2014: How does Berkshire decide to pull cash from subsidiaries to headquarters?

AUDIENCE MEMBER: Capital allocation. How do you decide how much cash comes up from the operating companies —

WARREN BUFFETT: Yeah, that’s —

AUDIENCE MEMBER: — to the mother ship?

WARREN BUFFETT: Yeah, that’s pretty simple, in that we don’t really care too much where that 20 billion minimum is.

We wouldn’t — but we don’t count the money in a regulated — well, in the energy business or the railroad.

So we really count the money that we could make a phone call and get.

With interest rates at these levels, we sit around sometimes with — every one of our companies, I would say, probably has more cash in it than if some other large conglomerate was running the place.

They would probably have sweep accounts and all of that. And we may get around to that at some point, but it just doesn’t make that much difference, because if we had it at the parent company, we’d have it out at five basis points. And if it’s at the — if it’s down at the subsidiary, it’s probably getting five basis points.

So we’re not — it’s not something we think about on a day to day or week to week or month to month basis.

I know where the cash is. And I know when we’re going to need cash and I know what I’m thinking about doing, or may possibly do in the next few months, that maybe something’s a 50/50 probability of happening.

And anything I am committing to do, I know where the cash is coming from.

But it doesn’t mean that we try to get it all in the parent company, day by day or week by week like many companies do. We could change that procedure someday. Maybe a sweep account would make sense at some point. Probably would.

But we’re not big disciplinarians of our subsidiaries day by day. We don’t want them to feel that way.

And there’s one company I’m thinking of, where I’ve never been there. Probably only talked to the fellow who runs it three or four times in ten years. You know, and there’s a lot of cash around. And every now and then, he sends me some.

And if I really need it, I mean, I know where it is. And he’ll give it to me. But there’s — it doesn’t really make much difference, you know, whether it’s sitting there, whether it’s sitting at Berkshire.

I don’t want to encourage to our managers of our other subsidiaries who are listening to this a new way of behaving. But, I sort of adapt to the companies, except when we really need the money, and then I grab it. (Laughter)

Charlie?

CHARLIE MUNGER: That’s just fine.