#it's really depressing to see people do those five years ago vs now and realize i haven't changed in the slightest

[brokebandwagon]

Hi Ladies! Thanks for making the pod, I always enjoy it :) I do actually have a question - is Ryan O'Reilly cursed? Whenever I look up the Blues to see how he's doing, it turns out they've given up five goals to Laine or fired their coach or some other traumatic storyline. Is it normal for a player to switch teams three times and never experience joy?

Thanks for the support and sorry we missed answering your question on the pod! (Ironically, he did come up in our convo before recording). Since we’re taking a break from recording until after the hecticness of finals and the first half of December, we’ll answer this one digitally. Under the cut because we’re wordy bitches here.

Maia (I got here first and got all the low-hanging fruit ¯\_(ツ)_/¯):

Ryan O’Reilly, to say the least, is a very interesting man.

Both of his trades have been seen as foolhardy to the team trading him. It wasn’t so long ago that Sabres fans (us included) were laughing at the Avs for trading such a good player… only to stand in their place not a mere three seasons later coming to full realization (with St. Louis fans laughing at us).

When a player is traded twice in the span of 3 years despite putting up good points and being a solid 1-2 center, a faceoff machine, and quite defensively sound, that’s never a good sign. The question at that point falls not on a player’s production, but their character.

Now ROR is hardly a horrible person – not by a longshot. He’s actually a really nice guy, but perhaps not the best team player or moral builder. We talk about this in one of our earliest episodes from the summer (1.03, judging from our old outlines), but ROR is almost always going to fill the score sheet, get the assists, get the goals. The trade of ROR to St. Louis was never about the points or goals, and no matter what the Sabres were going to be losing the best player in the trade. But there’s a lot more things that make a team tick then just putting up the points; there’s also camaraderie and truly being not just a team, but a family.

That’s not to say that ROR was the sole reason for the Sabres locker room issues –that falls on a lot of players, some of whom were shipped out or left to free agency (Evander Kane, Lehner, Johnson…)– nor is it to say that shipping ROR solved all the problems (that would unfairly erase all the work the remaining players did over the summer and in pre-season with communication, opening up to each other, working to hold each other accountable). But there’s no denying that the ROR trade was first and foremost, a character move.

It’s hard to gauge how much of the whole ROR vs Eichel thing was true –Jack certainly denies it (as heard on Spittin Chiclets)– but there had to have been a grain of truth in there somewhere. Think of it this way, ROR was brought into the organization only slightly before Jack, he was hailed as a leader. He was expected to be. Jack was too, perhaps, in his own way, but he had quite a bit of growing up to do first. Fast forward to the point where Jack truly starts to mature, he has an A, Brian Gionta is gone and so is the C…

That creates a vacuum, and while it’s always good to have players step up… there’s a difference between stepping up and stepping on toes, and maybe there was a bit of stepping on toes there. Trading ROR eliminates that issue, the locker room and the team is Jack’s to have. So many things changed in the off-season that it’s difficult to pin down exactly what the biggest game changer was (it’s all of them, honestly), but there’s no denying the importance of handing the reins over fully to a young, eager core just bursting at the seams to finally prove itself.

ROR was hard on himself and the team — both good traits to have, but in moderation; he’d still have the downtrodden attitude after good games and wins (despite their rarity). And again, there’s a difference between realism, humbleness, and being a constant downer. As much as GMBOT and co claim that ROR’s locker cleanout comments of “losing the love of the game” and etc didn’t affect their choice to trade him, they certainly did make it a lot easier to do so. The Sabres core needed to be desperately shaken up, and ROR was a very ready choice, esp after saying that. There is that argument that ROR at 27 fell just outside the “young core” Botts is building between 18-23, but then again, Jeff Skinner is 26. (But look at Skinner: what does he bring along with his production? Positivity, hard work, good locker room presence).

We haven’t really been following ROR’s track all that closely on the Blues. He’s putting up the points, for sure, but the Blues? Not so hot. The Sabres surely thought that the 1st rounder they received for him would be a late first rounder, but it’s looking more and more to be a high pick. So who knows, maybe ROR is cursed, but it’s interesting how the Blues have fallen since their acquirement of him.

To answer your question though: Is it normal for a player to switch teams three times and never experience joy?

Maybe, it just depends on the player. Don’t think Matt Duchene is exactly having a blast either

Meghan here;

Going off of what Maia said earlier, I think it was pretty obvious that there was tension in the locker room. If you ask me, I think it was in regards to leadership. Jack was being primed to be The Leader™ in the locker room; he was the youngest player who had the A, guys often commented on how they needed him (especially when he was out for those 4 weeks with an ankle injury), etc. It’s also rumored (and I don’t know how credible this is, so take it with a grain of salt) that he was traded from Colorado in the first place because he and Duchene were feuding for leadership in the locker room as well.

Now, I do want to stress that wanting to be a leader in the locker room isn’t a fundamentally bad trait. We all know this, but I want to put it on the record. However, it is a bad trait when you aren’t able to lead with another person/people. If that’s the case with ROR, then…that’s toxic. Is ROR a toxic person? I doubt it. I’m sure that, had he not had his struggles with leadership, he would have been a great resource both in and out of the locker room. But, as we can clearly see, he did have those problems.

So, to restate what Maia said, I also believe that this was a character move. Something I think a lot of people tend to ignore is that you can have all the talent in the world, but if your locker room is toxic? If your players are warring behind the scenes, if your players can’t get along? That talent doesn’t matter. Ultimately, I believe there were a lot of different reasons why the Sabres were garbage last year, and toxicity in the locker room was, in my opinion, one of the biggest.

To actually answer your question: no, I don’t think ROR is “cursed”. However, I think he just has a mixture of extremely bad luck to get traded to teams headed towards the bottom, and his attitude probably doesn’t help.

Cassie:

I don’t think ROR is cursed, but I don’t think he’s great for a locker room. Moving him was not a product of his production but more of a need for a culture change. If all you’re exposed to is someone that is down and depressed, eventually that rubs off. Unless ROR has changed his stripes, it’s unlikely that his aura has changed. It’s possible that the negative aura is tainting the Blues, but it’s also possible that the Blues are just bad. They were trending downward last season and it’s possible that it has continued. The Blues have a CF%/60 of 50.56 and a CA%/60 of 45.46. I’d believe that these are impacted and look better than they actually are because of ROR’s production. Overall, it’s just a bad team getting even worse goaltending. Oddly, they’re missing Hutton more so than benefiting from ROR. I think with ROR it’s a situation where he’s gone from team to team to team and have caught all three teams in a downslide. Combine that with him taking things too hard on himself it’s a toxic situation. I really hope he seeks out a sports psychologist because it would do wonders on his outlook.

#tbbanswers #buffalo sabres #ryan o'rielly #st louis blues #Anonymous #long post

[unproduciblesmackdown]

tfw hating life enough for a reeadmooore

‪yesterday afternoon i’d blocked out 3 pgs in my sketchbook & by that night i was thinking like well i’m so close to finished the sketchbook finally (ive been using it about a yr and a half by now) that i could just stop drawing when i hit the end there‬

but i’d mentioned the impending end of my sketchbook space a friend is already in the process of sending over some they havent ever used so that will at least mean if i stop drawing it’ll just have to be because i want to lol

like in this case it’s special b/c of course i’ve had periods where i’m like smh what if i just don’t draw anymore, but that’s tended to be about being frustrated w some element or other of it all. this time it was mostly just that every day of my life i have a tiny bit less motivation or energy or etc. yesterday i was thinking all day about offing myself, which i’d done the day before, and done today too

like, it’s nothing new, i’ve been hating being alive and wanting to kms and only moving in the direction of less disappointment to more disappointment and having to care less about things i previously cared about because for one reason or another things get to a point where it only adds frustration to my life anymore

but despite depression and wanting to die and life being miserble all being Not New, that doesn’t mean that it doesnt matter anymore, because after day after day after day after day after day of it for years and years, you’re in a worse place than you were a while back, even if you do feel the same. even a single day of wishing you were dead the whole time is shitty enough. feeling overall like even if you’re in a good mood now, you know your life is trash and you’re going to go back to feeling bad soon, is also shitty enough

like the thing that drawing had going for me is that, like reading and writing sometimes and even some other shit, it’s something i like to do. i do it for myself, really. but it helps that its the way i trick ppl into being here in the first place to see anything i’m talking about. i have really crap appeal. i mean i’m bad at being appealing thru shit i draw, but it’s still way more of something anybody wants vs like five yrs worth of my text posts. like...i have over 10x more followers than i did on a blog where i rarely drew anything ever

but anyways despite me drawing b/c i enjoy it, i enjoy enjoying things less. always in the middle of that “loss of interest in pleasure” life lol.......it doesn’t really matter how long i do or don’t keep drawing, b/c i mean, it doesn’t much matter to me whether i’m having fun or not. i can be enjoying drawing and still wanting to die, because that’s whats happening lol.....nothing that’s a personal factor of my life is all that important to me, because my personal existence is not that important to the person living it

also it sure hasnt helped that my sense of things like whether my life can get better or i’ll have the opportunity to pursue my nonexistent dreams or live an ideal version of my life that also doesn’t exist are all at all-time lows and only just getting lower day by week by month by year. the only way i can even look at cheering myself up is from a day-to-day perspective. and i can have a slightly more fun day than usual and then be extra down on the very next day b/c of how being a bit less numb means you’re crap-feeling emotions are now game too. and i’m very aware of how, if you’re not in a position that insulates you enough, if things get worse for you, that makes “things getting worse for you” more likely, and it’s an exponential drop that gets harder and harder to climb out of, and even if you move back up a notch out of good luck, you’re still just as likely to be knocked back down to where you were. the odds of me suddenly not only not fucking hating being alive but also having a life that doesnt fucking make me hate being alive? that’s a funny joke

‪also it’s frustrating that whether i feel good or miserable on any given day only really exists if i say something about it in a post like this lol... like i might feel awful one day but if i dont have it in me to spend ages writing about it, which is difficult also b/c putting feelings into words where ppl will only fully Get It if they’ve felt that way too, anyways if i dont write about how shitty i feel and post it then maybe later on when i’m feeling a little better or feeling a different kind of shitty, i also won’t be interested in being like “oh btw i felt awful the other day.” and if i don’t mention it, as far as everyone in the world knows, it was never a thing that happened, so it might as well not have. i mean, as a person i might as well not be happening, especially since i don’t want me to be happening lol‬

and like i was saying to someone the other day, its a lot harder via text to talk about shit b/c like, if you’re with a friend in person, you can talk abt boring or silly things and its easy and makes a good conversation. whereas talking via twitter means it would be clunky and time consuming to layout exactly had empty and depressing my existence is, and silly shit isn’t even worth the energy when you’re having a convo w lengthy gaps in it, so you can only really talk about the broadest, most interesting shit. which i don’t have much of, oh well

i do like talking and talking to people actually, it’s just rough when it’s all a few ppl online, even though i alsp extremely appreciate those people and enjoy the talking. it’s like, chatting to ppl online is like a piece of chocolate cake. it’s delicious and you love it, but it would be amazing if it was the extra bonus on top of getting solid meals every day, instead of it being the only thing you have to eat and you get it maybe once or twice a week and it’s still wonderful and is all the more valuable for it, but it isnt the same as getting enough to eat always, or Knowing you’ll keep getting enough to eat

anyways my social life is always its own special kind of depressing, even when i AM in the same place as friends. you’d have a hard time finding a situation where the concept of What I Have To Say seems interesting or even relevant to other ppl. and im not sure i’ve ever been in groups where i feel totally comfortable with everyone there and don’t feel out of place. so talking about the idea of knowing you always have access to someone to talk to or be with in person or having friends who you know you can hang out with and they actually like you and you still expect to have them a few yrs down the road—all that’s always been a “well, in theory i mean” or “at least, i imagine it would be like that” issue for me

tbh i generally feel the most comfortable enjoying myself when i do something alone; maybe it’s because i have more experience of ppl im around treating me really shittily than treating me well

ohhhhhh wellllllllllllllll what else do i have to talk about. hmmm the fact that feeling like i wanna die only seems to be regarded as an issue of “well are you gonna or not,” aka if you havent its a Victory and a happy situation instead of it being a matter of EVERY DAY I’M A CONSCIOUS ORGANISM I WISH I WAS DEAD AND MY EXISTENCE HAS BEEN HEADED IN THAT DIRECTION FOR AT LEAST THE LAST HALF OF IT

like how heartwarming that i’ve been actively suicidal for how many years? 6? 8? but i havent yet!! i always want to but just never get around to it and so this time for sure lol no more fooling around!! oh dammit and there goes another birthday still alive. like this is some elusive new years resolution or novel i mean to write.

funny i mention it because there’s practically nothing anymore that i want to do. even if i THOUGHT my life would ever become okay, i want fuckall out of it. i only exist, baby............and it’s like i said earlier, whenever i try to come up with a sad amount of potential motivations NOT to die, i have to realize that none of the shit is actually for me, or directly about me, or centered on me. like, this shit lost its charm ages ago.

well anyways. i suppose thats all i can think to say now. and it doesn’t make a difference whether i talk about my shitass existence and how crap i feel or not. it just gives the chance for a bit of it to exist in the world via a few other ppl being aware of it for a few minutes maybe, because who DOESNT want to thoroughly read a shit essay by some random weirdo about how everything sucks. the end

#i was innovative and typed this in twitter dark mode so my phone could have a break from me embedding the keyboard in the screen #anyways i wanna dye 😂😂😂

[ncfan-1]

Professor Venomous vs. Roller Skates

If there is skating, there will be falling.

[Also on AO3]

As is likely obvious, I based this fic on this post that Ryann Shannon made to her Twitter. 

----------------------------

The list of demands had been Cosma’s idea. She occasionally had to mind her nieces for long periods of time and had found that small children responded better to having to do their chores if they were allowed to make certain demands after long enough periods of compliance. “Just be careful you spell out anything she’s not allowed to demand ahead of time. The little monsters get very unruly if they think you’ve been acting in bad faith.”

Spelling out all of the things Fink wasn’t allowed to demand had been easy—or so Professor Venomous over-confidently, he realized now, had thought. She wasn’t allowed to demand any of the foods she was allergic to, especially not shellfish (No matter how much she begged, especially considering they’d found out she was allergic to it the hard way). She wasn’t allowed to conduct an experiment in the lab unsupervised; it was going to be a few years before Fink had the kind of fine motor control that would suffer allowing her to handle some of the more delicate materials or equipment. And by no means were they ever going back to the zoo, not since that time one of the zookeepers had taken Fink for an escaped zoo animal and tried to shoot her with a tranq dart.

Venomous had instituted the list of demands a few months ago, and so far, all had gone well. If Fink did her chores, then every other weekend she was allowed to write her latest demand on the list pinned on the front of the fridge by some of the refrigerator magnets they’d picked up the last time they were in the airport. She never really demanded anything too outlandish or beyond his ability to provide. Some of it had been, dare he say it, fun. (Vandalizing that billboard in sight of P.O.I.N.T. Headquarters had been very fun.) But today?

“You… want to go roller skating,” Venomous said blankly.

Fink grinned, showing off a mouth full of big, sharp teeth. “Yes!” One of those teeth was loose, and she whistled a little when she talked.

Venomous looked at Fink. He looked at the list, then stared around the kitchen and living room of their condo, then back to Fink. “You don’t own any roller skates,” he pointed out. “And if I get you roller skates, you’ll just outgrow them in a few months.”

“I didn’t say I wanted to go buy roller skates, Boss!” Fink protested. She puffed out her cheeks, eyes narrowed slightly. “I said I wanted to go to the skating rink!”

The skating rink. Try as he might, Venomous couldn’t quite help but twitch a little at the thought of it. Not being able to let things go was, to a certain extent, just part of being a villain, but there were some things he’d probably do better to let go of. This particular thing would be easier to let go of if he simply stayed away from any and all roller skating establishments.

“I honestly don’t know where to find any skating rinks,” Venomous tried. And it was the truth. The local skating rink when he was growing up had moved to another location about ten years ago. Not being the kind of person who frequented  skating rinks, and not being the kind of villain who targeted them, Venomous had never bothered to find out where the new location was.

But Fink was not to be deterred by such a thing. “I got you covered, Boss!” She whipped out her phone, typed something on it and held it out to him, grinning. “See?”

Too late, Venomous remembered that Fink’s phone had a map app on it. She’d already taken the liberty of plotting their course; the skating rink was seven miles northwest of the condo, fifteen minutes by car in present traffic. That close, huh?

For a moment, Venomous considered telling her to think of something else to do today. He considered making up some story about why they couldn’t go to the skating rink, something involving an old arch-nemesis and a run-in with the cops. But Fink had gotten to the point where she could pretty much always tell when he was lying. Cosma’s horror stories about what her nieces did when they got “unruly” loomed in the back of his mind. And most importantly, there was the bright-eyed look of anticipation on Fink’s face…

“Alright,” he conceded. “Let’s be ready to go in half an hour.”

…that Venomous couldn’t quite bring himself to mar with disappointment. Heh, that probably had something to do with why he was a Level -7 and not a Level -10 or lower. Oh, well. Maybe it wouldn’t be so bad.

Around forty-five minutes later, Venomous was looking at the front of the skating rink through the car windshield, and already a sense of foreboding was building within him. He couldn’t really pinpoint the source. The sun was shining; what few clouds were in the sky were thin and white, rather than gray and stormy. Nothing about the building screamed “obvious trap for villains looking to go roller skating.” But still, he was getting the same feeling he’d gotten the last time he ordered a robot from Boxmore, right before the blasted thing had fallen apart after that first hit.

There weren’t as many cars in the parking lot as he had been afraid there would be. Less people meant less chances of a meddlesome hero deciding that a villainous bioengineer and his evil minion just weren’t allowed to do normal, non-villainous things in their free time. But the fact that there were less people here than he’d expected, on a weekend of all times, might be commentary on the quality of the rink itself.

And then there was the sign.

“Come on!” Fink ran out ahead of him, stopping by the black-tinted glass doors as Venomous walked at a more sedate pace behind her, staring up at the sign all the while.

‘STARDUST’ was spelled out in big, bold Plexiglas letters. The interior of the glass was coated in silvery-blue glitter which sparkled in the daytime sun. An image of a silver disco ball shimmered just below the sign.

Well, maybe it was just a holdover from the last location.

And maybe it wasn’t.

He’d been unable to hear it from outside, but once they walked inside the rink Venomous heard clearly the music blaring over the speakers. Upbeat synth-pop that he was pretty sure he’d heard over the radio or in a club sometime around twenty years ago, just a little too loud for comfort.

The next thing Venomous was struck by after he took in the music was how dark it was. The light levels would have been more appropriate for a night club where the goal was to never get too good of a look at the person you were dancing with. For a skating rink where the presence of small children was presumably not only expected but accepted, it seemed a bit… dim.

Then there were the lights over the rink itself.

It was easy to pick out the rink. Located in a massive depression in the center of the building, surrounded by guardrails (that were spaced so that an enterprising child—say about Fink’s size—could have crawled under the lowest rung, Venomous couldn’t help but notice) and accessible only by stair, it’s not like anyone could miss it. Situated at multiple points over the rink were colored spotlights that glowed dimly on the polished, gleaming wood floor. They shone the full range of the color spectrum, slowly shifting from one end to the other. And over the center of the rink, there dangled a gigantic disco ball, from which shot beams of silver light.

Disco. Venomous glared up at the disco ball. This place just had to be disco-themed.

“Boss?” Fink tugged on his hand and pointed impatiently at a desk off to the side of the rink, near a massive display rack full of sheets and safety equipment, and a row of lockers. “Check-in’s over there.”

“Alright, alright!” In spite of recent unpleasant revelations, he could still laugh. “It’s not like it’s going to grow legs and run away!”

Manning the check-in desk was a teenager who, to put it mildly, looked bored out of his skull. Boredom wasn’t on the list of things Venomous typically associated with a skating rink, but he supposed that if you came in here every day, it was bound to lose its novelty sooner or later. The teen was dressed in clothes that Venomous could only describe as a mash-up of a disco dance floor reject pile and 80s workout clothes. Sweatband and knee-high leg warmers and long, tasseled fringe and far too much polyester. Workplace uniform, Venomous supposed. Hoped.

“Welcome to Stardust Skating Sanctuary,” the teen intoned in what was honestly the most unenthusiastic tone of voice Venomous had heard since the last time he’d snuck into Gar’s bodega in disguise. Just like the cashier in the bodega, he was busy typing away on his phone, not even looking up. “How may I help you?”

“How much does it cost to rent out a pair of children’s skates?”

Without looking up, the teen pointed backwards at a sign behind him, which read “UNDER 12—10 TECHNOS. 12 OR OLDER—15 TECHNOS.” “Linda at the skates will help you get set up,” he droned, busily typing on his phone.

Without further ado, Fink headed over to the skates rack, where a woman with four eyes and six arms was waiting with a child’s foot measuring device. For a moment, Venomous considered being offended by the cashier’s visible disinterest in paying customers, but he decided to just drop it. If he had to dress like that for work every day, he’d be done with everything, too.

Venomous handed the teen his credit card and waited, staring around the rink. At the back on the left-hand side, there were a few arcade cabinets. A trio of preteens were hanging around them, two of them squaring off at a dance machine while the third looked on. At the center of the back there was a sign for the restrooms. On the right-hand side, there was a small food court with tables set up in front of it; the aroma of fresh pizza wafted over to the check-in desk. Venomous let out a quietly relieved breath. At least there’d be somewhere for him to sit and wait while Fink was skating.

“Sir?” When Venomous turned his attention back to the teen, the latter was frowning at Fink, who was still looking for skates her size while Linda helped. “If your daughter is under four feet tall, you must accompany her into the rink.”

“Fink’s not my daughter; she’s my minion,” Venomous replied automatically. Like that would help him now.

The teen opened and shut his mouth like a fish stranded on dry land. When he found his voice again, he fixed Venomous in a flat stare and told him, “If your minion is under four feet tall, you have to accompany her into the rink,” like he had already had to explain this to far too many people. “Otherwise, she can’t skate. House rules.”

He pointed off towards the rink. When Venomous saw what he was pointing at, it was all he could do not to slap his forehead in dismay.

Off by one of the stairways down into the rink, there was a cardboard cutout. The character was decked out in inline skates, helmet, knee and elbow pads, and the sort of one-piece exercise suit that should have died with the 80s. Totally without explanation, it was a badger. It was holding its right hand about four feet off the ground, and a sign next to it read, “Boris the Badger says you must be this tall to skate by yourself. If not, ask your parents to join you!”

Venomous’s gut reaction was to refuse. He knew he’d have to put on skates to go into the rink; by no means would they make him do that. Never again. Venomous didn’t like making a complete fool out of himself in public any more than the next person.

But he’d already promised Fink that she could skate. Going back on his word now would be setting one heck of a bad example for her. Villains could double-cross their enemies any day of the week; that wasn’t just acceptable, but expected (Though if your enemy happened to be powerful or influential, perhaps not the best idea). However, villains—especially very young and inexperienced ones—really shouldn’t get the impression that double-crossing their allies was a good idea, especially not over something so trivial. Villains, real villains who didn’t traffic in things like moral ambiguity, tended to have limited social circles. You needed to be careful about just what you did with your social capital.

Of course, the chances of Fink, young as she was, doing anything but scrunching her face up in confusion if he spoke to her about ‘social capital,’ were close to nil, but the principle stood. Venomous really did slap his forehead this time. “Alright,” he muttered. “One child and one adult.”

By the time Venomous made his way over to the fitting area for skates, Fink appeared to be almost done finding something that fit her. They were down to two pairs of skates.

One of which was inline.

“Not the inline,” he vetoed, before Fink could say anything. “They’re too difficult to balance on. You’ll fall.”

Fink’s red eyes opened wide in indignation. “I will not!”

“You’ve never worn skates before. The inline skates are too advanced for you. You’re not wearing them.”

Fink stuck her tongue out at him, but grabbed the quad skates and went to wait on a bench by the rink, back turned to him.

“Do you have men’s quad skates in a size 10?” Venomous asked Linda. “I’m not picky about the color.”

Linda nodded. “That shouldn’t be a problem. Oh, sir? Is your daughter—“

“She’s my minion, not my daughter.”

Linda glared at him with all four eyes. “If your minion is less than seven years old, she’ll have to wear a helmet. Is she less than seven years old?”

Venomous had designed Fink to have stronger bones than nearly anyone she would ever encounter; the only reason they weren’t stronger was because his research suggested that that could lead to… problems. The likelihood of Fink ever winding up with broken bones or a skull fracture was close to zero. However, her soft tissue and internal organs were no sturdier than the average, healthy human’s. Going out on the rink without a helmet could still end poorly for her.

He weighed all that against one very important caveat: Fink’s ears. The helmet didn’t have any holes, so Fink’s ears would be completely covered, and she wouldn’t be able to hear a thing. There was also a risk of damage to her ears if they were pressed flat against her head for too long.

“She’s older than seven,” Venomous lied, and decided they’d just have to take their chances. He could stop her from taking a serious fall without much difficulty.

Linda looked less than convinced, but rather than trying to argue the point, she held out a key on a hot pink spiral bracelet. “Here is the key to a locker, so you won’t have to leave your shoes or any of your valuables out in the open. Now, if you’ll come with me, I think we can find skates for you…”

A short while later, Venomous had his skates (hot pink, again) and went over to where Fink was waiting. Well, sulking would be a better word for it. She glowered up at him when he approached. “I could’ve done it,” Fink groused, crossing her arms over her chest.

“If you do alright with the quad skates and we ever come back here, I’ll let you try them then. For now, you need to start off with something more stable.”

To show just how little she thought of that, Fink made what was, honestly, an impressively grotesque face. Venomous had seen corpses still trapped in a death rictus that were more pleasant to look at than that.

He smiled slightly. “Keep it up. Your face might stick that way.”

Fink beamed, anger apparently forgotten. “You think so?”

“Anything’s possible.”

Since another rule was that skates were not to be worn outside of the rink itself, they took their skates down into said rink. There were about thirty people using it, a near-even mix of children and adults, but the rink was large enough that it was fairly easy to find a quiet spot to sit down and get their skates on.

These are stiff, Venomous thought to himself as he struggled to get his skates on and laced. Apparently this particular pair of skates hadn’t been worn that often. That seemed a bit unlikely, considering there had only been ten pairs of skates in his size to start with, but perhaps they were new.

A faint odor of sweat clung to the cool air here, accompanied by shoe leather and a very weak pine-scented air freshener. Venomous wasn’t entirely sure how that was even possible, but the music was even louder here than it had been up above, so loud that it was making his teeth chatter. He spared a concerned glance for Fink—her hearing was much keener than the average human’s, after all—but inexplicably, she seemed unbothered. I suppose I should have her ears examined the next time we go to the doctor’s, he thought wryly.

Most of the rink was lined with a guardrail that, Venomous supposed (and hoped it was strong enough to serve the purpose), was meant to aid fallen skaters in getting back up. The only place with a break in the guardrails, asides from the access points at the stairways, was almost directly across from where he and Fink were sitting.

