Berkshire annual meeting 2017 in Omaha.

Buffet and Munger took the stage and answered questions all day.

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Some topics:

Automated driving: Will hurt Geico. Will compete with train lines. Will happen. We shall see how fast.

Sees Candy, we shaped our strategy. Bought for $25mm and have taken out $2bn in the last 40 years. Their approach:
Learning by trying.
Learn what doesn’t work.
Learn where the fish are. Fish there.
Durable advantage – brand, channel, quality. Back that.

Wells Fargo scandal, and Integrity errors:
CEO must act.
Values.
Hotline.
Compliance.
The right people.

Tech investing:
We knew Google worked but didn’t buy it. We should have. We were spending there with Geico.
Margins amazing.
Hard to displace.
But we passed.

Apple wait and see. We think it’s a consumer products company.

Bezos. Amazing to see two simultaneous businesses that are so big and strong. He is a different animal. Bezos is different from us, the Mellons, Berkshire. Building businesses is not investing or capital allocation.

Airlines. We bought the four top airlines. Tough business. 70% seat miles. We think capacity will tighten.
– Labor stability
– Fewer pilots
– Tighter capacity
– Less quality in this deal and some risk. Lots of competition looking for deals.
– Less margin of safety.

Trying to be brilliant is dangerous. Especially when you are gambling.

If there are tax cuts how will Berkshire use the savings? Mostly to customers. Won’t change our strategy.

Speculation and runs. Keynes in General Theory Chapter 12 on investing. Nothing more annoying than seeing your dumb neighbor making money…
New markets have more speculation than mature markets with mature investors. China will have some bubbles.

Ben Graham was preaching this in 1929.

The five largest American companies by market cap are worth 2.5T. Close to 10% of the US market cap. You could run them with no equity capital at all. None. Very different from the age of Carnegie and Rockefeller.

Milton Friedman. On a communist planner saying “The workers need the work to dig the mine”. Why don’t you give them spoons? said Friedman.

The one person economy, Buffett’s thought experiment. Would that work? The rest in leisure. Munger: it’s like being a Royal. No good.

But what if productivity doubled? 150mm labor force becomes 75mm. Munger: that doesn’t happen over night. It happens 5% per year. Then it’s good times. It’s the 1950s. But 25% year is impossible. And 2% is too slow – what we have now. The pain is too vivid and the wealth creation not vivid enough.

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