Neil McMahon (PH), New York City. Berkshire owns several companies — stock in several companies — which are called permanent holdings. In the early ’70s, we had a two-tier market, the one-decision stocks, high P/Es — 50, 60 times earnings. If that were to reappear again, would Berkshire’s companies still be permanent? Or is there a price for everything? WARREN BUFFETT
Well, there are things that we think there’s no price for. And we’ve been tested sometimes and haven’t sold them, but — You know, my friend, Bill Gates, says, you know, it has to be illogical at some point. The numbers have — at some price, you have to be willing to sell something that’s a marketable security, forgetting about a controlled business. But I doubt if we ever get tested on — there’s only a couple of them in that category. Actually, there — you know — I won’t comment on that. (Laughs) We really have a great reluctance to sell businesses where we like both the business and the people. So I don’t think I’d count on seeing many sales. But if you ever attend a meeting here, and there are 60 or 70 times earnings, keep an eye on me. (Laughs) Charlie? CHARLIE MUNGER
The so-called two-tier market created difficulties, I would say, primarily because a lot of people or companies were called tier one when they really weren’t. They just had been, at some time, a tier one. If you’re right about the companies, you can hold them at pretty high values. WARREN BUFFETT
Yeah, you can really hold them at extraordinary levels if you’ve got — it’s too hard to find. You’re not going to find businesses that are as good. So then you have to say, “Am I going to get a chance to buy back the same business at a lot lower price? Or am I going to buy something that’s almost as good at a lot lower price?” We don’t think we’re very good at doing that. We’d rather just sit and hold the business and pretend the stock market doesn’t exist. That actually has worked out way better for us than I would’ve predicted 20 years ago. I mean, that mindset is — or 25 years ago — that mindset is — there’s been a fair amount of good fortune that’s flowed out of that that I really wouldn’t have predicted. CHARLIE MUNGER
But there, you’re demonstrating your trick again, you know? Still learning. A lot of people regard that as cheating. (Laughter)
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Knowing when to sell is tough.