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Warren Buffett's Full Interview on 2016 Election & More

December 18, 2019 21:03 PM UTC
- Updated February 18, 2020 16:13 PM UTC

The Oracle of Omaha, Warren Buffett, talks 2016 election, his acquisition of Precision Castparts and activist investors.

Transcript
you run a giant conglomerate about to be expanded further by a big acquisition of Precision Castparts. Um, and these businesses in your in your company operate in about every industry. You had a board of directors meeting in Dallas about 10 10 days ago, and you're entitled to tell why you had it in Dallas. What did you tell your directors about the health of the economy, as seen by this huge block of business? Some event, they tell us, because they're coming. We have reports on a big businesses, but the interesting thing about the economy is that it if you get almost the same report ever since the fall of 2009 and it really is has been growing is growing at a couple percent a year, which is not bad, as we might get into later. But people have gotten more optimistic at times I've gotten, they thought about double dips at times, and then they thought it was accelerating. Our experience have been that certain areas have accelerated a lot like autos recently, but the overall game keeps running in about 2% per year, and that's been really quite steady. And that's what we see now, and, um, I assume that you see, I mean, how about housing? You've got big investments in house in one way or the other things picking up, Um, our furniture stores, air running. A good gains are carpets running a decent game. Brick has picked up somewhat, but it's so flow. But overall, you just see a couple of percent. I think the industrial areas slowed down a little bit. If you look at our cutting tools and that sort of thing on dhe, they tend to be kind, are really time basis because you don't Nobody loads up on cutting tools on. There's gonna be a big speculative boom in them or something. They so, uh, way just keep seeing a couple percent and is disappointing. Thio the least. Not like you think it's good. Well, let me let me give you a figure. I mean, people don't get disappointed in 2% the population and I say Stroh's about 8/10 of 1% a year. There's about 1/2 a percent from burst over death, about 3% 3/10 of a percent from Michael. So that's 1.2% per capita. You're getting. If you're getting 2% growth by the time you take off the 8 10 you take a generation, and the generation now is much more like 25 years. People have babies later. That means in one generation you're gonna get not even allowing for calm pounding. You get 30% gain in really output per capita. Now you start out. The U. S. Has $54,000 of GDP per capita. Take 30% more. About that means another 16,000 per person in real terms in one generation. If you take 2.7 people in the household, take 2.7 times 16 is 32 plus 11 $43,000 of household GDP gain in one generation. I mean, it's mind blowing. Our kids are going to live so much better than we live now. That's not so difficult. My family, my kids will tell you. But, uh hey, the, uh, the games, I mean everybody. Well, everybody in my neighborhood, I live in sort of a normal neighborhood, and everybody might ever It was better than John D. Rockefeller Sr lived in the year I was born and you know, everybody in this country and two generations, virtually everybody will look better than I loved it. Our country is a marvelous economic machine, and people talk about 2%. I think that's kind of discouraging, but it's miraculous what compound interest is over time. Well, you've now done as you've always done in these sessions. You've expressed your face in the U. S. Economy looking out there. Now, I'm gonna read Go back to the stock market here because I assume there might have been a little conversation at that board of directors mean about the stock market. Um, And I know you don't like to give, um, predictions about the direction of the stock market, but what can you say to us? It's crazy. The stock market's been crazy. In a sense, you don't think been created. Okay, well, right away that it hasn't moved around the stock market. Help it. The day to day movements are not that dramatic. If you look over history and the thing about the stock market, uh, in the 20th century, we had two world wars, a great depression. God knows how many reason sessions, flu epidemics, atomic bomb, you name it. The Dow Jones average went from 66 to 11,400. The stock market does wonderfully overtime because American businesses wonderfully overtime. I bought my first stock. Ah, in April of 1942. We were losing the war of that time. I mean, that was 45 months after the war broke on. Add the doll was a 100 you know, dollars. Whatever it is now 17. I mean, all all my life, I've heard people talk about how terrible things are you hearing in the political campaign. Now you make America great again. Great. Now it's never been greater at the It's ridiculous. Uh, let me just compare how we're living to 20 years ago. Just think of what the Internet does for me and writing an annual report. I want to get a fact here they're on something or the other. I used to go to the library or right away to some government bureau, you know, now I have it in 10 seconds. The world is changing all the time for the better. At it it gallops and one person's lifetime. I mean, I'm 85 in one person's lifetime riel GDP per capita