46) Glen Tongue: next acquisition, what can shareholders do to help?

Our appetite is always there, we are not going to borrow a lot of
money, we are not going to issue shares, our cash balances will tend
to build. Lubrizol was $9B we are looking at a couple more that are
the same size, we cant do a really big elephant now, we wont stretch,
we have not taken extra risk because we dont need to

cm - very reluctant to issue shares, very different to other places,
friend sold to socialist country and country sold shares and said we
are getting this for nothing haha

wb - we hate issuing shares

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45) performance

No manager results should be shorter than 5 years,  in reference to Todd Combs

Do Swiss Re and Munich Re decrease reinsurance?

Less than $4b, so it would not change at all what we are willing to
do. We are way below capacity in regards to risk we are going to
tolerate.

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Blogger jammed - I have about 5 posts left

43) Youth unemployment, entrepreneurial market positive

I did it by living at the Omaha public library for 3 years, anything
you do to improve your own skills will make you better you just don't
know when. The only diploma I have in my office is my Dale Carnegie, I
paid $100. You should start with communication.  If I never worked on
it, my life would have been very different.You want to find something
your passionate about and work hard in it.

CM - econ is a tough subject, the experts disagree, i would not hurry
into a field where teh experts dont agree id master the easy stuff.

WB _ I would not aedvise taking lots of courses in economics, they
didn't help me in any significant way

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42) If NetJets was "almost" bankrupt why didnt you tell customers?

I meant if not owned by BRK it would have been going towards
bankruptcy, we put money in to protect it (1.9B).

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41) Will Charlie do a meeting?

Yea we do it, called Afternoon with Charlie its only with hardcore addicts

Wind power
WB - its terrific but only when it blows, which is 35% of the time in
Omaha, never will be base load, wind is cleanest but it cant be relied
on, economics only make sense with an incentive tax credit from govt
which they have been doing, on its own it will not return and adequate
return on capital, BRK has paid 2% of all the corporate taxes, so they
have tax capacity to build more wind projects

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40) $38B of cash where is it?

Not banks not money markets, the only thing I feel safe with is UST

CM - I have seen people struggle to earn 10 bps, I think it is stupid,
you don't want to fool around searching for yield with short term
money it is never worth it

WB - company was going to bankrupt, over the weekend, but FTC needed
time so they closed early but they had real cash and made amazing
deals, it can happen at any time, if ben bernanke runs off to south
america with paris hilton or something haha leave that off the
transcribed part, when someone comes to us and says we need a deal
right now

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WB - I own a lot of the securities I told you not to buy, UST, but its a good place to leave money and forget about it

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37) FMR: Do you estimate growth?

Some products travel way better than others, obvi if we see growth on
incremental capital we like it but we will buy companies with low to
no growth if the price is cheap relative to the value. we would love
them all to grow, lubrizol wont grow very much but we still like it.
In connection with Lubrizol, Sokol met with them and they had
projections out to 2013 and sokol had projections to 2015, i have
never seen projections not go up, i pay no attention to it, we are
doing projections in our head obviously, don't ask a barber if you
need a haircut

Cm - for the kids in school, here is my advice learn our way but while
you are in school pretend to learn their way

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36) reinstating charitable program

it was tax efficient way to give away money, to give three charities,
no one else copied it, CEO wanted to direct contributions which is
wrong, we always had a small backlash of where the money went, BRK
would have contributed to planned parenthood and we are not going to
buy Sees candy but it never amounted to anything, then we bought
pampered chef 50,000 independent contractors usually women and a
campaign developed because BRK was giving to pro life from A class
shareholders were going to boycott Pampered Chef and they were being
hurt in their livelihoods, it was hurting a whole lot of people,
reluctantly i ended it. When we started hurting our 50000 employees
it became apparent to me it was unfair and i reluctantly stopped it.

cm - we didn't want parent company debating social debates of the time

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35) Midamerica trying to build nuclear plant in Iowa? Bond like return is it worth mega catastrophe risk

I dont think there is anything like in the exposure you refered to, i
think nuclear power is very important in our future, 20% of
electricity in US is nuclear, OPPD has nuclear facility. I think
nuclear is important and I think it is safe, it is not going anywhere
in the US because of what happened in Tokyo but that doesn't change my
view that we should continue to develop nuclear around the world.

CM - We cant be so risk adverse that things taking a tiny dent in a
subsidiary, we have to have a reasonable amount of courage to run this
business.

wb - we have to carry toxic waste on RR, but I regard myself as a
Chief Risk Officer, we are not doing anything that pressing my
imagination that will not take one nights sleep

cm - you can believe iowa will have a far safer plant

wb - far more people lsot their lives in coal mines

cm - and if a tsunami gets to iowa that will be hell of tsunami

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34) Congress and the debt ceiling?

