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Tim Beyers: He felt like the cautious parent that was launching the teenager out into the world with a bunch of cash in their pocket and saying, "Please, for the love of God, don't blow this." That's what it feels like to me. Now, that may be overstating it, Dylan, but what I will say is in the letter, he points out that Berkshire paid the US government $26.8 billion, billion with a B, taxes in 2024, and that over the life of Berkshire, the company has paid in $101 billion in tax revenue. I think he takes that a little bit as a point of pride, but he's also pointing out, "Look, we are giving you resources here." Then you made some comments about, like, please don't forget that we rely on you, federal regulators for sound fiscal policy, we need you." Fiat currencies can be quite volatile, and the American economy has been stable for a really long period of time because we have a history of saving, reinvestment, responsible fiscal policy. It felt like I don't know that it's a lecture per se, Dylan, but it was more like, can we please just, you got the car. Please drive the speed limit. Please stay within the lines. Can we not have craziness. It was like please don't drink and drive folks. That's what it was.

Dylan Lewis: I saw a little bit of that, too, and I appreciate the pride that he takes in the corporate taxes they pay. It makes a lot of what we are able to do possible. I think he acknowledged that, too in the letter, the idea that, hey, America's story is an incredible story. Berkshire is lucky and happy to be a part of it, and we would not be able to be what we are without this system that we're able to operate within. What I do appreciate about Buffett is not only does he give that advice or subtly give that advice, he lives it out when you look at it.

Tim Beyers: He does.

Dylan Lewis: The company's balance sheet. He is being very careful right now with cash and where money is going. I think trying to live that caution that he is expressing in his letter, Berkshire's cash continues to hit unprecedented levels on the balance sheet.

Tim Beyers: You're not giving them enough credit, $334 billion, those are Doctor Evil type numbers here on the balance sheet. You're talking nearly doubling the cash position in Berkshire over two years. That's extraordinary, Dylan. That really is. This $334 billion. By the way I'm over here in Colorado, Berkshire shareholder here. I'll take a dividend anytime you want to pay it. You got a lot of extra cash. This is not happening.

Dylan Lewis: I hate to break it to you, Tim. It's not coming.

Tim Beyers: It's not. It's not coming. It's not happening. But yes, that's a lot of cash. It speaks to the efficiency of the business. But let me give you an interesting stat here, Dylan, that we can go a little further down the path, but total operating income at Berkshire has jumped up to 27%, $47.4 billion. I thought this was an extraordinary stat, 53% of Berkshire operating subsidiaries. I think it's about 189 companies under that Berkshire banner, 53% of them had earnings declines. They underperformed. That's extraordinary. They still crushed it because of the lizard. The adorable little lizard with the British accent, GEICO just absolutely destroying it.

He gave a lot of credit to Todd Combs, rightfully so by the way. Just taken over GEICO over the past several years, and GEICO absolutely crushed it during the quarter. I guess during the year, I should say, 7.8 billion in pre-tax underwriting earnings more than doubling year over year. It's a good lesson, and Uncle Warren did mention this in the letter as well that you need to let winners win. He didn't say that exactly, but just like he did speak to the asymmetrical benefits of finding winners. Berkshire has benefited dramatically from just asymmetrical winning. This quarter, probably more than most, if you have the majority of your companies underperforming and you still destroy it, that's because you have winners who are giving you asymmetrical performance.

Dylan Lewis: One of the other things that helped out, he was quick to point out, "I want you to focus on the operating income. However, we had a large gain in investment income because of the treasury bill yields that we were able to get on that cash. Not that I'm happy to be holding onto this cash," he points out. He would rather be deploying it. But there are only so many places he can put that money to work, and it seems like increasingly here in the United States, he's having a hard time with that.

Tim Beyers: Let's remember that the number of public company. We do have fewer public companies today than we used to have. There's that. We also have large concentrations. We have the Magnificent 7, for example. We have a highly bifurcated or trifurcated or quatrafriated. [laughs] whatever, however you want to split it up stock market in which you really have a very few number of just mega companies, and then a bunch of tiny companies, and then a weird middle. It doesn't make for great fishing for a company like Berkshire, which is trying to buy giants and then make those giants into mammoths.

Dylan Lewis: Looking at the letter and taking a step back. Was there anything that you were hoping that you'd get some commentary from this year?

Tim Beyers: Well, yeah, dividend, but that's it. I know that's not happening. The only reason I say that is because it's very obvious. If it were the case that Warren Buffett just had a large stockpile of cash, but he had more than enough ideas and we knew that cash was going to be deployed, then I would never ask for a dividend because he's a better capital allocator than I am. But there's so much cash, and there's no way that he can deploy at all. It feels like when you get to that place where you don't have to start a new dividend policy, you just issue a special dividend, like, "We got too much cash this quarter. I'm not going to be able to deploy this all." Then just issue a special dividend, Warren. You don't have to have a dividend policy, just a special one from time to time. I don't eat candy every day, but I like candy every once in a while. Come on, man.

Dylan Lewis: You have a little candy stash in the back of the pantry. You want that special dividend every now and then, right Tim?