in the United States is going up six for one. Just imagine if you told by my dad in the waiting room. You know that your kid is going to see a six for one increase in the average GDP. I mean, he thought the country already going pretty far. They discovered the auto in that airplane and few things they thought there was nothing left to discover at that time. Wave found it all, Uh, and that's the way people always seem to feel. But this country has never been anything like it. There ever will be. And we're gonna look back 50 years from now. 100 years now, I think this was the Dark ages. Well, let me switch now. Thio Topic where some people would say we have not do not have an improved situation and others would say we do have that has come combined topic of corporate governance and activity way have seen the number of accident except rise. I think you might even start off with the thought that if corporate governance was better, we wouldn't have as many activists. Would that be true? Well, if every company were being managed well, there certainly wouldn't be any reason for activists. There might still be a few, but there wouldn't be any reason for. But the truth is that, uh, some companies at some companies, the manager's kind of forget who that really working for that becomes their own playpen and hurt others. Management's there sometimes incompetent. Not we're not saying often, and you know it's the job of a board when that occurs to do something about it. And sometimes they don't. So there's a reason why activism makes sense in certain cases. I don't think the bulk of activism relates that the local activism just wants a cork it they want the stock to go up next week. And at Berkshire, I've always said we run our company for the shareholders are going to stay and not the ones they're going to leave. And you know, you've been finest companies in America. Many times are selling the discount for what they, uh uh are worth that moment. When I bought The Washington Post Company in 1973 boats stock in it, it was selling it 1/5. What the properties were worth. Cap cities at the same time was selling in 1/5 of what the properties were work. They were both wonderful companies, but the whole market was depressed. And so any time a stock is selling below, what could be realized for it is not a reason to go out himself. Sell the business. Uh uh. The activists want that to happen. And, of course, they've attracted far more money for management. So what was a relatively small little industry 10 years ago has become a big business now, And do you know, they're like sharks. They gotta keep swimming. And, uh so as they attract more money, they happen. They have to go after things and they stretch for targets, and, you know, you're seeing that. But there is a place for them in America. All American businesses are not being run in the interests of their shareholders with really capable management. And when that happens, changes needed sometimes board to do it. But other times they don't. What is your own personal appetite for joining with the activists? Zero. Yeah. Yeah. Uh, no, I It, uh uh, I don't My partner, Charlie Munger, told me 50 years ago. He says, if you want to guarantee yourself a life of misery. Marry somebody with the idea of changing them, he said. You will be miserable, the rest. So I'm not really interested in getting into that. It's so much easier just to buy in with a bunch of people that are wonderful people doing it, you know that have a common goal and join in the spirit, the whole organization. So So, uh, I'm just not looking for that kind of trouble. Just fill out that A thought of Charlie Munger there Didn't he also say that if you want to have a happy marriage, be sure to go in with No, he said, If you wanna have a marriage, that will last Not necessarily a marriage made in heaven, but just one that will last, he said. What the quality do you look for in a spouse? You look for beauty. Do you look for brains? You look for character, look for honesty. You look for humor. No, not at all. You want to marry the last look for someone with low expectations. He's a very practical guy now. A year ago, you made news at this conference by saying that Hillary would run for president and furthermore, that she would win. Since then, a lot of water has gone over the dam. Or maybe I should say a lot of emails have been stored in the server over the servers server, at least. What are your up to date thoughts about Hillary's prospects? I think she is by far the most likely person do get the Democratic nomination. I think she is the most likely person to be president. United States. And, uh Uh, no, I I think that And actually I saw some odd that, uh, were presented a day or two ago on on the probabilities. Uh, what were they? Well, I think she was 4 to 5, which was considerably better than anybody else on becoming president. I know. I think she is the most likely person to become president. Still a long ways off. But you can have Elvis. You have all kinds of things happen. But she's a most likely the Democrats are most likely to win if they get turnout in in 2012 a much better job than they had historically in bringing out their base. And if they remember, the lessons of that may be used the same people. The demographics keep moving in their direction. Uh, so, you know, they're probably at least at least 1/2 a percentage point. Better, maybe even a full percentage point. And