NOT verbatim; I apologize in advance for transcription errors: my comments in parentheses
I use "BRK" to refer both to Warren & Charlie, and to Berkshire-Hathaway stock
Many questions relate to specific Berkshire or Wesco investments--I often didn't get the whole discussion because I haven't yet followed those investments individually

Q&A
In which fields has Charlie as an outsider "clobbered the locals" at their own game?
 1. real estate
 2. money management
 3. Berkshire/Wesco
Why BRK isn't being replicated
 1. contrary to academic literature
 2. too simple and too difficult: high risk of failure
 3. hierarchial systems that turn previously creative/rational minds into dogmatic company men/women
Why commodities (COP and PKX) given they are a macro bet and BRK doesn't like to make macro bets
 1. example: PKX is NOT (purely) a commodity business, but rather a high-tech business
 2. PKX learned a lot from Nippon Steel (specialty products)
On private equity funds
 1. BRK is not an LBO fund. BRK buys to hold, LBO funds buy to resell.
 2. LBOs work but you pay additional fees for the additional layer of consultants.
 3. Sometimes based on shoddy statistics.
 4. Not everyone can make 15%. Returns decreased because to much attracted capital
How is Charlie's nonprofit hospital doing? (Good Samaritan Hospital in Los Angeles?)
 1. It's losing money--so it really is nonprofit--and assets are in short-term paper to meet liquidity needs
How can USG ethically issue equity at below intrinsic value to improve its balance sheet?
 1. "they can't help it some of them went to business school" (laughter)
Why did BRK purchase UNH when it was involved in options backdating?
 1. regrettable behavior and the man (McGuire) deserved to lose his job
Why buy KFB (Kansas Bankers Surety?) over other insurers
 1. it engages in surety for banks.
 2. it knows what it knows and knows what it doesn't know (circle of competence)
 3. has underwriting profits yr after yr
Nature vs nuture
 1. If the environment is nonpathologic, nature is much more important that we realize.
 2. But you can still improve yourself.
 3. "The man was the prisoner of his talent." Play the game with your greatest strength (talent).
Global warming
 1. Charlie is not an expert even with his meteorology degree from CalTech.
 2. He thinks CO2 is "somewhat" warming the earth.
 3. There is no chance we can actually decrease CO2; even if developed countries are on board, they will fail because the developing world wants

to live like us too.
 4. Catastrophes such as flooding of coastal cities will happen over 100 years and as long as GDP growth is 1-2% we can accomodate displaced

people.
Should BRK distribute its excess cash & how much?
 1. won't happen unless ROE < 0
 2. WSC however should consider it. It doesn't have BRK's prospects (for investment) but it won't distribute because you all bid the

price>>intrinsic value and you all would then lose out.
Do other board members contribute to BRK?
 1. Not having an independent board is not a legal option.
Closely held beliefs that Charlie has overturned lately; checklists
 1. Used to never consider buying a railroad. Now they are efficient and have advantage over truckers. No new railroads are being built, either.

He arrived at this conclusion 2 years too late. "Man is too soon old and too late smart."
 2. If you barely catch (a mistake), you are using a mental checklist.
 3. Turn everything in reverse--avoid what you don't like and work on how to avoid it.
Why BRK buys more equities than WSC
 1. different reporting requirements, but both will buy.
Book Recs
 1. John Gribbin, Deep Simplicity: Bringing Order to Chaos and Complexity
 2. Istvan Hargittai, The Martians of Science: Five Physicists Who Changed the Twentieth Century
 3. Walter Isaacson, Einstein: His Life and Universe
Possible regrets of Ben Franklin's life?
 1. Ben Franklin would never say he had regrets, he didn't engage in self-pity
 2. perhaps his marriage
On ageing
 1. there are pleasures and disadvantages to ageing
 2. Charlie's analogy: he has jumped off the top of a skyscraper and now he's passing the 5th floor. "It's been a hell of a ride."
Multiple questions on investing and economy:
 1. Investors should not wait around for (a) expiring pharmaceutical patents (b) interest rates
 2. (Charlie later said that there are those who could value pharmaceuticals but it is not in Charlie's circle of competence.)
 3. Inefficient markets: (a) small neglected markets (b) where crazy people are selling in crazy markets, like derivates (but be careful!)
 4. China: unlike HK, Shanghai is in a period of gross excess.
Current account deficit:
 1. it matters that inflation/rates is low despite devaluation of dollar and increase in commodity prices, but Charlie has no idea how.
Why not sell Precision Steel?
 1. although a difficult business, it's still decent, and no disaster either.
Why JNJ? is it in BRK's circle of competence?
 1. best long term record in its field
Why Tesco?
 1. dominant in England
What do Warren and Charlie look for in their investment managers?
 1. they intend to hire 3 or 4 and give them a try with a portion of BRK's cash
 2. people who ALREADY know how to do it (not someone who needs to learn)
 3. young enough to start a long investment run
A B-school student from University of Redlands wants career advice: consulting or corporate?
 1. there is no one-size-fits-all answer
 2. consulting gives a more varied set of problems; corporate is good depending on which business
A typical day
 1. READ all your life.
 2. Don't multitask. leads to poor thinking.
 3. If wisdom is what you want, you'll get it sitting on your ass (reading)
Lessons from Charlie's legal background
 1. Considering both sides--objectivity.
 2. Teaching by indirection (induction): figure out what you don't want.
 3. How do you get what you want? Deserve what you want. The high road in I-banking is not crowded.
 4. Criticism of legal profession: fees exceed controversy (amount of lawsuit) even before going to trial. Law school is also a joke. Example of
case they spent 6 weeks on that never occurs in real life.
 5. Tune out folly. You'll gain an advantage.
Your railroad investments aren't Ben Graham-type investments
 1. the world changed.
Will the BRK CIO have to live in Omaha? Will acquisitions fall under the CEO or CIO?
 1. Lou Simpson, for example, lives and goes where he pleases. BRK is looking for a few more of him but there is no active search.
 2. Subsidiaries which acquire will do it independently
 3. All BRK investment decisions are run through Warren.
Did BRK give silver to the US Government for decreased regulatory scrutiny? cf. Salomon Bro's.
 1. No.
 2. They bought and sold silver too soon
Charlie talked about Nick Brady. Warren'ts reputation got him into consideration for acquiring Berkshire.
Motivation
 1. Robert Burns: "glorious independence"
 2. You need TIME TO THINK
 3. When a practicing attorney, Charlie sold the best hour of the day not to a client but to himself.
Protectionism and hedge funds
 1. Western social security will be safe if we can keep up GDP growth of 1-2%/yr.
 2. The US will no longer be the most important country in the world, but we shouldn't feel bad, every other most important country in the world

