2016 Annual Meeting
Berkshire's 50th anniversary meeting with Precision Castparts acquisition announcement, Munger's "gets the girl" joke, and discussions on derivatives dangers, BNSF rail, and political neutrality.
2016 Annual Meeting
Date: April 30, 2016 Location: Omaha, Nebraska Attendees: Warren Buffett (85), Charlie Munger (92) Source: Full Transcript
Overview
This was Berkshire Hathaway's 50th anniversary year of Warren Buffett taking control. The meeting was webcast globally for the first time with Mandarin translation. Key announcements included the Precision Castparts acquisition and discussions of derivatives dangers, railroad competition, and political neutrality.
Opening
Buffett opened with his signature humor:
"I'm the young one. You may notice in the movie that Charlie is always the one that gets the girl."
On the global webcast:
"We're delighted to have people around the world joining us."
50th Anniversary
This meeting marked 50 years since Buffett took control of Berkshire:
"We're celebrating 50 years of Berkshire. It's been an extraordinary journey."
On what he learned:
"The main lesson is that you want partners who are better than you. Charlie has been that partner."
Business Results
Q1 2016 Performance
On quarterly earnings:
"Insurance underwriting is down somewhat. We had important hailstorms in Texas."
On Precision Castparts and Duracell:
"These were added during the quarter, so their full earnings aren't shown in the figures."
On currency effects:
"When we borrow money in euros, the change in value shows up as interest expense. It's a technicality."
Key Topics
Precision Castparts Acquisition
Buffett announced the landmark deal:
"Precision Castparts is a tremendous business. We paid $32 billion."
On why he bought PCC:
"PCC makes the most intricate castings and machined parts for aerospace. It would be nearly impossible to replicate."
On the CEO Mark Donegan:
"Mark Donegan runs PCC. He's extraordinary. I couldn't be happier with the management."
Derivatives Dangers
Munger was vocal on derivatives:
"Derivatives are still a 'danger to the system.' They create phantom profits."
On the risks:
"We exited most derivatives. It was the right decision."
Railroad Competition
On BNSF's challenges:
"Railroad earnings are down significantly. Car loadings throughout the industry were down."
On coal shipments:
"We still love BNSF despite falling coal shipments. It's still a good business."
On the competitive threat:
"Trucks are always a competitor to rail. But rail is 3x cheaper per ton-mile."
GEICO Performance
On auto insurance challenges:
"Rise in auto death rate hurt GEICO. But we're improving our underwriting."
On the competitive environment:
"Progressive is doing well. We need to keep improving our product."
Amazon Disruption
On Jeff Bezos and Amazon:
"Amazon has 'disrupted plenty of people.' Jeff Bezos is an extraordinary competitor."
On learning from disruptors:
"We watch what Amazon does. But we don't try to predict what they'll do next."
Coca-Cola Defense
On sugar health concerns:
"Defending Coca-Cola from sugar health worries. It's about moderation."
On the business:
"Coca-Cola is still a wonderful business. People want happiness in a bottle."
Renewable Energy
On Berkshire's investments:
"We've invested heavily in renewable energy. It's the future of electricity generation."
On solar and wind:
"We're building renewable capacity across our utilities. The economics are improving."
Political Neutrality
On the election year:
"Berkshire will 'do fine' if Trump or Clinton wins. We don't bet on politics."
On remaining neutral:
"I won't tell you who to vote for. But I'll tell you to vote for Berkshire."
Notable Quotes
"Charlie Munger always 'gets the girl.' I've learned to live with it."
"Derivatives are still a 'danger to the system.'"
"Amazon has 'disrupted plenty of people.'"
"We're not targeting competitors for destruction."
"The rating agencies are wrong about Berkshire."
Key Themes
- 50th Anniversary - Celebrating five decades of Berkshire
- Precision Castparts - $32B aerospace acquisition
- Derivatives Risk - Munger's continued warnings
- Railroad Challenges - Coal decline, truck competition
- Political Neutrality - Doing fine regardless of election
- Digital Disruption - Amazon's growing influence
Related
This summary captures the key topics from the full 2016 transcript.