If they don't raise it, it would be the most asinine act they ever
performed. In Indiana they passed a bill to make pi an even 3 to make
it easier to learn that is the only thing that could compete with the
worst idea of not raising the debt ceiling, having a ceiling is
mistake. the debt capacity of 2011 is different then 2009, it doesn't
mean i dotn think it should grow larger as gdp but the amount of time
wasted, we have a lot do this is ridiculous waste, in the end there is
not chance they don't raise it, i wish they would eliminate they just
use it for posturing purposes, we wont have a problem as long we keep
isuing in our currencies, they difference between borrowing in your
own and somebody others is night and day! our only issues are the
printing press no working and inflation. we were trying to buying a
bank in in in (CM Chicago) only place we could find money in 1960s
were Kuwait in Dinars, but we didn't want to borrow in a foreign
currency

CM - i remember an era of bipartisan foreign policy (marshall plan)
now it seems to me both parties are competing to see who is the most
stupid and they keep topping each other

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33) Continuous learning, you read 5 papers a day and many reports?

I am not that fast

Cm - speed is over rated, I could do problems faster than my roomate
but he didn't make any mistakes, i wouldn't be disocuraged what the
hell difference does it make

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32) GS 10%, GE 10%, Dow 8.5%, Wrigley & Mars 11%, Swiss Re 12% - why the difference?

All done in different times except GS and GE, opportunity costs were
different in all of those, I could have done better in post panic, I
was early relative to 5 months later. They are not related to each
other, they go through everything available that day, past deals we
made dont matter. an error huge people make is to compare the best
deal they ever made (good advice) they are determined they are never
going to a deal like that again, the goal is not to make the best deal
ever but its the best deal at that time

CM - of course we are going to make different deals are different
times there is not other rational way

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31) how can we measure how well you allocate capital?

The real test is how much earnings are generated vs the earnings
retained, the job gets tougher every year

CM - we continue to beat the market avgs just not our past record

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30) Lubrizol did not shop the company, did they breach fiduciary duty

CM - Let me do this, they did not breach their duty because we were
not going to participate if they didn't do it our way

WB - we do not participate in auctions, they may get less money we
wont be there, if they want to do an auction we would have said good
luck

CM - any one else got an easy question?

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CM - water is not a problem and i would not worry about it

if you can figure out energy you can convert sea water into fresh
water, israel drinks 50% of sea water some times, people say drill
drill drill they are all nuts, we need to preserve hydra carbons

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31) Successor compensation

The next CEO will make a lot of money and they will deserve it, some
make well into 8 figures because they deserve it, for the excess
value.

CM- i hope it will be a long time in the future

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30) If you were to have a kid in 5 years how would you motivate them against other countries?

If you are very rich and you bring them up to thin they certain
privilege to think they got rom the right womb thats wrong, if you
raise them that others should do the work for them and fan themselves
you wont get a good result. I didn't want to give them an idea that
they were special because they were rich, dotn give them an incentive
to do better than the parent in what they have done well (thats not
fair), if your rich and urkids have no incentives its ur fault as a
parent

CM - I dont think you can raise kids affluent family an expect them to
dig fence poles, my advice is lose your fight as gracefully as you
can, its rare to have alit like intensity and passion, if your
proctologist you might not like your day

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29) Each of you give example of historical business success and failures?

CM - Costco became the best in the world in its category with an
extreme meritocracy and self imposed integrity to pass on savings to
customers and it create ferocious customer loyalty, they one store in
Korea that will do over $400MM, they are quite rare, the more normal
business is like GM which became the most successful business world
and wiped out shareholders, that is a very interesting story, i would
take them through the value line numbers, they faced a real difficult
problem heavily unionized combined with success and increase in
competition, from preventing wealth from killing you. The graphs don't
exist that I want to teach, how stupid are you. Part of it is because
how turf protected academics can be. That is the way is it should be
taught, HBS used to teach it that way and they stopped, history of
business trampled on other professors. IBM is an interesting case.