Painted on the wall, there was a smiling tiger dressed much the same as ‘Boris’ upstairs. Off to its left, a large sign read:

TAMMY THE TIGER SAYS SAFETY ROCKS!

Tammy’s Safety Rules:

No shouting No fighting No pushing or shoving No biting or clawing No food or drinks on the rink No use of superpowers No duels to the death No weapons ESPECIALLY no ray guns No gum

Stardust Skating Sanctuary is designated neutral territory for heroes and villains, as well as assorted sidekicks, apprentices, minions, henchmen, and robotic servants. So everyone remember to get along and have fun!

Neutral territory? Well, at least that minimized the chances of some trigger-happy hero or their trigger-happy sidekick to take a potshot at them. Venomous tapped Fink’s shoulder and pointed out the sign. “Have you read the safety rules yet?”

When Fink got to the end of the sign, she made another face, though this one looked more like she’d swallowed a lemon than done an impression of a death rictus. “Oh, not that again! So we can’t mess with any heroes even if they’re hogging the rink?!”

“Not unless you want to get kicked out—and never let back in.” Venomous smiled thinly down at her. However, if a hero tries to hassle you, I’ll hardly be angry if you give them what they gave you, and twice again.”

“Oh, don’t worry, Boss, I will,” Fink assured him.

All too soon, the moment of truth arrived. Venomous got to his feet, slowly, very slowly, clutching the guardrail in a death grip. He put as much weight as possible on his feet, willing them not to roll out from under him. Suddenly, he was finding himself inundated with a flood of memories from earlier years, none of them entirely pleasant. Ever so slowly, he began to remove his hand from the rail.

Fink, on the other hand, pushed off of the wall with all the confidence of someone who had no doubt of her success. She whirled around on her skates, cackling like someone who was plotting to take the world hostage with a doomsday weapon (One day. One day). “What were you worried about? This is easy! See me—oof!”

Of course she had fallen over. Planted face-first onto the flood, to be precise. Whoever was in charge of things upstairs loved punishing people for overconfidence, especially if they were villains. But before Venomous could even try to make his way over to her, she was right back up again, undaunted, and rocketing around on the skates.

I wonder if she even knows how to brake. But still, he smiled a little. Now, to let go of the guardrail…

He took a few tentative strides forward on the skates, careful not to stray too far from the rail. The floor must have been waxed just that morning; Venomous could see his face reflected there all too clearly, furrowed brow and clenched jaw. It was entirely too slick for his liking; every time he moved forwards, it was like trying to walk down a sidewalk coated in ice without falling over.

Venomous bit back a frustrated growl and moved away from the rail. He could walk around in go-go boots all day without a problem; why should roller skates (quad skates, too, not inline) be any different?

His first thought, after a few hesitant strokes, was that this wasn’t so bad. Certainly, it was beer than the last time, though that was hardly an achievement to applaud. With only a few minor hiccups, he could keep his balance without much trouble—this rink was level, and that certainly helped. He wasn’t going very fast—not like Fink, who was currently racing (as much as her short legs allowed) around the rink, with the other skaters scooting out of her way. Going that fast wasn’t the name of the game. Staying upright was.

This… wasn’t so bad. It was never going to be good, per se, but it wasn’t so bad.

His ankles wobbled ominously.

History taught a lesson that still held true in present day: once his ankles began to wobble, it was all over. He was not going to regain control, was not miraculously going to find himself steady again. It was all downhill from here. Still, Venomous tried to steady himself. Tried to stop, in vain.

Why did the ground always rush up to meet him so quickly, so hard? Venomous knew how the laws of gravity and inertia worked; he had paid attention in high school science classes. Still, it didn’t seem quite fair that the landing should be so unforgiving. At least he had landed flat on his back instead of landing on his face or his leg.

“You okay?” Fink called from the other side of the rink.

Venomous waved a hand weakly in her general direction. The light above shone blue, then purple, then black. “I’m fine.” The music seemed even louder than before; he nearly had to shout to hear himself over it. “Just keep on doing what you’re doing.” The silver disco ball was just barely in his field of vision. He scowled up at it, as though it was responsible for his fall.

The skates were not going to beat him. If he had to wear them, he would master them. If he could bioengineer a person like Fink, he could roller skate. Small children could do it; it only stood to reason that he could, too.

The second fall came maybe three minutes after the first.

The third fall came around thirty seconds after the second. Thrusting his arm out in front of his face was the only thing that kept Venomous from face-planting right onto the gleaming floor. This time, he didn’t get up. He really couldn’t be bothered. He just stayed where he was, lying face-down on the floor, his bones vibrating roughly in time to the music.

Before he could spend too much time enjoying his new career as a man-shaped roadblock, Fink skated over to him. Venomous could feel her poke his back cautiously. “Boss? You okay?”

“I’m dying,” he moaned.

A few more pokes followed that, more insistent. “You’re not dying,” Fink retorted. She prodded between his shoulder blades with her fingertips. “You just fell over!”

“I’m dying,” he insisted, struggling to keep laughter out of his voice and instead adopt a suitably morose tone. “Avenge me, Fink.”

“On what?” She jabbed her finger into his back. “The floor?”

Fink began to poke his back incessantly, until maintaining the ruse would have just been completely ridiculous, and, not without some reluctance, Venomous sat back up. He brushed his hair out of his face and grimaced down at her. Fink regarded him with a deliberately neutral look on her face, before that neutral look broke into a grin and she began poking his chest, hard.

Venomous batted her hand away. “Alright! Have some mercy on your creator; I’ve never taken to this as well as you have.”

Fink mimed at poking him one last time, but pulled her hand away, that grin still affixed to her face. “Have you ever been here before, Boss?”

He shook his head. “Can’t say that I have.”

It wasn’t a lie. The local rink had only been in this location for around ten years, after all. He’d never set foot in this building before today. It was good that he didn’t have to lie to her. Fink would have been able to tell, and there were some things he wasn’t ready to explain to her. When she was older, perhaps, but not now, when she still possessed a child’s black-and-white understanding of the world.

Mercifully, Fink didn’t pick up on any evasion of his. She merely raised an eyebrow and asked, “So I guess you can’t skate that great, huh?”

“I’m afraid not.” Leave aside the fact that if you wanted to learn to roller skate, there were more places to do it than just the skating rink. You didn’t often see an adult learning to roller skate on a sidewalk; outside of sports competitions and skating rinks, you didn’t often see an adult roller skating, period.

Fink regarded him in silence for a moment, before breaking into another grin. “I can show you how!”

Venomous tilted his head downwards and stared dubiously at her. “Says the girl who’s been roller skating for all of fifteen minutes.”

“I can!” Fink insisted, putting her hands on her hips. “You’re always telling me we gotta try new things.  Just trust me.”

And she’d said it. There went the death knell of any chance Venomous had of just sitting this one out, clanging so loudly that suddenly the music didn’t seem so loud after all. It was not use that the ‘gotta try new things’ Fink referred to had much more to do with trying to get her to eat foods she was unfamiliar with than with anything else. With little to no confidence of his ability to stay upright, he got back to his feet. Oh, well. Maybe it wouldn’t be so bad. At least no one he knew happened to be at the rink today to watch him fail repeatedly.

Fink grabbed his hand in her own and set off down the length of the rink. “See?” She laughed. “It’s easy once you get the hang of it!”

It really wasn’t, but it was hardly going to hurt him to just let her have this. It wasn’t always the kid who needed to learn new things.

----------------------------------

Trying to guess how Professor Venomous and Fink would act on a “day off” was a little bit of a process. Venomous spent most of ‘We’re Captured’ in a state of deep irritation, and wasn’t exactly happy for most of ‘Villain’s Night Out’ either; his appearances in ‘Villain’s Night In’ and ‘Boxmore Infomercial’ were basically just cameos. How does he act when he isn’t irritated, when he isn’t around heroes or other villains, when it’s his “day off”, I asked myself. The answer: “…Like a dad. A dad who also happens to a villainous bioengineer.” Until we get more insight into his relationship with Fink, I stand by this.

As for Fink, I figure that she’s probably still rambunctious, but at least a bit better-behaved when she isn’t around people she hates.

#OK KO let's be heroes #Fanfic #Professor Venomous #Fink #Egregious amounts of fluff

[etirabys]

so I was describing the story of the guy with anosmia to the giant, the one quoted in SSC’s What Universal Human Experiences Are You Missing:

I have anosmia, which means I lack smell the way a blind person lacks sight. What’s surprising about this is that I didn’t even know it for the first half of my life.

Each night I would tell my mom, “Dinner smells great!” I teased my sister about her stinky feet. I held my nose when I ate Brussels sprouts. In gardens, I bent down and took a whiff of the roses. I yelled “gross” when someone farted. I never thought twice about any of it for fourteen years.

Then, in freshman English class, I had an assignment to write about the Garden of Eden using details from all five senses. ... But I had to write about smell, too, and I was stopped dead by the question of what a peach smelled like. Good. That was all I could come up with. I tried to think of other things. Garbage smelled bad. Perfume smelled good. Popcorn good. Poop bad. But how so? What was the difference? What were the nuances? In just a few minutes’ reflection I realized that, despite years of believing the contrary, I never had and never would smell a peach.

All my behavior to that point indicated that I had smell. No one suspected I didn’t. For years I simply hadn’t known what it was that was supposed to be there. I just thought the way it was for me was how it was for everyone. It took the right stimulus before I finally discovered the gap.

I was describing this as a prologue to an unpleasant idea I was having. The giant and I had just remembered we’d been planning to check out if a particular local park had tennis courts – yelp said it did, but in the vaguest of terms. We’d both been to the park before and hadn’t noticed. The giant said we should go and check it out, and I said “yes, that sounds fun! It’s nice there, it’ll be a pleasant walk”, or something.

And it struck me, soon after I said that, that giving that reply had felt a lot like the times younger me left reviews on fics with good description saying “it was so vivid, I could see it in my head!” – I hadn’t meant to lie, I just hadn’t realize I had aphantasia yet, and what I really meant by this was “solid writing skill display in the description portions!”. I didn’t see anything in my head at all. Similarly, I wasn’t even sure if the walk sounded fun. It just seemed like a thing I’d been trained to say, because of the exposure I’ve had to people saying walks sounded fun. I don’t think I really enjoy walks in nature. There’s nice parts of it, but mostly it’s just unobjectionable.

I explained this suspicion to the giant and asked him a couple of questions about the pleasure ratio of taking a walking vs some other things, and he really does enjoy walks more than I do – there were some things I did appreciate about the experience, but overall it’s just... the only times I actually do it are when other people around who enjoy walks, and I want to Do Something Enjoyable with them, and I know that Walks Are Enjoyable. But it’s not actually enjoyable for me when it’s alone, otherwise I would do it when I’m alone. And I basically never do.

And worse, it struck me that this is the case with social events. People invite me to social events sometimes, and I say “that sounds fun” in the same way – or when it’s clearly not going to be fun, I say “that doesn’t sound like my thing” and don’t go, but most of the events I say “that sounds fun” about, I’m... really unsure if they are fun for me. There are things I enjoy about social events! But a great part of the reason I go is... it seems like I should go to them, it seems like I should enjoy them, but when I really query myself I don’t find much enjoyment at all. Not compared to the things I really unequivocally enjoy, like reading a good novel, or painting something, or working on an engaging program, or talking to someone I really like one on one. Social events are useful in that I may meet or deepen my friendship with someone who may become one of those people I really want to have one on one conversations with, but otherwise – I don’t think I like social events. I think I’ve been saying “sure, that sounds fun, I’ll try to show up” in a sort of trained way, like someone saying dinner smells great when they can’t actually smell it.

I now go to social events where I’m not constantly thinking “what am I doing here”, as was the case with the majority of social events until a year or two ago, but this never actually reached the point of “I enjoy being here”. It’s been steady at “This is fine” feat. the occasional “someone just made me laugh and I genuinely enjoyed myself for a few minutes”.

If this is true, I’m not sure if this has implications for how I should make decisions about activities in the future. The swathe of activities that fall under the umbrella of “...yeah, if I really think about it, I don’t actually like doing those, I think I’ve just been sort of pretending all along” is huge (most sorts of physical and social activity), and if I stopped doing them there wouldn’t be a lot of things to do in life. I would probably start getting bored and depressed. But is the solution to staving off boredom and depression to keep doing activities I don’t actually like that much, so I fool myself into thinking life is full of enjoyable things? That sounds kind of terrible.

#rambl #emo depletion #a list of things I unambiguously enjoy: good food; new music that I don't hate; a variety of authors I really like; painting; #writing fiction while high; sex with a handful of people I'm really comfortable with; really hilarious tumblr posts; #the part of programming where everything is going fine; reading good blog posts; having conversations with the <6 people I'm #really comfortable with; and..... that covers..... i think...... all of it #i was going to say bubble baths but i'm not actually sure i enjoy bubble baths. #dogs! I enjoy petting dogs. but the suffering we put them through seems unconscionable and I think they shouldn't exist maybe.

[sunshineweb]

18 Lessons for Investors and Managers from Warren Buffett’s 2014 Letter to Shareholders

One of my favourite Warren Buffett letters is from 2014. The reason I find this letter so special isn’t just because it marked the completion of 50 years of Buffett being at helm at Berkshire, but also because it contains a bonus – Charlie Munger’s words of wisdom and vision for Berkshire over the next 50 years.

What follows below are 18 big lessons Buffett and Munger have outlined in the 2014 letter, which are relevant for both investors and corporate managers. Though I suggest you read the original letter in its entirety by downloading it from here.

Note: Everything you read in the boxes below has been produced verbatim from Buffett’s 2014 letter.

I. Lessons for Investors

1. Price Vs Value How much should you pay for a business? Every day the stock market offers prices for thousands of businesses, but how do you know if the price for any particular business is too low or too high?

To succeed as an investor, Ben Graham suggested, you must be able to estimate a business’s true worth, or “intrinsic value,” which may be entirely separate from its stock market price.

For Graham, a business’s intrinsic value could be estimated from its financial statements, namely the balance sheet and income statement. He believed that the intrinsic, or central, value of any asset would be revealed by quantitative elements and that prices tend to fluctuate around this true value.

However, he emphasized the point that security analysis usually cannot determine exactly what is the intrinsic value of a given security. The analyst has only to establish that the value is either adequate or else that the value is significantly higher or significantly lower than the market price.

But then, you can’t overpay for a business i.e., pay much more than what its reasonably assessed value is, and expect to make a great return even in the long run. Here is what Buffett writes on the price vs value equation in his letter…

…a business with terrific economics can be a bad investment if it is bought for too high a price.

…a sound investment can morph into a rash speculation if it is bought at an elevated price.

2. Cut Your Losses Making mistakes is normal in investing. However, more important than realizing that you made a mistake, is to accept it and cut your losses rather than trying to get your money back the same way you lost it. In his letter, Buffett shares his own experience in cutting his losses in the retailing giant Tesco, while stressing that there isn’t just one cockroach in the kitchen.

At the end of 2012 we owned 415 million shares of Tesco, then and now the leading food retailer in the U.K. and an important grocer in other countries as well. Our cost for this investment was $2.3 billion, and the market value was a similar amount. In 2013, I soured somewhat on the company’s then-management and sold 114 million shares, realizing a profit of $43 million. My leisurely pace in making sales would prove expensive. Charlie calls this sort of behavior “thumb-sucking.” (Considering what my delay cost us, he is being kind.)

During 2014, Tesco’s problems worsened by the month. The company’s market share fell, its margins contracted and accounting problems surfaced. In the world of business, bad news often surfaces serially: You see a cockroach in your kitchen; as the days go by, you meet his relatives.

3. Stocks Better than Bonds in the Long Run Bonds, which are often seen as ‘safe’ by investors who have never invested in the stock market, or those who have lost a lot of money in stocks, are ‘risky’ in the long run owing to the inability of their returns (interest) to beat inflation. There’s ample proof of this from history, even in the Indian context, where people have lost purchasing power by remaining invested in bonds than stocks. On the other hand, people who have invested in good quality businesses and have sat on them for 10-20 years have reaped great rewards in terms of wealth creation. Buffett predicts in his letter that stocks will continue to remain safer than bonds in the long run.

The unconventional, but inescapable, conclusion to be drawn from the past fifty years is that it has been far safer to invest in a diversified collection of American businesses than to invest in securities – Treasuries, for example – whose values have been tied to American currency. That was also true in the preceding half-century, a period including the Great Depression and two world wars. Investors should heed this history. To one degree or another it is almost certain to be repeated during the next century.

4. Stock Price Volatility is NOT ‘Risk’ The only risk in investing is permanent loss of capital, which is very different from stock price volatility or fluctuation. A downward fluctuation – which by definition is temporary – doesn’t present a big problem you are able to hold on and come out the other side.

On the other hand, a permanent loss – from which there won’t be a rebound – can occur for either of two reasons: (a) an otherwise-temporary dip is locked in when the investor sells during a downswing – whether because of a loss of conviction; requirements stemming from his timeframe; financial need; or emotional pressures, or (b) the investment itself is unable to recover for fundamental reasons.

We can ride out volatility, but we never get a chance to undo a permanent loss. In his letter, Buffett stresses on this very fact of not considering volatility a synonym for risk, and thereby not getting fearful when stock prices move up and down, especially down.

Stock prices will always be far more volatile than cash-equivalent holdings. Over the long term, however, currency-denominated instruments are riskier investments – far riskier investments – than widely-diversified stock portfolios that are bought over time and that are owned in a manner invoking only token fees and commissions.

That lesson has not customarily been taught in business schools, where volatility is almost universally used as a proxy for risk. Though this pedagogic assumption makes for easy teaching, it is dead wrong: Volatility is far from synonymous with risk. Popular formulas that equate the two terms lead students, investors and CEOs astray.

If the investor fears price volatility, erroneously viewing it as a measure of risk, he may, ironically, end up doing some very risky things. Recall, if you will, the pundits who six years ago bemoaned falling stock prices and advised investing in “safe” Treasury bills or bank certificates of deposit. People who heeded this sermon are now earning a pittance on sums they had previously expected would finance a pleasant retirement.

If not for their fear of meaningless price volatility, these investors could have assured themselves of a good income for life by simply buying a very low-cost index fund whose dividends would trend upward over the years and whose principal would grow as well (with many ups and downs, to be sure).

5. Invest with Multi-Decade Horizon This is the biggest lessons we investors can draw from Buffett’s 50 years at helm at Berkshire. During this period, Berkshire compounded its shareholders’ wealth at an annualized rate of 21.6%. The performance becomes even greater considering that this has been achieved over a 50-year period.

The lesson to draw from this is that is that ‘t’ or ‘time’ is the most important variable in the compounding formula, even more powerful than ‘r’ or the rate of return. Of course, you must earn a decent return, but you will achieve the benefits of compounding only when you maintain this decent return over a 20-30 year period.

Consider this simple math – If you want to multiply your money 100x in 25 years, you want your investment to return 20% every year. In other words, Rs 1 growing at 20% per annum will turn to Rs 100 after 25 years, excluding all dividends. But if you sell this stock after 20 years (instead of holding for 5 more years), you will get just Rs 40. The remaining Rs 60 would come only between the 21st and 25th years.

That’s how compounding works. The longer you let your money grow, the faster will be the incremental return you would earn. Here is what Buffett writes in his 2014 letter about the importance of having a long-term perspective…

It is true, of course, that owning equities for a day or a week or a year is far riskier (in both nominal and purchasing-power terms) than leaving funds in cash-equivalents. That is relevant to certain investors – say, investment banks – whose viability can be threatened by declines in asset prices and which might be forced to sell securities during depressed markets. Additionally, any party that might have meaningful near-term needs for funds should keep appropriate sums in Treasuries or insured bank deposits.

For the great majority of investors, however, who can – and should – invest with a multi-decade horizon, quotational declines are unimportant. Their focus should remain fixed on attaining significant gains in purchasing power over their investing lifetime. For them, a diversified equity portfolio, bought over time, will prove far less risky than dollar-based securities.

6. Bad Behaviour is Destructive “A human being is a dark and veiled thing,” writes Daniel Kahneman, “…and whereas the hare has seven skins, the human being can shed seven times seventy skins and still not be able to say: This is really you, this is no longer outer shell. So said Nietzsche, and Freud agreed: we are ignorant of ourselves.”

When it comes to investing, we as investors are even more ignorant of what we really want. That’s exactly what Buffett echoes in his letter. He mentions five ways investors often destroy wealth – trading, timing, inadequate diversification, high fee, and leverage.

Investors, of course, can, by their own behavior, make stock ownership highly risky. And many do. Active trading, attempts to “time” market movements, inadequate diversification, the payment of high and unnecessary fees to managers and advisors, and the use of borrowed money can destroy the decent returns that a life-long owner of equities would otherwise enjoy.

Decades ago, Ben Graham pinpointed the blame for investment failure, using a quote from Shakespeare: “The fault, dear Brutus, is not in our stars, but in ourselves.”

7. Avoid Borrowing to Invest Buying stocks with borrowed money doesn’t make anything a better investment or increase the probability of gains. It merely magnifies whatever gains or losses may materialize. And then, leverage brings destruction if things go bad…really bad. And they often do.

Nassim Taleb says that we should judge people by the costs of the alternative, that is if history played out in another way. As he wrote in his brilliant book Fooled by Randomness – “Clearly, the quality of a decision cannot be solely judged based on its outcome, but such a point seems to be voiced only by people who fail (those who succeed attribute their success to the quality of their decision).”

In the same way, be very careful of judging your stock market success by the outcome you achieve, but by the decision you made. “Leverage can help me magnify my returns” is a great statement to make. But more often now, leverage – which is a result of arrogance created by good short-term returns or a result of survivorship bias, which is concentrating on the people or things that “survived” some process and inadvertently overlooking those that did not – will not only your destroy your savings and sleep, it will also destroy your reputation.

Buffett writes this about using leverage in investing…

…borrowed money has no place in the investor’s tool kit: Anything can happen anytime in markets. And no advisor, economist, or TV commentator – and definitely not Charlie nor I – can tell you when chaos will occur. Market forecasters will fill your ear but will never fill your wallet.

8. Big Investors, Small Investors – All Are Same Small investors often get enamoured by jargon-spitting stock market experts and big investors who appear on business TV to dispel their next predictions. The reason is often ‘authority bias’ – we consider someone an authority, when he/she is dressed or speaks like one. But Buffett reiterates what he has been saying for years – that all investors behave the same, and big investors behave more badly due to the great number of biases that they suffer from, as compare to the small investor.

So, before you trust a big investor with your time and money, remember what Buffett says…

The commission of the investment sins is not limited to “the little guy.” Huge institutional investors, viewed as a group, have long underperformed the unsophisticated index-fund investor who simply sits tight for decades.

A major reason has been fees: Many institutions pay substantial sums to consultants who, in turn, recommend high-fee managers. And that is a fool’s game. There are a few investment managers, of course, who are very good – though in the short run, it’s difficult to determine whether a great record is due to luck or talent. Most advisors, however, are far better at generating high fees than they are at generating high returns. In truth, their core competence is salesmanship. Rather than listen to their siren songs, investors – large and small – should instead read Jack Bogle’s The Little Book of Common Sense Investing.

9. What to Look for in an Investment Buffett outlines six key points of Berkshire’s acquisition criteria in the letter, something he has done several times in the past as well. While the first point can be immaterial for you, the next five points must be core to your investment philosophy, if you want to be a sensible, long term investor.

We are eager to hear from principals or their representatives about businesses that meet all of the following criteria:

(1) Large purchases (at least $75 million of pre-tax earnings unless the business will fit into one of our existing units), (2) Demonstrated consistent earning power (future projections are of no interest to us, nor are “turnaround” situations), (3) Businesses earning good returns on equity while employing little or no debt, (4) Management in place (we can’t supply it), (5) Simple businesses (if there’s lots of technology, we won’t understand it), (6) An offering price (we don’t want to waste our time or that of the seller by talking, even preliminarily, about a transaction when price is unknown).

10. Cigar Butt Approach – Does It Work Anymore? Shortly after Ben Graham’s death in 1976, Buffett became the designated steward of the former’s value approach to investing. Indeed, he himself became synonymous with value investing. It is easy to see why. Buffett was the most famous of Graham’s dedicated students, and never missed an opportunity to acknowledge the intellectual debt he owed to his teacher. Even today, he considers Graham to be the one individual, after his father, who had the most influence on his investment life.

This is despite the fact that, as early as 1965 and while working under Graham, Buffett was becoming aware that the latter’s strategy of buying cheap stocks (what Graham called ‘cigar-butts’, or companies selling for less than their net working capital) was not ideal, for it did not consider the quality of businesses, and just a stock’s cheapness. In fact, following Graham’s approach, Buffett bought some genuine losers.

Several companies that he had bought at cheap prices (they met Graham’s test for purchase) were cheap because their underlying businesses were suffering (so they were “value traps”). As such, Buffett began moving away from Graham’s strict teachings of focusing only on the price and a few balance sheet numbers, and not on the underlying quality of the business.

“I evolved,” he admitted, “but I didn’t go from ape to human or human to ape in a nice even manner.”

In his 2014 letter, Buffett outlines when the cigar-butt strategy worked for him, and when it didn’t, and why buying stocks just because they are priced ‘cheap’ can be a dangerous strategy.

My cigar-butt strategy worked very well while I was managing small sums. Indeed, the many dozens of free puffs I obtained in the 1950s made that decade by far the best of my life for both relative and absolute investment performance.

Even then, however, I made a few exceptions to cigar butts, the most important being GEICO…Most of my gains in those early years, though, came from investments in mediocre companies that traded at bargain prices. Ben Graham had taught me that technique, and it worked.

But a major weakness in this approach gradually became apparent: Cigar-butt investing was scalable only to a point. With large sums, it would never work well.

In addition, though marginal businesses purchased at cheap prices may be attractive as short-term investments, they are the wrong foundation on which to build a large and enduring enterprise. Selecting a marriage partner clearly requires more demanding criteria than does dating.

11. Listen to Charlie Munger Buffett’s discourse on investments is incomplete without his praise for his business partner and best friend Charlie Munger. After all, without any doubt, it was Munger who was responsible for moving Buffett toward focusing on business quality than just cheap price.

From the start, Munger had a keen appreciation of the value of a better business, and the wisdom of paying a reasonable price for it. Through their years together, he has continued to preach the wisdom of paying up for a good business.

In one important respect, however, Munger is also the present-day echo of Ben Graham. Graham had taught Buffett the twofold significance of emotion in investing – the mistakes it triggers for those who base irrational decisions on it, and the opportunities it thus creates for those who can avoid falling into the same traps. Munger, through his readings in psychology, has continued to develop that theme. He calls it the “psychology of misjudgement”.

Here is more praise Buffett has showered, and deservedly so, on Munger in his 2014 letter…

Charlie has a wide-ranging brilliance, a prodigious memory, and some firm opinions. I’m not exactly wishy-washy myself, and we sometimes don’t agree. In 56 years, however, we’ve never had an argument. When we differ, Charlie usually ends the conversation by saying: “Warren, think it over and you’ll agree with me because you’re smart and I’m right.”

