Berkshire Hathaway's annual event, the Berkshire Hathaway Shareholder Meeting, kicked off in May. Warren Buffett, the "God of Stocks", once again brought Abel and Ajit Jain, the head of insurance business, to answer questions from shareholders.
In addition to the plan to "retire" at the end of the year, Buffett also talked about a number of hot issues that the market is concerned about. What are the important things to be told about the conference? Jingtai interprets it for you.
Warren Buffett slams tariffs and protectionism: Trade should not be a weapon
First, Buffett was asked about the concept of "import vouchers" that he mentioned in a 2003 op-ed. The idea is to narrow the U.S. trade deficit. Warren Buffett explained: "Import vouchers are designed to balance trade. I devised the idea of this import voucher. It's a bit of a gimmick, but I think it's certainly a lot better than anything we're talking about right now. ”
In response to questions, Buffett did not directly name names, but he criticized US President Donald Trump's hardline trade policies. In particular, he pointed out that the imposition of punitive tariffs on other countries was a major mistake.
"Trade should not be a weapon," Buffett said at Berkshire Hathaway's annual shareholder meeting. "The United States has already won. I mean, it's a miracle that we've gone from a country that had nothing 250 years ago to a country that is incredibly important. ”
Warren Buffett further added: "It seems to me that when 7.5 billion people around the world are dissatisfied with you, and 30 million people in your country are somehow flaunting their achievements, it's a big mistake – I don't think it's either appropriate or wise." In other words, he believes that in the context of globalization, the United States should focus more on cooperation with other countries than confrontation.
Overall, Buffett's point is clear: trade should not be used as a weapon, but as a tool for global economic development. He stressed the importance of cooperation and balance, and reminded not to ignore the voices of the rest of the world.
About Japan|Warren Buffett said that if the Bank of Japan raises interest rates, it "will never consider selling" Japanese stocks
When asked if the Bank of Japan would stop investing in Japanese stocks if the Bank of Japan raises interest rates in the future, Warren Buffett, the "prophet of Omaha", made it clear that he would not reduce his holdings. He even emphasized: "In the next 50 years...... None of us will consider selling these shares. This shows that his confidence in the Japanese market is very strong.
In particular, Buffett noted that the performance of Japanese companies is "extraordinary". He also gave examples of companies such as Apple, American Express, and Coca-Cola that are doing well in the Japanese market. Clearly, he sees Japan as a good place to invest in the long term.
The investment guru also revealed an important piece of information: he has established "ultra-long-term partnerships" with five Japanese general trading companies: Mitsui & Co., Mitsubishi Corporation, Sumitomo Corporation, Itochu Corporation and Marubeni. He said he was treated "extremely well" by these companies and praised their unique business traditions and ways of doing business.
"They have a unique business tradition and way of doing business – which is different around the world – and we don't want to change the way they operate because they've done it successfully," Buffett stressed. This shows that he is very satisfied with the current operating model of these companies and is confident that they will continue to be successful.
Buffett further said: "We will never sell any stocks. This will not happen for at least a few decades. He added that the Japanese investment is fully in line with Berkshire's strategic objectives. At present, Berkshire has invested $20 billion in Japan, and Buffett even joked that he wanted to invest $100 billion instead of $20 billion.
Buffett's designated successor, Greg Abel, also responded that he envisioned holding shares of the Japanese trading company for at least 50 years, or holding them forever. This means that Berkshire is not only bullish on the Japanese market now, but also has a long-term plan for the future.
About AI products|Warren Buffett said that he will not invest everything around AI
First, Warren Buffett made it clear that he won't revolve all his investments around AI. "If I had to choose, I would invest in the reinsurance industry." He said, noting that when it comes to AI products, it should be Ajit Jain, who is in charge of Berkshire's insurance business, to make the decision.
Ajit Jain, vice chairman of Berkshire's insurance business, believes that while AI is expected to be a "game-changer," the company is in no hurry to integrate the technology into its business processes.
"In my opinion, there's no doubt that AI is going to be a real game-changer, and it's going to change the way we assess risk, price risk, sell risk, and even ultimately process claims," Jain explains. However, he cautions, "That being said, I do think people end up spending a lot of money chasing the next big thing." ”
Jain further emphasised the company's cautious approach: "We're not good at being the fastest mover. Our approach is more of a wait-and-see approach until the opportunities become clear and we have a clearer picture of the risk of failure, potential gains and potential losses. ”
In other words, Berkshire wants to avoid blindly following the herd and instead wait for the time to be ripe to ensure that every investment delivers a reasonable return.
