[00:02:36] Intro: You are listening to The Investor’s Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected.

[00:02:49] Clay Finck: So diving right in, to kick off the meeting, Buffett showed the results on the big screen for Q1 of 2023. Operating earnings came in at just over 8 billion, which was up from 7.1 billion in the previous year, and Buffett mentioned that he expected business to not be as good in 2023 as it was in the previous year just because of how good 2022 was.

[00:03:16] Clay Finck: You can see their business results in their most recent 10-Q, but one slide that they showed that I really liked before the Q&A session was the number of shares outstanding each year. When Berkshire has extra cash and not many opportunities to deploy that cash, at times they’ll repurchase shares, given the shares are trading at an attractive value.

[00:03:40] Clay Finck: Buffett harps over and over, I feel like each year how much he loves when businesses he owns repurchase their shares, and he isn’t afraid to do it for Berkshire itself. From 2019 to 2020, Berkshire repurchased 5% of shares outstanding. In 2021, they’ve repurchased 4.3% of shares, and in 2022, they’ve repurchased 1.2% of shares.

[00:04:02] Clay Finck: So on a cumulative basis from 2019 to the end of 2022, Berkshire’s shareholders increased their stake in the company by over 11% without having to purchase more shares themselves. Over time, this compounding makes a significant difference, especially when Berkshire repurchases shares at attractive prices because they’re getting more bang for their buck when they get the shares for cheap.

[00:04:27] Clay Finck: It’s just really a special moment to see Warren and Charlie enter the stage in thousands of like-minded people, giving them a standing ovation. You can almost feel the sense of community and camaraderie in the room as everyone is just so friendly, and it’s a really good reason to get away and come back home with a renewed sense of energy and purpose.

[00:04:52] Clay Finck: It’s something that’s really hard to explain, and something you just really have to experience yourself, and it feels really good to have people tell me that they listen to our episode on the Berkshire meeting last year and they decided to book their ticket to Omaha because of that. Having people recognize how valuable of an event this is for meeting like-minded people is really difficult to overstate.

[00:05:20] Clay Finck: All right, so here’s the first clip I wanted to play related to commercial real estate. We’ll go ahead and play the clip here

[00:05:30] Question: This question comes from Tom Seymour. He says, the first sentence of a recent Financial Times article read. Charlie Munger has warned of a brewing storm in the US commercial property market with American banks full of what he said were bad loans as property prices fall.

[00:05:47] Question: Please elaborate on what’s going on in commercial real estate. How bad will the losses be and what sectors or geographies look particularly bad? I’ll just add an addendum from another viewer who wrote in and wanted to know if Berkshire would be more active in commercial real estate as a result. 

[00:06:03] Warren Buffett and Charlie Munger: Well, Berkshire’s never been very active in commercial real estate. It works better for taxable investors than it does for corporations taxed the way Berkshire is. So, I don’t anticipate huge effects on Berkshire, but I do think that the hollowing out of the downtowns in the United States and elsewhere in the world is going to be quite significant and quite unpleasant. I think the country will get through it all.

[00:06:32] Warren Buffett and Charlie Munger: Right. But as they say, it will often involve a different set of owners.

[00:06:38] Warren Buffett and Charlie Munger: Yeah. And the buildings don’t go away, but the owners do well, but most people like to buy with non-recourse in real estate. And one time I asked Charlie, there was some real estate guy, we were talking to him, and you know, how do they decide how much they can a building like this is worth?

[00:07:00] Warren Buffett and Charlie Munger: And it’s, the answer is, it’s whatever they can borrow without signing their name. And if you look at real estate generally, you’ll understand what the phenomena that’s happening. If you remind yourself that that’s the attitude of most people that have become big in the real estate business.

[00:07:20] Warren Buffett and Charlie Munger: And it does mean then that the lenders are the ones that got the property. And of course, they don’t want the property usually. So then the real estate operator counts on negotiating with them. And the banks tend to extend and pretend. And there are all kinds of activities that rise out of commercial real estate development, which occurs on a big, big scale.

[00:07:46] Warren Buffett and Charlie Munger: But it all has consequences. And I think we’re starting to see the consequences of people who could borrow at two and a half percent and find out it doesn’t work at current rates, and they hand it back to somebody that gave them all the money they needed to build it. Charlie’s had more experience than real.

[00:08:09] Warren Buffett and Charlie Munger: Charlie started in real estate, though. I mean, Charlie. Charlie, yes.

[00:08:14] Warren Buffett and Charlie Munger: It’s difficult. I like what we do better.

[00:08:17] Warren Buffett and Charlie Munger: Well, Charlie once said to me when I was leaving his house a few months ago, I was visiting him. We talked for a couple of hours, and I said to Charlie as I left, I wasn’t anybody else in the house.

[00:08:34] Warren Buffett and Charlie Munger: And I said, except one daughter. And I said, “Charlie, I’ll just keep doing what we’ve been doing.” And Charlie said, without looking up or pausing a second, he says, “That’s all you know how to do, Warren.” Yeah, he was right too.

[00:08:51] Clay Finck: So there you see that Berkshire generally isn’t interested in purchasing commercial real estate, and generally, they prefer to buy great businesses that they can hold forever. It sounds like Buffett and Munger both believe that commercial real estate could be in some trouble in the coming years due to, you know, things like more businesses going remote, higher borrowing costs, higher interest rates, and these can all push down the purchase prices of these properties.

[00:09:21] Clay Finck: Next, I wanted to play a clip that discusses the future of value investing. Now, this is a hot topic nowadays as people are aware that they have to adapt as their environment changes. Here’s a clip on this subject.

[00:09:37] Question: Hi, my name is Jala Z. I’m from Santa Clara, California, and my question is to Charlie and Warren. Given the rise of disruptive technologies that can improve productivity significantly, and AI being one of them, how do you envision the future of value investing in this new era? And what adaptations or new principles do you think investors should adopt, and any recommendations for investors to remain successful in this rapidly changing landscape?

[00:10:07] Question: Thank you.

[00:10:08] Warren Buffett and Charlie Munger: Well, I’m glad to take that one. I think value investors are gonna have a harder time now that there are so many of them competing. First, a diminished bunch of opportunities. So my advice to value investors is to get used to making less.

[00:10:26] Warren Buffett and Charlie Munger: And Charlie has been telling me the same thing the whole time.

[00:10:30] Warren Buffett and Charlie Munger: We’ve known each other for a while. I mean, we get along wonderfully because we are making less. Yeah, well, but that’s mostly because of larger funds. When we were younger, we never thought we could manage 508 billion or even 5. But I would argue that there are gonna be plenty of opportunities, and part of the reason they’re requiring you to be patient is that there are plenty of opportunities.

