Berkshire Hathaway Annual General Meeting – May 2025

Warren Buffett's last AGM as CEO.

Berkshire Hathaway Annual General Meeting – May 2025

We were going to write briefly about the Berkshire Hathaway Inc. Annual General Meeting (AGM). It proved to be historic one, as Mr Warren Buffett surprised everyone by announcing that he will nor longer be CEO at the end of 2025 though he will remain as Chairman. The 40,000 plus people in the auditorium were shocked by the news, but one they took in the import of the announcement, they responded with a two-minute standing ovation

Social and traditional media exploded into life, and there have been many articles on Mr Buffett. The focused on his extraordinary life, the great longevity of his investment career, his unmatched track record, his integrity and his huge influence on investors, businesspeople, and many other people, who crossed his path either in-person or indirectly through the huge literature about him and his life.

I am sure you have already read many of these articles.

Once, I eventually fully adopted his investment principles (I was a poor student) my investment performance improved greatly, and I am very grateful for this.

The investment philosophy and approach that I pursue in this Substack is derived from the wisdom contained in Mr Buffet’s Annual Reports and some of the excellent books written about him and his investment approach. This Substack owes everything to him.

The newspapers featured many tributes. This one is from Jamie Dimon of JP Morgan.

“Warren Buffett represents everything that is good about American capitalism and America itself—investing in the growth of our nation and its businesses with integrity, optimism, and common sense. I’ve learned so much from him to this very day, and I am honoured to call him a friend.”

Ok let us get on with the AGM report.

In early May, there is one key event firmly placed in the long-term Investors’ schedule. It is the AGM of Berkshire Hathaway Inc led by 94-year-old Warren Buffett

Every year, over 40,000 plus Berkshire Hathaway shareholders spend the weekend in Omaha, Nebraska to listen to the wit and wisdom of one of most successful investors.

I have been watching the event every year for the last ten years and had the good fortune to attend in person in 2021. This weekend was the Berkshire 2025 AGM, the 60^th since Buffett took a controlling interest.

Before the meeting, the company reported the latest quarterly results. Berkshire reported earnings that showed lower operating profit in Q1. It was down 14.1% year over year to $9.64bn, with the drag coming from insurance operations. The company's cash pile grew to a record $347.7bn which is about 27% of total assets. This means the Balance Sheet is a fortress.

The company did not buy back any of its shares in the quarter. This indicates Buffett believes the shares do not offer compelling value currently.

Source: The Science of Hitting

At the end of the meeting, Buffett announced his plan to step down and nodded to his nominated successor, Greg Abel.

"The time has arrived where Greg should become the chief executive officer of the company at year end and I want to spring that on the directors and get that recommendation,"

Buffett has run Berkshire since 1965. He started his career his investing career in the early 1950s.

The tradition at these meetings, is for Buffett to answer any and all questions from investors. In the past he and his partner, Charlie Munger used to answer all shareholder questions for over 4 hours.

Yesterday it was Buffett to face shareholders and the with Greg Abel, who is currently vice- chairman and Ajit Jain, vice-chairman of insurance operations.

In one of the first questions, Buffett was asked as his views of the generalised tariffs policy being pursued by the US administration.

Buffett has been critical of tariffs in the past. Clearly, he has not changed his mind.

"We should be looking to trade with the rest of the world, and we should do what we do best, and they should do what they do best.”

"Trade should not be a weapon.”

“I don’t think it’s a great idea to design a world where a few countries say ‘ha-ha-ha, we won’ and the rest of the countries are envious.”

“It is a mistake in communication to lecture a bunch of other people about to what to do when you have won the game. “You don’t get far by lecturing the world when you’ve just won the game. It creates resentment.”

Buffett argued to his audience that 7bn people prosperity will not come at the expense of the Americans.

Mr Buffett was also asked about the efforts of DOGE to cut government spending and thus try to reduce the US Fiscal deficit.

His answer focused on the tendency of bureaucracy to grow relentlessly.

The paraphrase of his answer is as follow: bureaucracy is contagious and prevalent and grows in our capitalist system. It grow even faster in the government. This tend to push spending more. Overspending has hurt many civilisations, and the USA is not Immune. The current US fiscal deficit is not sustainable - we do not know when it will end but it will end sometime. It will get uncontrollable at some point. Buffett also hinted that the current US government ‘s aggressive approach with global trading partners will not have the desired outcomes and risks creating resentment.

