AUDIENCE MEMBER 00:09
Good afternoon, and thank you for staying around to answer our questions.
I have two. First of all, would you give us what logic went into your decision to both buy and sell McDonald’s?
And my second question goes to a term that you’ve used. You talked about the caliber of the shareholders at Berkshire Hathaway. How do you define the caliber and what difference does it really make?
WARREN BUFFETT 00:38
Well, it makes a lot of difference. Our idea of a high-caliber group is one that is just like us. (Laughter)
And that’s not entirely facetious in that we basically want shareholders who look at the business the same way we do. Because we’re going to be around running something, and what could be worse than having a group out there had a whole different set of expectations than we did, and evaluated us in a different way, and all of this sort of thing?
I mean, if you are going to — you’re going to have a given number of shares outstanding. Let’s say we have an equivalent of a million, two-hundred and some thousand A shares. Somebody’s going to own every single share.
Now, would you rather have them owned by people who understand your business, who understand your objectives, who measure you the same way you do, who have similar time horizons, or would you rather have the reverse? It makes a real difference over time to be in with people that are compatible with you.
So it’s a significant plus to us, the operation of the business, and it leads to a more consistent relationship between price and intrinsic value when you have a group like that, because they understand themselves and the business, and they’re not likely to do silly things in either direction.
So you get a much more consistent relationship than if we had a whole bunch of people who were thinking that the most important thing in evaluating this business was next quarter’s earnings.
Question about McDonald’s simply is, you know, it’s an outstanding business and we don’t talk about it when we buy it, we don’t talk about it if we sell it. Charlie?
CHARLIE MUNGER 02:15
Yeah. The question of what difference does it make to the management who the shareholders are, well, if you are into what I call trustee capitalism, where the shareholders aren’t just a faceless bunch of nothings, you feel as a kind of a hair shirt, an obligation to do as well as you can by the shareholders. Well, wouldn’t you rather feel an obligation to people you liked instead of people you didn’t like?
WARREN BUFFETT 02:51
Yeah, let’s say you were running a business and you had a choice of three owners.
You could have a hundred percent of it owned by whatever your favorite philanthropy is, you could have a hundred percent of it owned by the U.S. government, and you could have a hundred percent of it owned by, you know, the worst person you can think of, you know, in your hometown.
I mean, I think it would make a difference in how you felt about going to work every day. Number 9.
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