WEBVTT 00:00:00.000 --> 00:00:02.259 Welcome back to the deep dive. Today, we've got 00:00:02.259 --> 00:00:05.160 a well, a mountain of source material, financial 00:00:05.160 --> 00:00:07.440 reports, articles, deep historical research, 00:00:07.700 --> 00:00:10.119 and we're going to pull it all apart to understand 00:00:10.119 --> 00:00:12.320 one of the world's most fascinating and frankly, 00:00:12.419 --> 00:00:16.000 most unusual financial empires. Our mission today 00:00:16.000 --> 00:00:19.199 is very focused. We are doing a deep dive on. 00:00:19.480 --> 00:00:21.480 Berkshire Hathaway Inc. And you really can't 00:00:21.480 --> 00:00:23.260 just call it a company or an investment fund. 00:00:23.399 --> 00:00:26.079 It's so much more than that. It really is. It's 00:00:26.079 --> 00:00:29.399 an American multinational conglomerate headquartered 00:00:29.399 --> 00:00:33.500 famously in Omaha, Nebraska. But its reach is, 00:00:33.560 --> 00:00:35.159 I mean, it's truly global. It touches almost 00:00:35.159 --> 00:00:37.000 every part of the modern economy. And you have 00:00:37.000 --> 00:00:38.740 to start with the numbers just to set the stage. 00:00:38.960 --> 00:00:42.320 If you look at the 2024 financials, the scale 00:00:42.320 --> 00:00:45.000 is just, well, it's almost hard to comprehend. 00:00:45.299 --> 00:00:47.140 So what are we talking about? We're talking about 00:00:47.140 --> 00:00:52.439 total assets of over $1 .154 trillion. Wow. That's 00:00:52.439 --> 00:00:54.299 a number that just doesn't feel real. How do 00:00:54.299 --> 00:00:55.920 you even put that in perspective for someone? 00:00:56.079 --> 00:00:58.840 Well, think about it like this. $1 .15 trillion 00:00:58.840 --> 00:01:03.140 in assets is roughly the same as the entire GDP 00:01:03.140 --> 00:01:06.840 of a country like Mexico or Spain. So Berkshire 00:01:06.840 --> 00:01:08.980 Hathaway is basically its own national economy. 00:01:09.200 --> 00:01:11.200 In a very real sense, yes. And then there's the 00:01:11.200 --> 00:01:16.489 revenue. $371 .4 billion in 2024. It consistently 00:01:16.489 --> 00:01:19.469 ranks, what, fifth on the Fortune 500 list? Fifth, 00:01:19.650 --> 00:01:22.750 yeah. And the employee base is massive. It supports 00:01:22.750 --> 00:01:27.430 nearly 400 ,000 people globally, 392 ,000 to 00:01:27.430 --> 00:01:30.230 be exact. That's the sheer physical size of this 00:01:30.230 --> 00:01:32.189 machine. But there's another part of the scale, 00:01:32.310 --> 00:01:35.629 a more philosophical part, and that's the share 00:01:35.629 --> 00:01:39.090 price. The famous Class A shares, ticker BRKA. 00:01:39.290 --> 00:01:42.010 Exactly. It has the highest per share price of 00:01:42.010 --> 00:01:44.129 any public company on the planet. And it's not 00:01:44.129 --> 00:01:46.590 even close. We're talking what? In August of 00:01:46.590 --> 00:01:50.810 2024, it hit $700 ,000 for one share. For one 00:01:50.810 --> 00:01:53.250 single share. You literally need a down payment 00:01:53.250 --> 00:01:55.530 for a nice house just to buy one piece of this 00:01:55.530 --> 00:01:57.950 company. So why? I mean, is that just a vanity 00:01:57.950 --> 00:02:00.290 thing? No, not at all. It's actually a core part 00:02:00.290 --> 00:02:02.310 of their philosophy. It's a deliberate mechanism. 00:02:02.609 --> 00:02:05.599 The board. for decades has been completely against 00:02:05.599 --> 00:02:08.379 stock splits. And the idea behind that is? The 00:02:08.379 --> 00:02:11.599 idea is that the prohibitively high price acts 00:02:11.599 --> 00:02:14.759 as a filter. It weeds out the short term speculators, 00:02:14.879 --> 00:02:17.360 the day traders. It attracts only long term, 00:02:17.500 --> 00:02:20.000 really committed investors, people who think 00:02:20.000 --> 00:02:22.460 of it as joining a partnership, not just making 00:02:22.460 --> 00:02:24.419 a trade. That makes a lot of sense. It's a very 00:02:24.419 --> 00:02:27.180 expensive ticket to the club, but everyone in 00:02:27.180 --> 00:02:29.159 the club is there for the long haul. Precisely. 00:02:29.439 --> 00:02:31.939 Now, before we dive into the wild history of 00:02:31.939 --> 00:02:33.900 how this all started, we should probably talk 00:02:33.900 --> 00:02:36.939 about the people, the architects. Of course. 00:02:37.340 --> 00:02:39.599 You have to start with Warren Buffett, the chairman 00:02:39.599 --> 00:02:43.340 and CEO, and his indispensable partner for so 00:02:43.340 --> 00:02:45.199 many years, Charlie Munger. Right. Munger was 00:02:45.199 --> 00:02:48.080 the vice chairman from 1978 all the way until 00:02:48.080 --> 00:02:51.379 he passed away in late 2023. They were the duo 00:02:51.379 --> 00:02:53.560 that really built and codified this whole investment 00:02:53.560 --> 00:02:55.990 philosophy. But the future is already in motion, 00:02:56.169 --> 00:02:58.370 isn't it? The succession plan is one of the most 00:02:58.370 --> 00:03:01.430 watched, but also one of the most stable in the 00:03:01.430 --> 00:03:03.729 corporate world. Absolutely. The sources are 00:03:03.729 --> 00:03:05.949 very clear on this. The successors have been 00:03:05.949 --> 00:03:08.409 in place for years, working right alongside Buffett 00:03:08.409 --> 00:03:11.090 and Munger. You have Greg Abel and Ajit Jain. 00:03:11.189 --> 00:03:13.949 Okay, so break that down. Who does what? Greg 00:03:13.949 --> 00:03:16.750 Abel is the vice chairman who oversees all the 00:03:16.750 --> 00:03:19.199 non -insurance operations. That's the massive 00:03:19.199 --> 00:03:21.300 industrial side of the business, the railroads, 00:03:21.379 --> 00:03:24.719 the energy, the retail. And Ajit Jain? Ajit Jain 00:03:24.719 --> 00:03:26.639 is the vice chairman for all the insurance operations. 00:03:27.060 --> 00:03:29.919 And as we're about to discuss, insurance is the 00:03:29.919 --> 00:03:32.639 absolute engine room of Berkshire. It's the capital 00:03:32.639 --> 00:03:35.020 machine that fuels everything else. And the timeline 00:03:35.020 --> 00:03:37.259 for the handover is set in stone now. It is. 00:03:37.360 --> 00:03:40.419 Buffett announced in May of 2025 that he's going 00:03:40.419 --> 00:03:43.840 to retire as CEO at the end of 2025. And Abel 00:03:43.840 --> 00:03:46.050 will be the one to succeed him. So the handoff 00:03:46.050 --> 00:03:48.650 is happening very soon, which makes this deep 00:03:48.650 --> 00:03:51.169 dive, you know, incredibly timely. We're looking 00:03:51.169 --> 00:03:55.469 at the legacy Abel is about to inherit. OK, let's 00:03:55.469 --> 00:03:57.330 unpack this origin story. We're calling it the 00:03:57.330 --> 00:03:59.990 Accidental Empire, and it's just it's a perfect 00:03:59.990 --> 00:04:02.409 name for a company that owns massive railroads 00:04:02.409 --> 00:04:05.689 today. Its beginnings are so humble. And frankly, 00:04:05.810 --> 00:04:07.830 they're the result of a big mistake fueled by 00:04:07.830 --> 00:04:10.530 pure anger. It's an incredible story. Berkshire 00:04:10.530 --> 00:04:12.430 Hathaway didn't start as an investment vehicle. 