,000 of contributions. I just don’t think it would be worthwhile.
要是再新增1万股参与，意味着12万美元的捐款，但与此同时，我们需要投入大量人力物力，这在我看来并不值得。
Our ruling doesn’t presently cover the subject, in any event. It’s something we’ve thought about.
不管怎样，我们现有的裁定并没有涵盖这部分问题。但我们确实想过这个问题。
Charlie?
查理？
CHARLIE MUNGER: Yeah. I think even if they changed the ruling, we wouldn’t change the policy. It would be, administratively, very difficult.
查理·芒格：是的。我认为即使他们修改了裁定，我们也不会改变现在的政策。操作起来会非常困难。
WARREN BUFFETT: We run into other problems, in terms of people getting their material — just the material on the annual meeting.
沃伦·巴菲特：在让人们获取资料方面——仅仅是获取年度股东大会资料——我们就遇到了一些问题。
And we’ve heard from a number of shareholders that they can’t get it from their broker, and they don’t know what the B is all about because they didn’t get their proxies. And it just — street name posed more problems.
我们听到有不少股东说，他们从经纪人那里拿不到这些资料，也不知道B股到底是怎么回事，因为他们没有拿到投票代理文件。这些都是“街名”持股带来的额外问题。
Although, we have a — now we have — probably have more than — forget about the B. We have more than twice as many, I believe, holders in street name as in direct ownership. Although, the number of shares is far, far — I mean it’s — it’d be less than 20 percent of the shares. But it’s probably double the number of holders.
其实，如今我们这里（不算上B股），我认为街名持股的股东人数要比直接登记的股东人数多一倍以上。虽然街名持股的总股份数比直接登记的股份数要少得多，可能还不到全部股份的20%，但持有者的人数却大约是后者的两倍。
38. No “look-through earnings” in annual report
年度报告中未列示“穿透式收益”
WARREN BUFFETT: Zone 7?
沃伦·巴菲特：第7区？
AUDIENCE MEMBER: Good afternoon. My name is Bill Guerra (PH). I’m from the San Francisco Bay area. I’ve owned your shares for many years and appreciate the good job you’ve done.
观众提问：下午好。我叫比尔·格拉（音），来自旧金山湾区。我持有你们的股票很多年了，对你们的优秀表现深表感谢。
However, in this year’s chairman’s letter — you developed a concept a few years ago called look-through earnings.
然而，在今年的董事长致股东信中——你们几年前提出了一个叫“穿透式收益”的概念。
WARREN BUFFETT: Right.
沃伦·巴菲特：对。
AUDIENCE MEMBER: And I failed to see that this year. And I’m wondering if that no longer is a valid concept or why you refrained from showing the data?
观众提问：但我今年没有看到相关内容。我想知道，这个概念是否不再有效，或者你们为什么没有再列示相关数据？
WARREN BUFFETT: Yeah. That’s a good question. I should have actually covered that in the annual report, in terms of mentioning — because I’ve talked about it, and we’ll talk about it in the future.
沃伦·巴菲特：嗯，问得好。其实我本该在年度报告里谈谈这个概念，因为过去我提到过它，以后也会再谈。
And we do have a goal on look-through earnings of $2 billion in the year 2000. And that’s going to be adjusted upward to allow for the fact there are more shares outstanding. It’ll be the same basic goal.
我们确实定下过一个在2000年实现20亿美元“穿透式收益”的目标。考虑到我们现在发行的股份变多了，我们会做一些上调。但核心目标不变。
But there were two reasons that it was skipped this year. And like I said, I should’ve mentioned it.
今年之所以没有列示，主要有两个原因。正如我刚才说的，我本该提一下的。
One was it was the longest letter we’ve ever had. And having that section in there would’ve elongated it even a bit more. And that, coupled with the fact — and this is the important part of it — we had major changes in our — the composition of the company — immediately after the end of the year.
首先，今年的股东信是我们写过的最长的一封。如果再加上这部分，篇幅会更长。再加上——这是关键原因——年末刚过，我们公司结构就发生了重大变化。
So, our Capital City stock disappeared. At the time it disappeared, we didn’t know whether it was going into cash, or all Disney stock, or a combination.
比如，我们持有的首都城市公司（Capital Cities/ABC）的股票不存在了。当时我们还不清楚这部分资产最后会变成现金呢，还是全部变成迪士尼股票，或者是一部分现金一部分迪士尼股票。
We had the acquisition of the other half of GEICO where, even now, the accounting treatment isn’t clear. And I felt that —
我们还收购了GEICO剩余的另一半股权，但即便到现在，相关会计处理都还没完全确定。我觉得——
The look-through earnings last year were fine. But I felt that, by the time I got through explaining all of the adjustments you would have to make for the transactions then pending, that adding it to the — to already the longest letter I’ve written, would’ve slowed things down a lot and not been particularly helpful.
去年“穿透式收益”这个数字本身还是不错的。但是如果我再去解释所有尚未完成的交易所需要做的调整，那么整个股东信会变得更冗长，而且也不会带来什么特别的帮助。
It will be back in this year, this upcoming report, and future reports, because it’s a very important concept. And it’s something that we’re focused on.
在接下来的年度报告和未来的报告中，这个部分还会重新出现，因为它确实是个非常重要的概念，也是我们关注的重点。
It’s just that last year’s number — it would’ve been a mess by the time I got through trying to explain it.
只是去年这个数字——如果我想把它解释清楚，恐怕会相当混乱。
You know, I normally — the accounting stuff, I know, puts a lot of you to sleep. But believe me, it isn’t so much fun writing it either. (Laughter)
你也知道，平时那些会计问题就已经让很多人听得犯困。相信我，写起来也不怎么有趣。（笑声）
So, I skipped it this year. We’ll have it next year. And the number would’ve been OK last year, but there would’ve been a lot of asterisks attached.
所以今年我就省了这部分。明年会再出。去年那个数字本身是可以的，但会有很多要特别注明的地方。
39. Discount rate for estimating intrinsic value
估算内在价值时使用的折现率
WARREN BUFFETT: Zone 8, please.
沃伦·巴菲特：第8区，请。
AUDIENCE MEMBER: Yes. Mr. Buffett, good morning. My name’s Ed Walzak (PH) from New York. I’m a student and an admirer of your investment philosophy. I have a question.
观众提问：是的，巴菲特先生，早上好。我叫埃德·沃尔扎克（音），来自纽约。我是一名学生，也仰慕您的投资理念。我有个问题想问。
In determining a company’s intrinsic value, you seem to write or indicate that you project out a company’s owner earnings for a number of years, and then discount that back by prevailing rates.
在确定一家公司的内在价值时，您似乎提过或暗示过要先预估公司若干年的“所有者收益”（owner earnings），然后用当时的市场利率进行折现。
My question is, how much of a premium, if any, to prevailing risk-free rates do you demand when you discount back the owner earnings of a company?
我的问题是：当您对公司的所有者收益进行折现时，是否会在当时的无风险利率基础上再加上一定的风险溢价？如果会，大概是多少？
Or stated differently, for example, today, with loan rates at about 7 percent, if you did the same exercise with Coca-Cola, at what rate of interest would you discount back their owner earnings?
换种说法举例说明，如果当前贷款利率约为7%，您给可口可乐做同样的收益折现时，会用多少的折现率来计算它的“所有者收益”呢？
WARREN BUFFETT: Yeah. We get asked that question a lot. And we’ve answered it to some extent in past annual reports about what discount rate to use.
沃伦·巴菲特：嗯，这个问题我们经常被问到，在以往的年报里也有一定程度的说明。
We basically think in terms of the long-term government rate.
我们基本上是参考长期国债利率来思考这个问题的。
And there may be times, when in a very — because we don’t think we’re any good at predicting interest rates, but probably in times of very — what would seem like very low rates — we might use a little higher rate.
当然，偶尔也可能在某些时段——比如利率看似非常低的时候——我们会用略高一点的折现率。我们并不擅长预测利率，但偶尔会做一些相应调整。
But we don’t put the risk factor in, per se, because essentially, the purity of the idea is that you’re discounting future cash. And it doesn’t make any difference whether cash comes from a risky business or a safe business — so-called safe business.
但是我们并不把“风险因子”本身再额外加到折现率里，因为这个逻辑的核心是：我们在折现的是未来的现金流。至于现金流来自一家高风险公司，还是所谓的“安全”公司，这在折现的数学逻辑层面并没有区别。
So, the value of the cash delivered by a water company, which is going to be around for a hundred years, is not different than the value of the cash derived from some high-tech company, if any, that — (laughter) — you might be looking at.
因此，对于一家提供自来水的公司（可能会存在100年）的未来现金流，其价值和一家高科技公司所产生（如果能够产生的话）（笑声）的未来现金流，原则上并无不同。
It may be harder for you to make the estimate. And you may, therefore, want a bigger discount when you get all through with the calculation. But up to the point where you decide what you’re willing to pay — you may decide you can’t estimate it at all. I mean, that’s what happens with us with most companies.
当然，对高科技公司的未来现金流估算可能更困难，这意味着在最终做估值时，你也许会“要求”一个更大的安全边际（即间接体现为折现率更高、估值更低），或者你可能干脆觉得无法估算而放弃投资。对我们来说，大多数公司的情况也确实如此。
But we believe in using a government bond-type interest rate. We believe in trying to stick with businesses where we think we can see the future reasonably well — you never see it perfectly, obviously — but where we think we have a reasonable handle on it.
但是我们相信应该使用类似政府债券收益率的利率。我们也相信，应该尽量投资那些我们认为能够相对清晰预见未来的企业——当然不可能看得百分之百清楚——但至少要让我们有相当把握。
And we would differentiate to some extent. We don’t want to go below a certain threshold of understanding. So, we want to stick with businesses we think we understand quite well, and not try to have the whole panoply with all different kinds of risk rates, because, frankly, we think that’d just be playing games with numbers.
而且，我们会在一定程度上有所区分。我们不会涉足自己理解水平达不到某个门槛的企业。我们希望始终专注于我们自认为相当了解的业务，而不是给各种不同的风险业务都设定不同的风险溢价或利率。坦白说，我们觉得那种做法只是玩数字游戏。
I mean, we — I don’t think you can stick something — numbers on a highly speculative business, where the whole industry’s going to change in five years, and have it mean anything when you get through.
我的意思是——对于一个高度投机的行业、可能五年之内整个行业都会改头换面的企业，你如果硬要在折现时额外加上某个数字，最后得出的结果也没多少实际意义。
If you say I’m going to stick an extra 6 percent in on the interest rate to allow for the fact — I tend to think that’s kind of nonsense. I mean, it may look mathematical. But it’s mathematical gibberish in my view.
如果你说，“我要在折现率上额外加6%以应对这些不确定因素”——我觉得那有点荒谬。它也许在数字上看起来挺严谨，但在我看来，那只是数字游戏罢了。
You better just stick with businesses that you can understand, use the government bond rate. And when you can buy them — something you understand well — at a significant discount, then, you should start getting excited.
你还不如选择那些你理解透彻的企业，用政府债券利率进行折现。当你能以显著折价买到这类你熟悉的企业时，那才是值得兴奋的时刻。
Charlie? (Laughter)
查理？（笑声）
CHARLIE MUNGER: Yeah. The discounts were once greater than we now see.
查理·芒格：是啊。过去的折价比现在我们能看到的更大。
WARREN BUFFETT: That’s all you’re going to get, folks. (Laughter)
沃伦·巴菲特：各位，这就是我们要说的一切了。（笑声）
40. See’s Candies not going fat-free anytime soon
WARREN BUFFETT: Zone 1?
AUDIENCE MEMBER: Hi. Warren, it’s Peter Newman, Nick and Racky’s son. You can’t see me because I’m on your hard left over here.
And by the way, Racky says to send her love to you —
WARREN BUFFETT: Great.
AUDIENCE MEMBER: — and Susie.
I’m going to take a cue from something that the guy who asked the questions about the World Book —
I know you’re loathe to, normally, interfere in the running of your individual corporations, because they do so well on their own. And I am particularly fond of See’s Candy and their products. And you may or may not know that we have a chocoholic in our family, as you do in yours.
WARREN BUFFETT: Yeah. Makes good chocolate syrup, too. (Laughs)
AUDIENC MEMBER: Yeah, I won’t mention who.
However, when I was in there this Christmas buying some gifts, I noted that, with the exception of the little candy canes, there’s nothing in that store that is fat-free.
And we are facing a trend — (laughter) — in the world, especially in dessert items and ice cream and candy items, of fat-freeness.
And I just thought that, perhaps, it would be a word — worth a word to management to consider expanding the hard candy line.
WARREN BUFFETT: Well, we look at a lot of things. One of the problems, as you probably know, for example, in using aspartame is it doesn’t interact well with heat. And so that’s been sort of tough.
Now, Charlie and I have kept getting our regular boxes of candy during this weight loss-program. And we’ve — (laughter) — devoured them.
And candy, you know, it may be, on average, a hundred and — depends on whether it’s a sugar product or not.
But, take the lollipop, it’d be about 110 calories per ounce. But there’s — that’s one and a half, or one and a quarter lollipops, or something like that.
Most things are, you know, in that hundred per ounce to 150 per ounce range. So, candy is not a specific no-no.
If we can find something that the customer likes, that makes them think they’re getting skinnier by eating it — (laughter) — you know, that will be a breakthrough.
And we look forward — and we test everything that comes along. I can assure you. (Laughter)
In fact, Charlie and I may be the main testers.
Chuck Huggins is here today — and if you’ve got any ideas on it — who runs See’s. Done a terrific job of running See’s ever since we took over in 1972. He’d appreciate ideas.
But we are looking for things that appeal to the consumer that taste good and that they’ll go for. I mean, just as is, you know, the Coca-Cola Company, in terms of carbonated soft drinks. So, it’s a constant subject.
And, you know, there were high hopes on aspartame originally. But it just hasn’t panned out in terms of candy. And I’ve read a few articles about the fat-free stuff.
Well, it should be the fat substitute, which didn’t get me too excited about trying it. But I’m not sure whether some of you read those articles or not. We’ll keep looking, Peter, I appreciate it.
41. GEICO’s price: “We gulped a few times and paid it.”
WARREN BUFFETT: Zone 2.
AUDIENCE MEMBER: Good morning, Mr. Buffett and Mr. Munger.
As an aspiring shareholder, I’m very happy and proud to be here. Maybe I can encourage Mr. Munger to respond to my question this morning.
In regards to your purchase of the other half of GEICO, would you comment on your reasoning behind paying the premium above market value and why you, instead, did not purchase shares in the open market?
CHARLIE MUNGER: Well, we couldn’t have purchased very many shares in the open market at the quoted price. And the price we paid, with the large number of shares we got, we thought was a very satisfactory price.
WARREN BUFFETT: Yeah. We — what Charlie said is a hundred percent right. We also had a restriction that we agreed to many, many years ago — almost 20 years ago — as to the number of shares we would own without the consent — of the directors and, I believe, the Insurance Department.
So, we actually had some special restrictions on us in the case of GEICO. But if we hadn’t have had those restrictions, we’d have behaved in exactly the same manner.
And we didn’t think we could buy it any cheaper than that price. And we gulped a few times and paid it. And I think we will be happy that we did, as it’s turning out.
GEICO is doing very well. It — I mean, I knew it would do well. But I feel very good about it.
42. Newspaper business is still good, but not as good
WARREN BUFFETT: Zone 3.
AUDIENCE MEMBER: Mr. Buffett, my name is David Lowe (PH) from Ventura, California.
My first Berkshire meeting, and I want to mention that I’m very intrigued at the influence you have over the shareholders here. I note that the first beverage they ran out of in the lobby was Cherry Coke. (Laughter)
My question is about The Buffalo News. You say, in the letter for the ’95 report, that the newspaper industry has lost another notch in its economic attractiveness. Can you elaborate on that?
WARREN BUFFETT: Yeah. The — what you are seeing in newspapers is a circulation trend that has been prevalent for a long time, in terms of newspapers per household.
But that has been declining, and that — daily newspapers — and that I would say the trends of the last couple years are somewhat worse, in that respect.
I would say that the ability to price, both at the circulation and advertising level, is — has weakened a bit in recent years — not dramatically, but it’s weakened a bit.
At one time, newspapers really — daily newspapers in single-newspaper towns were probably as attractive, economically, as any business you could find. I mean, it — a large percentage of advertisers had very little choice, in terms of using them as an advertising medium.
People had less options, in the way of learning what was going on around them other than the daily newspaper. So, the — they started from a position of extraordinary strength.
They still have a very strong position. And I’ve tried to emphasize that in the report. I mean, they’re a bargain at the price they sell for. They give you all kinds of information with very low price. And they’re a magnificent way for most merchants to reach their customers.
But they are not — they do not have the exclusive advantages, in many cases, that they had 15 or 20 years ago.
Third-class mail has become more of an option. People have more ways of obtaining information. As we talked earlier, information can be processed electronically and delivered at far lower cost than people dreamt of 20 years ago.
So, all of those things eat away a little bit. It’s still a very fine business. But those — I don’t see anything that will reverse those trends. I don’t think that they will necessarily accelerate.