[00:10:59] Warren Buffett and Charlie Munger: The tech doesn’t make any difference or any of that. I mean, if you look at how the world has changed in the years since 1942 when I started, say, “Well, how do the kids that don’t know anything about airplanes, don’t know anything about internal combustion engines and cars, don’t know anything about electricity and all that,” but that really isn’t the world’s changing. New things coming along don’t take away the opportunities.

[00:11:29] Warren Buffett and Charlie Munger: What gives you opportunities is other people doing dumb things, and I would say that, well, in the 58 years we’ve been running Berkshire, there has been a great increase in the number of people doing dumb things. And they do big dumb things. And the reason they do it, to some extent, is because they can get money from other people so much easier than when we started.

[00:11:56] Warren Buffett and Charlie Munger: So you could start 10 or 15 dumb insurance companies in the last 10 years and you could become rich if you were adept at it, whether the business succeeded or not. And the underwriters got paid and the lawyers got paid and that creates, if that’s done on a large scale, which it couldn’t be done 58 years ago, you couldn’t get the money to do some of the dumb things that we wanted to do, fortunately.

[00:12:28] Warren Buffett and Charlie Munger: Ah, and so I don’t think that investing has disappeared so much from this huge capitalistic market that anybody can play in, but that the big money is in selling other people ideas. It isn’t in outperforming. And I think that if you don’t run too much money, which we do, but if you’re running small amounts of money, I think the opportunities will be greater.

[00:12:54] Warren Buffett and Charlie Munger: But then Charlie and I have always differed on this subject. He likes to tell me how gloomy the world is, and I like to tell him, “We’ll find something.” And so far, we’ve both been kind of right. Charlie, wouldn’t you budget an inch on that or not? There is so much money now in the hands of so many smart people all trying to outsmart one another and not promote one another.

[00:13:24] Warren Buffett and Charlie Munger: Getting more money out of other people, and it’s a radically different world from the world we started in. And I suppose it will have its opportunities, but it’s also gonna have some unpleasant episodes. But they’re trying to outsmart each other in arenas that you don’t have to play. I mean, if you look at the government bond market, if you look at the treasury bill market, I mean you’ve got this one bill that’s out of line with the others when we bought over 3 billion of it the other day and those are people.

[00:14:02] Warren Buffett and Charlie Munger: The world is overwhelmingly short-term focused, and if you go to an investor relations call, they’re all trying to figure out how to fill out a sheet to show the earnings for the year. And the management is interested in feeding them expectations that will slightly be beaten. I mean, that is a world that’s made to order for anybody that’s trying to think about what you do that should work over five or 10 or 20 years.

[00:14:34] Warren Buffett and Charlie Munger: And I just think that I would love to be born today and go out with not too much money and hopefully turn it into a lot of money. But Charlie would too, actually. Just like he would find something to do. I will just guarantee you. And it wouldn’t be exactly the same as before, but he would have a big, big, big pile.

[00:15:00] Warren Buffett and Charlie Munger: I would not like the thrill of losing my big pile into a small pile. Well, we like my big pile just the way it is. Well, I like we agree on that, incidentally. Okay. Yes, we do. You’re one of the most extreme lovers of the big pile.

[00:15:19] Clay Finck: I love this discussion on how we must evolve as value investors. Value investing can be really difficult nowadays because it’s easier than ever to learn about investing and get into it with the internet and things. But again, human emotions are still a large part of the market. People still become fearful, and they still become greedy, and that can create mispricings for us as value investors to capitalize on when the perspective returns are attractive relative to the risk that is associated.

[00:15:53] Clay Finck: Also, index investing seems to be really popular nowadays, and as more and more people pile into the index, this potentially pushes down the expected returns of just investing in the overall market through an index fund. This also can create distortions and potentially create opportunities in certain pockets of the market where many investors aren’t really looking.

[00:16:16] Clay Finck: One of my favorite books related to the Evolution of Value Investing is a book called Where the Money Is by Adam Seessel. I had Adam on our millennial investing show a year ago on episode 196, and Trey had him on We Study Billionaires back on episode 465 as well to chat about his book and why value investors must evolve with the times to stay relevant.

[00:16:43] Clay Finck: Another interesting advantage I think individual value investors can have is what is referred to as time arbitrage. In a world that is very short-term focused, huge advantages can be gained by owning businesses who think in terms of optimizing long-term shareholder value. And then it’s just a matter of holding a number of different types of these companies for a really long time.

[00:17:09] Clay Finck: While Wall Street is focused on the quarter to come, thinking long-term gives investors a massive advantage. Related to this idea of adapting to the times, business owners must adapt to the times as well as their capital allocators within their business and need to decide what sort of investments they should be making.

[00:17:30] Clay Finck: So I’ll go ahead and play a clip here related to this idea.

[00:17:36] Question: Hello, my name is Al Flores, and I’ve been a shareholder for about 16 years, coming from Guadalajara, Mexico. My question is for Warren and Charlie. Companies have the eternal dilemma between broad-building products that can make profits and increase their company’s competitive position.

[00:17:53] Question: In the best case, you can build products that have both characteristics at the same time, like Google did. But most of the time, companies need to choose between short-term profits and long-term defensibility. For example, Amazon was focused on building their famous Amazon flywheel with limited profits initially to obtain stronger network effects with the hope of getting more defensible profits in the future.

[00:18:19] Question: When you invest, you constantly speak about the importance of building competitive modes. What advice would you give to CEOs about how to balance this dilemma, which is essentially short-term profit versus long-term ability? Thank you.

[00:18:34] Warren Buffett and Charlie Munger: Well, the answer to controlling your destiny is what we’ve been able to do at Berkshire. So we have no pressure from Wall Street. You know, we don’t have investor calls. We don’t have to make promises. We get a chance to make our own mistakes and occasionally find something that works well. But we recognize that the people in this room and people like them are the ones we’re working for. And we’re not working for a bunch of people that care about whether we meet the quarter estimate or anything. So we have a freedom that we get to use and we’re interested in owning a wonderful business forever. Well, there aren’t very many wonderful businesses, but we do learn a lot as we go along.

[00:19:25] Warren Buffett and Charlie Munger: Charlie and I have often mentioned how we learned so much when we bought See’s Candy. We learned when we bought Ben Ros chain of women’s dress shops spread all over the eastern part of the country. We learned when we tried getting into the department store business back in 1966, and as the ink was drying on our purchase price, we realized we’d done something dumb. But we’re learning all the time how consumers behave. I’m not going to be able to learn the technical aspects of businesses, but that’d be nice if I knew it. But it isn’t essential. And you know, we’ve got a business at Apple, which is larger than our energy business, and we may only own 5.6 or 7%. But our ownership goes up every year. And I don’t understand the phone at all, but I do understand consumer behavior, and I know how people think about whether to buy a second car. I know how they go out to be different, we own auto dealerships, we own it. We’re learning all the time from all of our businesses how people react to GR animals versus, you know, selling them something else.

