2021: How did Berkshire make decisions during the early months of the pandemic?

BECKY QUICK: Thanks, Warren. And hello to everybody.

This first question that came in, came in from Andy Cies. He says he’s the owner of not nearly enough B shares.

He says, “Mr. Buffett, you’re well known for saying to be fearful when others are greedy and be greedy when others are fearful. But, by all appearances, Berkshire was fearful when others were most fearful in the early months of COVID, dumping airline stocks at or near the low, not taking advantage of the fear gripping the market to buy shares of public companies at exceptional discounts, and being hesitant to buy back significant amounts of Berkshire stock at very attractive prices.

“I’d appreciate hearing your thoughts surrounding this time and how Berkshire approached its decision making, specifically after it was assured, through the CARES Act, that the government would provide a robust backstop to the financial markets.”

WARREN BUFFETT: Well, it wasn’t until late — until both monetary and fiscal policy kicked in — well, you knew we had an incredible problem. And I am, just as Charlie is the chief culture officer, I’m the chief risk officer of Berkshire. That’s my job. We hope we do well, but we want to be sure we don’t do terribly.

But we didn’t sell a substantial amount. I mean we’re a company with six, probably $700 billion worth of businesses, some we own in their entirety, some we own a piece of.

And I don’t know whether we were sellers of maybe 1% of the value of all the businesses we had at that period.

But the airline — it’s kind of interesting with the airline businesses, in particular. And I’ll get to what was done in fiscal and monetary policy.

But we had a few people at various subsidiaries of Berkshire that wanted to go in for help from the government.

And, in some cases, they had minority shareholders who owned a few percent, and they said, well, this — you know, we’re going to get killed by what’s happening with the regulations that are being put out and that were stopping the economy. And they said everybody’s going in for them, and why don’t we go in?

I said, you know — (laughs) — Berkshire can handle it. This is for people that can’t handle what’s happening. And so, we’re not applying.

But the airlines were the most prominent beneficiaries of what took place immediately. They got 25 billion, initially, most of which went to the big four airlines, and some of which went is as grants, not loans.

And, you know, I think that was fine public policy. I think it — I wished it could go to every restaurant and dry cleaner and every small business that really was out of business and had no — I mean they were made toast of, you know, basically.

But the airlines — clearly, what happened was not their fault in any way, shape, or form. It wasn’t like 2008 and ’09 when people blamed the banks and hated to see them helped. So, it was —

Now, airlines operate in bankruptcy. So, it isn’t like that — three of the four big ones, as we know, went through bankruptcy within the previous 10 or 15 — so the airlines that were kind of used to operating in bankruptcy, they would have kept operating.

But it was perfectly proper for the airlines to be helped. The entire airline business, you know — you look at these figures of 2 trillion for Apple and so on — the entire big four airlines, they sold for about $100 billion, almost — I mean it’s a very, very small — combined, they wouldn’t come close to making the cut. I mean, they wouldn’t be in the top 50.

So anyway, they went into the government. They needed the government help, or they needed — or they would go bankrupt, some of them.

And really the Congress, but (Treasury Secretary) Steve Mnuchin, too, they decided they deserved the help, which I do not quarrel with at all.

But imagine if Berkshire was the 10% holder, which they had been, of everyone in the airlines, they said, “Take it up in Berkshire.” (Laughs)

It’s — it would be like one of our — they would have had — they might have very well had a very, very, very different result if they’d had a very, very, very rich shareholder that owned 8 or 9%. And they didn’t have that. You know, when they went in.

So, our — you might not have gotten the same result.

In fact, I would think you probably wouldn’t. I mean, I can just see the headlines now. I mean, you know, because you’ve seen the headlines on some companies that took a hundred million or two, you know, and really didn’t need it. And some of them gave it back — most of them gave it back.

But you were looking — you’re actually looking at probably a different result than if we’d kept our stock.

But in any event, an industry that was really selling for less than a hundred billion dollars lost a significant amount of money. They lost prospective earning power. I mean right now, they’re — you know, international travel’s not come back.

But I would say, overall, to — the economic recovery has gone far better than you could say with any assurance.

So, we didn’t like having as much money as we had in banks at that time. So I cut back some of the bank investment.

But basically, our net sales were about 1% or one and a half percent.

And looking back, you know, it would have been better to be buying. But what — I do not consider it a great moment in Berkshire’s history. But also, we’ve got more net worth than any company in the United States, under accounting principles. And we’ve got six or 700 billion of generally good businesses.

And I think, as I think, I think the airline business has done better because we’ve sold, and I wish them well.

But I still wouldn’t want to buy the airline business (laughs). International — people really want to — they want to travel for personal reasons, and business travel is another thing.

And we’ve got a big exposure to business travel, of course, through the fact that we own 19% of American Express and we own Precision Castparts, which services the air business.

So, we’ve still got a big investment in air travel, a big commitment to it.

But we wish the big four the best. And I think their managements have done a very good job during this period.