This year marks the 50th anniversary of Warren Buffett running Berkshire Hathaway. So the mood at the annual shareholders’ meeting on May 2 was even more celebratory than usual. Warren and his partner, Charlie Munger, were as sharp as ever and put on another excellent meeting. For five hours, the two answered questions before 40,000 people that ran the gamut from business specifics to philosophical life questions. 

I’ve been attending these meetings since 1998 and never tire of listening to Warren and Charlie. Typically I don’t come away with a major revelation, but it’s always valuable to hear their clear and common sense approach to business. There’s also plenty of timeless advice about how to conduct your life that’s inspiring and resonates with the audience.

At a time when the media is rife with stories of corporate greed and corruption, the Berkshire meeting is a refreshing reminder that business done the right way is noble and can be fun. It’s a powerful celebration and affirmation of business.

Here are my meeting notes, roughly in the order of the questions asked:

On 3G (the private equity firm Berkshire partnered with to buy Heinz and Kraft) and its practice of significantly reducing headcount after an acquisition

  • “There’s no policy to have more people than we need.” —Warren Buffett
  • Charlie also isn’t a fan of employing too many people and compared it to working in Russia: “They pretend to pay us, and we pretend to work.”
  • “Railroads went from 1.6 million workers to 200,000 while delivering more freight and better safety. Efficiency is required. I tip my hat to 3G,” —Warren Buffett
  • “We don’t believe in hiring extra people. Most of our managers don’t operate that way. Where I see it, I may tolerate it, but I don’t like it.”—Warren Buffett

IBM

  • Is IBM similar to textile mills in the 1960s? Charlie said no. “We own many companies that were mightier in the past than they are now. But IBM has managed through many tech changes.”
  • Warren added, “It helps that they repurchase shares.”

Business success

  • “The whole thing in business is to be open to ideas as they come along. Be open to having good accidents happen. Like when Lew Davidson, the head of GEICO, spent four hours with me at a young age, or when Jack Ringwalt wanted to sell National Idemnity or Ajit Jain walked into our offices.”—Warren Buffett
  • “If people weren’t so often wrong, we wouldn’t be so rich.”—Charlie Munger

Berkshire culture and growth rate

  • “Berkshire culture runs as deep as any large company’s could. Mrs. Louis in Germany [owner of a motorcycle apparel and accessories retailer] wanted to sell to Berkshire because its culture is institutionalized and will last for decades.” —Warren Buffett
  • “There are worse tragedies in life than having our growth rate slow,” said Charlie. “Name one!” Warren shot back.
  • “It’s wonderful to work with people who care about doing a great job rather than what’s in it for them.”—Warren Buffett

Coca-Cola

  • “There are 1.9 billion Coca-Cola products consumed per day. That was true decades ago, and I’m confident it will be true far in the future.”—Warren Buffett
  • On the trend of eating less sugar, Warren said, “Consumer food companies will adjust.”
  • “Twenty years from now there will be more Coke consumption than today. I’ve had one-quarter of all my calories for the past 30 years come from Coke products. I am 25% sugar!”—Warren Buffett
  • “Sugar is enormously helpful. It prevents premature softening of the arteries.”—Charlie Munger
  • “When I compare having a Coke product to something I get at Whole Foods, there’s no comparison. I don’t see smiles with the products there.”—Warren Buffett

Auto dealership business

  • “Auto dealers have no scale advantage—it’s a local business. The finance part is not attractive because banks are a cheaper source of money. Margins won’t widen as they grow this business.”—Warren Buffett
  • “Van Tuyl [recent auto dealership acquisition] is run like a meritocracy. The right people are there.”—Charlie Munger

Employee behavior

  • “340,000 people work for Berkshire. I’m pretty sure 5, 10, 25 are doing something I wouldn’t like.” —Warren Buffett
  • “Behave in all situations as if the situations were reversed.”—Charlie Munger

Law firms

  • “It’s how modern law firms work. They’re like a pie-eating contest where if you win, the prize is you get to eat more pie.”—Charlie Munger

Market valuation

  • “Today’s valuations are affected by the low interest-rate environment. Prices are higher when rates are lower. The question is how long will interest rates stay low?”—Warren Buffett
  • “Stocks were cheaper in 1973-74 than 2008-09.”—Warren Buffett
  • “Invest when things get cheap—no matter what people are saying on TV; sell when they get very enthused. It’s not a difficult intellectual exercise.”—Warren Buffett
  • “I don’t think value investing will ever go out of style. Who the hell doesn’t want value when they buy something?”—Charlie Munger
  • “Owning a farm where you don’t get a quote on it every day, month, or year is probably a better way to look at stocks.”—Warren Buffett

