2015: Will the traditional method of selling cars remain viable in the future?

JONATHAN BRANDT: Thank you, Warren, for allowing me — inviting me — to be part of this 50th anniversary celebration. I have a question about Van Tuyl.

Van Tuyl is a fabulously productive auto dealer that has, since its founding, used a traditional negotiated model with a particular successful emphasis on profitable add-on insurance and financial products.

Meanwhile, at least some other auto dealers, CarMax and Don Flow among them, have adopted, or are moving towards, models which emphasize fixed prices, transparency, and low sales pressure.

Given the evolving regulatory environment and changing consumer preferences, will Van Tuyl eventually need to adapt to this new mode of selling, or do you feel the traditional method of selling cars will be viable for decades into the future?

If the market requires a new way of selling, how hard is it for a sales culture that has been successful for decades doing business one way to change to another?

WARREN BUFFETT: Yeah. If a change is required, it will be made. And I don’t know the answers to which way it’s going to go on that. The — it’s true that people are — have been — and that’s not new — that’s been experimented with before — where people have tried a one-price system and no negotiating, no haggling and everything.

And I think a very large number of people would like to see that system, except when they actually get into it, it seems to break down for some reason.

It — there’s negotiation going on in a lot of businesses that — and it always amazes me. People say they don’t like it, but it’s what ends up happening.

And so Van Tuyl will adapt to what the customer wants. We’ll see how some of these experiments go. And I don’t think there would be any problem at all if the world goes in that direction and Van Tuyl going to it.

But I wouldn’t be surprised if five or ten years from now the system is pretty much the same. I wouldn’t be totally surprised if it changes, either, but I can’t predict the outcome.

I can predict that Van Tuyl, and the subsequent auto dealerships we buy, I can predict that they will be a very important part of Berkshire and I think will be quite profitable in relation to the capital we employ in the business.

Charlie?

CHARLIE MUNGER: Well, I very much like that acquisition, partly because I think we can do a lot more like it. I —

WARREN BUFFETT: Do you think you’ll be negotiating on cars ten years from now, when you buy a new one?

CHARLIE MUNGER: It’s been amazingly resistant to change for my whole lifetime.

WARREN BUFFETT: Yeah. Happens in the jewelry business, too.

I mean, there’s certain items — well, it happens in real estate. I mean, let’s just say that some real estate firm said we’re only going to take listings where you can’t negotiate.

Do you think? — I’m not sure how it would do, in terms of obtaining both listings and customers.

People seem to want to negotiate. If they hear a house is priced at 200,000, they’re not going — unless it’s some unusual situation — they’re not going to step right up and pay the 200. They’re going to bid.

When people are dealing with a big ticket item — a lot of people — their natural tendency is to negotiate and they particularly will do so if they think that’s built into the system.

So I’m not sure how it changes, but we’ll do fine, whatever direction it goes.