He began the meeting by responding to questions about Wells Fargo’s fake accounts scandal with strong criticism for how the bank handled the situation, saying it was a “huge, huge, huge error” if the company ignored calls from employees reporting misconduct.
“They totally underestimated the impact of what they had done once it became uncovered,” he said. “The main problem was that they didn’t act when they learned about it.”
Buffett placed blame on Wells Fargo’s incentive system, which paid, graded and promoted workers based on the number of services they sold to customers.
“It turned out that it incentivized the wrong kind of behavior,” he said.
He added the company had become too accustomed to paying fines much larger than the $185 million it paid the Consumer Financial Protection Bureau and didn’t properly assess the severity of the misconduct.
“They measured the seriousness of the problem by the dimensions of the fine, and they thought it signaled a less offensive practice,” he said.
The annual powwow was attended by thousands of Buffett investors and disciples. The annual Berkshire Hathaway meeting has been dubbed “Woodstock for capitalists.” Buffett, 86, was ranked this year by Fortune magazine as the world’s second-richest man, worth an estimated $75.6 billion.
Even the Oracle of Omaha admitted he’s made mistakes. He was critical of himself while speaking to shareholders as he and Vice Chairman Charles Munger admitted they made a mistake not investing in Google early, despite his subsidiary Geico being an early user of its ad service.
“We were close on seeing the impact,” Munger said.
Buffett marveled at modern tech companies and their ability to accumulate market value with minimal fixed assets or capital needs.
“The five largest market cap companies in America are worth $2.5 trillion and require no equity capital. That is an extraordinary change from the past,” he said.
He said this change in market led him to value his investment in IBM less and seek out more stock in Apple.
“We do view them very differently,” he said. “I think Apple is much more of a consumer products business.”