We have had runaway inflation at some point, and it is not something you should take risks with. Somebody has to cut spending – “it is not a job I want to do but it must be done, and Congress does not seem to be doing it.”

He noted the America had the luck to have two key advantages – a very productive economy and highly skilled and talented people. Yet policy seems to be driven by a desire to destroy those advantages.

“We have a strong, income producing stream. We have the greatest brain producing system but the one way to destroy it is to destroy the currency.”

Buffett stated in an ideal system there should be punishment and disincentives for outsiders who wish to destroy the currency. In fact, there are some incentives and rewards for people to destroy the value of money.

“Fundamentally, you should not have a society where the government destroys the currency.”

“What that does to the stability of a society, all the people that trusted their government are destroyed financially all the people that figure out ways to profit off it become rich or richer. I don’t think you want a society that operates in that manner.”

Government policy driven inflation and currency destruction damages the people who trust the government and rewards those who profit by positioning themselves to benefit from it. That is not the right way to run a society in Buffet’s view.

Our view. Buffett has an important rule that govern his public comments about people. His mantra is “Praise by name but admonish by category.”

In other words, do not name people when you criticise them, as this would antagonise them unnecessarily. Without mentioning President Trump, Buffett expressed his belief that international trade is a good thing, and high generalised tariffs are a bad idea especially, if they are used as a weapon. He also stated his view that global trade is not a zero-sum game. If other countries get richer, this does not mean the USA will get poorer.

He also stated why policies which drive up inflation and reduce the value of money. People who trust the government and believe they will be good stewards of the economy will leave their money is deposits or fixed income instruments and will see their wealth destroyed by inflation. On the other hand, sophisticated people including those close to the process of money creation in fiat-based, fractional reserve banking system will use leverage and trading prowess to take advantage of a falling currency - over time this will lead to huge windfall gains by some and much greater economic inequality. This will increase cynicism about the financial system and the government and will lead to a corrosive loss of trust in the whole system.

Investment in Japan

Buffett was asked about his investment in the five large, listed Japanese trading houses — Mitsui, Mitsubishi, Sumitomo, Itochu, and Marubeni. He said he had made a significant investment in them, but he would like to invest more if the opportunities are available.

The price of decades of success is that Berkshire is very big and must allocate invest very large amount in each company. This means most companies are ruled out as potential investments.

The growing cash pile

The big trend over the last few years has been the company's growing cash pile. It has now reached $347bn

which accounts of nearly 30% of total assets.

Buffet was asked the reason for this large stash. Was it to arrange a relatively clean slate for his successor, Greg Abel, or because there was lack of bargains in the stock market?

Buffett responded that he wished he was good natured enough to invest in a way to make Greg look good. The real problem was lack of opportunity. Buffett stated the market does not deliver market attractive opportunities in a regular predictable way.

The markets gives a lot of compelling opportunities only occasionally. It makes sense to be cautious and wait for the best conditions.

Buffett explained Berkshire has net cash inflows of about $40bn every year. If somebody told him to invest $50bn every year until the cash pile went down to $50bn, that would be a very stupid way to proceed.

“The one problem with the investment business is that things don't come along in an orderly fashion”

Buffet stated that at some point in the future, the market will trade at levels where there will be lots of bargains and shareholders would be glad that Berkshire had the cash on hand. Berkshire would not have to wait 50 years for compelling opportunities. It may not be in the next five years.

“We have made a lot of money by not wanting to be fully invested at all times."

Greg Abel said cash was an important asset as it give them optionality. Investments can be made quickly if one has the cash on hand.

Warren Buffett was asked about a Chicago hot dog maker called Portillo’s and what motivated Berkshire to buy it.

The CEO said he didn’t know about it and joked the deal “might have occurred when I wasn’t looking.”

It turned out it was an investment made by a private company with the name Berkshire Partners which has no connection with Berkshire Hathaway,

American Tailwind

Buffet has always said he has always said he has benefited from the American Tailwind and has frequently said “Never bet against America”.

Today the US is facing tremendous difficulties, and many commentators say this is the end of American exceptionalism.

Buffett was asked about this. He noted said America has gone through difficulties and there will be more in the future. However, markets had advanced despite these difficulties and people should not lose hope.

What has happened in the last 30, 45, 100 days…. It’s really nothing. There’s been three times since we acquired Berkshire when Berkshire has gone done 50% in a very short period of time. Three different times. Nothing was fundamentally wrong with the company at any time…. This [year] has not been a dramatic bear market or anything of the sort.”

Patience.