00:04:12.610 --> 00:04:15.289 It started in 1839 as a textile manufacturer. 00:04:15.629 --> 00:04:19.110 A textile mill. A textile mill. The company we 00:04:19.110 --> 00:04:21.689 know today was actually formed from a merger 00:04:21.689 --> 00:04:25.829 in 1955 between Hathaway Manufacturing and Berkshire 00:04:25.829 --> 00:04:28.389 Fine Spinning Associates. And at first, it was 00:04:28.389 --> 00:04:31.319 pretty big. It had 15 plants, 12 ,000 workers, 00:04:31.519 --> 00:04:34.279 over $120 million in revenue. But that industry 00:04:34.279 --> 00:04:36.519 was already in steep decline in the U .S., right? 00:04:36.579 --> 00:04:39.819 Oh, completely. Intense global competition, rising 00:04:39.819 --> 00:04:42.220 labor costs. It was a tough business to be in. 00:04:42.439 --> 00:04:45.100 Our sources show that by the end of the 1950s, 00:04:45.120 --> 00:04:47.560 seven of those original 15 plants were already 00:04:47.560 --> 00:04:49.720 shut down. Which brings us to the big question. 00:04:50.259 --> 00:04:53.120 How on earth did Warren Buffett, who was already 00:04:53.120 --> 00:04:56.000 a very successful investor by then, get himself 00:04:56.000 --> 00:04:58.939 stuck running a failing business like this? Well, 00:04:59.019 --> 00:05:00.620 the initial plan had nothing to do with running 00:05:00.620 --> 00:05:02.920 it. It was a classic arbitrage play. Buffett 00:05:02.920 --> 00:05:06.560 started buying up stock in 1962 at about $7 .50 00:05:06.560 --> 00:05:09.519 a share. And his thinking was what? His thinking 00:05:09.519 --> 00:05:11.800 was simple. The company was closing mills and 00:05:11.800 --> 00:05:14.120 liquidating assets. He figured that eventually 00:05:14.120 --> 00:05:15.959 they would offer to buy back his shares at a 00:05:15.959 --> 00:05:18.360 higher price and he'd make a nice, easy profit. 00:05:18.740 --> 00:05:21.560 A quick, low risk win. But that's not what happened. 00:05:21.980 --> 00:05:24.399 The pivotal moment, the one that changed everything, 00:05:24.579 --> 00:05:28.540 came in 1964. Right. Buffett had a verbal agreement 00:05:28.540 --> 00:05:31.040 with the manager, a guy named Seabury Stanton. 00:05:31.500 --> 00:05:34.439 He offered to sell his shares back for $11 .50 00:05:34.439 --> 00:05:38.420 per share. Stanton agreed. Verbally. And then 00:05:38.420 --> 00:05:40.560 the formal offer came in the mail. And then the 00:05:40.560 --> 00:05:43.060 formal written offer arrived. And the price wasn't 00:05:43.060 --> 00:05:46.079 $11 .50. It was $11 .37 and a half cents. An 00:05:46.079 --> 00:05:47.839 eighth of a dollar. Twelve and a half cents. 00:05:48.139 --> 00:05:51.480 Exactly. A tiny, almost insignificant financial 00:05:51.480 --> 00:05:55.230 slight. But that tiny detail is what changed 00:05:55.230 --> 00:05:57.689 financial history. Because Buffett got angry. 00:05:57.970 --> 00:06:00.689 He got furious. He said so himself later. He 00:06:00.689 --> 00:06:03.230 felt cheated. So instead of just taking the slightly 00:06:03.230 --> 00:06:05.930 smaller profit and moving on, he got his back 00:06:05.930 --> 00:06:08.389 up. He decided to go on the attack. What did 00:06:08.389 --> 00:06:11.529 he do? He started buying more stock. Enough stock 00:06:11.529 --> 00:06:13.269 to get a controlling interest in the company 00:06:13.269 --> 00:06:16.149 for the specific purpose of firing Seabury Stanton. 00:06:16.290 --> 00:06:19.500 So he got his revenge. Stanton was out in 1965. 00:06:19.980 --> 00:06:22.480 But in the process, Buffett became the majority 00:06:22.480 --> 00:06:25.540 owner of a dying textile business he never actually 00:06:25.540 --> 00:06:28.759 wanted to own. And that's the great irony. That's 00:06:28.759 --> 00:06:31.480 why we call it the accidental umpire. What's 00:06:31.480 --> 00:06:33.779 so fascinating is Buffett's own critique of that 00:06:33.779 --> 00:06:37.300 decision. He has said, many times that buying 00:06:37.300 --> 00:06:40.120 that textile company was the single biggest investment 00:06:40.120 --> 00:06:42.620 mistake he ever made. He actually put a number 00:06:42.620 --> 00:06:44.720 on it, didn't he? He did. He calculated that 00:06:44.720 --> 00:06:47.560 that emotional decision denied him compounded 00:06:47.560 --> 00:06:50.740 returns of about $200 billion over the next 45 00:06:50.740 --> 00:06:53.899 years. $200 billion lost because he was angry 00:06:53.899 --> 00:06:57.860 about 12 .5 cents. That's an incredible lesson. 00:06:58.160 --> 00:07:01.100 It is. It's a reminder that even the Oracle of 00:07:01.100 --> 00:07:04.350 Omaha is human. He said if he just put that capital 00:07:04.350 --> 00:07:06.569 directly into insurance businesses from the start, 00:07:06.649 --> 00:07:09.129 instead of wasting it trying to revive the textile 00:07:09.129 --> 00:07:11.089 mill, the results would have been astronomical. 00:07:11.550 --> 00:07:13.449 So what happened to the textile business? He 00:07:13.449 --> 00:07:15.990 slowly wound it down. The last mill finally closed 00:07:15.990 --> 00:07:19.389 in 1985, a full two decades after he took control. 00:07:20.089 --> 00:07:22.670 The old company had to basically die so the new 00:07:22.670 --> 00:07:25.430 one could be born. And that transition from a 00:07:25.430 --> 00:07:29.480 dying mill to a trillion dollar behemoth. It 00:07:29.480 --> 00:07:32.519 really hinged on creating a completely decentralized 00:07:32.519 --> 00:07:34.939 structure. And you see that perfectly in their 00:07:34.939 --> 00:07:37.360 corporate headquarters. Yes, this is such a defining 00:07:37.360 --> 00:07:38.680 part of their culture. I mean, you have this 00:07:38.680 --> 00:07:41.560 company, number five on the Fortune 500, operating 00:07:41.560 --> 00:07:44.180 all over the world. And its corporate headquarters 00:07:44.180 --> 00:07:46.959 in Omaha. It's tiny. It had only 27 employees 00:07:46.959 --> 00:07:51.459 as of... the end of 2024. 