2012: Has Berkshire's opinion of Walmart changed because of the Mexican bribery scandal?

ANDREW ROSS SORKIN: OK. This question comes from a shareholder named David Cass (PH) of Maryland.

He says, “One of Berkshire’s largest investments in recent years has been Walmart. Has your opinion of this company changed as a result of the Mexican bribery scandal?”

WARREN BUFFETT: No. I think — it looks — if you read the New York Times story, there’s always another side to it. But it looks like they may well have made a mistake in how that was handled, but I do not think it — and it may well result in a significant fine, you know.

But I don’t think it changes the fundamental dynamic. I mean, Walmart does operate on low gross margins, which means it offers low prices. And that works in retailing, and a lot of other things they do work in retailing.

So I do not see — I mean, it’s a huge diversion of management time and it’s costly and a whole bunch of things, but I don’t think the earning power of Walmart five years from now will be materially affected by the outcome of this situation.

Charlie?

CHARLIE MUNGER: Well, these are interesting issues.

I’m unaware of any place where Berkshire is slipping on this, but we have so many employees that it’s not inconceivable we could have some slippage somewhere.

And you get as big as Walmart, you’re going to have an occasional glitch. I don’t think there’s something fundamentally dishonorable about Walmart.

WARREN BUFFETT: When you have something as big as Berkshire, you’re going to have an occasional glitch. I mean, we have 270,000 people today interacting with customers and government officials and vendors and all kinds of people. I will guarantee you somebody is doing something wrong.

In fact, I would guarantee you at least, you know probably 20 people are doing something wrong. You can’t have a city of 270,000 people and not have something going on.

And we can talk until we’re blue in the face about what people should do and not do, but people don’t get messages sometimes the same way that you give them, and you know, we’re layers removed from people operating and others. And a lot of people just do crazy things.

So it is a — I mean, it is a real worry if you’re running a business like this that — you don’t worry about the fact somebody is doing something wrong, because there is going to be somebody doing something wrong. What you worry about is that it’s material and nothing gets done about it, and that you act fast if you hear about something.

And, you know, we’ve got hotlines and we’ve got all communications and everything, but that does not stop the fact that right now, somebody is doing something wrong at Berkshire.

And if we get twice as large someday we’ll have more people. And we try to convey to the managers that when they find out about something, you know, act on it, immediately let us know. We can handle bad news as long as we get it promptly.

But I’m very sympathetic to anybody running hundreds of thousands of people to the problems of the ones that — sometimes, you know, they don’t even think they’re doing something wrong. I mean, if you get 270,000 people together, maybe even a crowd this size, you’ll have some very peculiar people in it. (Laughter)