Tim Beyers: Every now and again, why not?

Dylan Lewis: I will take the other side of that bet. I don't think that will happen. I think a lot of people would be very happy if it did happen. I do wonder, though, if we see an environment where rates come down and they start earning a little bit less on some of that cash. That turns up the temperature on that a little.

Tim Beyers: Maybe. To be fair, I love how honest Warren is, as well. Look, I'm needling, but in the most joking manner. Honest to God, if Warren Buffett says, "Look, I'm better than you at this, and I'm just not going to pay you a dividend. You don't have to be a shareholder, but this is my policy." I'm like, "I'm good. Fair enough.".

Dylan Lewis: We didn't get a ton of discussion of one of the companies that Buffett has been selling down quite a bit of to raise that cash. Apple only got a very quick mention in this letter. I think he was talking about the large, highly profitable companies that Berkshire owns a piece of, and they got a passing mention there. We didn't get a lot of commentary on thoughts on the business, but Apple out with some of its own news today, Tim, the company announcing it will be investing $500 billion in the US over the next four years, focusing that spend on manufacturing, also expanding out its workforce, hiring about 20,000 people. What do you make of this?

Tim Beyers: I think the most interesting piece of this is the factory in Houston that they are planning to stand up. I think it's roughly 250,000 square feet, and this is intended to be for, essentially, if I read it right, an AI server farm. It's to build out, according to the report I read for supporting all of the service businesses, including, Apple Intelligence. Here's what I think is happening. Dylan, you are seeing the beginnings of the next great Apple OS, and it is called Apple Intelligence.

Dylan Lewis: That's interesting, Tim, because I feel like the headlines around Apple Intelligence so far have been under [inaudible].

Tim Beyers: Terrible.

Dylan Lewis: Kind of a meh.

Tim Beyers: I'm not even going to say, meh. I was going to say terrible. I think they've been terrible in terms of headlines, but I think that that is what's happening here. I think the Siri name is destined to go away. I think they are going to double down on because the only reason that you would invest that money at that scale into Apple Intelligence is that you have a thesis that the way to interact with Apple devices is moving away from the screen in front of you, whether it's a handheld device or a Mac to full on Star Trek. Computer, I want to do blah, blah. Either voice interface or some intelligent interface. Apple Intelligence can be the portal to all Apple devices from here on. But if it's going to be that, you have to do what Apple is doing right now. You have to make it an extraordinary system that has a huge amount of compute power that can be deployed anywhere in the world at any time of day or night. Why would you build an AI server farm out in Houston, because you're starting down the path of making Apple Intelligence the portal to Apple devices. Now, it's going to take a long time for that to happen, but I think that's the only reason you do this.

You want to make Apple Intelligence a real serious embedded AI differentiator. That is where we're heading is AI as something, it is not a thing in and of itself. It is something that's embedded in an existing system to help you do something. The trajectory of the AI should be, and I think this is what Apple is showing us with these investments is more invisible over time, not less visible, more invisible over time, which just becomes part of the workflow. I hope I'm right about this because I don't see the point of standing up a huge AI server farm if you are not investing heavily in Apple Intelligence as a portal.

Dylan Lewis: Well, I was going to ask. I mean, we've seen Apple in the last five years grapple with their hardware manufacturing reliance on China and start to spread and focus on manufacturing in India and diversifying themselves away from that contract manufacturing model they've used for such a long time. Following your train of thought here, it seems to me like if they are going to push heavily into that space, those servers necessarily have to be in the United States.

Tim Beyers: Hundred percent they do. They'll be built on US shores. There will be some chip contract manufacturing. You're not going to get away from Taiwan Semiconductor forever. But the current administration and the prior one both were putting pressure on Taiwan Semi to say, "Come to our shores. Build more stuff here." I think you'll see more of that, as well, cause Taiwan Semi and Apple are tight partners. That's not going to go away, Dylan. But having said that, absolutely. Look there's $500 billion worth of investment here over four years. This factory in Houston is not going to consume all that $500 billion, It's going to consume a portion of it But not all of it.

There's going to be a bunch of manufacturing facilities, and you're probably going to see quite a bit of build-out of AI server capability, not just in Houston but in all parts of the country. I find this fascinating, but it is objectively, based on what we saw from Apple. This is a doubling down on the services part of the business, which Apple has said is important for years. Now it's going to be not just services, but AI-powered services. To me, I have no insider knowledge of this whatsoever, but it makes no sense to do that unless you're trying to make Apple Intelligence a default portal, like the way that you interact with your iPhone. To be clear, I don't know that that's a winning strategy, but I'll tell you what it is, Dylan. It is different. [MUSIC]. Google has started down this path a little bit. But if Apple gets ahead in this area, it is different, and it could restart iPhone sales. Sometimes different is better than better, and I think that's where Apple is going.

Dylan Lewis: Tim Beyers, we will send your dividend plea to Warren Buffett's office. In the meantime, you're going to have to settle for Apple's 0.4% yield. I hope that's enough to tide you over.

