1998: Has Berkshire's policy of partnership and fair dealing increased its investment returns?

AUDIENCE MEMBER: David Winters from Mountain Lakes, New Jersey.

With the consolidation in the insurance industry, how do you think that will affect Berkshire’s insurance businesses and the long-term development of the float?

And if I may, not to encourage your dogma to run over your karma, but how do you think your policy of partnership and fair dealing has enhanced or detracted from your investment returns? Thank you.

WARREN BUFFETT: Now, with the consolidation taking place in insurance, it’s been taking place for some time. There have been some big mergers over the years.

It should — there are developments in insurance. We mentioned the super-cat bonds, which are not bonds at all. But that has an effect.

But I would say that there’s no merger that has taken place that I regard as being detrimental, either to our GEICO business or to our reinsurance business.

That has not been a factor, and I think if there were some more mergers it would not be a factor. I see no way that any entities being put together would change the competitive situation in respect to GEICO.

GEICO operating just as it does, independently, is as competitive as can be, and it would not benefit by being part of any other organization.

And our reinsurance business is much more opportunistic. And it’s not consolidation there, it’s just lack of fear, generally, by competitors who can price — particularly cat business — at a rate that could be totally inadequate, as I use in an illustration in the report. But nevertheless, it could appear to be profitable for a long time.

And there’s probably more of that going on now, and there’ll probably be a lot more going on in that arena.

We have some sensational insurance businesses, though. I have to tell you that — I don’t think you really have to worry too much about how we do in insurance in the future.

We have a number of GEICO people here today. I hope you got a chance to meet them. GEICO — and you saw Lorimer Davidson. I really was hoping he could be here, but Davy is 95 years old. I went to visit him a few months ago, and it just isn’t easy for him to get around.

But he built a sensational company and it stumbled once. Jack Byrne got it back on track and Tony Nicely’s got it going down the track at about a hundred miles an hour and it’s getting faster all the time. So we’ve got a great business there.

Charlie?

CHARLIE MUNGER: Nothing to add.