[00:20:44] Warren Buffett and Charlie Munger: And so See’s was a sort of breakthrough, but we just keep learning as to more about how people behave. And how a good business can turn into a bad business and how some good businesses can maintain their competitive advantage over time. And so we don’t have some formula that Berkshire people, we just, but we can also tell.

[00:21:08] Warren Buffett and Charlie Munger: In 10 seconds, whether it’s something of interest. I mean, when I get these calls and we wanna send decks and all that sort of thing, which is nonsense. It’s a bunch of guys sitting that get paid for drawing up these projections of the future and everything like that. They knew the future that, you know, we don’t know the future, but we do know certain kinds of businesses. We know what the right price is, and we know what we think we can project out in terms of consumer behavior and consumer threat and threats to a business. And that’s what we’ve been about and that’s what we’ll continue about.

[00:21:52] Warren Buffett and Charlie Munger: We do get, we don’t get smarter over time. We get, we get a little wiser though following it over time. And, and you can do it while sitting in the office with a telephone too, which we like. Charlie, well tell ’em the story of the Japanese investment that should be told again. That’s a nice story.”

[00:22:16] Warren Buffett and Charlie Munger: “Yeah. Well, it was pretty simple. I mean, other people were going through Playboy and I was going through Moody’s, basically. And there’s a movie out called Turn Every Page, which I saw again for the second time a couple of days ago, Lizzie Gotley. And I recommend everybody in this world watch that because I turned every page in the past.

[00:22:40] Warren Buffett and Charlie Munger: And I did it for thousands and thousands of pages in Moody’s, and I did it at the Department of Public Utilities in Boston. I did it at the Newton Insurance Department. You just kept turning pages. Well, that goes on for a while, but now we need big ideas in order to find things. And what was your question, Charlie?

[00:23:05] Warren Buffett and Charlie Munger: To tell him about the Japanese? Well, the Japanese thing was simple. I mean, it kinda, I like looking at companies every, I mean, I like looking at figures about companies and, and here were five very, very substantial companies, understandable companies, most of them maybe all of them we’d done business with in a dozen different ways.

[00:23:28] Warren Buffett and Charlie Munger: If you go a couple miles from where this place is, our last coal generating plant was built by one of the companies. So here they were, they were sitting as a group where they were earning, we’ll say 14% on what we were gonna pay to buy ’em. They were paying decent dividends. They were gonna repurchase shares.

[00:23:52] Warren Buffett and Charlie Munger: In some cases, they owned a whole bunch of businesses that we could understand as a group, although we didn’t mean we had deep understanding on any, but we saw them operate and everything there. There wasn’t anything to it. And at the same time, we could take out the currency risk by financing in yen, and that was going to cost us a half of 1%. Well, if you get 14% on one side, a half a percent on the other side, and you’ve got money that you know forever, and they’re doing intelligent things and they’re sizable. So we just started buying them. I didn’t even probably tell Greg until maybe six months after we’d gotten going, and then when we hit 5% in all of them, we announced on my 90th birthday that we owned over 5%. Recently, we went over for the first time to visit with them, and we were more than pleasantly surprised, delighted with what we found there. And now we own 7.4% of them. We won’t go over 9.9 without their agreement. And we sold another 164, whatever it is, billion of yen. What would’ve done for us if we only had 5 billion or something, and it made 10 billion simply in that way? Yeah, we would look like heroes. Now 10 billion just sort of disappears as it’s as a little in Berkshire’s reports. But it’s fun, and it is fun, and it is 10 billion. And Charlie says he keeps me out of bars talking about it. And I probably talked to Charlie about this the year after I started. I don’t have, but who knows. I mean, I probably knew he’d like it. I mean, obviously. And we tried to do every dollar we, we. Yeah, well, not even that, quite that much. Yeah. But you know, we are four or 5 billion ahead plus dividends, and we gotta carry. That’s terrific. And we, and they welcome us, and they should welcome us. But we love it the way they’re operating. We’re not there to tell ’em what to do in the least. So we didn’t, and, but we did say we never go over it 9.9, and we mean it, and then they know that we’ll be true to our word. And I went over there partly to introduce Greg to those people because we’re gonna be with ’em 10, 20, 30, 40 years from now, and they may occasionally find something that we can do jointly. And they look forward to doing that, and we look forward to it. And in addition, we have some other operating businesses in Japan. So, Greg, do you have anything? The only thing I would add is that when you went over there, Warren, it was to build the trust with these Japanese companies because we do hope there are long-term opportunities, but fundamentally, as you highlighted, they’re an incredible, they’ve been a very good investment. I’d also highlight the five meetings we had. We were really quite remarkable. These companies, the culture, and the history around it, and how proud they are, you know, there are just moments of learning from ’em. So it was just a great experience to spend really two days with the five companies.

[00:27:31] Warren Buffett and Charlie Munger: And an issue that we intended to be 56 billion yen that we were issuing and selling turned out to be 164.4 or something like that. Everything worked so well, and Charlie says that it doesn’t move 500 billion of net worth that much, but this one will keep adding over the years to Berkshire’s value with this very wide spread, probably four or $500 million a year. We’ll just keep looking for more opportunities in Japan. Berkshire is the largest corporate borrower outside of Japan that exists, and we didn’t set out to be that, but it’s turned out that way, and we’re not done in terms of what may come along there. We have some direct operations there, as I mentioned, and we’ve got some really wonderful partners working for us, so I don’t have to do anything.

[00:28:27] Clay Finck: Now the next question I wanted to play here is related to position sizing, which I feel is a topic that a lot of people love learning about, including myself. To me, it’s all about a person’s temperament and their own abilities and where they are at in their own journey. Someone that is much more comfortable with diversifying might put a position’s limit to say 5%, whereas someone like Charlie is more than happy to bet big when he finds something he really, really likes. Here’s a clip on position sizing.

 

[00:29:04] Question: The next question comes from Ellie Amin Tibet, who asks, during an episode of Investing the Templeton Way podcast, Professor Damodaran, who he respects almost as much as Warren and Charlie, mentioned that he is not comfortable with positions becoming a large part of his portfolio, for example, when they reach 25% to 35%. He mentioned that Apple is now 35% of Berkshire’s portfolio and thinks that is near a danger zone. She wonders if Warren and Charlie can comment.

[00:29:36] Warren Buffett and Charlie Munger: I believe to make one comment first, but Charlie will come up with, I think he’s out of his mind. Yeah, I knew that was coming. But Apple is not 35% of Berkshire’s portfolio.

[00:29:50] Warren Buffett and Charlie Munger: Berkshire’s portfolio includes the railroad, the energy business, See’s Candy, and more. They’re all good businesses. The good thing about Apple is that when they buy back their stock, we own a larger percentage of the company without doing anything. We can’t own more than 100% of any business, but they’re all the same to us. To think that our criterion for Apple is different than the other businesses we own is not true. It just happens to be a better business than any we own, and we put a fair amount of money in it, but we haven’t invested more in it than we have in the railroad. Apple is a better business than the railroad. It has an extraordinary position with consumers who are willing to pay a premium for their products. We don’t have anything like that that we own 100% of, but we’re very happy to have our current stake in Apple. We’re delighted every 10th of a percent that goes up, which is like adding a hundred million dollars to our earnings. Apple also uses their earnings to buy out our partners, which we’re glad to see them sell out too.