But I think that, if the only thing you owned in life was a daily newspaper in a single-newspaper town 20 years ago, you would feel slightly less secure today than you did at that time. But you’d still be a lot better off than owning virtually any other business.
Charlie?
CHARLIE MUNGER: Nothing to add.
43. “Outside information” in annual reports
WARREN BUFFETT: How about zone 4?
AUDIENCE MEMBER: Mr. Buffett, my name is Hutch Vernon. I’m from Baltimore, Maryland.
I know that you read lots and lots of annual reports. And I’m curious what you are reading for, if you would share that with us.
But I’m more curious — because I think I know what you’re reading for — if there are any disclosures — any further disclosures — that you would like to see companies make in their financial reporting, or that the SEC require in financial reporting or proxies or other communications with their shareholders? And that would be for both you and for Mr. Munger.
WARREN BUFFETT: Yeah. The main thing that they can’t mandate in annual reports: I really like to have — I like to know as much as I can about the person that’s running it and how they think about the business and what’s really going on in the business.
In other words, I would like to have a report that would be identical to what — if I owned half of a company but was away for a year, and I had a partner who owned the other half — when I came back, that he would tell me about what had taken place during the past year and what he foresaw coming up and all of that.
I — that is what I think the purpose of the report is. Now, the SEC mandates a lot of information, and —
VOICE: — side on?
WARREN BUFFETT: — some of that is helpful. But there’s an intent behind the report. I mean, if it’s a sales document I’m, you know, I’m less interested. I’m — and —
I don’t see any way to mandate what I’m talking about. But that’s the kind of report I’m looking for.
What I’m trying to do as I read reports, A, I like to understand just generally what’s going on in all kinds of businesses.
If we own stock in a company and in an industry, and there are eight other companies that are in the same industry, I want to own or be on the mailing list for the reports for the other eight, because I can’t understand how my company is doing unless I understand what the other eight are doing.
I want to have the perspective of, in terms of market share, what’s going on in the business or their margins or the trend of margins, all kinds of things that I can’t get unless I know —
I can’t be an intelligent owner of a business unless I know what all the other businesses in that industry are doing. And so, I try to get that information out of a report.
If I’m thinking about investing in a specific company, I try to size up their business and the people that are running it.
And over the years, I have found reading a lot of reports to be quite useful in terms of making business decisions at Berkshire.
If we own all of a business, I want to own shares in all of the competitors just to keep track of what’s going on. And I want to be able to intelligently evaluate how our managers are doing that. And I can’t do that unless I know the industry backdrop against which they’re working.
It’s amazing, you know, what — how well you can do in investing, really, with what I would call outside information. I find inside information — I’m not sure how useful that is.
But outside information — there’s all kinds of information around, as to businesses. And you don’t have to understand all of them. You just have to understand the ones that you’re thinking about getting in. And you can do it, if you just — nobody will do it for you.
You can’t read — in my view — you can’t read Wall Street reports and get anything out of them. You have to do it yourself and get your arms around it.
I don’t think we’ve ever gotten an idea, you know, in 40 years from a Wall Street report. But we’ve gotten a lot of ideas from annual reports.
Charlie?
CHARLIE MUNGER: What I find is that it takes a long time to read the annual report even if it’s a comparatively simple business, because if you really are trying to understand it, it’s not a bit easy.
WARREN BUFFETT: Yeah. I would say that, on average, in a business we’re really interested in, even though we know what to skip, to some extent, and what to read, I mean, it’s going to be 45 minutes or an hour on a report.
And if there are six or eight companies in the industry, that’s going to be six or eight hours, perhaps, and then their quarterlies and a lot of other —
I mean, it — the way you learn about businesses is by absorbing information about them, thinking, deciding what counts and what doesn’t count, relating one thing to another. And, you know, that’s the job.
And you can’t get that by looking at a bunch of little numbers on a chart bobbing up and down about a — or reading, you know, market commentary and periodicals or anything of the sort. That just won’t do it. You’ve got to understand the businesses. That’s where it all begins and ends.
44. “Berkshire is not a one-man show”
WARREN BUFFETT: Zone 5?
AUDIENCE MEMBER: Mr. Buffett, my name is Hank Strickland (PH). I’m from Fairfax, Virginia, which, if it were a city, would be the tenth largest in the United States. I’m here as a stockholder. And my daughter, who’s also my broker, is here with me.
We were also out there Friday night when we watched you warming up for the beginning of the ballgame. And we noted that you didn’t drop the ball. You seemed to be able to get it to the guy that was warming you up.
We noticed your first pitch, which I had difficulty characterizing as either being a passed ball or a wild pitch.
WARREN BUFFETT: It was a premature sinker, actually. (Laughter)
Very hard to hit, I might add. (Laughter)
AUDIENCE MEMBER: And, then, you moved spritely into the stands, did a lot of picture taking, photo opportunities, signed autographs, vaulted over a rail or two. And we noted, with great enthusiasm, your fitness.
Now that all having been said, many people would characterize Berkshire as a one-man company, with all due respect to Charlie. And many of this audience here, I’m sure, are retired or semi-retired. It’s not unthinkable that, perhaps, you might want to retire, or for good — God’s sakes —
WARREN BUFFETT: It’s unthinkable. I don’t want that one to go by. (Applause)
AUDIENCE MEMBER: Or for something — something worse could happen. And for those of us —
WARREN BUFFETT: That would be the worst, I think — (Laughter)
AUDIENCE MEMBER: Well I —
WARREN BUFFETT: I think death would be second. (Laughter)
AUDIENCE MEMBER: I could think of some things some of us might want to do to protect our sizeable investments, say, having owned Berkshire since Blue Shamp — Blue Chip Stamp days. But anyway, we could put in a stop order, might take out an insurance policy.
We might ask Charlie to masquerade as Warren after you’ve moved on. Those don’t seem like very attractive options. So, I’m very serious now.
How would you respond to the question of a stockholder that’s really concerned about Berkshire being a one-man show?
WARREN BUFFETT: Yeah. Well, Berkshire is not a one-man show. It’s a two-man show, in terms of capital allocation. There’s no question about that, at present.
But it’s run by many managers that are doing an outstanding job and that don’t need any guidance from Charlie or me as they go along.
But I might say that, you know, I will die with all of my Berkshire stock, essentially. And that will — stock will be held, either in the family or in a foundation, depending on the order of death, for a long time thereafter.
So, there’s no one that’s more concerned about the subsequent management issue than I. I mean, this is not something that ends, at all, on my death. And it doesn’t end for the Buffett family or The Buffett Foundation. So, it’s a subject that Charlie and I have both thought about.
The most likely situation — you got to get away from the idea that it’s a one-man show because, right now, we’ve got 33,000 people working for Berkshire out there, you know, as we speak.
And I’m sitting around, you know, watching movies about myself or something. I mean, you can see how vital I am to the place. (Laughter) So the — but the question —
And the other thing we do, besides allocate capital, is we do identify these managers. And hopefully, we make it attractive for them to stay and work for Berkshire.
But that — you know, that doesn’t require 150 IQ or anything to do that. It does require a certain sensitivity to why people want to get up in the morning and do what they do.
And when I’m not around, the logical, at some point — it depends on exactly when it happens, again. But Charlie’s a little older than I am. And it’s likely that it will be broken into a two-person function again, but not exactly the way Charlie and I function.
And that is that there will be someone in charge of investments and capital allocation. I mentioned Lou Simpson’s position, because he is younger than I am, in the annual report, and then someone in charge of operations. And we have that person in the organization now.
Now, I don’t know what the situation will be when I die, because it could be in 20 minutes or it could be in 20 years. And when that — so, I can’t specifically name the individuals.
We have the individuals now for both those functions. We’ll have the individuals for the same functions 20 years from now. I don’t know whether they’ll be the same people.
But it’s quite a logical way to run the business. GEICO was run that way and still is run that way and has been for some years.
It’s always struck me as terribly illogical, the way property-casualty insurance companies are run, because they’ve been dominated by the underwriting side of the business. And here they have this important investment side, but it’s always been — virtually every company’s been subservient to the underwriting.
And GEICO, very logically, set up a co-CEO arrangement some years back where — originally Bill Snyder before that — but Tony Nicely ran the underwriting end of the business and Lou Simpson ran the investment side.
And those are two very different functions. Same person, logically, doesn’t fit both functions in most cases. I mean, it’s a rarity when the same person happens to hit for both functions.
So GEICO worked very well that way. Still works that way. Lou runs investments. Tony runs underwriting.
And Berkshire — slightly different — it’s a variant on it. But, essentially, at Berkshire headquarters, you need someone overseeing and not meddling in them too much, but making sure you’ve got the right manager and you’re treating him fairly.
You need someone on the operating side. You need someone on the investment/capital allocation side. We’ve got those people now. And we’ll have them, you know, whenever it happens, too.
That’s the — that is the structure. And we’ve got some very good businesses.
And, you know, nobody’s buying See’s Candy because they think I’m sitting in some office in Omaha. And no one’s buying a GEICO insurance policy because, you know, my name is there as chairman or CEO. The businesses are marvelous businesses. They’ll continue very well.
And there will be a capital allocation problem then just like there is now. And there will be the problem of keeping good managers in place and treating them fairly. And that’s a solvable problem.
So, that’s the future as seen from Kiewit Plaza.
Charlie?
CHARLIE MUNGER: Yes. If you just run your mind through all the assets, I think you will quickly decide that there are large momentums in place that would do very well without us.
I mean, is Coca-Cola going to suddenly stop selling because some manager’s dead at Berkshire Hathaway?
You know, are the people going to stop using Gillette razor blades? Is GEICO suddenly going to stop being intelligently run? Are — is the Nebraska Furniture Mart going to try any less hard?
So, the existing assets, you can argue, have been lovingly put together, so as not to require continuing intelligence at headquarters. (Laughter)
And what — there would be a disadvantage in that I think it would be unreasonable to expect that a successor would be as good at making new investments as Warren has been in the past. Well, that’s just too damn bad. (Laughter and applause)
WARREN BUFFETT: The sympathetic ear over here. (Laughter)
45. Buffett doesn’t answer individual letters
WARREN BUFFETT: Let’s see, where are we? Zone 6 now?
AUDIENCE MEMBER: Mr. Buffett, I’m indebted to Walter Schloss for introducing me to you some 40 years ago. And finally in the early ’80s, I became a stockholder.
My question is, now that you’ve expanded headquarters 9 percent from 11 people to 12 people — (laughter) — do you now more frequently answer letters from stockholders?
As a specific, had you looked at my letter from January 1986? (Laughter)
WARREN BUFFETT: We haven’t gotten to January yet. (Laughter)
AUDIENCE MEMBER: Relating to Cap Cities/ABC and talk radio, the problem that occurred last month at cape — Cap Cities might have been prevented.
WARREN BUFFETT: You should get a form letter from us. But the — we do not — A, we do not get into the activities of our investee companies.
I mean, it — if people are unhappy about Coca-Cola or Gillette, and they shouldn’t be — (laughs) — but if they happen to be, they should talk to the companies themselves. I don’t interject myself into the management or operations of the investee companies.
In terms of questions about Berkshire — I put in the annual report a few years back — just running Berkshire takes up a fair amount of time, in terms of keeping track of a lot of businesses.
And it doesn’t need to take up as much time as it does with me. But I enjoy it. But the — I feel that the annual report, the annual meeting, are the time to take up everything on shareholder’s minds. And so, I don’t answer one-on-one questions.
I get all kinds of letters. They want career guidance. They want advice on their business. I mean, there’s a million letters that come in.
And it would really be — it would take a significant amount of time, that otherwise would be spent on Berkshire, to reply to that sort of thing. I may note them, in terms of what I address in subsequent annual reports.
But the annual meeting and the annual report, I feel, are the best ways to communicate with shareholders. And I really don’t do it the rest of the year, although you will get some form reply or you should get some form reply on it.
AUDIENCE MEMBER: Thank you.
WARREN BUFFETT: Thanks. It’s noon now. And I’d like to give everybody a chance to visit our other stores and everything. But we will be back here at 12:15.
Afternoon session
1. Investing with “the two wealthiest guys”
WARREN BUFFETT: OK, if we’ve got a monitor over in zone 1, we’re ready to start.
AUDIENCE MEMBER: Yes. Thank you very much. My name is Maria Nicholas Kelly (PH). I’m from Tacoma, Washington.
And my husband and I have rather different investment approaches. And in 1988, he bought me one share of Berkshire, so that I could learn something about investing. We both started about that same time.
And he has chosen to invest in, let’s say, about 40 different stocks and buying and selling, and doing rather well for us, frankly.
My approach is more simple. And basically, I finally figured out last year that I should invest in the companies of the two wealthiest men in the world.
So — (laughter) — I decided we should buy, monthly, more Berkshire and Microsoft. So, then this year — and so, we’ve been able to do that.
This year, we read in your report that Berkshire is selling “at a price at which Charlie and I would not consider buying it,” so my husband has challenged my investment strategy. (Laughter)
I know that you are an honest man. And while you may not — (laughter) — you may not recommend to “my partner, Charlie,” to buy more Berkshire at this time, do you recommend that I continue — (Buffett laughs) — my rather automatic investment buying of Berkshire?
And I wanted — I think I know the answer. But I wanted my husband to hear it from the horse’s mouth. (Laughter)
WARREN BUFFETT: I think you’re using me here. (Laughter)
AUDIENCE MEMBER: But —
WARREN BUFFETT: Well, I — we don’t recommend selling it, but we don’t recommend buying it, either. We are neutral on that subject.
And I hope you continue to be in with the two wealthiest guys. I like the other fellow, too. (Laughter)
AUDIENCE MEMBER: Thank you.
WARREN BUFFETT: Yeah.
2. American Express has “slipped” in credit cards
WARREN BUFFETT: Zone 2?
AUDIENCE MEMBER: Mr. Buffett, I am Harriet Morton from the Emerald City [Seattle], the same area, the land of Microsoft. And I have a couple small questions.
The first one is, recognizing your lack of interest in technology or sense of familiarity with it, I’m wondering if you’d give a few comments on Bill Gates as a manager.
But the second one, dealing with a business that you’re familiar with, has to do with American Express.
Would you comment on American Express’ strategy to deal with their declining market share in the credit card industry and the rising importance of debit cards? Thank you.
WARREN BUFFETT: I’m not sure I got that entirely, Charlie. Did you? I mean, I got the part about American —
CHARLIE MUNGER: She wanted you to comment on Gates as a manager and American Express as — with the problems in declining in market share.
WARREN BUFFETT: Well, the first part is very easy. You know, Bill Gates is, you know, one of the great managers of all time and is an exceptional business talent who loves his business.
And when you get that combination and a high energy level and, now, an heir to leave it to, I don’t think you do much better than that.
American Express has, you know — has slipped over from where they were 20 years ago, obviously, in the credit card business. And I think they may have taken their customer a little bit for granted for a while.
I think [CEO] Harvey Golub is very focused on correcting that and has made some progress. But the credit card business is a very different competitive struggle now than it was 20 or 25 years ago.
Interestingly enough, American Express, itself, backed into the business. Because they were worried about what was going to happen to their traveler’s check business, originally.
And they saw Diners Club come along. A fellow named Ralph Schneider and — started it. And they saw the inroads that were being made. So, the credit card was a reactive move. And for a while, they really dominated the field. And of course, they still dominate the travel and entertainment part of it.
But credit cards are going to be a very competitive business over time. And you need to establish — American Express needs to establish — special value for its card in some way, or it gets more commodity-like.
It’s not an easy business. But their franchise — they’ve got a strong franchise. It is not what it was 20 years ago, relative to the competition.
3. “A lot of mediocrity” among CEOs
WARREN BUFFETT: Zone 3?
AUDIENCE MEMBER: Good afternoon. My name is John Weaver. I’m a shareholder from Bellingham, Washington.
You have discussed what a wonderful business is. One of the criterias in your acquisition, page 23 of your annual report, is management.
Could you discuss how you decide what good management is and how you decide whether you have a good manager?
WARREN BUFFETT: The really great business is one that doesn’t require good management. I mean, that is a terrific business. And the poor business is one that can only succeed, or even survive, with great management. And —
But we look for people that know their businesses, love their businesses, love their shareholders, want to treat them as partners. And we still look to the underlying business, though. We —
If we have somebody that we think is extraordinary, but they’re locked into one of those terrible businesses, because we’ve been in some terrible businesses, and you know, the best thing you can do, probably, is get out of it and get into something else.
But there’s an enormous difference, frankly — there’s an enormous difference in the talent of American business managers.
The CEOs of the Fortune 500 are not selected like 500 members of the American Olympic track and field team. And it is not the same process. And you do not have the uniformity of top quality that you get with the American Olympic team in any sport. You do not get that in top management in American business.
You get some very able people, some terrific people, like a Bill Gates, that we just mentioned. But you get a lot of mediocrity, too.
And the test — I think, in some cases, that it’s fairly identifiable, who has done an extraordinary job. And we like people that have batted .350 or .360, in terms of predicting that they’re going to bat over .300 in the future.
And some guy says, you know, “I batted .127 last year. But I’ve got a new bat or a new batting coach,” you know, some management consultant has come in and told them how to do it, supposedly.
