BUFFETT: It's different than it was 10 years ago. It doesn't change very fast, but the one--the one way it would change for sure is based on age. I mean, if I'm running this place at 100, which I won't be, but obviously, there'd be a different three around at that time. Anybody that takes over after me should have a long run. I mean, there's a huge advantage in a lot of continuity in this place. It's really like a very big family and so you don't want somebody to come who'll run it for five years and then hand it off to someone else. So I would--age factor alone could cause somebody to drop off the list after a period of time. But we've never had anybody drop off the list because they've left us or anything like that. We've--it's a terrific group. You could pick the name out of a hat from the three and you'd get a terrific manager and--but the board knows exactly which one they would prefer at this time.
QUICK: Mm-hmm. Joe.
KERNEN: Thanks. Warren, along the same line with Dave Sokol, you know, I talked about the new normal and I can't imagine that a fractional ownership of a jet is ever going to go away, but you know the conspicuous consumption, the flying private, it's a little bit different than it was two or three years ago. And NetJets has been--I don't know if you call it struggling. For one of your assets I guess you would call it struggling.
KERNEN: And you'd like it to be profitable. Do--are you--do you have ideas on what to do there, or is that something that Sokol is going to have to just figure out himself and if he does it really well, maybe that does line him up to be the guy.
BUFFETT: Yeah, he's doing it really well. The situation with NetJets, and this is true both in Europe and the United States, is the number of planes owned by our owners is down maybe 15 percent or so. Now it's stabilized in the last few months. I mean, the number of people that are getting rid of their fractional ownership is being matched by new ones. The interesting thing is, flying per owner fell off dramatically a little over a year ago. I mean, when the recession hit, our owners, even though they'd already--they were paying for the hours, they were paying the management fee, when Thanksgiving came, when Christmas came, whatever it might be, when the Kentucky Derby came, the--their flying fell off quite dramatically, maybe by 25 percent. And like I say, they were paying the management fee anyway. That has come back a fair amount in the last couple of months. Flying per owner has increased somewhat. NetJets is, actually, as I put in the report, solidly profitable now. What Dave has done there has been miraculous. I mean, he is--he went--he went in there of August of last year and in terms of getting the balance sheet straightened out, our debt is down $500 million in terms of getting our operating costs in line with revenues. In all respects, NetJets is working very well now. But you're right, there are--compared to five years ago, or four years ago, you know, we're not seeing the same demand as we did then. And like I say, it's about equal in Europe and the United States.
KERNEN: It's solidly profitable now, though, you said. They--that fact wasn't made clear in the piece over the weekend, I don't think.
BUFFETT: Well, it--I actually used that term in the annual report. But yeah, it may not have been picked up that way. But, listen, for the whole year last year it lost $711 million pre-tax.
KERNEN: You know...
BUFFETT: I mean, that is huge.
KERNEN: ...a lot of people think of NetJets they think of--I see all the golfers. It says NetJets, but the Marquis thing is even--the Marquis Jet is even a bigger seems brand on some of the--with some of these athletes than the NetJets. What's the relationship there?
KERNEN: What will the relationship be in the future?
BUFFETT: The relationship with Marquis is exactly as it's always been. Marquis is a customer of NetJets. They buy--they buy planes, they sign up for the management fee and the hourly fee just like other customers. Then they subdivide it in effect by selling cards to people and they sold I think 2200 cards or something like that last year. So they sell a lot of cards. And you're right, it's interesting. They're both in the entertainment and the--and the professional sports field. The Marquis card is relatively more important than the direct ownership. I'm not sure why that's the same, but we want Marquis to do well. But they're a separate business and they just buy from us and then they resell.
QUICK: Hey, Warren, just on that point, we have a note that came in from one of the shareholders, one of their questions from Jack Harris in Rome City, Indiana. It's number 42, guys, in the control room if you want to follow. On that point he says, "With NetJets losing about three quarters of a billion dollars last year, this company to me really doesn't fit the Berkshire mold. What's the future of NetJets? Is there a chance that in the future you would sell the company?"
