Why Warren Buffett Studies Balance Sheets, Not Just Profits | Berkshire 2025

[Transcript]

AUDIENCE MEMBER: Hi, Warren. My name is Robert, and I’m a shareholder from Toronto, Canada.

So, Warren, three years ago, Charlie Rose asked your question to the effect of what you wanted to be remembered for. And your reply was, “He was a teacher.”

So in that spirit, Greg, I’m curious to hear maybe a story of where you learned something very, you know, profound from Warren. I’m sure you learned many things, but if there is a story that kind of comes up in your mind, we’d love to hear it, and vice versa, if we have the time.

Warren, what’s something that you may be learned from Greg? Thank you.

WARREN BUFFETT: Yeah, I will turn this over to Greg in just one second, but now the main thing I’d like to be known for is old age. (Laughter)

GREG ABEL: Well, Warren is obviously a remarkable teacher and I benefit from that every day and as I’ve already touched on for many years, I’m fortunate that if I had to be remembered as something right now, obviously, I want to be remembered as a great father, but equally, a coach.

And that goes to family, friends and just being involved with the kids, I coach in hockey or baseball or whatever it may be. I think we’ve got a great opportunity to get back to him at a very young age, so obviously, those would be how I’d want to be remembered, and hopefully that will be many, many years from now, but I love thinking of Warren truly as a teacher and he and every day get the opportunity to continue to learn.

Warren and I this dialogue is strong every week and we’re always talking around opportunities in Berkshire or things that are going on globally or in the US and each one is truly a learning moment.

I’ll maybe go back to the very first meeting with Warren because it still stands out in my mind, obviously, it was an incredible opportunity.

Warren was buying or acquiring Mid-America Energy Holdings company at that time, or thinking about it. And we had the — I had the opportunity with my partners to go over there on a Saturday morning, and we're discussing the business, and Warren had the financial statements in front of them.

And like anybody, I was sort of expecting a few questions on how the business was performing or a variety of things, but Warren locked in immediately to what was on the balance sheet and the fact that we had some derivative contracts, the weapons of mass destruction. (Laughs)

And associated with the utility business, we do have them because they use them to match certain positions, and they never match perfectly. But you do have them, and we’re required in the regulated business.

But I just remember Warren going to it immediately and asking about the composition of it and what the underlying risk was, and wanting to thoroughly understand it.

And it wasn’t that big of a position, but it was absolutely one of the risks he was concerned about as he was acquiring Mid-American and obviously, in light of Enron and everything that had gone on, it was a very pertinent question.

And then the follow-up to that was then there was an energy crisis in the US around electricity and natural gas, and a variety of folks who were making significant sums of money. This is a year, 18 months later.

And Warren’s follow-up question, a couple of years later, to me was, and I knew it was more just checking or testing, “So how much money are we making during this energy crisis? Are we making a lot? Do we have — are the speculative positions in place and are we making it?”

And the answer was we’re really not making any more today than we would have been six months ago, because all those derivatives were truly to support our business and weren’t speculative.

So, just that focus on understanding the business of what he was acquiring, understanding the risks around it, still stands out in my mind.

Warren?

WARREN BUFFETT: Yeah, that’s one thing we’ve really never talked about here, but I spend more time looking at balance sheets than I do income statements and Wall Street really doesn’t pay much attention to balance sheets, but I like to look at balance sheets over an 8 or 10 year period before I even look at the income account.

Because there are certain things that are harder to hide or play games with on the balance sheet than you can with the income statement.

I mean, neither one gives you the total answer on anything, but you still want to understand what the figures are saying and what they don’t say and what they can’t say and what the management will like them to say, that the auditors wouldn’t like them to say.

And I mean, there’s just a lot to be learned, and you do learn more from balance sheets in my view than most people give them credit for.

In terms of — I’m not worried about being remembered for that, people don’t remember.

Well, they don’t remember enough about Katharine Graham, for example, in terms of this story that shaped America in many ways.

Certainly, had just all kinds of impact, and I think I mean history is so fascinating, and Charlie was probably the best person you could imagine in what he learned.

Charlie was never satisfied with just superficial things about any subject. He really wanted to understand it, and he always would tell me that you know don't take a position on anything until you can describe the arguments against it better than the person who is arguing with you.

That you should be able to argue their case better than they can.

He was a remarkable teacher and but so and so with those other fellows I mentioned. And, of course, my dad was an incredible teacher.

So you make the most of the people you meet that are going to make you a better person, and probably forget about the rest to quite an extent.

Okay, let’s move on to number 12. Becky, you're next.

Source: https://buffett.cnbc.com/2025-berkshire-hathaway-annual-meeting/

 

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