forgetting about the profit that shareholders receive? Institutional owners should focus on these three aspects of the company's management.

Charlie and I think we would make more money if we could act incognito. You have no idea how insignificant our influence on management is. The management of companies is different people, with their own characters, states, and opportunities. We do not specify what they should invest in, and it does not matter. After all, we do not buy or sell. If the price of the company's shares goes up, we won't win anything. Nothing good will come of it if we drag managers on their backs.

But we have a very hard time in the public arena, where people don't want to understand it. Yes, I own 99% of Berkshire Hathaway. But, if there is such an opportunity, then I prefer anonymous purchases.

We have asked for confidentiality, but the US Securities and Exchange Commission does not always listen to our requests.

The role of the passive investor: large institutional investors must act and behave like owners. The most important point is whether a good leader is at the head of the company? Isn't the freedom given to him too great, even if he is an experienced manager? An executive director can only be stopped by other company leaders or owners ... and the board of directors will only do this if the owners point out mistakes to him. Sometimes company executives take actions that are economically unprofitable, obeying primitive impulses. I think institutional owners behave better than 10 years ago.

Q: I'm from Omaha too. When I tell my friends about your modesty, they are amazed. Tell me what you think about wealth? How do you think your attitude has contributed to the success of Berkshire Hathaway?

Answer: W. Buffett is happy that he was born in the USA (he won the birth lottery, so to speak). In his opinion, he has all the qualities that help to succeed in a capitalist society. And most important of them is the innate ability to handle money. Society allows him to earn money, and he believes that in the end the money should return back to society. He considers a progressive income tax fair. Society helped him get rich, which means he should benefit from it.

W. Buffett talked about the impact that wealth has on people and on himself in particular. Money means freedom. He has freedom of choice. He doesn't want to be a landowner. Indeed, in order to organize the cultivation of even 10 hectares of land and maintain a certain order, a considerable time is required. He also has no desire to spend 4 years building a house. Mr. Buffett is quite happy in the house he has lived in since 1958-1959. Yachts also do not attract him - it's too troublesome. He needs money in order to do what he loves with the people he likes.

He is happy with his life. He warmly treats employees, and in 15 years not a single person quit Berkshire Hathaway. W. Buffett does not buy companies owned by people he dislikes.

If you ask Charlie why they were successful, he will answer that it was due to "intelligent decision-making" and the fact that they never depended on or looked at the opinions of other people. In addition, W. Buffett stressed that he was happy that he was born in the United States. According to him, it's like winning the lottery - 1 chance in 50. He has the right abilities to become successful in a major capitalist power, where the ability to properly use capital is in demand.

W. Buffett illustrated his statement by quoting Bill Gates, who once stated that "if he had been born several thousand years ago, he would certainly have become the prey of some predator."

As for the splendor of luxury, he is already quite satisfied with his life. Mr. Buffett warned students against imitating rich people. Don't do something just because everyone else is doing it. For example, he does not need a large yacht, because the pleasure and benefit it brings does not justify the hassle and expense associated with owning and repairing. However, wealth gives him a “major luxury”: W. Buffett does what he likes every day and feels much happier than most 74-year-old people. He also does not need a huge mansion. He prefers to work with nice people.

The liking seems to be mutual, as not one of the company's 18 employees has left Berkshire Hathaway's headquarters in 15 years. In addition, W. Buffett never makes deals just for the sake of money. It's as ridiculous as marrying for convenience if you have a huge fortune. Money gave him the luxury of choice. Wealth lies precisely in the wealth of choice.

W. Buffett remembered how he watched the fight of middleweight boxers on a pay TV channel. The viewing cost him $54.95. But is that the price? In the recent past, only a relatively small audience gathered in Madison Square Garden could watch such a boxing match. Boxers have benefited because, thanks to technological progress, their performances can be watched by millions of people.

Therefore, W. Buffett has a positive attitude towards a progressive income tax. Similar feelings, in his opinion, should be experienced by athletes: thanks to society, they receive huge fees, and in order to maintain this position, they must share their earnings with other people.

Question: Obviously, you will never resort to income equalization at Berkshire Hathaway. However, you are selling insurance products that help other companies equalize their earnings, or at least keep them out of trouble. Is there a contradiction here?

Answer: The idea of ​​insurance is to set aside some amount each year to protect yourself from a crisis that happens once every 20 years. The very nature of the insurance product is to equalize income. Let's take auto insurance as an example. You pay $400 (or $350 if you call Geico) to protect yourself from potential threats. Sometimes companies apply insurance incorrectly, but they themselves no service here. If you have concluded a deal for a “risk-free transfer” with an insurance company, if necessary, you get the opportunity to use its services. Berkshire has made two of the largest retroactive insurance deals ever.

The first was when White Mountain bought One Beacon, and the second was when ACE bought Cigna. The buyers each paid $1.5 billion to cut payments related to past bad experiences. Berkshire had more risk tolerance than White Mountain and ACE (both companies struggled to pay their deals). But our powers are not unlimited.

There have been several instances of zero-risk transfers in the US. But in the last five years they have been carried out very rarely, because the adequacy of the risks of the transfer must be confirmed by auditors. It's not just for bookkeeping. In general, the primary insurer and the reinsurer must understand each other and work closely together. If the reinsurer is killed, then the primary insurer cannot simply pass the case on to someone else. He will have to take into account the experience gained in the next year's quota. Today, this practice is quite rare, because due to the emergence of brokers, insurers are focused not so much on customers as on the number of transactions. No one cares about developing customer relationships. The main thing is the lower price.

Q: A few weeks ago at an investment conference with the chief investment officers of Barclays Global Investors, State Street and Vanguard, we discussed the use of derivatives (security derivatives) in portfolio management. Everyone knows that in the past, when acquiring certain companies, you often took risks. It would be interesting to know if you think that in today's environment, some institutions are able to control risk and have the ability to use derivatives to reduce it.

Answer: Berkshire uses derivatives. Basically, there is nothing wrong with them. Without derivatives, it would be more difficult to control risks. But all clauses in contracts are made in favor of traders, and not in our favor. Currently, there are no ordinary securities left. They brought very little profit, and therefore people come up with very complex derivatives.

Berkshire continues to deploy positions. Three years ago, the reinsurance corporation General Re had 23,000 contracts, and today it has only 3,000. Derivatives are very difficult to manage. After September 11, 2001, everyone suffered huge losses - both the owners of large equity capitals and the owners of large portfolios of derivatives (especially those with no one knows what is hidden behind). A company's losses are inevitably reflected in its profit margin, and so on.

Another problem with derivative securities is that the motives of the people who issue them do not always coincide with the interests of the companies. For example, one of the highest paid employees of General Re signed extremely complicated contracts that did not always benefit the company.

Finally, large derivatives portfolios are usually reflected directly in the equity structure. This means that the billions of dollars on your balance sheet are highly dependent not only on the performance of your company, but also on the performance of others (other equity holders).

"Derivatives are a bit like AIDS - it's not who you sleep with, it's who your partner slept with before you."

Q: You often stress the importance of investing in people you like, trust and admire. However, you were buying companies just a few days after you learned about their existence. When making an investment decision, how do you assess the business ability of the managers and owners of the company?

Answer: W. Buffett confirmed that he bought companies more than once after a short telephone conversation,