[00:31:08] Warren Buffett and Charlie Munger: The index funds have to sell out. They bring the number of shares down, and you know, I, we went up slightly last year, and I made a mistake a couple of years ago and sold some shares when I had certain reasons why gains were useful to take that year from a tax standpoint. But, having heard me say that it was a dumb decision, and probably you’ve already given your comment about it, but we do not have 35% of Berkshire’s portfolio. Berkshire’s portfolio is the funds we have to work with, and we want to own good businesses, and we also want to have plenty of liquidity. Beyond that, you know, the sky’s the limit or our mistakes. Who knows what the bottom is. Charlie, do you want to add anything to your earlier comment?

[00:32:03] Warren Buffett and Charlie Munger: Well, I think one of the main things taught in modern university education is that a vast diversification is absolutely mandatory in investing in common stocks. That is an insane idea. It’s not that easy to have a vast plethora of good opportunities that are easily identified. And if you’ve only got three, I’d rather read my best ideas instead of my worst. Some people can’t tell their best ideas from their worst. And in the act of deciding that the investment already is good, they get to thinking it’s better than it is. I think we make fewer mistakes like that than other people. And that is a blessing to us. We’re not so smart, but we kind of know where the edge of our smartness is. That is a very important part of practical intelligence. A lot of people who are geniuses on IQ tests think they’re a lot smarter than they are, and what they are is dangerous. If you know the edge of your ability pretty well, you should ignore most of the notions of our experts about what I call the deification of portfolios. Okay.

[00:33:19] Clay Finck: I love this wisdom from Munger and the willingness to bet big when the odds are heavily in your favor. Of course, we need to be mindful and aware of our own blind spots and biases and not go all in when we think we’re really certain about a business. But we should also be mindful that in order to have the opportunity to get outsized returns, we need to make our allocation high enough that it will make a sizable difference to the returns of the overall portfolio.

[00:33:55] Clay Finck: At the end of 2022, I did an episode that discussed Buffett’s purchase of Taiwan Semiconductor. One audience member asked Buffett why he exited so quickly, given that not much change had happened geopolitically since he entered the position. Here’s the question on Taiwan Semiconductor and what Buffett had to say about the situation.

[00:34:16] Question: This question comes from Rohe: “Berkshire bought a substantial position in Taiwan Semiconductor, and contrary to its normal holding timelines, sold almost the entire position within a few short months. While you cited in a CNBC interview that geopolitical issues were the catalyst, these issues were seemingly no different when you acquired that stock. So what else, if anything, changed in those few months and prompted the firm to offload close to $5 billion worth of Taiwan Semiconductor shares?”

[00:34:48] Warren Buffett and Charlie Munger: Taiwan Semiconductor is one of the best-managed and most important companies in the world, and I think this will remain true in five, ten, or twenty years. However, I don’t like its location, and I’ve reevaluated my position on this. I don’t think it should be located anywhere other than Taiwan, even though they are expanding their capacity in the US, and one of our subsidiaries, Allegheny, is participating in their Arizona construction activities.

[00:35:18] Warren Buffett and Charlie Munger: We would prefer to invest in a similar company with marvelous people and a marvelous competitive position in the US. Although I won’t find that in the chip industry, I feel more comfortable with our capital deployed in Japan than in Taiwan. While I wish we hadn’t sold Taiwan Semiconductor, I’ve reevaluated my position in light of certain events that were going on.

[00:35:43] Warren Buffett and Charlie Munger: Troy: Well, my view is that Warren should feel comfortable if he wants to.

[00:35:48] Warren Buffett and Charlie Munger: Warren: Yeah, put that in the minutes.

[00:35:51] Clay Finck: The next question might have been one of my favorite ones from the meeting. First is because I loved the question, and second is that it came from a 13 year old of all people who I know has asked great questions in the past, as they mentioned in this clip. So here’s the next question regarding the US dollars reserve currency status, 

[00:36:09] Question: Mr. Buffett and Mr. Munger, hi. My name is Daphne. I’m 13 years old, and this is my sixth annual Berkshire Hathaway shareholder’s meeting, and I’ve had the privilege to ask you both questions in years past. My question for you today is the following: As you know, the US national debt is currently at an estimated 31 trillion, making up about 125% of the US GDP. In the meantime, over the past few years, The Federal Reserve has telegraphed that they intend to monetize the debt by printing trillions of dollars, even as they insist that they’re fighting inflation already. Other major economies in the world, such as China, Saudi Arabia, and Brazil, are moving away from the dollar in anticipation of this. My question is, are we likely to face a time in the future when the US dollar is no longer the global reserve currency? How is Berkshire prepared for this possibility, and what can we do as American citizens to attempt to shelter ourselves from what’s beginning to look like the beginnings of de-dollarization?

[00:37:20] Warren Buffett and Charlie Munger: Well, I should ask you to come up here and answer some questions. I mean, it’s very interesting. We are the reserve currency. I see no option for any other currency to be the reserve currency. And I think that nobody understands the situation better than Jay Powell. But he’s not in control of physical policy. And every now and then, he drops a few hints. And there was no question that when the pandemic broke out, it was a semi-war-like situation. But nobody knows how far you can go with the paper currency before it gets out of control, particularly if you’re the world’s reserve currency. Nobody knows the answer to that. And you don’t want to try and pick out the point at which it does become a problem because then it’s all over. And I think we should be very careful. We all learned Keynesianism and we applied it in World War II to the advantage of the country. We did everything we could to prevent inflation during the war. And then the war ended in August of ’45, and I think in January ’46, and I’m not giving you exact figures at all now, but in January ’46, I think the rate of inflation was at something like 1% or thereabouts. And by the end of the year, I think it was at like 15%. Again, I’m doing this from long memories, but it’s easy for America to do us a lot, but if we do too much, it’s very hard to see how you recover once you let the genie out of the bottle, and people lose faith in the currency and behave in an entirely different manner than they do when they feel that if they put some money in the bank or have a pension plan or whatever it may be, they’re going to get out something with roughly equal purchasing power. And it just changes the economy, and all kinds of things can happen then. And I can’t predict them, and nobody else can predict them, but I do know they aren’t good. And we will see. I do this as my, I’m, you know, I’ve voted for both parties, and it’s not limited to politicians of either party or anything of the sort.