that's a lot in elections. Better off just in terms of demographics than they were four years ago. But they do have, uh oh, a good many of their base have a low propensity to vote. And so you need an organization that makes sure you get your share of the vote up. Um, well, and how about the email controversy? Do you think that could maybe have been handled a little bit better? Yeah, it could have been handled better. Well, by the way, I guess during this election season, you have been really been had your time consumed by the fact that you're buying this big company of precision castparts. Have you really been bearing down on that? Talking to the CEO and so forth? Well, it's a big acquisition for us is $32 billion. I met the CEO on July 1st, amended for about 10 or 15 minutes. He actually was coming in to visit a fellow in our office alone. Stock is part of this portfolio. So I happened to be there. That was accidental. And I I thought I'd drop in and just see what this guy looked like. Yeah, as I was there for the last 10 or 15 minutes, and when he left, it just I could tell that this fellow would be able brought his business a lot better if he were private or under the under the wing of Berkshire. So I said to Ah, uh, Todd would then in the reason for the visit, I said, why don't we give him a call right afterwards and, uh, say if he would like an offer from us, we would make one, but we wouldn't make it unless theat any objection to it. And so we call them and, uh hey, check with the board. And he said, five, we're going to listen to an offer. So I met him that maybe 10 minutes at that time. Then he came up the Sun Valley where I was the only company thing. I met him for about 15 minutes. There, fellows get to the point very quickly that it's hard to make the conversation last. So, uh so I made him an offer. Ah, he said he'd take it to the board, and he got back in touch with me a little later. And he said they were couple members aboard the thought it would worth Maura And I said that was interesting. But way don't go up on price. So we made a deal that any man I have probably met this man who was upstanding manager. It's just our kind of guy are gonna give his name. And, uh, I probably met him. Maybe a total of 80 minutes now, So I really we didn't get one piece of information way do no due diligence. My due diligence is to look into their eyes basically, and, uh oh, wait, we do. How do intelligence way? Do not We did not have a figure that was not public. Uh, the one thing I asked him is I asked him if assuming we treat you right, uh, do you have any intention of retiring at 65? Because, uh, I'm totally dependent on him. He doesn't need me. I need him. And so I really have to know that I usually have a judgment about that. Anyway, just from this talking from now. I'm just actually, we own a company called Guarantee. Ever heard of your animals? Those of you who have young get Ah, the, uh, the CEO of that company, which we bought we bought in 2002. He was 76 then. Ah, he's gonna be 90 on March 16th. And, uh, I will guarantee you that he is not a thought of retiring. And I know you feel good about it. I like that kind of guy. Yeah, right. Oh, my. My thoughts on retiring or sort of a moving target. I, Charlie's 91. He'll be 92 on January 1st. And he's my canary in the coal mine. I must say that people keep saying to me Now, what can you tell us about the next CEO? Berkshire? And my first answer to them is Have you thought about the timing? I said, you gotta have. You gotta have a timing in mind if you were to pick somebody right now, it might be X. But if it's 10 years from now and I personally believe that Warren will be CEO, then unless he has physically or mentally declined, I don't see any sign of I said, 10 years from now that other guy might be completely worn out. I gotta write a story on that. I'm writing it in a fact here by telling that when I want to come back to politics, um, the Republicans, how is this crazy contest for the Republican nomination going to turn out? And is it going to be settled eventually by what you and I grew up with, which was conventions at which it was left to be decided at the convention? It could happen, You know, it could happen that back in 1924 I think the Democratic Convention went 100 and three Balance on Duh. Ah, and the two people who got a combined 80% on the first ballot, neither one of them even ended up with the vice presidency. So really strange things happen. Conventions. I don't Have you ever been Denny? But they changed in somewhat over in complexion over the years. But this one could change back. Somebody could go there with a plurality, but not a majority. So it it will be. I mean, this is something we haven't seen before. When you've got three non politicians with an aggregate of 50% of the vote on the Republican side And, uh uh, what we're really saying in government right now. And I think it's manifesting itself a little bit. And in these, uh, the base and what's happening in the polls now, you know, we will always thought in terms of two party government, but we now really have three party government, and we're seeing that in the speaker selection. I mean, you, you you may have a I'm only calling themselves Republicans and Democrats, but there's a distinct party now within the Republican Party, and you have three party government and the traditional Republican Party as a plurality. But they do not have