Berkshire Hathaway 2013 Annual Shareholder Meeting

Warren Buffett opens the 2013 annual meeting with acknowledgments and reviews first quarter results showing $3.8 billion in operating earnings. He explains insurance earnings were helped by dollar strength and a settlement with Swiss Re, and highlights exceptional growth at GEICO.

Buffett details GEICO's remarkable performance improvements in 2013, with both closure rates and persistency reaching record levels. He explains the economic value of each new policy and encourages shareholders to get quotes.

Discussion of Berkshire's underperformance versus the S&P 500 over the recent five-year period and expectations for future returns. Charlie and Warren explain why returns will be lower than historical averages but still satisfactory.

Warren explains Iscar's competitive advantages over larger competitor Sandvik, emphasizing the incredible entrepreneurial story of founder Stef Wertheimer who built a world-class company from Israel against established global players.

Buffett announces Berkshire's strategic expansion into large commercial insurance, explaining the reinsurance arrangement with Aeon and plans for primary insurance. Charlie notes this business is peculiar to Berkshire's capabilities.

Discussion of Progressive's Snapshot technology for usage-based insurance pricing and why GEICO has not adopted similar approaches. Warren explains GEICO's underwriting criteria work exceptionally well as evidenced by their profitable growth.

Warren discusses the SEC's new position allowing material announcements via social media and defends Business Wire's value proposition of accuracy and simultaneous disclosure to all investors.

Discussion of how low interest rates affect Berkshire's massive cash holdings and float. Warren explains the tradeoffs and notes both Berkshire and the country have benefited significantly from Fed policy.

Brief discussion of Bitcoin where Warren admits he knows nothing about it but has no confidence in it becoming a major universal currency. Charlie also declines to comment due to lack of knowledge.

Warren addresses Bill Ackman's pyramid scheme allegations against Herbalife and explains how Berkshire's Pampered Chef differs fundamentally by focusing on sales to end users rather than loading up distributors.

Charlie reveals insights into Warren's operating methods, explaining how living on autopilot for ordinary decisions while consuming caffeine and sugar creates ideal conditions for important decision-making, all discovered before modern psychological research confirmed these approaches.

Warren defends newspaper acquisitions by explaining the expected 10% after-tax return despite declining revenues, helped by tax advantages from purchasing S-corporations. He promises annual transparency on actual returns achieved.

Discussion of hedge funds entering the reinsurance business primarily for tax advantages and the challenges of competing against irrational pricing. Warren explains how Berkshire maintains discipline despite competitive pressures.

Warren addresses questions about women in leadership at Berkshire and corporate America, sharing personal stories about his equally talented sisters who lacked the same opportunities. He acknowledges progress but notes more work remains.

Warren and Charlie discuss Bill Gross's concept of the 'new normal' lower returns. Warren emphasizes focusing on knowable facts about businesses rather than unknowable economic predictions. Charlie surprisingly agrees with Gross that future returns may be lower.

Warren addresses competitive threats from Gildan in the underwear market, explaining how Fruit of the Loom maintains advantages through brand recognition while acknowledging Gildan's success in non-branded wholesale segments.

Discussion of Berkshire's evolution toward buying great businesses even when Charlie thinks the price is too high. Warren explains how stock market auction dynamics can create better opportunities than negotiated acquisitions.

Warren defends the fiscal stimulus response to the 2008 financial crisis, giving credit to both the Obama administration and George W. Bush for appropriate emergency interventions. He praises Bush's famous 'sucker can go down' quote as brilliant economic insight.

Warren explains why Howard Buffett will serve as non-executive chairman after his death - to maintain culture and provide objective oversight of CEO performance. He describes the social dynamics that make CEO changes difficult and how Howard's large ownership stake aligns incentives.

Warren expresses sympathy for people dependent on fixed income in the current low-rate environment, describing the loss of purchasing power as brutal and staggering. He reiterates his 2008 advice to own equities.

Warren and Charlie discuss how to spot fraudulent accounting, sharing colorful stories including Charlie's encounter with someone wanting to sell fire insurance on concrete structures underwater. Warren explains pattern recognition from decades of experience matters more than checklists.

Discussion of how modern bank financial statements have become nearly impossible to understand due to derivatives and complexity. Warren shares the Gen Re story where 23,000 derivative contracts cost them $400 million to exit.

Warren reveals an astonishing story from his time running Salomon Brothers where a $180 million 'plug number' had been used for 10 years to reconcile unreconcilable differences between Phibro and Salomon systems, with auditors never catching it.

Student from Kenya presents shareholder proposal requesting MidAmerican Energy establish greenhouse gas reduction goals. Proposal notes MidAmerican generates half its power from coal despite having largest renewable portfolio, and cites climate risks to Berkshire's insurance business.

Formal conclusion of the annual meeting with voting on director elections and the greenhouse gas proposal. All directors elected with overwhelming support.