WB - our plane was hijacked, and we picked as dirty capitalists, each
of us given one request, charlie said i would like to give one much
more my speech on the virtues of costco, and you WB shoot me first
haha

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28) Joel - Goodwill and young Warren vs old Warren

AOL Time Warner would be written off, basically in evaluatignthe
businesses we own forget about good will, in determing how well we
allocate capital you need to factor in goodwill. if you bought KO
good will would get $100B of goodwill, you have to allow for goodwill
when you are deciding how well one allocates capital. i think
amortizing goodwill makes no sense, look at return on net tangible
assets.
CM - when we buy a business we get 10% net operating return, $60B of
float $6B of earnings isn't so bad
WB - paying $9b for lubrizol, $1B pre tax earnings. you have to judge
us on 9b investment you judge CEO of lubrizol on the capital he
deploys

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CM on worst businesses

Wb - going into smaller businesses that had no chance of going big,
dexter was our worst business, furniture mart is terrifric

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27) Ajit as successor, talk more about him

Ajit is not exactly a publicity hound, i cannot think of any decision
he has made that i wouldnt have done the same thing, you would be
better off voting with him then me, he is as rational as Charlie, he
loves what he does, he's creative, ajits mind works like a machine, my
best deal was hiring him

CM - model medical school, secret to the success in a field is to get
really interested in, every thanksgving Ajit flys to london because
they don't have a thanksgiving

Wb - he thinks of BRK before anything else, he could have monetized
himself many times before, he could create 100MMs of wealth by
leaving, he's smart he knows it and it doesn't cross his mind, and
comp he thanks me but I feel like i left off a zero, you wont find
anything like him

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26) BRK splitting A shares?

We have already split it, you can convert A shares into 1500 B Shares
but the same very other way.

CM _ May you live until the A stock splits

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25) which companies will do best/worst inflation

best will be ones that have lowest capital needs, See's (since we
bought dollar fell 85%),sees sells 75% more lbs of candies by 10x
revenue and it didn't take too much cpaital. Anyone who can increase
prices wihtout heavy CAPEX.

Utilities are more like bonds, you need to build generators, bond like
investment, not going to do well in inflation like bonds wont do well.

CM - capital intensive business RR like ours and our utilities are
best in the world

WB - our RR, govt has talked about high speed rail for $43B in
California, projections go up over time, we paid $43B for 2200miles of
track, 1300 bridges, 600 locomotives (not sure on numbers) but used
that comp to value rr

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24) Whitney Tilson - Don't you think you are being overly conservative about future earnings and insurance losses?

I agree with you Whitney, I dont know if I would consider break-even
overly conservative but i woudl say tis conservative. Katrinas happen,
but it wouldnt be inappropriate to believe we would make mone on
underwriting.

CM _ asked WB would you want any other insuarance company?

WB - no absolutely not, GEICO had an underwriting profit of 8 pts
probably best quarter. ajit started a business from scratch, its more
infrequent, if someone wants a huge amount of insurance, tad at gen re
has done a tremendous business. i didn't have anything to do with it
so I can brag about them

CM - invested with an Omaha boy and you got some of the best insurance
companies in the world.

WB - we paid $7mm for national indemnity and now it has more net worth
than any insurance in the world,

CM - casualty is a tough business there are temptations to be stupid
in it, but if you got to be in it we have the bets ones

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23) Focus on private over public equities

Public is not an after thought, we spend more time on public because
private do not come around as often, we spend equal time on both. A
lot of our cos have opportunity to make more money in the future. We
sound as much time on portfolio as we always did, $150B in cash and
securities.

CM - as we get forced into larger and larger stocks we are not going
to do as well

WB - a lot less well, we have to put billions into them, these are not
fields that are not being looked into by other analysts

CM - we get called now to buy whole companies and i like it a lot,
better then shuffling paper

WB- its fun to do both actually

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22) Erosion of dollar, how can Aussie own BRK?

I like BRK, he owned AUSD last year one of the two currencies he
owned. We try to increase earnings power hopefully to a degree
greater than inflation. We will share in gains and losses with
shareholders because our interests or aligned via our ownership. no
way we can do as well in the past, now that we are working with these
sums.

CM - nothing more than to add - Australia has open pit minds with Asia
demanding commodities, we will do well compared to companies in US

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21) Resigning from board of Washington Post?

I will not sell any stock, I can save travel time and phone call away,
normally i wont comment, but I will be unequivocal about this I will
not sell Washington Post. I am just cheaper than before, you can call
me. You can ask Melinda

CM - I am on the Costco board, I really admire them, one of the
pleasures of my life. I don't have a big ownership interest. serving
on lots of boards is for the birds.

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20) Small business owners, not TBTF, do you think we will have to bailout another company as tapayers?

