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businesses you have to worry about I mean at an airline business is a good case and the airlines you you know you just have to keep spending money like crazy and you have to spend money like crazy if it's attractive to spend money and you have to spend it the same way if it's unattractive you just it's part of the game Even in our textile business to stay competitive we would have needed to spend substantial money without any necessary any any clear prospects of making any money when we got through spending it and those are real traps those kind of businesses and they may work out one way or another uh but but they're dangerous and uh in a Seas candy we would love to be able to spend 10 million 100 million 500 million dollars and get anything like the returns we've gotten in the past but there aren't good ways to do it unfortunately we'll keep looking but it's not a business where Capital produces the profits uh flight safety Capital produces the profits the you need more simulators as you go along and more pilots are to be trained and and so capital is required to produce profits but it's just not the case it sees and at Coca-Cola uh particularly when new markets come along you know the China's of the world or or East Germany or something of the sort the Coca-Cola company itself would frequently make the Investments needed to build up the bottling infrastructure uh to rapidly capitalize on those markets the old Soviet Union um uh so those are those are expenditures you don't even make the calculation on them you just know you've got to do it you've got a wonderful business and you want to have it spread worldwide and you want to capitalize on it to its fullest and you can you can make a return on investment calculation but as far as I'm concerned it's a waste of time because you're going to do it anyway and and you know you want to dominate those markets over time and eventually uh you'll probably fold those investments into other bottling systems as the market gets develop but you don't want to wait for conventional bottlers to do it you want to be there one of the ironies incidentally it might get a kick out of some of the older members of the audience that when the uh Berlin Wall went down and Coke was there that day with uh with Coca-Cola for for East Germany that coke came from the bottling plant at Dunkirk so there was a certain poetic irony there Charlie do you have any Hammond I've heard Warren say since very early in his life that the difference between a good business and a bad business is usually the good business just throws up one easy decision after another whereas the Badness business gives you a horrible choice where the decision is hard to make is this really going to work is it worth the money uh the if you want to a system for determining which is a good business and which is a bad business to see which one is throwing the management bloopers Time After Time After Time easy decisions it's not very hard for us to decide to open a new seed store in a new Shopping Center in California that's obviously going to succeed it's a blooper on the other hand there are plenty of businesses where the decisions that come across your desk are just awful and those businesses by and large don't work very well I've been on the board of coke now for 10 years and we've had project after project come up and there's always an Roi but it doesn't really make much difference to me because in the end almost any decision you make that solidifies and extends the dominance of cope around the world in an industry that's growing by a significant percentage and which has great inherent underlying profitability the decisions are going to be right and you've got people there that will actually get them well you're saying you get blooper after blue yeah and then Charlie and I sat on US Air and the decisions would come along and it would be a question of you know do you buy the Eastern shuttle or whatever it may be and and you're running out of money and yet to play the game and to keep the traffic flows such as with connecting passengers everything just have to continually make these decisions whether you spend 100 million dollars more on some Airport and and they're Agony because again you don't have any real choice but you also don't have any real conviction that it's going to translate those choices are going to or lack of choices they're going to translate themselves into real money later on so one game is Just forcing you to push more money into the table with no idea what kind of a hand you hold and the other one you get a chance to push more money and knowing that you've got a winning hand all the way drawing why'd we buy you a sir could have bought more coke uh area seven my name is my name is bakul Patel I am from upstate New York my question is is baksha prepared for 1929 style of depression or like a prolonged bear Market that exists in Japan 1929 style of depression or like a prolonged bear Market that exists in Japan well funny we don't expect what you're talking about but we're probably about as well prepared as any company can be for adversity because we Berkshire has been built to last uh net we would benefit over a 20-year period by having some periods of terrible markets uh periodically in that 20-year period that doesn't mean we're wishing for them and it doesn't mean they're going to happen but uh we make our money by allocating Capital well and and the lower the General stock market would be the better we can allocate Capital so we're we're well prepared but we're not necessarily expecting that's right yeah we are not going to ever sell everything and go to cash and wait for the crash so we can go back in uh on the other hand we are structured so that oh I think net a lot of turmoil in the next 20 years will help us not hurt us I don't mean it'll be pleasant to go through the down cycle but it's part of the game area eight my name is Pete Banner from older Colorado first of all Mr Buffett Mr Munger thank you for your genuine generosity today uh Berkshire closed yesterday the a share was about uh or Friday 69 000 in the v share was about twenty three hundred dollars do you feel that price is uh grossly overpriced or grossly underpriced or reasonably priced well I'll let Charlie answer that one I'm not going to say no wait wait we're just never going to we're never going to give out advice on Berkshire stock that there's no you know that is up to people who who want to buy and sell it and uh anything we would say could easily get magnified and people would be acting out of months later and who knows all the problems that they could produce so uh it would be quite eccentric if we were to every day put out an announcement Now's the Time to buy Now's the Time to sell our own stock eccentric we are but that eccentric we aren't area nine I'm Irene Finster your longtime partner from Tulsa Oklahoma hi Irene yeah and Irene has a soda fund you ought to go visit her first I want to thank you for giving your shareholders the opportunity to select their own charities and second I'm very concerned about your health due to your diet of red meat Irene these are our products that I'm eating candy candy cream that's just what I do it through in public and I want to know what your doctor says my doctor says I'm I must be heavily relying on my genes I will tell you I I mean Charlie and I are both very helpful if you're in the Life Insurance business you would be happy to ride us at standard grades I could assure you uh you know they asked George Burns when he was 95 what does your doctor say about smoking these big black cigars and he said my doctor's dead Charlie and I played Bridge with George when he was about 97 I'd say at the Hillcrest Country Club and there was a big sign behind him and said no smoking by anyone under 95.