Buffett was asked whether Patience is always a virtue in investing. He said markets are open most days and offer opportunities every day. One should wait very patiently for the right opportunity.

He recalled that he was once approached by a gentleman called Bill Steiner on behalf of one of the Annenberg sisters who wanted to sell her company. They were asking for $6mn and the company had $2mn in cash, $2mn in Real Estate and annual profits of $ 2mnIt was clearly a bargain.

When the bargain is obvious, Buffett said you do not want to be patient.

Buffett noted that while patience was often a virtue, it is not always the case. You should not be patient when there are bargains and when people are wasting time talking about things that that are going to happen.

In these situations, patience is not a virtue but a liability.

GEICO

GEICO is a 100% owned insurance company focused on auto-insurance.

Two years ago, they had noted there were problems at GEICO, and it had fallen behind competitors.

Todd Combs, one of the two fund managers who work for Buffett, had been brought in to run the company. Ajit Jain noted that he had done a good job, and the company was performing very well.

Jain noted GEICO’s combined Ratio had been driven down to around 80 which is very impressive.

Note: The insurance combined ratio is a key profitability metric in the insurance industry, indicating how efficiently an insurer manages its day-to-day underwriting activities. It's calculated by dividing the sum of claim-related losses and expenses by earned premiums. A ratio below 100% signifies underwriting profit, while a ratio above 100% indicates a loss.

Jain also auto insurance will change greatly if autonomous or self-driving vehicles (AVs) become widespread. Auto-Insurance will become less about operator error and more about product liability.

There will be a decline in the number of accidents, but the cost of repairs will be much greater due to the very sophisticated technology embodied in the AV.

Warren Buffett has a long, historical perspective and stated that cars getting safer is not necessarily bad news for the auto-industry.

In 1950, the cost of an auto policy was $ 40 a year. Since then, cars have become much safer and yet policy costs and premiums have increased 50X. There has been a huge growth in the industry since then. The rise in the number of safe AVs will not necessarily harm the prospects for the auto-insurance industry

US Economic policy

Buffett said he was scared about fiscal deficits not just in the United States and the tendency of government to devalue the currency

There will always be government’s who oversee a decline in the currency over long periods. It is hard to build checks and balances to prevent this from happening.

He noted that we have had a lot of fun in the last 100 days (of the Trump Presidency) seeing what people do to eliminate to overcome fiscal problems.

He noted that things may happen where Berkshire might want to own a lot of foreign currencies.

Our Comment. Buffett rarely speaks publicly about currency exposure. He is cautious on the dollar at a time when he has record cash pile which means he is cautious on the market as well. He is quietly warning about policies which could potentially result in a large loss of confidence in the USA. In this case it might make sense to have a lot of exposure to non-dollar currencies.

Private Equity Capital in Insurance.

Many large Private Equity companies such as Apollo and KKR have raised permanent capital and expanded into insurance. The panel were asked about how this had affected Berkshire’s vast insurance business.

Ajit Jain said this was key trend. New money has come into life insurance but not in Property and Casualty (P&C). This has affected pricing, and Berkshire has pulled out of some businesses as they do not believe pricing levels justify the risk.

Jain argued the new players have taken excessive leverage and invested in high-risk assets. As long as the economy does well these people will do well. The implication was clear. If the economy worsens, the new entrants will be in trouble.

Buffett says there a lot of people who want to emulate the scale of Berkshire’s insurance and re-insurance business but do not want to have 30% of the CEO’s net worth in the company. The implication was clear. The new plyers do not have their money on the line. They are playing with other people’s money and taking excessive risk. This may not end well. It is a film that Buffett as seen many times in his long career and his experience tells him it rarely ends well. This is warning for anybody with shares in Apollo, KKR, Ares Credit, Blackstone and the like.

Financial Analysis

“I spend more time looking at the Balance Sheet than I look at the Income Statement. You can learn a lot form the Balance Sheet. It is much harder to manipulate the numbers on the income statement than the balance sheet.”

US Infrastructure

Buffett spoke about the huge infrastructure investment needs.

Berkshire has huge capital resources. The country needs investment. Buffet mused that it should be possible to work out a public private investment vehicle with the kind of urgency that was displayed during wartime.

One of the problems is legislative veto at the state level. “If every one of the 48 states had a vote to stop it, the inter-state highway would probably never have been built. “

Electric utilities and wildfires

Berkshire Hathaway Energy (BHE) owns several utilities including PacifiCorp. Electric utilities have held been liable for wildfires that have led to cuts in electricity supply and damage to property.

