Warren Buffett on US debt, inflation, current markets, India, global investing, AI and more at Berkshire Annual Meeting 2024

It was business as usual at the Berkshire Annual Meeting 2024. In the absence of Charlie Munger, Warren Buffett fielded questions from shareholders along with Greg Abel and Ajit Jain. From how the transition was progressing at Berkshire Hathaway to Buffett’s views on the stock market, the US dollar, his decision to cut stake in Apple, how keen Berkshire was to invest outside America, and the oft-repeated question on what if he started out with a million-dollar corpus today, Buffett took on whatever came his way, sometimes answering without answering in his characteristic playful style. Here are the key takeaways:

1)      US debt and inflation: Buffett said he wasn’t as worried about the quantity of national debt as much as the US fiscal deficit. “It won’t be the quantity of the national debt. There isn’t any alternative to the dollar as a reserve currency,” he said. The focus is on the Fed, but the fiscal deficit should be the focus, he said. Powell doesn’t control fiscal policy, but that is where the trouble will be. “Jerome Powell is not only a great human being but a very wise man. But he doesn’t control fiscal policy. Every now and then, he sends out a disguised plea, saying please pay attention to this,” he concluded. He said, he was worried about inflation being let loose in a way that would threaten the whole world’s economic situation.

2)      Investing 101: Buffett reiterated some of his core investment tenets, the importance of avoiding mistakes, avoiding what is too hard to understand etc. “Sometimes, we’ve done things that were big mistakes. But we never get close to fatal mistakes. And “every now and then,” he said, they did something that “really works.” Referring to Berkshire’s accumulated earnings of $571 billion, Buffett said, “This does show what can be done — really, without any miracles — if you save money over time.” We missed a lot of things, and what we really regretted was missing something that turned out to be very big; we never worried about something that we didn’t understand.” Buffett also alluded to how quick decision-making gave Berkshire the edge. “Charlie and I made decisions extremely fast, but (after) years of thinking about the parameters that would enable us to make a quick decision.” Buffett also said he would not attempt to predict the market while deploying capital.

3)      Current market view: On whether the current valuation of S&P 500 was justified, Buffett said, “This is not the time when the phone is ringing off.” He said there have been times when he has been awash with opportunities that he could have invested everything by nightfall, and other times when the year goes by without seeing anything that makes the needle move. Sometimes, he said, he and Greg Abel look at acquisitions themselves where they think the managers don’t necessarily have the same equations in mind.

4)      Investing in India: Fielding a question regarding the rise in India markets and if Berkshire and would invest in India, Buffett said there may be a unexplored, unattended opportunity but the question is whether BRK has some kind of advantage compared to people who get paid for assets managed and who make money on how they buy rather than what they buy.

5)      Global investing: Buffett said Berkshire Hathaway’s primary hunting ground for investments will continue to be the United States. “We have preferred to largely invest in the US; companies here are unmatched. We did commit to Japan because it was overwhelmingly compelling.” He said that Berkshire Hathaway invests in US-based companies that conduct business globally. For example, Coca-Cola, a preferred soft drink company, operates in over 170 countries, said Buffett. Last year, Berkshire Hathaway increased its stakes in four Japanese trading companies: Marubeni, Mitsui, Mitsubishi, and Sumitomo thanks to severe undervaluation. Besides, Berkshire’s only other significant investment is in the Chinese electric vehicle company BYD.

6)      Artificial Intelligence: Warren Buffett said scamming could be an industry in the future as he shared a recent experience with Artificial Intelligence where he saw a video of himself with his voice saying his wife or daughter couldn’t tell it was false. Buffett said he did not know anything about AI, but AI has the potential for enormous good and harm and we will find out later whether AI is going to change society. “If I was interested in investing in scamming, it’s going to be the growth industry of all time,” he quipped. He compared AI to the development of nuclear weapons in terms of the great change it could bring about. “We let a genie out of the bottle when we developed nuclear weapons, and that genie has been doing some terrible things lately. And the power of that genie scares the hell out of me. And under that, I don’t know any way to get the genie back in the bottle,” he said. On the kind of Berkshire businesses that could be disrupted by AI, Buffett said AI results in more idle time and displaces labor, so anything that’s labor-intensive will be disrupted. “It can create an enormous amount of leisure time. AI is profound. That’s what makes it a Genie.”

7)      Cutting Stake in Apple: Berkshire Hathaway will continue to hold Apple unless they drastically change their capital allocation, Buffett said. Buffett reiterated how Munger changed his investment approach from buying companies at cheap prices to buying wonderful companies at fair prices. “We own American Express, Coca-Cola, which are wonderful businesses, and Apple is also one.” Despite cutting stake over the past few quarters, Apple is Berkshire’s largest holding. Tim Cook, present at the Berkshire Meeting, told CNBC that the company feels “privileged” to have Berkshire as a shareholder.

8)      Berkshire’s capital allocation: Warren Buffett said Berkshire’s cash pile could climb to $200 billion by the end of the current quarter. “We’d love to spend it, but we won’t spend it unless we think they’re doing something that has very little risk and can make us a lot of money,” signalling this is not a market that has too many opportunities to buy. In the same breadth, he said Berkshire would be looking at increasing operating income and decreasing shares outstanding (buy-back) as a way to increasing earnings. Berkshire does not pay dividends, and Buffett said the last time Berkshire paid dividends was in 1968. “I must have been in the restroom then,” he quipped.

On how capital allocation could change after Buffett, he said, “Greg understands businesses extremely well and if you understand businesses, you understand common stocks. The responsibility should lie with Greg Abel and whatever the CEO decides, that’s for him to decide when he is running the money.” Abel added, “The capital allocation policies followed by Berkshire will be sustained after Warren Buffett. We want to maintain the fortress of capital to act when the opportunity presents itself and protect our shareholders.”

9)      Lesson for leaders: Ajit Jain explained that the transition was made possible by Buffett’s clever approach to dealing with managers. He noted that even after the transition, many managers would continue to call Buffett for various issues. However, Buffett skillfully handled those calls, speaking to them kindly, making them feel good and really important, while simultaneously not providing them with the answers they sought. “As a result, the transition took place. People got the message and were very responsive to it. It’s a non-issue for us today,” said Jain matter-of-factly. Buffett, however, downplayed his role.

10)  Life and success: Finding what you love is the key to success in life, a message Buffett has consistently emphasized in annual meetings. Answering a question on what Buffett would do to grow a million-dollar corpus today, Buffett simply reiterated the importance of finding what you love to do and dedicating oneself to it. He recalled having gone through the Moody’s Manual, which was about 1,500-2,000 pages. “I would try to know everything about everything small. You have to be in love with the subject; you can’t be in love with just the money. The human brain works best when it finds what is suited for,” he said. The other life lesson he mentioned was the importance of finding the right heroes. He said, you have to have the right heroes, and it is not about what they have accomplished but based on what you want to become. “There is a special place for someone who continues to love you even if you are breaking the rules.” Buffett also touched upon the role of luck in life and investing and the effect of compounding. “My great skill has been avoiding bad luck. If someone had told me I would live to 90, I wouldn’t have bet on myself.” Stating that being born in the United States is a huge plus, he added, “Someone who says that he did it all himself is deluding himself,” he said.