What most of you do not know about Charlie is that architecture is among his passions. Though he began his career as a practicing lawyer (with his time billed at $15 per hour), Charlie made his first real money in his 30s by designing and building five apartment projects near Los Angeles. Concurrently, he designed the house that he lives in today – some 55 years later. (Like me, Charlie can’t be budged if he is happy in his surroundings.) In recent years, Charlie has designed large dorm complexes at Stanford and the University of Michigan and today, at age 91, is working on another major project.

From my perspective, though, Charlie’s most important architectural feat was the design of today’s Berkshire. The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.

12. Beware of Companies Making Acquisitions Would you risk your life savings on a coin toss? Of course you wouldn’t. But over the past few years, CEOs of many Indian companies – large, mid, or small – have risked their business with the same odds – by making disastrous acquisitions. They have shown what thrill for action when combined with cheap money can destroy shareholder wealth in such huge scales.

Acquisitions are often misused as the universal, over-simple growth formula, or just as a quick fix. As buying companies also boosts egos of managers making acquisitions, the essential questions can end up being dismissed as irrelevant, boring, or too mundane to be answered properly. This is exactly what Buffett captures when he writes about companies making expensive acquisitions and investment bankers justifying the same.

Too often CEOs seem blind to an elementary reality: The intrinsic value of the shares you give in an acquisition must not be greater than the intrinsic value of the business you receive.

I’ve yet to see an investment banker quantify this all-important math when he is presenting a stock-for-stock deal to the board of a potential acquirer. Instead, the banker’s focus will be on describing “customary” premiums-to-market-price that are currently being paid for acquisitions – an absolutely asinine way to evaluate the attractiveness of an acquisition – or whether the deal will increase the acquirer’s earnings-per-share (which in itself should be far from determinative).

In striving to achieve the desired per-share number, a panting CEO and his “helpers” will often conjure up fanciful “synergies.” (As a director of 19 companies over the years, I’ve never heard “dis-synergies” mentioned, though I’ve witnessed plenty of these once deals have closed.) Post mortems of acquisitions, in which reality is honestly compared to the original projections, are rare in American boardrooms. They should instead be standard practice.

13. Wait for Fat Pitches Given that stocks go up and down, the best way to win at the investing game is to have the discipline to form your own opinions and the right temperament, which is more important than IQ. All you have to do is sit there and wait until something is really attractive that you understand.

But by listening to everybody talk on television, especially because everybody sounds authoritative, investors often turn this fundamental advantage into a disadvantage. There’s no easier game than stocks, if and only if you don’t play it too often. And you play only when you get the fat pitches inside your circle of competence.

Here is what Buffett writes on the need to avoid listening to financial experts, and especially when the tide is rising and everyone is rising with it…

Periodically, financial markets will become divorced from reality – you can count on that. More Jimmy Lings will appear (Lings was a 1960s-era US businessman who founded the company LTV, and invented what he called “redeployment.” During an era when most companies made products and sold them, he saw the future of business: acquisitions and mergers).

They will look and sound authoritative. The press will hang on their every word. Bankers will fight for their business. What they are saying will recently have “worked.” Their early followers will be feeling very clever. Our suggestion: Whatever their line, never forget that 2+2 will always equal 4. And when someone tells you how old-fashioned that math is — zip up your wallet, take a vacation and come back in a few years to buy stocks at cheap prices.

II. Lessons for Managers

14. Cash is King One of the characteristics that define a great business is its ability to constantly generate more cash than it consumes. Cash is after the life-blood of a business, and the biggest wealth creators in history have been companies that have managed this assed well. Buffett has always stressed on the importance of cash, and here is what he reiterates in his 2014 letter…

Financial staying power requires a company to maintain three strengths under all circumstances: (1) a large and reliable stream of earnings; (2) massive liquid assets and (3) no significant near-term cash requirements.

Ignoring that last necessity is what usually leads companies to experience unexpected problems: Too often, CEOs of profitable companies feel they will always be able to refund maturing obligations, however large these are. In 2008-2009, many managements learned how perilous that mindset can be.

At a healthy business, cash is sometimes thought of as something to be minimized – as an unproductive asset that acts as a drag on such markers as return on equity. Cash, though, is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent. American business provided a case study of that in 2008. In September of that year, many long-prosperous companies suddenly wondered whether their checks would bounce in the days ahead. Overnight, their financial oxygen disappeared.

15. Respect Alternative Histories One peculiar but common way our brain works is that we often remember what’s easily available to us, and see what’s easily visible. So, we conclude that the stock trader who is rich must know what he is doing. In the same way, an investor who uses leverage to increase his bets and in the process magnifies his returns is also considered a role model.

In business, a CEO who borrows a lot of money to make acquisitions and in process turns his business bigger in quick time, also seem to be doing the right things (at least when times are euphoric).

In effect, the general belief is that if the outcome is good, the process and decisions made to arrive at that outcome must have been sound. Right?

Well, I hope if life were that easy and followed such straight patterns. But that’s not the case especially when randomness and ‘external factors’ play a role and in investing they do play a significant role.

At least, if you were to believe what Nassim Taleb has to say about “alternative history” in his amazing book “Fooled by Randomness” – “Imagine you are offered $10 million to play Russian roulette, i.e., to put a revolver containing one bullet in the six available chambers to your head and pull the trigger. Each realisation would count as one history, for a total of six possible histories of equal probabilities. Five out of these six histories would lead to enrichment; one would lead to a statistic, that is, an obituary with an embarrassing (but certainly original) cause of death.”

This thought is echoed by Buffett in his letter when he writes about CEOs taking undue risks to grow their businesses…

A CEO who is 64 and plans to retire at 65 may have his own special calculus in evaluating risks that have only a tiny chance of happening in a given year. He may, in fact, be “right” 99% of the time. Those odds, however, hold no appeal for us.

We will never play financial Russian roulette with the funds you’ve entrusted to us, even if the metaphorical gun has 100 chambers and only one bullet. In our view, it is madness to risk losing what you need in pursuing what you simply desire.

16. CEOs and Character Buying companies run by ethical managers has always been Buffett’s key criteria of investing. In the 2014 letter, he expands on what he looks at in CEOs, which serves some great lessons for companies who are searching for their own CEOs…

…rational, calm and decisive individual who has a broad understanding of business and good insights into human behavior. It’s important as well that he knows his limits. (As Tom Watson, Sr. of IBM said, “I’m no genius, but I’m smart in spots and I stay around those spots.”)

Character is crucial: A Berkshire CEO must be “all in” for the company, not for himself. (I’m using male pronouns to avoid awkward wording, but gender should never decide who becomes CEO) He can’t help but earn money far in excess of any possible need for it. But it’s important that neither ego nor avarice motivate him to reach for pay matching his most lavishly-compensated peers, even if his achievements far exceed theirs. A CEO’s behavior has a huge impact on managers down the line: If it’s clear to them that shareholders’ interests are paramount to him, they will, with few exceptions, also embrace that way of thinking.

…one other particular strength: the ability to fight off the ABCs of business decay, which are arrogance, bureaucracy and complacency. When these corporate cancers metastasize, even the strongest of companies can falter.

17. Why Did Berkshire Under Buffett Do So Well? As I mentioned at the start, one reason Buffett’s 2014 letter is very special is because his business parent and best friend Charlie Munger has shared his thoughts and vision for Berkshire. While Munger’s entire write-up is worth reading, here is what he writes on what makes Berkshire so special and why the business did so well under the stewardship of Buffett…

Only four large factors occur to me:

(1) The constructive peculiarities of Buffett, (2) The constructive peculiarities of the Berkshire system, (3) Good luck, and (4) The weirdly intense, contagious devotion of some shareholders and other admirers, including some in the press.

I believe all four factors were present and helpful. But the heavy freight was carried by the constructive peculiarities, the weird devotion, and their interactions. In particular, Buffett’s decision to limit his activities to a few kinds and to maximize his attention to them, and to keep doing so for 50 years, was a lollapalooza.

Buffett succeeded for the same reason Roger Federer became good at tennis. Buffett was, in effect, using the winning method of the famous basketball coach, John Wooden, who won most regularly after he had learned to assign virtually all playing time to his seven best players. That way, opponents always faced his best players, instead of his second best. And, with the extra playing time, the best players improved more than was normal. And Buffett much out-Woodened Wooden, because in his case the exercise of skill was concentrated in one person, not seven, and his skill improved and improved as he got older and older during 50 years, instead of deteriorating like the skill of a basketball player does.

18. Can Berkshire Model be Replicated? Here’s one more amazing dose of wisdom on whether the Berkshire model can be replicated by others…

The answer is plainly yes. In its early Buffett years, Berkshire had a big task ahead: turning a tiny stash into a large and useful company. And it solved that problem by avoiding bureaucracy and relying much on one thoughtful leader for a long, long time as he kept improving and brought in more people like himself.

Compare this to a typical big-corporation system with much bureaucracy at headquarters and a long succession of CEOs who come in at about age 59, pause little thereafter for quiet thought, and are soon forced out by a fixed retirement age.

I believe that versions of the Berkshire system should be tried more often elsewhere and that the worst attributes of bureaucracy should much more often be treated like the cancers they so much resemble. A good example of bureaucracy fixing was created by George Marshall when he helped win World War II by getting from Congress the right to ignore seniority in choosing generals.

Book Recommendations Buffett recommended the following books in his 2014 letter –

The Little Book of Common Sense Investing ~ Jack Bogle

Where Are the Customers’ Yachts? ~ Fred Schwed

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[lastmover]

2015 Berkshire Hathaway Annual Meeting (Afternoon) Transcript

1. Didn’t get Clayton Homes question in advance

WARREN BUFFETT: OK. Everybody will settle down, we’ll move right along.

I want to clear up one thing. My daughter told me that because we had all those — I had — all those slides that were in answer to Carol’s first question, that Carol [Loomis] and I had discussed it ahead of time.

I will guarantee you that I’ve discussed no questions with anyone on the panel, and they will tell you the same thing.

But I knew I was going to be asked questions about Clayton, so I prepared the slides.

It was an accident that it turned out to be the first question, but it was certain to be in the first few.

So, Carol did not — Carol in 60 years has never tipped me off on anything, nor have the other panelists.

And everything — but we were — but I was — prepared for the fact that people would be asking questions about Clayton.

OK. Let’s move right along, and we’ll go to Becky.

2. Businesses that do best in high inflation

BECKY QUICK: OK. This is a question — oops, that’s not the question. Hold on.

Here it is. This is a question from John Wells, right here in Omaha, and he says, “You’ve described inflation as a gigantic corporate tapeworm. Which of Berkshire’s businesses are best suited to thrive during a period of high inflation and why? Which will suffer the most and why?”

WARREN BUFFETT: Yeah. Well, the best businesses during inflation are usually the best — they’re the businesses that you buy once and then you don’t have to keep making capital investments subsequently.

So you get — you do not face the problem of continuous reinvestment involving greater and greater dollars because of inflation.

That’s one reason real estate, in general, is good during inflation. If you built your own house 55 years ago like Charlie did, or bought one 55 years ago like I did, it’s a one-time outlay, whereas if you’re — and you get the — you get an inflationary expansion in replacement capital without having to replace yourself.

And if you’ve got something that’s useful to someone else, it tends to be priced in terms of replacement value over time, so you really get the inflationary kick.

Now, if you’re in a business such as the utility business or the railroad business, it just keeps eating up more and more money, and your depreciation charges are inadequate and you’re kidding yourself as to your real economic profits.

So, any business with heavy capital investment tends to be a poor business to be in in inflation and often it’s a poor business to be in generally.

And the business where you buy something once — a brand is a wonderful thing to own during inflation.

You know, See’s Candy built their brand many years ago. Now, we’ve had to nourish it as we’ve gone along, but the value of that brand increases during inflation, just as the value of, really, any strongly branded goods.

Gillette bought the entire radio rights to the World Series in 1939. And as I remember, it cost them $100,000, and for that they got to broadcast the Yankees, I think, versus the Reds in 1939.

And think of the number of impressions they made on minds in 1939 dollars for $100,000, and they were getting in the minds of young guys like myself. I was eight or nine. And millions of people — and they did it in those dollars then.

And, of course, if you were going to go out and try out and do — have similar impressions on millions of minds now, it’d cost a fortune. And part of that is due to inflation. Part of it’s due to other things.

But it was a great investment, which could be made in 1939 dollars that paid off, in terms of selling razors and blades in 1960 and 1970 and 1980 dollars.

So that’s the kind of business you want to own.

Charlie?

CHARLIE MUNGER: Well, yeah, but if the inflation ever goes completely out of control, you have no idea how it’s going to end up.

If it weren’t for the Weimar inflation, we might never have had Adolf Hitler. It was the twosome of the great German inflation followed by the Great Depression that brought us Hitler. And think of the price that the world paid for that one.

We don’t want inflation because it’s good for See’s Candy. (Laughter)

WARREN BUFFETT: I didn’t quite realize I was —

CHARLIE MUNGER: No, I wasn’t criticizing you.

WARREN BUFFETT: What’s good for See’s Candy is good for the United States. (Laughter)

3. Organic growth vs. acquisitions

WARREN BUFFETT: OK. Gary?

GARY RANSOM: Three years ago you noted that you had looked at a large commercial lines insurance company as a possible acquisition, and now you’ve started up Berkshire Specialty, which seems to be off to a good start.

What are your thoughts on whether that has replaced the idea of taking over — of buying or acquiring a large company, or is Berkshire Specialty doing well enough that you’re content with that —

WARREN BUFFETT: Yeah.

GARY RANSOM: — organic growth?

WARREN BUFFETT: I would say that it’s almost certain that we — I don’t want to say 100 percent certain — but it’s almost certain we will not take over a large commercial insurance company.

We’ve got the ideal operation, in my view, in Berkshire Hathaway Specialty.

We’ve got the right people running it. We’ve got Ajit overseeing it. We’ve got more capital than any commercial insurance company in the world so that our securities are — and, therefore, our policies — are really better than anyone else’s.

So, we’ve got all these things going for us. And if we bought a big operation, we would have paid a very substantial nondeductible acquisition premium, and this way we’ve actually made money while we’re in the building stage.

And I think it can be a very, very big operation five or 10 years from now. So it’s almost zero probability that we’ll buy somebody else.

Charlie?

CHARLIE MUNGER: Well, I certainly agree with you.

WARREN BUFFETT: OK. The — that’s how he keeps his job. (Laughter)

We’ll go to — incidentally, all the overflow rooms, including at the Hilton, got filled. I’m not sure where a couple — where station 11 is — but we always lose a fair number at lunchtime.

So I’m sure everybody can find a seat, but we do apologize to those who could not find a seat this morning.

4. Munger on reputation and behaving well

WARREN BUFFETT: Station 11?

AUDIENCE MEMBER: Yes. Hey, Warren and Charlie. How are you guys? Congratulations on 50 years.

WARREN BUFFETT: Thank you.

AUDIENCE MEMBER: So, in this year’s annual letter, Charlie wrote about the peculiar attributes that made the Berkshire system, and the leader of the system, a historically organizing entity — organizational entity.

So, my question to both of you is what practical mental model or mental models would you impress upon a young, enterprising individual at the infancy of their career to build an important enduring enterprise of that particular distinction and impact?

And if you could give, like, maybe some contrasting examples, like why is a Microsoft able to build itself into a dominating monolithic company, versus a See’s Candy, which can be a great enterprise to spin off cash flow but not necessarily be an enduring — or not necessarily enduring — but an impactful enterprise to the level of a Berkshire or Microsoft?

CHARLIE MUNGER: Thank you, Warren. (Laughter)

WARREN BUFFETT: You’re the guy that wrote it. (Laughter)

This is pineapple juice, incidentally. People were questioning that. (Laughter)

They say it’s good for your throat if you’re going to talk a long time.

CHARLIE MUNGER: Yes. Well, of course, reputation you get over a long period of time.

Very few people are like Charles Lindbergh where you just suddenly have a great reputation.

Most of us have to acquire one very slowly, and that was true in Berkshire’s case.

And any individual you just have to get the best reputation you can in the years you’re allotted and the time available.

And it may work out well, it may work out poorly. But it’s a wise investment.

I see, all the time, opportunities come to people where it’s the credibility they’ve gotten in the past that causes them to have the new opportunity.

So, I think hardly anything is more important than behaving well as you go through life.

And — I think we actually try to behave better as we got more prosperous, and I think you’d be crazy if you didn’t.

So, I’d certainly recommend that you follow those old-fashioned principles.

And I don’t think there’s any way of guaranteeing a total powerhouse brand, nor can — if a result is a one in 50 million-type result, you’re probably not going to get it.

WARREN BUFFETT: Gianni Agnelli of Fiat, back in — I think it was 1988 — I was at dinner with him one time, and he said something to me that stuck with me. He said, “When you get old,” he says, “You’ll have the reputation you deserve.” He says, “For a while you can” —

CHARLIE MUNGER: Fool people.

WARREN BUFFETT: — “fool people,” but he says, “When” — he was talking about himself at the time — but he said, “When you get to be my age,” he said, “Whatever reputation you have, it’s probably the one you deserve.”

And I think the same is true of companies. And, frankly, you know, it has helped Berkshire a whole lot that it has gotten a reputation to be a somewhat different sort of company.

I mean, I don’t think we set out to do that, exactly, but it has worked out that way.

5. Climate change risk for insurance subsidiaries

WARREN BUFFETT: Andrew?

ANDREW ROSS SORKIN: Warren, you have said that global warming has not increased Berkshire’s payouts for weather-related events. Yet, other insurers, including Travelers, have cited climate change as a risk factor that they use.

Are Berkshire’s models different and, if so, how?

WARREN BUFFETT: Yeah. No. I’ve seen the — of course, the SEC requires you put in all these risk factors, and the lawyers will tell you to put in, you know, everything possibly you can think of, you know, that you’ll develop Alzheimer’s or whatever it may be.

They just want you to have a laundry list so that it’s all been covered in case of later litigation or something of the sort.

So people do put in weather risk, and maybe they put it in because they’ve got some model that shows it. But, you know, we price our business — basically, we price it every year.

It’s not like a life insurance company. A life insurance company you make a contract that — so much a thousand. And if you buy whole life insurance, you’ve set a price for — if you’re 20, you may have set a price for 60 or 70 years in the future. But that is not the property casualty insurance business, which we’re in.

We set it one year at a time. And I see nothing that tells me that on a yearly basis that global warming is something that should cause me to change my prices a lot, or even a small amount.

That doesn’t mean that it isn’t a threat to humanity or — you know, and terribly important. It just means that if I’m going to sell a one-year insurance policy, and I’m going to sell it on a $1 billion plant, I may care enormously about the fire protection, and other various other kinds of protection, within that plant.

I may care about what’s going on adjacent to that plant, and all kinds of things, but I am not thinking about global warming. It does not change the situation, in a material way, in any one-year period of time, in my judgment.

And, you know, it — if I was writing a 50-year wind storm policy in Florida, I would think very hard about what global warming might do in that case to the incidence and the intensity of potential hurricanes.

But I do not think it has any material effect on the likelihood of — or the intensity — of a hurricane in Florida or Louisiana or Texas or — next year.

So, it is not a — it’s not something I would put in the 10-K as a threat.

Charlie?

CHARLIE MUNGER: I don’t think it’s totally clear what the effects of global warming will be on extremes of weather. I think there’s a lot of guesswork in that field, and a lot of people like howling about calamities that are by no means sure.

WARREN BUFFETT: Yeah. Do you think — would it change your one-year prediction as to what the rate should be?

CHARLIE MUNGER: No.

WARREN BUFFETT: No. It wouldn’t change mine either, so I don’t really understand why they put that in there.

CHARLIE MUNGER: A lot of people get very invested. It’s like a crazy ideology.

It’s not that global warming isn’t happening. It’s just that you can get so excited about it you make all kinds of crazy extrapolations that aren’t necessarily correct.

WARREN BUFFETT: Yeah. Look at it this way. Would you change the rate for tomorrow on insurance because — from the rate today — for global warming? I doubt it very much.

Now, you know, would you change it for 50 years? Might very well.

But I think that one year is much closer to one day than it is to 50 years, in terms of focusing on that factor.

So, I do not want our underwriters to sit there thinking a lot about — in terms of writing a risk or the price at which to write that risk — I do not want them thinking about global warming. I want them thinking about whether there’s a moral risk involved and who owns the property.

I mean, that can be very significant. There used to be one fellow called “Marvin the Torch,” that if you insured “Marvin the Torch,” global warming didn’t really make much difference. His building was going to go. (Laughter)

Marvin had a marvelous way of looking at it, though. He said, “I don’t burn buildings; I create vacant lots.” (Laughter)

6. More oil & gas investments possible despite poor record

WARREN BUFFETT: OK. Gregg?

GREGG WARREN: When we look back at some of your bigger stock purchases during the past decade, two names actually stand out: ConocoPhillips and ExxonMobil.

In the first instance, you bought shares near the height of the spike in oil prices in 2008, later acknowledging that this was a mistake given how dramatically oil prices fell during the crisis.

While you’ve been able to swap some of those holdings, post a spinoff of Phillips 66 into operating assets, most of what you sold the last six years, by our estimates, has been at a loss.

Given that experience, it surprised some of us to see you take a meaningful position in ExxonMobil during the summer of 2013.

While it looks like you were able to eliminate that stake at cost as oil prices fell last year, these types of investments, which can be negatively impacted by the volatility in oil prices, don’t really seem to fit well with the other types of investments in your stock portfolio, many of which are built on strong franchises with unique competitive advantages.

With that in mind, and given the track record that Greg Abel and his team at Berkshire Hathaway Energy have had acquiring and investing in energy assets, does it make more sense to leave future energy-related investments in their hands?

WARREN BUFFETT: Well, there’s nothing we like better than to back up Greg in buying utility properties.

And — but they — we call it energy, but it’s not oil and gas in Berkshire Hathaway Energy, and they’re really in a dramatically different business than ConocoPhillips or ExxonMobil.

But we are looking, constantly, for opportunities for Berkshire Hathaway Energy to spend big money, and it will.

Berkshire Hathaway Energy, we paid $35.05 per share in 1999 to buy the stock.

I was at $35, and I don’t change my prices and Berkshire — the company was then called MidAmerican — they hired some investment bankers to come out from New York, and investment bankers spent a week here doing nothing.

But they felt — before they went home, they said, you know, “You’ve got to give us something because we’re going to send a big bill.” And I said, “Well, in that case, we’ll pay $35.05 and you can say you got the last nickel out of me.” (Laughter)

So my ambition ever since has been to have Berkshire Hathaway Energy earn $35.05 per share. It’s never paid a dividend.

It will probably earn about $30 a share this year, which is a great tribute to Greg and his management. But we will get the 35 or better because he will make some good deals.

It’s not at all analogous to the ConocoPhillips or ExxonMobil investments. As it turned out, we wrote ConocoPhillips down because we were required by the auditors to do it.

We actually, by the time we got all through, we made some money in it, and we made a little money in ExxonMobil, too.

But we will not be buying, very often, oil and gas stocks, but we will — we probably haven’t bought the last one.

In the end, we look at the cash, we look at available opportunities, both in investments and businesses, and we make decisions, occasionally, on buying something and sometimes we change our mind.

And that will continue that way. It’s been going on that way for a lot of years.

And we have not distinguished ourselves, at all, in the oil and gas field, although we’ve made a little money, and we passed up one or two where we could have made a lot of money.

Charlie?

CHARLIE MUNGER: Yeah. And with interest rates being so low and the dividend on ExxonMobil being the size it was, it was not a bad cash substitute, if you think only in those terms.

WARREN BUFFETT: Yeah. It worked out OK. There were other things we could have done a lot better, but that’s always been true and will continue to be true.

7. No “tears” for corporations on taxes

WARREN BUFFETT: Station 1.

AUDIENCE MEMBER: Mr. Chairman, Mr. Vice Chairman, my name is Andy Peake, and I’m from New York City.

First, congratulations to you on a remarkable 50 years, and second, thank you for hosting a one-of-a-kind annual meeting where you patiently answer questions from shareholders. I believe you are both — (Applause)

WARREN BUFFETT: Thank you.

AUDIENCE MEMBER: I believe you are two of the most knowledgeable and authoritative people on planet Earth on the U.S. tax code.

Our tax code is obviously broken at both the individual and the corporate levels.

Today, we have 2.1 trillion in offshore corporate cash sitting there not being brought home. We have the highest corporate tax rates in the world, and for high-income earners in the U.S., other than hedge fund managers, in states like New York and California, an all-in rate greater than 50 percent.

What can be done to effect real change to bring about a simpler, more rational tax code? Thank you.

WARREN BUFFETT: Well, it takes 218 members of the House of Representatives and 51 U.S. senators, and a president that will sign the bill.

The question is: how much you think the country should spend and then from whom do you get it?

And I would point out that despite the tax rates that all the corporate chieftains complain about, the share of earnings — share of GDP — accounted for by corporate profits is at a record.

Corporate taxes 40 years ago were 4 percent of GDP. They’re now running about 2 percent. They’ve decreased significantly while payroll taxes have increased.

You know, it’s a real question.

And once you get special provisions in the code, it is really hard to get rid of them, absent a major revision of the code.

I actually think — I may be an optimist on this, but I’m — I think both Ron Wyden and Orrin Hatch, the two ranking members, Senate Finance Committee, I think they’re capable of working out something that they — neither one of them likes — but they both like it better than what exists now, and I think it can be made considerably more rational.

But in the end, if we’re going to spend 21 or 2 percent of GDP, we should probably raise 19 percent of GDP.

We can take a gap of a couple percent without getting further into debt as a proportion of GDP than we are, so we’ve got that leeway.

But, you know, you take 19 percent of 17 1/2 trillion, or thereabouts, and you’re talking, as Senator [Everett] Dirksen said one time, real money.

And how much you get from corporations, how much you get from individuals, how much you get from estate taxes, you know, it’s a fight up and down the line.

So I — and in terms of the cash abroad, basically you can bring it back, you just have to pay tax at U.S. corporate rates. And our corporate rates are 35 percent.

Charlie and I, a good bit of our life, operated with corporate rates of 52 percent, later at 48 percent, and the country grew well. American business prospered during that period.

I don’t shed any tears for American business, in terms of the tax rate overall. I think there could be a much more equitable code, in terms of the corporate tax, but I do not think that the 2 percent of GDP that’s being raised from corporate taxes, which is far lower than was the percentage 30 or 40 years ago, I do not think that’s an onerous number.

And for people who are getting 1/4 or 1/2 percent on their CDs, who have retired, and with American business earning, on tangible equity, which is the way they measure it, you know, probably averaging close to 15 percent, I think equity holders are getting treated extraordinarily well compared to debt holders in this economy. (Scattered applause)

Charlie?

CHARLIE MUNGER: Well, I agree with you, and I don’t die over these little differences in the tax code, either.

I live in California, of course, where — there’s, like, a 13 1/2 percent tax on long-term capital gains, nondeductible for federal purposes. That’s a ridiculous kind of a tax to have in California because it drives rich people out.