a majority, and that's something we really haven't come to grips with much in this country. We are not in terms of culture in terms of rules, terms of a whole bunch of things. We have been set up for two party government, and we don't know how to deal yet with three party government, and that's accentuated by the fact that in the Senate, you know, they changed the closer rule in 1975. That wasn't a closure to speak up before that. So now you can have a majority in the Senate. But you still have 1/3 party, which is the closure vote. You can call it needing to get to 60 votes for anything that's important. So we're actually dealing with a governing situation that before 1975 would not have existed in either house, and and we're struggling with it to imagine that you can't find it wants to be speaker of the house Here. I was just starting to be. My dad was in the House of Representatives. I mean, Sam Rayburn was speaker of the House, and I mean, he was one powerful guy. And of course, the speaker is number three in line to be president. So it's a it's really you're witnessing sort of a, uh, a quiet revolution in terms of of how America will be governed in and we may go back to the old system. We may find a way that that we can get it back to two parties, but it is not a two party system now. And do you have any anticipation of how it's going to turn out? No, I know because you have. You don't have Ah, uh, three parties that are going to cooperate with each other. I mean, it is their differences are not really very negotiable. And it's it's a great spectator sport. I wouldn't want to be a participant, but I like it is a spectator sport. Okay, this could be my life. The last question we're going to turn to questions from the audience. So you could be trying to attract attention. Somebody with a microphone, Um, in the vastly just centralized operation that has burnt your half of halfway. What happens when you have a subsidiary being run by a CEO? Not up to the job. How do you get that person out of there? And how much of a personal part do you play in the action? Well, if you have 80 or so subsidiaries, the really all report to me, you know, basically, and and, uh, our batting average has been good about getting people. And of course, we don't get rid of that 65. So I know people for all the work. I know when you hit the junkie, but Bircher, you're ready for the junkie believing so we Seymour is very safe in this job in 91. He I mean, you know, I will, Uh uh, So but occasionally we need somebody different. Sometimes they just aren't up to the job. Sometimes, actually, age is a factor. And that and that's a very tough one. Age is a factor because since we have no retirement age, when I go to see someone that's been a friend for decades and done all kinds of things for May I can't go and say, Well, you know, we have this mandatory retirement age of 70 or something, and I'm sorry. I know you'd be good for another 20 years. It isn't true. You know, I have to say, you aren't what you were before. I don't say it that way, but that's the message I'm delivering. I hate that on, so I always do it too late. I procrastinate, and I say, Well, you know, we got 80 companies seven behind, right? Okay. It all went down a lot. I come up with any damn thing I need to, you know, to avoid the unpleasantness, but I do it myself, and it's usually not as bad as I think it's going to be but But, uh, it's the job is mine of making changes in management. And, uh uh, it's I would give a lot do not have that job, but there really isn't anyone. I couldn't turn it over to, uh, we had one company. Ah, run by a guy that Charlie and I both loved. I mean, the guy was just wonderful. We didn't see him very often. One of our managers I've seen for 10 years uh, you made me go on. There's probably something I just take what little figures should we said, But with this month. But we had this one guy and he was a wonderful, wonderful, wonderful guy. Then all kinds of things for me and Charlie. And he developed Alice numbers and, uh uh, we saw very infrequently, and I think he sort of got himself up for the event, if he would say so. So he really ran this company with Alzheimer's for for a couple of years, and, uh, finally it became obvious. Uh, I really thought that was a pretty good test that you should buy companies that are good enough so that the guy with Alzheimer's it's a new yardstick. We have a Berkshire. I hope they fly it with a CEO someday. I'm fucking up this new yardstick now, Ready for our first question from the audience over here. I think we got good morning, Warren and Carol. Thank you very much. Thank you. You are high cake. Gutman from UPS. And I was curious. We spoke a bit about activists and I wanted to get your opinion and maybe insight on what appears to be targeting of female run companies by activists. And what we in this room can do to combat that because I'm very good efforts have been made it especially in the DuPont case yet. Uh, it seems like sometimes the odds were stacked again. So I would love to get your insight on that. Yeah, I I don't know that what the statistics would be on that, But what The activists really thereafter? Publicity's e. They're after results to some extent, and they're they're after attracting more money. I mean, these guys get paid very often on something that's a fee based on both assets management assets managed and performance. And if you can get 20 