27 people to oversee 00:07:51.459 --> 00:07:53.720 more than a trillion dollars in assets. That 00:07:53.720 --> 00:07:56.040 just speaks to a level of trust and discipline 00:07:56.040 --> 00:07:58.639 that you don't see anywhere else. It's extreme 00:07:58.639 --> 00:08:01.339 decentralization. The philosophy is, you know, 00:08:01.399 --> 00:08:03.300 it's pretty simple. We buy great companies. We 00:08:03.300 --> 00:08:05.339 keep the great management teams in place and 00:08:05.339 --> 00:08:07.399 we let them run their business. We only step 00:08:07.399 --> 00:08:10.319 in on big capital allocation decisions. That 00:08:10.319 --> 00:08:13.259 tiny headcount in Omaha is a physical manifestation 00:08:13.259 --> 00:08:16.279 of that trust. OK, so that tiny corporate footprint 00:08:16.279 --> 00:08:18.480 can only work if there's a rock solid philosophy 00:08:18.480 --> 00:08:21.699 guiding how all that capital gets used. So let's 00:08:21.699 --> 00:08:23.839 get into part two, the investment philosophy 00:08:23.839 --> 00:08:26.740 and crucially the float engine. How did they 00:08:26.740 --> 00:08:29.360 actually turn that failing company into a money 00:08:29.360 --> 00:08:31.879 making machine? Well, the philosophy is often 00:08:31.879 --> 00:08:35.299 just called value investing. But Buffett's version 00:08:35.299 --> 00:08:39.179 is it's a lot more specific than that. His main 00:08:39.179 --> 00:08:42.740 principle is a preference for what he calls evergreen 00:08:42.740 --> 00:08:45.519 businesses. Evergreen. Meaning what exactly? 00:08:45.840 --> 00:08:47.840 Meaning businesses that generate predictable 00:08:47.840 --> 00:08:52.200 long term returns and are ideally insulated from. 00:08:52.509 --> 00:08:55.970 massive technological or social change. He wants 00:08:55.970 --> 00:08:59.070 stability. And that explains his famous avoidance 00:08:59.070 --> 00:09:01.590 criteria, right? The things he won't invest in. 00:09:01.610 --> 00:09:04.090 Exactly. Number one, he avoids companies he doesn't 00:09:04.090 --> 00:09:06.110 fully understand. That's what kept him out of 00:09:06.110 --> 00:09:07.929 tech for so long until Apple, which we'll get 00:09:07.929 --> 00:09:10.909 to. Number two, he's reluctant to invest in companies 00:09:10.909 --> 00:09:13.750 that are facing huge structural change. He doesn't 00:09:13.750 --> 00:09:15.330 want to bet on turnarounds. He wants to bet on 00:09:15.330 --> 00:09:17.860 stability. And the third one is a big one. He 00:09:17.860 --> 00:09:20.159 generally avoids real property. You don't see 00:09:20.159 --> 00:09:22.299 Berkshire buying up office towers or shopping 00:09:22.299 --> 00:09:25.100 malls. Why not? His reasoning is all about the 00:09:25.100 --> 00:09:27.919 economic moat, that durable competitive advantage. 00:09:28.580 --> 00:09:30.840 Real estate, for the most part, doesn't have 00:09:30.840 --> 00:09:33.779 one. The pricing is very precise. Management 00:09:33.779 --> 00:09:36.820 is complex. And he believes it just doesn't offer 00:09:36.820 --> 00:09:39.759 the same long -term competitive edge as owning 00:09:39.759 --> 00:09:42.320 a great business or a financial asset with pricing 00:09:42.320 --> 00:09:44.740 power. But the whole system doesn't just run 00:09:44.740 --> 00:09:47.580 on smart decisions. It runs on a massive river 00:09:47.580 --> 00:09:50.220 of cash that comes from the insurance subsidiaries. 00:09:50.679 --> 00:09:53.980 This is the famous float. The float is the secret 00:09:53.980 --> 00:09:56.379 sauce. It's the absolute key to understanding 00:09:56.379 --> 00:09:59.480 Berkshire. Think about how insurance works. You 00:09:59.480 --> 00:10:02.299 pay your premium up front for a promise that 00:10:02.299 --> 00:10:04.590 the insurer might have to pay out on later. Right. 00:10:04.710 --> 00:10:07.210 I pay my car insurance premium today, but I might 00:10:07.210 --> 00:10:09.669 not have an accident for months or years or ever. 00:10:10.029 --> 00:10:12.450 Exactly. And all that money, the premiums that 00:10:12.450 --> 00:10:14.370 Berkshire's insurance companies collect but haven't 00:10:14.370 --> 00:10:17.590 yet paid out in claims, that's the float. So 00:10:17.590 --> 00:10:19.850 it's basically a giant interest -free loan from 00:10:19.850 --> 00:10:22.549 all their policyholders. It is the ultimate strategic 00:10:22.549 --> 00:10:25.769 advantage. It's a huge pool of capital that isn't 00:10:25.769 --> 00:10:28.210 debt, so there's no interest. And it isn't equity. 00:10:28.730 --> 00:10:31.389 So it doesn't dilute the shareholders. They get 00:10:31.389 --> 00:10:34.210 to invest this massive float for their own benefit 00:10:34.210 --> 00:10:37.110 until the claims come due. When did this become 00:10:37.110 --> 00:10:39.649 the central strategy? It happened pretty early 00:10:39.649 --> 00:10:43.309 on. The first big non -textile acquisition was 00:10:43.309 --> 00:10:45.549 an insurance company called National Indemnity 00:10:45.549 --> 00:10:48.750 back in 1967. That was the start. But it really 00:10:48.750 --> 00:10:51.750 scaled up with a few key acquisitions later on. 00:10:51.809 --> 00:10:55.409 Massively. The crown jewel is Geico. Berkshire 00:10:55.409 --> 00:10:57.490 started buying into Geico in the 70s when it 00:10:57.490 --> 00:11:00.110 was in trouble. By 1996, they bought the rest 00:11:00.110 --> 00:11:02.929 of the company for $2 .3 billion. GEICO's direct 00:11:02.929 --> 00:11:05.590 -to -consumer model is a cash -generating machine 00:11:05.590 --> 00:11:08.049 that just feeds the float engine constantly. 00:11:08.350 --> 00:11:10.470 And then came the even bigger reinsurance deal, 00:11:10.690 --> 00:11:14.549 GenRe. Right, GenRe, acquired in 1998 for $22 00:11:14.549 --> 00:11:17.070 billion, though that one came with a lesson. 00:11:17.169 --> 00:11:19.690 He felt he overpaid for it, right? He did, and 00:11:19.690 --> 00:11:22.230 he admitted it publicly. But that's the thing 00:11:22.230 --> 00:11:24.970 about their model. Even a perceived overpayment 00:11:24.970 --> 00:11:27.629 for a quality business that generates a massive, 00:11:27.690 --> 00:11:30.889 consistent float can be absorbed by the strength 00:11:30.889 --> 00:11:32.889 of the whole conglomerate. And speaking of paying 00:11:32.889 --> 00:11:35.289 for things, there's a great story from the 2022 00:11:35.289 --> 00:11:39.210 Allegheny acquisition that really shows his attitude 00:11:39.210 --> 00:11:41.289 toward Wall Street. Oh, it's a classic. They 00:11:41.289 --> 00:11:44.490 bought Allegheny, another insurer, for $11 .6 00:11:44.490 --> 00:11:47.100 billion. But as part of the deal, Berkshire actually 00:11:47.100 --> 00:11:49.840 reduced the purchase price by the exact amount 00:11:49.840 --> 00:11:52.340 of money Allegheny had paid its investment bankers 00:11:52.340 --> 00:11:55.220 in fees. So he was essentially saying, I'm not 00:11:55.220 --> 00:11:58.179 paying for your bankers. Exactly. It was touted 00:11:58.179 --> 00:12:00.840 as a perfect example of Buffett's famous disdain 00:12:00.840 --> 00:12:03.710 for the investment banking profession. He made 00:12:03.710 --> 00:12:05.649 sure that Berkshire shareholders weren't funding 00:12:05.649 --> 00:12:08.590 what he saw as unnecessary middleman fees. This 00:12:08.590 --> 00:12:10.809 is where the float engine gets really, really 00:12:10.809 --> 00:12:13.289 interesting. Because when you have that much 00:12:13.289 --> 00:12:15.909 low -cost capital, you can become the lender 00:12:15.909 --> 00:12:18.009 of last resort when everyone else is panicking. 