We’re very suspicious of that. So we don’t like banjo hitters who suddenly proclaim that they can become power hitters.
And then we try to figure out what their attitude is toward shareholders. And that isn’t uniform, either, throughout corporate America. It’s far from uniform.
We still want them to be in a good business, though. I would emphasize that.
We feel that — I mean, I gave the illustration of Tom Murphy in the annual report.
I mean, no one had either the ability — no one could top his ability or integrity, in terms of the way he ran Cap Cities for decades. I mean, and you could see it in 50 different ways.
I mean, he was thinking about the shareholders. And he not only thought about them, he knew what to do to forward their interests, and —
In terms of building the business, he only built it when it made sense, not when it did something for his ego or to make it larger alone. He did it when it was in his shareholders’ interests.
And they’re not all Tom Murphys. But when you find them, and they’re in a decent business, you want to bet very heavily and not make the same mistake I made by selling out once or twice, too. (Laughter)
4. “Diversification is a protection against ignorance”
WARREN BUFFETT: Zone — was that zone 3 or —? Yeah, zone 4.
AUDIENCE MEMBER: Yeah, my name is Mark Hake (PH). I’m from Scottsdale, Arizona.
And I am very interested in your policies on diversification and also how you concentrate your investments.
And I’ve studied your annual reports going back a good number of years, and there’s been years where you had a lot of stocks in your marketable, equitable securities portfolio. And there was one year where you only had three, in 1987.
So, I have two questions. Given the number of stocks that you have in the portfolio now, what does that imply about your view of the market in terms of, is it fairly valued, that kind of idea?
And second of all, whenever you — it seems that, whenever you take a new investment, you never take less than about 5 percent and never more than about 10 percent of the total portfolio with that new position. And I wanted to see if I’m correct about that.
WARREN BUFFETT: Yeah. Well, on the second point, that really isn’t correct.
We have positions which you don’t even see, because we only listed the ones above 600 million in the last report. And obviously, those are all smaller positions.
Sometimes, that’s because they’re smaller companies, and we couldn’t get that much money in. Sometimes, it’s because the prices moved up after we’d bought them. Sometimes, it’s because we may be selling the position down, even. So there’s nothing magic.
We like to put a lot of money in things that we feel strongly about. And that gets back to the diversification question.
You know, we think diversification is — as practiced generally — makes very little sense for anyone that knows what they’re doing.
Diversification is a protection against ignorance.
I mean, if you want to make sure — (laughter) — that nothing bad happens to you relative to the market, you own everything. There’s nothing wrong with that. I mean, that is a perfectly sound approach for somebody who does not feel they know how to analyze businesses.
If you know how to analyze businesses and value businesses, it’s crazy to own 50 stocks or 40 stocks or 30 stocks, probably, because there aren’t that many wonderful businesses that are understandable to a single human being, in all likelihood.
And to have some super-wonderful business and then put money in number 30 or 35 on your list of attractiveness and forego putting more money into number one, just strikes Charlie and me as madness.
And it’s conventional practice, and it may — you know, if you all you have to achieve is average, it may preserve your job. But it’s a confession, in our view, that you don’t really understand the businesses that you own.
You know, I base — on a personal portfolio basis — you know, I own one stock. But it’s a business I know. And it leaves me very comfortable. (Laughter)
So you know, do I need to own 28 stocks, you know, to have proper diversification, you know? It’d be nonsense.
And within Berkshire, I could pick out three of our businesses. And I would be very happy if they were the only businesses we owned, and I had all my money in Berkshire.
Now, I love it — the fact that we can find more than that, and that we keep adding to it. But three wonderful businesses is more than you need in this life to do very well.
And the average person isn’t going to run into that. I mean, if you look at how the fortunes were built in this country, they weren’t built out of a portfolio of 50 companies. They were built by someone who identified with a wonderful business. Coca-Cola’s a great example. A lot of fortunes have been built on that.
And there aren’t 50 Coca-Colas. You know, there aren’t 20. If there were, it’d be fine. We could all go out and diversify like crazy among that group and get results that would be equal to owning the really wonderful one.
But you’re not going to find it. And the truth is, you don’t need it. I mean, if you had — a really wonderful business is very well protected against the vicissitudes of the economy over time and the competition.
I mean, you know, we’re talking about businesses that are resistant to effective competition. And three of those will be better than 100 average businesses.
And they’ll be safer, incidentally. I mean, there is less risk in owning three easy-to-identify, wonderful businesses than there is in owning 50 well-known, big businesses. And it’s amazing what has been taught, over the years, in finance classes about that.
But I can assure you that I would rather pick — if I had to bet the next 30 years on the fortunes of my family that would be dependent upon the income from a given group of businesses, I would rather pick three businesses from those we own than own a diversified group of 50.
Charlie?
CHARLIE MUNGER: Yeah, what he’s saying is that much of what is taught in modern corporate finance courses is twaddle. (Laughter and applause)
WARREN BUFFETT: You want to elaborate on that, Charlie? (Laughter)
CHARLIE MUNGER: You cannot believe this stuff. I mean, it’s modern portfolio theory and — yeah, it’s —
WARREN BUFFETT: It has no utility. But you know, it will tell you how to do average. But, you know, I think anybody can figure out how to do average in fifth grade. I mean, it’s just not that difficult, and —
It’s elaborate. And you know, there’s lots of little Greek letters and all kinds of things to make you feel that you’re in the big leagues. But it — (laughter) — there is no value added. (Laughs)
CHARLIE MUNGER: I have great difficulty with it because I am something of a student of dementia — (laughter) — and I have —
WARREN BUFFETT: And we hang around a lot together. (Laughter)
CHARLIE MUNGER: And I get ordinarily — classified dementia, you know, on some theory, structure of models. But the modern portfolio theory, it involves a type of dementia I just can’t even classify. (Laughter)
Something very strange is going on. (Buffett laughs)
WARREN BUFFETT: If you find three wonderful businesses in your life, you’ll get very rich. And if you understand them — bad things aren’t going to happen to those three. I mean, that’s the characteristic of it.
CHARLIE MUNGER: By the way, maybe that’s the reason there’s so much dementia. If you believed what Warren said, you could teach the whole course in about a week. (Laughter)
WARREN BUFFETT: Yeah, and the high priests wouldn’t have any edge over the laypeople. And that never sells well. (Laughter)
CHARLIE MUNGER: Right.
5. Downsizing is sometimes needed to correct excessive hiring in the past
WARREN BUFFETT: OK, zone — what, 5, are we over there?
AUDIENCE MEMBER: Yes. Good afternoon, Mr. Buffett, Mr. Munger, board of directors.
Wanted to ask, in looking ahead, do you see the trends of extensive outsizing, the offshoring, the downsizing, the expendable workforce, the rightsizing, the diminished commitment to company loyalty, and the greater emphasis on the short term, quick buck, bottom line versus your commitment to the long-term investment affecting your pool of investment possibilities and your decision processes?
And do you possibly think of creating new companies on your own?
WARREN BUFFETT: Well, I think that the trends you talk about, and the attention devoted to them, could have some effect, just in terms of how the public and Congress may feel toward business.
Historically, you know, every industry, at all times, is interested in downsizing or becoming more efficient.
Now, if the industry is growing, you can achieve efficiency by doing more work, or turning out more output, with the same people.
But you know, if you go back 150 years and look at the percentage of people in farming, for example, farming has downsized from being a very appreciable percentage of the American workforce to a very small percentage. And essentially, that’s released people to do other things.
So, it’s in the interest of society to get as much output in anything as it can per unit of labor input. It’s very difficult on the individual involved.
And you know, it’s no fun — I guess it’s no fun being a horse when the tractor comes along, or a blacksmith, and when the car comes along. But the —
So, I don’t quarrel with the activities. I quarrel, sometimes, with how it’s done. And I do think there’s been a certain lack of, in certain cases, some empathy or sensitivity in terms of the way it’s being done.
You should try to make your businesses more efficient. We hope we’re not in businesses that will require us to lay off people over time, because we hope that physical output grows, and that we become more productive and can keep the same number of people to get greater output.
Dexter Shoe has done a great job of that over time. They’ve become more and more productive. But they’ve sold more shoes instead of selling the same number of shoes and letting people go. But sometimes, industry trends —
I mean, at World Book, we have fewer people than we had a year or two ago. And we didn’t — we don’t have any answer to that.
Over time, we got out of the textile business. I wish we didn’t have to. But we did not know how to run a textile company in New England and compete effectively.
Like I say, I would — I love avoiding those businesses. And to the extent we can, we will.
I mean, GEICO is going to add people over time. And I think Berkshire Hathaway’s going to add people over time.
But I can’t — but it is in the interest of society to do jobs more effectively. It’s also in the interest of society, it seems to me, to take care, in some way, of the people that are affected by that activity. And either — in some cases, it may be retraining.
But in other cases, you know, it doesn’t work so well if you’re 55 years old, and you’ve been working in a textile mill all your life, and all of a sudden the guy that runs the place can’t make any money out of selling your output. I mean, that’s not the fellow’s fault that’s been working at the textile mill for 30 years.
So, there’s a balance in that. I think that the attention that’s come about lately, I think there’s — to some degree, it was a media fad based on some particularly dramatic examples at a couple of companies.
I don’t think there is more displacement going on now, as a percentage of the labor force, annually, than there was 10 years ago, in terms of reconstituting what people do. But it’s gotten a lot of attention lately.
There could be a backlash on that, in terms of corporate tax rates or a number of things. And we might feel it in that direction.
We want, at Berkshire, to do everything as efficiently as we can. Part of that, in a big way, is not taking on a lot of people we don’t need.
A lot of the mistakes that are being corrected now are because people got very fat. And their businesses got very fat in the past and took on all kinds of people they don’t need. We see that in a lot of businesses that we’re exposed to.
And as long as they’re very prosperous, really, no one does very much about it. And then when the time comes, they all of a sudden find out they can get way more output.
The oil companies are a classic example. You know, the people, probably, actually needed to produce, refine, and market oil probably hasn’t changed that much. But if you look at the employment relative to barrels produced, refined, and marketed, it’s gone down dramatically over 20 years ago.
To me, it just means that they weren’t being run that well 20 years ago. And it never should’ve occurred in the first place.
We don’t want to take on more people than we need in any of our businesses, because we don’t want to lay people off, either.
Charlie?
CHARLIE MUNGER: Well, if you put it in reverse, you’d say, name a business that has been ruined because it was over-downsized. I cannot think of a single one.
But if you asked me to name businesses that were half-ruined, or ruined, by bloat, I mean, I could just rattle off name after name after name.
It’s gotten fashionable to assume that downsizing is wrong. Well, it may have been wrong to let the business get so fat that it eventually had to downsize.
But if you’ve got way more people than are needed in the business, I see no social benefit in having people sit around half employed or unemployed.
WARREN BUFFETT: You’re very likely to compete against some guy, at some point, who doesn’t have more people around than needed in the business, too. But it doesn’t change. For the people involved, they’ve got real problems, and —
CHARLIE MUNGER: Warren, can you name one that has been ruined by over-downsizing? There must be one, but —
WARREN BUFFETT: Well, it’s like Eisenhower said about Nixon. Give me a week, and I’ll come up with something. (Laughter)
6. No layoffs at insurance operations due to reduced volume
WARREN BUFFETT: How about zone 6?
AUDIENCE MEMBER: Mr. Buffett, Mr. Munger, I’m Walter Kaye of New York City.
WARREN BUFFETT: We’re glad to have you here, Walter.
AUDIENCE MEMBER: What?
WARREN BUFFETT: We’re glad to have you here. Walter’s been a good friend of ours.
AUDIENCE MEMBER: Thank you very, very much. You just make me more of an egomaniac, a humble egomaniac, by saying that.
I don’t know if Mr. Munger’s wife is here and Mrs. Buffett is here, but back East, where I come from, in New York, they say, “When people — when men are successful, it’s their wife’s doing. But if they’re a failure, it’s because they’re lazy.” (Laughter)
But anyhow, I just wanted to, again, thank you very much. You’ve done such great things for our family. It’s absolutely incredible.
And to those of you who don’t know these two gentlemen, besides being financial geniuses, and you all know Mr. Buffett and, somewhat, Mr. Munger, too, they’re the finest human beings you’ll ever meet. I mean, just the way they explained this downsizing is the most intelligent thing that I’ve ever heard.
And eventually, like, you know, these people eventually find work. They have to be reeducated and everything like that.
But one point of business I’d like to ask you, if you don’t mind. I have been noticing that there has been a tremendous amount of new capital going into reinsurance carriers.
And I was wondering if you could make a few comments about that, if you think that will affect the reinsurance business — have any effect on the insurance business in general, because, as you know better than I, we’re still in a very soft market.
And there isn’t a month that goes by that I don’t hear of some new reinsurance carrier, whether in Bermuda or London or somewhere. Thank you.
WARREN BUFFETT: OK. Walter knows more about insurance than I do. But I’ll, nevertheless, comment on that.
There has been a fair amount of capital. And there was a rush of it about, I’d say, maybe three years ago into the reinsurance business.
But there has been capital come in, and that is negative for our business. I mean, because any capital that’s brought in, basically, will get employed.
We are willing, at Berkshire — and we do it — we are willing to sit on the sidelines in the reinsurance business.
We’ll offer quotes. But somebody that — will cut those prices substantially, if they’ve got a lot of capital and want to keep busy. And if you’ve got a lot of capital in this business, or if you attracted a lot of capital, you will do something. You might like to do something smart, but if need be, you’ll do something dumb.
You’ll rationalize it, so you think it’s smart. But you will do it. You won’t just sit there and write the shareholders at the end of the year and say, you know, “We asked you for $300 million last year. And we’d like to report that it’s all safely in a bank account at Citicorp.” It just doesn’t work that way.
So they will go out and do something. People don’t like to sit around all day and do nothing.
And that means that prices will get cut under certain circumstances. And those circumstances — that’s happening now.
We will — at Berkshire, we do have a rule about downsizing on that. We have promised people, at all of our insurance operations, that we will never have layoffs because of a drop in volume. We do not want the people who run our insurance business to feel they have to write X dollars in order to keep everybody there.
We can afford some overhead around that’s costing us a little money for lack of using it at full capacity, because it isn’t that much, relative to the size of our insurance operation.
What we can’t afford are people feeling some internal compulsion to keep writing business in order to keep their job. So, we have a strong policy on that.
And if the business falls away, in terms of price, we won’t be doing business. But we will be around to do business in a big way when the circumstances reverse.
They reversed in the casualty business for a while in 1985 or thereabouts. And we did a terrific amount of business.
They reversed in catastrophe reinsurance four or five years ago, and we became very active in that, and —
We will have times that are very good for us in insurance. It’s a lot like investments. If you feel you have to invest every day, you’re going to make a lot of mistakes. It just — it isn’t that kind of a business. You have to wait until you get the fat pitch.
And in insurance, it’s similar. You do not — if we had a budget for premium volume for our insurance companies, it would be the dumbest thing we could do, because they would meet the budget.
They could meet any budget I set out. I could tell some operation that wrote a hundred million last year to write 500 million this year, and they would meet it, you know, and I would be paying the bills for decades to come, so —
It’s a very illogical way to try and plan 8 or 10 percent-a-year growth.
Now, GEICO is a different story in that GEICO is a business that is the low-cost operator and can attract, from a huge pool, business at, I think, a very good rate of growth simply by letting people know what’s available out there. So that is a business that I see growing under almost any circumstances.
But our reinsurance business will swing around enormously, in terms of volume, based on what the competitor is doing. And what the competitors are doing depends, to a great extent, on how much money they’ve got burning a hole in their pocket.
And right now, it’s going one direction. But it will change, I mean, just like investment markets change, you know. I’ve been through at least a half a dozen periods where people think, you know, they’re never going to get a chance to buy securities at intelligent prices. And it always changes.
In the insurance business, people that misprice their policies will pay the price for it. And the world will still need insurance. And we will still be there.
7. International expansion for GEICO would be dangerous distraction
WARREN BUFFETT: Zone 7? Oh, we don’t have any. I guess we have everybody in here now, so we’ll go back to zone 1.
AUDIENCE MEMBER: Mr. Buffett, salutations from Portugal. I am from Portugal. My name is Herculano Fortado (PH). I have been a shareholder of your company since it was traded on the NASDAQ.
And I hold the shares and went on accumulating year after year, whenever funds were available and were at my disposal.
Now, a little bit about my history. As a student, I am from India. I was born in India, of Indian parentage. And my parents were very modest and could not afford me higher education. I started my school —
WARREN BUFFETT: I think maybe you’d better just get to the question, though, if you will, please.
AUDIENCE MEMBER: Yes. And then started writing insurance, life insurance, for a company which was a subsidiary of American Life.
My question now is this. I am now living in Portugal, and I see that the European market is developing and Berkshire Hathaway is having a very big slice of insurance investments.
They don’t seem to be operating in the new markets that are emerging in Europe, and as well as in countries like India or the Pacific area, where the human — two-thirds of human beings are living.
Is there a policy or a plan, on the part of Berkshire Hathaway, to diversify and internationalize their insurance business? This is my only question.