billion under management, New charge two and 2020 really doesn't get to be that important. That, too, is $400 million a year, so attracting money is enormously important to anybody. The investment business and different styles become popular from time to time, and a soon as they dio people Russian just say, That's my style of the contract management Carol. I had a friend that described Wall Street in terms of the way it operates is having the innovators, the imitators and the swarming incompetence. Essentially, that's way money attraction is. I mean, you know, Hedge Fund started out they really didn't start out with a W. Joe Carroll made him famous for Jones, and and once it was when people start assuming good results are attractive with a form as opposed to the ability of the person running it. But they think the form itself will create wonderful results. Everybody's gonna take that form, and in the last couple of years, a lot of a lot of forms have disappointed. And when hedge funds have disappointed and so as forms disappoint, money runs around and people run around promoting, uh, some other form, and it becomes the flavor of the day because there's a lot of money out there, and they're willing to pay a lot of very high fees for the promise of performance. And you don't really have to ever particularly deliver. I mean, just the promise will last long enough to get you rich in your Children, rich in your grandchildren, rich. So, uh, it's nice if you perform on top of that right now. Predicting the last two years activism is assailable form and therefore get sold, and Wall Street sells it. Uh, I don't know whether there's been a picking out of of female run businesses, but I would say there certainly has been a picking on a really pretty decent and well managed businesses because they run out of the other kind. You know, I mean, there's only so many that are being mismanaged, and and, uh, that doesn't stop the people that have now hundreds of billions of dollars to invest in the form. So I I've had one or two friends that have called me about about on activist surfacing, and I tell him, uh, just say you're going to basically you're going to run the company for the shoulder is going to stay in rather than the one that's going to get out on and then and and mean it and follow it. And don't try and do something that some little wrinkle here there supposedly satisfying because it isn't gonna satisfy many ways that I say. If you find you get desperate, send them over to Berkshire. I said, we love activists. It's just fun to joust with him and everything. They're not gonna get gonna get anyplace. And so, uh, some maybe, you know, maybe we could be sort of a rest home for activists and then but, uh, and of course, you go one step further. It's in Wall Street's interest to stare Management's about activists. I mean, you've got both investment bankers and law firms that, you know they're not dying to have an activist call on your door, but it doesn't cause him to break out in tears, either because you you take them on and then they get all involved in the strategy, and it's their job, to some extent, to make you worry more than you probably shouldn't even worry. I mean, it's a it's a commercial world out there in case you haven't noticed it. And, uh uh, There are a lot of companies that I hear about that are paying significant amounts. Two people. The sort of strategize has gotta keep activists away. The that's way to have me back of us away is to perform reasonably well in your business and also to computer Kate. Well, with your show over, I mean, in the end, you've got a bunch of owners out there and unbalanced. They're going to be on your side. After all, they've got their money with you. Ah, but they, uh they should be treated as partners. And that's one thing we've always done it, Bircher always will do. And I think I think, uh, did you? Well, I'll give you one illustration. We had a boat a year ago. Somebody put on the ballot that Berkshire should pay a dividend that were kind of nasty about it. They said, You know what? Warren doesn't need one, but but the rest of us do. So why don't we vote, have a dividend and which was fine with us. So we put it on and we did not campaign. And with over a 1,000,000 shareholders are shareholders voted 47 the 1 47 to 1 against paying a dividend. Now that on Lee comes through years of communication and explaining toe white dividends really don't make sense in our case at this time. And, uh, shareholders will be on your side, but you shouldn't expect him to only be on your side when you're in trouble. I mean, you want to keep communicating. You really have to have a partnership attitude and you have a partnership attitude. I think it gets through to the hair over. Okay, Another question. Over here. Over here. Good morning, Warren. Linda Addison Norton Rose Fulbright Last year, Carol Loomis retired from Fortune after 60 years and had to explain and defend her decision to retire. He sure did make well, and that was what I was going to ask you. You have some very unique and refreshing views on retirement. Did you give Carol any advice and did she take it? Well, those are two different questions now. Bear in mind that she gives me advice that I don't take it, so it's perfectly understandable, but exercise Civil rights, uh, the, uh, well, I think it's I think it's a terrible mistake if you're the kind of business work. You could do it. I