00:12:18.649 --> 00:12:20.529 Let's talk about the financial crisis playbook. 00:12:20.789 --> 00:12:23.009 This is where you see the true power of the float. 00:12:23.429 --> 00:12:26.409 In 2008, when the financial world was collapsing 00:12:26.409 --> 00:12:29.210 and credit markets were frozen solid, Berkshire 00:12:29.210 --> 00:12:31.129 could step in. They had cash when no one else 00:12:31.129 --> 00:12:33.669 did. The most famous example, of course, is Goldman 00:12:33.669 --> 00:12:36.990 Sachs. September 2008, the height of the crisis. 00:12:37.350 --> 00:12:41.490 He invested $5 billion. That was a huge vote 00:12:41.490 --> 00:12:45.159 of confidence. But the terms were... They were 00:12:45.159 --> 00:12:48.340 not exactly generous. Not at all. They were incredibly 00:12:48.340 --> 00:12:50.759 favorable to Berkshire. He bought $5 billion 00:12:50.759 --> 00:12:53.179 in preferred stock that paid a guaranteed 10 00:12:53.179 --> 00:12:56.460 % annual interest. So that's $500 million a year 00:12:56.460 --> 00:12:58.879 just in interest payments flowing into Berkshire. 00:12:58.960 --> 00:13:01.299 Guaranteed. And on top of that, they got warrants. 00:13:01.899 --> 00:13:05.379 The right to buy 43 .5 million shares of Goldman 00:13:05.379 --> 00:13:08.460 Commons stock at a hugely discounted price of 00:13:08.460 --> 00:13:12.000 $115 a share. So he got a massive income stream 00:13:12.000 --> 00:13:14.519 and massive future upside. What did they end 00:13:14.519 --> 00:13:16.779 up making on that one deal? The final profit 00:13:16.779 --> 00:13:19.820 was immense. Just on the preferred stock, they 00:13:19.820 --> 00:13:23.000 made about $1 .8 billion. But the real win was 00:13:23.000 --> 00:13:25.759 on the warrants. The profit from those was estimated 00:13:25.759 --> 00:13:29.720 at over $2 billion. So all told, you're looking 00:13:29.720 --> 00:13:32.720 at a profit of more than $3 .8 billion. It was 00:13:32.720 --> 00:13:35.559 a masterstroke made possible only because they 00:13:35.559 --> 00:13:37.840 had the cash ready. And they ran basically the 00:13:37.840 --> 00:13:39.899 same play a few years later with Bank of America. 00:13:40.039 --> 00:13:43.100 The exact same playbook. In 2011, Bank of America 00:13:43.100 --> 00:13:46.220 was in trouble. Berkshire swooped in, $5 billion 00:13:46.220 --> 00:13:49.139 in preferred shares, this time paying 6 % interest, 00:13:49.379 --> 00:13:52.799 still a sweet $300 million a year. And I assume 00:13:52.799 --> 00:13:55.700 a boatload of warrants. A massive boatload. warrants 00:13:55.700 --> 00:13:59.059 for 700 million common shares at just over $7 00:13:59.059 --> 00:14:01.960 a share. By 2017, that position had generated 00:14:01.960 --> 00:14:04.799 a profit of around $12 billion, and that's not 00:14:04.799 --> 00:14:06.559 even counting the billions they collected in 00:14:06.559 --> 00:14:09.220 interest payments along the way. It's the perfect 00:14:09.220 --> 00:14:11.679 demonstration of having dry powder when everyone 00:14:11.679 --> 00:14:14.019 else is running for the hills. Okay, so now we 00:14:14.019 --> 00:14:16.960 move to part three, the vast portfolio itself. 00:14:17.220 --> 00:14:19.460 This is what all that flowed and all that disciplined 00:14:19.460 --> 00:14:21.919 thinking has built over decades. It's just the 00:14:21.919 --> 00:14:24.279 sheer breadth of what they own is incredible. 00:14:25.060 --> 00:14:27.440 Let's start with the fully owned subsidiaries, 00:14:27.460 --> 00:14:30.519 the businesses Greg Abel oversees. Right. These 00:14:30.519 --> 00:14:33.080 are the engines of stable day to day earnings. 00:14:33.159 --> 00:14:35.220 You can really group them into a few big categories. 00:14:36.139 --> 00:14:38.480 Infrastructure, essential manufacturing and then 00:14:38.480 --> 00:14:40.679 consumer retail. These are the definition of 00:14:40.679 --> 00:14:42.679 those evergreen businesses we talked about. The 00:14:42.679 --> 00:14:45.570 infrastructure giants are. Well, they're literally 00:14:45.570 --> 00:14:48.110 the backbone of the economy. The flagship is 00:14:48.110 --> 00:14:50.769 BNSF Railway. They bought the rest of it in 2010 00:14:50.769 --> 00:14:53.870 for $26 billion. At the time, that was their 00:14:53.870 --> 00:14:56.330 biggest deal ever. And owning a railroad, that 00:14:56.330 --> 00:14:58.750 is the ultimate economic mode, isn't it? It really 00:14:58.750 --> 00:15:00.649 is. You can't just go out and build a competing 00:15:00.649 --> 00:15:03.289 railroad. The barriers to entry are immense. 00:15:03.830 --> 00:15:06.909 So BNSF has this incredible, predictable stream 00:15:06.909 --> 00:15:09.529 of returns that's tied directly to the health 00:15:09.529 --> 00:15:12.509 of the U .S. economy and global trade. Plus, 00:15:12.610 --> 00:15:14.769 it's a fantastic hedge against inflation. Then 00:15:14.769 --> 00:15:16.710 you've got the whole energy division, Berkshire 00:15:16.710 --> 00:15:20.149 Hathaway Energy or BHE. BHE is a monster in its 00:15:20.149 --> 00:15:23.289 own right. It owns huge utilities like Pacific 00:15:23.289 --> 00:15:25.470 Core in the U .S. and Northern Power Grid in 00:15:25.470 --> 00:15:28.590 the U .K. And utilities are the classic evergreen 00:15:28.590 --> 00:15:31.029 business. People need to turn on the lights and 00:15:31.029 --> 00:15:33.269 heat their homes no matter what the economy is 00:15:33.269 --> 00:15:35.450 doing. And that division also includes a huge 00:15:35.450 --> 00:15:37.509 real estate brokerage, right? Yes, Home Services 00:15:37.509 --> 00:15:40.289 of America. It owns brands like Long & Foster. 00:15:40.450 --> 00:15:43.690 It's another move into a stable, essential, regulated 00:15:43.690 --> 00:15:46.309 industry. That's the theme. And you can't talk 00:15:46.309 --> 00:15:48.610 about infrastructure and logistics without mentioning 00:15:48.610 --> 00:15:52.009 the truck stops. Pilot Flying J. They acquired 00:15:52.009 --> 00:15:54.669 the final piece of it in 2024 for $3 billion. 