Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. We're here at the Berkshire Hathaway Annual Meeting. It's lunch time and I'm here with Josh Aguilar and with Billy Fitzsimmons, they are equity analysts from Morningstar. We're going to get their take on the first half. Guys, thanks for joining me.
Josh Aguilar: Thank you so much for having us.
Billy Fitzsimmons: Good to be here.
Aguilar: Thank you.
Glaser: Let's start with the dividend. There was a question on if Warren Buffett would ever consider a special dividend, and came down pretty close to no.
Aguilar: Last year was really interesting, because he alluded that he was a lot more open to that. This year he basically put the kibosh on it. He said they look around for opportunities, trying to create a dollar more for every dollar retained. He decided basically that the shareholders are overwhelmingly in favor of us keeping money and being able to allocate capital the way we think is best. I think the special dividend is a no, at this point.
Glaser: Billy, are you surprised that changed a little bit from last year, where he seemed open to it?
Fitzsimmons: Definitely. Last year the commentary was very optimistic. That was my initial interpretation. That surprised a lot of people. The cash balance has only grown since then, so it was going to come up again; but he basically nixed it. Kind of a reversal from some of that commentary last year.
Glaser: In a surprise to no one, Wells Fargo was a topic of conversation. They seemed to still really stand behind the firm, even with the continued problems. Anything in that commentary that makes you rethink the way Buffett is thinking about Wells Fargo?
Aguilar: It hasn't really changed. I think his point has always been, there are problems. They acknowledged the problems, the incentives were misaligned; but at the end of the day, they're working those problems. I don't think there's anything too new to that story.
Fitzsimmons: I'd say the same thing. There were a couple questions about Wells already. There might even be more the second half of the conference.
Glaser: All right, let's turn to Elon Musk and Economic Moats. This was one of the most spirited portions of the conversation here. Were you surprised that they may not see eye-to-eye? Musk said he doesn't think that moats are all that important anymore.
Fitzsimmons: Definitely. The Musk commentary is in direct opposition to what Buffett has historically preached.
Aguilar: I agree. There's basically a dichotomy between the old world and the new world, in some ways. At the same time, Musk's argument kind of misstates the truth. At the end of the day, innovation is the way to get to a moat. You can have proprietary technology, you can have patents, you can have brands that are a byproduct of that innovation; and I think that's an intangible moats source. How we look at moats really helps in this situation.
Fitzsimmons: I would just add that part of that question too, that was interesting to me, was they talked about how moats are changing. Technology is making moats erode faster. That was part of the question, too. That came up on Tesla's earning call, and Buffett kind of acknowledged that, too. He acknowledged that, yes, moats are changing. Technology erodes things that had historically been sound.
Glaser: Our colleague Gregg Warren asked a question about succession. If they're still going to have access to good deals after he's gone. There seemed to be a little bit of daylight between Warren and Charlie on that, with Warren saying no, and Charlie saying kind of, maybe. What's your take on that?
Aguilar: It's tough to replicate Warren, right. But I've always thought it's true that Berkshire will survive [after] Buffett. Gregg has done a great job putting a piece out there saying here's why we think that.
Fitzsimmons: I don't think so either. I know last year at the conference, when the question came up, Buffett just said, someone takes over, they break up the company, the asset prices go up, because it's valued separately.
You also have to remember that this business works, because you have all these components that work together. You have the float from the insurance. You have the utilities business that's now paying out a dividend. That came up as well. It's a special system that all works together, and that might not be a possibility long-term.
Glaser: Billy, Josh, thanks for talking with me today.
Aguilar: Thank you so much.
Fitzsimmons: Thank you, Jeremy.
Aguilar: Thank you so much.
Glaser: For Morningstar, I'm Jeremy Glaser. Thanks for watching.