Each year at Berkshire Hathaway’s shareholder meeting, CEO Warren Buffett and vice chairman Charlie Munger sit down for 8 hours in front of 40,000 live spectators — and many more online — and wax philosophical on all topics imaginable.
Here are some of the highlights:
Self-driving cars and trucks may be years off, but when they come, they will hurt Berkshire Hathaway, according to Buffett. “Autonomous vehicles, widespread, would hurt us if they spread to trucks and they’d hurt our auto-insurance business,” Buffett said.
Warren Buffett plans to run Berkshire until he’s “buried in the ground.” The question of his successor has come up in recent years as he has gotten older. On the subject, Buffett says there’s one thing that he would like to see from his replacement, and that’s a willingness to accept modest compensation. Ideally, that person would be already very rich.
Warren Buffett spoke about Wells Fargo (WFC) and its 2016 scandal, in which up to 2 million credit card and bank accounts were created without customers’ permission. “At Wells Fargo, there were three very significant mistakes, but there was one that dwarfs all the others,” said Buffett. “At some point if there’s major problem, the CEO gets wind of it. And the CEO has to act.”
Berkshire Hathaway has historically shied away from investing in technology stocks, though it has invested in IBM (IBM) and Apple (AAPL). Berkshire’s vice chairman Charlie Munger added that they avoided tech stocks in the past because they felt they had “no advantage where other people did.” He added that he thought they were “probably smart enough” to figure out Google (GOOGL, GOOG), though.
President Donald Trump’s plan to cut corporate tax rates to 15% would almost certainly be a boost to Warren Buffett and Berkshire Hathaway. “The deferred taxes that are applicable to unrealized gains on securities would all be applicable to us,” Buffett said. “We have $90 or $95 billion in gains, and our owners, dollar for dollar, will participate in that … If the rate were to drop 10%, that $9.5 billion is real.” Buffett added that the impact of lower corporate taxes, however, would be uneven across its holdings.
Charlie Munger thinks stock market investors might find better investment opportunities overseas right now. Munger said, “I do think the Chinese stock market is cheaper than the American stock market. And I do think China has a bright future. There will be growing pains of course.”
A value investor from China asked how to spread the value investing philosophy in a market system where so many are speculating. “There’s always some speculations, always some value investors in the market,” Buffett said. The problem arises when people start to see others benefitting from playing the market.
In typical fashion, Warren Buffett railed against the hedge fund industry and its notorious fees. “In all the professions, there is value added by the professionals, as a group, compared to doing it yourself. In the investment world, that isn’t true,” Buffett said. He added that the active managers cannot do better than the aggregate of “the people who just sit tight.”
The godfather of index investing knows there is a limit to the strategy’s usefulness. “If everybody indexed, the only word you could use is chaos, catastrophe,” said Jack Bogle, founder of Vanguard. “There would be no trading. There would be no way to turn a stream of income into a pile of capital or a pile of capital into a stream of income.”
Artificial intelligence will kill some jobs, but on the whole, help improve society. That’s essentially the insight Warren Buffett had to offer on the subject. “I would certainly think they [artificial intelligence developments] would result in significantly less employment in certain areas, but that’s good for society,” Buffett said. “It may not be good for a given business.”
Warren Buffett said that rising health care costs, not the tax system, is the number one problem that American businesses face. “If you go back to 1960, or thereabouts, corporate taxes were about 4% of GDP, I mean they bounced around some. And now, they’re about 2% of GDP,” Buffett said. “At that time, health care was 5% of GDP, and now it’s about 17% of GDP.” In Buffett’s view, this says a lot of what’s playing a bigger role in hindering business activity in the economy.
Over the last several decades in America, our economic prosperity has not been shared equally, and the impacts of globalization have taken a large portion of the blame. Asked about this trend, Warren Buffett said that in America, “Nobody should be roadkill.” He added, “You’ve got an enormously prosperous country. You’ve got $60,000 in GDP per capita. So we’ve got prosperity, and that prosperity is enhanced by trade.”
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- Buffett: Here’s the ‘big mistake’ investors make