Renewable energy

  • “Twenty percent of Berkshire Hathaway Energy in Iowa comes from wind. That will be 58 percent by the end of 2016.”—Warren Buffett
  • “We have $18 billion committed to renewable energy (wind and solar). It’s dependent on tax credits. We’re able to invest far more money because of our consolidated tax return—more than any other utility. Most utilities don’t pay that much income tax.”—Warren Buffett

Worst failure

  • “My most memorable failure: We invested $400 million in Dexter Shoe, and it went to zero. And we paid for it in stock that’s now worth $6-7 billion! It makes me feel better when the stock declines.”—Warren Buffett
  • “Most anytime we issued shares it was a mistake.”—Charlie Munger

Leverage

  • “We could have used leverage and been much bigger. But we would be sweating at night. We don’t like sweating at night,” said Charlie. Added Warren, “Over financial matters!”

Interest rates and inflation

  • “I’ve been very wrong on rates and inflation. We’ve had five to six years of zero rates. The Fed balance sheet has gone from $1 trillion to $4 trillion. It’s still hard for me to see if you toss money from helicopters how you don’t get inflation. We are operating in world we don’t fully understand. We have to be prepared for anything.”—Warren Buffett
  • “There are no 30-year mortgages at Clayton [Berkshire’s manufactured housing business].”—Warren Buffett
  • “I am nervous about printing money, especially when we spend it like a helicopter spreading it around rather prudently, financing infrastructure projects, and so on.”—Charlie Munger
  • "You make little progress in life trying to make macro predictions. We have abdicated. It’s better to say ‘we’re ignorant.’” —Charlie Munger

Deferred taxes

  • “The $37 billion in deferred taxes Berkshire has is due to (1) unrealized appreciation and (2) bonus depreciation. I wouldn’t look at it as a form of equity.”—Warren Buffett

Management incentives

  • “Henry Singleton [of Teledyne] had clever incentives for executives. But Teledyne got into trouble after Singleton left with government contract fraud. Charlie and I believe in incentives. But we have seen decent people get into trouble with incentives. The CEO promises a certain number, and his executives don’t want to make the CEO look bad. Egos get involved. You have to be careful in the messages you send as CEO. If you don’t want to disappoint Wall Street, your managers will react.”—Warren Buffett

Risk

  • “There’s still a lot of risk in high finance. The idea that Dodd-Frank removed all the risk is nonsense.”—Charlie Munger
  • “Berkshire is miles away from being a SIFI [systemically important financial institution].”—Warren Buffett

Brand power

  • “Brands have to stand for the promise of them in people’s heads. You’ve got to protect a brand. It’s a fabulous asset.”—Warren Buffett

Global investing

  • “Investment principles do not stop at borders. I would apply the principles of the Intelligent Investor—stocks as prices of a business—in evaluating businesses overseas.” —Warren Buffett

United States and China

  • “The luckiest person ever born on a probabilistic basis is the baby born in the United States today.”—Warren Buffett
  • “But we can’t get too smug. It’s important the United States and China have a good relationship and work together. There’s nothing more important for our respective safety and the benefit of the world than close cooperation with China.” —Charlie Munger

Berkshire CEO qualifications

  • “You need significant operating experience to be the Berkshire CEO. I wouldn’t vote to have someone whose sole experience was investments run an operation like Berkshire. But the CEO should have some investing skills. A dual background is helpful.”—Warren Buffett
  • “Trustworthiness is more important than brains.”—Charlie Munger

Tax policy

  • “Don’t shed tears for corporate America on tax rates. They are not onerous. We still earn 15% on tangible equity. Charlie and I remember rates as high as 50%.”—Warren Buffett
  • “California has a really stupid tax policy. The Federal policy is OK. The California tax policy drives rich people out. Florida is much smarter.”—Charlie Munger

Reinsurance

  • “The reinsurance business not as good as it once was and is unlikely to get better. Money has come in—not because they want to be in reinsurance—but because it’s an uncorrelated asset class. We’re in it for the long haul.”—Charlie Munger

How to get people to like you

  • “Get very rich and very generous.”—Charlie Munger
  • “Be a person you would like. Have a good sense of humor, and don’t take credit for things you didn’t do.” —Warren Buffett
  • “That really works in a marriage. Change yourself, not your marriage partner.” —Charlie Munger