Hawaii and Florida have enough sense to know that rich people don’t commit a lot of crimes, they don’t burden the schools, and they provide a whole lot of medical expenditures that are good for everybody else’s income.

I think California has a really stupid tax policy. But I don’t think the U.S. — but I don’t think the U.S. policy is — (applause) — I don’t think the U.S. policy is bad at all.

WARREN BUFFETT: And it’s nondeductible because of the alternative income tax —

CHARLIE MUNGER: Yes, exactly.

WARREN BUFFETT: Yeah. That really wasn’t the case before, but it —

CHARLIE MUNGER: No, it’s always —

WARREN BUFFETT: — kind of slipped in.

CHARLIE MUNGER: No, they did it on purpose. (Laughter)

No, they did it on purpose.

WARREN BUFFETT: Early stages of paranoia. (Laughter)

CHARLIE MUNGER: Yeah. But it is — it’s amazing. The idea of driving the rich people out, Florida is so much smarter than California on that subject. And it is really demented.

Who in the hell doesn’t want rich people coming in and spending in their state?

WARREN BUFFETT: Yeah, yeah. Remember that as you come here to Nebraska for the meeting. (Laughter)

I would say I really do think there’s some chance this year — and not a tiny chance.

I know both Ron Wyden and Orrin Hatch. They’re patriotic, they’re smart, they want to do the right thing. They’ve got different ideas about what the right thing is, there’s no question about that, but they also know they can’t get any place without cooperating.

But I think the real opportunity is if they work out of the public eye in doing — in working on something — and I wouldn’t be surprised if they are. I think that’s the way to get it done.

Charlie has always pointed out, what would have happened if the Constitutional Convention back there in Philadelphia had been held with every delegate running out immediately to tell the TV cameras how right he was and how wrong everybody else was.

It doesn’t accomplish much to dig in on positions, and not be in a position to compromise, because it takes a lot of compromise to write something when you have two different — fundamentally different — views on some important aspects of the tax code.

But those are two good guys, and I would not — I don’t think it’s impossible that we have a new corporate tax code within a year.

8. Buffett on Adam Smith’s “Wealth of Nations”

WARREN BUFFETT: OK. Carol?

CAROL LOOMIS: This question, which is a little bit offbeat, comes from Jordan Shopof (PH) of Melbourne, Australia.

“Mr. Buffett, in the forward to the sixth edition of Benjamin Graham’s ‘Security Analysis,’ you identified four books that you particularly cherish.

“Three of these books were authored by Graham himself, and their influence on you is well-known.

“The contributions of the fourth book to your thinking, however — that book was Adam Smith’s ‘The Wealth of Nations,’ published in 1776 — what that book meant to you is seldom discussed.

“So my question is, what did you learn from “The Wealth of Nations” and how did it shape your investment and business philosophy?”

WARREN BUFFETT: Well, it doesn’t shape my investment philosophy, but I certainly learned economics from it. And my friend Bill Gates gave me an original copy of it. I was able to study this.

Adam Smith wrote it in 1776. It’s — you know, there’s just — if you read Adam Smith and if you read Keynes, Ricardo, and then — and if you also read that little book we’ve got out there called “Where Are the Customers’ Yachts?” you will have a lot of wisdom.

I forgot to mention, I was supposed to mention, too: we didn’t want to put it on sale earlier because it would have given away the movie, but we do have “Berkshire Bomber” underwear out there, or sweatshirts, or whatever it may be, so Fruit of the Loom has those.

And we have Fred Schwed’s “Where Are the Customers’ Yachts?” book, which contains an incredible amount of wisdom and very few pages and very entertaining.

But if you want to go for — if you want to not only get a lot more wisdom but appear more erudite, you should read “The Wealth of Nations,” also.

Charlie?

CHARLIE MUNGER: Adam Smith is one of those guys that has really worn well. I mean, he is rightly recognized as one of the wisest people that ever came along.

And, of course, the lessons that he taught way back then were taught again when communism failed so terribly, and places like Singapore and Taiwan and China, and so forth, came up so fast.

The productive power of the capitalist system is simply unbelievable, and he understood that fully and early, and he’s done a lot of good.

WARREN BUFFETT: I took an idea of his on the specialization of labor, you know, and he talked about people making pins or something, but I applied that, actually, to philanthropy.

You know, I mean, the idea that you let other people do what they’re best at and stick with what you’re best at, I’ve carried from mowing my lawn to philanthropy, and it’s a wonderful thing to just shove off everything and say somebody else is better than I am at that, and then work in the field that’s most productive for you.

CHARLIE MUNGER: Yeah. You didn’t do your own bowel surgery, either.

WARREN BUFFETT: No. (Laughter)

I’m not sure I have any reply to that. (Laughter)

9. Subsidiaries aren’t too focused on short term

WARREN BUFFETT: OK. Jonathan?

JONATHAN BRANDT: Warren, you have told the managers of your businesses to think of their businesses as something they will own forever and that their first priority should be to widen the moat and take care of their customers.

In more than one case, according to people I’ve spoken to, Berkshire’s subsidiaries that were formally publicly traded have run into trouble by — now this is on the margin, mind you — trying to maximize calendar year earnings and dividends to the parent, as opposed to focusing on the long-term health of the business.

Do you find that managements of formally public companies, through force of habit, perhaps, have more trouble making decisions with only minimal concern for short-term results than would be the case for formally private companies?

If this dynamic is a real one, is there something more that can be done to combat it?

And I’m curious, are most of Berkshire’s compensation structures based on 12-month results or are they already based over multiyear periods?

WARREN BUFFETT: Yeah. I don’t think we’ve had any particular problem with public companies versus private companies that we’ve bought.

I mean, if you took the aggregate of the public companies we bought and matched them up against the private companies, I don’t know which group I would rather own or which has delivered the greater returns.

CHARLIE MUNGER: I don’t know where he gets the idea.

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: It’s not apparent to us.

WARREN BUFFETT: Yeah. Well, you’ve heard Charlie. And I can’t think of it myself.

And, you know, if we tell them to think about 100 years, we mean think about 100 years, and I think they know we mean it. They certainly know we run Berkshire, you know, in terms of our own decisions that way.

So, I think we set the right example, and I think we use the words to convey that belief as strongly as we can, and we try to reinforce — we try to put it in the annual report, we try to talk about it in meetings like this.

We believe in sort of hammering the same message out there over and over again.

Now, we don’t ignore yearly results at all, it’s just we don’t live by them. But I get figures every month on virtually every business, and I read them with great interest, and, you know, I’m thinking about them all the time.

I don’t think they’re unimportant, but we don’t live by them. And I think what really counts, you know, is where we’re going to be three years, five years, or 10 years from now.

But I also — I wouldn’t — if we’re subpar in some area, I wouldn’t accept the fact that we’re working to maximize things in 10 years mean that we should be throwing away money, or anything like that, in the short run, or not paying attention to the business.

But I’d have to say what Charlie has, I don’t really agree with the premise.

10. Buffett’s interest in German companies

WARREN BUFFETT: OK. Station 2.

AUDIENCE MEMBER: Dear Warren, dear Charlie. Thank you for 50 great years. I’m a happy shareholder and hope to have you continue long.

My name is Victoria Von Tropp (PH). I’m from Bonn in Germany.

And my question is, you own companies both here in the U.S. as well as in Germany. What differences in corporate culture and in performance do you see between German and U.S. starter companies?

WARREN BUFFETT: Charlie?

CHARLIE MUNGER: Differences between what —

WARREN BUFFETT: I know the question. I’m just looking to you for the answer, not the question. (Laughter)

CHARLIE MUNGER: Now that he can hear so much better, he —

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: Well, we — we’ve had a hard time buying things in Europe. It’s been quite rare.

And I think the traditions, and the family traditions, are different in Europe than they are in the United States, and in some other countries.

And Germany, of course, has a long tradition of being very good at technology and capitalism, and that’s been a godsend to Germany. And we’ve always admired the way the Germans have performed.

The Germans actually work fewer hours than a lot of other people and produce a lot more and, of course, Warren and I are pretty good at that. (Laughter)

So we’re — we admire the Germans, particularly the engineering side, and — but we’ve been thinking about owning good German companies for a long time and we finally bought one.

WARREN BUFFETT: Yeah. But I’ll make a prediction. I will predict we buy at least one German company in the next five years.

I think that — I think we are far more on the radar screen than we were just a few years ago in Germany. I think we now have a woman over there who brought, through somebody else as well, but brought Louis to our attention.

I think she is going to hear about more things because of her association with us on the transaction and the fact that we tried to get the word out as to her help with us.

So, I would really be surprised if we don’t make at least one deal in Germany in the next five years, and I would look forward to it. I mean, we’ll be very, very happy with — you know, we have to get a business, we understand.

I’ve had, probably, four or five letters in the last couple months, ever since the Louis deal was announced, but they’ve been very small businesses in practically each case.

But we’ll get one. We’re eager, we’ve got the money, and we do fit the family situation, occasionally.

And prices may be a little more attractive there than in the United States, although I haven’t seen anything yet that we’ve bought.

But I would say that there’s a reasonable chance that the price of something we’re offered over there might catch my attention more than U.S. prices, currently.

11. Why competitors sometimes underprice GEICO

WARREN BUFFETT: OK. Becky.

BECKY QUICK: This question caught my attention not because I think it’s a complaint, but I think it’s an actual question about the actuarial models that you use at GEICO.

It comes from Stan Zion (PH). And he says, “My wife and I are stockholders of Berkshire Hathaway. I’m 78 and she’s 74. We have a long-time accident-free driving record.

Yet, when we applied to GEICO with our stockholder discount, GEICO was unable to beat our rates for comparable coverage with other fine companies. Why?”

WARREN BUFFETT: Well, it’s the reason that we probably can beat the rate maybe 40 percent of the time with people who contact us and 60 percent of the time we can’t.

No company is going to be the lowest in all cases. And we have our own underwriting criteria that involves many variables, one of which is age, but it wouldn’t be a dominant one at that age.

But we have many, many variables. And we make our calculations, and very good competitors like State Farm and Allstate, USAA, and so on, they have somewhat different underwriting weightings and sometimes they come in below us.

But I don’t think any company, of size, will be the lowest more often than GEICO.

We give out quotes on the telephone to many, many thousands of people every week. I get the figures every week, and I get the number of quotes, and I get the number of policies sold.

And I can tell you the percentages are very substantial that we sell. And we’re not selling them if we’re charging them more than the people before them. So it — different people have different weightings for different variables.

And the couple you referred to sound like they should get a very good rate from somebody, but they apparently got a better rate from somebody else other than us. And that’s going to happen, perhaps 60 percent of the time, and 40 percent of the time we’re going to get the business.

And since we’re only 11 percent of the whole market now, it means we’ve got a lot of policyholders yet to gather.

The — it’s an interesting question when you’re looking at how to evaluate drivers. You know, we know that 16-year-old boys are about as bad as they get; 16-year-old girls are a better class.

Does that mean they’re better drivers? Not necessarily.

It may mean they don’t have the same tendency to show off. It may mean they don’t drive as many miles. It may mean a whole lot of things.

So we ask a lot of questions, and other people ask different questions, and we will come up with different rates. But it’s definitely worth 15 minutes to call GEICO. (Laughter)

Charlie?

CHARLIE MUNGER: Well, I would say besides if — when you get into the older people’s group and you find you’re not deteriorating as fast as most of your contemporaries, you may be paying an unfair price for the insurance, but it’s a good tradeoff. (Laughter)

WARREN BUFFETT: Gary.

I haven’t thought of it that way before. (Laughter)

12. Reinsurance business getting worse due to “facades”

GARY RANSOM: The reinsurance market has changed dramatically over the last two or three years, a lot of alternative capital coming into the business, making it much harder to make the assumption that there would be a big opportunity after the next big catastrophic event.

What is it that you and Ajit are planning to change, or do, to take advantage of whatever opportunities might be there?

WARREN BUFFETT: Well, wouldn’t our competitors like to know? (Laughs)

The reinsurance business is not as good as it was, and it’s unlikely to be as good as it was.

There’s a lot of money that’s come into reinsurance, not because they want to reinsure people, but because it’s become either a fashionable asset class for people that are looking for so-called noncorrelated investments and may not know what they’re doing, but it’s something you can sell people, you know, that’s an attractive line to go to pension funds with.

And then, secondly, it’s a beard for doing — for asset management. So, if you go to Bermuda and start a reinsurance company, you can actually run a hedge fund, and you need a little business to make it look like you’re doing something other than running a hedge fund, and locating it offshore so you don’t pay any tax, but that’s the primary motivation.

So when you get a whole lot of people that are bringing money in and they sort of need your facade of reinsurance to cover up what their real motivations are, you’re likely to get less attractive prices in reinsurance.

And that’s been happening on a fairly large scale, and I would say that I would expect the reinsurance business in the next 10 years to not be as good as it has been — I’m talking about the whole industry — as it has been, you know, in the last 30 or something like that.

It’s a business whose prospects have turned for the worse, and there’s not much we can do about it.

We do find things to do. There are certain things that only Berkshire can do, and we’ve — I mentioned in the annual report that there have been eight—I think it was eight—contracts written with premiums of a billion dollars or more, and we’ve written all eight of them.

So, we do — there’s a certain corner of the world that we’ve got a strong position in, and there’s a few other things we will do, but it’s not as good as it was.

Charlie?

CHARLIE MUNGER: Well, I think, generally speaking, of course, it’s going to be harder and, of course, this competition from promotional finance is getting more and more intense and they’re more optimistic.

They’re searching for a robust narrative. We’re not searching for a robust narrative so we can sell something. We’re playing the game for the long pull and other people just pretend to be doing so.

WARREN BUFFETT: Yeah. We could — we’ve had the opportunity over — for a long period of time — to go out and promote reinsurance-type money, and really take advantage, you know, of people on it, because we would have the best reputation in the field, and we could attract a ton of money, and we could get a big overwrite on it.

But it’s not our game.

CHARLIE MUNGER: And we don’t particularly admire the way it’s being played.

13. How to win friends and influence people

WARREN BUFFETT: Station 3.

AUDIENCE MEMBER: Mr. Buffett and Mr. Munger, my name is (inaudible) from South Florida, and I’m currently in seventh grade.

My question is how do you make lots of friends and get people to like you and work with you?

WARREN BUFFETT: That’s not a bad question. (Applause)

Very good question.

CHARLIE MUNGER: Well, you know, I was pretty obnoxious when I was your age and asked a lot of impertinent questions, and not everybody liked me.

And so the only way I could get the people to like me a little bit was to get very rich and very generous. (Laughter)

That will work.

WARREN BUFFETT: People will see all kinds of virtues in you if they think you’ll write a check. (Laughter)

Yeah. The two of us — both Charlie and I were on the obnoxious side early on, but you should get a little smarter about human behavior as you get older.

And I turned out to have some pretty good teachers as I went along, in terms of what worked.

I mean, I have looked at other people during my lifetime and at these wonderful teachers. They weren’t teachers in the standard definition, but they were people I admired and I thought to myself, “Why do I admire these people?” And if I want to be admired myself, you know, why shouldn’t I take on some of their qualities?

So, it’s not a complicated proposition, you know. If you look around you at the people you like in your school, write down three or four things they do that make you like them, and then look around at the three or four people that turn you off, and write down those qualities, and decide that you’re going to be a person you, yourself, would like, that you’d take on the qualities of the person on the left.

You’re generous, you’re friendly, you know, you accept things with good humor, you don’t claim credit for things you don’t do, all of these things. And they’re all possible to do.

And if you like that in other people, people are going to like it in you. And if you find things that are kind of obnoxious, you’re always late, you’re always claiming credit for more than you do, and you’re kind of negative on everything, and you don’t like those in other people, get rid of them in yourself and you’ll find out it works pretty well. (Applause)

CHARLIE MUNGER: And it really works in marriage. If you can change yourself instead of trying to change your spouse, that’s a good idea. (Laughter)

WARREN BUFFETT: Charlie has said the most important thing in selecting a marriage partner is that you don’t look for intelligence or humor or character. He says you look for someone with low expectations. (Laughter)

14. NetJets wasn’t a mistake despite labor problems

WARREN BUFFETT: OK. Andrew?

ANDREW ROSS SORKIN: OK. This is a question about NetJets. We received several related to NetJets. We’ve combined these two.

The first is, can you comment on the lengthy dispute with NetJets’ pilots who are picketing outside, and Whitney Tillson asks, “What type of return on investment do you expect from the billions on order in aircraft for NetJets,” and in a very pointed way, he writes, “Was buying NetJets a mistake?”

WARREN BUFFETT: No, I don’t think buying NetJets was a mistake. We’ve had a few things where it looked like a mistake for quite a while and some of them turned out to be a mistake.

But NetJets is a very decent business. We have a good business; the pilots have a good job.

And the — it’s not really the right way to look at it, I don’t think, in terms of return on investment in the billions of dollars of orders we have because we resell those planes to owners.

And we do have a core fleet that represents an investment, but the investment is held, in very large part, by the owners themselves. I own — what do I own? Three-sixteenths, or something like that, of one type of plane that my children use. I own an eighth of another plane that I use. But that’s my investment; it’s not the NetJets investment.

The — labor relations — at Berkshire we’ve had hundreds of labor unions over the years, literally hundreds. In fact, we probably have hundreds at the present time.

And we’ve only had — in 50 years — we’ve had three strikes that I can remember. I don’t think there have been any others. There could have been some one-day walkout, maybe.

But we had a four-day strike at a Berkshire Hathaway textile operation, we had a four-day or so strike at the Buffalo News 30 years ago, and we had another strike at See’s Candy one time.

So, we have no anti-union agenda whatsoever, and we think we have sensational pilots.

I mean, I’ve flown NetJets, my family has flown NetJets, now for 20 years, and we’ve had nothing but professional pilots and friendly pilots.

And it’s not — you know, it’s in human nature to have differences, sometimes, about what people get paid.

Our pilots make an average of 145,000 a year. They worked — they work seven — they have options, but one of the options, and the main option, is seven days on and seven days off.

We pay for their time to get to where they’re based. They can live anyplace in the country. And compared to our competitors at Flexjets or Flight Options or so on, or in charter, we pay well.

But it’s perfectly understandable that employers and employees have some differences from time to time. And we’ll get it worked out, but that doesn’t necessarily come in a day or a week or a month.

And our volume is up, in terms of flying. Our volume is up, in terms of owners in the United States. Europe is flat. But the United States is the bigger end of it.

So it’s a business I’m very glad we own. I’m proud we own it. It’s a first-class operation. We give our pilots more training, I believe, than anybody else.

I’m flying on NetJets. My kids are all flying on NetJets. Our managers, in many cases, are flying on it, so nobody cares more about safety.

This is not a company where the CEO flies on his own jet and other people fly in other ways. So I — and I get the same — I get the same planes that the other people get and the same pilots. I mean, there’s no special arrangements.

So we’ve got this intense interest in safety, and we’ve got very professional pilots. And at the moment, we’ve got a difference of opinion about a contract, but that will get settled, in my view.

Charlie?

CHARLIE MUNGER: I have never, in all the years, had a NetJets pilot who didn’t affect me as a wonderful fellow and a very skilled, able, and dutiful, reliable person.

And I would say most — I can think of no NetJets pilot that has ever in any way indicated that he’s dissatisfied with his life, and a lot of them say they just love it, because of the — I’m not at all sure the union is fairly representing the pilots.

WARREN BUFFETT: OK. (Applause)

He said fellows. Actually, we have a lot of women pilots, too.

15. Tax code helped Duracell-P&G deal

WARREN BUFFETT: Gregg?

GREGG WARREN: Warren, looking at your acquisition of Duracell from Procter & Gamble, at the time of the deal, you noted that Duracell is a leading global brand with top quality products. You’re obviously familiar with the business, which was initially acquired by Gillette in 1996.

While Duracell does provide fairly steady cash flows and has a strong brand in market position, its core business is in decline, with advances in technology making alkaline batteries far less relevant than they were 20 years ago.

Looking back historically, you’ve been willing to hang onto businesses operating in declining industries as long as they continue to generate some cash for Berkshire overall, so having Duracell in the portfolio is not necessarily out of the ordinary.

The question I have is, how much of a role did tax planning actually play in doing this deal, given the extremely low-cost basis on your P&G shares, some of which you’ve been selling the last several years?

And would you have done this deal without tax considerations? And, if so, at what price?

WARREN BUFFETT: Well, both Procter & Gamble and Berkshire Hathaway had tax advantages in doing the deal this way, so they probably wouldn’t have sold it at the price at which the deal took place, and we wouldn’t have bought it at the price, without the tax benefits that each enjoyed.

And this is something — we had to have held our stock for over five years in Procter & Gamble.

It’s something that’s been in the code a long time that we’ve had nothing to do with it being in the code, but it’s part of the code.

And it’s somewhat similar to the real estate exchange arrangement, where you can exchange real estate and defer any tax.

And we don’t get a new tax basis on the Duracell; we keep the old lower tax base, just like on — what do they call it? Is it section 1231 or —

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: — real estate exchanges. So it’s analogous to that, and the answer is that there wouldn’t have been a transaction from Procter & Gamble’s standpoint and there wouldn’t have been a transaction, probably, from Berkshire’s standpoint, if it hadn’t been for the fact that we could do an exchange arrangement.

As to the declining business part, the battery business will be a declining business, but it will be around for a very, very, very long time on a worldwide basis.

And Duracell has a very strong position. It’s a very good business. And, like you say, I was familiar with it when I was on the Gillette board.

But the — you know, it will have unit declines over a period of time, but I think we’ll do fine with the Duracell investment. I’m looking forward to getting the deal complete, which probably won’t take place until the fourth quarter because we have to get it detached from a lot of other things like the IT and distribution centers and everything else that it’s involved in with P&G.

But P&G has been great to work with. They’re making the transition — you know, they couldn’t be better to work with during that period, and I’ll be very happy when we own it.

16. Why I’m giving away most of my wealth

WARREN BUFFETT: Station 4.

AUDIENCE MEMBER: Hello, Warren and Charlie. I am Marvin Blum, an estate planning lawyer from Fort Worth, Texas, home to four of your companies.

And by the way, we’re excited about the new Nebraska Furniture Mart and the Berkshire Hathaway Automotive Group in the Dallas/Fort Worth area.

Next to Omaha, we hope you think of Fort Worth as your second home.

WARREN BUFFETT: It’s been good to us. And actually, we have five companies down there. MiTek just bought one.

AUDIENCE MEMBER: All right. Even better.

At the annual meeting a couple years ago, I asked about your estate plan and your idea of leaving kids enough so they can do anything, but not so much that they can do nothing.

Today, I’d like to ask you about your decision to sign the Giving Pledge, promising to give away at least one-half of your assets to charity.

Can you talk about your views on philanthropy, and how to balance leaving an inheritance to your family versus assets to charity?

WARREN BUFFETT: Well, it depends very much on the individual situation. And actually, I promised to give over 99 percent, in my case. But that still leave plenty left over. (Applause)

As you know, the estate tax exemption has been moved up substantially here in the last couple years, so you — I might have a very different feeling if I’d had a child that worked actively, helped me build the business, and all that sort of thing, and it was a small business, and I wanted to give it to them. But that can be really done without any estate tax these days, particularly if a little planning is used ahead of time.

It’s a very individual thing. I — as Charlie — you know, when you get to the — figuring out what you do with your money, the options get very — fairly — limited. And as Charlie said the other day, you know, he said where he’s going it won’t do him much good anyway. (Laughter)

There’s no Forbes 400, you know, in the graveyard.

So the question is, where does it do the most good? And I think it does limited amounts to do some real good for my children, so I’ll be sure that they have that, or they already have it, to a degree.

And, on the other hand, when I look at a bunch of stock certificates in a safe deposit box that were put there 50 years ago or so, they have absolutely no utility to me, zero. They can’t do anything for me in life.

I mean, they can’t let me consume 7,000 calories a day instead of 3,000. They can’t — there’s nothing they can do.

I’ve got everything in the world I want, and I’ve had it for decades. If I wanted something additionally, I’d go buy it.

So, here these things are that have no utility to me and they have enormous utility to some people in other parts of the world. I mean, they can save lives. They can provide vaccines. They can provide education. There are all kinds of utility.

So why in the world should they sit there for me or for, you know, some fourth generation down of great-grandchildren or something, when they can do a lot of good now?

So that’s my own philosophy on it, but I think everybody has to develop their own feelings about it and should follow where they go.

I do think — I do think they might ask themselves, what — you know, where will it do the most good?

And it can be pretty dramatic between what it can do for millions of people that don’t really have remotely the same shot at having a decent life that I’ve had, or what it, you know, what it can do for me.

I mean, if it — I could have 10 houses, but, you know, I could buy a hotel to live in, you know. But would I be happier? It would be crazy.

Charlie and I both like fairly simple lives. But the one thing we do know is we know what we like and what we don’t like, and we don’t judge it by what other people like.

So I don’t have too much advice for anybody, but I would say start thinking about it.

When I call people on the Giving Pledge, you know, some of them — I’ll get some 70-year-old and he says, “You know, I don’t want to think about it yet.” And I always tell him. “Are you going to make a better decision when you’re 95 with some blond on your lap?” (Laughter)

That actually was tried a few years ago, as you may know. (Laughter)

Charlie?

CHARLIE MUNGER: No, but it does occur to me that that fellow that was complaining about the tax system should remember that when — they recently changed the estate tax rules, so you can leave 5 million to your kids, and so forth. I think that’s a very constructive change in the law.

So I don’t think we should assume that our politicians are always going to be totally crazy. That was a very desirable change, I think.

17. Distribute long-term stock holdings to shareholders?

WARREN BUFFETT: OK. Carol.

CAROL LOOMIS: The questioner’s name is Andre Bartel (PH), and he’s a Berkshire shareholder.

“Would it make sense” — and I’m going to add my own edit here to say, and would it be legally permissible — “for Berkshire to distribute, at some time in the future, any or some of the long-term equity investments, for example, Coca-Cola or American Express, to the shareholders in a tax-sufficient way, as Yahoo is planning to do with the Alibaba stake, for example?

“The idea would be to return capital to shareholders using assets that Berkshire is not actively managing, that is, has not bought or sold for some time, and has very low incentive to sell because of income tax implications, while not taking away resources—cash—that could be reinvested by the Berkshire management better than by its shareholders.”

WARREN BUFFETT: Yeah, I don’t think Yahoo solved it, actually. Charlie, you follow that, too.

CHARLIE MUNGER: I don’t think that we can do that with American Express and so forth. It’s a bad example. We’ve got no way of doing that.

WARREN BUFFETT: No. There used to be a way to do that many years ago, and it was done. I don’t mean by us, but I saw other examples of it.

But, under the code, there’s no way to use appreciated securities to redeem your own shares, to — you can do it for something like acquiring, where you’re exchanging it for like asset type thing on the Duracell arrangement, but there’s no way to distribute it to shareholders without paying the full capital gains tax. And —

CHARLIE MUNGER: Yeah, spinoffs of whole businesses to shareholders, if you held them a long time, but that’s about the only thing you can do.