WARREN BUFFETT: Thank you.
The reinsurance business of Berkshire Hathaway is totally international. I mean, we deal with risks all over the world. We deal with companies all over the world.
And that’s the nature of the reinsurance business, generally, although there might be some that would be more specialized to this country, but —
We are quite willing to take on risks around the world, although they have to be risks with a large premium. I mean, that’s the nature of our reinsurance business. We’re not in the retail end of the business.
But we do that worldwide. And we’ll continue to do that worldwide, because there are huge risks that exist for primary insurers around the world. And they need somebody to lay them off on.
Now, whether they will pay the proper price is another question. And it may be a little more difficult, in a few jurisdictions, to do business than in others. But that’s an international operation.
GEICO has two-and-a-fraction percent of the U.S. auto market. We have about 2 1/2 million policyholders. There are over a hundred million in the country.
And there is such an opportunity here that it would be diversionary to go into other countries with GEICO.
There’s been a firm that was very successful over in England that introduced a somewhat GEICO-like operation about 10 years ago. And they did very well. They are now encountering more competition. And their results are falling off somewhat, but —
There’s a huge potential for GEICO in this country. And I would not want the management of GEICO to be going off in other directions now, when there’s so much to be done here.
I mean, three percentage points on our growth rate here, for example, you know, would be 75 million or so of volume. And that, in turn, would keep compounding over time. Well that — there’s too much to do here before we set up some startup operation around the world.
And there are actually various problems in a lot of jurisdictions in — to run a GEICO-like operation — although I wouldn’t say that that prevails every place. I mean, there could be opportunities. But the opportunity here in this country is huge. And the management of GEICO is focused.
I love focused management. The management of — if you read the Coca-Cola annual report, you will not get the idea that Roberto Goizueta is thinking about a whole lot of things other than Coca-Cola.
And I have seen that work time after time. And when they lose that focus — as, actually, did Coke and Gillette both, at one point 20 to 30 years ago somewhat — it shows up.
I mean, it — two great organizations were not hitting their potential 20 years ago. And then they became refocused. And what a difference it makes. It makes tens of billions of dollars’ worth of difference, in terms of market value.
GEICO actually started — they started fooling around in a number of things in the early ’80s, and they paid a price to do it. They paid a very big price.
They paid a direct price, in terms of the cost of those things, because they almost all worked out badly. And then they paid an additional price in the loss of focus on the main business.
That will not happen with the present management. Tony Nicely thinks about nothing else but doing — carrying the GEICO message to people who — that 97 1/2 percent or so that are not policyholders. And that will work very well for us over time.
Charlie?
CHARLIE MUNGER: We are indirectly in all of these emerging markets through Coca-Cola and Gillette. So, it isn’t true that we’re totally absent.
WARREN BUFFETT: No. Well, at Coca-Cola the international markets are 80 percent of profits — actually, a little more.
Gillette, I think they’re about 70 percent or so. So, the — we love the international aspects of the Coca-Cola or Gillette businesses. And that’s a very major attraction.
But the management of those companies is focused on that. But they are doing — they have distribution systems, and they have recognition, and they’ve got a lot going for them over there. But the beauty of it is that they’re maximizing what they do have going for them, which was not the case 20 years ago.
They just sort of let it go more by default, and they started fooling around with a lot of diversification. And you know, basically, that has not worked that well. So, we like focus. We love focus.
CHARLIE MUNGER: Yeah, and doing it indirectly, as we’ve done, one can argue that we, thereby, do it a lot better. (Laughter)
WARREN BUFFETT: We won’t explore the implications of that. (Laughter)
8. Shareholders boost Borsheims sales
WARREN BUFFETT: Zone 2?
AUDIENCE MEMBER: My name’s George Olson (PH). I’m from Atlanta, Georgia. I have a couple quick questions for you.
First of all, I’d like to have your comments on the USAir preferred that were — they’re several quarters in arrears on.
And secondly, I was wondering about the Borsheims report from yesterday. You usually comment on that. (Laughter)
WARREN BUFFETT: Well, Susan Jacques, who runs Borsheims, called me this morning. And her voice was hoarse but happy, and — (Laughs)
Borsheims — that comparable day last year was the biggest day of the year. And it was about 60 percent up this year, so — I’m — you’ve done your part. (Applause)
CHARLIE MUNGER: We are starting a new custom at Berkshire Hathaway’s annual meetings. A shareholder came up to me and asked for my autograph on his sales slip from Borsheims — (laughter) — which was a $54,000 watch.
Now, that is the kind of autographs we like to give. (Laughter and applause)
And so our message to you all is, “Go thou and do likewise.” (Laughter)
WARREN BUFFETT: It wasn’t a member of Charlie’s family, incidentally. (Laughter)
9. USAir investment has improved, but was still a mistake
WARREN BUFFETT: The USAir preferred, as I mentioned in the annual report, it looks considerably better than it did 18 months ago or thereabouts.
But their fundamental problem — and Steve Wolf has said this — the new CEO of USAir — the fundamental problems are there. And they either address and correct those fundamental problems, or those problems will address and correct them. (Laughter)
And the — you know, their costs are out of line. Their costs are those that are relics of a regulated, protected environment. And they are not in a regulated, protected environment. And so far, they have not had any great success in correcting the situation.
Knowing Mr. Wolf, I’m sure he is, you know, focused entirely on getting that changed. And he will need to get it changed. And he — his record has been pretty successful at that.
So, we’re a lot better off with our US Air preferred than we were 18 months ago, but it still is a mistake I made.
And we would’ve been a lot better off if I’d just, as Charlie says, gone out to a bar that night instead. (Laughter)
You got any comments, Charlie, on USAir? He doesn’t want to comment. It may sound like it’s his deal. (Laughter)
CHARLIE MUNGER: It’s, plainly, worth a lot more than it was last year. (Laughter)
10. Newspapers may evolve, but won’t disappear entirely
WARREN BUFFETT: And with that, we’ll move to zone 3. (Laughter)
AUDIENCE MEMBER: Hi, David Winters, Mountain Lakes, New Jersey.
Without ruining my fun, can you give me a few hints about how I should think about calculating the intrinsic value — (Buffett laughs) — of the insurance businesses?
And secondly, I’m wondering about, not that you can foretell the future, either one of you, but with regards to newspapers, is there any concern that it goes the way of the printed World Book and Blue Chip Stamps?
WARREN BUFFETT: It could — I think it’s very — I’ll answer the second part first.
I think it’s very unlikely — very, very unlikely, you know, down to a few percentage points, that newspapers will go the way of Blue Chip Stamps.
World Book is a different story. World Book has got — they have a reasonable shot at a decent future. But it’s not automatic.
But the newspaper, it may be configured somewhat differently. It may get a different percentage of its revenue from circulation and advertising than it does. I mean, there may be some evolutionary-type changes in it. But it’s still a bargain.
It is a bargain to anybody that is interested in their community. It’s still a bargain to a great many advertisers.
We spend a lot of money advertising in newspapers in our various businesses. And we feel we are getting our money’s worth, obviously. And it works.
But it just doesn’t have the lock that it used to have on the business.
11. Why $7B of insurance float is better than $7B of cash
WARREN BUFFETT: Now, what was the other question about?
Did you want to repeat the first one?
AUDIENCE MEMBER: (Inaudible)
WARREN BUFFETT: Oh, yeah, the question about the insurance business, the intrinsic value.
I would say this. We have — I’m not going to give you a precise answer, but I will tell you this.
We have 7 billion, presently, of float. That’s the money we’re holding that belongs to someone else but that we have the use of.
Now, if I were asked, would I trade that for $7 billion and not have to pay tax on the gain that would result if I did that, but I would then have to stay out of the insurance business forever — total forever non-compete clause of any kind in insurance — would I accept that? And the answer is no.
Now, that is not because I would rather have 7 billion of float than 7 billion of net proceeds of free money. It’s because I expect the 7 billion to grow.
And if I’d made that trade — that I’m just suggesting now — if I’d made that 27 years ago and said, “Will you take 17 million for the float you have, no tax to be paid, the float for which you just paid 8-million-7 when we bought the companies, and gotten out of the insurance business,” I might’ve said yes in those days, but it would’ve —
CHARLIE MUNGER: Oh, you would’ve?
WARREN BUFFETT: Yeah. (Laughter) Yeah.
CHARLIE MUNGER: No, he keeps learning. That’s one of his tricks. (Laughter and applause)
WARREN BUFFETT: That’s probably true in this case. I’m not sure about other cases.
But it would’ve been a terrible mistake. It would’ve been a mistake to do it 10 or 12 years ago with 300 million.
It is not worth $7 billion to us to forego being in the insurance business forever at Berkshire Hathaway.
Even though it would all be, you know, it would be — if it were nontaxed profits, so we got the full 7 billion, pure addition to equity — we would not take it. And we wouldn’t even think about it very long. So as Charlie says, that is not the answer that we would’ve given some time back. But it’s a very valuable business.
It has to be run right. I mean, GEICO has to be run right. The reinsurance business has to be run right, National Indemnity, the Homestate Company. They all have to be run right. And it’s not automatic.
But they have the people, the distribution structure, the reputation, the capital strength, the competitive advantages. They have those in place. And if nurtured, you know, they can become more valuable as time goes by.
12. Keeping more mortgages has increased Freddie Mac’s risk a “tiny bit”
WARREN BUFFETT: Zone 4?
AUDIENCE MEMBER: Yes. I’d like to ask the chairman and Mr. Munger about Freddie Mac.
A few years ago, I think they were earning most of their money from the guarantee fees and the float. Now, they’ve got the huge balance sheet, a lot of short-term liabilities.
Do you think that’s a more risky business now and that the spread might go away in some, you know, less-than-foreseen event?
WARREN BUFFETT: Charlie, I think he aimed that one at you. (Laughter)
CHARLIE MUNGER: It’s probably slightly more risky, but I don’t think they’re taking horrible risks. It’s still a very good business.
WARREN BUFFETT: Yeah, what the question referred to is that, formerly, Freddie Mac emphasized, normally, just the guarantee of credit and then passed all interest rate risk onto the market.
Now, they’ve retained, for their portfolio, a greater percentage of the mortgages that come through their hands.
I think they’ve structured the liabilities quite intelligently to handle what they call in the investment world “the convexity problem,” but — which is that the borrower has the option of calling off the deal tomorrow or retaining it for 30 years. And that is a very disadvantageous contract to enter into, if you lend money.
They have done quite an intelligent job of attacking that by callable debt and various things. But you can’t address a problem like that totally. There is no way to set up some model that satisfies that entire risk.
They’ve done a good job. But as Charlie says, the larger the portfolio, as compared to guarantee fees — because you’ve still got the — you got the credit risk on the portfolio, and you’ve added a little interest rate risk at the extremes.
And it doesn’t keep us up nights, but it’s a tiny bit riskier than it used to be.
13. Don’t wait for downturn to buy a great company
WARREN BUFFETT: Zone 5?
AUDIENCE MEMBER: (Inaudible) — I’m the guy who asked you my question, my family last year — (inaudible) — my mom. This guy said fine, so I — (inaudible) — (laughter).
I know you said do what you want. I just wanted to let you know that —
WARREN BUFFETT: Well, you did what you wanted. I mean, you followed my advice. (Laughter)
I’m batting 1.000. We’ll see what you’re batting next year. (Laughter)
AUDIENCE MEMBER: I had one quick question — (inaudible) — you said, if you have three great companies, wonderful businesses, they could last you a lifetime.
And I have — one thing that struck me in a way that — (inaudible) — great businesses get pounded down. And then you bet big on them, like American Express and Disney at one time.
And my question is, I have capital to invest, but I haven’t yet invested it. I have three great companies, which I’ve identified: Coca-Cola, Gillette, and McDonald’s.
And my question is, if I have a lifetime ahead of me, where I want to keep an investment for more than 20 or 30 years, is it better to wait a year or two to see if one of those companies stumble, or to get in now and just stay with it over a long time horizon?
WARREN BUFFETT: Yeah. Well, I won’t comment on the three companies that you’ve named.
But in general terms, unless you find the prices of a great company really offensive, if you feel you’ve identified it —
And by definition, a great company is one that’s going to remain great for 30 years. If it’s going to be a great company for three years, you know, it ain’t a great company. I mean, it — (Laughter)
So, you really want to go along with the idea of something that, if you were going to take a trip for 20 years, you wouldn’t feel bad leaving the money in with no orders with your broker and no power of attorney or anything, and you just go on the trip. And you know you come back, and it’s going to be a terribly strong company.
I think it’s better just to own them. I mean, you know, we could attempt to buy and sell some of the things that we own that we think are fine businesses. But they’re too hard to find.
I mean, we found See’s Candy in 1972, or we find, here and there, we get the opportunity to do something. But they’re too hard to find.
So, to sit there and hope that you buy them in the throes of some panic, you know, that you sort of take the attitude of a mortician, you know, waiting for a flu epidemic or something, I mean — (laughter) — it — I’m not sure that will be a great technique.
I mean, it may be great if you inherit. You know, Paul Getty inherited the money at the bottom, in ’32. I mean, he didn’t inherit it exactly. He talked his mother out of it. But — (laughter) — it’s true, actually.
CHARLIE MUNGER: Close enough.
WARREN BUFFETT: Yeah, close enough, right?
But he benefitted enormously by having access to a lot of cash in 19 — in the early ’30s — that he didn’t have access to in the late ’20s. And so, you get some accidents like that.
But that’s a lot to count on. And you know, if you start with the Dow at X, and you think it’s too high, you know, when it goes to 90 percent of X, do you buy?
Well, if it does, and it goes to 50 percent of X, it gets — you know, you never get the benefits of those extremes anyway, unless you just come into some accidental sum of money at some time.
So, I think the main thing to do is find wonderful businesses.
Is Phil Carret here? We’ve got the world —there’s the hero of investing. Phil, would you stand up?
Phil is 99. He wrote a book on investing in 1924 [“Buying a Bond”]. (Applause)
Phil has done awfully well by finding businesses he likes, and sticking with them, and not worrying too much about what they do day to day.
There’s going to be — I think there’s going to be an article in the Wall Street Journal about Phil on May 28th, and I advise you all to read it. And you’ll probably learn a lot more than by coming to this meeting, but —
It’s that approach of buying businesses — I mean, let’s just say there was no stock market. And the owner of the best business in whatever your hometown is came to you and said, “Look it, you know, my brother just died, and he owned 20 percent of the business. And I want somebody to go in with me to buy that 20 percent.
“And the price looks a little high, maybe, but this is what I think I can get for it. You know, do you want to buy in?”
You know, I think, if you like the business, and you like the person that’s coming to you, and the price sounds reasonable, and you really know the business, I think, probably, the thing to do is to take it and don’t worry about how it’s quoted. It won’t be quoted tomorrow, or next week, or next month.
You know, I think people’s investment would be more intelligent, you know, if stocks were quoted about once a year. But it isn’t going to happen that way, so —
And if you happen to come in to some added money at some time when something dramatic has happened — I mean, we did well back in 1964, because American Express ran into a crook.
You know, we did well in 1976, because GEICO’s managers and auditors didn’t know what their loss reserves should’ve been the previous couple of years.
So, we’ve had our share of flu epidemics. But you don’t want to spend your life — (laughs) — waiting around for them.
14. “Change is likely to work against us”
WARREN BUFFETT: Zone 6.
AUDIENCE MEMBER: I’m Joe Condon (PH) from London.
Both Mr. Buffett and Mr. Munger have addressed my question in annual reports and at previous meetings here. This is my first time. It has to do with investment in a few great, high-technology stocks.
I know your answer has been that, if you don’t understand it, and I can’t, after this performance, can’t really believe that both of you don’t understand most of the high-technology questions. But I’m thinking about not only Microsoft but, say, Pfizer and J&J.
All three companies, which have already proven that not only do they have a great product, proven management over 10 to 15 years, great market share positions, which are not easy to get into.
And I, frankly, don’t see a big difference in the P/E ratios, for example, you could say, Coca-Cola, or, you know, against Johnson & Johnson or Pfizer, which are very powerful companies. I wonder if either or both of you would address that question again.
WARREN BUFFETT: Charlie, why don’t you? (Laughter)
CHARLIE MUNGER: If you have something you think you understand that looks very attractive to you, we think it’s smart to do what you understand. If — we’ve been unable to find companies that fit our slender talents.
We well might have been in the Pfizers and Microsofts and so forth. But we’ve never had to revert to it.
We don’t sneer at it. Other people with more talent have found that a wonderful course of action.
WARREN BUFFETT: We generally look at businesses — we feel change is likely to work against us. We do not have great ability — we do not think we have great ability to predict where change is going to lead.
We think we have some ability to find businesses where we don’t think change is going to be very important.
Now, at a Gillette, the product is going to be better 10 years from now than now, or 20 years from now than 10 years from now. You saw those earlier ads going back to the Blue Blade and all that. The Blue Blade seemed great at the time. But they keep — the shaving technology gets better and better.
But you know that Gillette — although they had that little experience with Wilkinson in the early ’60s — but you know that Gillette is basically going to be spending many multiples the money on developing better shaving systems than exist now, compared to anyone else.
