Warren Buffett’s Berkshire Hathaway AGM 2023: Warren Buffett and Charlie Munger concluded the Q&A session today. They covered a lot of ground, including regional banking troubles, their scepticism around artificial intelligence “hype,” the rationale behind Berkshire’s recent investments in Japan, and the dollar’s status as a reserve currency, while offering up patented advice on investing. Earlier, Berkshire Hathaway announced that its fiscal first quarter net profit soared to as much as $35.5 billion, with the firm’s cash hoard topping $130 billion.
Warren Buffett AGM 2023 Highlights: Berkshire Hathaway 59th shareholder meeting
Warren Buffett and Charlie Munger concluded the Q&A session and thanked all the attendees for being part of the investors' all-time favourite Berkshire Hathaway annual event.
“Charlie and I have long felt that the auto business is just too tough,” Buffett said, adding an anecdote about Henry Ford’s challenges in the industry in the early 1900s. Buffett said that there are too many global competitors for the automaking business to generate attractive returns. It’s also in the midst of a transition to electric vehicles, which imposes huge capital costs and risks in the near term before it becomes clear which companies will be successful and which won’t.
“We don't want to compete with Elon in a lot of things. Musk has a dedication “to solving the impossible and every now and then he'll do it, but it would be torturous to me and Charlie” Warren Buffett says.
“Elon Musk would not have achieved what he has in life if he hadn't tried for unreasonably extreme objectives,” Munger says. “He likes taking on the impossible job and doing it. We're different. Warren and I are looking for the easy job that we can identify.”
“I think Elon Musk overestimates himself, but he is very talented so he's overestimating somebody who doesn't need to overestimate to be very talented,” Charlie Munger says when asked about past implied criticism of the Tesla CEO and Twitter owner
“Do not make any mistakes that take you out of the game and you should spend a little bit less than you earn or you'll never get out of debt,” said Warren Buffett.
Other life advice from Warren Buffett and Charlie Munger includes “You need to know how people can manipulate other people, and you do resist the temptation to do it yourself,” and “Get toxic people out of your life, and do it fast.”
“Nobody knows how far you can go with a paper currency before it gets out of control, particularly if you're the world's reserve currency. And you don't want to try and pick out the point where it does become a problem because then it's all over,” Warren Buffett said. “I think we should be very careful,” Buffett adds, noting how quickly inflation grew after the end of World War II. People behave very differently when the inflation genie “gets out of the bottle,” he added.
“I'm so old fashioned I liked it better when banks didn't do investment banking,” Charlie Munger said. Bankers should be more like engineers, looking at how to stay out of trouble rather than getting fabulously rich, he adds.
“The problem plaguing the banking system is an age-old one: “Fear is contagious.” But the current situation seems to defy the fact that the FDIC has made depositors completely whole,” – Warren Buffett
When asked about why Berkshire sold Taiwan Semiconductor Manufacturing Company in a matter of months, Warren Buffett replied that the company's location made him rethink his position.
Greg Abel, the vice chairman for non-insurance operations at Berkshire Hathaway, is next in line to succeed Warren Buffett as Berkshire Hathaway Inc's chief executive. Warren Buffett says he’s “100% comfortable” with Abel being the conglomerate's future leader. “I don't have a second choice,” says Buffett. “If something happened to Greg, I would tell the directors they have a problem.”
The Q&A session breaks for lunch. Warren Buffett says they've taken 25 questions so far. They're aiming to take around 60.
When asked that Berkshire has previously bought a lot of stock back, what will Greg do? Warren Buffett replied, “The answer is Greg understands capital allocation as well as I do and he will make those decisions in the same framework as I would make them.” “The framework has been laid out and really don't see that framework changing. When opportunity presents itself we will be buyers of our shares,” Greg said. “It can be the smartest thing you do or the dumbest thing you do,” Buffett added.
“U.S. and China are always going to test how much they can push each other, but if they push too far things can go bad. So need good leaders. You really want people who will convince the other country as well as their own how to engage to not give away the whole store and not take their whole store,” says Warren Buffett.
“There's been some tension in the economic relationship between U.S. and China and wrongly created on both sides. The one thing we should do is have a lot of free trade with China. Think of what Apple has done by engaging with China as a big supplier. Everything that increases the tension is stupid,” says Charlie Munger.
“Our operations have been better than other large companies because we don’t change managers like them,” said Charlie Munger. Warren Buffett hired Ajit Jain, the insurance biz head at Berkshire, even though Jain didn't know much about the insurance business. He said, ” If I have the top pick of the 10 best insurance managers in the world, I would still pick Ajit.” Warren Buffett said he doesn't select managers based on where they got their degrees from.
“Prices have not been attractive over last 15 years. In December we were hoping we would get a few days in the sun and I was very optimistic but didn't happen on Jan. 1. Prices looked better on April 1 and now we have a lot of exposure to property catastrophe business,” says Ajit Jain.
Too many smart young people are going into wealth management, Munger adds. “I think the solution of having a huge proportion of the young and brilliant people all go into wealth management is a crazy development in terms of its consequences for American civilisation,” Munger says. “We don't need as many wealth managers as we have.”
The U.S. tends to tackle problems in a “herky-jerky” manner, but has consistently produced an improvement in living standards over his lifetime, Warren Buffett says. “I'm slightly less optimistic than Warren is,” Charlie Munger says.
“Everybody talks about the executive bench and all that sort of thing, which is baloney,” Warren Buffett says. “You don't have that many people that can run five of the largest GAAP net worth companies and all kinds of diverse businesses, but you don't need five people either. “You need a lot of good operating managers and you need somebody at the top who allocates capital and makes sure that you've got the right operating managers,” he says.
Greg Abel has been designated to succeed Buffett when he's no longer capable of running Berkshire. At present, Ajit Jain runs Berkshire's insurance operations, while Abel is in charge of non-insurance operations. “When the time comes, the major decisions will be up to Abel, with advice from Jain,” Warren Buffett says.
Opportunity in value investing comes from others doing ‘dumb things, said Warren Buffet. Charlie Munger said value investors should be comfortable making less because there’s more competition.
Warren Buffett says the commercial real estate market value mainly depends on how much you can borrow non-recourse, and it’s starting to see the consequences of that. “It all has consequences,” he added. “We are starting to see the consequences of people who could borrow at 2.5% 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.”
Berkshire Hathaway has never been very active in commercial real estate, but the “hollowing out of the downtowns in the United States and elsewhere in the world is going to be quite significant and quite unpleasant,” Charlie Munger said.
“I think value investors are going to have a harder time now that there are so many of them competing for a diminished set of opportunities,” Charlie Munger said. “My advice to value investors is to get used to making less.”
“AI can change everything in the world except how people behave” -Warren Buffet.
Warren Buffett praises Ajit Jain for growing Berkshire Hathaway Specialty from nothing and “without costing a dime of entry.”
We may make bad investment decisions plenty of times. The key is to try to stay as rational as possible said Warren Buffett.
Warren Buffett said that regulators made the right decision to intervene to protect depositors at banks including Silicon Valley Bank, which failed in March. Had they not, “it would have been catastrophic,” Buffett said.
Warren Buffett said he was a net seller of stocks in the first quarter. Berkshire sold $13.2 billion worth of stocks, buying only $2.8 billion.