2022: How can shareholder's assess Berkshire's insurance exposure?

BECKY QUICK: This question is for Warren and Ajit. And it comes from someone named Modi, in Israel, who writes, “My family and I are long-term shareholders of Berkshire and we plan to hold it forever. We like that the current management thinks in the long term to increase shareholder intrinsic value.

“But we aren’t sure that, at the time of the management change, the new management will act the same way you do.

“It might take risks in the insurance field where it’s hard to find on the balance sheet, and that might take years to realize.

“We would like to know how we can assess the insurance risk today and in the future, or to know in time, when you and Ajit are not here anymore.”

WARREN BUFFETT: Well, I would say that the future, for a long time, is about as assured as you can have in the world.

We don’t have an answer for the nuclear problem or anything, but we have a culture that a), has worked; b) has the shares, and the shareholders, that will carry it a long way.

And, you know, the first year — let’s say I die tomorrow — the first year, you know, everybody says, you know, what’s going to happen? Are they going to spin it off? They can do all these things.

You’ve got the shares held in a place that it can’t happen. You’ve got a board of directors that understands that our culture is 99.9% of running the business.

They don’t think that having meetings of the committees, and bringing in outside experts, or anything like that, mean a thing.

I mean, it’s a process that the world has adopted, and they’ve done it for reasons we understand. But Berkshire’s just plain different, you know.

We are a business that exists for people to trust us. And all we have to do to fulfill that trust is fairly simple things.

We’ve got the people to do it. We’ve got unbelievable resources to do it.

And it isn’t that difficult, as long as you’ve got the freedom, essentially, to do it.

And the world will write stories a year after, “So a year later, what has happened at Berkshire?”

You know, the railroad will be run the same way.

The big worry, of course, is that somebody comes in, figures they can make billions if, as a group, or, you know, people that sell the businesses and say, it’s better to be private, you know, or it’s better to be ‘pure’ this, or something like that.

Well, you know, we’re a pure partnership, is what we’re pure at. (Laughs)

And we do have what we think is a special relationship with our owners. And I don’t think the relationship changes, and the ownership doesn’t change that much.

And, true, there’s nobody can take us over for a long, long time. And, by that point, we would hope that maybe the superiority of this culture might be somewhat better understood by the world.

And we will be here— if we have the same culture, we’ll be 100 years from now — assuming that, you know, we haven’t had a nuclear exchange or something.

But Berkshire is built for forever. There is no finish point.

Nobody’s waiting to retire, or have their options vested, or thinking about — we don’t have anybody that’s thinking about, should I take another job? You know, they’re doing what they want to do in life.

And it isn’t because, you know, we’re topping somebody else’s offer, or that headhunters come around and say, we want this person or that person, and what’ll it take to get him? Well, they can’t get him.

Now, I don’t know whether we could build it again, but we’ve got it. And we didn’t know we were building it, exactly, when we took over.

You know, we had a lousy textile mill. I mean, it isn’t like Charlie and I sat down — he didn’t happen to be in Berkshire, but he was my partner and everything, and so we were mental partners — we didn’t sit down and work out some plan that said, well, we’ll run the dumb textile business for 20 years, and then we’ll finally have to fold it, and then we’ll do this and that and everything. We just kept putting one foot in front of the other.

But we did know how we felt about running a public company.

And one thing we wanted to do, always, was we wanted to have people that were in synch with us. We don’t really want that group I saw in the Flamingo, you know, in 1952. We wanted people who trusted us.

And we started, in my case, in the partnership, we started with seven. And Charlie started a partnership, but this is the same thing.

We didn’t go to institutions. And we didn’t pay fees to people to bring in money or anything like that.

We sat down with people. In my case, I handed them a little sheet of paper, and it set the ground rules. I wanted to be sure we were on the same page.

I said, you don’t have to read the partnership agreement. I mean, there’s no way in the world I would be taking advantage of you. I shouldn’t be here if you think I’d take —

But I do want you to be on the same page, and measuring me by the same yardsticks I measure myself.

And those people stayed with me, and they’re still— they, or their children, or their children’s children are shareholders of Berkshire. But they’re partners.

And it would be hard to do that again, but I would do it with — if I were going to be in this field, I would try and do the same thing. I would try to find people to trust me.

And I don’t want to be with people that are saying, how’d you do versus the S&P, you know, last month? Or, you know, what’s your long/short position? Or anything like that.

I sold securities for three years. And I just didn’t want to be in that position, where essentially, they thought maybe that I could do things that I couldn’t do. So, I finally found a way to get a few people — I mean, I didn’t — actually, I stumbled into it — but a few people that trusted me, and they just gave me their money. And we’ve lived happily-ever-after.

So, the new management — and the management after them, and the management after them — (coughs) — they’re just — excuse me — they’re just custodians of a culture that’s embedded. The owners believe in it. People that work there believe in it.

And we’re not saying other things can’t do better, or anything of the sort. We’re just saying, this is what we’ve got. And we have got the directors, we’ve got the share ownership and all of that to — and the size that, essentially, can ward off any attempts to change the culture.

And, you know, it’s silly to talk about, if our board members did this, and did that, and they, you know —

In the end, obviously, we’re always going to follow the law. We’re a Delaware company and we follow Delaware law.

But that doesn’t mean that we have to do what every other Delaware corporation does, and how they look at the Delaware statues. We will follow the law, and then we’ll run it as a group of people who trust us. And we appreciate that trust. Charlie?