00:15:55.080 --> 00:15:57.960 Owning a major truck stop chain is a critical 00:15:57.960 --> 00:16:00.620 link in the supply chain. It complements BNSF 00:16:00.620 --> 00:16:03.220 and just provides another steady stream of revenue 00:16:03.220 --> 00:16:05.159 tied to transportation. All right. Let's shift 00:16:05.159 --> 00:16:07.340 to manufacturing and materials, the sort of unseen 00:16:07.340 --> 00:16:09.779 essentials that make everything else run. The 00:16:09.779 --> 00:16:12.759 biggest one here by far is Precision Cast Parts 00:16:12.759 --> 00:16:17.059 Core, or PCC. That was a $32 .1 billion acquisition 00:16:17.059 --> 00:16:19.799 in 2016. It was a massive deal. And what do they 00:16:19.799 --> 00:16:22.620 make? They make highly complex, high tolerance 00:16:22.620 --> 00:16:25.820 metal parts for things like jet engines. It's 00:16:25.820 --> 00:16:27.720 a classic moat company because the expertise 00:16:27.720 --> 00:16:30.019 and regulatory approval required means there's 00:16:30.019 --> 00:16:32.759 almost no competition. But this deal is also 00:16:32.759 --> 00:16:35.360 a good reminder that not every swing is a home 00:16:35.360 --> 00:16:38.580 run. It is. In 2020, Buffett came out and said 00:16:38.580 --> 00:16:41.639 he overpaid for PCC. They ended up taking a write 00:16:41.639 --> 00:16:44.600 down of about $10 billion. But here's the key. 00:16:44.980 --> 00:16:47.200 The strength of the overall Berkshire machine. 00:16:47.740 --> 00:16:50.460 is such that it can absorb a $10 billion mistake 00:16:50.460 --> 00:16:53.460 and just keep moving. It shows how robust the 00:16:53.460 --> 00:16:56.360 model is. What other big industrial names anchor 00:16:56.360 --> 00:16:58.200 this part of the business? Well, you've got a 00:16:58.200 --> 00:17:00.059 lot of companies that make the basic stuff of 00:17:00.059 --> 00:17:02.840 industry and construction. Lubrizol, a chemical 00:17:02.840 --> 00:17:05.859 company they bought for $9 billion. Johns Manville, 00:17:06.000 --> 00:17:08.400 which makes insulation. Shaw Industries. Which 00:17:08.400 --> 00:17:11.140 is the world's biggest carpet manufacturer. The 00:17:11.140 --> 00:17:13.960 biggest, by far. Again, not a flashy business. 00:17:14.619 --> 00:17:17.400 Insulation and carpets. But they are essential. 00:17:18.099 --> 00:17:21.480 Shaw has this huge moat because of its scale 00:17:21.480 --> 00:17:24.200 and distribution networks. You added MyTech, 00:17:24.400 --> 00:17:26.259 which makes products for the building industry, 00:17:26.460 --> 00:17:29.440 and Duracell batteries. These are all just the 00:17:29.440 --> 00:17:31.619 fundamental building blocks of a modern economy. 00:17:31.740 --> 00:17:33.859 Okay, let's go to the consumer side. This is 00:17:33.859 --> 00:17:35.839 where you find some of the most famous brands. 00:17:36.220 --> 00:17:39.140 And we have to start with See's Candies. See's 00:17:39.140 --> 00:17:41.119 Candy is the legend. It's Buffett's favorite 00:17:41.119 --> 00:17:44.019 case study. They bought it way back in 1972 for 00:17:44.019 --> 00:17:47.559 just $25 million. And the return on that has 00:17:47.559 --> 00:17:51.740 been astronomical. By 2019, that $25 million 00:17:51.740 --> 00:17:55.039 investment had returned over $2 billion in cash 00:17:55.039 --> 00:17:58.200 to Berkshire. That's an 8 ,000 % return. It's 00:17:58.200 --> 00:18:00.519 the perfect example of a brand with pricing power. 00:18:00.829 --> 00:18:02.730 Meaning people love it so much they'll pay more 00:18:02.730 --> 00:18:05.009 for it every year. Without even blinking. They 00:18:05.009 --> 00:18:06.990 can raise the price of a box of chocolates year 00:18:06.990 --> 00:18:09.789 after year and people just keep buying it. That 00:18:09.789 --> 00:18:12.309 is the definition of a moat. And it's highly 00:18:12.309 --> 00:18:14.569 seasonal. About half its revenue comes in November 00:18:14.569 --> 00:18:16.569 and December. It's a cash machine right when 00:18:16.569 --> 00:18:18.710 they want it. The consumer portfolio also has 00:18:18.710 --> 00:18:22.130 staples like Dairy Queen. Acquired in 1997 for 00:18:22.130 --> 00:18:25.710 $585 million. And then a whole stable of home 00:18:25.710 --> 00:18:28.170 furnishings companies. Nebraska Furniture Mart. 00:18:28.569 --> 00:18:31.230 Jordan's, RC Willie. And we can't forget the 00:18:31.230 --> 00:18:33.829 service sector holdings, which are quite diverse. 00:18:34.049 --> 00:18:37.150 Very diverse. You have NetJets, which is fractional 00:18:37.150 --> 00:18:38.970 ownership of private jets, a luxury service. 00:18:39.130 --> 00:18:41.109 Then you have Flight Safety International, which 00:18:41.109 --> 00:18:44.349 is a global leader in pilot training. And McLean 00:18:44.349 --> 00:18:46.930 Company, a massive logistics and distribution 00:18:46.930 --> 00:18:49.390 business they bought from Walmart that keeps 00:18:49.390 --> 00:18:51.869 shelves stocked all over the country. Before 00:18:51.869 --> 00:18:54.150 we pivot to the stocks, we should touch on the 00:18:54.150 --> 00:18:56.549 media ventures because that shows an interesting 00:18:56.549 --> 00:18:59.480 strategic shift. Right. They used to own a lot 00:18:59.480 --> 00:19:02.359 of local newspapers through BH Media Group, but 00:19:02.359 --> 00:19:04.160 Buffett saw the writing on the wall for that 00:19:04.160 --> 00:19:07.259 industry. So in 2020, they sold most of them 00:19:07.259 --> 00:19:09.880 to Lee Enterprises. But here's the clever part. 00:19:10.259 --> 00:19:13.299 They also became a key lender to Lee, loaning 00:19:13.299 --> 00:19:15.980 them over $500 million. They went from being 00:19:15.980 --> 00:19:18.799 an owner in a declining industry to being a secured 00:19:18.799 --> 00:19:21.420 creditor. It was a very strategic retreat. Okay, 00:19:21.480 --> 00:19:23.940 let's pivot now to the other side of the portfolio, 00:19:24.299 --> 00:19:26.819 the one that gets all the headlines. the major 00:19:26.819 --> 00:19:29.640 securities holdings, funded by all that insurance 00:19:29.640 --> 00:19:33.819 float. And this portfolio is really dominated 00:19:33.819 --> 00:19:37.200 by one massive name, Apple. Which was a famously 00:19:37.200 --> 00:19:39.200 late investment for Buffett in the tech space. 00:19:39.440 --> 00:19:41.140 He always said he didn't understand tech. But 00:19:41.140 --> 00:19:43.559 he saw Apple differently. He didn't see it as 00:19:43.559 --> 00:19:46.000 a tech company. He saw it as a consumer products 00:19:46.000 --> 00:19:48.420 company with the best economic moat in the world. 