WARREN BUFFETT: Yeah, but even there, I mean, what Yahoo has done has not got rid of the tax.

CHARLIE MUNGER: I don’t know anything about Yahoo.

WARREN BUFFETT: Yeah. No. The — or what they’re planning to do.

It may give them some other option if Alibaba wants to eventually redeem it themselves.

I mean, there could be something where they could work out a deal with Alibaba. I do not see how that they’ve gotten rid of the tax, unless they do a subsequent transaction of some sort with Alibaba, but maybe they have different tax advice than I’ve seen.

I mean, I know all kinds of cases where people — where corporations — have unrealized — large unrealized — gains in marketable securities, and I have not seen, in recent years — although I did see it early in my career when the law was different, but I’ve not seen in recent years any way that people have gotten that money into the hands of the shareholders without paying a tax at the corporate level.

Charlie?

CHARLIE MUNGER: No. That’s — that’s what we say.

18. Is reduced household formation by young people permanent?

WARREN BUFFETT: Yeah. Jonathan?

JONATHAN BRANDT: Berkshire owns many companies that benefit from single-family home construction: ACME, Johns Manville, Benjamin Moore, MiTek, and Shaw among them, not to mention the railroad.

After the financial crisis, you said that young adults who are postponing household formation by living with parents or in-laws would eventually get sick of that arrangement and we would start to see normal rates of household formation once the job market improved or even if it didn’t.

Jobs are now more plentiful. Yet, household formation still continues to be below rates thought to be normal, whether because of high student debt, a shift in attitudes about homeownership, or stricter mortgage terms for first-time buyers.

Could something more secular be going on where household formation rates, relative to the population, could continue to be lower than historical rates?

Could the U.S. become more like Europe where many adult children live with their parents or in-laws for quite some time, or do you think, still, that the subdued rate of household formation is a mostly cyclical phenomenon, and that the rate will eventually revert to the historical mean, boosting single-family home starts and earnings for this group of companies?

WARREN BUFFETT: Yeah. I don’t know the answer, obviously, but I think the latter is more likely.

I may be wrong. When’s the last set of figures you’ve looked at in that connection? I’ve heard that it’s turned up a fair amount in the last six months, but — have you seen anything on that, Jonny?

JONATHAN BRANDT: Nothing really recently, no.

WARREN BUFFETT: Yeah. I should know the figures, but I don’t, for the last six months or nine months. But my impression was they had turned up somewhat.

I did my best on selling that ring in the movie to that guy, and they’re going to form a household here in another month or two to which I’ve been invited.

But the truth is I don’t know, the — you know, what’s going to happen on household formation.

I would expect — but I expected it earlier than this — I would expect it to turn up. It always turns down in a recession, and you could argue that we’re not all the way back from the recession yet.

Your guess would be as good as mine.

Charlie?

CHARLIE MUNGER: I feel exactly the same way, but I think I speak for a lot of members of the audience when I say I have some grandchildren that I wish would marry somebody suitable promptly. (Laughter)

WARREN BUFFETT: What’s the reason for your interest, Charlie?

CHARLIE MUNGER: I don’t think it’s healthy for these people to hang around looking for pie in the sky or whatever in hell they’re doing. (Laughter)

WARREN BUFFETT: Are they in attendance today?

CHARLIE MUNGER: I don’t know. Some of them may be. I don’t want to name names. (Laughter)

WARREN BUFFETT: No. I think you’ve already been pointed enough.

19. Why individual over corporate philanthropy?

WARREN BUFFETT: OK. Station 5.

AUDIENCE MEMBER: Gentlemen, thank you for a great day.

My name is Mark Roy (PH), and I am the executive director of the Immanuel Vision Foundation here in Omaha.

Earlier today, I sat up in the corner and spoke to my son who is working and living in Indonesia, among the poorest of the poor, funded, incidentally, by the Gates Foundation.

The contrast between where he is sitting today and where I am sitting could not be more dramatic.

You have been a model of philanthropic caring for the needs of others. You have demonstrated that it’s not how many shares we have but how we share with others.

So following up on the last speaker, I want to ask, how can corporations be encouraged to make an even greater impact in the lives of those who are not shareholders?

WARREN BUFFETT: Yeah. I agree, you know, entirely with your motivation about increasing philanthropy.

I am much more of a believer, however, in individual philanthropy than corporate philanthropy.

I really feel that I’ve got everything I need, but I do also feel that I’m working for the shareholders and they should determine their own philanthropic activities, that it’s their money. (Applause)

Now, we participate in — I mean, I encourage all our companies to continue the philanthropic behavior that they had before we’ve acquired them, and, you know, we want them to participate in their communities and to help the entities that help their employees and their customers.

But I don’t really think it’s my business, ever, to write a check to my alma mater or whatever it may be, and do it on company funds. I just — I don’t feel it’s my money.

I really look at this as a partnership. We’ve always looked at it as a partnership. And we had a system some years back where all the shareholders could designate contributions, and I felt that was quite a good system. And then we had to give it up for reasons that — I hated to give it up, but we had to do it.

The interesting thing about philanthropy — I mean, I have never given a penny to any organization that has cost me anything in my life. I mean, I’ve never given up a movie, I’ve never given up a trip, I’ve never given up a vacation, I’ve never given up a present to my kids.

You know, people give money this Sunday, you know, that really, actually, changes their lifestyle in a small way, and that hasn’t happened with me. Everything I’ve given has been ungodly surplus, you know, and I’m glad I can do it.

But it’s people like your son, you know, that I really admire.

Charlie? (Applause)

CHARLIE MUNGER: Well, my taste for giving away somebody else’s money is also quite restrained. (Laughter)

WARREN BUFFETT: I was on the board one time of an organization that needed to raise a fair amount of money, and it wasn’t church affiliated or anything like that.

And so they asked me to call on four or five corporate chieftains and they said, “Be sure not to ask them to give anything personally, just ask them to give corporate money.”

And just — I said, “I’m not going to do it,” basically. If they’re not — if they won’t put up their own money, why should they write checks on behalf of all their shareholders?

So I’ve got real reservations about corporate philanthropy for the personal reasons, to some extent, of the CEO, or the directors.

20. Euro can survive eurozone changes

WARREN BUFFETT: OK. Becky?

BECKY QUICK: This question comes from Felipe, and he asks, “Do Charlie and you think that the euro currency has had a positive or negative effect overall on the eurozone economy, and do you think it would be a good decision for France to quit the euro currency and go back to the franc?

WARREN BUFFETT: Well, that’s too easy for me to answer, so I’ll give it to Charlie. (Laughter)

CHARLIE MUNGER: I haven’t got the faintest idea. (Laughter)

I think the euro had a noble motivation and had promise of doing a lot of good and it undoubtedly has done a lot of good.

But it’s a flawed system, in some ways, to put countries that are so different together, and it’s straining at the moment. The big strains aren’t in France.

WARREN BUFFETT: No.

CHARLIE MUNGER: The big strains are in Greece and Portugal and so on.

And I do think they created something that was probably unwise. They got countries in there that shouldn’t have been there.

You can’t form a business partnership with your frivolous, drunken brother-in-law, you know. (Laughter)

I mean, you have to make your partnerships with somebody else. And I think they lowered their standards a little and it’s caused strains.

WARREN BUFFETT: I think — (laughs) — everything here is off the record, understand. (Laughter)

They — I think it’s a good idea that needs a lot of work, still.

And I think it has been a good thing, net, to this point.

But it — you know, it is flawed and the flaws are appearing, but that doesn’t mean it can’t be corrected.

I mean, we wrote a Constitution in 1789 that, you know, still took a few amendments, you know, and some of them didn’t happen for a long time in respect to some very important factors.

So, I don’t think the fact that it wasn’t perfectly designed initially should condemn it to being abandoned, but I think that if there are flaws, you have to face up to them. And I think that maybe the events that are happening currently will cause that.

We could have had — presumably — we could have had a common currency with Canada and probably have made it work, I mean, if we decided —

CHARLIE MUNGER: Sure, we could have made it work.

WARREN BUFFETT: Yeah. We could have had a North American currency with Canada and, you know, we’d have worked it out, and it might have even been useful.

But we couldn’t have had a hemisphere-wide currency with Venezuela in it or —

CHARLIE MUNGER: With Argentina.

WARREN BUFFETT: Yeah. (Laughter)

And so — he loves to name names. (Laughter)

Praise by name; criticize by category. (Laughter)

And I actually think it’s probably desirable to have a euro currency properly designed and enforced so that — you know, that the rules really apply. There were rules, originally, on the euro, which got broken very early on, by not the Greeks, but by the Germans and the French, as I remember. So —

CHARLIE MUNGER: The investment bankers let them — they helped them prepare phony financial statements.

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: They — actually, it was investment banker-aided fraud.

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: Not exactly novel. (Laughter)

WARREN BUFFETT: So, returning to our main point, I think the euro can and probably should survive and I think it’s going to take some real changes and maybe some examples to enable it to do so.

I hope it really — I mean, it’s going to go in the direction of more cohesion or less, and very soon, probably. And I think if it can figure out a way to do it with more cohesion, overall it will be a good thing for Europe.

But it certainly, you know, in its present form it’s not going to work.

Charlie? I don’t know why I’m giving you another shot, but — (Laughter)

CHARLIE MUNGER: I think I’ve offended enough people.

WARREN BUFFETT: Right. (Laughter)

There’s two or three in the balcony. (Laughter)

21. Munger: GEICO synergies are “dumb idea”

WARREN BUFFETT: OK. Gary.

GARY RANSOM: With the Van Tuyl acquisition — or now Berkshire Hathaway Automotive — there may be some natural synergies with GEICO, if it’s nothing more than just putting a gecko on the salesman’s desk.

Would you expect to do anything in that regard to encourage getting more customers through that relationship?

WARREN BUFFETT: Yeah, I don’t think so.

You always have these things that the investment banker will tell you will produce synergy and all that. Most times that doesn’t work.

And historically, selling auto insurance through dealerships hasn’t been particularly effective. And if we were to do that, we would probably have to compensate people who did the insurance work — or made the insurance sales — out of Van Tuyl. That would add to costs.

I mean, GEICO is a low-cost model, and it’s a wonderful low-cost model. And [CEO] Tony Nicely has done an incredible job of keeping those costs down and our — and you can see it in our expense ratios.

We spend a lot of money on advertising. But its success depends on delivering first-class insurance at a better price than other people can get, and the more people we put in distribution system or anything —

So, I would doubt very much that we do anything along that line. I think that those two companies will do better if run as two independent businesses than if we try to push through something.

We — Charlie and I have seen a lot of things on paper that involve that sort of a proposition and very, very few succeed.

Charlie?

CHARLIE MUNGER: Well, I agree. It’s a very dumb idea, and we’re not going to do it. (Laughter)

22. Buffett doesn’t follow silver market anymore

WARREN BUFFETT: OK. Station 6.

AUDIENCE MEMBER: Mr. Buffett, in this environment of quantitative easing, low interest rates, and an overvalued stock market, what value in silver at these prices do you see, and do you still follow the silver market?

WARREN BUFFETT: I really don’t follow it much anymore. But at one time, we owned over 100 million ounces of silver, and I knew a fair amount about the supply and demand for it, and the prospective supply and demand.

But I really don’t — I haven’t paid much attention to it for a long, long time.

CHARLIE MUNGER: That’s a very good thing too. (Laughter)

We didn’t do that well.

WARREN BUFFETT: Yeah. We made a little money.

CHARLIE MUNGER: Yes.

WARREN BUFFETT: The — you know, photography — the interesting thing about silver is that there are some pure silver mines, but overwhelmingly, silver is produced as a by-product, you know, in terms of copper mining and that.

So it — it doesn’t respond as much to its own supply and demand characteristics — that’s still a factor — as it does in terms of the supply and demand characteristics of the things of which it’s a by-product, like copper.

So, it’s a very small market, too. But we came out better than the Hunt brothers, but other than that, we don’t think about silver anymore.

23. Could activists take control after Buffett?

WARREN BUFFETT: OK. Andrew.

ANDREW ROSS SORKIN: Charlie, question about activism.

Activism continues to grow and, as Charlie stated at the 2014 annual meeting, he sees it getting worse instead of getting better.

So the question is, we hope that Charlie and Warren will both be around forever, but, unfortunately, there will be a time when they’re no longer here to manage the store.

WARREN BUFFETT: I reject such defeatism. (Laughter)

ANDREW ROSS SORKIN: If Warren is giving away his shares to charity over a ten-year period through his estate plan, and activists become increasingly more powerful, how will Berkshire defend itself from activists in the near and far future?

And would you consider it a failure if Berkshire were broken up in the future and shareholders received a significant premium? And for you to consider it success, what would the premium need to be?

WARREN BUFFETT: Well, if it’s run right, there won’t be a premium in breaking it up.

It may look like it. I mean, people will say there’s subsidiary A that would sell at 20 times earnings and the whole place would sell, like, at 15. But the whole place won’t sell at 15 if you spin off the one at 20.

I mean, it — I laid out in the annual report — there are a lot of benefits to Berkshire, in terms of having the companies in the same corporate tax return.

So I think it’s unlikely that, on any long-term basis or intermediate-term basis, that the value of the parts will be greater than the value of the whole.

The best defense against activism is performance. But lately, there’s been so much money pouring into activist funds, because it’s been easy to raise money for that — I mean, it’s been a successful way of handling money for the last few years, and institutional money then starts flowing into it, and the consultants recommend it, and all of that sort of thing.

And so, I would say that much of what I see as activism now, people are really reaching, in terms of what they’re — of the kind of companies that they’re talking about and the claims of what they can do and that sort of thing.

I think the biggest — you know, if you’re talking about my shares getting dispensed over 10 years after my estate is settled, and the voting power they have, and I think, by the time that gets to be a reality, I think the market value of Berkshire is likely to be so great that even if all the activists gathered together, they wouldn’t be able to do very much about it.

Berkshire is likely to really be a very, very large organization 10 or 20 years from now.

CHARLIE MUNGER: Besides, the Buffett super-voting power is going to last a long time.

WARREN BUFFETT: Last a long time, yeah.

I always — I’ve got these friends that call me — other companies and they’ve got an activist, and they’re worried about it. I just tell them to send them over to Berkshire. We’ll welcome them.

We’d love to have them buy our stock because they’re not going to get anyplace. And that’s going to be the situation for a long, long time.

We should be a place where people can dump their activists. (Laughter)

Charlie?

CHARLIE MUNGER: Well, the thing that I find interesting is, in the old days when many — most — stocks sold for way less than they were worth, in terms of intrinsic value, it was very rare to find an American corporation buying the stock in.

WARREN BUFFETT: Oh, yeah.

CHARLIE MUNGER: Now, in many cases, the activists are urging corporations to buy the stock in heavily, even though it’s selling for more than it’s worth.

This is not a constructive activity, and it’s not a desirable change, and it’s not a very responsible activity for the activists.

WARREN BUFFETT: There’s been more stupid stuff written on such a simple activity as stock repurchase. Both stupid stuff written and stupid stuff done.

I mean, it’s a very simple decision, in my view, as to whether you repurchase your shares. You know, you repurchase them if you’re taking care of the needs of the business and your stock is selling for less than it’s intrinsically worth. That — I don’t see how anything could be more simple.

If you had a partnership and the partner wanted to sell out to you at 120 percent of what the business is worth, you’d say forget it.

And if he’d want to sell out to you for 80 percent of what it’s worth, you’d take it. It’s not complicated.

But there’s so many other motivations that entered into people’s minds about deciding whether to repurchase shares or not. It’s gotten to be a very contorted and kind of silly discussion in many cases.

And Charlie is right. The — if you look at the history of share repurchases, you know, it falls off like crazy when stocks are cheap and it tends to goes up dramatically when stocks get fully priced.

But it’s not what we’ll do at Berkshire. At Berkshire, you know, we will presently — you know, we would love to buy it by the bushel basket at 120 percent of book, because we know it’s worth a lot more than that.

We don’t know how much more, but we know it’s worth a lot more.

And we don’t get a chance to do that very often. But if we do get a chance, we’ll do it, big time.

But we won’t buy it in at 200 percent of book, because it isn’t worth it.

You know, it’s not a complicated question, but people that — I’ve been around a lot of managements that announce they’re going to buy X worth and then they buy it regardless of price.

And a lot of times the price makes sense. But if it doesn’t, they don’t seem to stop, and nobody tries to — seems to want to stop them.

Charlie?

CHARLIE MUNGER: Well, I certainly agree with you.

WARREN BUFFETT: OK.

CHARLIE MUNGER: I don’t think it’s a great age, this age of activism.

WARREN BUFFETT: Want to expand on that? (Laughter)

CHARLIE MUNGER: Well, I — it’s hard for me to think of any activists I want to marry into the family. (Applause)

WARREN BUFFETT: I better stop before he names names. (Laughter)

24. American Express & credit card history

WARREN BUFFETT: OK. Gregg.

GREGG WARREN: Warren, American Express, which is Berkshire’s third largest stock holding, has relied on powerful network effects and its valuable brand to generate economic profits over the years.

It has created a virtual cycle with its collection of cardholders being desirable to merchants, who have been willing to pay higher transaction fees with those fees ending up funding rewards programs and services for American Express’s cardholders.

More recently, though, competitors have turned this model against the firm, targeting its cardholder base with ever-increasing levels of rewards and services, while charging merchants lower fees than American Express does.

The company also saw its image of exclusivity take a bit of a hit earlier this year when Costco ended a 16-year relationship with the firm, a move that affects one in 10 American Express cards in circulation and which will impact results this year and next.

With restrictions on interchange fees and the growth and acceptance of mobile payment technologies likely to impact future revenue streams, and moves by the firm to go down-market in pursuit of transaction volume potentially diminishing the brand, how does American Express defend its moat?

WARREN BUFFETT: Well, American Express has been pretty good at that, and particularly when Ken Chenault’s been running it.

The — it will be — you know, it — all aspects of payments will be subject to lots of innovation and various modes of attack.

I think that American Express is still a very special company. And like I say, Ken has done a sensational job in anticipating a lot of these trends and guiding it into different markets. As you mentioned, it’s going down in the — into debit cards, effectively, and things of that sort.

I think there’s a lot of loyalty with American Express cardholders. I do think a proprietary card is worth more than a co-branded card, but I think that — I probably shouldn’t get into the specifics of Costco. I’ve got a Costco director sitting next to me.

But we’re very happy with American Express, but we’d be even happier if the stock goes down and the 4 or 5 billion they spend a year buying in stock buys even more shares.

Charlie?

CHARLIE MUNGER: Well, I like it a little better when they had a little less competition, but that’s life. (Laughter)

WARREN BUFFETT: Incidentally, you’ll find in this 50-year history of Berkshire, you know, American Express did wonders for us back in the 1960s. And there’s a little history in there on the fact that it was an assessable stock until 1965, which nobody paid any attention to until 1963 on.

But the company has an incredible history of adapting. I mean, they started out as an express company, you know, move trunks around, and valuables around.

And then the railroad came around and started doing the same thing, so they went to traveler’s checks as a way to — very handy way — of moving money around the world.

And then the credit card came along, Diner’s Club came along, in the 1950s, and that threatened the traveler’s check and then they moved into the Travel and Entertainment card, as it was called then.

And the interesting thing is that Diner’s Club, who was first — Ralph Schneider and Al Bloomingdale priced their card at, as I remember, $3, and they looked like they were sewing up the market.

And American Express came along and did something very interesting. They priced their card, I think, at $5, and actually established a better image.

I mean, people that pulled out their American Express card at a dinner table, they looked like J.P. Morgan.

And the guy that pulled out a Diner’s Club card, they’d have a whole bunch of flashy things on it, he looked like a guy who was kiting his expense account or something of the sort. So you just automatically felt like a more important person with your American Express card.

They have been very nimble, and very smart, and particularly in recent years, under Ken, in terms of meeting all kinds of challenges. And I think they’ll have plenty of challenges in the future, and I’m delighted we own 15 percent of the company.

25. Why children need good financial habits

WARREN BUFFETT: OK. Station 7.

AUDIENCE MEMBER: Hi. My name is Chang, originally from Seoul, South Korea, and working in Los Angeles, California.

I’ve been traveling more than 27 countries, and last year I taught financial literacy lesson in one of the local elementary school in (inaudible) city.

Today here, we’re talking about investments in capital markets, but young students in developing countries, they don’t know how to save money, or they don’t know the concept of interest.

So, in order to overcome the educational challenges, I would like to provide volunteer opportunities to talented Americans to teach in South American schools to overcome the — while they are traveling.

So, what do you think about my plan or do you have any advice? Thank you.

WARREN BUFFETT: Charlie, do you have any advice?

CHARLIE MUNGER: Well, I failed in this activity with some of my relatives, so I don’t think I can improve South America. (Laughter)

No, I think if you don’t — if you don’t know how to save, I can’t help you. (Laughter)

WARREN BUFFETT: No, but the important thing is to get good habits early on.

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: You really — you know someone said the chains of habit are too light to be felt until they’re too heavy to be broken. And habits really make an enormous difference in your life.

So Andy and Amy Heyward have developed the “Secret Millionaires Club,” which I’ve helped out with a little, and our goal is to, in an entertaining way, present good habits to young kids through a kind of a comedy series.

And I think that’s — it’s actually having a pretty good effect. And here in a few days, we’re going to have a — here in Omaha — we’re going to have eight finalists in young kids from around the country that have developed businesses of their own, and I’m always enormously impressed with these kids.

But the importance of developing good habits yourself, or encouraging good habits in your children very early on, in respect to money, can change their lives.

And, you know, I was 9 or $10,000 ahead when I got out of college, and I got married young and had kids very fast.

And if I hadn’t had that start, my life would have been vastly different. So it — you can’t start young enough on working on good money habits.

And I do think the “Secret Millionaires Club” is very good, but there could be lots of other good ways of teaching those lessons.

26. No plans to change debt level

WARREN BUFFETT: OK. We now have moved solely to the audience, so we’ll go to station 8.

AUDIENCE MEMBER: Hello, Warren, Charlie. My name is Stefano Grasso (PH), and I come from Genova, Italy. It’s great to be here today for the 50th anniversary.

Last year, I asked you what was the right level for leverage at Berkshire Hathaway, and why not to increase it. I argued that increasing liability more at the cheap level would benefit Berkshire, thanks to the investment capabilities of the present management.

This year, I would like to get your view on the possibility of working on the other side of the balance sheet and using part of the cash sitting on bank chair — bank accounts — to reduce some of the liabilities currently on its balance sheet.

For example, the index puts at Berkshire sold between 2004 and 2008, generated a premium of almost 5 billion.

Few years down the line, Berkshire benefited from the float. The indexes are higher and the time to maturity of the put got shorter.

The question is, if the unwinding of the puts were acceptable by the counterparts which bought them, would you consider unwinding them at a reasonable price? Thank you.

WARREN BUFFETT: Are you speaking — you’re speaking specifically of the equity put options we have?

AUDIENCE MEMBER: I’m speaking about them, but as just an example. I’m talking also of maybe reducing debts or doing other —

WARREN BUFFETT: Yeah. Well, what we hope, of course, is that what we call the excess cash, which is cash beyond 20 billion that we can put to work buying a business. But you can’t do, you know, one a week or one a month. So it’s opportunistic.

And I don’t know whether the phone call that’s going to result in the next deal will come in next week or it may come in a year from now.

We will get calls and we will put money to work. You know, we just — we can’t do it at an even flow. And we have, you know, virtually no debt.

If someone had told the two of us 50 years ago that we’d be able to borrow money in euros with a long duration of 1 percent or something like that, we would have felt we would have ended up with a way different balance sheet than we have today.

But, I mean, money is so cheap that it causes people to do almost anything on the asset side, and we try to avoid doing that because we don’t, you know, we don’t want to drop our standards too fast just because the liability side is costing us so little.

But I don’t think — obviously, if we can unwind a derivative trade on a basis where we thought we were mathematically ahead by a significant amount, we would do it.

But I think that’s very unlikely with the contracts we have now, so we’ll probably — I think it’s very likely they just run out over time.

We carry a liability of well over — I think it’s getting somewhere between 3 1/2 and 4 billion — for something that has a settlement value today of 400 million.

So it’s very hard for us to — it’s very hard for us on the other side of the contract to arrive at a price that we both would be happy with.

We’re not going to deleverage Berkshire. There isn’t that much leverage to start with.

I mean, the float really is, essentially, very close to permanent. I mean, it can decline a couple percent in a year, but it can also increase a few percent.

So, I see no drain on funds of any consequence from the float for as far as the eye can see, and we have very little debt out. So I would not want to pay down the debt we have now.

Logically, we probably should take on more debt at these prices, but that’s just not something that appeals to us.

Maybe if we find a really big deal, we might take on a little more. I would like to at least have that as something I was thinking about.

Charlie?

CHARLIE MUNGER: We’d love to have something come along where we actually felt a little capital constrained. We haven’t felt capital constrained for a long time.

It’s a problem we’d love to have, something so attractive that we —

WARREN BUFFETT: We’d stretch a little.

CHARLIE MUNGER: We’d stretch a little. That would be glorious.

And it could happen, by the way.

WARREN BUFFETT: And it could happen.

27. No economies of scale for auto dealers

WARREN BUFFETT: OK. Station 9.

AUDIENCE MEMBER: Hi, Mr. Buffett and Mr. Munger. My name is George. I’m translating for my father, (inaudible), from Shanghai, China.

Last year it was my father standing here asking his question, and this year it’s me. I feel so lucky.

I know at the end of last year, you purchased a car sales dealer. This year, you said in your public letter that you are going to continue to buy. The ultimate purpose of investment is to seek the return.

So my question is, whether the rate of return can be necessarily higher with the scale of the dealers?

If so, why we cannot see that happen in China? How come the differences with the dealership business of the same nature in the United States and China? Thank you.

WARREN BUFFETT: Yeah. I don’t know the dealership situation in China.

I would say — I think I mentioned this a little earlier — that I don’t think we’re going to get significant benefits of scale as we buy more units in the auto field. I just don’t see where it would come from.

But we don’t need it. What we really need is managers in those individual dealerships that have skin in the game of their own, and that run them, you know, as first-class businesses, independently.

And that’s what we’ll be looking for. We’ll not be looking for scale. I don’t know the situation in China. Maybe Charlie knows more about that. I think he does.

CHARLIE MUNGER: No. But I don’t think we’d be very good at running dealerships in China. And I think the people who run Van Tuyl are very good at running the ones here, so —

WARREN BUFFETT: Yeah with 17,000 here and we’ve got 81 of them, there’s a little room to expand.

The problem is going to be price. Our purchase probably caused people to move up their multiples by one or two — people that have them — and we paid a full, but fair, price for Van Tuyl and we’ll be using that price, more or less, as a yardstick.

And we really thought we bought the best there, so, if anything, we would be hoping to buy others, maybe for a bit less.

So we will not — we may buy a lot of them, we may buy very few, just depending on price developments.

The — we’re having a big car year and profits are good in the dealership field. But when profits are good, we want to pay a lower multiple.