You know, they’ve got the distribution system. They’ve got the believability. If they bring out a product, and they say, “This is something that men ought to look at,” men look at it.
And they found out here a few years ago that the same thing happened when they said to women to look at it in the shaving field. They wouldn’t have that same credibility someplace else. But in the shaving field, they have it.
Those are assets that can’t be built. And they’re very hard to destroy.
So change — we think we know, in a general way, what the soft drink industry or the shaving industry or the candy business is going to look like 10 or 20 years from now.
We think Microsoft is a sensational company run by the best of managers. But we don’t have any idea what that world is going to look like in 10 or 20 years.
Now, if you’re going to bet on somebody that is going to see out and do what we can’t do ourselves, I’d rather bet on Bill Gates than anybody else.
But that — I don’t want to bet on anybody else. I mean, in the end, we want to understand, ourselves, where we think a business is going. And if somebody tells us the business is going to change a lot, in Wall Street, they love to tell you that, you know, that’s great opportunity.
They don’t think it’s a great opportunity when Wall Street itself is going to change a lot, incidentally. (Laughter)
But they — you know, it’s a great opportunity. We don’t think it’s an opportunity at all. I mean, we — it scares the hell out of us. Because we don’t know how things are going to change.
We are looking, you know — when people are chewing chewing gum, we have a pretty good idea how they chewed it 20 years ago and how they’ll chew it 20 years from now. And we don’t really see a lot of technology going into the art of the chew, you know? (Laughter) So, that —
And as long as we don’t have to make those other decisions, why in the world should we? I mean, you know, if I — all kinds of things, we don’t know. And so, why going around trying to bet on things we don’t know, when we can bet on the simple things?
Zone 1? (Applause)
I can see the shareholders like us sticking with the simple ones. They understand us, yeah.
15. We don’t reveal more about our stocks than we have to
AUDIENCE MEMBER: Good afternoon, Warren. Jerry Zucker (PH), Los Angeles, California.
In the annual report, the second-largest holdings of unsecured securities are labeled, “Others.”
Could you please expand on some of the holdings there? Like, do we still own PNC? And are we supposed to be buying Big Macs, as the press has reported?
WARREN BUFFETT: Yeah, well, actually, it’s a very descriptive title, “Others.” (Laughter)
We do that for several reasons. But one is that we have no interest in people buying Berkshire or looking at the Berkshire report or anything else, in order to generate investment ideas for themselves. Some people may do it, but we are not in that business.
Berkshire Hathaway shareholders are not being paid for that. There is no way it benefits the owners of the company.
So, we will not disclose, in the way of our security holdings, more than we feel we have to disclose in order to be fair about things that can be material to the company.
And we certainly have no interest in disclosing them to people who, essentially, want to use the information to try and figure out where our buying power may be, subsequently, or something of the sort.
So, we will keep raising the cutoff level. And you may see more and more in others.
And I will say this. There’s a lot of speculation about what we do, in the press, and I’d say about half of it’s accurate and about half of it’s inaccurate.
And again, we leave to you the fun of figuring out which half is right. (Laughter)
Yeah, we hope you get a lot for your money in buying a share of Berkshire. But we don’t want to act as an investment advisory service.
16. Buffett isn’t worrying about the Y2K computer problem
WARREN BUFFETT: Zone 2?
AUDIENCE MEMBER: David Coles, Appleton, Wisconsin.
Earlier, you made reference to the vicissitudes of time. What are the plans to ensure that all the computer systems and companies in which Berkshire has an interest will function correctly with dates of January 1st of the year 2000 and beyond?
And what will you do to reassure shareholders that we will not suffer serious business loss or failure due to incorrect handling of these dates by computer systems?
WARREN BUFFETT: Well, actually, I’ve got a friend that’s quite involved in the — (laughter) — question of — no, I’m serious about that — the 2000 question with computers. But that’s the kind of thing I don’t worry about.
I mean, I will let the people who run the operating businesses work on that. And I’ll work on capital allocation. And I have a feeling, one way or another, we’ll get through it.
But like I say, we have — there are a lot of things at Berkshire we don’t — (applause) — we don’t spend a lot of time on a lot of things at the headquarters that other companies have whole departments on.
And our managers have not let us down. I mean, I must say that we’ve got a group at one business after another. And they focus on their business. And they mail the money to us in Omaha. And we’re all happy. (Laughter)
Charlie?
CHARLIE MUNGER: I have the feeling that our people will be quite good at keeping the computer systems in order and with backups. I also have the feeling that few companies could handle a big computer snafu better than we could.
I have the feeling the Coca-Cola stock would be there. The Gillette stock would be there. The Nebraska Furniture Mart would be full of furniture and know the customers.
I don’t think a computer crash is going to do us in.
WARREN BUFFETT: Yeah. You’re correct, though, that that is a problem for the computer world. But as Charlie says, it’ll hit other people a lot harder than it hits us.
Most of the things — we try to be in businesses that are fairly simple and that can’t get all messed up.
And by and large, I think that we’ve got an unusual portfolio of those. And when it gets to our investees, you know, they’re going to worry about those problems themselves.
We really worry about allocating money around Berkshire and having the right managers in place. That — if we can do those two right, everything else’ll take care of itself.
17. Berkshire businesses are “way easier to predict”
WARREN BUFFETT: Zone 3?
AUDIENCE MEMBER: My name is Peter Bevelin from Sweden.
You have said that you like franchise companies, companies that have — that are castles surrounded by moats, companies that are possible to — you can have some prediction five, 10 years down the road.
But aren’t businesses like See’s Candy, the furniture business, the jewelry business, the shoe business, businesses that are hard to predict the future, five, 10 years down the road?
WARREN BUFFETT: What was that on the last part of that?
CHARLIE MUNGER: Aren’t these businesses hard to predict five or 10 years down the road?
WARREN BUFFETT: Yeah, I think —
CHARLIE MUNGER: Things like shoe business and —
WARREN BUFFETT: I think they’re far easier to predict than most businesses. I think I can come closer to telling you the future of virtually all of the businesses we have, and not just because we have them — I mean, if they belonged to somebody else — than if I took the Dow 30, excluding the ones we own, or you know, the first 100 companies alphabetically on the New York Stock Exchange.
I think ours are way easier to predict. There are fair — they tend to be fundamental things, fairly simple. Rate of change is not fast, so I feel pretty comfortable.
I think, when you look at Berkshire five years from now, the businesses we have now will be performing pretty much as we’ve anticipated at this time.
I hope there are some new ones, and I hope they’re big ones. But I don’t think that we’ll have had lots of surprises in the present ones.
My guess is we’ll have had one surprise. I don’t know what it’ll be. But I mean, you know, that happens in life. But there won’t be a series of them.
Whereas, if you — if we were to buy — if we owned a base metals business or many retailing businesses I can think of, or an auto business, I’m not sure I’d know where we would stand in the competitive pecking order five or 10 years from now.
I would not want to try and come in and displace See’s Candies, for example, in the business it does, or the Furniture Mart. It’s not an easy job.
So, I don’t think you’ll get lots of surprises with the present businesses of Berkshire, but the key is developing more of them.
18. Eisner is “most important factor” in Disney’s success
WARREN BUFFETT: Zone 4?
AUDIENCE MEMBER: My name is Stafford Ordahl. I’m from Morris, New York.
I was just wondering if the surprise could be coming from Disney. Because it seems to me they’ve been coasting, up until very recently, on the efforts of a person that’s no longer with the company, [Jeffrey] Katzenberg, who is one of those rare geniuses, like [filmmaker Steven] Spielberg, that has his finger on the pulse of the American people.
And that — they don’t come along every day, even in Hollywood.
They might be a very different company now that all of his efforts are, so to speak, out of the pipeline.
WARREN BUFFETT: Yeah. Have you finished, or —?
AUDIENCE MEMBER: Yes.
WARREN BUFFETT: Yeah, I — Katzenberg is a real talent. I would say that, by far, I mean, by far, the most important person at Disney in the last 12 years, or whatever it’s been, has been [CEO] Michael Eisner.
I mean, if you know him and what he has done in the business, there’s no one — [former President and Chief Operating Officer] Frank Wells did a terrific job in conjunction with Eisner.
But Eisner has been the “Walt Disney,” in effect, of his tenure. He knows the business. He loves the business. You know, he eats and lives and breathes it. And he has been, in my view, by far, the most important factor in Disney’s success.
Now, they face competition. The money is in — you know, the big money is in the animated films and everything that revolves around that, because you go from films to parks to character merchandising and back. And I mean, it’s a circular sort of thing, which feeds on itself. There’s going to be plenty of competition in that.
I mean, they’ve — you know, you’ve seen what MCA and Universal’s going to do in the parks in Florida. And you know what DreamWorks is going to do in animation. And now, you’ve got new technology in animation, you know, through [Pixar CEO Steve Jobs.] And there’s a lot of things going on in that field.
So the question is, 10 years from now, what place in the mind — because it’s a share of mind. You know, they call it share of market, but it starts with share of mind — and what place in the mind of billions of children around the world, and their parents, does Disney itself have, and their characters, relative to that owned by other organizations and other characters?
And it’s a competitive world, so there will be people fighting for that. But I would rather start with Disney’s hand than anyone else’s, by some margin. And I would rather start with Michael Eisner running the place than with anyone else, by some margin.
So that does not mean that it can’t become a much more competitive business. Because people look at the video releases of a “Lion King,” and they salivate.
You know, you sell 30 million copies of something at whatever it may be, 16 or $17, and you can figure out the manufacturing cost. And you know, it gets your attention. And it gets your competitors’ attention.
But going back, if I had to — if I thought the children of the world were going to want to be entertained 10 or 20 years from now, and I had my choice of betting on who is going to have a special place, if anyone has a special place, in the minds of those kids and their parents, I think I would probably rather bet on Disney.
And I would feel particularly good about betting on them, if I had the guy who has done what Eisner has done over those years presiding in the future.
Charlie?
CHARLIE MUNGER: Well, I think it helps to do the simple arithmetic. Suppose you have a billion children of low-middle income 20 years from now. And suppose you could make $10 per year per child, after taxes, from your position. It gets into very large numbers.
And — (laughter) — I don’t know about your children and grandchildren, but mine want to see Disney. And they want to see it — (applause) — over and over and over again. They don’t want to see Katzenberg. (Laughter)
WARREN BUFFETT: Well I —
CHARLIE MUNGER: I mean, in terms of the trade name. (Laughter)
WARREN BUFFETT: It’s a pretty good trade name. I mean, when you think about names around the world, it’s interesting that, you know, it’s very hard to beat the name Coca-Cola. But Disney’s got a — it’s very, very big name.
And Charlie’s point that they want to see them over and over again, and it’s kind of nice to be able to recycle Snow White every seven or eight years. You hit a different crowd.
And — (laughter) — it’s kind of like having an oil field, you know, where you pump out all the oil and sell it. And then it all seeps back in over seven or eight years. (Laughter)
19. Why Wall Street businesses are “tough” to manage
WARREN BUFFETT: Zone 5?
AUDIENCE MEMBER: I’m Randall Bellows (PH) from Chicago. Thank you for this marathon question-and-answer period.
WARREN BUFFETT: We enjoy it. Thanks.
AUDIENCE MEMBER: Thank you. My question is on the security business, Wall Street firms, in general, and specifically, what you feel about Salomon at this time. Thank you.
WARREN BUFFETT: Well, we know more about the security business than we knew 10 years ago. (Laughter)
And it, you know, it is a tough business to manage.
There’s a lot of money made in the business and then — throughout Wall Street, I’m talking about. There’s, you know, there’s very big sums of money made. And then the question is, how does it get divided up between the institution and the people there?
And you get to this question — I’ve often used the analogy of, you know, would you rather — if you’re an investor, and you get a chance to buy the Mayo Clinic, you know, that is one sort of an investment. And if you get a chance to buy the local brain surgeon, that’s another one.
You buy the local brain surgeon and his practice for X millions of dollars. And the next day, you know, what do you own?
And if you’re buying the local brain surgeon, you would not pay any real multiple of earnings because he’s going to have this revelation, several days later, that it’s really him and not you there, with your little stock certificate, that’s producing the earnings. And it’s his reputation. And he doesn’t care.
Can you imagine Berkshire Hathaway advertising brain surgery, you know, how much business we would do?
So — (laughter) — he owns the business, even though you’ve got the stock certificate.
Now, if you go to the Mayo Clinic, no one can name the name of anybody at the Mayo Clinic, unless you live within 10 miles of Rochester [Minnesota].
And there, the institution has the power. Now, it has to keep quality up and do all the things that an institution has to do. But whoever owns the Mayo Clinic has an asset that is independent of the attitude of any one person in the place the next day.
Wall Street has a mix of both. And there are some businesses that are more — where the value resides more in the institution. And there are some where the value resides more in the individuals.
We’ve got a couple of sensational people running Salomon. And they wrestle with this problem as they go along. And they seem to be wrestling considerably more successfully currently than was the case close to a year ago.
But it is not an easy business to run. And it’s not an easy business to predict, unless you have a business that’s very institutional in character, and there aren’t many of those in Wall Street.
20. Not important if part of the market is “kind of screwy”
WARREN BUFFETT: Zone 6?
Sorry we got a — the microphone’s over here.
CHARLIE MUNGER: (Inaudible)
WARREN BUFFETT: Yeah. Just raise your hand and the monitor will supply the microphone.
AUDIENCE MEMBER: Thank you. Howard Winston (PH) from Cincinnati, Ohio.
One question. Are you concerned about the rising valuations on the NASDAQ market, where companies trade at multiples of revenues instead of multiples of earnings?
WARREN BUFFETT: The rising value of what, did you say?
AUDIENCE MEMBER: The NASDAQ market —
WARREN BUFFETT: Oh.
AUDIENCE MEMBER: — where they trade at 10 times revenues or more, 30 times revenues, instead of 10 times earnings?
WARREN BUFFETT: Yeah. Well, we don’t pay much attention to that. Because throughout the careers Charlie and I have had in investing, there have always been hundreds of cases, or thousands of cases, of things that are ridiculously priced, and phony stock promotions, and the gullible being led in to believe in things that just can’t come true.
So that’s always gone on. It always will go on. And it doesn’t make any difference to us.
I mean, we are not trying to predict markets. We never will try and predict markets. We’re trying to find wonderful businesses. And the fact that a part of the market is kind of screwy, you know, that’s unimportant to us.
We tried, a few times, shorting some of those things in our innocence of youth. And it’s very tough to make money shorting even the obvious frauds. And there are some obvious frauds.
It really is — it’s not tough — it’s not so tough to find the obvious frauds, and it’s not tough to be right over 10 years. But it’s very tough to make money being short them, although we tried a few times way back.
It’s — we don’t look at indicia from stocks in general, or from P/Es, or price-sales ratios, or what other things are doing.
We really just focus on businesses. We don’t care if there’s a stock market. I mean, would we want to own Coca-Cola, the 8 percent we own of Coca-Cola, or the 11 percent or Gillette, if they said, you know, “We’re just going to delist the stock and we’re never — you know, we’ll open it again in 20 years?”
It’s fine with us, you know. And if it goes down on the news, we’ll buy more of it. So we care about what the business does. Yeah.
21. A business is more important than where it’s based
WARREN BUFFETT: Norton, did — why don’t you give him the microphone there?
AUDIENCE MEMBER: Thank you, Warren, for including me — (Buffett laughs) — out of order.
WARREN BUFFETT: It’s good to have you here. Norton [Dodge] represents a family that came in nineteen-fifty —
AUDIENCE MEMBER: Six.
WARREN BUFFETT: Six! Yeah, that joined up with the partnership and has been with us ever since. (Applause)
AUDIENCE MEMBER: A very, very fortunate connection. (Laughter)
WARREN BUFFETT: Both ways, Norton, both ways.
AUDIENCE MEMBER: And —
CHARLIE MUNGER: Careful, Norton. We don’t want you mobbed on the way out. (Laughter)
AUDIENCE MEMBER: But I might say that it all began with my father [Homer Dodge] discovering — thanks to a professor of finance that was also at the University of Oklahoma — Ben Graham, back in 1940.
And then later, when Ben Graham was about to retire, we were trying to find his protégé. And clearly, that was Warren. And so he belongs to that long tradition.
But the question I wanted to ask was, you’ve mentioned the very strong companies that Berkshire has that are really international companies, like Coca-Cola and the — Gillette.
But are you considering, or have you ever thought of considering, the foreign companies that are undervalued? Or have you, for some reason, not included that in your universe of companies to consider?
WARREN BUFFETT: We’ve looked at companies domiciled in other countries. And we continue to look at companies domiciled in other countries.
We wouldn’t — you know, we’re happy for the U.S. and for Atlanta that Coca-Cola’s domiciled in Atlanta. But would we pass on it if it happened to be domiciled in England? No, we’d love it, if it were domiciled in England, too.
And we feel that the important thing is the business, not the domicile. Although, it’s — A, we’re more familiar, in a general way, with domestic companies that are domiciled here, although they make — they may make their money internationally.