BUFFETT: No, we will not sell the company. And it's true that our guarantee of their debt is what kept them alive last year, and--but I don't see any reason why NetJets, unless private aviation was banned in some way or something, but I see no reason--NetJets is going to make money and it makes money even during a period like this when sale of planes are not very high. So it is by far the dominant factor in the--in the business. It has--the value of its fleet is well over that of the next three competitors combined. So we own the business, in effect. We're--and it's a profitable business. It just got out of control a year ago and it has this huge loss. The year before that it was profitable.
QUICK: OK, Carl has a question, too.
QUINTANILLA: Yeah. Warren, we got started on the NetJets issue by talking about Sokol and I wanted to ask you about the section in your letter where you talk about a Ajit Jain, who obviously has a job that involves managing big portfolios of risk, as you do. And you say, "If Charlie, I and Ajit are ever in a sinking boat and you can only save one of us, swim to Ajit." What should we make of that?
BUFFETT: No question. What we make of that is Ajit is incredibly valuable to the Berkshire. He is--he's been--single-handedly, he's been responsible for a huge part of Berkshire's success ever since he came with us in 1985. He runs a business in his special reinsurance area really unlike any in the world. He built it all by himself and he's built--you know, we have over, as I remember, we have over $20 billion afloat that is in our hands that we're using to buy other businesses and that float has cost us less than nothing because of the skills...
BUFFETT: ...of Ajit that has as an underwriter. Incidentally, one of the things that he just underwrote, if France wins the World Cup, I think we're going to lose about 30 million bucks or something like that. We get all kinds of risks that come into Berkshire.
QUINTANILLA: But when it comes to the succession issue, that's high praise. And when you say the board knows who it would be if something were to happen tomorrow, this--reading this makes you think this--that he might be the guy.
BUFFETT: Well, you're the guy reading it, so I'll let you answer the question.
QUINTANILLA: Right, thanks. That's helpful.
BUFFETT: But I will say this. Ajit incidentally, it--you--I couldn't have a closer relationship with anybody than Ajit. We talk every day. This is a fellow that one time when there was a question on some long-term compensation that I'd made arrangement with on, and there was a reason to pay it immediately, I called up Ajit and I said, you know, `What do you think the figure should be.' And we're talking in the millions of dollars. And Ajit said, you know, `Whatever you say, Warren.' And I came up with a number, and I said, you know, `But if you think this is wrong, you tell me.' And he said--he said, `Warren, whatever you--it's your number.' And all of our relationship has been that way ever since he came in 1985. He's a fantastic human being.
QUICK: Warren, there's a shareholder who wrote in, Eric Soo, from Chicago, Illinois. He said, "You said that Charlie (Munger) has the quickest business mind you've ever seen. You've said Bill Gates solves a dice riddle that only three other people have solved that you've ever seen, one being a logician or something. And you've touched on Ajit's intelligence." You just talked about him. But this shareholder wants to know your impressions of these three and which of the three is smarter.
BUFFETT: Well, if you add up the ideal of the three people you just mentioned, we're talking national debt figures. I mean, I--those guys--I mean, I--you know, I get an inferiority complex being around any of them. They have different types of minds. They're--they have ungodly levels of general intelligence. But they each have somewhat different special abilities. Charlie does have--he has the best--he's 86 years old now and he has the best 30-second mind in the world. If I call him and describe a problem to him, any kind of a situation, he gets to the essence of it immediately. I mean, he doesn't--he doesn't stop at the first 28 stops. He goes right around the board all the way to Boardwalk, you know, with one big move. And Bill, Bill has this knowledge that encompasses everything in the world. I mean, he devours subjects, whether it's physics or you know, or medicine, or you name it. And Ajit is unbelievably good at evaluating probabilities, and he's a great salesperson, too. I mean, he--people like us after we make money.
KERNEN: Yeah. Hey, Warren, it was--it was TXU week back here with the major papers. I think, what is it, Energy Future or something is the--is the name.
KERNEN: And I know you have a--an investment there, and you've got a lot of utilities. Can you just comment on what the heck happened? I guess it's natural gas, I guess it's the economy in Texas. What do you think they need to do? Are they asking you? You've got--I mean, it matters to you how this thing works out. And what do you...
BUFFETT: Yeah. We...
KERNEN: Go ahead.