I mean, because, if we’re going to be in the car business forever, we’re going to have some good years and we’re going to have some bad years. And we would rather buy at a 10 or 12 times multiple of a bad year than buy at an eight times multiple of a good year.

And that’s not necessarily the way that sellers think, although they probably understand it, but they don’t want to think that way. So we’ll see what happens.

28. Buffett values internet more than private jet

WARREN BUFFETT: OK. Station 10.

AUDIENCE MEMBER: Hi. Mr. Buffett and Munger, very excited to be here.

My name is (inaudible), also from Shanghai, China. Because now (inaudible) a company providing wealth management to the high-net wealth individuals in China. The company name is North, from North Ark (PH), listed at (inaudible).

You two are my idols. What’s your secrets of keeping so young, so energetic, and so quick?

Please don’t say because of Coca-Cola. (Laughter)

And as someone says that old papa could not understand the internet, but I don’t believe that.

What’s your opinion? Will you pay more attention to internet? Could I invite both two gentlemen to answer my question? Thank you very much.

WARREN BUFFETT: Charlie, I didn’t get all that, so you —

CHARLIE MUNGER: Well, he asked are we going to be using the internet.

Warren is a big internet user compared to me. And — but —

WARREN BUFFETT: I love it. (Laughs)

CHARLIE MUNGER: He plays bridge on it.

WARREN BUFFETT: I use a lot of — I use search. It’s been a huge change in my life, and it costs me a hundred dollars a year, or something like that.

If I had to give up the plane or I had to give up the internet: the plane costs me a million-and-a-half a year, the internet costs me a hundred dollars a year. You know, I wouldn’t want to give up either one of them, but I’d give up the plane.

CHARLIE MUNGER: Interesting. (Laughter)

WARREN BUFFETT: Charlie’s given up both.

CHARLIE MUNGER: Are we going to be doing more — I think everybody’s going to be doing more things on the internet. It is growing in importance. And so like it or not, we’re dragged into modern reality.

WARREN BUFFETT: Doesn’t sound like he likes it, does it? (Laughs)

CHARLIE MUNGER: No, I don’t like it.

I don’t like multitasking. I see these people doing three things at once, and I think, God, what a terrible way that is to think.

I am so stupid, though, I have to think hard about a thing for a long time. And the idea of multitasking my way to glory has never occurred to me. (Laughter)

But at any rate, the internet is here and it’s going to be more and more important and everybody’s going to think more about it and do more about it, like it or not. And, of course, the younger people are way more prone to use it than we are.

But Berkshire — you have what, how many Bloombergs now?

WARREN BUFFETT: In the office?

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: Do we have two or three. Mark?

I don’t know. They don’t tell me about them. They sort of hide them when I come in the room.

CHARLIE MUNGER: We’re into the modern world.

WARREN BUFFETT: We have — [CFO] Marc Hamburg tells me we have three — but we’ll reevaluate that situation when I get back to the office. (Laughter)

What’s that?

Oh, we’re not paying for one. I like that. (Laughter)

Let’s see if we can not pay for two. (Laughter)

No, the internet — and it’s changed many of our businesses. I mean, it’s changed GEICO’s business very, very dramatically. And it’s affecting — it affects them all, to one degree or another.

It’s amazing to me — I mean, people get pessimistic about America. Just think in the last 20 or 25 years—well, just 20 years on the internet—how dramatically it’s changed your life.

You know, the game is not over yet. There’s all kinds of things that are going to happen to make life better.

And Charlie may not think the internet makes life better, but when I compare trying to round up three other guys on a snowy day to come over to my house to play bridge, versus snapping the thing on and having my partner in San Francisco there and two other friends, and so on, in 10 or 20 seconds, I think the world has improved.

CHARLIE MUNGER: Well, if I had your partner, I’d think it had improved, too. (Laughter)

29. Raise earned income tax credit instead of minimum wage

WARREN BUFFETT: OK. Station 11.

AUDIENCE MEMBER: Hi. I’m Whitney Tillson, a shareholder from New York.

Mr. Buffett, I know many shareholders have felt irritation, to put it mildly, when you’ve weighed in on social issues such as tax policy, or endorsed and raised money for a particular candidate, but I, for one, applaud it.

I think everyone, but especially people who’ve achieved wealth and prominence and thus have real ability to effect change, have a duty to try and make the world a better place, not just through charitable donations, but also through political engagement, and I’d say that even to people whose political views are contrary to my own.

My question relates to one of the big issues today: rising income inequality, and related to that, the campaign to raise the minimum wage, which has had some recent successes with some of the largest businesses in the country like Walmart and McDonald’s.

How concerned are you about income inequality? Do you think raising the minimum wage is a good idea? And do you think these efforts might meaningfully affect the profitability of corporate America?

WARREN BUFFETT: Yeah. I think income inequality is — I think it’s extraordinary, in the United States, to see how far we’ve gone.

Well, just go back to my own case. Since I was born in 1930, the average GDP per capita in the United States has gone up six for one.

Now, my parents thought they were living in a reasonably decent economy in 1930, and here their son has lived to where the average is six times what it was then.

And if you’d asked them at that time, and they’d known that fact, that it would go from 8 or $9,000 in today’s terms to $54,000, they would have said, “Well, everybody in America is going to be enjoying a terrific life,” and clearly they’re not.

So, I think it is a huge factor. There are a million causes for it, and I don’t pretend to know all the answers, in terms of working towards solutions.

But I do think that everybody that is willing to work should have a reasonably decent livelihood in a country like the United States, and — (applause) — how that is best achieved — I’m actually going to write something on it pretty soon.

I have nothing against raising the minimum wage, but to raise it to a level sufficient to really change things very much, I think, would cost a whole lot of jobs.

I mean, there are such things as supply and demand curves. And if you were to move it up dramatically, I think you would — it’s a form of price fixing. I think you would change the opportunities available to people very dramatically.

So I am much more of a believer in reforming and enlarging the earned income tax credit, which rewards people that work, but also takes care of those whose skills don’t fit well into a market system. So I think you put your finger on a very big problem.

I don’t think — I don’t have anything against raising the minimum wage, but I don’t think you can do it in a significant enough way without creating a lot of distortions.

Whereas, I do think the earned income tax credit makes a lot of sense and I think it can be improved. There’s a lot of fraud in it. It pays out this lump sum, so you get into these payday type loans against — I mean, there’s — a lot of improvements can be made in it.

But I think the answer lies more in that particular policy than the minimum wage. And, like I said, I think I’m going to write something on it pretty soon. And if there’s anybody I haven’t made mad yet, you know, I’ll take care of it in the next one.

Charlie?

CHARLIE MUNGER: Well, you’ve just heard a Democrat speaking and here’s a Republican who says I agree with him.

I think if you raise the minimum wage a lot, it would be massively stupid and hurt the poor, and I think it would help the poor to make the earned income credit bigger. (Applause)

30. “Ridiculous argument” that college boosts lifetime earnings

WARREN BUFFETT: Let’s go to station 1.

AUDIENCE MEMBER: Hi. I’m Michael Monahan (PH) from Long Island, New York.

Warren, Charlie, the higher education system has expanded, covering almost everyone who would like to receive a college education. This demand has translated into rising college costs.

As a high school junior, I’m looking at prestigious institutions such as UPenn, Villanova, NYU, Fordham, and Boston University.

On the other hand, my parents are experiencing sticker shock. All of these schools have a sticker price of over $60,000, with some students, as shown in a businessinsider.com article, can pay over $70,000, as the case at NYU.

How will the average American family be able to pay this in the future and, more importantly, how do you two feel about this?

WARREN BUFFETT: Charlie?

CHARLIE MUNGER: Well, the average American family does it by going to less expensive places and getting massive subsidies from the expensive places.

If we had to give our college education to only people who could write cash checks for 60 or $70,000 a year, we wouldn’t have that many college students.

WARREN BUFFETT: No.

CHARLIE MUNGER: So most people are paying less or getting subsidies. And — but I think it is a big problem, that education has just kept raising the price, raising the price, raising the price.

And they say, but college educated people do better. It’s a big bargain. But maybe they do better because they were better to start with before they ever went to college, and they never tell you that. (Applause)

WARREN BUFFETT: It’s a ridiculous argument.

CHARLIE MUNGER: And so —

WARREN BUFFETT: I think that’s one of the silliest statistics that they publish, I mean, to say that a college education is worth X because people that go to college earn this much more than the ones that don’t. You’re talking about two different universes.

And to attribute the entire difference to the one variable, that they went to college as opposed to the difference between the people who want to go to college and have the ability to get into college —

CHARLIE MUNGER: It’s completely nutty —

WARREN BUFFETT: — it’s a fraud

CHARLIE MUNGER: — and about 70 percent of the people believe in it. So it gives you a certain hesitation about relying on your fellow man. (Laughter)

So I think most people have to struggle through with the system the way it is.

There’s a big tendency to have prices rise to what can be collected. And people just rationalize that the service is worth it. And I think a lot of that has happened in education, and, of course — (applause) — a lot is taught in higher education that isn’t very useful to the people who are learning it and, of course, a lot of those people would never learn much from anything.

So it’s really wasting your time, and that’s just the way it works. So I think there’s a lot wrong.

What I noticed that was very interesting is that when the Great Recession came, every successful university in America was horribly overstaffed and they all behaved just like 3G. They all, with a shortage of money, laid off a lot of people. And the net result was they all worked better when it was all over with the people gone.

And so this right-sizing is not all bad. I don’t think there’s a college in America that wants to go back to its old habits. And — but you put your finger on — it is a real problem to look as those sticker shocks.

It’s like any other problem in life. You figure out your best option and just live with it.

We can’t change Villanova or Fordham. They’re going to do what they’re going to do. And as long as it works, they’ll keep raising the prices.

WARREN BUFFETT: And it will keep working.

CHARLIE MUNGER: Yes. And that’s pretty much the way the system works.

When it really gets awful there’s finally a rebellion. In my place in Los Angeles, the little traffic accident got so it cost too much to everybody because of so much fraud, and the chiropractors, and some of the plaintiffs’ attorneys, and so on.

And finally, the little accidents were costing so much that they worried about the guy who lived in a tough neighborhood who couldn’t afford to drive out to get a job. And the auto insurance companies thought, my God, with prices going up like this, they’ll have legislation creating state auto insurance or something.

So the net result is they put the plaintiffs’ attorneys to trial in every case, and that fixed it. And maybe something like that will happen in higher education. But without some big incentive, I think higher education will just keep raising the prices.

31. Bullish on China

WARREN BUFFETT: On that cheerful note, we’ll move to station 2.

AUDIENCE MEMBER: Thank you for taking my question.

My name is Brendan Chin (PH). I’m form Taipei, Taiwan.

My question is, China is undergoing a number of structural changes. What do you — when you take the pulse of the Chinese economy, what do you read and what advice would you give? Thank you.

WARREN BUFFETT: Charlie’s the China expert. I think China’s going to do very fine over a period of time.

CHARLIE MUNGER: Yeah. I’m a big fan for what’s happening in China.

And as a matter of fact, I’ve just ordered — prepared — a bust of Lee Kuan Yew, the recently deceased ex-prime minister of Singapore, because I think he’s contributed so much to fixing, first Singapore, and then China.

And one of the things Lee Kuan Yew did in China — in Singapore — was to stop the corruption, including cashiering some of his close friends.

And China is doing the same thing. And I consider it the smartest damn thing I’ve seen a big country do in a long, long time, and I think that to — it’s hard to set the proper example if the leading political rulers are kleptocrats.

You know, you don’t want to be run by a den of thieves. You want responsible people.

And what Lee Kuan Yew did is he paid the civil servants way better and recruited very good people. And he just created a better system and, of course, China is widely copying him. And it’s a wonderful thing they’re doing.

So I’m very high on what’s going on in China, and I think it’s — I think it’s very likely to work. If you — they’ve actually shot a few people. That really gets people’s attention. (Laughter)

WARREN BUFFETT: Now we’re starting to get some practical advice here. (Laughter)

What has happened in China, you know, over the last 40 or so years, I mean, I — it just strikes me as totally miraculous. I don’t think — I would not have believed that a country could move so far so — a country of that size, particularly — so far so fast. And it’s —

CHARLIE MUNGER: It never happened before, in the history of the world, that a company so big had come so far. When I was a little boy, 80 percent of the population of China was illiterate and mired in subsistence poverty and agriculture.

Now just think — and they’ve been through horrible wars and look at them. It’s one of the most remarkable achievements in the history of the Earth.

And a few people made an extreme contribution to it, including this Chinese politician in Singapore.

And I give the Communist Party a lot of credit for copying Lee Kuan Yew.

That’s all Berkshire does is copy the right people.

WARREN BUFFETT: Yeah. In 1790, the United States had 4 million people. China had 290 million people.

They were just as smart as we were. They worked as hard, similar climate, similar soil. And for 200 — close to 200 — years, you know, the United States went with those 4 million people to close to 25 percent of the world’s GDP and China really didn’t go anyplace.

And then those same people, in 40 years — and they’re not working harder now than they were 40 years ago — they’re not smarter now than they were 40 years ago, in terms of the basic intelligence — and just look at what’s been accomplished.

I mean, it does show you the human potential when you find a system that unleashes it, and we found a system that unleashed human potential a couple hundred years ago and they found a system that unleashed human potential 40 or 50 years ago.

And, you know, when you see that example, you know, it has to have a powerful effect on what happens in the future.

And it’s just amazing that you can have people go nowhere, basically, in their lives for centuries and then just — it explodes. And it just blows me away to see it, and you make it — it’s the same human beings, but they’ve — they found a way to unlock their potential and I congratulate them for it.

And as Charlie said earlier, China and the United States are going to be the superpowers for as far as the eye can see. And it is really good for us, in my view, that the Chinese have found the way to unlock their potential.

And I think its imperative for two countries with nuclear weapons that, in this kind of world, that they figure out ways to see the virtues in each other rather than the flaws.

We’ll have plenty of disagreements with the Chinese, and they will with us, but remember that on balance, we’re both better off if the other one is doing well. That’s just my own view. OK. (Applause)

32. “We just kept reading … and went with our instincts”

WARREN BUFFETT: Station 3, please.

AUDIENCE MEMBER: Hello, Mr. Buffett and Mr. Munger. My name is Chander Chawla and I’m from San Francisco. Thank you for the last 50 years of sharing your wisdom and being an exemplar of integrity.

Fifty years ago, when you were starting out or getting into new industries, how did you figure out the operational metrics for a new industry where you did not have previous experience?

WARREN BUFFETT: Well, we — A) we didn’t have it thought out that well, in a sense, at that time.

But we basically looked for companies where we thought we could understand what the future would look like 5 or 10 or 15 years hence. And that didn’t mean we had to do it to four decimal places or anything of the sort, but we had to have a feel for it, and we had to know our limitations. So we stayed away from a lot of things.

And at that time, prices were different, so we — in terms of knowing we were getting enough for our money, it was a much easier decision than it is currently.

But it wasn’t — they weren’t elaborate — well, there were no planning sessions or anything of the sort. We just kept reading and we kept thinking and we kept looking at things that came along, as Charlie described it in the movie, and you know, comparing Opportunity A with Opportunity B.

And in those days, we were capital constrained, so we usually had to sell something if we were going to buy something else. And that always makes for — you know, that’s the — an interesting challenge, always, when you’re measuring something you hold against something that has come along and to see which is more attractive.

And we probably leaned very much toward things where we felt we were certain to get a decent result than where we were hopeful of getting a brilliant result.

Went with our instincts, and kept putting one foot in front of the other.

Charlie, what would you say?

CHARLIE MUNGER: Well, that’s exactly what we did, and it worked wonderfully well. And part of it is because we were such splendid people and worked so constructively, and part of it is we were a little lucky. We had some good fortune.

Now, Warren says he was lucky to go to GEICO, but not every 20-year-old was going down to Washington, D.C., and knocking on the doors of empty buildings to try and find something out that he was curious about.

So we made some of our luck by being curious and seeking wisdom, and we certainly recommend that to anybody else.

And there’s nothing that produces wisdom more thoroughly than really getting your own nose whacked hard when you make a mistake, and we had a firm amount of that, didn’t we?

WARREN BUFFETT: We had plenty of them. If you read this book, you’ll see about a few of them.

We thought we knew the department store business in Baltimore and we thought we knew about the trading stamp business.

We’ve had a lot of experience with bad businesses, and that makes you appreciate a good one. And to some extent, it sharpens your ability to make distinctions between good and bad ones.

And we’ve had a lot of fun along the way. That helps too. If you’re enjoying what you’re doing, you know, you’re likely to get a better result than if you go to work with your teeth clenched every morning.

CHARLIE MUNGER: I think we were helped because we came from families where there was some admirable people, and we tended to identify other admirable people better than we would have coming from a different background.

So, my deceased wife used to say, you can’t accomplish much in one generation.

We owe a considerable amount, both of us, to the families we were raised in. I think the family standards helped us to identify the good people more easily than we would have if we’d had a more disadvantaged background.

Do you agree with that, Warren?

WARREN BUFFETT: Yeah. Have you still got your father’s briefcase?

CHARLIE MUNGER: I’ve still got it, but I don’t know where it is. (Laughter)

Can’t carry it anymore. It’s worn out. It’s got holes in it.

WARREN BUFFETT: I’ve got my dad’s desk from 75 years ago.

33. How Buffett found his first investors

WARREN BUFFETT: OK. Station 4.

AUDIENCE MEMBER: Hi, Warren and Charlie. This is Cora and Dan Chen from Talguard in Los Angeles, and we’re thrilled to be here again.

Thank you for planting the seeds for which my generation can sit under the shade, and for my children’s generation with “The Secret Millionaires Club,” so that they can sit under the shade. I walk amongst giants.

WARREN BUFFETT: Go on. Go on. (Laughter)

AUDIENCE MEMBER: That’s all I have. (Laughter)

WARREN BUFFETT: Don’t hold back.

AUDIENCE MEMBER: Seriously though, thank you so much for everything you’ve taught us.

WARREN BUFFET: Thank you.

AUDIENCE MEMBER: How were you able to persuade — (applause)

WARREN BUFFETT: Thank you.

AUDIENCE MEMBER: How were you able to persuade your early investors, all early on, besides your family and friends, to overcome their doubts and fears and to believe in what you’re doing?

There’s a lot of other asset classes out there, such as — a lot of people believe, real estate, bonds, gold. How were you able to get over that? And something I’ve been really dying to ask you —

CHARLIE MUNGER: We didn’t do very well until we had a winning record. (Laughter)

AUDIENCE MEMBER: Prior to the early winning record, how were you able to get them to buy into what you were trying to do?

I mean, no one has ever done what you’re doing, and no one has, still. And I’ve been really wanting to ask you, in the past, you said you’re 90 percent Graham and 10 percent Fisher. Where does that percentage stand today?

Thank you again from a grateful student of your teachings, and my children love what you do, too. They wrote you a letter.

WARREN BUFFETT: Thank you. Thank you. (Applause)

A lot of it — you know, I started selling stocks here when I was 20 years old. I got out of Columbia. And although I was 20, I looked about 16 and I behaved like I was about 12.

So I was not — I did not make a huge impression selling stocks. I used to just walk around downtown and call on people, which is the way it was done, and then I went to work for Graham.

But when I came back, the people that joined me, actually — one of my sisters, her husband, my father-in-law, my Aunt Alice, a guy I roomed with in college, and his mother, and I’ve skipped one — but in any event, those people just had faith in me.

And my father-in-law, who was a dean at the University — what was then the University of Omaha — he gave me everything he had, you know, and to quite an extent they all did.

And so it was — they knew I’d done reasonably well by that time. That would have been 1956, so I’d been investing five or six years. And actually, I was in a position where when I left New York and came back to Omaha, I had about $175,000 and I was retired.

So I guess they figured if I was retired at 26, I must be doing something right and they gave me their money.

And then it just unfolded after that. An ex-stockholder of Graham-Newman, the president of a college came out, Ben Graham was winding up his partnership for his fund and he recommended me.

And then another fellow saw the announcement in the paper that we formed a partnership and he called me and he joined, and just one after another.

And then, actually, a year or two later, a doctor family called and they were the ones that ended up with me meeting Charlie.

So a lot of stuff just comes along if you just keep plodding along.

But the record, later on, of the partnership attracted money, but initially it was much more just people that knew me and had faith in me. But these were small sums of money. We started with 105,000.

Charlie?

CHARLIE MUNGER: Well, of course that’s the way you start, and — but it’s amazing. We’ve now watched a lot of other people start. And the people that have followed the old Graham-Newman path have one thing in common: they’ve all done pretty well. I can hardly think of anybody who hasn’t done moderately —

WARREN BUFFETT: Everybody did well, yeah.

CHARLIE MUNGER: So, if you just avoid being a perfect idiot — (laughter) — and have a good character and just keep doing it day after day, it’s amazing how it will work.

WARREN BUFFETT: Yeah. It was accident, to a significant extent.

If a few of those people hadn’t have said to me, you know, “What should I buy?” And I said, “I’m not going to go back in the stock brokerage business, but I will — you know, we’ll form a partnership and, you know, your fate will be the same as mine and I won’t tell you what I’m doing.”

And they joined in, and it went from there.

But it was not — it was not planned out in the least. Zero.

I met Charlie, and he was practicing law, and I told him that was OK as a hobby, but it was a lousy business. (Laughter)

And so he —

CHARLIE MUNGER: Fortunately, I listened. (Laughter)

It took a while, however.

WARREN BUFFETT: Yeah.

34. Munger: rationality is a moral virtue

WARREN BUFFETT: OK. Station 5. We’ve got —

AUDIENCE MEMBER: Hi. My name is Arthur. I’m from Los Angeles. I want to thank you for having us in your hometown.

And we’ve all been listening to your business prowess and all your successes. There’s no question that you’re good at business and finance and have fun doing it.

But there are comments that you’ve made on income inequality, giving away 99 percent of your wealth, and I’m led to believe that you’re motivated by more than just amassing wealth or financial gains.

So, I’d like to speak to your value core and ask what matters to you most and why?

WARREN BUFFETT: Charlie, what matters to you most?

CHARLIE MUNGER: Well, I think that I had an unfortunate channeling device.

I was better at figuring things out than I was at everything else. I was never going to succeed as a movie star, or as an athlete, or as an actor, something, so — and I, early, got the idea that — partly from my family, my grandfather, in particular, whose name I bore, had the same idea — that really, your main duty is to become as rational as you could possibly be.

I mean, rationality was just totally worshiped by Judge Munger, and my father and others.

And since I was good at that and no good at anything else, I was steered in something that worked well for me and — but I do think rationality is a moral duty.

That’s the reason I like Confucius. He had the same idea all those years ago. And I think Berkshire is sort of a temple of rationality. What’s really admired around Berkshire is somebody who sees it the way it is. Wouldn’t you agree with that, Warren?

WARREN BUFFETT: Yeah, that —

CHARLIE MUNGER: More than anything, more than —

WARREN BUFFETT: You better see it the way it is.

CHARLIE MUNGER: Huh?

WARREN BUFFETT: You better see it the way it is.

CHARLIE MUNGER: See it the way it is.

And so, that’s the way I did it.

But that goes beyond a technique for amassing wealth. To me that’s a moral principle.

I think if you have some easily removable ignorance and keep it, it’s dishonorable. I don’t think it’s just a mistake or a lack of diligence. I think it’s dishonorable to stay stupider than you have to be, and so that’s my ethos.

And I think you have to be generous because it’s crazy not to be. We’re a social animal, and we’re tied to other people.

WARREN BUFFETT: Well, I would say — this doesn’t sound very noble, but the — what matters to me most now, and probably has for some time — I mean, there are things that matter that you can’t do anything about, I mean, in terms of health and the health of those around you and all that — but actually, what matters to me most is that Berkshire does well.

Basically, I’m in a position where we’ve probably got a million or more people that are involved with us, and it just so happens that it’s enormously enjoyable to me so I can rationalize it, the activity.

But I would not be happy if Berkshire were doing poorly. That doesn’t mean whether the stock goes down or whether, you know, the economy has a bad year.

But if I felt that we weren’t building something every year that was better than what we had the year before, I would not be happy.

And, you know, I get this enormous fun out of it and I get to work with people I like and —

CHARLIE MUNGER: But that’s very important. Truth of the matter is it’s easy for somebody like Warren or me to lose a little of our own money, because it doesn’t matter that much, but we hate losing somebody else’s.

It’s — and that’s a very desirable attitude to have in a civilization.

Don’t you hate losing Berkshire money?

WARREN BUFFETT: Yeah. That would be the only thing that would keep me up at night. (Laughs)

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: Yeah. We won’t do it.

We can lose money on individual things, obviously. We can have bad years in the economy, and we can have years the stock market goes down a lot. That doesn’t bother me in the least.

What bothers me is if I do something that actually costs Berkshire, in terms of its long-term value, and then I feel, you know, I do not feel good about life on that day.

But we can avoid most of that, fortunately. We do get to pick our spots. We’re very fortunate with that.

CHARLIE MUNGER: Well, a good doctor doesn’t like it when the patient dies on the table, either, you know. (Laughter)

Not a new thought. (Laughter)

35. No help for “the most intelligent question”

WARREN BUFFETT: OK. Let’s go to — let’s go to station 6.

AUDIENCE MEMBER: Hi, Mr. Buffett and Mr. Munger. My name is Petra Bergman. I’m from Stockholm, Sweden, in northern Europe. I work at something called EFN.SE.

I wanted to ask you, from my point of view, what would be the answer to the most intelligent question I could ask you right now? (Laughter)

CHARLIE MUNGER: Everybody tries that question, and it would be wonderful if that would solve all your problems. But I don’t think it’s a very good question. (Laughter)

Or perhaps I should say —

WARREN BUFFETT: Let’s phrase that differently, Charlie.

CHARLIE MUNGER: Well, what I mean is, you’re asking too much of somebody when you — you ask him to honestly say what is the most enlightening question he can answer.

WARREN BUFFETT: Yeah. I get that asked by the students a lot. And I’ve had a lot of practice in hearing it asked, but I haven’t had very much success in answering it.

So I’ll have to beg off on that one.

36. Buffett on fun and “the game”

WARREN BUFFETT: How about 7?

AUDIENCE MEMBER: Good afternoon, Warren and Charlie. Congrats on 50 years. My name is Jim and I’m from Brooklyn, New York.

This is kind of a follow-on to a recent question. You both had success in investing, even before Berkshire Hathaway, as investors and as fund managers.

While it’s well known you closely followed Graham’s teachings, others, like Walter Schloss and his son, also had success with similar teachings, yet different strategies.

What would you cite as the most important reason for your early success with small amounts of capital, and given hindsight today, what might you have done to improve your strategy with these small funds?

WARREN BUFFETT: Yeah. Well, I had a great teacher, I had exceptional focus, and I had the right sort of emotional qualities that would help me in being an investor.

I enjoyed the game. You do give it all back in the end. It wouldn’t make any difference if I — you know, that was not the key thing.

The game was enormously fun. And I think Gene McCarthy said about football one time, you know, it’s just about, you know, hard enough to be interesting but not so hard as to be beyond the capabilities of people understanding it, and that’s kind of the way this game is.

