2007: Has Buffett lowered his hurdle rate for investments?

AUDIENCE MEMBER: Hi. My name is Glenn Tongue, and I’m a shareholder from New York.

I’d like to congratulate you on Berkshire’s newest director. Sue is a terrific addition. My question is —

WARREN BUFFETT: We agree with you.

AUDIENCE MEMBER: My question is, according to the 10-Q filed yesterday, you purchased about 5.3 billion in shares in the first quarter.

This acceleration in activity is occurring while the general market levels are getting more expensive.

Does this indicate some shift in your thinking about hurdle rates of return for your ever-growing asset base and/or your prospects for an elephant-sized acquisition?

WARREN BUFFETT: Well, that’s a good question. I would — incidentally, I would say in the first quarter, actually, stocks didn’t rise. But they’ve risen a lot in April.

But they didn’t go down, either. I mean, they were pretty much flat. And we did invest 5 billion or so in equities.

Did we change our standards? You know, I don’t think so. But, you know, you can’t be a hundred percent sure that you have — you know, if you haven’t had a date for a month, you know, you may say that was a girl you would have dated the first day, but who knows. (Laughter)

So, I don’t know for sure the answer, but I think we would have dated that girl the first day.

And the second question, in terms — does it reflect giving up on finding an elephant to acquire in terms of a business? The answer to that is no. We’ve got plenty of money available.

And we would sell stocks if we really — I mean, that would not be a problem — if we really needed to, to buy a really big business.

So we’re as prepared as we’ve ever been prepared to buy a big business outright. We hope we do. We hope we buy relatively small ones if they’re attractive.

We bought a very attractive business, TTI, run by Paul Andrews — terrific business — in the first quarter.

And, you know, I wish it was five times the size, but maybe it will be some day. But we know that we’re in with the kind of person we want and the kind of business we want. And if we find larger ones, one way or another, we’ll swing them.

Charlie?

CHARLIE MUNGER: Yeah. The one thing I think we can promise you is that we won’t make returns, on average, in the kind of stuff we’re buying now like those that we made 10 or 15 years ago.

WARREN BUFFETT: Yeah. We won’t come close, no.

CHARLIE MUNGER: No. It’s a different world with more modest expectations.

WARREN BUFFETT: And we hope you share them.