Berkshire Hathaway's Sue Decker on the absence of Charlie Munger: His impact will go on forever

The absence of long time Berkshire Vice Chair Charlie Munger will be felt at this annual meeting here. It’s something that the board has been preparing for with both Warren Buffett and Mr. Munger working well past the age of 90. Joining us right now with what is ahead for Berkshire Hathaway is the company’s lead Director, Sue Decker. Sue, great to see you, Great to see you Becky. So this is a different meeting and it does have, I think, shareholders focused on what the future brings for, for, for Berkshire Hathaway. Where are you all in terms of the board on all of this? How are things going and what do you think about this, this year? Do you mean as it relates to Charlie? Yeah, Charlie not being here. Yeah. Well, first of all, it’s sad. He’s, you know, a legend. And and also I’ve worked with him closely on the Costco board as well as Berkshire. So it’s it’s sad, but I do think that he, Warren wrote in the annual report a lot about his being an architect of Berkshire. And I think what that means is that he’s left a blueprint that guides us in decision making. So he may be absent, but his his impact will go on forever and I think that so his seat will be empty. But I think he’s he’s all around us. He’s in the air that we breathe. He’s in the DNA of Berkshire. What? What sort of things come to mind when you think about the blueprint that he laid out, what what sort of rules are or charlieisms that you kind of keep in mind as a board member? Well, I think, I think one is just the, the old ABC’s, the absence of arrogance, bureaucracy and complacency that he tried to instill when he talks about how you should run a business and the the ills that have that grip a lot of other companies when they don’t do that. He’s always been, you know, an advocate for frugality for ethics. Hard to separate those same principles from what Warren’s been talking about. The two were were very aligned on all that. But I think those those principles are really part of Berkshire’s identity. So. So there are some issues facing Berkshire Hathaway and Warren was very clear about it in the letter that he wrote to shareholders this year. Just in terms of disappointments on the earnings, he would point out both Berkshire Hathaway Energy and BNSF and and there are some different problems that are facing each of those sectors, each of those industries and each of those parts of the company. When it comes to the energy front, how, how do you kind of look at the liability that’s out there? How do you look at the lawsuits that are being brought and and also this confiscatory nature and and regulatory creep in some states. Yeah, you know it’s I think there’s two things to think about when we think about Berkshire Energy. One is just the liability for the wildfires in Oregon and we’ve reserved about 2 1/2 billion. There’s not all that on the balance sheet now because we spent some of it, but that’s roughly what we estimate the impact will be. Of course, we don’t know, but over time we will become more clear. But I think that’s something that Berkshire can easily absorb. And I think the bigger question though is what does this mean in terms of what which Warren wrote about. But in the annual report it which is that for years and years the utility business has been guaranteed a rate of return based on a rate base. And you know the regulatory framework, a partnership with the regulators who say yes, you should be able to earn a a a small but decent return exactly. You’re going to be investing money on the capital expenditures exactly. And so the certain types of capital expenditures can be included in that rate base and others can’t. But if you start taking climate change into effect it, you know that either needs to be fully reflected in a rate base or somehow it needs to be borne by society as a whole. It can’t really be borne by the electric utility industry. So I think it, you know the the near term issues are not so significant for Berkshire. We’ll get through it. It’s a huge company, trillion dollar balance sheet. So it’s going to be manageable. But I think the bigger question is how, how does that relationship evolve between the government and utility sector? And I think it’s also strategically quite relevant right now because of the world of AI and computational power that is so significant that that the draws on the electrical grid are just going to get more and more significant over the next 5-10 years at the data centers and supercomputers now. So there’s this needs to get worked out. There has to be a otherwise the there’s going to be a much more risk averse reaction by the utility industry to invest new capital and I guess that could be limiting also in terms of what it means for AI and the power of computing down the road too. Not to mention the E VS that we are planning to drawing off the grid too. Absolutely. What what type of expenditures would it take to be able to keep up with all of that? Gosh, I don’t know but I I’m just look look at Q1 for meta and Google Alphabet and Microsoft. I think the collective CapEx in Q1 was 30 billion for those three companies that’s Q1. So and I I’ve read recently that some are predicting that data centers you know will cost 100 billion in 20-30. And so it’s a huge amount of capital that is going to be wanting to go into this industry to help fuel this, this platform shift to AI. And I think it’s it’s important that the regulators figure something out here that will incent the right behavior. Hey Sue I’ve, I’ve looked through a lot of questions from shareholders and there are some questions that recircle resurface every year. One of them is the dividend. But that’s a a question that you you hear in more force now, especially as people start to wonder what is the ability of Berkshire to be able to invest and beat the S&P 500. As the numbers get bigger, it’s tougher and tougher. I love large averages. It’s hard to find deals that really move the needle for Berkshire. Do you all talk about a dividend potentially because even Warren in the letter this year says we don’t pay a dividend right now, which I think made people what question, OK, is he opening the door for one down the road? Well, I think down the road is a long time and anything could happen. I think so far clearly the, the, the, the issue that it’s getting harder to generate uses for all the cash is not brand new. And so back in I think it was 2019 we started doing more systematic share repurchases for the first time. There’s been some episodic ones with families and things like that before, but in the last you know four years if you look at the treasury stock line and the 10K, you’ll see that it’s I think we’ve purchased about 7580 billion dollars, it’s in in the last four years. So we’re starting to pursue that. I think that is a form of of cash return to shareholders that is tax efficient. It’s also doesn’t it’s completely discretionary in any one year. So you know once you start a dividend it it can be pulled but the the the goal is never to stop unless it’s a special dividend that’s. Yeah. So now that’s as I say I almost think in in the hierarchy of choices a special dividend is something in between something on the Costco board that we’ve employed really successfully. But that is not something that we’re we’re discussing right now. And you know and over time things could change of course, but I think the redeploying the capital through share repurchases, the preferred method at the moment.