Right now, various insurance business units are really trying to get into the AI space, trying to figure out the best way to take advantage of it. However, Jain added: "We haven't made the conscious big deal out of this opportunity yet. I guess we're going to be in a state of readiness and we'll be able to jump right into it as soon as that opportunity presents itself. ”
Warren Buffett and his team are very pragmatic about AI. They acknowledge the huge potential of AI, but also emphasize the need to err on the side of caution and not rush to large-scale investments.
Warren Buffett's Perspective: Embrace Change and Adapt to the Future
An investor asked: If autonomous driving is widespread in the United States, how will GEICO adjust its policies and business? In particular, there are issues related to the division of responsibilities, vehicle liability, and software liability.
Ajit Jain, who is in charge of insurance, was the first to respond: "From an insurance point of view, autonomous driving is not going to be fundamentally different right away. He explained that most current car insurance premiums are priced based on the frequency of driver error, and that their policies and claims systems work in this way.
Jain went on to say that while self-driving technology may reduce the chance of accidents, once the technology becomes more widespread, insurers will adjust accordingly. "Self-driving technology does have the potential to reduce the chance of accidents, and Geico shares a similar view with other insurers," he said. ”
Warren Buffett shared his opinion, referring to what Charlie Munger once told him: "When we decided to enter the textile industry, we couldn't foresee the future transformation of the whole industry. The world is changing all the time. ”
Warren Buffett uses the example of playing baseball or golf to describe business decisions: "Not every swing will make a home run, and not every shot will make a hole-in-one." You have to accept the fact that you will make mistakes. He stressed that although it is very important for us to discuss whether auto insurance will change because of autonomous driving, at present, autonomous driving has not yet been fully commercialized, and the United States has not yet promoted it on a large scale.
Warren Buffett noted: "What the insurance industry will look like in the next 100 years, no one can predict with certainty. But one thing is clear, he argues: the world is dynamic. Just as Albert Einstein's special theory of relativity in 1905 eventually led to the emergence of nuclear weapons, advances in science and technology are always accompanied by unforeseen results.
Buffett also mentioned that today's cars are becoming more and more like high-tech products, and the maintenance costs brought about by technological upgrades have increased significantly. He recalls that when he first went to GEICO in 1950, the average annual premium was about $40, and now $2,000 a year is the norm. At the same time, however, the number of traffic fatalities has dropped significantly. "If you look at it from another angle, it's actually a lot safer to drive now than it used to be."
He also pointed out that changes in the energy industry, medical care, and the political environment may lead to industrial restructuring. In the business world, there are no "answers" to many questions, only "action points". Wake up every day and rethink how you run your industry.
About the stocks of tech giants|Observe the future of the "Big Seven of U.S. Stocks".
An investor asked: At the 2017 AGM, you didn't need to lend money to these big tech companies, but you still bought their shares. Now that these companies such as Microsoft, Apple, Amazon, etc., have a lot of capital and are investing in AI, has your view changed?
Warren Buffett explained: "Yes, they do make a lot of money because they invest a lot of money. He pointed out that there is nothing wrong with needing capital in everything you do. Coca-Cola, for example, has its own bottling company, which requires a lot of capital investment, but in terms of sales, the capital requirements are not large.
"It's a great business, and Coca-Cola is still very popular." Warren Buffett continued, "If you're a bottling company, anywhere, you need to invest a lot of machinery in the beginning, and of course it costs money. But then the capital required is not so much, only a very small amount of capital is needed to operate, and the return that can be obtained is actually very high. ”
Warren Buffett said: "It will be very interesting to observe the future increase in capital intensity of the 'Big Seven' of US stocks. "There are a lot of people in the U.S. who have become very wealthy by looking at how others are investing," he said. ”
Warren Buffett further emphasized the uniqueness of the insurance industry: "Today people often talk about investing in high-return businesses, usually from a capital point of view, insurance, property insurance, casualty insurance is actually a very unique and rare business. Because you have to have money to work on as a guarantee for future profits, you have to keep your promises, but you can use the insurance money you get, and you can do this with long-term intensive capital management. ”
He added: "Overall, it's a very good business, you can buy apples, and the Apple business is actually a good business, and we've been holding Apple for a long time, and it's doing very well." ”
Warren Buffett concluded: "It's an interesting topic which businesses have to have a lot of working capital or are very capital intensive, and in some places there are quite a lot. He believes that capital needs vary widely from industry to industry, and understanding these differences is important to make informed investment decisions.