[00:39:53] Warren Buffett and Charlie Munger: People take positions. Some of them understand what they’re doing. Some of them don’t understand what they’re doing. And you know, if they put me on some medical board, I don’t understand what I’m doing. You know, it’s something that there’s nothing wrong with the fact that you can’t master everything. You can’t all be Isaac Newton, but you can’t go around pretending you do or making decisions on it. And we are not as well off in relation to curbing inflation expectations, which become self-fulfilling. And we are not as well off as we were earlier. And Berkshire is better prepared than most investments for that kind of a period. But I said this in the annual report, but we aren’t perfectly prepared because there’s no way to perfectly prepare. You don’t know what course of action will occur. And it’s a very political decision now. It’s a tribal decision to some degree. And you hope for leadership that actually will do something, recognizes the problem. And America’s an incredible society. Rich, you know, we got everything going for us. But that doesn’t mean we can just print money indefinitely. But as that, it’ll be interesting to see how it turns out, Charlie.

[00:41:15] Warren Buffett and Charlie Munger: Well, at some point, printing money to buy votes will be counterproductive.

[00:41:19] Warren Buffett and Charlie Munger: Yep. And we don’t know exactly where that comes. And if something is going to be dangerous and unproductive, you ought to keep it a fair distance away. Now, if you have a culture that is exceptionally strong, like Japan, they have done some strange things there, but they couldn’t have been the reserve currency.

[00:41:41] Warren Buffett and Charlie Munger: No, of course not. And but Japan bought back most of the national debt and a lot of the Colin stocks and debt. Just the Federal Reserve owns practically everything in Japan, and the country’s working. It’s in 30 years of economic stasis, but it’s not going to help. I really admire Japan, but I don’t think we should try to imitate it.

[00:42:07] Warren Buffett and Charlie Munger: I don’t think we’re as good as Japan at taking, they have a cohesive culture and we don’t, Charlie. Yeah, that’s exactly right. In Japan, everybody’s supposed to suck it up and cope, and in America, we complain. So I hope you come next year with a tougher question, but thank you. And I predict I would love to be born again today in the United States. I mean, we can do a lot of dumb things and get away with it. We can’t do an unlimited number. There are people who care about that, and you know, you have to be willing to be extraordinarily unpopular.

[00:42:49] Warren Buffett and Charlie Munger: I mean, Paul Volcker, there were other Federal Reserve chair people that would not have done what they did. It’s just too uncomfortable. And there used to be a politician in Nebraska, and if you ask them some really tough question like, you know, how do you stand on abortion? Or he would look you right in the eye and say, “I’m all right on that one.” And then they move next door. Well, that’s what people have done basically on inflation, and they, one way or another, they say, “I’m all right on that.” And then they don’t really think about what the consequences of their actions could be, particularly, and it’s so much fun to, there are 435 of you to just be one of 435 instead of being the person actually responsible anyway.

[00:43:44] Warren Buffett and Charlie Munger: I am still next to the question of two superpowers. And when you get into really destroying a planet, destroying the reserve currency of the world, when there’s really no subsequent, and forget about all the toys, you know, with, with I mean, it’s a joke to think of any in tokens or that’s sort of that, that’s madness, but it’s also madness to just keep printing money. Yeah, and we know how to do it. And we actually came from a money printing, money printing economy. In World War II, which was required, and we suffered significant inflation in the price level. I mean, there’s a million ways to judge it, but it’s maybe 10 times what it was then, or something like that. Well, that’s getting close to the edge of where you don’t want to hold dollars anymore.

[00:44:40] Warren Buffett and Charlie Munger: You want to hold something else. You want to hold real estate, you want to hold an interest in a business. There are a lot of good, your best defense is your own earning power. If you’re the best doctor in town, if you’re the best lawyer in town, if you’re the best teacher in town, or even if you’re the 10th best or 10, you’re going to make a good living.

[00:45:09] Warren Buffett and Charlie Munger: I mean, you know, the economy is productive and you will succeed with your talents, but you won’t succeed by hoarding dollars. You’ll just be, you’ll just succeed by the fact that your value to the community, which is a rich community overall, is sustained. And so the best investment is always in yourself. That’s the answer I would give you.

[00:45:33] Warren Buffett and Charlie Munger: Well, we have a situation where we’ve learned to print money in gobs and little, a big chunk of our young people go right into wealth management. This is like we did.

[00:45:46] Warren Buffett and Charlie Munger: Yeah. Like we did. Like we did. Yes. We’ve been bad examples and I want to say that I didn’t realize wealth management was going to get so big when I went into it, and I want to apologize for what’s happened.

[00:46:03] Warren Buffett and Charlie Munger: Yeah. Well, anyway, you did well.

[00:46:05] Clay Finck: I do generally agree that Berkshire is a better inflation hedge than most companies. And this is because the capital allocators are mindful that high inflation is a possibility and they know what a great business looks like when they see it. Additionally, most of the businesses that Berkshire invests in does not require a lot of additional capital to maintain their operations and the businesses they own have pricing power, and these types of businesses are in the best position on a relative basis to have a good handle on inflation.

[00:46:34] Clay Finck: This next question I wanted to play is about what major mistakes people should try and avoid. Here’s the clip. 

[00:46:40] Question: Good afternoon, Mr. Buffett and Mr. Munger. My name is JC, I’m 15 years old, and I’m from Ohio. This is my fourth in-person Berkshire meeting. I have a lot of passion for learning from your speeches, interviews, and articles. Thank you for sharing your wisdom all the time.

[00:46:59] Question: Mr. Buffett, in your annual shareholder letter this year, you said that Berkshire’s journey consisted of continuous savings, the power of commanding the American tailwind, and avoidance of major mistakes. You have humbly admitted in the past that you have made many mistakes, but this is the first time that major mistakes stood out to me. Could you please advise us on what major mistakes we should learn to avoid in both investing and in life? I would also like to have Mr. Munger’s thoughts too, please. Thank you very much.

[00:47:36] Warren Buffett and Charlie Munger: Charlie said the major mistake you can make is then, you know, you’re lucky to be in the United States. To go around the world, you don’t have a lot of choices, some in some places, but you should write your obituary and try and figure out how to live up to it. And you know, that’s something you get wiser on as you go along in the business.

[00:48:03] Warren Buffett and Charlie Munger: Mistakes, you just wanna make sure you don’t make any mistakes to take you out of the game or come close to digging out of your game. You should never have a night when you’re worried about investing. I mean, assuming you have any money to invest at all. And you should just spend a little bit less than you earn, and you shouldn’t spend a little bit more than you earn.

[00:48:32] Warren Buffett and Charlie Munger: And then, then you’ve got debt and the chances are you’ll never get out of debt. I’ll make an exception in terms of a mortgage on your house, but credit card debt, and we’re in the credit card business big time and we’ll stay in the credit card business. But why get behind the game? And if you’re effectively paying 12 or 14 or whatever percent, you’re paying on a credit card, you’re saying, I’m gonna earn more than 12 or 14% on money. And if you can do that, come to Berkshire Hathaway.

