OMAHA, Neb. Billionaire Warren Buffett said AI may change the world, but new technology won’t take away opportunities from investors and he is confident America will continue to thrive despite its bitter political divisions.
Buffett and his partner Charlie Munger spent all day Saturday answering questions from the annual shareholder meeting for his Berkshire Hathaway conglomerate inside a packed arena in Omaha.
The new arrivals do not take away the opportunities. What gives you the opportunity is other people doing stupid things, said Buffett, who had the chance to try out ChatGPT with his friend Bill Gates a few months ago.
The problem now is that partisanship has shifted more towards tribalism, and you don’t even hear the other side in tribalism, he said.
Both Buffett and Munger said the US would benefit from having an open trading relationship with China. Both countries should be careful not to exacerbate tensions, the stakes for the world are too high.
Anything that increases tension between these two countries is stupid, stupid, stupid, Munger said.
The chance to hear legendary investors answer questions about business and life draws people from all over the world to Buffett’s hometown. Some shareholders feel a particular urgency to participate because the two men are both in their 90s.
Charlie Munger is 99 years old. I just wanted to see it in person. He’s on my wish list, said Sheraton Wu, 40, of Vancouver. I have to participate while I can.
Chloe Lin traveled from Singapore for what she called “a once-in-a-lifetime opportunity.
Takeaways from the Berkshire Hathaway Annual Meeting
The two capitalists discussed a number of topics, including:
- Buffett said bank regulators must find a way to punish executives and board members who make risky decisions that doom a bank.
- The US has a worrying level of debt, but it’s hard to know how much the country can support without devaluing the dollar and jeopardizing the world’s reserve currency.
- Buffett said Apple’s largest Berkshire stock holding is a wonderful business because of how devoted consumers are to their iPhones. “I don’t understand the telephone at all,” Buffett said. But I understand consumer behavior.
- Elon Musk is a brilliant man who has taken on impossible tasks and succeeded even if he overestimates himself. Buffett and Munger said, but his approach doesn’t appeal to investors looking for places they can thrive without a ridiculous amount of effort. We are different, Munger said. Warren and I are looking for easy work that we can identify.
- Berkshire isn’t a big player in commercial real estate, but it has foreseen future problems. Munger said the emptying of inner cities in the United States and other parts of the world will be quite significant and quite unfortunate.
- To avoid life’s biggest mistakes, Buffett said, you should write your own obituary and figure out how to live up to it. Also avoid debt and in business try to avoid taking so many risks that a single mistake can wipe you out.
- Munger gave equally simple advice: spend less than you earn, avoid toxic people and activities, and keep learning for life.
In a nod to longstanding concerns about their ages, Berkshire showed video clips of past meeting sequence questions dating back to the first one they filmed in 1994. Two years ago, Buffett finally said Greg Abel will replace him as CEO even if he doesn’t. he plans to retire. Abel already oversees all of Berkshire’s non-insurance businesses.
Greg understands capital allocation as much as I do. He will make these decisions on the same framework I use, Buffett said.
Abel assured the crowd that he knows how Buffett and Munger have handled things for nearly six decades. I really don’t see the structure changing.
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Protests outside the arena
Not everyone in Omaha was a fan.
Outside the arena, Berkshire-based NetJets pilots protested the lack of a new contract and environmental groups questioned why the company’s utilities continue to burn coal. Pro-life groups carried placards declaring Buffett’s Billions Kill Millions to oppose his many charitable donations to abortion-rights groups.
Earnings Berkshire Hathaway
Berkshire Hathaway said Saturday morning that it earned $35.5 billion, or $24,377 per Class A share, in the first quarter. That’s more than 6 times last year’s $5.58 billion, or $3,784 per A share.
Three analysts polled by data firm FactSet had expected Berkshire to report operating earnings of $5,370.91 per A share.
However, Buffett has long warned that these underlying figures can be misleading due to wide swings in the value of Berkshire’s investments, most of which rarely sell. Buffett says operating earnings excluding investments are a better measure of company performance. They grew nearly 13% to $8.065 billion, up from $7.16 billion a year ago.
Buffett said he expects operating earnings to grow this year, even as the economy is slowing and most of the company’s assets sell for less. He said Berkshire would profit from rising interest rates on its holdings and that the insurance market looked good.
The first quarter of this year was relatively quiet compared to a year ago, when Buffett revealed he spent $51 billion in early 2022 buying stocks like Occidental Petroleum, Chevron and HP. Buffett’s signings have slowed, aside from a series of additional Occidental signings.
Edward Jones analyst Jim Shanahan said the quarterly report suggests Berkshire may have sold about 35 million shares of Chevron, but Buffett seems bullish on oil stocks given his recent Occidental purchases.
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Buffett quashed speculation that Berkshire could buy all of Occidental. He said Berkshire would not bid for control of the oil producer even though it could buy more shares and holds warrants to buy another 83.9 million shares.
At the end of the first quarter of this year, Berkshire held $130.6 billion in cash, but spent $4.4 billion during the quarter to buy back its shares.
Berkshire’s insurance unit, which includes Geico and a number of large reinsurers, reported operating income of $911 million, up from $167 million last year, driven by a rebound in Geico’s results. Geico benefited from higher premium charging and reduced advertising and claims costs.
But Ajit Jain, who oversees all of Berkshire’s insurance business, said Geico still had a long way to go in updating its in-house technology.
CFRA Research analyst Cathy Seifert called these comments a fairly sincere acknowledgment that Geico has a lot of work to do to reach its peers.
Berkshire’s BNSF Railway and its large utility unit reported lower profits. BNSF earned $1.25 billion, down from $1.37 billion. The number of shipments handled decreased by 10% after the loss of a major customer and the slowdown in imports. The utilities division added $416 million, down from $775 million a year ago.
Berkshire owns an eclectic assortment of dozens of other businesses, including retail and manufacturing companies like See’s Candy and Precision Castparts.
Berkshire shareholders have rejected a series of proposals that Buffett has opposed. That would have required the company to disclose more about the risks and diversity of climate change, divide Buffett’s job into separate chairman and chief executive officer positions, and silence executives’ political views.
With Buffett controlling nearly a third of the votes, those proposals never got much of a chance.
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