00:19:49.039 --> 00:19:51.779 The stickiness of the iPhone ecosystem gives 00:19:51.779 --> 00:19:54.069 it incredible pricing power. He started buying 00:19:54.069 --> 00:19:57.630 in 2016. And by 2022, it was what? Over 40 % 00:19:57.630 --> 00:20:00.470 of their entire stock portfolio. A huge concentrated 00:20:00.470 --> 00:20:03.289 bet, which means any move they make in Apple 00:20:03.289 --> 00:20:05.690 is a massive market event. So what does this 00:20:05.690 --> 00:20:07.630 all mean for today? It means what they did in 00:20:07.630 --> 00:20:10.509 2024 was seismic. They sold a huge chunk of it. 00:20:10.589 --> 00:20:13.119 A huge chunk is an understatement. Our sources 00:20:13.119 --> 00:20:16.039 show that in the second quarter of 2024, Berkshire 00:20:16.039 --> 00:20:19.000 cut its Apple stake by nearly 50%. They sold 00:20:19.000 --> 00:20:22.900 $75 .5 billion worth of stock. Wow. That's not 00:20:22.900 --> 00:20:24.799 trimming a position. That's a major strategic 00:20:24.799 --> 00:20:27.279 shift. It absolutely is. Yeah. And it's what 00:20:27.279 --> 00:20:29.759 instantly ballooned their cash reserves to that 00:20:29.759 --> 00:20:33.960 record $276 billion. It signals that they either 00:20:33.960 --> 00:20:36.640 see much better opportunities elsewhere or... 00:20:36.960 --> 00:20:38.920 Maybe more likely, they think Apple's valuation 00:20:38.920 --> 00:20:41.539 has gotten a little too high. Beyond Apple, though, 00:20:41.660 --> 00:20:44.019 the portfolio is anchored by these big financial 00:20:44.019 --> 00:20:47.279 staples. Exactly. They own over 20 percent of 00:20:47.279 --> 00:20:49.220 American Express, a position they've held for 00:20:49.220 --> 00:20:51.779 decades. They own a big chunk of Bank of America, 00:20:51.900 --> 00:20:54.019 which they got on those favorable terms we discussed. 00:20:54.240 --> 00:20:56.880 They own a piece of Moody's ratings. And then 00:20:56.880 --> 00:20:59.180 there was the recently revealed mystery stock. 00:20:59.380 --> 00:21:01.660 Which turned out to be Chubb, the insurance giant. 00:21:01.779 --> 00:21:04.539 Right. A nearly seven and a half billion dollar 00:21:04.539 --> 00:21:07.480 stake in Chubb. These are all foundational pillars 00:21:07.480 --> 00:21:09.920 of the global financial system. And in energy, 00:21:10.039 --> 00:21:12.279 they're heavily concentrated in traditional oil 00:21:12.279 --> 00:21:15.079 and gas. Very heavily. It's a bet on enduring 00:21:15.079 --> 00:21:17.940 global demand and a hedge against inflation. 00:21:18.359 --> 00:21:21.759 They own a big stake in Chevron and an even bigger 00:21:21.759 --> 00:21:24.140 one, almost 27 percent in Occidental Petroleum. 00:21:24.400 --> 00:21:26.599 The most surprising part of the portfolio for 00:21:26.599 --> 00:21:29.480 me is the international play, the big investment 00:21:29.480 --> 00:21:33.299 in Japan. The Sogo Shosha, the big Japanese trading 00:21:33.299 --> 00:21:36.420 houses. This is a really interesting and rare 00:21:36.420 --> 00:21:39.220 move outside the U .S. for them. These companies 00:21:39.220 --> 00:21:41.200 are totally different from a U .S. conglomerate. 00:21:41.279 --> 00:21:44.059 They're involved in everything from energy and 00:21:44.059 --> 00:21:47.059 commodities to global logistics. So what's the 00:21:47.059 --> 00:21:50.059 strategy there? By buying a piece of the five 00:21:50.059 --> 00:21:53.839 largest ones, Itochu, Mitsubishi, Mitsui, and 00:21:53.839 --> 00:21:56.680 so on Berkshire, gets this incredible diversified 00:21:56.680 --> 00:21:59.599 exposure to global trade flows and commodity 00:21:59.599 --> 00:22:02.180 markets that it just can't get from its U .S. 00:22:02.180 --> 00:22:05.420 holdings. By 2023, they'd up their stakes to 00:22:05.420 --> 00:22:08.440 over 7 % in each. It's a big bet on the future 00:22:08.440 --> 00:22:10.380 of global supply chains. Finally, we have to 00:22:10.380 --> 00:22:12.400 look at the sales and the regrets. Because that's 00:22:12.400 --> 00:22:14.039 where you learn a lot. We have to talk about 00:22:14.039 --> 00:22:16.440 the airlines. Oh, the airline saga. It was a 00:22:16.440 --> 00:22:18.960 huge reversal for Buffett. He called the industry 00:22:18.960 --> 00:22:21.740 a death trap for investors for years. Then in 00:22:21.740 --> 00:22:24.559 2016, he dove in, buying stakes in four major 00:22:24.559 --> 00:22:27.160 airlines. And then the pandemic hit. And in April 00:22:27.160 --> 00:22:29.880 of 2020, he sold everything, liquidated the entire 00:22:29.880 --> 00:22:32.559 position at a big loss. He just decided the pandemic 00:22:32.559 --> 00:22:34.319 had fundamentally and permanently changed the 00:22:34.319 --> 00:22:36.529 risk profile of that business. He's also been 00:22:36.529 --> 00:22:38.609 very open about the Paramount Global investment 00:22:38.609 --> 00:22:41.609 being a mistake. A huge mistake, by his own admission. 00:22:42.109 --> 00:22:45.369 He invested $2 .6 billion in 2022 and sold it 00:22:45.369 --> 00:22:48.930 all by May 2024 at a substantial loss. He took 00:22:48.930 --> 00:22:51.289 full personal blame for misjudging the streaming 00:22:51.289 --> 00:22:53.970 wars. We've also seen them sell based on geopolitics, 00:22:53.970 --> 00:22:56.769 which is a newer factor. The TSMC sale is the 00:22:56.769 --> 00:22:59.549 perfect example. They bought $4 billion of the 00:22:59.549 --> 00:23:02.730 Taiwanese chipmaker in 2022 and then sold almost 00:23:02.730 --> 00:23:05.049 all of it in the next six months, explicitly 00:23:05.049 --> 00:23:07.869 citing the rising geopolitical tensions around 00:23:07.869 --> 00:23:10.990 Taiwan. It shows that political risk is now a 00:23:10.990 --> 00:23:13.730 huge part of their moat calculation. And the 00:23:13.730 --> 00:23:15.630 portfolio is still being actively managed. It's 00:23:15.630 --> 00:23:18.250 not static. Not at all. The last quarter of 2024, 00:23:18.569 --> 00:23:20.529 for example, they bought over a billion dollars 00:23:20.529 --> 00:23:22.890 of Constellation brands. But at the same time, 00:23:22.910 --> 00:23:25.690 they sold their entire stake in Ulta Beauty after 00:23:25.690 --> 00:23:27.829 only owning it for six months. And they got rid 00:23:27.829 --> 00:23:30.609 of all their S &P 500 ETFs. It shows they are 00:23:30.609 --> 00:23:33.069 constantly reevaluating and they are not afraid 00:23:33.069 --> 00:23:35.859 to admit a mistake and get out quickly. OK. Let's 00:23:35.859 --> 00:23:38.319 move on to part four, which is the corporate 00:23:38.319 --> 00:23:40.799 governance and the culture, because it's just 00:23:40.799 --> 00:23:44.259 as unique as that $700 ,000 share price. We have 00:23:44.259 --> 00:23:46.380 to talk about the two -tier stock structure. 00:23:46.619 --> 00:23:49.000 Right. So we've established the Class A shares 00:23:49.000 --> 00:23:52.259 are intentionally expensive to attract long -term 00:23:52.259 --> 00:23:55.099 investors. It's an anti -speculation tool. But 00:23:55.099 --> 00:23:57.440 they had to create the Class B shares in 1996, 00:23:57.700 --> 00:24:00.759 and it was to fight off copycats, right? That's 00:24:00.759 --> 00:24:03.299 exactly it. Other investment firms started creating 00:24:03.299 --> 00:24:06.299 these trusts. were basically designed to give 00:24:06.299 --> 00:24:09.079 people cheap, fractional access to Berkshire. 