Berkshire AGM transcribed – Rise of, Inc. (AMZN)

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Great transcript from the Berkshire annual meeting with a focus on, Inc. (AMZN) – stay tuned as we will have a lot more coverage in the coming days


This segment gives considerable focus to Berkshire’s biggest ever transaction (Precision Castparts) and freewheels through to why the duo have had such happy lives and unpacks why Berkshire has sold off its ,massive external reinsurance investments. We also get the first of many references which Buffett made during the meeting to the rising power of – hope you own the shares. It kicks off with Buffett’s long time friend, former Fortune magazine journalist Carol Loomis, explaining how the question and answer session works.

WARREN BUFFETT: Well, it’s one of the problems of prosperity. The ideal business is one that takes no capital but yet grows. There are a few businesses like that and we own some, but we’d love to find one that we can buy for $10bn/$20bn/$30bn that was not capital-intensive and we may, but it’s harder and that does hurt in terms of compounding earnings growth. Obviously, if you have a business that grows, gives you a lot of money every year, and it isn’t required in its growth, you get a double-barrel effect: from the earnings growth that occurs internally without the use of capital, and then you get the capital it produces to go and buy other businesses.

See’s Candy was a good example of that. Back when the newspaper business was good, our Buffalo Newspaper was a good example of that. The Buffalo Newspaper was making (at one time) $40m per year and had no capital requirements. So we could take that whole $40m and go buy something else with it.

Increasing capital acts as an anchor on returns in many ways.

CAROL LOOMIS: Good morning. I’ll make my very short speech about the fact that the journalists and the analysts too, have given Charlie and Warren no hint of what they’re going to ask so they will be learning for the first time, what this is going to be also. This question comes from Eli Moises. In your 1987 Letter to Shareholders, you commented on the kind of companies Berkshire likes to buy – those that required only small amounts of capital. You said, “Because so little capital is required to run these businesses, they can grow while concurrently making almost all of their earnings available for deployment in new opportunities.” Today, the company has changed its strategy. It now invests in companies that need tons of capital expenditures, are over-regulated, and earn lower returns on equity capital. Why did this happen?

Full article here

[munger] Inc. (AMZN)

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