2020: Why has Berkshire underperformed the S&P 500?
Becky Quick: (03:08:37)
I got a number of variations on this next question, some more polite than others. This one's right about down-the-middle. But this is from [Mark Blakely 00:03:08:44] who writes in from Tulsa, Oklahoma, and he says "Like many, I'm a proud Berkshire Hathaway shareholder. However, in comparing the performance of Berkshire with the S&P 500 over the last 5, 10 or 15 years, I've been disappointed in Berkshire's under-performance. Even year to date, Berkshire is trailing the S&P 500 by 8%. To what would you attribute Berkshire's under-performance? While I can't imagine ever selling my Berkshire stock at some point, money is money."
Warren Buffett: (03:09:11)
No, I agree with everything that, I forgot his name, but just said. I mean the truth is that I recommend the S&P500 to people. And I happen to believe that Berkshire is about as solid as any single investment can be, in terms of earning reasonable returns over time. But, I would not want to bet my life on whether we beat the S&P500 over the next 10 years. I obviously think there's a reasonable chance of doing it, and we've had periods, I don't know how many out of the 50 55 years we've been doing it or, I don't know how many we've beaten or not. I mentioned earlier that 1954 was my best year, but I was working with absolutely with peanuts, unfortunately. And, I think if you work with small sums of money, I think there is some chance of a few people that really do bring something to the game.
Warren Buffett: (03:10:24)
But I think it's very hard for anybody to identify them. And I think that when they work with large funds, it gets tougher. And it's certainly gotten tougher for us, with larger funds. And I would make no promise to anybody that we will do better than the S&P500. But what I will promise them is that I've got 99% of my money in Berkshire. And most members of my family, may not be quite that extreme, but they're close to it. And I do care about what happens to Berkshire over the long period about as much as anybody could care about it. But caring doesn't guarantee results. It does guarantee attention. Greg?
Greg Abel: (03:11:11)
Well, I would agree Warren that there's never guarantees. But when I look at the assets we have in place and the teams that are in place, I... You're committed to Berkshire, but we have dedicated teams that equally are dedicated to Berkshire and they're sure going to give it their best effort every day. And, when I look at the assets and the people, I think we have, as you said, you can't guarantee it, but we have a great chance of sure giving a good effort to outperform it.
Warren Buffett: (03:11:43)
It's hard to imagine getting a terrible result with Berkshire but, anything could happen. And what I do know is it would be easier to be running 5 million than... Our book, net worth at Berkshire at the quarter end, I think was Three hundred and seventy some billion, which is down, but it's still greater than the book net worth of any corporation in the United States. I mean, maybe there's some federal corporation that has more, but in terms of... And it may be the greatest in the world. I'm not sure. And that makes life difficult in some ways too.
Greg Abel: (03:12:21)
Right, and the potential of our operating businesses are substantial. When you think, we've talked about energy, you touched on it, that infrastructure is continuing to change. We're ready for a hundred billion dollars of investment opportunities there. If we just look at the business over the next 10 years and the infrastructure that's required and how it's changing substantial investments there, that just tell me we have very good prospects. And we're well positioned to pursue them. Which again to me, when you look at our core business, you touched on in Burlington, the insurance and energy, our downside is very nicely protected. We have three really core great businesses.
Warren Buffett: (03:13:08)
Yeah. And we're better positioned than anybody in the energy business just because we don't have dividend requirements. We retained 28 billion of earnings over 20 years. You can't do it if you run a normal public company. And we've got a huge appetite and the and the country needs it, the world needs it. And we are a very logical, well structured, well managed I would say because it doesn't involve me, a company who participate in just huge requirements around the world now. They're slow and they involve state governments. And there's a lot of..., It's not anything that happens dramatically. It will happen. And, and Berkshire should participate in a huge way.
Warren Buffett: (03:14:04)
We can do things in insurance, nobody else can do. That doesn't mean much, at many times. But occasionally it may be important. So, there are some advantages to size and strength. But there are disadvantages to size too. If we find some great opportunity for a billion dollars to double our money, that's a billion pretax and that's, 790 million after tax. And on a market value of 450 billion or whatever it may be. That doesn't amount to much, unfortunately. We'll still try and do it if we can.
Greg Abel: (03:14:45)
Becky Quick: (03:14:49)
I want to ask this question that came in because I think some people may have had a misinterpretation about something you said a few minutes ago. This is the benefit of being able to get these questions real time, but a few moments ago you were talking about the people at the company who will be allocating capital after you and Charlie are no longer doing it and you mentioned that you've got Todd, Ted and Greg all doing that, but I've gotten a few questions that read similar to this. This one's from [Edward Popula 03:15:14] in New York city who says, "Dear Warren, I noticed you didn't mention Ajit Jain, when you reeled off your list of future management, is he out of the picture?