on incentive comp BUFFETT: But [Ted and Todd] are perfect, and we pay them each a salary of a million dollars a year, and we give them 10 percent of the amount by which their portfolios beat the S&P. So that if they beat the S&P by 10 points, they get one point, for example, and we get nine points. But we do it on a three-year rolling basis so you don’t get the seesaw effect. And each one gets paid 80 percent based on their own efforts and 20 percent based on the other person’s, so that they have every incentive to operate in a collaborative way rather than sit there jealously guarding their own ideas and hoping the other guy doesn’t do very well. -- WARREN BUFFETT: Well, we’ve always been more concerned about how our record is achieved than the precise record itself. And with both Todd and Ted, Charlie and I were struck by, not only a good record, but intellectual integrity and qualities of character, a real commitment to Berkshire, a lifelong-type commitment. And we’ve seen hundreds and hundreds of good records in our lifetimes; we haven’t seen very many people we want to have join Berkshire. But these two are perfect, and we pay them each a salary of a million dollars a year, and we give them 10 percent of the amount by which their portfolios beat the S&P. So that if they beat the S&P by 10 points, they get one point, for example, and we get nine points. But we do it on a three-year rolling basis so you don’t get the seesaw effect. And each one gets paid 80 percent based on their own efforts and 20 percent based on the other person’s, so that they have every incentive to operate in a collaborative way rather than sit there jealously guarding their own ideas and hoping the other guy doesn’t do very well. So it’s a — I don’t think we could have a better — it’s the same structure on pay, basically, that we had with Lou Simpson for 20-some years, except he did not have a partner. To the extent that they employ people underneath them, that comes out of their performance record, and it’s worked far better than either Charlie and I had hoped, and we had pretty high hopes. We had 1 3/4 billion with each of them at year end, but we’ve added another billion each on March 31, so they’re running 2 3/4 billion apiece.

Lately, I'm thinking a lot about AI, the market, and trading edges. What will probably happen? My base scenario: What we can see with AI in general is that things are changing quickly. We also know that edges do appear and disappear. Of course, it depends on whether they are beta-driven or alpha-driven. Beta-driven edges tend to stay longer, maybe the factor is getting weaker over the long term. Alpha-driven edges are more the competition game and they are getting arbed away with the growing competition. I believe that in the age of AI edges will disappear much faster, especially simple alpha-driven ones. They'll be exploited quicker to their liquidity limits. And trading broad portfolios while working on new edges in a semi-automated way is the only way to survive going forward. The market is already pretty competitive, and it will be more competitive than ever. Who won't use AI heavily will have hard times.