‘Forget about all the toys’ – Key points from this year’s Berkshire Hathaway shareholder meeting

This year’s Berkshire Hathaway annual shareholder meeting saw famed investor Warren Buffett serve up his thoughts on a wide range of issues, dispensing some valuable advice along the way.

Mr Buffett, who serves as chairperson and CEO of the sprawling holding company, was accompanied, as always, by vice-chairperson Charlie Munger, as the two answered dozens of questions posed to them during the event dubbed ‘Woodstock for Capitalists’.

The meeting kicked off with the group’s first quarter results, which showed a 12.6 per cent increase in operating profit to $8.1 billion (€7.34 billion).

Its stock of cash also increased to €130.6 billion (€118.3 billion), leading to questions about where, precisely, the company hopes to invest these.

So far, Mr Buffett and Mr Munger have been executing a stock buy-back programme whenever they see Berkshire Hathaway’s stock undervalued, spending $4.4 billion on during the first quarter of the year. Although this was faster than the pace of buy-backs seen in recent quarters, it does not match the major repurchases seen in 2020 and 2021.

The pair shared a number of insights:

On TSMC

Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest and most valuable semiconductor company. Berkshire Hathaway took a $4 billion position in the company in late 2022, but sold it all within just a few months.

Mr Buffett is known as the high priest of value investing, typically holding shares in companies for decades, so the move raised eyebrows among market watchers.

On Saturday, he confirmed that the sale did not reflect a change in his assessment of TSMC’s business, but was rather a consideration of geopolitical developments.

“Taiwan Semiconductor is one of the best managed and most important companies in the world, and you’ll be able to say the same thing five, 10, or 20 years from now,” Buffett said. “I don’t like its location.”

Tensions around Taiwan have been heating up between the USA and China, which still claims the island as its own.

On the automobile industry

Mr Buffett also shared his view that the car business “is just too tough”’, with the large number of global competitors making profits wafer-thin.

The shift to electric power generation also entails large capital costs and risks, with it remaining unclear which automakers will be left standing on the other side.

On the other hand, demand for cars is going nowhere, and Berkshire Hathaway is a stakeholder in the sector through its 78 car dealerships spread across the US, making it among the largest dealership groups in the country.

On the energy transition

Berkshire Hathaway Energy, the group’s utility company, is committed to reduce its carbon footprint by half over 2005 levels. It is therefore investing in clean energy general and extending transmission lines to more renewable energy sources.

Mr Buffett argued that the United States’ approach to the energy transition is too fragmented, and it holding it back from proceeding as rapidly as it should.

Referring to a frequent talking point among green activists, he drew a parallel to the deep collaboration between federal government, businesses and citizens seen in World War II, when the entire US economy was reshaped to provide the industrial capacity to service the war effort.

“The capital is there, the people are there, the objective is obvious, we just don’t seem to be able to do it in peacetime,” Mr Buffett said.

On the dollar as the world’s reserve currency

“We [the dollar] are the reserve currency,” said Mr Buffett. “I see no option for any other currency to be the reserve currency.”

He was responding to a question on whether the dollar could be dethroned from its position, as countries like Russia and Brazil have started paying for certain international transactions in Chinese yuan.

This has caused a flurry of consternation, or, in some cases, triumphalism, on the end of the dollar’s hegemony on world trade.

He warned against the idea that cryptocurrencies like bitcoin could provide a safe store of value: “Forget about all the toys – it’s a joke to think of any tokens, that’s madness,” when it comes to the reserve currency of the world, he said. “But it’s also madness to just keep printing money.”

On banks’ collapse

Referring to the recent collapse of First Republic Bank, Mr Buffett said the CEO and directors of banks that collapse “should suffer”, as otherwise it “teaches the lesson that if you run a bank and screw it up, you’re still a rich guy, the world still goes on … That is not a good lesson to teach the people who are holding the behaviour of the economy in their hands.”

He added :“The incentives in bank regulation are so messed up and so many people have an interest in having them messed up … it’s totally crazy.”

Mr Munger echoed his concerns “I don’t think having a bunch of bankers, all of whom are trying to get rich, leads to good things. I think bankers should be more like an engineer, avoiding trouble rather than trying to get rich … It’s a contradiction in values.”

On avoiding major mistakes in life

Asked a philosophical question on how to avoid major mistakes in business and in life, Mr Buffett suggested writing your own obituary:

“You should write your obituary and then try to figure out how to live up to it,” he said. “It’s not that complicated.”