and actually at his 95th birthday party he had about five very good-looking young girls that were there degrade them with it with a big cake and everything and he looked them over one after another and he said oh girls he said I'm 95 one of you is going to have to come back tomorrow we're very big on George Burns in recent years Yvonne Edmonds from Cedar Mountain North Carolina I have a specific question but not a trivial one uh your um you you regularly compare Berkshire Hathaway's performance to the S P 500 which is very helpful and uh and very interesting but I haven't seen a correlation coefficient between the S P 500 daily from day to day performance clothes say and the in Berkshire Hathaways close now it so happens for me and I'm sure some other people in the audience that I don't always have access to newspapers or the internet for that matter newspapers that published Berkshire Hathaway performance on a daily basis or even a weekly basis for that matter or a monthly basis um it would be very helpful to know the extent of a correlation coefficient between those two variables if you have that would you let us know what it is and if you don't would you please consider calculating it in the future well it could be calculated but I don't think it would have much meaning I mean it would be a historical correlation coefficient which you know I would I would be very reluctant to have people place any weight and I try to indicate even the limitations of the yearly comparison of the relative performance because what was doable by us in the past is not doable today I I mentioned in my annual report the best decade I ever had on comparative performance by far was the 50s now I don't think it was because I was a lot smarter than unwilling to accept that but uh you know I I had some edge of um well there's probably 40 plus points per year uh but I was working with it that that is no relevance to the day whatsoever it would be misleading uh to publish it or make calculations based on it um so I I think I think that you would find I don't know what you'd find on a specific correlation between Berkshire and the s p you find a lot of correlation well you might not find so much you find it in intrinsic value between that and Coke and a few stocks like that but I don't I don't really think that's that's a particularly useful information uh going forward we have no objection anybody wants to make the calculation but it wouldn't be something that would be of any utility to us and if we don't think it should be utility does we don't want to put it out for shareholders as being a possible utility we do think that the s p annual calculation has some meaning because it's an alternative for people uh to invest they don't need us to buy the s p so unless over time we have some advantage over that uh you know what what are we contributing what value is added by by our management so we think that that's people should hold us accountable even though we wouldn't we would prefer not to be because that it is a tough comparison for us as a tax paying entity against the non a pre-tax calculation on the S P but we don't pay any attention to Beta or any of that sort of thing it just doesn't mean anything to us we're only interested in price and value and that's that's what we're focusing on all the time and any kind of Market movements or anything don't mean anything I don't know what Berkshire is selling for today and it really makes no difference you know it just doesn't make any difference what does count is where it is 10 years from now and I can't tell you what it was selling for on May 4th 1983 or May 4th 1986 I don't care what it sells for on May 4th 1998.
I do care you know where it is in general 10 years from now and that's where all the focus is um Charlie yeah we're publishing data in the Forum where we would like it if we were the passive shareholder and uh so you're getting the data and you're getting it on a time schedule based on what we would want if we were in your position and we don't think and we don't think the correlation conventions would help us we don't think anything that relates either to volume price action relative strength any of that sort of thing and I bear in mind that when I was in my teens I used to eat that stuff up I mean I was making calculations based on it all the time and kept charts on her wrote well even wrote an article or two on it but it just it just has no place in the operation uh one of the pleasant things about dealing with Arnold is yours is he's never talked about a correlation coefficient okay if the correlation Isn't So extreme you can see it with the naked eye he doesn't compute it
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