And we feel a tiny bit more comfortable, just a tiny bit, in terms of understanding the nuances of taxes, and politics, and shareholder governance, and all of that in something where we’ve been reading and thinking about it daily than someplace where we’ve had a little less experience.
But we would love to find a wonderful business that is domiciled in any one of 30 or so countries around the world.
We look some. We don’t look as hard as we look at domestic companies. We’re not as familiar with them.
But I have read hundreds of annual reports of companies spread around the world. And we’ve owned a few, just a couple.
They’re usually not as big, so just getting the kind of money in, in many cases, is more of a problem. But some of them are big.
And we do not have such a surplus of ideas that we can afford to ignore any possibilities. And if we can find something with a market cap, probably, of at least $5 billion or greater, that strikes us as having our kind of qualities, and the price is right and everything, we will buy.
22. We never reach “for an extra eight of a percent”
WARREN BUFFETT: Zone 1?
AUDIENCE MEMBER: Good afternoon, Mr. Buffett. I’m Nelson Coburn (PH) from Silver Spring, Maryland. I have one question I want to ask that hasn’t come up here yet.
Where does the money sit that comes in, say, from dividends and whatever other income that comes into Berkshire, that you’re waiting to invest someplace else? Is it get — someplace where it’s taking in a profit? Or is it just sitting, gathering dust? (Laughter)
WARREN BUFFETT: Well, we only have about four or five commercial paper names we accept. We’re very picky about where we put — the money all gets invested. We do not have anything sitting around in a safe or anyplace else. So it’s all invested.
But we do not get venturesome, in the least, in terms of where our short-term money goes. So we only have, like I say, maybe four or five approved names on commercial paper, all of which I approve. I mean, if anything ever goes haywire on this, it’s my fault.
Right now, we have, maybe, a billion and something in relatively short-term Treasurys. And we have a little extra in some commercial paper, maybe.
But you will never see us reaching for an extra eighth of a percent on short-term yields.
Some of you may remember the fiasco in the — in Penn Central, in the commercial paper market. And Penn Central, around 1970 or thereabouts, was paying a quarter of a point, as I remember, more than other commercial paper issuers.
And of course, they, one day, despite showing a positive net worth, I think, of a billion and a half or so, they said they had a lot of net worth but no cash. Turned out cash was more important. And so they defaulted.
Now, the interesting thing about doing that is, if you’re getting a quarter of a point extra, and you came over on the Mayflower, and you landed, and you said, “Well, I’m going to apply myself to getting a quarter of a point extra on short-term money,” and you didn’t make any mistake until you got to Penn Central, you would — aside from the compounding aspect — you would be behind at that point.
And I don’t like a business that you can do right for 300 years and then make one mistake and — (laughter) — be behind.
So we are very picky about short-term paper. But it is all invested. And when it’s large amounts, it probably will be in Treasurys. A couple firms’ commercial paper, we take.
23. Volatile earnings to be expected at Salomon
WARREN BUFFETT: Zone 2, please?
AUDIENCE MEMBER: My name is George Gotti (PH) from Zurich, Switzerland. I’ve got a question with respect to Salomon.
Salomon experienced quite a large volatility in profits and even revenues in the past years. What are your views on how this will develop in the future with respect to volatility in profits and revenues?
WARREN BUFFETT: I didn’t get a hundred percent of that, Charlie. Want to —?
CHARLIE MUNGER: Yeah, well —
WARREN BUFFETT: I can see, he can hear. We make a great combination. (Laughter)
CHARLIE MUNGER: Well, you can see we aren’t wasting much around the joint. (Laughter)
Salomon’s earnings have always been volatile, at least all the time I’ve been around the place. And I don’t think that that volatility will — is likely to disappear.
All that said, we very much like the people at Salomon. And they’ve done a ton of business with Berkshire over the years and in a whole lot of different capacities. And they’ve done it very well.
So we’re high on the firm, as a customer. And the firms we like, as a customer, we think, maybe, other people will like, as a customer. And generally, we love it, volatile or no.
WARREN BUFFETT: If you — at Salomon, as well as other firms of that type, they mark their securities to market. And so the changes in those marks go through earnings daily, actually, but you see them quarterly.
Interestingly, if you took Berkshire over the last 30 years, and marked to market, as we do now for balance sheet purposes, but not for income statement purposes, because the rules are different in that case — if you did that, you would see enormous volatility, quarter to quarter, in Berkshire’s figures.
You would — I don’t think you’d necessarily have seen any down year. But you would’ve seen swings between a few percent and, perhaps, 50 percent or something.
And if you looked quarterly, you’d have seen a number of quarters of losses. And you would’ve seen some great upsurges, too.
The volatility would be extreme, if it had all been run through the income account. But accounting convention does not call for running it through the income account, in the case of Berkshire. And it does, in the case of Salomon.
But the nature of their business is volatile earnings. The nature of most Wall Street businesses is going to be volatile earnings. Some may follow policies that tend to make it look a little less volatile than it might actually be, even.
The real thing that counts is two things, really. I mean, it’s running it so that the volatility never kills you in any way, and the second is having a decent return on equity over time. And I think that the people at the top of Salomon are very focused on that.
CHARLIE MUNGER: I think it’s illogical for the credit rating agencies to mark down Salomon as much as they do because the earnings are volatile. But they’re in a style business. And it’s their game.
24. Very little interaction between Berkshire subsidiaries
WARREN BUFFETT: Zone — what are we? Zone 3 now? Yeah, zone 3.
AUDIENCE MEMBER: Yes. I have three quick questions.
Do you have any formal or informal way where the managements — I know that you don’t interfere with the managements of the holdings — but where they can cross-pollinate ideas, for instance, you know, selling World Book through the GEICO channel or something like that?
WARREN BUFFETT: I’ll answer that right now. There’s very, very, very little of that, I — you know, maybe once in two or three years, maybe some idea might strike me as worth passing along. But I — they’re doing fine running their own operations.
We don’t do it within Berkshire, either. They really go their own way.
Now, they know what businesses we’re in. And so they can always go directly to somebody else. But they don’t need me to communicate.
25. Lloyd’s of London reputation problems have helped Berkshire
WARREN BUFFETT: Zone 4?
AUDIENCE MEMBER: My name is Mike Macey (PH) from Las Vegas, Nevada.
My question is this. There have been some recent news articles on the problems at Lloyd’s. What effect, if any, do you see the problems at Lloyd’s having on an increase in the Berkshire insurance or reinsurance business?
WARREN BUFFETT: Well, I think, probably, I think it’s fair to say that the problems of Lloyd’s have helped us because Lloyd’s had a terrific reputation. It was the first stop and, usually, the last stop for all kinds of unusual risks and large risks 20 years ago.
And the fact that they have lost some of their luster in that period has helped us. And, you know, we didn’t do anything to contribute to it, but it obviously benefits us, as a competitor, when questions develop about an organization which has been a premier player in the industry.
So, Berkshire probably possesses more capital than all of Lloyd’s put together, and it has established a reputation for being willing to quote on very large risks very quickly and to do exactly what it says. And it might very well be that, in many cases, we would get a call before they would get the call now.
So we’ve been a beneficiary and, probably, in a fairly good-sized way, from their problems. And it’s more difficult for them to make inroads on us now than would’ve been the case 10 years ago.
We have a — I don’t like to lay it on too strong — but we do have a preeminent position in a certain area of really large-scale reinsurance that will be difficult for anyone else to replicate.
Now, they may not like our prices. There may not be demand for some of the things we can do. But if there is demand, we are very likely to get some very significant business out of that position. And we’ve seen it some in recent years. And we’ll see it more in the future.
26. “We assume we’ll be around forever”
WARREN BUFFETT: Zone 5?
AUDIENCE MEMBER: Mike Assail (PH) from New York City with a question for Charlie about the hundred or so models we ought to have in our head —
WARREN BUFFETT: Here we go.
AUDIENCE MEMBER: — mentioned at the end of the excellent “Worldly Wisdom” speech.
I’d like to know the most useful models on industry consolidation, on product extension, on vertical integration, and any models which explain the special cases when it makes sense to invest in retailing stocks. And if Warren has anything to add or subtract, I’d love to hear it. Thank you very much.
CHARLIE MUNGER: Well, I’m glad to answer such a modest question. (Laughter)
I spoke about having a hundred models in your head. But those are all great, big models of considerable generality that are useful over and over again.
Now, you’re down into very complex sub-modeling when you get into a separate model for what’s going to happen in industrial consolidations and retail and so on, and I’m not up to all those sub-models. (Laughter)
WARREN BUFFETT: The truth is, you know, we’re up to a few. But we take the general models and, you know, plug them in. And sometimes, the light goes on. And sometimes, it doesn’t. But if it does, they could be quite useful.
If you focus, you do see repetition of certain business patterns and business behavior. And Wall Street tends to ignore those, incidentally. I mean, Wall Street really doesn’t seem to learn, for very long, business lessons.
It may not be to their advantage to learn it. Charlie would — that would probably plug right in to Charlie’s model. It’s —
CHARLIE MUNGER: You bet.
WARREN BUFFETT: Yeah. It’s better, if you’re out selling the future, it may be better to forget the past, if you’re getting paid on selling it and not on betting your life on it in some way.
One situation at Berkshire that really is somewhat different than many companies: we assume, and unfortunately, it’s in error, but we assume we’ll be around forever.
So when we — in our insurance business, we assume we’re going to be here to pay every claim. And we’re not going to retire at 65 and hand over something to someone else. And there wouldn’t be any sense paying games on accounting because it would catch up with us later on.
And whereas, in many businesses, I don’t think they have quite the same horizon on things. They do at a Coca-Cola, or they do at a Gillette.
But many companies are thinking about what kind of — I think, I’m afraid that, more than you’d like — are thinking about what little pictures they can paint for the next four quarters or so. And that’s easy to do.
But our problem is we’re going to be around a lot longer, we think, than four quarters, so that’s not an option available to us. And we have to — we really run it as if, in the year 2050 or something, somebody’s going to look and say, “Did — how’d it work out?”
27. Compensation plans must include cost of capital
WARREN BUFFETT: Zone, where are we, 5 or 6? Wherever the microphone is.
Zone 5, we got a mic over there? Maybe that was — 6! OK, we’ll go to 6.
AUDIENCE MEMBER: You state, in your letter —
WARREN BUFFETT: Could you have the microphone? Or do we have one in the — yeah. Want to bring him the microphone? Particularly for the people behind you, it’s a little difficult.
AUDIENCE MEMBER: Glen Rollins (PH), Atlanta, Georgia.
You state, in your letters to shareholders, that with your wholly owned companies, you reward them at a higher rate when they release capital to you. And you, likewise, charge them a higher rate when they need capital. Could you elaborate on that?
WARREN BUFFETT: Well, we — some of our businesses don’t need capital at all, or need so little that it doesn’t make sense to build it into a formula.
So we have certain businesses, those are the best businesses, incidentally, that take — to take, essentially, no capital because it means that, if you double the size of the business, you don’t need any more capital. And those are really wonderful businesses. And we’ve got a few of those.
But where our businesses do produce capital, we could have all kinds of complicated systems and have capital budgeting groups at headquarters and do all kinds of things.
But we just figure it’s simpler to charge people a fair amount for the money and then let them figure out, you know, whether they really want to buy a new slitter or whatever it may be in their business.
And it varies a little bit. It varies on the history of when we came in. It varies on interest rates that they — but we generally will be charging people something in the area of 15 percent, in terms of working out compensation arrangements for capital.
Now, 15 percent pretax, depending on state income taxes, is only 9 to 9 1/2 percent after-tax. So you can say that isn’t even enough to charge people, but we find that 15 percent gets their attention.
And it should get their attention, but it shouldn’t be such a high-hurdle rate that things that we want to do don’t get done.
Our managers expect to be running their businesses for a long, long time. So we don’t worry about them doing something that works for them in the next year but doesn’t work five years out or vice — you know, where they don’t make longer plans, because they see themselves as part-owners of the business. But we want them to be owners with a cost attached to capital.
We think it’s awful, frankly, the way businesses reward executives with absolutely no regard for the cost of capital. I mean, a fixed-price option for 10 years — you know, imagine giving somebody an interest-free loan for 10 years. You’re not going to do it.
And if a company is retaining a significant part of its earnings, and you give out a fixed-price option for 10 years, you know, they can do nothing with it but put it in a savings account, and they’ll make some money off of it. So it — we like attaching a cost to the capital.
If we had options for me and Charlie at Berkshire, which would not — it’s not going to happen, but it would not be illogical. We have responsibility for the whole place.
You could have some kind of a compensation arrangement that worked in respect to how the whole enterprise fared, and it would make sense for the two of us.
It wouldn’t make sense for the rest of our managers because they work on specific units. And you should have compensation arrangements that apply to those units.
But assuming you had it for the two of us — which we’re not going to have, I want to assure you — but we would say the fair way to do that would be to have an option at not less than present intrinsic value.
Forget what the market price is. Because, believe me, it — the idea of having the more depressed your market price be, the better your option price be, does not make any sense.
So we would have it at not less than intrinsic value. And then we would have it step up yearly based on something relating to a cost to capital. Because we would say, “Why should we get free use of the shareholders’ capital?” And we could work out a fair stock option.
That would be perfectly appropriate. We won’t do it, but it’d be a perfectly appropriate way to have us compensated that involved an issuance, then an initial price of not less than intrinsic value, and involve carrying costs.
And then we would be in a position, still, not totally analogous to shareholders, because we wouldn’t have a downside that you have, but we would at least have the carrying cost that you have of ownership.
And we work that through into our unit compensation plans by having a cost of capital that, like I say, tends to run about that 15 percent area.
And if people can give us money, we should be able to figure out a way to do something better than 15 percent pretax with it. That’s part of our job, too. So we will pay them to give us back money.
CHARLIE MUNGER: Well, we really invented a more extreme system. And that is the executives can buy Berkshire Hathaway stock in the market for cash.
This is a — (laughter) — very old-fashioned system, but most of them — it doesn’t take any lawyers, or compensation consultants, or — and most of them have done it. And most of them have done very well with it. I don’t know why it doesn’t spread more. (Laughter)
WARREN BUFFETT: People say they want their management to think like shareholders. Management, you know, they’re compensating them. We’re going to have them think like shareholders. It’s very easy to think like a shareholder. Become one, you know? (Laughter)
And you’ll think exactly like a shareholder.
CHARLIE MUNGER: Right, right.
WARREN BUFFETT: It’s not a great — it’s not a huge psychological hurdle to get over, if you actually write a check. (Laughter)
28. Unlike many movie companies, Disney makes money for shareholders
WARREN BUFFETT: Zone 1?
AUDIENCE MEMBER: John Lichter from Boulder, Colorado.
Are there some worthwhile books that you could recommend to us?
And secondly, with respect to Eisner and Disney, how would you define Michael Eisner’s circle of competence? And are you concerned that he might step outside it?
WARREN BUFFETT: Well, I would say that he has proven himself very good at understanding what Disney is really all about.
And you can look back to the predecessor management, between Walt and Eisner. And they didn’t really do much with that, if you look at those years.
What is special about Disney? And how do you make it more special? And how do you make it more special to more people? I mean, those are the things that you want to — and you’ve got wonderful ingredients to work with when you’re working with something like Disney.
I mean, it — you know, one of the advantages — we were talking about the Mayo Clinic and brain surgeons. The nice thing about the mouse is that he doesn’t have an agent, you know. I mean, the mouse is yours. (Laughs)
He is not in there renegotiating and, you know, every week or every month and saying, you know — (laughter) — “Just look at how much more famous I’ve become in China,” you know, or something. (Laughter)
So if you own the mouse, you own the mouse. And Eisner understands all of that very well. I would say he’s been very skillful, in terms of how he’s thought about it.
I worry about any manager. It has nothing to do with Michael Eisner. But Charlie and I worry about ourselves in terms of getting out of our circle of competence.
And we’ve done it. It is very tempting. And it’s probably part of the human condition, in terms of hubris or something, that if, you know, that if you’ve — as Charlie would say, if you’ve — you know, if you’re a duck floating on a pond, and it’s been raining, and you’re going up in the world, after a while, you think it’s you and not the rain.
You know, that there — that you’re some duck. (Laughter) But —
CHARLIE MUNGER: Right, right.
WARREN BUFFETT: And we all succumb to that a little bit.
But I think that Disney, Coca-Cola, Gillette — I think those companies are very focused. I think our operating units are very focused.
And I think that gives us a huge advantages over the managers that are getting a little bored and decide that they’d better fool around with this or that to show just how talented they really are.
Charlie?
CHARLIE MUNGER: Yeah. Eisner is quite creative. And he also distrusts projections. And that is a very good combination to have in the motion picture business. (Laughter)
WARREN BUFFETT: Yeah, Charlie was a lawyer for, what, 20th Century in the old —
CHARLIE: Yes.
WARREN BUFFETT: — days? Yeah, and he saw a little bit of how Hollywood operated. And it kept us out of buying any motion picture stocks for about 30 years. Every time I’d go near one, he’d regale me with a few stories of the past.