There are institutions around the world, people wont like it, but
governments should bail out companies, but management and shareholders
should be wiped out. We are doing this with Fannie and Freddie, even
Chrysler is paying back and I didn't think they would but I am
impressed, I didnt think we would get money from auots but the govt
made a decision about workers. In europe they are deciding if
countries are tbtf, the problem will always be with us. For that
reason you have reduce the propensity to fail, you have to make it so
the CEO and board (not same draconian of CEO) any institution that is
bailed out should leave CEO and spouse dead broke, board should give
back last 5 years of director fees. if you run an institution that
society coudl get hurt, you need strong incentives to proven failure.
reduce leverage in the system, it helps. Fannie and Freddie are too
big to figure out, which is ok we need to get it right.

CM - past panics and recessions start from wall st, they usually are
started by peopling making money with leverage and pushing bubbles,
this should have caused something like the 30s where we prevented it
from happening for a long time, but since we didn't you can expect it
sooner than you think, this is stupidity and it comes from academics,
econ and finance are not hard science, they should have gone into
snake charming

WB - is there anyone we didn't insult?

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19) Charlie what did you learn last year?

CM - I hate to admit this, I read the book In The Plex and I found it
very interesting, I find these engineering cultures very interest,
will I make any use of this I doubt it but I enjoyed learning it, but
I believe if you go to bed learning a little more every day then that
is your goal

WB - I learned to let Charlie write the press releases

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18) Is this an oil bubble?

We took a position in an oil (CM it was 10 a barrel) - to answer your
question we really don't know, you are dealing with a finite resource,
the world is 85MM barrels getting close to 8mm barrel a day, that is a
lot of oil to take out of the ground, new frontiers to eb found, we
have stuck a lot of straws into the ground and it is finite, so it
will be higher just cant tell you when

how many oil producing wells in US? 500,000

I have no idea what the price will be, traditionally BNSF hedged oil
because they use diesel, i suggested to them no to, if we could guess
oil then we should do that instead. Berkshire does not hedge in away
for commodities, some subsidiaries do, very few commodity have i eve
had confidence in, one thing i am confident in is that US dollar will
decline over time. a real intelligent person can make more money over
time then speculating

CM - if we have done nothing but oil, we would not have done nearly as
well. what we have done is much easier then what you have tried to do
(speaking to women who said she bough oil and sold at peak and is very
good at it)

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17) BYD CEO, unexplained product launch delays?

CM - the price is higher than what brk paid, any company that tries to
move as fast as BYD is going to have various glitches and delays, i am
quite encouraged by what has been going on, they tried to doubel sales
6 x times in 6 years and it worked the first 5 times, ill take it

wb - nothing more to add

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1 hour lunch break is over

Ron Olsen is addressing the audience on corrections to the Sokol
statement for the record

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16) US lagging the rest of the world. Anything fiscal and monetary policy?

We have had our foot to the floor on monetary. People think fiscal, we
had a stimulus bill and thats, it we have a tremendous fiscal program
going on we take in 15% of GDP and spend 25% of GDP. Agree with what
government did in fall of 2008. resi construction has flat lined,
when it comes back and it will, but it takes working off a crazy
inventory we have. when that comes back you will see a pick up
employment. shaw carpets and nebraska furniture mart will hire when
resi contruction comes back not just construction workers. i said in
annual report it may pick up by end of year, we are creating
households faster then we are building this a good thing, the
tornadoes re sad but they took out homes. People think it is slow
recovery but if you think about the hit we took,
290K max per week and 106K bottom we are 190K now - rail cars per week
Iscar is picking up
when resi construction gets rid of huge overhang, i think it will
surprise people

cm - the one place i think we are making a mistake is that we are not
learning enough from the financial collape, we should take an axe and
widdle the financial sector down to size

wb - how would you do that?

cm - i would have tax disocurage trading, securities should trade like
real estate, hft is legalized front running, making heroes out of
people that succeed is bad for the moral fiber of our country, the
lack of contrition of finance people makes sokol look like a hero.

wb - if you trade an s&p contract for 10 seconds for a profit, 60% of
the gain is a long term at 15%

cm - the hedge fund traders pay less on taxes then professors and cab
drivers, this is dimented

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15) Explain trading policies for employees?

there are three people that can execute trades, we are not an
investment advisory firm or a mutual fund. we have clear rules and i
can assure you they will be reviewed by audit committee. buffett was
on audit committee of coca cola, they had code violations they happen.
solo hit high up. we had a case where a friend of mine who was a VP
and we supplied the evidence that sent him to jail, we had a women
arrested in our office to make clear we mean business. we have sent
more than one person to jail. we can have all the records int he world
but bad things can happen. rules are not made to be danced around.

cm - greatest institutions hire people they trust a lot, its fun to be
trusted, you need mutual trust. big compliance dept are one wall st
and they have the most scandals

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14) BRK vs another mutual fund?

