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Okay -- this is the rest of my press conference notes. As with all my reports of the meeting, note that I'm doing my best to report accurately, but I'm working with a lot of scribbled notes. I do think that most everything should be fairly accurate. Also, the only one talking here is Buffett -- Munger has left.

So... part 2:

About the annual meeting

WEB: Attendance was a little lower this year than others. The goal has always been to manifest the spirit of partnership. If you have a million shares outstanding, you only have that many seats. You want people on the same wavelength. This is not only an invitation to likeminded people to join us, but also a nudge to others to leave. Ideally, we want people who plan to hold on for life and who;d be happy to not see a price quote for five years, but who would get reports on the business. We have a class of shareholder that's more consistent with our goals, mine and Charlie's, than any company I know. We've had problems when people buy just because the stock is going up -- they'll probably sell within six to twelve months. Why would I want that? I talked to thousands of shareholders this weekend, as I like to make myself available.


We don't do one ounce of preparation [regarding thinking about questions and answers] for the meetings. I just ask Charlie what time he's coming. There's a lot of logistics, though, of course.

On some "tech" stocks

WEB: I own 100 shares of companies such as Microsoft and Intel, so I get the reports. I don't think it's a dumb thing if you want to learn about businesses to invest tiny amounts in various companies -- especially for young people -- to get exposed to various managements, to go to shareholder meetings, get reports, etc.

When asked "What do you worry about?"

WEB: When I was at Salomon, I was worried. Much was out of my control. I didn't know what others, such as the circuit court, were thinking. I'd read the papers closely.

When I'd interview managers, I'd ask what their business nightmare is. Andy Grove's book, "Only the Paranoid Survive," mentions the silver bullet question -- if you could put one competitor out of business, which one and why?

I don't worry about the economy [or short-term things]. Look at See's. Julys are terrible, Decembers are great. I don't feel worse in July than in December.

What's his worst nightmare?

WEB: My job is just keeping managers of good businesses happy. I guess I'd worry about… well, the scenario of unit shares being created -- we warded that off by creating the class B shares. We'd have had salesmen selling people on $500 or $1,000 of Berkshire stock based on a past performance we're not likely to repeat -- then they'd get their commissions and leave us with hundreds of thousands of wards of Berkshire… the class B shares did make Berkshire a little more volatile.

Some Miscellany

WEB: Lou Simpson gets a contingent payment based on a 3 year rolling average performance. Measuring anyone on a year-to-year basis doesn't make sense. His last 3-year rolling average is below the S&P, but that doesn't bother me one bit.

Believe me, if it starts raining gold, we'll be out there not with forks but soup ladles.

Age doesn't matter. I'd rather hire Jack Welch now than when he was 50. He was good then, but he's better now.

Your job as CFO is to allocate your own capital. Not to have advisors or consultants tell you what to do.

On the Economy and Timing

WEB: I have no views on timing whatsoever. If I could lay odds, I think the probability of the past 17 years being repeated… I'd put it at less than 1%.

On Social Security

WEB: There are two ways of looking at it. It was originally pitched as insurance. It wouldn't have passed as [what it really is -- ] a transfer payment. It's a transfer payment from the productive to the unproductive -- which is a good thing. Our society is able and increasingly able for one group to care for the other group. It's a perfectly rational system. If we were all on an island living together, we'd create a system where the productive help [those who need it].

I don't think it makes sense for the government to invest [Social Security money] in equities. Increase productivity so that there's no declining capacity. You can count on our country. The U.S. government *owns* 35% of all U.S. equities. It gets 35% of all corporate earnings. Call it a special class of stock. 35% of Berkshire Hathaway is probably around $50 billion.

The government has the power to change the % it gets. It could just directly tack on a 10% surcharge to taxes just for Social Security.

On Investing vs. Speculating, and Bull and Bear Markets

WEB: [Has there never been this much speculation in the market?] I don't know how to measure it, so I can't say. Sure, a greater % of people are speculating.

With investing, the primary focus is on what the asset will produce over a long period of time.
With speculation, the focus is on the price of the asset over a short period of time.

It's terribly exciting and reinforcing to be in a bull market. It feeds on itself, like a bear market. There's no way of knowing how long it will go on. Eventually, something will interrupt it. It's the nature of the human animal.

