May 2, 1999

These notes are not in all cases the exact words that Mr. Buffett or Munger spoke at the meeting. I did try to copy down their exact words as much as possible. Any mistakes and/or emissions are my own. Feel free to contact me if you believe I made an error. - Rich Rockwood

B: "Majority of issues at present prices will disappoint people"

Do the right thing, do it the best

B: Ron Ferguson decided he preferred not to be on board. Restricts his stock purchasing/holdings options

B: "Stocks not little items that wiggle around"

• Incremental value today is zero, not bringing anything to the party (due to no opportunities in market to increase equity holdings)
• Will add incremental value over time
• Growth of float is significant at Geico
• No growth until premium values increase in future (Believe this was in reference to General Re)
• B: At current time float is not a plus in our hands
• CM: Just have to do 1/3 as well with float as in the past to work out well

• Possible if Mr. Buffett had been in NY deal would have gone through
• CM: Interesting how talented the people were and still ran into problems. Not last convulsion in derivatives market
• B: Why do really bright people risk losing what is important to them for something not important. Believe he was referring to lose of reputation vs. money
• B: Really bright people go broke with leverage

• B: Everything is provided in the annual report to calculate Intrinsic Value (IV)
• B: Way money is put to use is significantly affected by external circumstances
• CM: No trouble to have lots of money, should be no tears in house
• B: He was harsh on ROE record of AT&T, brings no insight into telecommunications game, this why not buying stock in this area.
• B: Wants to be like Mrs. B and live until 104
• B: Not in business of being White Knights, business of being investor
• B: Doesn't know much about Chinese companies, may not be a large enough field for Berkshire
• B: Wants informed owners who are comfortable owning BRK and know what business is.
• B: View change as threat more than opportunity (sorry but I can't remember the context)
• CM: "If things can't go on forever, they will stop". Thinks it is important the example you set.
• CM: Eventually the price of oil will go way up, doesn't mean you can make money on it.
• B: Bad news for Washington Post that Cable prices have increased. Cable has not had good return on invested capital. Cable programming has good return on investments.
• CM: "Let world take succeeding generations down." This comment was in reference to willing money to children.
• B: Much easier to predict Coke business than Microsoft.
• B: Bill Gates named two stocks to hold if left for 10 years, also said he would take Coke because it was a "sure" success
• B: "Understand Dilly bars, not software"
• B: I see nothing to think that blade and razor business wouldn't go indefinitely
• B: Life Insurance, no bias, isn't very profitably, term insurance prices don't make sense.
• B: Hate to compete with Coke and Gillette anywhere in the world
• CM: Legislation threat to tobacco is serious

• B: Obviously Internet has important impact on retailing, could pose such a threat they would not get into business. Internet will be a huge force in many arenas.
• B: Brand names very important when have thousands of items. Borsheim's brand will offer Borsheim's an advantage in costs due to one huge center. Wants to build Berkshire brand, has thought a lot about it and wants to capitalize on it in the future
• B: Geico big beneficiary of Internet, can have a store anywhere in country rent free
• CM: Says tricky to figure out how technology will transform
• B: Good for country to have info tech lead
• CM: BRK businesses will fair better against technologies as far as them going obsolete due to technology.
• Internet is a huge development, Charlie and I both understand early development - promotion, don't necessarily like it. Whole field has gone wild, a few will succeed as businesses.

• Personal Comments: Spoke with her briefly she was very nice and very informative
• B: Alice understands insurance very well, recommend report as a toolkit
• B: Thinks its useful to have an analyst that is well versed in BRK, non-paid information office.

• B: Start with the A's and examine all of them
• CM: Dancing in and out of your favorite companies is not a good idea. B: Have to make two decisions right, when to buy and when to sell. Also have to pay taxes along the way.
• B: Investing is about valuing businesses. Encourage us to look at inefficiently priced businesses.
• B: Built snowball on top of a very long hill, start very young and live a long time. Keep expenses low.
• B: Find out what you know and don't know. Think for yourself
• CM: First struggle is to get to $100,000. Underspend income grossly to get there quicker.
• B: Valuation is an art
• B: Get a strong enough moat so management less of a factor
• B: Standard Deviation doesn't tell you anything
• CM: Academic approach to capital ??? is dumb, keep doing dumb things
• B: Better investor if look back at decisions you make and determine if you make the right decision
• B: Pick out five to ten companies in which you understand their products, get annual reports, get every news piece on it. Ask what do I not know that I need to know. Talk to competitors and employees. Essentially be a reporter, ask questions like: If you had a silver bullet and could put it into a competitor who would it be and why. In the end you want to write the story, XYZ is worth this much because…
• Cm: The question why is the most important of all.

• B: Dubious of sustained 20% growth
• CM: See some similarities with 60's and 70's, doesn't think it will necessarily end like '73. Always will be waves of optimism and pessimism.
• B: Wants to take big gulps in stock market when opportunity available. Almost impossible to make good buy in a negotiated purchases. More likely to find fair deal in negotiated purchases than in stock market in present time.
• B: Stocks valued so high they can't ever expect to earn enough to justify earnings. Think about the math behind this.
• B: Market is generally fairly efficient, generally fairly efficient at valuing businesses. This fairly efficient doesn't suffice.
• CM: People who think market is reasonably efficient are correct.

• Costs of option come out of shareowners pockets
• CM: Fundamentally wrong to not have fair accounting at big firms. Accounting in America is corrupt
• B: No against options per se, crazy to pay subsidiary in BRK stock
• B: Any option should not be greater than the value of business and not greater than the costs of capital

• B: If could buy group of pharmaceuticals below market multiples they would do it. As a group they are good, wouldn't buy individual at these prices.

• B: EJ Is a natural fit, very big company in 10-15 years. Large gains in IV in aviation field. Accelerate investments in Europe, in substance not capital intensive industry.
• Flight Safety is more capital consuming. ROE doesn't move around, current ROE due to costs

• B: qualify except for liquidity standpoint
• B: Thinks if do get the best way would be to phase in the weighing over twelve month period.

• CM: Major country, when sliding down just keep going down, brought about by boom/bust land and bad accounting. Important to not let a lot of bad sloop to get into regulation.

• Repurchasing shares is an option but BRK would have to be significantly undervalued and we would have to have no other uses for cash.

• Some state of paranoid self pity is worst frame of mind

• B: USAA does a terrific job of delivering a low cost insurance service to specific groups
• B: In terms of cost Geico is best in country
• B: Thinks average insurance business will stay average
• B: BRK generally very well positioned in industry, low margins offer may offer an opportunity to grow even faster

• CM: Hagstrom's first book didn't contribute to human knowledge. His second is good, recommend everyone buy a copy.
• CM: Best biography ever read: Titan: Bio of John Rockefeller

• CM: Also recommended The Wealth and Poverty of Nations
• Buffett recommended Common Sense on Mutual Funds : New Imperatives for the Intelligent Investor by John Bogle and Personal History by Katharine Graham

• B: Money ends up in star performers, not those that really know how to make money.

• A lot of potential for mischief when write something down on a piece of paper and forget about it for a long period

© 1997 rrockw@yahoo.com
Developed by: Richard M. Rockwood