By Anupreeta Das And Erik Holm
Shareholders peppered Warren Buffett and Charlie Munger with
questions Saturday, ranging from granular queries about individual
Berkshire Hathaway Inc. businesses to big-picture ones about the
challenge of income inequality in the U.S.
Through it all, the Berkshire duo kept up their good spirits and
humor, chomping on See's peanut brittle and drinking Cherry Coke as
they took turns answering. As in years past, Mr. Buffett was the
more voluble of the two; Mr. Munger often sticks to one-liners,
delivered in his trademark deadpan style.
"I'm trying to think of any activists I'd want to marry into the
family, " Mr. Munger said at one point, responding to a question
about whether Berkshire would be a target for activist funds after
Mr. Buffett and Mr. Munger are gone.
When Mr. Buffett said the Internet had changed his life in a big
way, Mr. Munger said: "The idea of multitasking my way to glory
never occurred to me."
Mr. Buffett was downbeat when asked about trends in the
reinsurance business, where Berkshire has a massive presence. The
conglomerate owns two reinsurers, Berkshire Hathaway Reinsurance
Group and General Re, which help other insurers manage risks in the
property and casualty, health care, life and other markets.
"Reinsurance is a business whose prospects have turned for the
worse," Mr. Buffett said, adding that the industry had become "a
fashionable asset class" with hedge-fund money rushing into the
sector. That has driven down prices and likely will make
reinsurance less attractive for Berkshire in the next decade, he
said. However, the company still will be on the lookout for unusual
opportunities, he added.
Shareholders were also eager to hear Mr. Buffett talk about some
of Berkshire's smaller businesses, including private-aviation
company NetJets Inc., which has been in the midst of contract
negotiations with unions for more than two years. Pilots from the
company held placards and marched outside the annual meeting venue
during the day.
Mr. Buffett said Berkshire wasn't antiunion and that he expected
the NetJets management and unions to resolve their dispute, even if
it took several months. "It's human nature to have differences," he
said, adding that the company's pilots were well compensated.
There were a few provocative questions too.
Shareholders probed Mr. Buffett and Mr. Munger about Berkshire's
relationship with investment firm 3G Capital, and its investments
in International Business Machines Corp. and Coca-Cola Co. IBM and
Coke are among Berkshire's biggest stockholdings but both have
grappled with how to keep their hold on markets that are
evolving.
The questions about 3G mostly had to do with whether Mr.
Buffett's approach and philosophy meshed with 3G's. One shareholder
called 3G's cost-cutting moves brutal in an email read by Carol
Loomis, a retired Fortune journalist who was on a panel asking
questions of Mr. Buffett and Mr. Munger. The question was about
whether Mr. Buffett no longer "aspired to balance capitalism and
compassion."
Mr. Buffett said that 3G had bought some companies staffed with
"considerably more people in the job than needed," but that the
layoffs spurred those same companies to perform "exceedingly
well."
One shareholder asked Mr. Buffett about Clayton Homes Inc., a
Berkshire subsidiary that has been accused of predatory lending
practices. Clayton Homes, which builds, sells, finances, leases and
insurers its manufactured houses, has come under shareholder
scrutiny after an April investigation by the Center for Public
Integrity and the Seattle Times newspaper alleged predatory
collection and lending practices, high fees and other problems at
the company. The article said these practices led to unsuspecting
borrowers getting trapped in loans they couldn't afford.
Clayton Homes has said the story was "misleading."
"I make no apologies whatsoever for Clayton's lending
practices," Mr. Buffett said. "Clayton has behaved very well."
Some of the big-picture questions sought Mr. Buffett's and Mr.
Munger's views on the feasibility of value investing in emerging
markets and growing income equality at home.
Mr. Buffett said income disparity was a problem, but that
raising the minimum wage wouldn't solve the issue because it would
have to rise by a large amount to make a difference in living
standards. Rather, he believes in reform and advocated for an
earned income tax credit "that rewards people who work."
The duo also got their share of questions about philanthropy,
the books they had read, advice for youngsters starting out in
their careers and the attributes necessary to run Berkshire.
A seventh-grader who traveled from Florida asked, "How do you
make lots of friends? And how do you get people to like you and
work with you?" Mr. Buffett said his behavior evolved as he tried
to learn from those he admired. Mr. Munger quipped that the only
way he could get people to like him was "to get very rich and be
very generous."
Erik Holm and Kristen Scholer contributed to this article.
Write to Anupreeta Das at anupreeta.das@wsj.com
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