Berkshire Meeting Notes Part I
CEOs and Risk
The CEO must be also and leading risk officer; today Buffett is the leading risk officer and it’s up to him. His successor will have the same responsibility, this is non-negotiable. Buffett’s reference to the big insurance operations within Berkshire and how being able to deal with and understand the risks involved with these particular businesses leads one to believe that his successor most certainly will be a leader from the insurance divisions…Ajit Jain is the one that comes to my mind immediately. Buffett said there won’t be any art majors taking the helm. Skill sets in fields such as math and finance as well as behavior are needed to run the show.
In regard to China investments, given their importance in the world is there any advice you’d give them to encourage more investment? Charlie says, “We’re not giving investment advice to China” (laughter). With Berkshire’s Big Four they maybe talk twice a year with the CEOs. There’s no need to give them advice; just let them do their thing.
Berkshire stock needs to be significantly undervalued to do buybacks and they feel comfortable with 1.1 times book at this point; that is significant to them. The intention is for the cash position will not go below $20 billion. “Some people buy back their stock regardless of price. That’s not our system.” – Charlie Munger
The American banking system is in fine shape. The European banking system was gasping for air not long ago. The ECB came up with a solution, a huge act to inject the amount of money into the system that they did at such a low rate. Buffett has an overall positive opinion on the US banking bailout. If it hadn’t been done our society would be looking quite different today. While as a shareholder he may not have liked it for the banks that didn’t need the money, overall it was the right thing to do and we benefitted from the actions.
Price competition, evaluation likelihoods of accidents, much to learn and many unknowns that are simply unpredictable. Always looking for more information, of course there are the obvious indicators. Others are nuanced like credit scores…they can be very telling for example. Reference to Progressives efforts to learn more of driving habits via devices installed in cars. Buffett thinks it’s an interesting way to learn more information which ultimately is the key. Does the cost outweigh the benefit? They just can’t say yet.