On the good old days

WEB: In the old days, I'd put $5,000 in a company and it could have made a big difference to my performance. Today a $500 million investment doesn't make that big a difference at all. My universe was much bigger then. And I'd find lots of opportunities just by turning pages -- going through great lists of companies.

How he operates

I bought CORT Business this year fro $400 million. I'd never heard of it before. I got a fax from a guy who sold me a Falcon 20 in the 80s -- with a story from the Washington Post about CORT Business. It had had a deal blow up, with many unhappy shareholders. So I went and ran off a 10-K for 1998 and the latest 10-Q and read them. Half an hour later, I faxed back and said that for the right price, I'd be interested. I still don't know where the company's headquarters is.

With Mid-American Energy, I was in the Monterey area. Walter Scott was at a party I was at. He said what would you think about doing something with this? In 60 seconds I said that it was interesting. I looked at the financials later and came up with a price of $2 billion.

Jordan's Furniture

WEB: Jordan's wouldn't have sold to anyone but us. They knew the Blumkins [of Nebraska Furniture Mart fame] and others and that they were all happy with us and could continue to operate as they usually did. People know what they're getting with us. Our managers are very rare people who don't need to work for money -- they do it because they love it.

On why he gave himself a "D" for capital allocation this year

WEB: Well, it's called an annual report, not an annual tribute to management's aspirations. I imagine writing it to my sisters -- bright people who haven't been following the company for one year. I start out with "Dear Doris and Bertie," and then when I'm done I remove the Doris and Bertie part.

Plus, if I didn't say I did a lousy job, you [the press] would have.

Discussing the value of various people vs. their salaries/wealth

WEB: If I'd been around a million years ago, I'd have been some animal's lunch. What I do is incredibly less valuable than the wealth that's being created. I am wired in such a way that I'm able to be paid well to allocate capital. I'm an accident of time and geography. If I'd been born in Bangladesh, I [wouldn't have had the same opportunities].

The social importance of what I do is in no way commensurate with what I'm paid. Look at who has done the most for society and you'll see little correlation with pay.

Take [baseball hall of famer] Ernie Banks. In 1960, what was he worth? It was related to his talent, the size of his stadium, his teammates, etc. In the old days, two boxers like Lennox Lewis and Michael Grant were limited by the size of Madison Square Garden. But today when they fight it's televised on pay-per-view. Their value is much greater.

I'd say some teacher who molds how thousands of people behave over a lifetime has much more impact.

On stock price moves

WEB: Whether a stock has gone up or down in the past day, week, year -- doesn't matter. It has to do with the business. A stock doesn't know its owner.

on Value Investing

WEB: 90% of the time, when people talk about value investing, it's gibberish to me. When they talk value vs. growth, 100% of the time it's gibberish. If I were on TV all the time, I'd either be speaking a lot of gibberish myself, or I'd just be repeating myself.

On Microsoft

[Buffett admitted he doesn't know the facts all that well.] WEB: It's been penalized already just by the process. The uncertainty, the diversion of attention... It's taken a hit already -- although I can't say how much. [He wouldn't break it up.]

On whether he's the greatest investor

WEB: I'm a rational investor, working with too much money. You can't say who the best investor is. But you can list those who've done very well. Ben Graham may have been the world's greatest teacher of investing -- he probably wasn't the best investor, though, because he didn't care enough. Many of the most successful investors have followed his thinking -- in various ways.

On newspapers and the Internet

WEB: If newspapers (which I love) could make the Internet go away, they'd be better off financially, but they can't. Compare the Internet with a product where you have to chop down trees, etc. This is an enormous change. It's a surprise to me that papers still sell for the same amounts they did before [the Internet age].

The Internet is still in its infancy, but we don't know exactly how much -- is it a 2 year old en route to adulthood, or a 4 year old?

Summing up

WEB: You should be looking to the performance of the business, not the performance of the stock. I'd like for stocks to only trade every few years, but I can't do that. The worst reason in the world to own a stock is because it's going up. [People like that] sell it because it's going down. You need to have realistic expectations

Well, at this point, the conference was supposed to be over, and I had to leave. I don't think that the conference went on much longer.
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