[00:49:10] Warren Buffett and Charlie Munger: So it’s, it’s, I hate to say this when Charlie’s around me, but it’s straight out of Ben Franklin. I mean, it’s not that complicated, but I’ll give you a couple of lessons. You know, Tom Murphy took the first time I met him, said two things to me. He said, “you always tell someone to go to hell tomorrow.” Well, that was great advice then. And think of what great advice it is when you sit down on a computer and screw your life up forever by telling somebody to go to hell or something else in 30 seconds, and you can’t erase it and you know you haven’t lost the option.

[00:49:55] Warren Buffett and Charlie Munger: And he said, “you know, praise by name, criticize by category.” Well, what makes more sense than that? I mean, who do you like that criticizes you all the time? And you don’t need to vilify anybody to make your point on subjects of discussion. And then, I’ll give you another general piece of advice.

[00:50:17] Warren Buffett and Charlie Munger: I’ve never known anybody that was basically kind that died without friends. And I’ve known plenty of people with money that have died without friends, including their family. And, but I’ve never known anybody. And then, you know, I’ve seen a few people, including Tom Murphy Sr. and maybe Junior who’s here, but certainly his dad. He, I never saw him. I watched him for 50 years. I never saw him do an unkind act. I didn’t seem to very many stupid acts either. I mean, it wasn’t that he was non-discriminating. He just decided that there was no reason to do it. And wow. What a difference that makes in life.

[00:51:02] Warren Buffett and Charlie Munger: Charlie: Well, it’s so simple to spend less than you earn and, in death, shrewdly avoid toxic people and toxic activities and try to keep learning all your life, etcetera, etcetera, and do a lot of deferred gratification because you prefer life that way. And if you do all those things, you are almost certain to succeed. And if you don’t, you’re gonna need a lot of luck, a lot of luck, and you don’t wanna need a lot of luck. You want to go into a game where you’re very likely to win without having any unusual luck. Yeah. I’d add one more thought too. You need to know how people can manipulate other people. Then you need to resist the temptation to do it yourself.

[00:51:52] Warren Buffett and Charlie Munger: Oh, yes. The toxic people who are trying to fool you or lie to you, who aren’t reliable meeting their commitments. A great lesson of life is to get them the hell outta your life. Yep. And do it fast. Do it fast. And I would add with Charlie, wouldn’t totally agree with me, do it tactfully if possible too. But do get ’em outta your life. Yes. Yeah. I don’t mind a little tact or even a little financial cost, but the question is getting them a hell outta the lot.

[00:52:29] Clay Finck: This all falls well in line with Charlie’s thesis on avoiding standard stupidities. He’s not really trying to do anything extraordinary from day-to-day. He’s just trying to continuously not do things that a dumb person would do. And I really like that point of surrounding yourself with like-minded and positive people to help encourage those positive behaviors and then avoid the negative behaviors that don’t really do you any good.

[00:52:57] Clay Finck: And this is what brought me to value investing because value investing, when done right, is a reliable way to build wealth over time, especially when you diversify into a number of great businesses that are pretty likely to continue to increase their earnings power year after year after year.

[00:53:17] Clay Finck: Next, I wanted to play this question regarding oil.

[00:53:21] Question: This is a question from Monroe Richardson. The Wall Street Journal reported in March that oil producers are producing less oil and may have reached their peak in the Permian Basin. Given the major positions of both Occidental Petroleum and Chevron in the Permian, would you please explain the rationale for Berkshire’s significant holdings of both those companies considering the future outlook for oil there?

[00:53:47] Warren Buffett and Charlie Munger: Well, there’s no question. It’s really interesting about oil, and Charlie knows way more about oil than I do. When did you buy that royalty in Bakersfield or wherever it is? But that was before I met you, right?”

[00:54:02] Warren Buffett and Charlie Munger: “Yes. No, it wasn’t before, it was just before, right?”

[00:54:06] Warren Buffett and Charlie Munger: “Yeah. And that got him still paying me $70,000 a year. What’d you pay for them, boy?”

[00:54:13] Warren Buffett and Charlie Munger: “A thousand dollars.”

[00:54:14] Warren Buffett and Charlie Munger: “Yeah. Yeah. Now that’s the opposite of the Permian. My dad bought a thousand or $1,500 worth of royalties before he died in 1964. He left my mother and her two daughters. My older sister died, and my younger sister’s here today and she gets these checks every month and she knows about all these different fields and what they’re producing.”

[00:54:39] Warren Buffett and Charlie Munger: “And that’s the reality of half of the oil production, or something around that, in the United States. And then the other half is shale. And you know, if you’ve gone to the movies, I’ve never watched oil. You’ve never watched the things that are pumping Charlie’s royalties in California. You see these gushers of oil well in the Permian, and I’m like, ‘This should sink in on you’.”

[00:55:06] Warren Buffett and Charlie Munger: “And the first day, the first day when you bring in a, well, you know, it may be 12,000 barrels, it may be 15,000 barrels, and it’s dangerous. Oxidental had one come in, I think in 19,000 barrels or something like that, one day. And in a year, year and a half, it becomes frankly nothing.

[00:55:29] Warren Buffett and Charlie Munger: It’s just, it’s a different business in effect. And in the United States, it’s interesting, we use whatever we use, maybe 11 in a fraction. Well, we produce 11 in a fraction million barrels of oil equivalent a day. But if shale stopped, I mean, it would drop to 6 million very fast. Well, just imagine taking 5 million barrels a day out of the production in the world.

[00:55:56] Warren Buffett and Charlie Munger: And then we’re also taking down our strategic petroleum reserve. Strategic petroleum reserve is the ultimate oil field. You don’t have to drill. It’s just like we’ve got, and it was supposed to be strategic, but it gets involved in politics, and so there’s all, when you talk about the oil business, you’re talking about different kinds of businesses, basically.

[00:56:20] Warren Buffett and Charlie Munger: And we like Occidental’s position in the Permian, and we wouldn’t like that position or, well, it got to minus one day it got to minus $30 or a barrel. That was crazy, of course. But if oil sells at X, you know, you do very well, and it sells at half of X. You know your costs are the same, and it doesn’t change the production, and it doesn’t work as well. But it also brings down the oil production of the United States very fast.

[00:56:55] Warren Buffett and Charlie Munger: So we don’t know what oil prices will be, but we do very much like the Occidental position they have, and that’s why we financed them a few years ago. And it looked like it was a terrible mistake when the oil market just totally collapsed, and then it changed around, and we bought a lot of the common stock in the last few months. They’ve reduced our preferred, which we don’t like, obviously. I mean, we’d be disappointed in them if they didn’t reduce it. It’s intelligent from their standpoint.

