Berkshire Hathaway
Dinner with Warren Last Night

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By teabone
February 13, 2001

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Last night Executive Jet sponsored a dinner at The Breakers Hotel in Palm Beach for current and potential customers. Warren was the featured after dinner speaker. Since many of us have not seen him since the last annual meeting, I thought it worthwhile to report on his after dinner remarks.

Warren began with a joke about a friend of his to whom he commented:
"Did you hear that the NASDAQ just broke 2500"?

His friend responded, "Yes, I'm one of them."

Warren then pitched for NetJets saying that everyone in his family and all but one of the Berkshire board members had shares in the NetJet program. His most telling comment, IMHO, was that there were two important things in life that money could not buy-- health and love-- everything else could be purchased including fame, sex, testimonials, and power. He repeated his oft quoted remark that the only difference between him and most people was that he was like most Americans who slept 7 hours a night on a $200 mattress that could be purchased at NFM, ate at McDonalds, and lived in a simple house. The major difference between him and most people is that he can afford to travel better, he does via his 1/4 share ownership of a Hawker via NetJets, and he enjoys it.

After that commercial interlude, Warren agreed to answer questions about anything but current Berkshire equity acquisitions or sales.

Here are the questions and answers I remember arranged by topics:

The furor over Clinton's speech to Morgan Stanley
Morgan Stanley's CEO sent its clients an email stating that inviting Clinton to speak at its meeting was "a mistake." Warren said that he guessed that the fall out would be that Clinton would be getting fewer invitations to speak from investment banks. He noted that Executive Jet invited him to speak because he was the low bidder.

Bush Tax Cut
Warren thought that too much of the tax cut would benefit the rich and that more should go to the lower income groups. He noted that payroll taxes result in lower income groups paying a larger percentage of their ordinary income as taxes than do higher income groups. Warren said that his own secretary pays proportionally more taxes on her ordinary income then he. (I felt like saying," Warren, solve that problem by giving her a big raise.")
He did say that he was please thus far with Bush's performance as president.

National Debt
Warren is not concerned by the current level of the national debt and does not see any real need to abolish it. He pointed out the reality that Uncle Sam has trillions of dollars in equity in excess of the debt by virtue of its ability to tax corporations. Specifically, he said that you could imagine that Uncle has a special class of Berkshire sock that pays an annual dividend. This dividend grows annually with earnings. Currently the dividend is around $2.2 billion-- paid in the form of corporate taxes at the 35% level. Warren estimated that the value of Uncle Sam's "ownership" of Berkshire to now be $75 billion.

Trade Deficit
Warren is not too concerned with the current level of the trade deficit. He likened it to a family owning a 100000-acre farm giving away a few acres a year in order to support itself.

Energy Crisis in California
He thought that the solution are for California to legislate an energy czar to deal with the power companies and negotiate with them to lower rates and for current rates to be adjusted to motivate consumers to use less electricity than last year and penalize them for using more

He does not believe that there will be any deflation in the future besides the continually decreasing cost of long distance communication

Nothing new to report. He again explained that 99.9% of his and his wife's net worth would go to a foundation that shall be run by five "very smart people" who will be instructed to "think big" and "don't be afraid to fail."

The one bit of new news is that one of Berkshire's companies has sold Hicks the disability policy for A-Rod's $250 million contract. Warren discussed the basic inequities of baseball compensation because of the unequal distribution cable TV profits. He said that if the economics of baseball do not change then the same teams would always be the pennant winners.

Current economic climate
Warren agrees that the economy has slowed and thinks that Greenspan is doing a good job. He categorically stated that his decision to purchase companies always has been and is made regardless of the current economic climate.