I mean, it’s not like Henry Singleton, kind of questions he took on. It’s actually a pretty easy game, and it does require a certain emotional stability.

And I went at it hammer and tong. I went through the manuals and everything, but I was enjoying when I did it.

And, like I say, I started out — between ages seven and about 19, I had that same enthusiasm, but I didn’t really have any guiding principle.

And then I ran into “The Intelligent Investor” and Ben Graham. And then at that point, I was able to take all this energy and everything, and enthusiasm for it, and now I had a philosophy that made a lot of sense — total sense — and I found that I could employ, and so the game became even more fun. But it wasn’t really more complicated than that.

Charlie?

CHARLIE MUNGER: Well, I don’t have anything to add.

I do think that it’s an easy game if somebody has the temperament for it and keeps at it because he’s — likes it and it’s interesting — interested in it.

I have a problem that Warren has less of. I don’t like being too much an example to people who want to get rich by being shrewd and buying and passively holding securities.

I don’t think that’s enough of a life. If you wrest a fortune from life by being shrewder than other people and buying little pieces of paper, I don’t think that’s an adequate contribution in exchange for what you’re taking.

So, I like it when you’re investing money for an endowment, or a pension fund, or your relatives, or something, but I never considered it enough of a life to merely be shrewd in picking stocks and passively holding them.

WARREN BUFFETT: Yeah. Running Berkshire has been far, far more fun than running, in my case, multiple partnerships, or just an investment fund. I mean, that —

CHARLIE MUNGER: You’d be less of a man. If you’d run that partnership —

WARREN BUFFETT: It would be a crazy way to go through life.

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: Yeah. I mean, it just — you know, Berkshire is incredibly more satisfying.

CHARLIE MUNGER: So if you’re good at just investing your own money, I hope you’ll morph into doing something more.

37. Dow Jones’s big missed opportunity

WARREN BUFFETT: OK. We’ll do 8 and then we’ll move onto the annual meeting.

AUDIENCE MEMBER: My name is John Boxtose (PH). I’m from South Dartmouth, Massachusetts.

My question was regarding an interview that you gave, Mr. Buffett, several years ago.

You made a very interesting point. It was about the old Wall Street Journal, if you will, the one before it was purchased by News Corp.

You mentioned in the interview that Wall Street Journal, at some point in the past, had very significant competitive advantages, but a number of them were largely unrealized.

I was just wondering if you could elaborate on that, what the advantages were, how they were unrealized, et cetera. Thank you.

WARREN BUFFETT: Well, Dow Jones, which owned the Wall Street Journal, you know, in the ’60s and ’70s, going into the era of the enormous spread of financial information — and value of financial information — you know, they basically, they owned the field.

They had the news ticker and they had the Journal, which, you know, anybody interested in finance in the country identified with.

And they — starting with that, in what would be an incredible growth industry, finance, you know, for the next 30 or 40 years they — I forget a couple of those ventures they went into, and they bought a chain of small newspapers, I remember, one time — and they just totally missed what was going to happen.

You know, here comes Michael Bloomberg and, you know, takes away financial information. They had such an advantage. And they didn’t really see various areas that they could have pursued, which could have turned that company into something worth many hundreds of billions of dollars, in all probability.

And, you know, they had a situation where a family owned it, and a lawyer essentially controlled the family’s behavior, and they were sitting pretty. You know, they were all getting dividends, but there was nobody there with any imagination as to what could be done in the financial field.

So, starting with this position, they were a trusted name, they were in every brokerage firm in the country with a news ticker.

I mean, I went to Walter Annenberg’s house one time and he had the Dow Jones ticker there — it just — or the news ticker.

And it was — they couldn’t have been in a better place. They couldn’t have started with a stronger position. They had a very good balance sheet. And they just let the world pass them by.

Now, Rupert is changing it into a different newspaper. He’s going into — he’s basically going into competition with the — or he’s gone into competition — with the New York Times, so he — but that’s the game he likes. And it makes for a very interesting competitive situation.

Charlie?

CHARLIE MUNGER: Well, they did end up with 6 or $7 billion, so they may have blown their opportunities, but they didn’t destroy their fortune.

WARREN BUFFETT: If you’d had the hand — if Tom Murphy had had the hand —

CHARLIE MUNGER: Oh, yeah.

WARREN BUFFETT: — it would have been in the hundreds of billions, wouldn’t it?

CHARLIE MUNGER: Well, I don’t know. I’m not sure if we had had that hand we would have —

WARREN BUFFETT: Well, I’m not so sure. I’m talking about Murph. (Laughs)

There were a lot of opportunities there.

CHARLIE MUNGER: Well, I think even Murph is more like us than he is like Bill Gates.

WARREN BUFFETT: Well, I’m not sure where that goes, but... (Laughter)

CHARLIE MUNGER: Well, but I think it’s hard to invent new — entirely new — modalities and so on.

WARREN BUFFETT: I think Bill would have done well with Dow Jones, too.

CHARLIE MUNGER: Yes. He might —

WARREN BUFFETT: I’d like to buy into that retroactively.

38. Q&A concludes

WARREN BUFFETT: OK. 3:30 has arrived. We’re going to go to the annual meeting in about five minutes. We’ve got a certain amount of formal business to take care of. And I thank you all for coming. (Applause)

39. Berkshire’s formal annual business meeting

WARREN BUFFETT: Let’s reassemble and we’ll conduct the business of the meeting.

The meeting will now come to order. I’m Warren Buffett, chairman of the board of directors of the company, and I welcome you to this 2015 annual meeting of shareholders.

This morning I introduced the Berkshire Hathaway directors that are present.

Also with us today are partners in the firm of Deloitte & Touche, our auditors. They are available to respond to appropriate questions you might have concerning the firm’s audit of the accounts of Berkshire.

Sharon Heck is secretary of Berkshire Hathaway, and she will make a written record of the proceedings.

Becki Amick has been appointed inspector of elections at this meeting. She will certify to the count of votes cast in the election for directors and the motion to be voted at this meeting.

The named proxy holders for this meeting are Walter Scott and Marc Hamburg.

Does the secretary have a report of the number of Berkshire shares outstanding, entitled to vote, and represented at the meeting?

SHARON HECK: Yes, I do. As indicated in the proxy statement that accompanied the notice of this meeting that was sent to all shareholders of record on March 5, 2015, the record date for this meeting, there were 824,920 shares of Class A Berkshire Hathaway common stock outstanding, with each share entitled to one vote on motions considered at the meeting, and 1,227,069,442 shares of Class B Berkshire Hathaway common stock outstanding, with each share entitled to one ten-thousandth of one vote on motions considered at the meeting.

Of that number, 592,750 Class A shares and 736,403,387 Class B shares are represented at this meeting by proxies returned through Thursday evening, April 30.

WARREN BUFFETT: Thank you, Sharon. That number represents a quorum, and we will therefore directly proceed with the meeting.

First order of business will be a reading of the minutes of the last meeting of shareholders. I recognize Mr. Walter Scott, who will place a motion before the meeting.

WALTER SCOTT: I move that the reading of the minutes of the last meeting of shareholders be dispensed with and the minutes be approved.

WARREN BUFFETT: Do I hear a second?

VOICE: I second the motion.

WARREN BUFFETT: The motion has been moved and seconded. Are there any comments or questions?

We will vote on this motion by voice vote. All those if favor say “Aye.”

AUDIENCE: Aye.

WARREN BUFFETT: Opposed? The motion is carried.

40. Election of Berkshire directors

WARREN BUFFETT: The next item of business is to elect directors.

If a shareholder is present who did not send in a proxy or wishes to withdraw a proxy previously sent in, you may vote in person on the election of directors and other matters to be considered at this meeting. Please identify yourself to one of the meeting officials in the aisle so that you can receive a ballot.

I recognize Mr. Walter Scott to place a motion before the meeting with respect to election of directors.

WALTER SCOTT: I move that Warren Buffett, Charles Munger, Howard Buffett, Stephen Burke, Susan Decker, William Gates, David Gottesman, Charlotte Guyman, Thomas Murphy, Ronald Olson, Walter Scott, and Meryl Witmer be elected as directors.

WARREN BUFFETT: Is there a second?

VOICE: Second.

WARREN BUFFETT: It has been moved and seconded that Warren Buffett, Charles Munger, Howard Buffett, Stephen Burke, Susan Decker, William Gates, David Gottesman, Charlotte Guyman, Thomas Murphy, Ronald Olson, Walter Scott, and Meryl Witmer be elected as directors.

Are there any other nominations? Is there any discussion? The nominations are ready to be acted upon.

If are there any shareholders voting in person, they should now mark their ballot on the election of directors and deliver their ballot to one of the meeting officials in the aisles.

Ms. Amick, when you are ready, you may give your report.

BECKI AMICK: My report is ready. The ballot of the proxy holders in response to proxies that were received through last Thursday evening cast not less than 657,744 votes for each nominee. That number far exceeds a majority of the number of the total votes of all Class A and Class B shares outstanding.

The certification required by Delaware law of the precise count of the votes will be given to the secretary to be placed with the minutes of this meeting.

WARREN BUFFETT: Thank you, Ms. Amick. Warren Buffett, Charles Munger, Howard Buffett, Stephen Burke, Susan Decker, William Gates, David Gottesman, Charlotte Guyman, Thomas Murphy, Ronald Olson, Walter Scott, and Meryl Witmer have been elected as directors.

41. Adjournment of formal Berkshire annual meeting

WARREN BUFFETT: Does anyone have any further business to come before this meeting before we adjourn?

If not, I recognize Mr. Scott to place a motion before the moving.

WALTER SCOTT: I move that this meeting be adjourned.

WARREN BUFFETT: Second?

VOICE: Seconded.

WARREN BUFFETT: A motion to adjourn has been made and seconded. We will vote by voice. Is there any discussion? If not, all in favor say “Aye.”

AUDIENCE: Aye.

[flauntpage]

DGB Grab Bag: Chicago Hopeless, Stone-Faced Karlsson, and Math—How Does it Work?

Three Stars of Comedy

The third star: The curling faceoff – This was a pretty funny way to open this week's outdoor game.

Slightly less funny: A few hours later when the curlers got drunk and threw the rock into the power generator.

The second star: Erik Karlsson and Eugene Melnyk – I'm no body language expert, but I'm not getting a real big "Can't wait to sign a long-term extension" vibe here.

By the way, this was literally front-page news in Ottawa. Good times up here.

The first star: Nazem Kadri vs. Rasmus Ristolainen – Not their fight from Monday's game; that wasn't all that good. But their post-scrap debate on the subject of conceptual mathematics was fantastic.

Kadri's right, by the way. I guess we can add "counting" to the list of things the Leafs are better than the Sabres at, right next to "draft lotteries."

Outrage of the Week

The issue: The NHLPA released the results of an extensive poll of over 500 players, who were asked to weigh in on various questions about life in the league. The outrage: Wow, did you see the results? They were stunningly, jaw-droppingly… boring. Is it justified: To be clear, it's cool that the NHLPA does this stuff. Some information is better than no information. But with most of this poll, it was only slightly better. We learned things like "Connor McDavid is fast" and "Sidney Crosby is good." (We also learned that Carey Price is the league's best goalie, so apparently many of the surveys were returned by mail that took three years to arrive.)

Some of the results were mildly surprising—Wes McCauley ran away with best referee honors, and the players still seem to love Shea Weber and Jonathan Toews. We also found out that players apparently have no idea how bar graphs work. But that was about it.

Some eyebrows were raised over the revelation that 77 percent of players support the current points system, but that's no shock at all—just like their GMs, of course players are going to like free bonus points. The coach can't bag skate you too hard for a three-game losing streak if you still picked up a few points, right? If anything, the story here is that even a league where banking points is everything, 23 percent of players have still realized that the current system is awful.

Maybe the most depressing section of the poll comes at the end, when players are asked to name the best ever at various positions, because it ends up serving as a reminder of how damn young today's players are. The forwards are all from the 80s and beyond, with no love for Gordie Howe or Rocket Richard or Jean Beliveau. They get the best defenseman right, with Bobby Orr taking top spot, but he only gets 61 percent of the vote, with Nicklas Lidstrom finishing a relatively close second at 29 percent, no mention of Doug Harvey, and Scott Niedermayer(!) finishing fifth. And the goalies skip over Terry Sawchuk, Glenn Hall, and Jacques Plante, but find a spot for Price in the top five. Seriously, when were all you guys born, in the 90s? (Thinks for a second.) Yeah, don't answer that.

At the end of the day, it's a fun little poll that clearly isn't trying to ruffle any feathers—the only question with a negative focus is about bad ice. That's understandable, but man it feels like a missed opportunity. Don't you want to see these guys rate the league's worst coaches, referees and GMs? Can't we ask them which owner they'd least like to play for, or which city has the ugliest fans? While we're at it, let's get them to rate Gary Bettman's job performance on a scale of 1 to 10, or explain where they plan to spend the 2020 lockout. Maybe even include an essay portion where they have to explain goaltender interference.

It was a good effort, NHLPA, but you can do better. Next time, give us the director's cut.

Obscure Former Player of the Week

The Blackhawks are finally bad again, and they're going to miss the playoffs for the first time in a decade. It goes without saying that fans around the league are heartbroken, and we wish to offer our love and support to Hawks fans during these difficult times.

But if it helps at all, it's worth remembering that there have been far worse Blackhawks teams than this year's mess. And sometimes, being pathetic enough to warrant a little bit of pity can pay off. So this week, let's devote our obscure player section to the story of Ed Litzenberger.

Litzenberger was a big winger who had the misfortune of trying to break in with the Montreal Canadiens in the 1950s. That team was pretty stacked, making it to the final for ten straight years, and Litzenberger only managed to crack the lineup for a total of five games across two seasons. He finally earned a regular spot in 1954, and was reasonably productive, managing 11 points in the season's first 29 games. But that's where those terrible Hawks come in. By the mid-50s, Chicago had made a habit of finishing dead last, and the franchise was at serious risk of going under. So in a rare burst of charity, the other teams decided to offer up just enough help to keep their competition alive.

That help included Litzenberger, who was traded to Chicago for cash midway through the 1954-55 season. Well, "traded" might be pushing it; some sources use the word "donated." Either way, the deal was his chance to take on a top line role, and he made the most of it by racking up 40 points in the season's final 44 games. That was enough to earn him Calder honors as rookie of the year, the only time in the award's history that a player has won it while splitting his season between two NHL teams.

For the rest of the decade, Litzenberger starred in Chicago, earning second-team All-Star honors in 1957. He was a big part of the franchise's rebuild into contenders, eventually helping them win a Stanley Cup in 1961. He was traded to Detroit that summer, and then quickly made his way to Toronto where he'd win three more Cups. The 1964 championship was his last NHL action, but he'd head to the AHL and win two more titles, making him by some accounts the only North American pro hockey player to win a championship in six straight seasons.

So let Ed Litzenberger be a lesson to GMs everywhere. If over the next few weeks Stan Bowman comes up to you making puppy dog eyes and mumbling about how tough it is in Chicago these days, do not give him one of your best prospects just to be nice.

Be It Resolved

Seattle is getting an NHL team.

That's not really breaking news at this point. If any of us somehow hadn't clued into that development over the last few years of watching the league make eyes at the market, their recent ticket drive seals the deal. The ownership group collected 10,000 deposits in the first few minutes and over 25,000 in the first day.

So yeah, while nothing will be official for a while, it's basically a done deal. Seattle is getting a team, probably for the 2020-21 season. People are already doing mock expansion drafts. This is happening. And it's good news for everyone.

Well, almost everyone. And then there's Quebec City.

They'd been holding out hope that they'd be an expansion candidate. They have an arena ready to go, and plenty of NHL history. They'd hoped to bring back the Nordiques, just like Winnipeg brought back the Jets a few years ago.

But now it probably can't happen. Seattle gives the NHL an even 32 teams, which finally brings us back to the days of two equal conferences and four equal divisions. While it wouldn't be unheard of for the NHL to beat a good thing into the ground, it certainly feels like this will be the last round of expansion for at least a little while. And that means Quebec City is out of luck, at least when it comes to expansion.

Of course, that's not the only way to get a team, and that's where things get a little touchy. Quebec has long been one of the top targets for every rumor about an NHL team relocating. That quieted down slightly during the expansion process, since there was a more obvious path back to the NHL available. But now that that door has slammed shut, we can expect to start hearing whispers about some team or other making eyes at Quebec City.

So today, be it resolved that when the "Struggling team is moving to Quebec" rumor mill starts firing on all cylinders again, we can all be cool about it. No, it's never fun to see some other city salivating over your team. No, that team probably won't move, because to his credit, Gary Bettman makes it very hard to relocate a franchise. Yes, all that Quebec talk is probably wishful thinking, and maybe even a publicity plot to squeeze more arena upgrade out of your town.

It's annoying. But it's not the fault of fans in Quebec. They just saw their best chance at a team fade away, so they're going to start looking toward Plan B. They know how much relocation sucks—they went through it themselves, and with a team that immediately turned around and won the Cup to boot. But right now it's their only shot. You can't blame them for taking it.

We all know how the game is played. So let's handle it without having a meltdown. That means you, Florida, Arizona, and Carolina. You, too, if the arena thing falls through, Islanders. And hell, maybe even you, Ottawa and Calgary, at least as long as your owners are allowed to talk. Defend your turf, sure. But save the faux outrage that someone else is trying to lure your team away. It's a long shot, but it's all they have. And you'd do the same if the roles were reversed.

Classic YouTube Clip Breakdown

There's been a minor controversy up here in Canada this week involving the Vancouver Canucks. Basically, the organization seems to have decided that the market is too negative, and not everyone disagrees. That's spiraled into a bigger discussion over how a fan base should treat a team that continually finishes last, and whether fans deserve some share of the blame when the team they root for can't get it together.

That's all well and good, but let's take a moment here to defend Canucks fans. Are they negative? Sure. But you would be too if your team was underperforming. And it's a few bad apples spoiling the bunch—it's not like everyone who likes the Canucks is some sort of toxic jerk.

So today, let's hit up YouTube and randomly search for somebody being positive about the Canucks. I bet if we got back to the franchise's better days like, say, 1994, we can find a perfectly wonderful person who's willing to say nice thing about them. Hey, here's a clip now!

Oh.

So, this clip is from an intermission during Game 2 of the 1994 Stanley Cup final. The Canucks are facing the Rangers, and New York came in heavily favored. But Vancouver pulled off the upset in Game 1, earning a 3-2 overtime victory in which goaltender Kirk McLean made 52 saves, and they're giving the Rangers all they can handle in the second game.

In one of those wacky "man-on-the-street" segments, a Vancouver reporter has apparently found a few diehard Ranger fans to interview about the series. We never do catch the guy's name, but he's apparently a local real estate developer. That's a good business to be in. Here's hoping he sticks with it, rather than doing anything else ever.

"You've got some team, and you've got some goalie, I can tell you." See? This guy knows his stuff. The Canucks did indeed have a goalie that year.

Our reporter starts to ask them if they're surprised about something, then suddenly does this really weird pause where he seems to get distracted. I can't be sure, but I think it might have something to do with the time traveler from the future who appears just off camera holding a sign that says "RUN."

He finally stumbles through a question about whether the Rangers should be kicking more butt, in which case this nice man's wife gives a very smooth answer about how any team that makes the final will be a good one. Very diplomatic! She should go into politics.

(I’m kidding, of course. Only politicians should ever be involved with politics.)

Next we get a somewhat weird question about the difference between New Yorkers and Ranger fans. Our nice real estate man ignores the question completely, and instead mentions the Rangers' 54-year Cup drought and that "they've met somebody who's doing an incredible job in goal, as you know about."

He, uh, has no idea what Kirk McLean's name is, does he?

"He's there taking a lot of shots. Many more shots." Nope, no idea at all. But he's right about all those shots. McLean was playing like a wall in this series. Like a real actual wall, not one you just make up. I'm not sure why I felt the need to clarify that.

We close with the nice man's wife, who jokes about hockey not being all that big down south and then suggests that maybe Atlanta should get a team again. Ha ha, whoops! I guess this couple has some bad ideas.

Epilogue: The Rangers ended up winning this game and the next two after it to take a 3-1 series lead. The Canucks fought back to even the series before losing a heart-breaking seventh game in which Sergei Zubov and Alex Kovalev combined for three points, because sometimes the Russians help one side win. In hockey. Again, not sure why I felt the need to clarify that.

Anyway, here's hoping this fine couple, who are no doubt still happily married to this day, enjoyed the Rangers' win. They seem like real hockey fans. Maybe someday they'll even get to personally meet some Stanley Cup champions, and everyone will be happy.

Have a question, suggestion, old YouTube clip, or anything else you'd like to see included in this column? Email Sean at [email protected].

DGB Grab Bag: Chicago Hopeless, Stone-Faced Karlsson, and Math—How Does it Work? published first on https://footballhighlightseurope.tumblr.com/

[calvin9burks7]

Get All Your House Buying Questions Addressed

Sometimes you can find it hard to make a decision when purchasing real estate. Just make sure you know what you are doing when you make your investment. If you are having trouble deciding what it is you should do then this article is for you. In this article there are tips to purchasing real estate that can help enlighten you in your decision making. When purchasing real estate, you should be realistic in thinking about your resale options. If you are not going to stay in the home for the duration of the mortgage, like many first time buyers tend not to do, then weigh the cost vs. resale of the property, so you have a clear idea of the life of the purchase. If you are trying to buy a new home and you find the one that you want and you end up in a bidding war you need to keep something in mind. You may think that you have found your perfect home but there are probably numerous homes in that town that you may like just as much if not more. So be sure to keep looking around. Before buying a home, take a tour of the neighborhood. Find out about crime rates. You may even want to ask your agent about registered sex offenders in the area. If you buy your dream home but you're afraid to use that beautiful porch because of the neighborhood, you really haven't gotten the best house you could. If you are considering purchasing a home that requires renovation or repair, bring along a contractor experienced in home rehab to the viewing. The contractor may notice hidden defects that would escape the average homeowner. In addition, the contractor may be able to give you a ballpark estimate on the cost of renovating the property. Consider buying a brand-new home in the fall. In many cases builders are beginning to discount their inventory and they may even offer some great incentives around September to make the sales that they need before the end of the year. Prices of these homes that do not sell in the fall will go back up in the spring. If you have always wanted a vacation home now is the time to purchase one. Some of the most depressed housing markets in the country are in great vacation areas. You could pick up a nice property for a cheaper price than you could have five years ago. Interest rates are also very attractive right now so it is a great time to buy. Research the area as well as the property. Try to find out as much as you can about natural disasters that may have occurred over the years as well as the local crime rate. Find out about what local highway access so you can map out your route to work, school or shopping. Never be afraid to negotiate a better price. With the weak housing market, perhaps the seller will be eager enough to reduce the sales price in order to sell. Those with great credit can pretty much call the shots these days. Although interest rates are at historic lows, few borrowers qualify and buyers are so scarce that they can often name their price. Get pre-qualified for a home loan. There's nothing worse than finding your dream house, only to realize that you can't afford it. Before you look for a house, contact a mortgage lender and get pre-qualified. Have all the pertinent information, such as, employment history, credit history and outstanding debts. The mortgage lender will then be able to tell you exactly how much they are prepared to loan you. If you have to move because of a job offer, make sure you visit your future town or city. You do not want to commit to a home without going to look at it. It may seem nice in pictures, but there could be problems that you would only know about if you see it in person. When you are going to look at homes with your Realtor, take one car. This way, you can talk about the pros of cons of a home while you drive to another. Also, you do not want to arrive at a home way before or way after your Realtor does. Get your financing in order before you put in an offer on a short sale home. Lenders want to see that you are going to be able dallas townhome to finish the deal. If you are pre-approved, have a down payment, and are ready to close whenever necessary, they will give preference to your offer over others. Going to open houses, is a great way to meet a real estate agent. When you attend an open house, you will get to see an agent in action. You will get to see if the real estate agent is friendly, if they are professional, and if they can answer questions that you may have. It is a great casual setting to meet a real estate agent. Make sure to get an opinion from a home inspector that you trust before you buy a home. Some real estate agents have home inspectors that they work with on a regular basis. The inspector may be able to be bribed into saying the home is in better condition than it truly is. Make sure that you do not forget about the closing costs of buying or selling a home. When moving, people are so focused on moving costs, mortgage payments and other expenses that they forget to set aside money for closing costs and must scramble to come up with the payment. If you like fishing, boating, swimming, or any other activity involving the water, you should consider buying real estate that is bordered by a lake. The right property could even come with its own boat launch and dock that you can use. Real estate around water can ensure you always have something to do. With the knowledge you learned from this article you should feel more confident with purchasing real estate. The more knowledge you fill your brain with about real estate the more chance you have at making the decisions that should benefit you in real estate. So use the knowledge you learned from here and go out there and feel confident with your decisions.

[junker-town]

Why the Falcons will beat the Patriots in Super Bowl 51

Retired NFL defensive lineman Stephen White studied the tape and saw a distinct advantage the Falcons have that will be hard to stop, even for the Patriots.

It seems like it was only yesterday that I was working on my breakout players posts in the preseason, and yet somehow all we have left of this postseason now is the grand finale on Sunday. Gotta say it kinda snuck up on me. It’s depressing every year when I realize that only one game stands between me and another long, boring offseason. On the bright side, I have to say that after studying the Patriots and Falcons a little more closely on film, I have a feeling that this year's matchup may end up being one of most entertaining that we have ever seen in a Super Bowl.

I say that because most fans just love offense. Hell, so do I, and these two teams get busy on offense. The Falcons, for instance, ended the regular season ranked third in passing yards per game, fifth in rushing yards per game, and lead the league in scoring, averaging an eye-popping 33.8 points per game. Their quarterback Matt Ryan, my pick for MVP, was tops in the NFL for passer rating in 2016 of any player with over 11 attempts with 117.1 and second in the league in passing yards with 4,944, to go with 38 passing touchdowns against just seven interceptions.

The Patriots, on the other hand, weren’t too shabby either as they ended the season fourth in the league in total yards per game, fourth in passing yards per game, and third scoring offense with a more-than-respectable 27.6. Tom Brady didn't waste any time after serving his four-game suspension to start the season and still found a way to end up 20th in the league in passing yards with over 3,500 to go with 28 touchdowns against only two interceptions. It is kinda funny that Brady ended up third in the league in passer rating because the guy who finished second was ... Jimmy Garoppolo.

He's a system quarterbaaaaaack!

Just kidding.

Or am I?

Styles make fights

It doesn't get much more evenly matched than these two high-powered offenses. As for their defenses, however, they couldn't be more different. The Falcons are a 4-3, and statistically, they were pretty mediocre this season. The Patriots run a 3-4 and were statistically dominant this year.

The Patriots defense finished the regular season with the best scoring defense in the league, giving up only 15.6 points per game. They also ranked third in the league in rush yards allowed per game.

A person might get the impression that the Falcons won't be able to keep up with the Patriots on Sunday. The film tells a somewhat different story.