[00:57:32] Warren Buffett and Charlie Munger: So we’ve taken, of the $10 billion preferred, we’ve gotten maybe four or 500 million of it, retired at 110% a par. But Vicky Hollub is an extraordinary manager of Occidental. Her first job was at City Service. That was the first stock I bought in 1942. She knows what happens beneath the surface. I know the math of it. I wouldn’t have the finished idea what to do if I was in an oil field. I mean, I, I don’t, I can dig two feet down. I can do that in my backyard, and that’s my understanding of subsoil in the world.

[00:58:13] Warren Buffett and Charlie Munger: I can’t picture the field where Charlie has been collecting that monthly check for 50 plus years, roughly 60 years. Or my sisters getting at various fields where they just keep pumping and bumping and bumping in. And we in the United States are lucky to have the ability to produce the kind of oil we’ve got from Shell. But it is not a long-term source like you might think by watching movies about oil or something of the sort. Charlie, do you have anything in? Yeah, it really dies fast. Those Shell what? Those Shell wells if you like, quick death in your oil wells. We have ’em for you. Not accidental. They’re doing a lot of good things. Yeah, they drill a lot of new wells. Yeah, they’re doing it in a profit, but it’s a different kind of oil. It’s just different. Yeah. Yeah. And that’s true of almost half the oil produced in the United States. And there are times when there’s a lot of oil down there that nobody knows how to produce, and they’ve been working at it for like 50 years, but they worked at the existing shale production for about 50 years before they figured it out. And it was weirdly complicated when they finally were able to do it. There’s only one type of sand that works. Can you imagine a horizon and a little why, you know, maybe a mile and a half or something? It’s just so different than what you think about, drive, go laterally for three miles, two miles down. Yeah. How the hell do you drill two or three miles laterally when you’re already two or three miles under the earth? They’ve mastered a lot of very tricky technology. Do we only get any oil out of these wells at all? And we love the position with Occidental, and yeah, we love having Vicky run it. And they’ve been, and there’s a lot more oil down there. If anybody can figure out another magic trick, that’s all we need is another magic trick. But Occidental has some other things too. Yes. Yes. But the price of oil still is incredibly important in terms of the economics of short-lived oil. I mean, no question about that. And well, if it’s, and we, incidentally, you know, there’s speculation about us buying control. We’re not gonna buy control. We don’t wanna. We’ve got the right management running. We can. We wouldn’t know what to do with it. Charlie wouldn’t mind know what to do in an oil field, admitting.

[01:01:05] Warren Buffett and Charlie Munger: You’re buying coal would be like going out and seeking to what? Acquire a cancer or something. You can’t even borrow to expand a coal mine now. It’s really unfashionable.

[01:01:17] Warren Buffett and Charlie Munger: Yeah. And we think, frankly, some of the things that are ridiculous on both sides. On both extremes. I mean, it’s just, I mean, you’re dealing with physics, you’re dealing with energy. It’s the politicalization of positions on something that’s enormously important in terms of energy. It just lends itself to demagogues and fundraisers and advisory organizations and everybody in sight.

[01:01:41] Warren Buffett and Charlie Munger: But we will make rational decisions, and we do not think it’s un-American to be pro-producing oil. And there is no oil basin in the United States that compares to the Permian in terms of promise. Yeah, we were lucky. Well, we didn’t know it was there until not that many years ago. It had sort of been used up, and they always knew this.

[01:02:07] Warren Buffett and Charlie Munger: The oil was there, but they thought it was gonna stay unrecoverable forever. The second or third stock I bought was Texas Pacific Land Trust, and they owned out in 3 million acres down there. And they were grazing revenues of $10,000 a year or something like that, and they were sitting on this incredible amount of oil. Basically, that company is now part of Chevron and went through Texaco and did all kinds of things. There’s still a Texas Pacific Land Trust, but a lot of that property is fee-owned by Chevron, which is some advantage.

[01:02:46] Warren Buffett and Charlie Munger: But it’s an interesting subject, I’ll put it that way. And we will not be making any offer for control of Occidental, but we love the shares we have. We may or may not own more in the future, but we certainly have warrants on which we got as part of the original deal on a very substantial amount of stock at around $59 a share. And those warrants lasted a long time, and I’m glad we have them.

[01:03:18] Clay Finck: The fact that Munger is receiving checks every month for $70,000 from just a thousand dollars initial investment is simply amazing, and it really helps illustrate the power of long-term compounding and the type of thinking it really takes to take advantage of that compounding.

[01:03:36] Clay Finck: A good episode we have here on our network chatting about why Buffett purchased a large position in oil is Trey Lockerbie’s episode with Josh Young, back on episode 468 from 2022. Buffett during this clip specifically mentioned the strategic petroleum reserve for the US. The SPR has been drawn down to 364 million barrels of crude oil, and that’s down 50% from its highs in 2011, and that’s really drawn down sharply since the middle of 2021.

[01:04:07] Clay Finck: Next, I wanted to play a clip talking about incentives, which again is one of my very favorite topics, and how Berkshire can attract high-quality managers that want to have their business sold to Warren and Charlie. Here’s the clip.

[01:04:23] Question: Hi Warren and Charlie,

[01:04:24] Question: My name is Anderson Fuller, and I’m from Port Nova Scotia in Canada. Before I ask my question, I just want to thank you for all you’ve done to give us insight into your minds as investors.

[01:04:39] Question: For me, the most compelling takeaway from Berkshire is your emphasis on and successful use of properly aligned incentives. In my view, owning and leading a business has two central benefits. First, you directly benefit as the company goes through your equity in it. And second, you have autonomy.

[01:04:59] Question: Incentives for employees are a bit easier to understand, such as offering benefits, fair pay, and creating a strong culture. But I’ve always struggled to understand them at the highest level. Even though you say Berkshire gives its managers significant flexibility, it must be less than what they have when they were independent.

[01:05:20] Question: Additionally, you would think passion and a willingness to sell would be inversely correlated. So how exactly does Berkshire bridge the gap and incentivize owners of its subsidiaries to give up these benefits to Berkshire?

[01:05:34] Question: Thank you.

[01:05:35] Warren Buffett and Charlie Munger: Well, what we really hope to find is managers who love their business but don’t like a lot of what comes with it as a public company. I mean, if they have to spend a lot of time listening to people tell them what to do about this or that, and they can’t afford to irritate them, or they have to go along with their trade association because of what, you know, whatever they may call it, because you don’t want to look like a free rider. And then there are all kinds of things, compromises that people have to make in most jobs.

[01:06:16] Warren Buffett and Charlie Munger: Charlie and I solved that problem. I had five bosses in my life, and I liked all five of them, and two of them were just huge factors in making my life better. But I liked all five of them. A couple of them are, you know, some people here, JC Penney. Cooper Smith. You know, I worked with 75 cents an hour and I loved working at Penn’s. Well, I didn’t love working at Penn’s, but I loved working for Cooper Smith. And you know, it was 75 cents an hour, but I had to do what they told me to do, which was to sell men’s church first Inman’s clothing, the children’s clothing, and so on. And I loved working for the newspaper.