stopped being it at some time.
 3. Hedge funds pay less taxes than a university professor. This was an accident of the tax code, but it is crazy.
 4. Not good for our country when brilliant young minds what to give up (productive fields like) engineering for derivatives and fixed-income

arbitrage.
Most resolute Buffett fan: Andy Kirkpatrick
Biggest "source of human misjudgement"? (Peter Bevelin, Seeking Wisdom from Darwin to Munger)
 1. self-serving bias
 2. Example of a story told by Dean Kendall: a man worked at a candy shop. His son took a piece of candy at the store and ate it, but told his

father he'd put it back. The father said, don't give it back, you'll go crazy trying to do it. Instead, just take all you want and call yourself

a thief every time.
Will BRK returns be eroded by its popularity?
 1. its way of looking at things will become more popular, and it won't get any easier.
3 biggest problems for the US/world?
 1. Pathogenic war (not sure if I heard right). Craziness in the Middle East: too many young men with no hope, no future, and nothing to do.
 2. Doubling the human population
 3. Social deterioration of civilization
Subprime sector
 1. Rating agencies are not to blame; averaged out, they do a good job. Be mad at the originators, not the rating agencies.
 2. These companies mislead people, charge high commissions, and are some of the "most disgusting people" around.
 3. The real tragedy is that I-banks take their paper just to unload it on someone else (unethical): the only question is "can I unload this for

a quick profit?"
 4. Charlie like the old 95% FHA loan because it was given to the deserving poor who you knew would make good on paying back the loan. But the

current subprime mortages are irresponsible, given to entitled people who are dishonest and stupid. These mortgages violated all principles of

good engineering and it didn't bother the companies one bit.
Minimum target return
 1. Warren just did the best he could with the talent and resources available.
 2. Make decisions in life based on opportunity cost. Most people forget this.
 3. BRK has great opportunites--throw out everything else.
Why Iscar?
 1. It's not a Ben Graham stock, but it is a hell of a business.
On Warren learning a lot after age 60: he now does currencies and derivatives.
Is insurance slowing down?
 1. Not that great a business, BRK will do way better but with enormous irregularity (volatile earnings but high on average)
Specific lessons learned in the last 10 years?
 1. everyone's the same through the years, only more so.
 2. learned a lot more when younger
 3. more selective now about investments
Charlie mentioned that he didn't have an ounce of regret over missing the purchase of a large chewing tobacco company (which company?) that went

on to make millions. NB: the social conscience of tobacco as an investment was not an issue, said Charlie, because the company executives chewed

tobacco themselves, and Charlie thought chewing tobacco wasn't as dangerous as smoking
Terrorism
 1. We're lucky it hasn't been worse.
 2. We're trying to fix it, but some of the fixing is peculiar.
Unconventional thinking
 1. Unconventional approaches: GOOG--letting employees do what they want), WFMI--stakeholder approach.
 2. One medical school adopted a full disclosure policy for medical mistakes--no lawyers--and malpractice costs went down.
 3. Charlie then contrasted this to, and railed against, politicians entrenched in gerrymandered districts with no accountability.
Should I buy more BRK/WSC even though Warren & Charlie are getting old?
 1. Charlie has $2 billion in Berkshire and he hopes his family will hold it when he's gone
 2. BRK won't get the same return it did in the past, then again his family won't need the same return
 3. BRK/WSC are respectable to own--reasonably safe investment, with moderate ambition

Books on sale at the meeting, benefiting the Huntington Library (both of these available on amazon.com and probably other websites)
Poor Charlie's Almanack, expanded 2nd ed. ISBN-10 1-57864-366-X; ISBN-13 978-1-57864-366-0
Peter Bevelin, Seeking Wisdom from Darwin to Munger, ISBN-10 1-57864-428-3; ISBN-13 978-1-57864-428-5