So it’s a business where people are — can trade other people’s money for their own significance in their world. And that is a dangerous combination, where if I can buy significance in my world with your money, you know, there’s no telling what I’ll do. (Laughter)
CHARLIE MUNGER: Part of the business reminds me of an oil company in California. And it was controlled by one individual. And people used to say, about it, “If they ever do find any oil, that old man will steal it.” (Laughter)
The motion picture business, it’s only about half of it that has normal commercial morals.
WARREN BUFFETT: Yeah, we’re not applying that to Disney.
CHARLIE MUNGER: No.
WARREN BUFFETT: Disney is really — Disney’s done an extraordinary job for the shareholders.
And they make real money out of movies. Most movie companies have — they make money for everybody associated with it, but not a lot has stuck to the shareholders.
Zone 2?
AUDIENCE MEMBER: I —
29. Book recommendations
WARREN BUFFETT: What? Oh, the books! Charlie, what are you reading these days? (Laughs)
CHARLIE MUNGER: Well, I’m almost ashamed to report because I’ve gone back and picked up the part of biology that I put up — should’ve picked up 10 or 15 years earlier. And if any of you haven’t done it, it’s a total circus, what they figured out over the last 20 or 30 years in biology.
And I — if you take [evolutionary biologist Richard] Dawkins, “The Selfish Gene” and “The Blind Watchmaker”, I mean, these are marvelous books. And there are words in those books that are entering the English language that are going to be in the next Oxford Dictionary. I mean, these are powerful books. And they’re a lot of fun.
I had to read “The Selfish Gene” twice before I fully understood it. And there were things I believed all my life that weren’t so, and I think it’s just wonderful, when you have those experiences. We always say, “It isn’t the learning that’s so hard. It’s the unlearning.”
WARREN BUFFETT: Yeah. I made the mistake of taking Charlie up to Microsoft in December. And he became friends with [Chief Technology Officer] Nathan Myhrvold.
And they are corresponding back and forth with increasing fervor and enthusiasm about mole rats. And they copy me on all these communications. So I’m getting to see this flow back and forth on the habits of mole rats.
I really haven’t found a way to apply it at Berkshire. But I’m sure Charlie — (laughs) — has got something he’s working on, on that. He’s gotten very interested in biology lately.
I like — you know, I’ve always liked reading biography, but since the — the computer has changed my life. I now find myself playing bridge on the computer about 10 hours a week. And unfortunately, I didn’t want to give up sleep or eating or Berkshire. So the reading has been kind of light.
On investment books, if you’re asking about that, I would recommend the first two books that Phil Fisher wrote back around 1960, “Common Sense [Stocks] and Uncommon Profits” and the second one [“Paths to Wealth Through Common Stocks”]. They’re very good books.
You know, I obviously recommend, first and foremost, [Benjamin Graham’s] “The Intelligent Investor,” with chapters eight and 20 are the ones that you really should read.
Two of the — well, all of the important ideas in investing, really, are in that book, because there’s only about three ideas. And those — two of them are emphasized in those two chapters.
Actually, I think John Train’s “Money Masters” is an interesting book.
I don’t know. Can you think of any others, Charlie, that we want to tout? (Laughs)
CHARLIE MUNGER: I don’t know. We have such a fingers-and-toes style around Berkshire Hathaway. (Laughter) So you sort of count.
WARREN BUFFETT: The three —
CHARLIE MUNGER: I’ve never seen — you know, Warren talks about these discounted cash flows. I’ve never seen him do one. (Laughter and applause)
WARREN BUFFETT: Yeah.
CHARLIE MUNGER: If it ever —
WARREN BUFFETT: There are some things you only do in private, Charlie. (Laughter)
CHARLIE MUNGER: If it isn’t pluperfect obvious that it’s going to work out well, if you do the calculation, he tends to go on to the next idea.
WARREN BUFFETT: Yeah, it’s sort of — it is true. You don’t — if you have to actually do it on — with pencil and paper, it’s too close to think about. I mean, it ought to just kind of scream at you that you’ve got this huge margin of safety.
I mentioned the three ideas. The three ideas, I should elaborate on. One is that — to think of yourself — to think of investing as owning a business and not buying something that wiggles around in price.
And the second one is your attitude, which ties in with that, the attitude toward the market, that’s covered in chapter eight. And if you have the proper attitude toward market movements, it’s an enormous help in securities.
And the final chapter is on the margin of safety, which means, don’t try and drive a 9,800-pound truck over a bridge that says it’s, you know, “Capacity: 10,000 pounds.” But go down the road a little bit and find one that says, “Capacity: 15,000 pounds.”
30. We’ll do more in insurance, but we don’t know what
WARREN BUFFETT: Zone 2?
AUDIENCE MEMBER: Yes, Chip Tucker (PH), Minneapolis.
Mr. Buffett and Mr. Munger, what market share does Berkshire have in super-cat insurance business? And what’s your outlook for both the market growth in that business and the potential market share growth with — from Berkshire?
You answered a related question regarding GEICO’s auto opportunities. Are there other insurance businesses potentially worth expanding into? Or is your focus on super-cat and autos opportunity enough?
CHARLIE MUNGER: You know, Warren can answer that question a lot better than I can.
WARREN BUFFETT: I — we don’t — there wouldn’t be any good market share figures in something like super-cat.
We know that, a couple years, and last year, I think, too, we had to be the biggest in terms of premium volume.
We simply take on so much more than anyone else will. And we were getting the calls on the big risks, you know, 400 million here or something of the sort. We had a quote we put out on a billion dollars on the New Madrid fault here a little while ago. Nobody else will be doing that.
So we got market share by our willingness to do large volume, by the fact that people knew we would pay subsequently, but we don’t — while we know we were the largest, we can’t give you any precise figures.
We also know we’re slipping in that now, but that makes no difference to us. We’d only be interested if we were slipping in profitable markets.
And what was the second part of the question on that, Charlie?
AUDIENCE MEMBER: What other opportunities —
WARREN BUFFETT: Oh, what other opportunities in the insurance business?
We — just this year, we bought a very, very small company [Kansas Bankers Surety], the managers of whom are here, a very fine insurance company. It has a little niche.
It — I mean, it will never be huge or anything of the sort, but it’s the kind of business that we can understand. And we like the people that run it. And we like the position they’ve achieved in the market. So we’re delighted to be in it.
We are willing to think about a whole variety of things to do in insurance. But most of them, we find, make no sense. We’ll be — we’ll do other things in insurance over the next 10 or 15 years. It’s just bound to happen, but I can’t tell you what they will specifically be.
The biggest single thing we will do in terms of value, though, probably, is grow GEICO. But we will do other things. And who knows what they might be?
We have expanded some in the — it’s a small business — the structured settlement business, from when we talked a year or two ago. And we are the preferred provider of structured settlements. Those are annuities, essentially, that are payable to people who are usually the victims of a very bad accident.
So they’re very severely injured people, with injuries that will probably last for life. And so we will be making payments to people who are incapable of earning a living, may incur substantial medical bills, for many decades, sometimes, 50 or 60 years.
Those annuities are provided by our companies to other insurance companies and to these injured people, usually, with the approval of the injured person’s attorney.
And when the advisors to the injured person think, “Who is going to be around in 50 years to pay money to this person who’s been incapacitated,” they frequently, and in our view, logically, think of Berkshire. So we have become much better known in that over the last couple of years.
It’s not a big business. And it won’t be a big business. But it’s a perfectly decent business. And it’s one where we have a competitive advantage over time.
We don’t obtain the competitive advantage by price. We obtain the competitive advantage from the peace of mind that the injured party obtains from knowing that that check will be in the mail 50 years from now.
And that’s the kind of business where we have some edge. And we’ll find other things to do over time, but can’t — I can’t —
It isn’t like we’re looking at some specific area and saying, “We’re focusing on this.” We’re aware, generally, of what’s going on in the insurance business. And we’re very ready to move when the time comes, so that we can do something intelligent.
31. People rewarded by capitalism need to help those who aren’t
WARREN BUFFETT: Zone 3?
AUDIENCE MEMBER: Mr. Buffett and Mr. Munger, my family’s been associated with Berkshire since 1968. So I ask this question with a great deal of respect for your integrity and your wisdom.
I work as an inner-city schoolteacher, where there is a rising and pervasive sense of hopelessness.
When I ask my students, “What would make you happy?” their predominant response is, “A million dollars.” As some of the richest men in the world, I wonder what your response to them might be.
And as a second part of this question, the philosophical underpinnings of capitalism have largely ignored a systemic perspective involving issues of ongoing depletion of limited global resources exploited to sustain a market economy, widening gaps between the very wealthy and the severely impoverished, and an international view of America as a country whose primary values are greed and imperialism.
As we move into the 21st century, do you see a need to re-envision capitalist premises towards original notions of democracy, justice, and humanitarian concerns?
WARREN BUFFETT: I didn’t get all of that.
CHARLIE MUNGER: Well — (laughter) — I will say this. I am higher on the existing social order than you are. (Applause)
I — there’s always plenty wrong with a social order. And certainly, there are places where ours is a lot more broken than it used to be.
I don’t think Warren and I have any wonderful solution to all the problems of the world. But wishing for a million dollars instead of some more tangible short step is the wrong frame of mind. That isn’t the way we got our million dollars.
WARREN BUFFETT: But I don’t — (Applause)
CHARLIE MUNGER: Warren might give a different answer, by the way. He’s a —
WARREN BUFFETT: No, I would agree with the — I, you know — wishing for a job makes a lot of sense to me and figuring out how to get one and then going from there. But it —
There is and always has been — that doesn’t mean it always should be — but there is a tremendous amount of inequality.
What you don’t want is an inequality of opportunity. There will be a lot of inequality in ability.
A market system, like we have, churns out what people want. If they want to watch a heavyweight fight, and they want to watch Mike Tyson, they’re going to pay him $25 million for getting in the ring for a few minutes.
And it produces what people like. And it produces it in abundance. And it’s done very well in terms of production.
It is much better to be in the bottom 20 percent in this country now than it was 50 years ago. And it’s better to be in the bottom 20 percent of this country than in any other country. But it still isn’t very satisfactory.
The market system does not reward — it does not reward teachers, does not reward nurses — I mean, it does not reward all kinds of people who do all kinds of useful things in any way comparable to how it will reward entertainers, or people who can figure out the value of businesses, or athletes, or that sort of thing.
A market system pays very big for something that will entertain them. People want to be entertained a good bit of the day. And it pays better for people that will entertain than educate.
I think — I don’t want to tinker with the market system. I don’t think I should be telling people what they should want to do with their lives.
But I do think that it’s incumbent on the people that do very well under that system to be taxed in a manner that takes reasonable care of anybody that is not well adapted to that system, but that is a perfectly decent citizen in every other regard.
And that is — you know, I don’t want to start getting into comparable worth in terms of how I tax. But I do think that somebody like me, that happens to just fit this system magnificently, but wouldn’t be worth a damn in Bangladesh or someplace, you know, because what I have wouldn’t pay off there — their system would not reward that.
I think that we get from society — society provides me — this society provides me — with enormous rewards for what I bring to the game. And it does the same with Mike Tyson. And it does the same with some guy whose adenoids are right for singing or whatever it may be.
And I don’t want to tamper with that. But I do think those people who are getting all kinds of claim checks on the rest of society from that — I think there should be a system that people — where people who are not well adapted to that system, but that are perfectly decent citizens in every other respect, do not really, you know, fall through the slats on that.
And I think progress has been made on that over the last 50 years. But I think we’re far from a perfect society in that respect. And I hope, you know, more progress is made in the next 50 years.
I don’t think the wishing for the million dollars, though — you know, it doesn’t work that way. I think —
But if you are lucky enough to have something that the market system rewards, you do very well here. And if you’re unlucky enough to have something it doesn’t reward, you do better now than you would’ve 30 or 40 years ago. And you do better than in other countries.
But I can see where it seems very unjust to look at somebody else who has just a little different mix of talents that can achieve claim checks in a way that keeps them and the next five generations of their family in a position where they don’t have to do very much.
CHARLIE MUNGER: I would say that I like a certain amount of social intervention that takes some of the inequality out of results in capitalism.
But I hate, with a passion, rewarding anything that can be easily faked. Because I think then people lie, and lying works, and the lying spreads. And I think your whole civilization deteriorates.
If I were running the world, the compensation for stress under workman’s compensation would be zero, not because there isn’t real stress. Because there’s no way to keep the fakery out, if you reward stress at all.
WARREN BUFFETT: There was a great article, and this applies — (applause) — to an earlier question.
There was a very good article in Forbes about one issue ago that showed the occupational profile of the U.S. at a couple of different intervals, going back to 1900.
And one problem you can see, just by looking at that profile, is that, if you assume 20 percent of the — the bottom 20 percent — however you measure it, in terms of employability — whether it’s measured by IQ, or interest in working, or energy level, or whatever you want to do — they fit, very well, most of the jobs that were available a hundred years ago.
In other words, you could do most of the jobs, of which there were many, with relatively unimpressive mental abilities. And as jobs have changed, the profile of people hasn’t changed. So there are more people that end up on the short end.
Now, the good part of that is the society produces so much more that it can take care of those people, one way or another. Now, the trick is to take care of them and make them not only feel, but be productive and be part of the act, and —
We’ve got enough product to do that. But the country turns out way more output than 50 or a hundred years ago.
We don’t have — we’re not perfect at figuring out how to make the bottom 20 or 30 percent, in terms of abilities, fit a new, changing job profile.
I really recommend you look at that Forbes magazine. Because if you think through the implications of those charts, I think you’ll see what social problems have to be attacked.
32. “No magic” to running a bank — just don’t do “something foolish”
WARREN BUFFETT: Zone 4?
AUDIENCE MEMBER: Edward Barr, Lexington, Kentucky.
Earlier, you led us through a discussion of the competitive position of Disney. And you also discussed share repurchase.
I wondered if you could also lead us through a discussion of the competitive position of Wells Fargo, since they just effected such a large combination [with First Interstate], in addition with, perhaps, some discussion of their share repurchase, which is probably as large, in percentage terms, as any company I can think of at the present time.
WARREN BUFFETT: Well, Wells should repurchase their shares, if they feel that they’re repurchasing them below intrinsic business value. And that’s a calculation that they make.
And you should — have to ask the question of them what their calculus is of that. But that will determine whether that share repurchase program makes good sense or not.
The advantages of an in-market merger are — can be dramatic. Sometimes, it just causes a bank to do what they should’ve done anyway.
I mean, I’m not so — I’m not always as convinced that the economies come about through — totally through scale, as they are just from taking a hard look at how they run their business.
We may have in the audience today — he was here earlier — the CEO of the Bank of Granite, which is in Granite, North Carolina. And that bank earned 2.58 percent on assets, I believe, in the most recent quarter, annualized, and had a 33 percent efficiency ratio.
Now, that bank is 400 million or 500 million of assets. You know, it doesn’t need to be 5 billion in order to get more efficient or anything of the sort.
It’s got — it’s so much more efficient than any of those larger banks that had to be put together to get those ratios that it makes you kind of wonder about the underlying rationale.
But I’m sure that Mr. [John] Forlines, who runs that bank, just focuses on — and he’s been focusing on it for a lot of years — just doing the right things day after day. And it didn’t take any in-market merger or anything of the sort to cause him to do that.
I recommend any of you in the banking business to get his report because there is nothing magic about the community of Granite, North Carolina.
Nor does he work under laws that are way different than the rest of bankers or anything of the sort. He just gets a record that — achieves a record — that makes all the rest of the records look silly.
We had a fellow over in Rockford, Illinois, in the bank we owned back in the ’70s, Gene Abegg, whose brother is going to be 104. There was a fellow from Rockford here that got me to sign a note to Ed Abegg, who will be 104 soon. I wish Gene had lived to 104.
But Gene ran a bank in Rockford that, when banks — the best banks were earning one percent on assets, he earned two percent on assets. And he did it with way less leverage than anyone else and lower loan losses and big investment portfolio.
And there wasn’t any magic about it. He just didn’t do anything that didn’t make sense.
And there’s a lot of room for improvement in the banking business with or without mergers.
But I would say that Wells, on the record, has done an exceptionally good job of running their bank compared to other big banks. And I would say that those two operations put together will be run a whole lot more efficiently than if First Interstate had been run by — run on its own.
It’s a business that can be a very good business, when run right, as the Bank of Granite or Illinois National Bank in Rockford proved. There’s no magic to it. You just have to stay away from doing something foolish.
It’s a little like investing. You know, you don’t have to do anything very smart. You just have to avoid doing things that are ungodly dumb when looked at about a year later and — you know, airlines and that sort of thing. (Laughter)
And you know, that’s the trick. It is not some great crystal ball game where you look into the future and see all these things that other people can’t possibly see. I mean, what’s complicated about Coca-Cola or Gillette or Wells Fargo, for that matter?
And that’s — we like businesses like banking, if we’ve got somebody in charge of them that is going to run them right. We’ve got a — I don’t know whether Bob Wilmers is here. But he runs First Empire, which we have a good-sized investment in. Bob just runs it right, you know?
I do not worry about surprises from Bob or First Empire. And he’ll do things — if he can grow, and it’s logical, he’ll grow. And if it isn’t logical to do something, he’ll pass. He has no ego compulsions forcing him into some sort of action. And he runs a terrific bank.