I advise people to buy index funds if you are not going to be active,
if you have a day job, i adivse buy an ides fund consistenly over
time. it will be a perfectly satisfactory investment, i would rather
BRk at current prices over index fund, i like brk better

cm - i like brk a lot better and i would be unhappy to own an index
funds, a skilled investor wont do as well as historical, reduced
expectations are needed.

wb - big on lowering expectaions charlie

cm - thats how i got married

wb - and he lived up to them

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13) FMR PM to Becky Quick: why are you not short the dollar?

We did in the past but not now, but now all currencies are going to
decline, a short position is just a bet on which one declines faster,
i have mild feelings but not big conviction. 80% of Coke is going to
be non-dollar, we have some non-dollar bets but we will not make big
bet against dollar. a dollar in 1930 is worth 6 cents today, but we
still have done well, i hate inflation but we have done well with it,
we have not had run away inflation but we need to guard against

cm - i think one way the world muddles through - take a god awful
culture like Greece, they make money on tourism and they close it
during tourist season they dont pay taxes but they are still around

wb - they have been around for a while

cm - adam smith said great coutnries have plenty of great ruin

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12) Legacy

be known as a teacher, oldest corpse, wilt chamberlin"at last I sleep alone"

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11) go gos of 1990s conglomerates?

we are a conglomerate, tax efficiency transfer of money from business
that do not have good ways of using it to ones that do. LTB, Gulf of
Westerns, Teledyne, they were issuing shares to buy they were ponzi
schemes that people wanted to go along with. But Teledyne issued when
it was overpriced and bought it when it was underpriced, the other
ones were very different. Buying low p/e company with high p/e stock
can be a dangerous game. we are congolomearet and gernally they are
unpopular but i think we can run it in a rational way

cm - some of those companies got into heavy manipulation, one said i
know what im going to report i just dont know how

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10) How did you raise your first funds?

I moved back here from NY in 1956 and a few members of family said
manage my money. didn't like being in selling securities because when
it fell i wanted to buy but i felt bad. i needed to be in a room all
by myself, told 7 members of my family and roomate and mother from
college. I will not tell you what I am doing. it was very slow,
dodge came in and another guy in the fall. we stumbled along fro 6
years in my house, did it all myself. when charlie came along, law is
ok as a hobby no place for a man of your intellect.

cm - long time to leave a family business, wb pounded on me.

wb - attracting money?

cm - helps if you conduct your life that people trust you and helps
even more if people are right to trust you

wb - present fee structure, you can attract money and make it without
doing anything with it haha we never charged a fixed fee

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9) Commodities, BRK has not kept up with inflation, why not buy gold?

When we started BRK, gold has a way to go to catch up to the return on of BRK.

There are 3 categories of investments: anything denominated in a
currency, items that you buy that dont produce anything but you hope
someone will buy from you in the future (gold), what it will produce
like a farm and you decide what to pay based on what it will delver
over time.

WB pulled out a 1 dollar bill, it says in god we trust and that is
false advertising. If elizabeth warren were here she would say in govt
me trust and if govt acts wrongly. any currency based investment is a
bet on how the government will behave. if you lived in zimbabwe.
almost all currencies have depreciated over time, unless we are
getting paid extremely well they dont amok sense.

All the gold in the world into a cube 68 feet on a side. You could get
a ladder and sit on top of it and say, you could fondle it, you could
polish it, but its not going to do anything. Al you are doing is
hoping that someone will else will buy it from. Keynes described this
in chapter 12, the beauty contest. Anytime you buy an asset that cant
do anything, you are betting someone else will pay more. We did that
with silver but silver had industrial use. I was off on 13 years

if you buy that farm and how much will it produce and how much you
have to pay, logically you should not care what the price is tomorrow.
cotton doubled in price, much to the chagrin of fruit of loom, and if
you go back in time cotton isn't exactly a great investment but it has
a productive use.

Rising prices cause excitement and your neighbor owns gold and you
think you are smarter than he is and your wife asks you it can cause
prices to rise.

CM - somethign peculiar about buying an asset if the whole world goes
to hello, if you courtly is trying to kill you then maybe but then
probably other coutnries are going to hell but id prefer BRK. Other
people like to buy paintings of soup cans but i don't recommend that
either.

WB - we producing more gold every year, dig it up in africa bury it in
ny fed reserve. 1b acres of farmland valued at 2 trillion, take ten
xom 4 trillions, you could own all farmland and 10 XOm or the cube of
gold you can fondle. that may seem like a close choice but not to me

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8) US Bank and Wells Fargo, what is your outlook on these based on the US econom?