00:24:09.380 --> 00:24:11.599 They were trying to piggyback on the name. So 00:24:11.599 --> 00:24:14.200 to stop that, Berkshire created its own lower 00:24:14.200 --> 00:24:16.599 -priced option. They did. They introduced the 00:24:16.599 --> 00:24:19.680 Class B shares, the BRKB. Originally, they were 00:24:19.680 --> 00:24:21.880 a fraction of the price, but after a split in 00:24:21.880 --> 00:24:25.779 2010, they're now priced at 1 ,500th of a Class 00:24:25.779 --> 00:24:28.380 A share. It makes ownership accessible to almost 00:24:28.380 --> 00:24:31.119 anyone. But that accessibility comes with a tradeoff 00:24:31.119 --> 00:24:33.259 in terms of power, doesn't it? A huge tradeoff. 00:24:33.380 --> 00:24:35.799 This is the critical part for governance. A Class 00:24:35.799 --> 00:24:39.059 B share has only one ten thousandth of the voting 00:24:39.059 --> 00:24:42.000 rights of a Class A share. One ten thousandth. 00:24:42.000 --> 00:24:45.359 Wow. Yeah. It ensures that the effective voting 00:24:45.359 --> 00:24:48.259 control stays concentrated with the long term, 00:24:48.380 --> 00:24:51.640 high value Class A shareholders who are most 00:24:51.640 --> 00:24:54.559 aligned with the founding philosophy. It's designed 00:24:54.559 --> 00:24:57.380 to maintain stability. And that philosophy of 00:24:57.380 --> 00:25:00.640 sort of. extreme frugality and long -term thinking, 00:25:00.819 --> 00:25:03.500 it starts right at the very top with executive 00:25:03.500 --> 00:25:06.440 pay. The contrast here is just iconic. Warren 00:25:06.440 --> 00:25:08.819 Buffett's salary has been fixed at $100 ,000 00:25:08.819 --> 00:25:13.420 a year for 35 years. $100 ,000 to run a trillion 00:25:13.420 --> 00:25:15.759 -dollar company. It's unbelievable. He gets no 00:25:15.759 --> 00:25:18.059 stock options, nothing like that. Just about 00:25:18.059 --> 00:25:20.660 $300 ,000 a year for security services. It's 00:25:20.660 --> 00:25:22.720 a powerful signal. And what does that signal 00:25:22.720 --> 00:25:25.059 to everyone else? It signals that he sees his 00:25:25.059 --> 00:25:27.740 job as a suet of capital, not an executive trying 00:25:27.740 --> 00:25:31.000 to maximize his own pay. His wealth is tied entirely 00:25:31.000 --> 00:25:32.920 to the performance of the stock that he owns. 00:25:33.039 --> 00:25:35.420 It sets the cultural tone for the whole organization. 00:25:35.819 --> 00:25:38.119 But you have to contrast that with the pay for 00:25:38.119 --> 00:25:40.759 his successors, Greg Abel and Ajit Jain. Right. 00:25:40.799 --> 00:25:42.880 They're compensated like the top tier global 00:25:42.880 --> 00:25:45.920 executives they are. Abel and Jain each get a 00:25:45.920 --> 00:25:49.059 salary of $20 million a year plus a potential 00:25:49.059 --> 00:25:52.009 bonus. Yeah. The message is, you know, the operational 00:25:52.009 --> 00:25:54.309 leaders are rewarded handsomely for their performance, 00:25:54.490 --> 00:25:57.049 while the chairman maintains that symbolic minimal 00:25:57.049 --> 00:25:59.930 pay. And this all leads us to the future. The 00:25:59.930 --> 00:26:02.630 succession plan is now very clear and very public. 00:26:02.890 --> 00:26:05.210 It's the biggest governance change in the company's 00:26:05.210 --> 00:26:07.490 history. Abel and Jane were made vice chairman 00:26:07.490 --> 00:26:10.369 in 2018. Abel was formally named the successor 00:26:10.369 --> 00:26:13.480 in 2021. And with Buffett's announcement. The 00:26:13.480 --> 00:26:16.339 timeline is set. Abel takes over as CEO at the 00:26:16.339 --> 00:26:19.160 end of 2025. Finally, we can't talk about the 00:26:19.160 --> 00:26:21.119 culture without talking about the annual shareholders 00:26:21.119 --> 00:26:23.660 meeting. It's less a meeting and more of a festival, 00:26:23.759 --> 00:26:26.799 right? The Woodstock for capitalists. It's completely 00:26:26.799 --> 00:26:29.720 unique in the financial world. Over 40 ,000 people 00:26:29.720 --> 00:26:32.279 descend on Omaha, Nebraska every year for this 00:26:32.279 --> 00:26:35.000 thing. And the main event is a six or eight hour 00:26:35.000 --> 00:26:37.619 Q &A session where Bucket and his team answer 00:26:37.619 --> 00:26:39.779 questions directly from shareholders. Totally 00:26:39.779 --> 00:26:41.900 unfiltered. It's all about transparency, but 00:26:41.900 --> 00:26:44.380 they also make it fun. The introductory cartoon 00:26:44.380 --> 00:26:46.539 they play every year is legendary for setting 00:26:46.539 --> 00:26:49.019 that tone. Oh, they're brilliant. They use those 00:26:49.019 --> 00:26:50.980 cartoons to show they don't take themselves too 00:26:50.980 --> 00:26:54.880 seriously. Like in 2004, they had a cartoon with 00:26:54.880 --> 00:26:57.460 Arnold Schwarzenegger as the Warrenator trying 00:26:57.460 --> 00:26:59.819 to travel back in time to stop Berkshire from 00:26:59.819 --> 00:27:03.329 being formed. Always sports cameos and spoofs, 00:27:03.329 --> 00:27:06.750 right? Always. In 2007, Buffett was playing basketball 00:27:06.750 --> 00:27:09.450 against LeBron James in the cartoon. They used 00:27:09.450 --> 00:27:11.390 them to poke fun at their own subsidiaries, too. 00:27:11.869 --> 00:27:14.430 In 2008, there was a cartoon where Charlie Munger 00:27:14.430 --> 00:27:16.589 becomes president, and his solution to climate 00:27:16.589 --> 00:27:18.910 change is for everyone to eat more Dairy Queen. 00:27:19.309 --> 00:27:22.829 It's just a brilliant way to maintain this incredibly 00:27:22.829 --> 00:27:25.789 approachable, almost folksy culture for what 00:27:25.789 --> 00:27:27.950 is at its heart one of the most powerful and 00:27:27.950 --> 00:27:30.069 disciplined financial machines ever created. 00:27:30.329 --> 00:27:31.829 But, you know, this raises a really important 00:27:31.829 --> 00:27:34.250 question. For all the talk about integrity in 00:27:34.250 --> 00:27:36.890 this folksy culture, the sheer scale of this 00:27:36.890 --> 00:27:39.609 decentralized empire means it's not immune to 00:27:39.609 --> 00:27:42.130 controversy. We have to look at the scrutiny 00:27:42.130 --> 00:27:44.920 some of the subsidiaries have faced. Right. When 00:27:44.920 --> 00:27:47.660 you own hundreds of companies in highly regulated 00:27:47.660 --> 00:27:50.660 industries, you're going to face legal and regulatory 00:27:50.660 --> 00:27:54.339 challenges. And our sources detail a few key 00:27:54.339 --> 00:27:57.319 ones. The first has to do with lending discrimination 00:27:57.319 --> 00:28:00.099 at their Home Services of America division. That's 00:28:00.099 --> 00:28:03.480 right. In 2022, a subsidiary called Trident Mortgage 00:28:03.480 --> 00:28:05.880 Company had to pay a $20 million settlement. 