think it's crazy and be crazy for me too. Leave my job. Something I could do it. I mean, if I quit today, I see these people. They spent the whole week planning their hair cut. That is not my idea of living. You know, uh, I unfortunately, in a business, you know, my, my my muscles or go on My balance is my stamina is going, but it doesn't make any difference in what I do. So I'm very lucky that way that I was. If I hadn't stepped in a professional heavyweight boxer, which was my only choice, I think it would've been a whole different game. But this game, it really doesn't mean I don't understand. I tell the students when they come to see me, I got 40. I gotta eight schools this Friday coming of 160 students. And don't take the job that you would take if you didn't need a job. And that's what I've got. I made it. And you want it. You want to be doing something you would do if you didn't need the money. And you know, most people don't need the money. But if you're in the position where you don't, you should be doing what you would do if you didn't need the money. And I would rather do this than anything in the world. I'm having fun. I mean, I don't My Social Security check is coming every month. I mean, I do not need this, but I I think I do Carol the book Tap dancing to work. I tap that ass to work, and she knows I do. And you know, there's nothing more exciting than the to get there and and find it. Some company weren't even thinking about a week ago that you might buy for $32 million in the making aircraft parts, and it just doesn't get any better than that. I'm not sure you answered her questions about you. Well, I I just I talked it through with Carol, and I want to make sure that she had a chance, you know, hear all the arguments throwing con, but the thing about what she's done to, she can write if she wants to. I mean, she did. It was not that they took away a pen and pencil from her, you know? And so if she wants to write chicken right and she can write on subject she wants to write on and she can probably getting published any point. So, uh, riding his hard work. Go on. And I still have the editing of the annual report. That's true. She added the annual report. So she just correcting my errors is probably take six months of the year. On the other hand, other six I tried to take. Why didn't I convince him that, right. Well, uh, it I can see where it might be more fun. I know something. You want to keep writing even to start picking your own subjects in a point. I mean, you had a great latitude in doing that. A fortune, of course. But, uh uh, she had a very, very good job. If I didn't have a job I had, I would have liked her job and vice versa. Well, hers paid better, actually. Yeah, OK, another question. Oh, where Over there in the back here. Weren't. I am joined Bradford on the CEO of a company called Social Finance. So fi and we work in Silicon Valley and intact and I'm interested to see what you have to say about all the unicorns in Silicon Valley and if you will ever participate in things like uber Airbnb. Um, and there's a lot of discussion about out there about the bubbles coming, the bubbles not coming, the VC pitting against each other. And I just wanted to see what your what your take on that is. And then for a bonus round, what would you do about the Syrian refugee crisis? Because I think it's important I'm gonna filibuster of the first. Uh, well, we have never that I can think of, uh, bought into start ups or anything of the sort. The, uh we love the fact they're occurring. We recommended Airbnb, for example, for our shareholders of the meeting this year. Just the hotels were pushing so hard on price. So, uh, I love what they're coming up with, but I don't bring anything to that game at all. I mean, and and the valuations tend to be, uh, you know, nosebleed by our standards. Uh, I want to buy a very big, very solid businesses that I know will be around for 50 or 100 years and by about a reasonable price. Have a manager running and then just go back to drinking Coca Cola. And he's a Venus or whatever it may be. So I I have no ambition to be some venture capitalists. You know who's getting promoted on something that I wouldn't fully understand and with the whole idea of ah, Siri's of offerings, all of higher prices and consecutive rings of offering that it's just a game that that doesn't appeal to me. But it's where a tremendous number of interesting things are going to come from. I would I would, uh, I would not be critically good about, uh uh uh, I see Jenny here, the Tom Watson one time said, Uh uh, I'm I'm no genius, but I'm smart in spots and I stay around those spots. And so both Charlie and I try to stick with things we feel we understand. We feel we understand this fellow with the, you know, with the airplane parts businesses, and we've been around enough so that there's a high probability where rights not a certainty. But once you get a dare being beer, you burn. You know I'd be going to lift and set of uber. And, uh, I don't bring anything to that game that hundreds of thousands of other people might bring more to the game with Syrian thing. I I don't really have a good answer on that. For one thing, I don't have a little fact by a long shot, but, uh uh, I, uh I did not want to tackle foreign policy. I'll take domestic policy for and one that I believe we have to quit time And Warren, as usual, we really take Thank you. Thank you. Go.