Third FMR question

Best banks in the country, different then money center banks you think
of. Banking as a whole, profitability will be considerably less in the
years ahead then it was early part of this century. A real important
reason is the leverage will reduces which is good society. The
leverage could be used but because when used unintelligently as you
can see in TBTF ruins it for everyone. Even if ROA was as high there
will be less assets so returns will be lower. We still think USB and
WF are still good business, not as attractive as when leverage was
higher. Troubles in banking, you have seen worst in the past, banking
is fundamental. Stubbs, I dont know why we think of new ways to lose
money when they old ones were working so well. The FDIC has had to
handle 3800 institutions, that has not cost US taxpayer a penny, its a
mutual insurance company. it always happens on the asset side, they
always mess up. I like those positions, I added to WF. 25-30% on
tangible equity will not be future.

CM - M&T bank is headed by a real sensible fellow and its been a
wonderful investment, written by Bob Romers Annual report and I
recommend it as reading and Jaime Diamonds at JP Morgan. Wilmer
doesn't like banks making money on trading because you are making
money on your clients.

WB - romer also dislikes money tends to flow where people work on
money and brain drain is a problem

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8) Aside from Sokol, BRK dividends?

We will pay dividends, when we do perhaps we should pay 100% because
we are saying we cant find anything better. Lets assume you had a
saving account, earning 5% or sell it at 1.2x? Every dollar invested
has returned more than a dollar, more intelligent to leave the money
and sell off shares if you want the income. the logic is
unquestionable the reality is uncertain, there is an end to it at some
point. when the time comes that 1 is buying 0.90 we will declare a
divident, when we announce it the stock should go down and it will,
because we lost our ability to compound wealth.

CM - if you want to sell some stock to buy somethign that is ok?

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7) Do you still believe low tangible business are superior to high CAPEX businesses, for inflation protection?

This first is still better for inflation, the best testament to that
is your own earning power, if you are the top lawyer, as inflation
goes on you willing get paid more and more and not have to put large
capital into it. The worst businesses are the ones with big
receivables and inventories that need high capital investments,
usually we are not attracted to utilities and railroads. RR will have
a right to the increase in economic prosperity. We were doing to
$30MM business on $9MM capital now $300MM on $40MM, it has made us
1.5B in that period. if candy prices double, and it is much better
investment o have if you have inflation.

CM- we didn't always notice, and sometimes we forget, continuous
learning is always necessary.

WB _ i am better investor because i am abuisness man and a better
businessman becuase i am an investor. Fortune 1977 article how
inflation swindles the equity investor. the best inflation hedge is a
royalty with no fixed capital needs, not inventory no a/r no capes. we
are going into high capes businesses because we cant deploy this much
money, there are not enough Sees candies, there is a real disadvantage
to size.

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6) Future of America debt, why do you speak so positively of US?

Dick Holland, one their good friends. I don't see how you can not look
at this country and be positive, if you look at 1776 it has been the
most extraordinary economic period. I was born in August 1930, if
someone came to me in the womb and said you should see what its like
out there, 25% unemployment, dust bowl the grasshoppers are taking
over, dow will be at 42 down from 348. Since then quality of life is
up 6 to 1, there has been nothing like that. His father was anti-new
deal, we were told things were going to hell. My father in law told my
wife to be that he wanted to have a talk with me, doc thompson said i
want to tell you are going to fail but its not your fault, if you
starve my daughter would have starved anyone, the democrats are going
to take coutnry to communism and its not your fault. When I got out
of school in 1951, my dad and Ben Graham said you have a good future
in stocks but not now, the dow is above 200 and it never goes above
its a bad time to start. the coutnry always has a bad times, we had a
civil war, 15 recessions since it started, we will aways have a list
of reasons why the coutnry will fail, all i can tell you is it doesn't
happen in a straight line. capitalism is an amazing thing, the game
is not over, the rest of the world is catching up. china is not
smarter they don't work harder they have tapped into a system that
works wonderfully well.

CM - Oh I can go back further than that, Europe survived the black
death, the world is going to go on.

WB _ Do you have anything more?

CM- I have known Dick a long time, and i agree with some of what he
says. You can be cheerful if things are slightly deteriotaitnng. The
politicians are never so bad that you don't wish to have them back?

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5) Trying to value BRK out loud with a 7% discount, $185K the complexity of your empire a value trap?