Buffett said they made a mistake when they bought PacifiCorp in the way some of the liabilities were structured.

Wildfire risks are not going away anytime soon. They have to consider the litigation risk they face.

In PacifiCorp, all the training is about keeping the asset working. So, when a wildfire approaches, they may have to de-energise which goes against their ethos and modus operandi. They must be careful when their actions could cut power off form the hospital.

Investors in Utilities were never looking to take on such litigation risks. Utilities give you a stable but relatively low regulated return in line with the perceived low risks. This is equation as been changed by court ruling against PacifiCorp on wildfire liabilities.

These cases will be stuck in courts for ever. PacifiCorp cannot become insurer of last resort for their customers.

BHE is worth a lot less money than it was two years ago due to these judicial and societal trends. Values change and not always upward.

Our enthusiasm for buying utilities is much lower than it was 2 years ago.

The Invest Management Industry

Buffett was asked about the time wen he described large cap technology businesses as very good businesses as they were capital-light and generated very high Returns n Equity and Returns on Capital Employed. In the last two years, these companies have been making very large capital investments in large datacentres. Surely they cannot be described as capital-light anymore.

Buffett agrees that these companies probably are not capital light business. The former are good investments as it is “always good to make money without putting much money than it is when you have to invest a lot of money.

Buffett used this opportunity to give his views on the investment management industry one last time.

Some people have gotten very rich investing other people’s money. Professional Investment Management is a well-designed business for the people who are working in it. The trick in life is get other people’s money and get an override (like a management fee or a performance fee).

“I did it for 12 plus years (when he ran the Buffett Partnerships from about 1952 to 1964) but there was difference as “we put our own capital in it. It can lead to a lot abuse. After a while Charlie and I decided not to do it that way.”

“If you all were paying 1% in investment fees last year, Berkshire shareholders would’ve paid $8 billion.”

“Charlie and I did it differently — we put all our own money into it. We shared the losses too.”

On American Capitalism

Buffett noted that capitalism as a system has served America well as it has developed from an agricultural country to an economic superpower.

“Capitalism has succeeded so much for America and developed it so well. It is like a Cathedral. The problem is the Cathedral has a casino attached to it. There are a lot of other people in the casino moving money around. It is taking money from one pocket to another. We should not have let the Casino dominate the Cathedral.”

The system is good but distributes it rewards very capriciously. The idea that you get what you deserve is difficult to believe or accept.

We have an imperfect system which works well. It will be up to the next generation to design an even better system.

Leadership and organisational culture:

“Many people want to be managed, need help in being managed. Some don’t. Some you just leave alone.” “People want a manager that they admire. And they’re not going to admire them if those people profess to behave in one manner and behave in another.”

“It’s easier, and this is a sad thing, for an organisation to see its quality move downward than it is upward.”

“Once you start deviating downward, it is really contagious, and it is hard to rebuild.”

“You really need someone that behaves well on top and is not playing games for their own benefit.”

On Artificial Intelligence and Berkshire’s approach to it.

“People end up spending enormous amounts of money trying to chase the next new fashionable thing.”

“We are not very good in terms of being the fastest or the first mover. Our approach is more to wait and see until the opportunity crystallizes.”

“We have not yet made a conscious big-time effort in terms of pouring a lot of money into this opportunity.” “If you gave me a choice... of getting the top AI product or having Ajit making the decision, I would take Ajit at any time. And I'm not kidding about that.”

On the importance of playing the long game in investing

“The big thing you have to do is always ensure you can play the next day.”

“You only have to get rich once. You don’t want to do anything that risks what’s been created.”

“If very stupid things are happening around you, you do not want to participate.”

On Market Volatility and Investor Psychology

“Berkshire has gone down 50% in a very short period of time — three different times. Nothing was fundamentally wrong with the company at any time.”

“This has not been a dramatic bear market or anything of the sort.”

“If it makes a difference to you whether your stocks have gone up 15% or not, you need to get a somewhat different investment philosophy.”

“You've got to check your emotions at the door when you invest.”

On Berkshire’s Earning Power and Market Psychology

“We will make our best deals when people are the most pessimistic.”

“Berkshire will increase its earning power over time as we retain money… but it won’t come in any even stream.”

Buffett may be stepping aside, but he will still be going to the office every day and will still be the chairman. The corporate culture will remain as the values that built Berkshire — patience, integrity, and independent thinking — will still be there.