00:28:06.339 --> 00:28:08.859 This was after the Department of Justice and 00:28:08.859 --> 00:28:11.180 the Consumer Financial Protection Bureau alleged 00:28:11.180 --> 00:28:14.119 redlining. And what does redlining mean in this 00:28:14.119 --> 00:28:16.680 context? The federal investigation alleged that 00:28:16.680 --> 00:28:18.759 the company wasn't providing equal access to 00:28:18.759 --> 00:28:20.720 mortgages in certain neighborhoods, specifically 00:28:20.720 --> 00:28:23.559 communities with large black and Latino populations 00:28:23.559 --> 00:28:26.930 in and around Philadelphia. It's a serious allegation 00:28:26.930 --> 00:28:28.529 that highlights the challenge of making sure 00:28:28.529 --> 00:28:30.829 that ethical standards are met across such a 00:28:30.829 --> 00:28:33.269 vast, decentralized network. And there have also 00:28:33.269 --> 00:28:35.369 been allegations of aggressive lending in the 00:28:35.369 --> 00:28:38.269 manufactured housing business. Yes. In January 00:28:38.269 --> 00:28:42.089 of 2025, the CFPB sued another Berkshire subsidiary, 00:28:42.309 --> 00:28:45.309 Vanderbilt Mortgage and Finance. The lawsuit 00:28:45.309 --> 00:28:47.190 alleges that they were using aggressive tactics 00:28:47.190 --> 00:28:49.630 to push borrowers into loans they couldn't actually 00:28:49.630 --> 00:28:52.609 afford. With pretty severe consequences for those 00:28:52.609 --> 00:28:54.890 borrowers. According to the allegations, yes. 00:28:55.369 --> 00:28:57.710 The result was significant financial hardship, 00:28:58.029 --> 00:29:00.710 excessive fees, and in some cases, people losing 00:29:00.710 --> 00:29:02.869 their homes or going into bankruptcy. These kinds 00:29:02.869 --> 00:29:05.690 of issues really challenged that clean, conservative 00:29:05.690 --> 00:29:08.089 image of Berkshire. And finally, let's touch 00:29:08.089 --> 00:29:10.150 on the environmental concerns around the energy 00:29:10.150 --> 00:29:13.170 division, BHE. A Reuters investigation in 2025 00:29:13.170 --> 00:29:16.589 really focused in on this. While BHE has invested 00:29:16.589 --> 00:29:19.269 a lot in renewables, the report was very critical 00:29:19.269 --> 00:29:21.210 of the fact that it still operates several of 00:29:21.210 --> 00:29:24.049 the most polluting coal -fired power plants in 00:29:24.049 --> 00:29:26.609 the entire country. And it's the timeline for 00:29:26.609 --> 00:29:28.869 those plants that's the real point of contention, 00:29:28.890 --> 00:29:31.890 isn't it? It is. Critics point out that BHE plans 00:29:31.890 --> 00:29:33.809 to keep some of these high -emission coal plants 00:29:33.809 --> 00:29:38.009 running until at least 2049. That very long timeline 00:29:38.009 --> 00:29:40.569 raises serious environmental and public health 00:29:40.569 --> 00:29:43.769 concerns that seem to run counter to the company's 00:29:43.769 --> 00:29:46.500 image as a long -term steward of capital. These 00:29:46.500 --> 00:29:49.180 controversies are a really necessary counterpoint. 00:29:49.259 --> 00:29:52.579 They show just how hard it is to manage a conglomerate 00:29:52.579 --> 00:29:55.740 of this size, where the actions of one subsidiary 00:29:55.740 --> 00:29:58.000 can have these major national repercussions. 00:29:58.119 --> 00:30:00.480 You absolutely do. And speaking of scale and 00:30:00.480 --> 00:30:03.220 strategic choices, this all brings us back to 00:30:03.220 --> 00:30:06.039 the biggest financial signal the company is sending 00:30:06.039 --> 00:30:09.190 right now. That massive pile of cash. Right. 00:30:09.329 --> 00:30:12.049 Let's revisit that number because it's just astounding. 00:30:12.230 --> 00:30:15.190 As of mid 2025, the sources show Berkshire was 00:30:15.190 --> 00:30:20.130 holding $344 billion in cash and treasury bills. 00:30:20.869 --> 00:30:24.349 $344 billion. That is by far the largest cash 00:30:24.349 --> 00:30:27.170 position of any public company in the U .S. And 00:30:27.170 --> 00:30:30.630 that huge $75 billion sale of Apple stock is 00:30:30.630 --> 00:30:33.170 a big reason why. It sends a pretty clear signal 00:30:33.170 --> 00:30:35.569 that finding big, high quality businesses to 00:30:35.569 --> 00:30:41.740 buy at what they can What a deep dive this has 00:30:41.740 --> 00:30:43.900 been. I mean, we've traced the entire story of 00:30:43.900 --> 00:30:46.000 Berkshire Hathaway from what Warren Buffett himself 00:30:46.000 --> 00:30:49.359 called a monumentally stupid decision. All over 00:30:49.359 --> 00:30:52.099 12 and a half cents. Exactly. A mistake born 00:30:52.099 --> 00:30:54.559 of anger that accidentally forced the creation 00:30:54.559 --> 00:30:56.940 of this trillion dollar conglomerate we see today. 00:30:57.180 --> 00:30:59.619 We've seen how that accidental empire was built, 00:30:59.740 --> 00:31:01.980 not just on brilliant stock picks, but on this 00:31:01.980 --> 00:31:04.539 disciplined philosophy fueled by the massive 00:31:04.539 --> 00:31:07.279 float engine. from the insurance businesses. 00:31:07.839 --> 00:31:09.859 That's what allowed them to be the lender of 00:31:09.859 --> 00:31:12.480 last resort in a crisis. And we explore the sheer 00:31:12.480 --> 00:31:15.480 breadth of what they own, from things like carpets 00:31:15.480 --> 00:31:17.720 and insulation to entire railroads and power 00:31:17.720 --> 00:31:19.920 grids. And then the dynamic stock portfolio, 00:31:20.180 --> 00:31:22.339 which has been defined recently by that massive 00:31:22.339 --> 00:31:25.119 strategic sale of Apple stock. And all of this 00:31:25.119 --> 00:31:27.180 is happening at this critical moment of transition. 00:31:27.759 --> 00:31:29.519 The governance is about to change for the first 00:31:29.519 --> 00:31:32.259 time in decades, with Greg Abel set to take over 00:31:32.259 --> 00:31:35.180 from Buffett at the end of 2025. He's inheriting 00:31:35.180 --> 00:31:37.640 a perfect machine that is just, it's drowning 00:31:37.640 --> 00:31:40.960 in cash. He is. And that brings us to our final 00:31:40.960 --> 00:31:43.519 provocative thought for you to think about. That 00:31:43.519 --> 00:31:48.039 record cash reserve, that $344 billion, it sets 00:31:48.039 --> 00:31:50.779 an unbelievably high bar for future acquisitions. 00:31:51.339 --> 00:31:53.720 The question isn't just how Greg Abel will use 00:31:53.720 --> 00:31:56.220 it. It's about the opportunity cost of just letting 00:31:56.220 --> 00:31:58.680 it sit there. Does that cash become the ultimate 00:31:58.680 --> 00:32:00.779 strategic weapon if the market goes into another 00:32:00.779 --> 00:32:04.240 panic, giving him incredible power? Or does the 00:32:04.240 --> 00:32:06.440 drag on returns become so great that shareholders 00:32:06.440 --> 00:32:08.819 start demanding he spend it, maybe forcing him 00:32:08.819 --> 00:32:10.539 to lower the very standards that made the empire 00:32:10.539 --> 00:32:13.339 so successful in the first place? It is the ultimate 00:32:13.339 --> 00:32:14.900 inheritance, and it's the ultimate challenge 00:32:14.900 --> 00:32:17.160 for the next leader of the accidental empire.