The operating earnings are almost certain to increase, but how much
who knows. The investments are the same they could go up, our primary
goal is to build primary operating earnings. Neither one of us would
give an intrinsic value it would be a range, but even our ranges would
differ modestly. You have received signals once or twice, when we buy
stock. W said it once and it went up so of course we didn't buy any.
Corp america buys when it is high not low, they may an equation that
escapes my reasoning power. We do not consider BRK overprices. We had
a very large international company and its bigger than we can handle,
but we will NOT use the stock, because in the end our shareholders
would lose because its currency. If Lubrizol wanted stock we wouldn't
have done a deal, we were happy to give $9B in cash. we would not give
a portion of stock because we don't give away a portion of already
good businesses. you can draw your own deductions from my statement?

CM_ you are looking at the two right factors, we have not lost are
ability to do interesting things with our cash, we will not be as
inactive as we are now.

We say normal earning power is $12B, we just used $9B

WB - Can you see us using stock? CM- Sure if the new businesses is so good

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5) Sorkin on Sokol again

I didn't know anything about Lubrizol, i would never understand
chemicals but i do understand economics, are there moats are their
barriers, i said call charlie he is smarter, charlie said i dont
understand it either, david didn't get a hold of charlie. what dave
said to me, is what ham bridge (CEO of Lubrizol) explained ot me was
a good understanding of industry dynamics and what relation oil
companies had to lubrizol, oil companies have got out of the business,
consolidated over time, i looked over ease of entry, when i bought
sees in 1972, i have 100mm could i take on sees candies and i came up
with the answer now. I ask the same question, if i had $100B could I
take on Coca cola, bran son tried it with virgin cola but thats not
the type of promise you want to make. its not impossible to enter this
business but the lubrizols low cost, 10B market, pretty good size
motor on this thing, lots of patents but more than that they have good
connection with partners when someone makes motor they work with
lubrizol. I believed Iscar had a durable competitive advantage.
Lubrizol is the #1 market share and the business is sustainable and
good business over time, engines run longer run smoother. Lubricants
are always going to be around it will be around for a long time.

CM - Iscar and Lubrizol are sisters under this skin, small market
thats anyone with any sense would not enter, but if you have any more
give Warren a call

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4) FMR: if you lived another 50 years what asset class or sector would you add to circle of competence?

It would have to be big, if i could really become an expert, I mean
real expert in technology filed that would bew awesome, it is going ot
be a huge field, there is likely to be a few huge winners and many
disappointments, your not going to have a big edge in oil, but the
degree of discrepancies in technology will be very dramatic and the
gains will be so.

CM - tech or energy - i think we are the wrong people to develop the
expertise, i d think we have could try to identify someone with
abilities we lack, but its been hard to find.

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3) Sokol has great talent but lacks integrity, but what if this happened to your successor?

assumption that sokol, was next in line which wasnt true but entitle
to think he was a candidate. i think its a good idea that my son
howard be chairman with no compensation, chance of mistake is low, the
leading candidate, id bet on him. the meek will inherit the earth but
will they remain meek? the executors will have a big block of stock
which can make a change of CEO as long as chairman and CEO are
different. its pretty hard if you have mediocre CEO, a bad ceo can be
kicked out. its not easy to kick out a CEO when the chairman is not
independent, but howard will act as a safety measure. the directors
will look at quality of human being as much as managerial skills, its
vital that you have someone BRK that cares more about BRK then
himself. we have multiple candidates that fulfill that.

CM - idea of buffet has precedent, the rockfeller family was in charge
of std oil, and they stepped in to throw out for moral reason.

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Effect of ending POMO?

wb - qe2? you are on acronym ahead of me, its no secret what they are
going to do, i don't think, if something is that well known any effect
of that has been discounted by this point in time. if you say you are
going into tax rates in year, the market does not wait until a year to
build it into market prices, there may be other things that happen,
but i see no reason for it to cause any disruptions. obi a huge market
force will be withdraw, you lose that buyer but govt issuance will
remian same but market has known.

c, - nothing to add

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1) when you found out about sokol I do not understand ur reaction, u said u would be ruthless and you weren't, the press release was not direct or clear and you praised sokol, you expressed no anger why did you handle so inadequatley?

I learned march 14, I got a call from John Froin works for citi and Chicago and called wb said congrats and said citis team that worked with dave were proud to be part of it and this was news to me and the next day I had mark cfo call dave and ask what happened, he said he called to get a number from citi which was an understatement.
I was waiting for draft of lunrizol proxy because I was leaving for asia, the most imprtant part of proxy is history transaction. I got that the afternoon if the 18th and it had a lot of info about dave and citi and at that point Munger Tolls olsen got involved. Ron Olsen was on trip to asia and on mar 26 we knew mto was being intereviwed three times and what happened. I don't have a bberry but ron does, I was getting some info but we decided we needed a board meeting when we got back on 26th on 28th we were going to bring Charlie into it. On the 26th he sent me his retiring, and maybe interviews did it, retirement saved us money so we don't have a litigate. So I sent out press release which has been the subject of mild critiscm. I ran it by dave, and he removed one line about how wb knew he would not be a sucessor because he said he didn't want to be. Both reviews and his cnbc appearance he didn't feel neeto correct facts. Board met they called the SEC. As far as I was comcerned dave was gone, minimal severance and sent damming evidence to authority
Now ppl wanted me to be more anger in pr

