This is the afternoon session of the Warren Buffett/Charlie Munger question-and-answer session with shareholders at the Berkshire Hathaway Annual Meeting at the Qwest Arena in Omaha, Nebraska on Saturday, May 3, 2008 as live-blogged on CNBC.com's Warren Buffett Watch. All times are Central.
1:12 pm: Warren Buffett and Charlie Munger are back on stage taking more questions from shareholders. There are a few more empty seats than in the morning session, but the arena is still mostly full.
1:14 pm: Buffett says he's made a lot of mistakes over the years, but none of them could have been prevented by "conventional due diligence."
1:15 pm: Buffett says that when Berkshire says financing is going to be available, it's available no matter what, "even if Ben Bernanke runs away to South America with Paris Hilton." Big laugh line.
1:16 pm: In response to a question on his religious beliefs, Buffett says he's an agnostic. He just doesn't know if there is a God and he doesn't know if he'll ever find out.
1:20 pm: Asked about Kraft, Buffett says that he thinks most of the big food companies have good assets. He uses Coca-Cola as a good example. Hard to take it on because of the power of its brand built over decades. "We feel good about branded products when they're runaway leaders in their field."
1:30 pm: Buffett says we run Berkshire in a way that is not dependant on anybody else. We want the company to keep working even if the rest of the world stops working the way it did the day before.
1:33 pm: Buffett says we can usually make a decision in five minutes and are able to move quickly when appropriate. "If we can't make a decision in five minutes, we can't make a decision in five months." They know quickly if something looks good. "We waste a lot of time, but only on the things we want to waste time on."
1:37 pm: Buffett says he met Carlos Slim (world's second richest man on Forbes 400 list) many years ago, but doesn't know him well at all.
1:38 pm: When asked if he would encourage Coca-Cola to boycott the Beijing Olympics over Tibet, Buffett says he thinks every country should participate in the Olympics. Olympics are a "wonderful event" and contribute to a better world over time. Munger adds that he thinks China, while imperfect, is moving in the right direction. Buffett says the U.S. is also moving in the right direction, because at one time it denied the vote to blacks and women.
1:40 pm: Buffett - "We will figure out better ways" to use coal while protecting the environment. He notes Mid-American has put in a lot of wind power, but remains very dependant on coal, and will be dependant on it for some time to come. "Will require leadership and cooperation" on a worldwide scale, and the U.S. is not in a great leadership position due to its extensive energy use in the past. Munger says there's an environmental reason for being pro-coal compared to biofossil fuels. "Most people don't think that way, but I do."
1:47 pm: Question on how to stop nuclear proliferation. Buffett: "The genie is out of the bottle" when it comes to nukes. There is more knowledge and there will always be some people who want to do harm, so the chokepoint will be the nuclear materials. "It is the primary problem facing mankind." The larger the world's population, the more people will want to harm their neighbor. Nuclear technology potentially gives those people a powerful weapon, much stronger than someone throwing a rock at the next cave. "We live in a very, very dangerous world that is getting more dangerous.. We've been very lucky since 1945." He recalls the Cuban Missile Crisis in 1962 as a time when the world avoided a nuclear conflict.
1:52 pm: A lengthy statement from a woman who describes how she's teaching young people about financial responsibility is interrupted by applause. It doesn't stop the woman who continues until there's more applause and Warren asks her to ask her question. It is, what else should I be doing to help them learn. Buffett says he's ready to hire the entire class right now. "The most important investment you can make is in yourself." Pick up good habits when you're young, he advises.
1:56 pm: A nine-year-old from Chicago asks if Buffett would like to buy the Chicago Cubs, his favorite team, from Sam Zell and is baseball a good investment? Big laughter from audience. Buffett says baseball teams have been a good investment, in part because television has "expanded the stadium." Buffett says at the questioner's age, he thought he would eventually buy a baseball team, but no longer thinks he will.
2:04 pm: Q - Why don't Americans save more? A - "This country may not save very much because it doesn't need to save as much as a less wealthy country."
2:09 pm: Says he can't remember a similar crisis in his lifetime in which residential real estate sent "out the shock waves." But he's seen many variations on the theme. "There are these primal urges in trying to get rich and wanting to believe in the tooth fairy." Munger: "It was a particularly foolish mess." Even Internet-based delivery of groceries, which was really stupid, was smarter than what happened in the mortgage mess, says Munger.
2:14 pm: Buffett and Munger, sitting side-by-side at a simple table with a spotlight at one end of the arena floor, seem to still be going strong. Here in the press box, there are signs of fatigue among the hundred or so reporters typing away.
2:19 pm: Buffett asks a man making a statement on property rights if he has a question. The response: no. Buffett jokes, "I kind of suspected that."
2:20 pm: The popularity of the car in the U.S. makes expansion of mass transit in the country very unlikely. "It seems to be human nature."
2:22 pm: In response to a question on whether credit default swap market will follow sub-prime as the next financial disaster. Buffett notes that Berkshire has been in that market, writing what is in effect insurance against a company going bankrupt. He says he doubts there will be a problem, in part due to the example the Federal Reserve set when it stepped in to prevent the collapse of Bear Stearns. Credit defaults have been very volatile, but it hasn't created a problem yet. As long as the Fed is ready to step in, he doesn't see a systemic risk. Some institutions may lose a lot of money, but someone else will make a lot of money. Munger says there is some stupidity in the credit default swap market, but not as much as there was in the mortgage market when "bums were swept off skid row and given mortgages." (Charlie seems to talk a lot about stupidity.)
2:32 pm: Twelve-year-old asks why Buffett didn't follow Ben Graham's lead and embrace dividends. He jokes that he had to do some things on his own. He goes on to say that some Berkshire Hathaway subsidiaries do generate excess cash, like See's Candies, but it's spread around the company rather than paid to shareholders as dividends because he thinks the company will make better use of the money, benefiting shareholders in the long run who would also be taxed on dividends.
2:38 pm: Q -Would Berkshire consider a major purchase of a business in China or India? A - Buffett replies that the odds of doing a major purchase in any one country except for the U.S. are fairly low. Will probably buy some smaller companies, and doesn't rule out a large acquisition in any given foreign country.
2:40 pm: Q - Who has influenced you the most in investing and life? A - Buffett says his greatest influence was his father, followed by Ben Graham, Dave Dodd .. and Charlie has learned a lot from Ben Franklin. He notes that parents are very important teachers who instruct more by what they do than by what they say. Munger says people learn in different ways. He learned a lot from reading.
2:46 pm: On excessive executive compensation, Buffett notes that "big wigs" don't like to be embarrassed, so shareholders should speak up when they see excesses and the press will do the rest. He notes that it's been tough for shareholders to do that.
2:49 pm: Munger says high-ranking executives have a "moral duty" not to take too much money.
2:51 pm: Q - How do you know that a company's competitive advantage is enduring, especially with drug companies that have products "in the pipeline" that are hard to evaluate. Buffett says it's hard to tell if individual drug companies will do well, but that the group should do well over time. "We do not pick one-by-one" when it comes to drug companies.
2:54 pm: "The Chinese people are starting to realize their potential."
2:58 pm: Buffett says his hope for Berkshire Hathaway 20 years from now is that its culture will be maintained, that it will be seen as a place where good managers want to work for the rest of their lives. That and to have the world's "oldest living managers." The audeince rises for a standing ovation. That concludes the Q&A session.
3:10 pm: After taking a break, Buffett is now conducting the formal business session of the annual meeting. It is totally routine.
3:15: Buffett, Munger and the other directors have been re-elected to the Board and the meeting has been adjourned.
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