2020: Will Berkshire send cash to its subsidiaries that need it?

Becky Quick: (02:22:40)
That gets kind of to another question that came in from Mark McNicholas in Chicago, Illinois. He says, “Berkshire itself as a Fort Knox like balance sheet, but some of its operating companies may be tight on cash during the pandemic. Would Berkshire consider sending cash to its operating companies to one, ensure that they can get through the pandemic and and two, allow them to increase market share while their competitors struggle?”

Warren Buffett: (02:23:04)
Well, we’ve sent money to a few and we’re in a position to do that. We’re not going to send money indefinitely to anything where it looks like their future is not. It’s changed dramatically from what it was the year or so ago or just even six months ago. You know, we made that decision in terms of the airline business. We took money out of the business basically even at a substantial loss, and we will not fund a company that where we think that it’s going to chew up money in the future.

Warren Buffett: (02:23:40)
We started out with a company like that in our textile business at Berkshire Hathaway in 1965 and we went for 20 years trying to think we could solve something that wasn’t that solvable. So we are not in the business of subsidizing any companies with shareholders money. If people want to do that with their own money, but we’re not going to do it on their behalf. But we have advanced money, we are perfectly ready to advance money.

Warren Buffett: (02:24:08)
Gaining market share and all that. That may happen, but the companies that need money probably, market share is not their number one problem. I’ll put it that way. Greg, would you?

Greg Abel: (02:24:25)
Yeah. Well yeah. It’s interesting when we look at our different companies as we went into the pandemic or we’re addressing the COVID 19 crisis. Obviously the first focus by our management team and appropriately was our employees and effectively making sure they’re safe and that the business environment we’re in, that they could continue to operate. Then we quickly moved to looking at where our customers were in the cycle, I.E. What was the underlying demand within the business? And to great credit to our managers, they very much have adjusted their businesses consistent with the underlying needs and demands of our customer.

Greg Abel: (02:25:09)
So effectively they’re moving with the customer, meaning very few of our businesses have actually required funds. Some have. And as Warren said, we’ve advanced the funds to them, but the businesses have really reacted in a way where they’re managing consistent with where the market’s at. I.E., the demand for their products.

Warren Buffett: (02:25:32)
Berkshire is almost certain to generate cash. I mean nothing’s a hundred percent certain, but as Greg mentioned at Berkshire Hathaway energy, we had some short term financing. We don’t have short term financing to any degree. We’ll never get ourselves in a position where we have a lot of money that can come due tomorrow. And people that were financing heavily with commercial paper and then found their business stopped. Well you’ve seen what’s happened to the airlines. I mean they need money. Cruise lines need money.

Warren Buffett: (02:26:10)
There’s some businesses that, it’s just the nature of what they’re in. Berkshire will never get it in a position where it needs money. And we factor in, like I said, we factor in some things that are not ridiculously unlikely. And I’m not going to spell out scenarios because I, to some extent, you start spelling out scenarios, you may increase the chance of them happening. So it’s not something that we really want to talk about a lot, but our position will be to be to stay a Fort Knox.

Warren Buffett: (02:26:56)
But we don’t need it. We don’t need a hundred and, it’s a little higher now than it was at quarter end. We don’t need 130 or 35 billion, but we need a lot of money that’s always available. And that means we own nothing but treasury bills. I mean, we’ve never owned, we never buy commercial paper. We don’t count on bank lines and a few of our subsidiaries have them, but we basically want to be in a position to get through anything. And we hope that doesn’t happen but you can’t rule out the possibility anymore than in 1929 you could rule out the possibility that you know you would be waiting until 1955, or the end of 1954, to get even. Anything can happen and we want to be prepared for anything, but we also want to do big things.

Warren Buffett: (02:27:53)
If the prices are attractive. As Greg said, there was a period right before the Fed acted. We were starting to get calls. They weren’t attractive calls, but we were getting calls and the companies we were getting calls from after the Fed acted, a number of them were able to get money in the public market. Frankly terms we wouldn’t have given it to them.