Now, I'm not going to try to sell the Falcons defense as the second coming of the ’85 Bears or anything. When I went back and watched several games where the Falcons gave up a lot of points, it turns out in many of those instances Atlanta allowed the majority of those points in the fourth quarter of games. These were games when their opponents were down big and trying to catch up, and the Falcons, rightfully, weren't quite as aggressive on defense. Giving up a lot of points in the fourth quarter is somewhat worrisome, but it’s worth pointing out these games that they actually won this season.

In Week 2 the Raiders had 14 points through the first three quarters, but end up with 28. Atlanta won 35-28

In Week 4 the Panthers had 10 points in the first three quarters, but ended up with 33. Atlanta won 48-33.

In Week 5 the Broncos had 3 points in the first three quarters and ended up with 16. Atlanta won 23-16.

In Week 9 the Bucs had 14 in the first three quarters and ended up with 28. Atlanta won 43-28.

In Week 17 the Saints had 13 in the first three quarters and ended up with 32. Atlanta won 38-32.

Hell, in the NFC Championship they held Aaron Rodgers and crew scoreless in the first 30 minutes of the game, going into halftime up 24-0

For additional context, Atlanta and New England had five common opponents this year. Here is a comparison of how many points those opponents scored against each.

I wouldn't consider the Falcons a dominant defense just yet, but they aren't quite the pushovers that some of their statistics might have you believe. And they definitely aren't as far off from the Patriots defense as you might think.

Interestingly enough, when it came time for me to pick who I thought would win on Sunday, a lot of my rationale had to do with both defenses.

One of the things that stood out to me watching that Falcons defense is how closely it already mirrors what the Seahawks do.

That's not really a huge revelation considering the fact that Atlanta's head coach Dan Quinn was the defensive coordinator for Seattle in 2013 and 2014 (which means yes, he was there when they lost to the Patriots in Super Bowl 49). At the same time, Gus Bradley's five years as head coach in Jacksonville is a good reminder that trying to emulate a defense in a different place doesn't always work out so well.

Even though they don't have the same amount of talent across the board, defensively, that the Seahawks do, the Falcons play that same kind of defense. And they move around like they have been at it for much longer than the two years since Quinn got there.

The Falcons, much like the Seahawks, generally keep the game plans simple and just expect their guys to play really disciplined football. That simplicity also allows them to play really, really fast.

Like the Seahawks, the Falcons tend to stick with their base 4-3 alignment for most of the game without a lot of different looks. I would say the Falcons probably send a little more pressure than the Seahawks simply because they don't quite have the collection of pass rushers that Seattle has just yet.

Yeah, Vic Beasley led the league in sacks with 15.5, but no other defender had more than Adrian Clayborn's 4.5 sacks, and he’s now on IR. I don't think there is a huge difference in how much either team blitzes. Both usually like to rely more on their four-man rush than anything else.

Another thing both defenses have in common is that when they do decide to blitz, it usually catches the opposing offense off guard. And that can lead to big plays.

The Falcons, like the Seahawks, also play a lot of single-high safety with some form of zone behind it, but both defenses also don't mind mixing in a little man-to-man as well.

The most important thing that the Seahawks and Falcons defenses share is tons of speed at every position.

Back when I was playing in Tampa a long, long, long, long time ago people used to say that we ran to the ball so well play after play that it looked like someone had sped the tape up. That's about as great as compliment as I have ever heard.

You can't just have fast players on defense, you have to have dudes who hustle, or all that speed is wasted. When I watch the Seahawks on film, they remind me a lot of how we used to get after it back in the day. I'm seeing that same kind of hustle out of the Falcons on defense as well.

That speed factor also shows up for the Falcons in terms of not giving up a lot of big plays — at least not till the fourth quarter. As a defensive coordinator, it is a luxury when you have corners who are fast enough that you don't have to constantly give the safety help over the top. It allows you to put all kinds of wrinkles into your scheme for your safeties and you can blitz a little more liberally without having to worry that one of your guys is going to get Moss'd if the pressure doesn't get there right away.

In this new passing-league era of the NFL, having speed everywhere also helps you with the underneath coverage as well.

One of the reasons why the Falcons' speed on defense is so important to this Super Bowl matchup is because of the versatility of the Patriots' running backs.

Quietly, James White was the second-leading receiver for the Patriots during the regular season with 60 catches. His five receiving touchdowns were also second only to Martellus Bennett's seven. Dion Lewis, who only played in seven games in the regular season, had 17 catches. Both of those guys can break your ankles out in space.

In the playoffs both White and Lewis have four catches and a receiving touchdown, which may not be eye-popping numbers, but the threat of what they can do as receivers tends to force opposing defenses to make substitutions to account for them in the passing game.

The Falcons, however, have two rookie linebackers — Deion Jones and De'Vondre Campbell — who can both run and cover pretty well. That means Atlanta can generally stay in its base personnel for most of the game and still match up just fine even when the Patriots try to get their running backs involved in the passing game.

I'm pointing this out because, as the saying goes, "styles make fights." Some teams just happen to match up well with others and this, to me, appears to be one of those times.

I have the utmost respect for the Patriots and the standard of excellence they’ve set for over a decade now, but probably much to the dismay of my guy Bomani Jones, I am picking the Falcons on Sunday. The film just tells me they are a bad matchup for New England.

Falcons offense vs. Patriots defense — A personnel advantage

Unlike when I picked the Broncos over the Panthers last year, I don't think there will be a specific scheme advantage this time around, but rather key personnel advantages.

We know that Bill Belichick is a defensive genius and that he can usually find a way to take out your biggest threat on offense. Sometimes even your top two threats. The problem with trying to defend the Falcons is that they have so many damn weapons to go along with a stone-cold killer like Julio Jones, who simply demands extra attention.

The Patriots are normally a well-oiled machine on defense, but one issue I saw a few times on film was they would have trouble when a team's third or fourth receiving option had a lot of speed and took them deep. That's not unique to New England because that third or fourth receiving option is usually covered by a linebacker or a team's third or fourth cornerback. Most teams just don't have a third or fourth option who is good enough to really exploit that matchup.

Atlanta has Taylor Gabriel, appropriately nicknamed "Turbo," and Tevin Coleman, who can both line up in the slot and blow the doors off of anybody you put in front of them on a fade route. Considering how much man-to-man the Patriots like to play, I can see Gabriel and/or Coleman having a huge day catching the ball down the field.

If the Patriots do what I think they will and use their linebackers to "hug up" the backs on passing downs when they are lined up in the backfield, I also wouldn't be surprised if Devonta Freeman has a big day catching the ball after the Falcons counter that Patriots tactic by motioning him out of the backfield more.

That's one thing about Ryan and the Falcons: They will nickel and dime you all the way down the field if they have to. If the Patriots are intent on taking Julio out deep, then Ryan will just keep dumping it off and dumping it off until 12 plays later they are on the New England 2-yard line about to punch it in.

If the Patriots can't deal with Freeman and Coleman out of the backfield, things could get ugly fast.

This might be the one game where the Patriots actually feel the loss of Jamie Collins, who they traded to Cleveland, while trying to match up with those running backs in the passing game.

Another guy whom I believe is going to have a big day for Atlanta's offense is fullback Patrick DiMarco.

Time after time on film I saw him making key blocks to spring his running backs. Particularly against teams that still line up in a traditional 3-4 alignment at times (like the Patriots), he did a good job taking on the force player and giving Freeman and Coleman the opportunity to bounce outside where they could really do damage. He is also a viable receiving threat out of the backfield, so while the Patriots may key in on Jones out wide and Freeman and Coleman underneath, DiMarco is likely to be open in the flat quite a bit.

As a reminder, again, the Falcons also have a Julio Jones.

If your team doesn't have a Julio Jones, I strongly suggest you try to get one.

Playing on turf, in perfect conditions in Houston should give a well-rested Jones the opportunity to show out on Sunday night, even if New England shows him extra attention. There may come a time during the game where the Falcons offense sputters for a drive or two, but all it takes is one slant route to Julio and a couple of broken tackles to fix that. It also helps when you absolutely have to make a play to have a guy as tall, physical, fast, and athletic as Jones who you can chuck it up there to and just let him go get it.

Let's not forget that even in that loss to the Seahawks earlier in the season, even as poorly as the Falcons played at times, if either Richard Sherman doesn't grab Jones’ arm and/or the ref actually called pass interference, the Falcons may well have come back and won that game.

Jones is like a human tiebreaker. With Rob Gronkowski on IR, the Patriots don't have anyone comparable on offense. Martelleus Bennett can be a matchup nightmare, but he ain’t no Julio Jones, bruh.

Matt Ryan under pressure

Now I actually believe the Patriots will blitz quite a bit and show a lot of 3-4 on early downs against the Falcons. If there is one thing that can bother Ryan, like most quarterbacks, it’s pressure. Which is not to say that Ryan folds under pressure. For the most part that isn't true. Ryan actually does a good job moving around in the pocket, at times escaping the pocket to avoid pressure and deliver the ball down the field.

When you look at some of Ryan's worst decisions, however, they almost always come when he is under duress. That is pretty much the only time when he is ever careless with the football. If he doesn't feel pressured, he will just patiently wait until someone comes open or throw it away.

If the Patriots want to force turnovers, then bringing additional pressure is probably the only way to get it done, so I expect that you will see New England coming from everywhere at times, trying to force one of those occasional brain farts out of Ryan.

That will make the Patriots vulnerable to those deep shots I mentioned earlier, and I expect Ryan to take them early and often. Doesn't matter if he only hits on a couple. A couple big plays in a game like this can be the difference, especially if they come early on.

Falcons defense vs. Patriots offense — Thrown off schedule

I expect that the Patriots offense will also move the ball up and down the field on the Falcons, but they will have to do so meticulously. The Falcons are going to be flying to the ball, and they’re very good tacklers. They also aren't prone to letting a lot of balls get thrown over their heads. That means the Patriots are going to have to grind all the way down the field for most of the game.

The good news for New England is that the team is made to do just that on offense. They can run the ball with Blount, White, and Lewis. They can also kill you on underneath routes with Bennett, Julian Edelman, and Danny Amendola.

What the Falcons have to hope is that at the right time they will be able to send pressure to knock the Patriots off schedule. Even with as well as Brady has played this year — and he has been outstanding — if the Falcons get the Patriots into third-and-long where they can really put all that speed on defense to good use, I believe Atlanta will win a lot of those battles.

Brady, again like most quarterbacks, does not like to get hit, so it will be incumbent upon the Falcons to get heat on him one way or the other. And that brings me to one of players to watch for the Falcons on defense.

Dwight Freeney is going to be a major factor in this game.

Freeney has now had two weeks to study left tackle Nate Solder. He will also be facing Solder on turf, which means Freeney will have great traction for his explosive get-off on speed rushes as well as good footing to execute spin moves to great effect after he gets Solder bailing out of his stance.

I'm betting that in those two weeks Freeney noticed the same thing I did about Solder: starting off with power and then turning it into a speed rush gives him problems.

Once a rusher feels Solder anchor down on the power move, he can quickly escape off the block to the outside. Freeney is long in the tooth, but he can still give a tackle the business when he has time to rest and prepare. I expect to see him all over Brady all night, especially since this might be his last game in the NFL.

I'm not just talking sacks, though I think Freeney will get at least one. I'm talking about not allowing Brady to feel comfortable in the pocket with just a four-man rush. To beat the Patriots you have got to bring the heat on Brady, there really isn't any other way.

I'm still trying to figure out what kinda dirt weed the Steelers' defensive coordinator was smoking when he decided he would use so many three-man and even two-man rushes against Brady in the AFC Championship. You have to at least rush four most of the time, maybe more at some point.

The "maybe more" part is where Brian Poole comes in.

See, Poole does a little bit of everything for the Falcons. He can cover and he can hit, and the guy can blitz his ass off. He has a knack for disguising when he is coming and he can get from point A to point B in a damn hurry. I doubt that the Falcons will blitz (where blitz here means send more than four players to rush the passer) much more than a handful of times, kind of like Seattle in its earlier win over the Patriots this season, but when they do decide to unleash Poole, I'm expecting there to be fireworks. Just ask Aaron Rodgers about him.

I really like both of these teams, but there can be only one winner on Sunday. After watching the film and thinking it through, I just feel like Atlanta is the better team top to bottom, especially with Gronk out. Even a future Hall of Fame coach and a future Hall of Fame quarterback won't be able to overcome that.

Oh, and I just want to point out that Joel Thorman and I tied for first place on our SBNation “experts” panel for picking games during the regular season. We are currently tied in the postseason as well ... and he picked New England. So yeah, these are high stakes for me, but I feel confident in my prediction.

[junker-town]

Why the Falcons will beat the Patriots in Super Bowl 51

Retired NFL defensive lineman Stephen White studied the tape and saw a distinct advantage the Falcons have that will be hard to stop, even for the Patriots.

It seems like it was only yesterday that I was working on my breakout players posts in the preseason, and yet somehow all we have left of this postseason now is the grand finale on Sunday. Gotta say it kinda snuck up on me. It’s depressing every year when I realize that only one game stands between me and another long, boring offseason. On the bright side, I have to say that after studying the Patriots and Falcons a little more closely on film, I have a feeling that this year's matchup may end up being one of most entertaining that we have ever seen in a Super Bowl.

I say that because most fans just love offense. Hell, so do I, and these two teams get busy on offense. The Falcons, for instance, ended the regular season ranked third in passing yards per game, fifth in rushing yards per game and lead the league in scoring, averaging an eye-popping 33.8 points per game. Their quarterback Matt Ryan, my pick for MVP, was tops in the NFL for passer rating in 2016 of any player with over 11 attempts with 117.1 and second in the league in passing yards with 4,944, to go with 38 passing touchdowns against just seven interceptions.

The Patriots, on the other hand, weren’t too shabby either as they ended the season fourth in the league in total yards per game, fourth in passing yards per game, and third scoring offense with a more than respectable 27.6. Tom Brady didn't waste any time after serving his four-game suspension to start the season and still found a way to end up 20th in the league in passing yards with over 3,500 to go with 28 touchdowns against only two interceptions. It is kinda funny that Brady ended up third in the league in passer rating because the guy who finished second was ... Jimmy Garoppolo.

He's a system quarterbaaaaaack!

Just kidding.

Or am I?

Styles make fights

It doesn't get much more evenly matched than these two high-powered offenses. As for their defenses, however, they couldn't be more different. The Falcons are a 4-3, and statistically, they were pretty mediocre this season. The Patriots run a 3-4 and were statistically dominant this year.

The Patriots' defense finished the regular season with the best scoring defense in the league, giving up only 15.6 points per game. They also ranked third in the league in rush yards allowed per game.

A person might get the impression that the Falcons won't be able to keep up with the Patriots on Sunday. The film tells a somewhat different story.

Now, I'm not going to try to sell the Falcons defense as the second coming of the '85 Bears or anything. When I went back and watched several games where the Falcons gave up a lot of points, it turns out in many of those instances Atlanta allowed the majority of those points in the fourth quarter of games. These were games when their opponents were down big and trying to catch up, and the Falcons, rightfully, weren't quite as aggressive on defense. Giving up a lot of points in the fourth quarter is somewhat worrisome, but it’s worth pointing out these games that they actually won this season.

In Week 2 the Raiders had 14 points through the first three quarters, but end up with 28. Atlanta won 35-28

In Week 4 the Panthers had 10 points in the first three quarters, but ended up with 33. Atlanta won 48-33.

In Week 5 the Broncos had 3 points in the first three quarters and ended up with 16. Atlanta won 23-16.

In Week 9 the Bucs had 14 in the first three quarters and ended up with 28. Atlanta won 43-28.

In Week 17 the Saints had 13 in the first three quarters and ended up with 32. Atlanta won 38-32.

Hell, in the NFC Championship game they held Aaron Rodgers and crew scoreless in the first 30 minutes of the game, going into halftime up 24-0

For additional context, Atlanta and New England had five common opponents this year. Here is a comparison of how many points those opponents scored against each.

I wouldn't consider the Falcons a dominant defense just yet, but they aren't quite the pushovers that some of their statistics might have you believe. And they definitely aren't as far off from the Patriots defense as you might think.

Interestingly enough, when it came time for me to pick who I thought would win on Sunday, a lot of my rationale had to do with both defenses.

One of the things that stood out to me watching that Falcons defense is how closely it already mirrors what the Seahawks do.

That's not really a huge revelation considering the fact that Atlanta's head coach Dan Quinn was the defensive coordinator for Seattle in 2013 and 2014 (which means yes, he was there when they lost to the Patriots in Super Bowl 49). At the same time, Gus Bradley's five years as head coach in Jacksonville is a good reminder that trying to emulate a defense in a different place doesn't always work out so well.

Even though they don't have the same amount of talent across the board, defensively, that the Seahawks do, the Falcons play that same kind of defense. And they move around like they have been at it for much longer than the two years since Quinn got there.

The Falcons, much like the Seahawks, generally keep the game plans simple and just expect their guys to play really disciplined football. That simplicity also allows them to play really, really fast.

Like the Seahawks, the Falcons tend to stick with their base 4-3 alignment for most of the game without a lot of different looks. I would say the Falcons probably send a little more pressure than the Seahawks simply because they don't quite have the collection of pass rushers that Seattle has just yet.

Yeah, Vic Beasley led the league in sacks with 15.5, but no other defender had more than Adrian Clayborn's 4.5 sacks, and he’s now on IR. I don't think there is a huge difference in how much either team blitzes. Both usually like to rely more on their four -man rush than anything else.

Another thing both defenses have in common is that when they do decide to blitz, it usually catches the opposing offense off guard. And that can lead to big plays.

The Falcons, like the Seahawks, also play a lot of single high safety with some form of zone behind it, but both defenses also don't mind mixing in a little man-to-man as well.

The most important thing that the Seahawks and Falcons defenses share is tons of speed at every position.

Back when I was playing in Tampa a long, long, long, long time ago people used to say that we ran to the ball so well play after play that it looked like someone had sped the tape up. That's about as great as compliment as I have ever heard.

You can't just have fast players on defense, you have to have dudes who hustle, or all that speed is wasted. When I watch the Seahawks on film, they remind me a lot of how we used to get after it back in the day. I'm seeing that same kind of hustle out of the Falcons on defense as well.

That speed factor also shows up for the Falcons in terms of not giving up a lot of big plays — at least not till the fourth quarter. As a defensive coordinator, it is a luxury to have when you have corners who are fast enough that you don't have to constantly give the safety help over the top. It allows you to put all kinds of wrinkles into your scheme for your safeties and you can blitz a little more liberally without having to worry that one of your guys is going to get Moss'd if the pressure doesn't get there right away.

In this new passing league era of the NFL, having speed everywhere also helps you with the underneath coverage as well.

One of the reasons why the Falcons' speed on defense is so important to this Super Bowl matchup is because of the versatility of the Patriots' running backs.

Quietly, James White was the second leading receiver for the Patriots during the regular season with 60 catches. His five receiving touchdowns were also second only to Martellus Bennett's seven. Dion Lewis, who only played in seven games in the regular season, had 17 catches. Both of those guys can break your ankles out in space.

In the playoffs both White and Lewis have four catches and a receiving touchdown, which may not be eye-popping numbers, but the threat of what they can do as receivers tends to force opposing defenses to make substitutions to account for them in the passing game.

The Falcons, however, have two rookie linebackers — Deion Jones and De'Vondre Campbell — who can both run and cover pretty well. That means Atlanta can generally stay in its base personnel for most of the game and still match up just fine even when the Patriots try to get their running backs involved in the passing game..

I'm pointing this out because, as the saying goes, "styles make fights." Some teams just happen to match up well with others and this, to me, appears to be one of those times.

I have the utmost respect for the Patriots and the standard of excellence they’ve set for over a decade now, but probably much to the dismay of my guy Bomani Jones, I am picking the Falcons on Sunday. The film just tells me they are a bad matchup for New England.

Falcons offense vs. Patriots defense — A personnel advantage

Unlike when I picked the Broncos over the Panthers last year, I don't think there will be a specific scheme advantage this time around, but rather key personnel advantages.

We know that Bill Belichick is a defensive genius and that he can usually find a way to take out your biggest threat on offense. Sometimes even your top two threats. The problem with trying to defend the Falcons is that they have so many damn weapons to go along with a stone-cold killer like Julio Jones, who simply demands extra attention.

The Patriots are normally a well-oiled machine on defense, but one issue I saw a few times on film was they would have trouble when a team's third or fourth receiving option had a lot of speed and took them deep. That's not unique to New England because that third or fourth receiving option is usually covered by a linebacker or a team's third or fourth cornerback. Most teams just don't have a third or fourth option who is good enough to really exploit that matchup.

Atlanta has Taylor Gabriel, appropriately nicknamed "Turbo," and Tevin Coleman, who can both line up in the slot and blow the doors off of anybody you put in front of them on a fade route. Considering how much man-to-man the Patriots like to play, I can see Gabriel and or Coleman having a huge day catching the ball down the field.

If the Patriots do what I think they will and use their linebackers to "hug up" the backs on passing downs when they are lined up in the backfield, I also wouldn't be surprised if Devonta Freeman has a big day catching the ball after the Falcons counter that Patriots' tactic by motioning him out of the backfield more.

That's one thing about Ryan and the Falcons: They will nickel and dime you all the way down the field if they have to. If the Patriots are intent on taking Julio out deep, then Ryan will just keep dumping it off and dumping it off until 12 plays later they are on the New England 2-yard line about to punch it in.

If the Patriots can't deal with Freeman and Coleman out of the backfield, things could get ugly fast.

This might be the one game where the Patriots actually feel the loss of Jamie Collins, who they traded to Cleveland, while trying to match up with those running backs in the passing game.

Another guy whom I believe is going to have a big day for Atlanta's offense is fullback Patrick DiMarco.

Time after time on film I saw him making key blocks to spring his running backs. Particularly against teams that still line up in a traditional 3-4 alignment at times (like the Patriots), he did a good job taking on the force player and giving Freeman and Coleman the opportunity to bounce outside where they could really do damage. He is also a viable receiving threat out of the backfield, so while the Patriots may key in on Jones out wide and Freeman and Coleman underneath, DiMarco is likely to be open in the flat quite a bit.

As a reminder, again, the Falcons also have a Julio Jones.

If your team doesn't have a Julio Jones I strongly suggest you try to get one.

Playing on turf, in perfect conditions in Houston should give a well-rested Jones the opportunity to show out on Sunday night, even if New England shows him extra attention. There may come a time during the game where the Falcons offense sputters for a drive or two, but all it takes is one slant route to Julio and a couple of broken tackles to fix that. It also helps when you absolutely have to make a play to have a guy as tall, physical, fast and athletic as Jones who you can chuck it up there to and just let him go get it.

Let's not forget that even in that loss to the Seahawks earlier in the season, even as poorly as the Falcons played at times, if either Richard Sherman doesn't grab Jones’ arm and or the ref actually called pass interference, the Falcons may well have come back and won that game.

Jones is like a human tiebreaker. With Rob Gronkowski on IR, the Patriots don't have anyone comparable on offense. Martelleus Bennett can be a matchup nightmare, but he ain’t no Julio Jones, bruh.

Matt Ryan under pressure

Now I actually believe the Patriots will blitz quite a bit and show a lot of 3-4 on early downs against the Falcons. If there is one thing that can bother Ryan, like most quarterbacks, it’s pressure. Which is not to say that Ryan folds under pressure. For the most part that isn't true. Ryan actually does a good job moving around in the pocket, at times escaping the pocket to avoid pressure and deliver the ball down the field.

When you look at some of Ryan's worst decisions, however, they almost always come when he is under duress. That is pretty much the only time when he is ever careless with the football. If he doesn't feel pressured, he will just patiently wait until someone comes open or throw it away.

If the Patriots want to force turnovers, then bringing additional pressure is probably the only way to get it done, so I expect that you will see New England coming from everywhere at times, trying to force one of those occasional brain farts out of Ryan.

That will make the Patriots vulnerable to those deep shots I mentioned earlier, and I expect Ryan to take them early and often. Doesn't matter if he only hits on a couple. A couple big plays in a game like this can be the difference, especially if they come early on.

Falcons defense vs. Patriots offense — Thrown off schedule

I expect that the Patriots' offense will also move the ball up and down the field on the Falcons, but they will have to do so meticulously. The Falcons are going to be flying to the ball, and they’re very good tacklers. They also aren't prone to letting a lot of balls get thrown over their heads. That means the Patriots are going to have to grind all the way down the field for most of the game.

The good news for New England is that the teams is made to do just that on offense. They can run the ball with Blount, White and Lewis. They can also kill you on underneath routes with Bennett, Julian Edelman and Danny Amendola.

What the Falcons have to hope is that at the right time they will be able to send pressure to knock the Patriots off schedule. Even with as well as Brady has played this year — and he has been outstanding — if the Falcons get the Patriots into third-and-long where they can really put all that speed on defense to good use, I believe Atlanta will win a lot of those battles.

Brady, again like most quarterbacks, does not like to get hit, so it will be incumbent upon the Falcons to get heat on him one way or the other. And that brings me to one of players to watch for the Falcons on defense.

Dwight Freeney is going to be a major factor in this game.

Freeney has now had two weeks to study left tackle Nate Solder. He will also be facing Solder on turf, which means Freeney will have great traction for his explosive get-off on speed rushes as well as good footing to execute spin moves to great effect after he gets Solder bailing out of his stance.

I'm betting that in those two weeks Freeney noticed the same thing I did about Solder: starting off with power and then turning it into a speed rush gives him problems.

Once a rusher feels Solder anchor down on the power move, he can quickly escape off the block to the outside. Freeney is long in the tooth, but he can still give a tackle the business when he has time to rest and prepare. I expect to see him all over Brady all night, especially since this might be his last game in the NFL.

I'm not just talking sacks, though I think Freeney will get at least one. I'm talking about not allowing Brady to feel comfortable in the pocket with just a four-man rush. To beat the Patriots you have got to bring the heat on Brady, there really isn't any other way.

I'm still trying to figure out what kinda dirt weed the Steelers' defensive coordinator was smoking when he decided he would use so many three-man and even two-man rushes against Brady in the AFC Championship. You have to at least rush four most of the time, maybe more at some point.

The "maybe more" part is where Brian Poole comes in.

See, Poole does a little bit of every thing for the Falcons. He can cover and he can hit, and the guy can blitz his ass off. He has a knack for disguising when he is coming and he can get from point A to point B in a damn hurry. I doubt that the Falcons will blitz (where blitz here means send more than four players to rush the passer) much more than a handful of times, kind of like Seattle in its earlier win over the Patriots this season, but when they do decide to unleash Poole, I'm expecting there to be fireworks. Just ask Aaron Rodgers about him.

I really like both of these teams, but there can be only one winner on Sunday. After watching the film and thinking it through, I just feel like Atlanta is the better team top to bottom, especially with Gronk out. Even a future Hall of Fame coach and a future Hall of Fame quarterback won't be able to overcome that.

Oh, and I just want to point out that Joel Thorman and I tied for first place on our SBNation “experts” panel for picking games during the regular season. We are currently tied in the postseason as well ... and he picked New England. So yeah, these are high stakes for me, but I feel confident in my prediction.