Cm _ that was not the most clever pr, you don't want to make decisions while angry. You can always tell a man to go to he'll tomorrow if you think its such a.good idea. It could have been more angry but.I think virtues is as important as error

Update on earnings

Almost all businesses not related to residential businesses have gotten better qtr by qtr. What was different, the first qtr was the second worst wtr in insurance due to catastrophes, katrina was the worst ever. Asia hit reinsurance particuallary hard, estiamted cost 50b brk represents 3-5%. Insurance lost 821, usually assume breakeven, unlikely to have underwriting profit for 2011 unless no hurricanes. First time in 9 years will have a reinsurance loss, does not effect my opinion that we will have breakeven going forward. Insurance income will drop with GS and GE or pfd going away. 43b in cash earning nothing, will not be that way forever so that will help (Sounds like view on short rates). Believes railroads competitive adv becoming more clear as oil prices rise. Lost on australian floods, new zealand earthquake, and japan earthquake. Swiss re not interested going forward, they had 5 yr deal in fourth year and they get 20% of eanings, wb jokehe wished they cancelled early. 700mm of loss
25000 autos will get insured this year.
Wb _ how many ppl are in NZ charlie?
Cm - well id guess 5b
Wb did quick math and showed 10x worse than katrina.
Could be one of the worst years for reinsurance because 3rd qtr is usually worst for hurricanes.
Goodwill does not grow for Geico but he estiamates good will 14b on the books 1b. Same goodwill that mars and coke has, policy holder has significant value that is not on  balance sheet , if only 66 of you sign up that is a goodwill 100000.

Accouting Lesson

Other than temporary impairment
Nobody knows what "quite a while" means for at a depressed price is when you run it through income statement. Wells fargo required to markdown 337mm but had to ignore 3.7b gain. Could have used avg cost instead of specifi identifiactiom method which we use for tax purposes so you can realize largest loss. Ignore gains and losses in investment securities focus on operating earnings. Headlines will say net incoem but it can be useless from an operating performance.

Comments on Sokol
You saw in the movie the Salomon testimony. I was elected chairman of solomon on a sunday at 3pm, someone asked me what happened? What happened was inexplicable and inexcusable, looking back at solamon I still feel the same way and to some extent with what happened with sokol and failing to tell me about his contact with Citi and then his purchase of stock before the recommendation to me, there is no question of it being inexcusable. The inexplicable part but I would like to talk about it but what goes through my mind, dave made no attempt to disguise what was doing, in insider trading people use their neighbors the third cousin, dave left a clear record of his purchases. After Leer deal we supply of list of everyone who knew and when and then a while later FINRa you get a list of who traded to see if you recognize any of them, its inexicable if he thought if he was doing something wrong why do it in the open. Brk paid David 24mm yr last year. Walter Scott said dave and greg should get special compensation we called it that lollapalooza in honor of charlie. It was a cash payout based on a 5 yr operating income and if they hit it dave got 50mm and dave for 25mm. Dave looked at it and said this more than generous, you should split it equal with me and greg. I witnessed dave transfer 12.5mm to his jr partner with no fanfare no push. What I find inexplicable is that 3mm caused this? What causes a man to turn away 12.5mm and ten years later buy stock in advance of a deal for 3mm. Tracy Brit got a shout out. Wb was debating what day sokol told him and how he told him. I should have pushed harder and asked him but what someone says I owned the stock I usual assume more than a week.

I believe it is mistkae to assume.greu haired people are no more rational

Any explaniation for irrational?

Hubris

Introductions

Im warren and he's Charlie _ I can see and he can hear that's why we work together.

will answer any question on sokol,  everything will be transcribed for website

The movie

Governator was ok

But The Office skit was hilarious!

The movie begins

The calm before the stampeed

Borsheim's

Cartier sells $300,000 in watches over the weekend just to shareholders

Berkshire Hathaway Office

Buffett's house

Lunch at Gorat's

Landed in Omaha

Easy flights,already met some interesting people on the plane rides

Mobile Post

Test to see mobile post

So it begins..

Test post - at the airport everyone is glued to TVs watching the royal wedding, it's very easy to get a seat facing the other way.