Charlie?
33. We do “whatever comes along that makes sense”
WARREN BUFFETT: OK. Zone 5.
AUDIENCE MEMBER: Dorothy Craig (PH) from Seattle.
And I noticed, in the annual report, that your recent acquisitions doubled the revenue for Berkshire Hathaway. And it seemed astounding for me. I’m wondering how that’s possible.
WARREN BUFFETT: Well, it’s — for one thing, we started from kind of a small base. The — but we — the GEICO acquisition, you know, added 3 billion or so of revenues, and — actually more than that, a little more than that, but not much more. And RC Willey and Helzberg’s probably added 600 million or so in the current year.
And since we were working off a base of 3 1/2 or so billion, those three acquisitions did double the revenues. We won’t have many years when that happens. It’s not any goal of ours to double the revenues or increase them 20 percent, even, or anything.
We just — we try to do whatever comes along that makes sense. And if there’s a lot that comes along in one year that makes sense, we’ll do a lot. And if there’s nothing that comes along that makes sense, we’ll do nothing.
So it’s — there’s a lot of accident in it. But last year, you know, a fair amount happened. And I’d love to see a lot happen next year. But we don’t know at this point.
Charlie?
CHARLIE MUNGER: Nothing.
34. GEICO’s Lou Simpson has more investing options now
WARREN BUFFETT: Zone 6.
AUDIENCE MEMBER: Oh me? Yes, my name is Victor Lapuma (PH). And I’m from the Virgin Islands. And my question is on the GEICO asset side.
One of the things that makes Berkshire unique is the high percentage in equity as opposed to fixed assets. And GEICO, as of the end of the year, looked like a typical insurance company with four times the fixed assets as equity assets.
And my question is, over time, will they have the same composite as Berkshire on the asset side?
And the second part of that question is, how are the asset allocations decisions being made at GEICO after the merger as compared to before the merger?
WARREN BUFFETT: The decisions at GEICO, which, as you say, is about 5 billion of marketable securities, have been made, and are being made, and will be made, by Lou Simpson. Lou has done a fabulous job of running the investments of GEICO since about 1979. And we’re lucky to have him.
There are very few people that I will let run money running businesses that we have control over. But we’re delighted, in the case of Lou. I mean, that’s one in a thousand or something. But Lou has done a terrific job, will do a good job.
And the one thing we offer him, he has the ability to do whatever he wants to do with those assets now. He did not have that ability before GEICO became part of Berkshire. Because at that time, there were certain ratios that were necessary for — which were understandably necessary, that made sense.
With GEICO as a standalone entity, with its own net worth of a billion and a half or 2 billion, and doing 3 billion of business, it would’ve been inappropriate for him to take on a different configuration, beyond a certain point, in equities.
So he was constrained by the nature of the business he was in and its capitalization. That constraint no longer applies. So he, with that 5 billion, can do whatever he wants.
Now, if he does certain things, we would need to provide backup to GEICO, so that their policyholders would be protected under the most adverse of circumstances. But that’s no problem for us.
We could do it by quota share reinsurance. We could do a lot of things. We could just guarantee their obligations. And we are in a position to do that.
We haven’t done it yet because it’s not — hasn’t been necessary yet. But if it made sense — if Lou wanted to be 5 billion in equities and it made sense, we would arrange things so that the GEICO policyholders would be every bit as secure as under the most conservative of investment portfolios.
So Lou has another string to his bow now. And there may be a time when it gets used. He’s been great under the old system. And he may be better under this system.
CHARLIE MUNGER: That’s a very shrewd question. You’re to be complimented.
WARREN BUFFETT: That means it’s something we thought about — (laughs) — before, but you are to be complimented, right.
35. “Permanent holdings” probably won’t be sold even if market overvalues them
WARREN BUFFETT: Let’s see. Zone 1?
AUDIENCE MEMBER: Neil McMahon (PH), New York City.
Berkshire owns several companies — stock in several companies — which are called permanent holdings.
In the early ’70s, we had a two-tier market, the one-decision stocks, high P/Es — 50, 60 times earnings.
If that were to reappear again, would Berkshire’s companies still be permanent? Or is there a price for everything?
WARREN BUFFETT: Well, there are things that we think there’s no price for. And we’ve been tested sometimes and haven’t sold them, but —
You know, my friend, Bill Gates, says, you know, it has to be illogical at some point. The numbers have — at some price, you have to be willing to sell something that’s a marketable security, forgetting about a controlled business.
But I doubt if we ever get tested on — there’s only a couple of them in that category.
Actually, there — you know — I won’t comment on that. (Laughs)
We really have a great reluctance to sell businesses where we like both the business and the people. So I don’t think I’d count on seeing many sales. But if you ever attend a meeting here, and there are 60 or 70 times earnings, keep an eye on me. (Laughs)
Charlie?
CHARLIE MUNGER: The so-called two-tier market created difficulties, I would say, primarily because a lot of people or companies were called tier one when they really weren’t. They just had been, at some time, a tier one. If you’re right about the companies, you can hold them at pretty high values.
WARREN BUFFETT: Yeah, you can really hold them at extraordinary levels if you’ve got — it’s too hard to find. You’re not going to find businesses that are as good.
So then you have to say, “Am I going to get a chance to buy back the same business at a lot lower price? Or am I going to buy something that’s almost as good at a lot lower price?”
We don’t think we’re very good at doing that. We’d rather just sit and hold the business and pretend the stock market doesn’t exist.
That actually has worked out way better for us than I would’ve predicted 20 years ago. I mean, that mindset is — or 25 years ago — that mindset is — there’s been a fair amount of good fortune that’s flowed out of that that I really wouldn’t have predicted.
CHARLIE MUNGER: But there, you’re demonstrating your trick again, you know? Still learning. A lot of people regard that as cheating. (Laughter)
36. Buffett doesn’t expect Gates will join Berkshire’s board
WARREN BUFFETT: Zone 2.
AUDIENCE MEMBER: Yeah, Alan Rank, Pittsburgh, Pennsylvania.
Knowing your aversion to technology but your close affiliation with Bill Gates, Microsoft, have you ever considered either inviting him to be part of the Berkshire through the board, or being involved to maybe solve some of the problems with World Book and taking it to the new technology and expanding it?
And on the other end, you also love insurance and the float. Have you considered the other businesses that would have that similarity, such as cemeteries and funeral homes with their pre-need and their large cash reserves?
WARREN BUFFETT: The — Bill and I talked about the encyclopedia business some years ago. But he was pretty far down the line at Encarta, quite far down the line at Encarta, actually, before I even met him. So it wasn’t — my guess is, if we had met earlier, that there might have been something evolve in that.
But he had put a lot of chips on Encarta and had done a good job with it. So it really wasn’t — it wasn’t a real option to work with him on World Book.
Bill also is very focused on his business. And I believe he’s on the board of some biotech company in which he’s got a significant investment.
But you will not see him on the boards of, at least I don’t believe that you will, of American corporations — I think, if you look at the boards in the, say, up in the Pacific Northwest, where he had a lot of friends and knows the companies well and maybe grew up with some of the people.
But I don’t think you’ll see him on anything which really doesn’t — which is just a business that doesn’t grab him intellectually on something. I do think there’s one biotech company that he’s involved in that way. And you know, he’d be a terrific asset.
But he really focuses on Microsoft. He has his board meetings, as I remember, on Saturday. They last, you know, all day. And then he goes after the business that way. He’s not —
I don’t think he’d be interested on being on a bank board or an insurance company board because he just figures he’s got other things to do with his time. And I think he’s probably right. (Laughs)
37. Not all “float” businesses are attractive
WARREN BUFFETT: Zone 3? Oh, the question was about other kinds.
We’ve always had an interest in float businesses of one sort or another, but —
You know, Blue Chip Stamps was such a business, until it disappeared — (laughs) — one day, and we couldn’t find it. We went — looked in the closet. We looked everywhere, out in the backyard. (Laughs) Where was it?
So we like that sort of business. But most of the float businesses, the costs are pretty explicit. And like I say, we don’t like most insurance companies as float businesses. We are not interested in buying the typical insurance business, because we think the float will end up costing us too much.
We’d rather borrow money with an explicit cost attached to it rather than have the implicit costs of an underwriting loss with most companies.
But we’re always — we are interested in businesses that provide cash rather than use up cash. We’re willing to have them use cash, if the — if what they use will produce high enough returns. But we’ve got this bias toward things that throw off cash.
Charlie?
CHARLIE MUNGER: Well, if we go into the pre-need funeral home business, that’ll be the day. (Laughter)
38. Expect a “better” market for Class A than Class B
WARREN BUFFETT: Zone 3. (Laughter)
AUDIENCE MEMBER: Charlie is a difficult act to follow. I’m Robert Keeley (PH) from Washington, D.C.
I have a brief comment and a brief question. The comment is that I think you may be considerably underestimating the interest there will be in purchases of Class B stock later this week and next week.
I have at least 10 friends in Washington who are aware that I’m a Berkshire shareholder and that I was coming to this meeting. And they’ve insisted that I report back to them tomorrow on just what happened with the Class B stock because they’re very interested in buying some of it.
Now, that’s anecdotal, to be sure. But if you take that ratio of 10 people to even the shareholders who are present here today, you’re talking about tens of thousands of people who are going to be in that market.
And my question relates to liquidity. On page 18 of your annual report, you say, and I quote, “The prospect that most shareholders will stick to the A stock suggests that it will enjoy a somewhat more liquid market than the B.”
Could you explain that? It seems to me that if most shareholders keep their A stock, do not convert it or sell it, that the B stock will be much more liquid. Maybe I don’t understand liquidity.
WARREN BUFFETT: No, I think you do. You understand it. And I’ll elaborate just a bit.
The — certainly, in the first week, I would expect the B stock to trade far more, although I hope it doesn’t trade like most new issues trade in relation to the amount sold.
It’s just the nature of a new offering that there’s usually — there’s always some flurry of activity. Sometimes, I think it’s quite excessive. And I don’t think it will be with Berkshire. But there will be some flurry of activity.
But longer range, let’s just assume that there’s $400 million worth of B stock. There will be 40 billion of A.
Now, admittedly, you know, I’m not going to do anything with my stock. And many people in this room have a very low tax basis and, except under very unusual circumstances, have no intention of doing anything with their stock.
So of that 40 billion, there’s a very significant percentage that you might say is almost inoculated against reaction to market changes.
But there still is a very significant dollar value. There’s a fair amount held by funds, for example.
And so the market value of what I would call the potentially tradeable A is likely to far exceed the market value of the potentially tradeable B. Now, it may be that all of the B is potentially tradeable, whereas, only a small portion of the A is.
But that 40-billion-to-400-million ratio, I think, almost ensures that, after the initial flurry, that the better market — and when I say, “better market,” I mean the ability to move large dollar amounts in both directions with minimal movement of price — the better market — not by a huge margin — but the better market is likely to be in the A. And frankly, we hope that it is. We still hope there’s a good market in the B, obviously.
But if you’re talking 10 shares of the A, which is a $300,000 or so investment, I think that, two months from now — that it’s likely to be that buying or selling $300,000 worth of A will have slightly less of a percentage impact than buying or selling $300,000 worth of B, but not by a significant amount.
But that’s what I meant by that comment of having a slightly better market in the A than the B. And that’s important from our standpoint because, if that situation became reversed and the B became the better market, then people would have a real incentive to convert from A to B over time, and eventually the B market would dominate.
We don’t anticipate that happening. And I think the way we’ve arranged it, it won’t happen. But it could happen.
Charlie?
CHARLIE MUNGER: Yeah, well, I think we’ve also created arrangements in the way we’ve written the prospectus and rewarded the selling brokers that tend to dampen demand, both individual and institutional. And we sometimes accomplish what we try to do. (Laughter)
WARREN BUFFETT: Zone 4? Don’t ask us for a list of those, what we’ve accomplished. (Laughter)
39. Corporate return on equity will probably drop
AUDIENCE MEMBER: Dan Pecaut, Sioux City, Iowa.
In the mid-’70s, you wrote an article on how inflation swindles the equity investor and that the average return on equity for corporate America would be like 12 or 13 percent.
Last year, the average was more like 20. Have the laws of economics been repealed or modified? Or if not, what sort of calamities might occur as we revert to the mean?
WARREN BUFFETT: Well, I have been surprised by returns on equity. There was a good article in Fortune about two issues ago. Well, it was in the “Fortune 500” issue, whenever that was. And it discussed the question of return on equity.
And it made some good points about how the introduction of putting post-retirement health benefits on the balance sheet tends to swell equity returns subsequently. In other words, it moves down the denominator in terms of total equity employed.
And there’s been a lot of big-bath accounting, where there have been write-offs, so that counting that, I don’t think it has gotten to 20 percent. But it’s higher than — it’s certainly higher than I anticipated when I wrote that article.
And I would say that it would seem very extreme to me, in a world of — like we’re living in now — to have equity cap — returns on equity — close to the 20 — average close to the 20 percent rate over time. But it has surprised me, how high returns have been.
Now, you have had situations like at Coke, for example, where 25 years ago, they would not have repurchased stock. And so, they’d have piled up more equity in the business. And Coke’s return on equity, if it had been following the policies of 1970 or ’75, would be far less than it is now.
Coke really doesn’t need equity. And so, it can earn extraordinary returns and very large dollar sums. To the extent that impacts the figures, that has some impact on them.
To the extent that General Motors sets up many, many billions of a reserve for post-retirement health benefits, that tends to make the returns on GM look a lot better than it did in the past, when it wasn’t even recognizing those costs and, therefore, had an equity that really was much larger than the true equity.
So there have been some things happen like that. But all in all, I don’t think, under any system of accounting, the 20 percent returns for American industry are in the cards.
Charlie?
CHARLIE MUNGER: Well, I agree. And I think that this business of having way more consolidation and the successful companies, like Wells Fargo, buying in stock, I think that’s had a huge effect, too.
I don’t think it’s actually gotten that much — obviously, we had a long period of real growth and so on. And I think that, on average, business has earned higher returns on equity. But I think a whole lot of things have combined to goose the results. And I don’t see how it could go much farther.
40. Buffett’s investment doesn’t reflect any real estate insights
WARREN BUFFETT: Zone 5?
AUDIENCE MEMBER: Yes. My name is Ted Elliott (PH) from Connecticut.
The press reported a recent investment you made in the real estate business. And I wondered if you would comment as to your outlook for that business.
WARREN BUFFETT: Well, that’s just sort of an asterisk. I’ve got virtually everything in Berkshire, and I own a few municipal bonds outside and a few other things, but I don’t want to buy anything that Berkshire’s involved in. It just complicates life. And all the best things I like — (laughs) — are in Berkshire.
So every now and then, some little thing happens to hit the radar screen that is too small, really, for Berkshire. And I’d bought a hundred shares of that company back when I — it’s called Property Capital Trust — I’d bought 100 shares of that back when we owned NHP, which had done a couple of deals with them. So I — my policy of reading every annual report in sight that can further my knowledge about anything, I bought 100 shares.
And then I happened to see a year or so ago, where they said they were going to liquidate. So having some money around, I bought that. But it’s not based on any feeling about the real estate business, any sophisticated analysis of the company, or anything else. It’s a minor personal investment.
I have no insights whatsoever. We’ve done a few things in real estate at Berkshire. But they’ve been large things. And there was a brief period when there were a couple things that were intelligent to do.
If we’d started a little earlier, there might’ve been a lot more things. But we started a little late. So we’re doing nothing now. But we listen to things, occasionally.
But we’re looking. We’re basically looking for big things at Berkshire. And we haven’t found anything in real estate in a long time. And we may never.
But who can tell? I mean, we’ve got our oar in the water. And the couple things we’re in are working out fine. But they’re not significant relative to Berkshire’s size.
41. Berkshire’s past growth not a yardstick for new investments
WARREN BUFFETT: We’ll go to zone 6. And this is the last question because it’s going to be 3 o’clock. And let’s have zone 6.
AUDIENCE MEMBER: Hi, my name’s Mike Nolan from New Jersey. My wife and I have been shareholders since 1984, and happy ones. Thank you both. Two questions today.
In the retail store industry, in light of Berkshire’s outstanding 23 percent annual growth in book value per share and the industry’s roughly 8 to 9 percent growth in equity over the last several years, we wonder, why would Berkshire exchange stock for securities such as these, when the growth and the net worth of the acquired companies, if they’re anywhere near the industry average that you’ve acquired this year, are one-third or less?
To quote Barnett Helzberg from the annual report, “The diamond business is a very competitive industry.”
WARREN BUFFETT: Well, all retail is competitive. And both of those companies have averaged a lot better returns on equity than the numbers you cite for the industry.
And the second point, you know, we have no way of making 23.6 percent in the future. So we do not use our historical — if we used our historical average as a yardstick for new investments, we would make no new investments because we don’t know how to make 23.6 percent in the future.
But we like — we regard the retail business as a very tough business. We like the records of those companies, their market positions, and their managements. And when we find a business like that, and we feel very comfortable with the people running it, we will make the deal.
But we won’t expect to make 23.6 percent on our money over time doing that.
I’d like to thank everybody for coming. You’ve, you know — (Applause)
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