2017 Berkshire Annual Meeting - CNBC 3-Hour Interview with Buffett, Munger & Gates

Buffett reflects on missed Google opportunity despite Geico's early heavy usage at $10-11/click with zero cost of goods sold. Should have recognized value but uncertain about technological moat sustainability. Discusses Apple investment (consumer behavior understanding) vs IBM sale (losing confidence). Key theme: circle of competence vs recognizing business model value.

Buffett explains paradigm shift where largest companies (Apple, Microsoft, Amazon, Google, Facebook) with $2.5T combined market cap need essentially zero equity capital - can run on negative capital. Contrasts with historical capital-intensive industries (autos, aerospace, railroads, steel, utilities) that built America. These asset-light tech giants are 'awash in cash' they can't even deploy effectively.

Buffett learned early not to react to elections after watching his father's panic responses to Democratic wins. Has never made investment decisions based on electoral outcomes. Trump election initially tanked market then rebounded hours later - typical overreaction. Emphasizes owning businesses long-term like farms, not trading based on political events.

Buffett dismisses 0.7% Q1 2017 GDP as measurement noise. Believes economy has grown steadily at ~2% since fall 2009. Quarterly figures subject to seasonal adjustment errors and measurement problems. Never made investment decision based on GDP. Focuses instead on railroad data and direct business metrics from Berkshire subsidiaries.

Buffett uses railroad example: 1.6M workers post-WWII down to under 200K today carrying MORE freight - dramatic productivity gains. But 55-year-old steel worker or shoe manufacturer is 'road kill' - won't learn new trade. Rich society ($57-58K GDP per capita) has moral obligation to care for those bypassed by productivity improvements. Doesn't blame them for voting against system.

Buffett defends Coca-Cola's 1200 headquarters job cuts despite profitability. Argues highly profitable companies can afford excess staff but shouldn't - violates capitalism's core principle of efficient resource allocation. Freed workers should innovate elsewhere, increasing overall output per capita. 3G's zero-based budgeting spreads efficiency pressure across consumer goods sector.

Buffett calls airlines 'brutal business' because incremental cost of filling empty seat is nearly zero, creating pressure to discount that 'infects all seats.' Gate concentration provides some protection but fragile. US Air went bankrupt twice (Buffett made money only by luck during brief recovery). Seat occupancy percentage is critical metric. Post-bankruptcy consolidation improved industry from 'suicidal' to merely 'extremely competitive.'

Buffett calls healthcare a 'tapeworm on the competitive well-being of American business' - grew from 5% GDP (1960) to 17% (2017), a catastrophic 12-point headwind vs international competitors with single-payer. Charlie Munger: system is 'cockamanie' complexity with disgusting waste from over-treatment of dying. Advocates Medicare-for-all with aggressive fraud prevention, though acknowledges government weakness at enforcement.

Buffett dismisses dynamic scoring as self-serving - everyone hires academics to justify their desired tax cuts claiming economy will benefit. Bill Gates agrees tech companies don't need tax relief - 'not starving right now' with very high profits. Emphasizes tax code certainty value over constant reform. One-time repatriation holiday is 'cockamanie' encouraging future offshore shifting.

Berkshire sitting on $95B cash/equivalents - 'we don't like that but' finding opportunities extremely difficult. Charlie: 'army of people in finance' and shadow banking funding LBOs with liberal leverage and fee-driven incentives paying high prices. 'Lot of idiotic deal making in venture capital now.' Market multiples high due to low interest rate benchmark. If big recession hits, 'lot of this leverage finance would present a lot of agony.'

Charlie Munger breaks with 'fellow Republicans' calling deregulation push 'bonkers.' Argues institutions using government deposit guarantees must behave conservatively. 'Too-big-to-fail' banks shouldn't swing for fences - should be in 'different form.' Berkshire could have made 'so much more money...by being just a little more leveraged' but chose conservatism. Shadow banking handling LBOs is appropriate risk segregation.