BUFFETT: We own some bonds. We don't--you know, there's several equity holders. I'm not sure whether there's been any change in the equity holders. But KKR and Tex Pacific and TBG and Goldman, at least, were among the equity holders, big equity holders. I have not talked to anybody, equity holder about it. We own some bonds, and we paid in the low 90s for those bonds, and I think they're selling in the 70s. So--but they've been paying us 10 1/2 percent or thereabouts. So they haven't been a terrible investment but they certainly haven't been a great investment. TXU, the old TXU, the price they received for electric--electricity, in effect, is a function, to some extent, of natural gas prices. And when they made the deal originally, they hedged themselves with natural gas futures out quite a ways. But that doesn't go forever. And then they had these huge maturities in the year 2014. So that's a case of people getting very exuberant at the top, paying a lot of money. My understanding is that at least one of those participants carry their equity at 40 percent of their costs. But I would bet a lot that--and I don't know at all, but I would bet that Goldman carries their holdings lower. But that's just a guess on my part.
QUICK: Another question from a shareholder. We mentioned earlier that you've got at least 65,000 new shareholders, maybe another 100,000 that you've been watching, and you say that you're trying to teach them that they're there for the long haul. But just so you get a sense of what some--of something shareholders are thinking, Anthony Tate writes in. He's from Clinton, Maryland. He says, "I recently purchased 10 shares of Berkshire B shares as a rookie investor." He's just curious, "Where do you see this stock in, say, about six months in terms of value? My plan is to hold on to it long-term. So I just want some insight as to whether this is a good stock to hold on to. Is six months a long-term investor in your mind?"
BUFFETT: No, no. I have no idea where it will be in six months. None, just zero.
BUFFETT: I mean, my son's bidding on a farm in Illinois. He's already farming a lot of acres. Is he buying that with the idea that he's going to sell it in six months, you know? Six months is not an investment period. There's no one in any--there isn't one stock I own, whether it's Coca-Cola or Wells Fargo or Berkshire Hathaway or--I don't have any idea whether they're going to be up 20 percent, down 20 percent. Just no idea at all. If they go down a lot and I have some money, I'll buy some more of them, you know. But it's very interesting. People who buy farms are much more logical about it, usually, than people that buy stocks. They buy a farm, they don't get a quote on it the next day or the day after. They don't buy it at 11 in the morning and think `I'm going to sell it at 4 in the afternoon.' They look at what the farm's going to do over time. And that's what I try to talk about to Berkshire shareholders. And not everybody feels that way about stocks. And I'm not quarreling with them, they just shouldn't own Berkshire unless they have a very long time horizon.
QUICK: Well, on that point, though, with all these new shareholders, it's going to lead to some changes. Plenty of questions came in, like this one from Ray Herverford in Highland, Illinois, who says, "I've been attending the annual meeting for many years but lately it's been increasingly difficult to get to Omaha to get a seat. There were 35,000 people attending the meeting last year and the Quest Center's Web site states that it only seats 17,000. The last two years I watched in an overflow room. If I'm going to watch on a TV screen, it's crazy to get on a plane to get to the TV. Can we either move the meeting to a city that can accommodate the crowds or carry it live on a Web cast or CNBC or something?"
BUFFETT: Yeah. One of the--if we moved it to another city, I'm not sure what would happen to the taxes on my home here in Omaha. And I know I wouldn't do well when I go out trick or treating on Halloween. So I don't really have an option about moving it from Omaha, and it's a real problem on crowds. And I've thought about--obviously, I've thought about webcasting or something of the sort. It's true that people pick up on a transcript of what takes place on the meeting usually very quickly on the Web or something of the sort. I do like--I do like the personal interaction. I mean, I have a lot of fun with the crowds, and I think they have fun coming here. But it is--you know, we can probably hold 40,000 in Omaha. There will be overflow rooms, that main room does only hold about 17,000. People don't seem to mind that too much. They're milling around buying things, I might add, you know, that we have in our--in our display area. We've got 200,000 square feet, roughly, of display. But, you know, there's not a great answer to it.
QUICK: All right. Carl.
QUINTANILLA: Warren, just listening to you a second ago, I think our eyebrows were raised when you said, `Oh, if the stock goes down 20 percent, I have some money, I'll buy some more of it.' Hope you'll forgive the broad stock question, but has your appetite for new stock purchases of any company been whetted because of the rise in markets or are you as optimistic now about stocks as you were when you wrote in The Times last year, year before?