NetJets and its pilot’s strike

  • “NetJets was not a mistake. We have a decent business. NetJets pilots make $145,000 per year, with seven days on and seven days off. I’m not sure unions are accurately representing pilots.”—Charlie Munger

Philanthropy

  • “Philanthropy is a very individual thing. I promised to give more than 99% of my wealth away. If I had a child who was very talented, helped build the business, smart—I’d leave it to the child.”—Warren Buffett
  • “Bonds in a safety deposit box are of little utility to me and great utility to people on the other side of the world. Where will it do the greatest good? Charlie and I both live very simple lives.”—Warren Buffett
  • “You can leave $5 million to your kids. That’s a very desirable change in the tax law. We can’t always assume politicians will do crazy, unreasonable things.”—Charlie Munger
  • “I don’t think it’s healthy for [young people] to lay around looking for pie in the sky or whatever. Speaking for many grandparents in the audience, I wish they would start to form households soon.”—Charlie Munger
  • “I believe in personal philanthropy, not corporate philanthropy. I’m working for shareholders, and they should determine their own philanthropy. I have real reservations about corporate philanthropy.”—Warren Buffett

Euro

  • “They probably created something unwise. You can’t create a business partnership with your thriftless, drunken brother.”—Charlie Munger
  • Warren responded, “Praise by name, criticize by category. He loves to name names.”

Corporate activism

  • “The best defense against activism is performance. Money is flowing into activism. Activists are now reaching in terms of the kinds of companies they are targeting. This is not a constructive activity. Stocks traded below intrinsic value for many years. Now shares are above intrinsic value, and activists are urging companies to repurchase shares.”—Warren Buffett
  • “I don’t think it’s a great age, the age of activism. I don’t want an activist to marry into the family.”—Warren Buffett
  • “I failed in this activity with some of my relatives.”—Charlie Munger

Acquisition prices

  • “I don’t want to lower our standards on the asset side just because money is so cheap.”—Warren Buffett
  • “We’d rather pay 12x earnings in a bad year than 8x in a good year [referring to auto dealers]. Right now we are having a good year in selling autos.”—Warren Buffett

Internet

  • “The Internet was a huge change in my life. I love it. If I had to give up either my plane (which costs $1.5 million per year) or the internet ($100 per year), I’d give up the plane.”—Warren Buffett
  • “I hate multi-tasking.”—Charlie Munger

Income inequality

  • “Income inequality is extreme in the United States. on a GDP per capita basis it has gone up six to one in my lifetime.”—Warren Buffett
  • “Everybody who is willing to work should have a decent livelihood. Raising the minimum wage would cost a lot of jobs. It’s a form of price fixing. The Earned Income Tax Credit makes a lot of sense. It can be improved. There’s fraud. But the answer lies more in the EITC than the minimum wage.”—Warren Buffett (Warren later wrote a terrific editorial piece on this topic for The Wall Street Journal)

College education

  • “There are the silliest statistics on the value of a college education. They compare the income of those who go to college and those who don’t. Attributing all of the gain to college is crazy. Maybe college students do better because they were better people before they attended.”—Warren Buffett

Dow Jones

  • “Dow Jones totally missed it. They had such an advantage. But they let the world pass them by. They could have been Bloomberg.”—Warren Buffett
  • “The family did end up with $6-7 billion so they didn’t destroy their fortune.” —Charlie Munger

China

  • “Lee Kuan Yew stopped corruption in Singapore. China is doing the same thing. Smartest thing I’ve seen a country do in a long time. They are copying Lee Kuan Yew. They’ve actually shot a few people. That scares people off.” —Charlie Munger
  • “Charlie just ordered a bust of Lee Kuan Yew. That’s what Berkshire does—copy smart people.”—Warren Buffett
  • “We have a system that unleashes human potential. We found it several hundred years ago. China found it 40-50 years ago.”—Warren Buffett

Buffett and Munger families

  • “You can’t accomplish much in one generation. We both owe a lot to the families that raised us.”—Charlie Munger
  • “We had admirable people in our families and that helped us identify other admirable people.”—Charlie Munger
  • “At an early age, I got the idea that my main duty was to become as rational as you could be. I got that from my grandfather.”—Charlie Munger
  • "It’s dishonorable to stay stupider than you have to. You have a duty to remove it.”—Charlie Munger

 A good life

  • “If you wrest a fortune by buying stocks, trading pieces of paper, it’s not much of a life. If you’re good at managing your own money, I hope you do more with your life.”—Charlie Munger

 Those were some of the highlights for me. If you’re interested in business or investing, I’d highly recommend attending next year’s Berkshire meeting. It’s one of a kind.