[01:07:06] Warren Buffett and Charlie Munger: And I had a great manager when I was a nurse in Nebraska, got to work for Ben Graham. I mean, everything worked out, but there’s nothing like working for yourself, and if you can’t own a big company, working at Berkshire Hathaway for running a company is the closest thing you will get. You don’t have to spend time courting analysts who you probably have contempt for. In many cases, you don’t have to spend time with banks, you know, getting money and particularly in terrible times. Yeah, there are all kinds of, you get a lot in the way of freedom that I would think would be meaningful to me. And it might be better if you own the whole place yourself, but maybe you’ve got siblings who want out. Maybe there are a million reasons why you may not be able to achieve that unless you sell to Berkshire. And that’s easier probably if you have a family business where people want to go in different directions than it is for the public company. But there are still possibilities there.

[01:08:20] Warren Buffett and Charlie Munger: So that’s why, that’s why I think if I owned a public company and it was worth many great, many billions of dollars, and Berkshire Hathaway wanted to buy it, and the shareholders were willing to vote it, I would consider it. The way I would feel about life. But one thing, I wouldn’t want to retire at 65. I’d want to keep working. And you know, we just, we, there are reasons to sell to Berkshire, which Charlie and I, in certain positions, if we were on the other side, would take the deal. But it isn’t for everybody.

[01:09:00] Warren Buffett and Charlie Munger: Charlie,

[01:09:00] Warren Buffett and Charlie Munger: I think we have a pretty good Warren. We’ve been very lucky. And I don’t know, it seems to me that most of the people who are gonna end up the way we did, they almost already know how to do it. Well, the most important purchase in retrospect that we may have made was National Indemnity. Not because specifically what it did, but what it led to.

[01:09:27] Warren Buffett and Charlie Munger: And Jack Ringwalt controlled the company and I knew him and liked him. And he knew me. And once a year, he’d get irritated when the Nebraska Department of Insurance or somebody would come around and said they always came around when the car track was open. You know, so they could… I mean, he had all these theories about why it was a pain in the neck to be regulated.

[01:09:56] Warren Buffett and Charlie Munger: And I told Charlie Heider, “Next time Jack is in that mood where he is ready to sell just ’cause he’s tired of fooling around with all these guys, be sure and find him.” And so Charlie called me one day and he says, “Jack is in the heat.” And I said, “Bring him over.” And we made a deal. Well, that’s why Jack sold and he was happy after he made the deal. And I was happy after we made a deal. So there’s a man that controlled the business but just decided these people didn’t seem to bother him as much once they were my problem and not his.

[01:10:40] Warren Buffett and Charlie Munger: And you just can’t tell when lightning will strike. And that didn’t do magnificent things for us initially, but just look at what it led to, you know, and then so you never… You know, if you knew how you were gonna, again, if you knew how you were gonna shoot all 18 holes, it wouldn’t be any fun playing, you wouldn’t get on the first tee. I mean, it’s the uncertainty, the fun of playing the game, the opponent, all kinds of things that make a game interesting.

[01:11:16] Warren Buffett and Charlie Munger: And I think Charlie and I are in the most interesting game in the world.

[01:11:22] Clay Finck: So, really, the advantage of selling to Berkshire is that it may be easier and may cause a lot less headaches than going public. You know that Warren will be holding your business into perpetuity. You get to run your business however you like.

[01:11:39] Clay Finck: There are a lot of different reasons, and Berkshire has really built this reputation that there are really favorable places to sell your businesses for the business owners who really care about who they’re selling to, and they really care about what happens to their business after it’s under new ownership.

[01:12:00] Clay Finck: To wrap up this episode, I thought there was no better way than to close it out with some humor from Charlie Munger, which he really always seems to deliver on every single year. Here’s the final clip I wanted to play.

[01:12:16] Question: Dear Warren and Charlie,

[01:12:18] Question: My name is Victoria Tro. I am 22 years old and I study at the CDTM in Munich, Germany, at the Center of Digital Technology and Management.

[01:12:29] Question: As your grandchildren are closer to my age, I would like to ask you how you transfer your wisdom to them and your heirs. How do you guide them when it comes to investing? Do you believe in investing as a family or individually?

[01:12:46] Question: Thank you.

[01:12:47] Warren Buffett and Charlie Munger: I’m going to let Charlie do the answering. Now he’s got more… Well, well, I have my grandchildren, but I am quite philosophical about my grandchildren not thinking exactly the way I do. It seems to me that’s almost a natural course of life, and I just live my life my own way. And they can observe it as an example if they want to, and if they don’t, they can try some other way. I don’t like it when they try some other way, and I have to pretend that I like some of the boyfriends and girlfriends I don’t like, but I just struggle through like everybody else, and usually, I just bite my tongue and keep silent. That’s my way of handling it.

[01:13:38] Warren Buffett and Charlie Munger: Well, I would say that I think that in my case, my three children have grown a lot smarter than the last 30 years, and I think I’ve grown smarter than that. Well, I know, but you needed a lot of help. That is for sure. No, I would totally acknowledge that. That’s why I had the room to go. I mean, I had plenty of room for improvement, but y’all had a lot to grow.

[01:14:08] Warren Buffett and Charlie Munger: I worked a year for US Steel, which was in their fabrication department in Los Angeles, a big operation. The thing was utterly doomed, and three years later it went back to Greenfield. The whole thing was raised to the ground. I did not see it coming. Now I would be ashamed to be that ignorant and that as I was at that age; it was a sin. And my professors, by and large, were even more ignorant than I was. We just noted he had observed the basic economics of business in a scientific way at all when I was young.

[01:14:49] Warren Buffett and Charlie Munger: Well, if we’re getting into confession time, I have to tell you it’s 3:30, so we don’t want to keep going on. Who knows what we’ll be saying another half-hour?

[01:15:01] Clay Finck: All right, so that’s all we have for today’s episode. There’s really nothing like being in Omaha and being around thousands of other Berkshire shareholder owners who have an owner’s mindset. They’re lifelong learners. They understand the true power of compounding, and most importantly, they’re just really good people.

[01:15:20] Clay Finck: There’s really nothing like the energy in the CHI Center and actually seeing Warren and Charlie in person, as well as being around many other popular people in the crowd, such as Tim Cook, Monish Pabrai, Guy, Spear. The list goes on. Thank you again to those of you who joined us at our events. If you didn’t make it this year, we do plan on being in Omaha again next year, as always.

[01:15:50] Clay Finck: So stay tuned. If you’d like to attend our events that we’ll be hosting in Omaha, we never know how many more years we’ll have the chance to listen to both Warren and Charlie on stage, so I know I’ll definitely be there again next year if I have the opportunity. With that, I’ll see you all again next week.

[01:16:14] Outro: Thank you for listening to TIP. Make sure to subscribe to Millennial Investing by The Investor’s Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com.

[01:16:28] Outro: This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.