Tim Beyers: I can get a cup of coffee with that. Fair enough.

Dylan Lewis: Thanks for joining me today.

Tim Beyers: Thanks, Dylan.

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Dylan Lewis: Coming up next on the show, American pharmaceutical options for legally treating mental health issues could expand soon. MindMed is testing the effects of LSD on depression and anxiety. It is the first company to reach a phase 3 trial for this application. My colleague Ricky Mulvey caught up with MindMed CEO Robert Barrow to dig into his company's work and the future of psychedelics and mental health. Robert Barrow is the CEO of MindMed a company that's finding out how psychedelics and other novel treatments can help people with anxiety, depression, and even autism. Very exciting stuff. Robert appreciate you being here on Motley Fool Money.

Robert Barrow: Thanks so much for having me.

Ricky Mulvey: I want to focus on the anxiety and depression solutions you're looking at first. You have a novel treatment, which in some ways, is not so novel. LSD has been around for quite some time and right now, psychiatrists and mental health professionals have a toolkit, and primarily in that toolkit is SSRIs and talk therapy, that thing. But for our audience, how is the potential for psychedelics different from the current treatments we have for anxiety and depression?

Robert Barrow: That's exactly right. Look at the backdrop. The last real meaningful innovation in mood and anxiety disorders was in the early 1990s with the invention and introduction of things like Zoloft and Prozac. Now we have about a dozen SRIs approved for these sorts of indications. Over the period that they have been available, though, we've seen this exponential and just massive growth in the diagnoses and the impact of anxiety and depression, and other psychiatric disorders. Really, the meaningful opportunity, the leap forward here would be for a new mechanism of action that's never been approved before to treat psychiatric disorders.

The really clinically interesting dynamic is a single one-time administration that has both a rapid and extremely durable effect. Whereas for SSRIs and anxiety for benzodiazepines, patients need to continually take the drug pretty much indefinitely to maintain the effect, what we're seeing is that after a single administration, we get clinical effects within 24 hours really as soon as you can measure them. Those effects are durable in many cases for three-plus months and we haven't looked quite much longer than that yet, and so maybe many months longer than that. That trajectory-altering impact on these highly burdensome disorders is something that is extraordinarily exciting to us and extraordinarily exciting to the field.

Ricky Mulvey: For the listener, your company is the first company to get to a phase three trial to see how basically LSD can help people with anxiety and depression. You're fairly close to the finish line, and that's exciting. You also have an interesting situation in terms of who approves your drugs. We now have Robert F Kennedy at Health and Human Services and he said back in September that, "My mind is open to the idea of psychedelics for treatment. People ought to have the freedom and liberty to experiment with these hallucinogens to overcome debilitating disorders". I'll focus on the open-minded part. What's the elevator pitch to someone whose mind is open to psychedelics helping with these disorders, but maybe not totally sold on it?

Robert Barrow: Look, I think the most important thing that we have is an exponential growth in the disorders we're trying to treat. This is a massive problem that everyone recognizes and while there certainly is a cultural history and a story, before the Controlled Substance Act, the wide distribution and use of many of the molecules in this category, the real promise here is to take patients in many cases, off of daily drugs to have a meaningful impact that in many ways, in a lot of research suggests is beyond just symptom suppression. I think that's really what we're focusing on here is that no longer would we simply be talking about blunting emotions or blunting the symptoms of anxiety and depression. But actually trying to bring forward a transformational treatment option that really meaningfully changes quality of life could meaningfully change, yes, the symptoms. That's how we measure that clinical benefit, but have a much more expansive potential than that and really changing the trajectory of someone's life and someone's the disorder they're living with.

Ricky Mulvey: What's going to be the training for people who are traditionally used to prescribing SSRIs and antidepressants to folks with depression and anxiety if they get LSD is something within their toolkit? As you said, it's not just blunting emotions. It becomes intensely different when people are probably more present within the moment that they're in, and they're able to be in touch with their emotions a bit more, but it's a completely different solution than what they're used to. What's that training going to look like?

Robert Barrow: Really one of the things that I think needs some clarification that many people may not understand, which is that the actual delivery and the prescribing is something that's going to be likely separated. There's no requirement that the person writing the prescription for a product be the one sitting with a patient and monitoring a patient and there's some important distinctions. One of the decisions we made very early in development several years ago before we started our phase 2 program was we wanted to isolate the drug's effect. There's been a lot of talk about psyched assisted therapy and psychedelic therapy has been another term thrown around. We decided to look at this from a development standpoint to show that the drug stands on its own, that it has a clinical effect, in the absence of any therapeutic intervention, any psychotherapy. That's what we've done in our development program. That's what we're doing in phase 3, and we've shown that, in fact, it does very well at just that.

As we think about in the real world, then, how would this get rolled out at scale? We certainly expect there's going to be a requirement and a need, and it should be in place that patients have someone monitoring their psychological, physical well-being. So far in clinical trials, we haven't seen any physiological liability. What we basically need to do is ensure that someone knows that they're safe if they need to have a drink of water or go to the bathroom, there's someone there to support them. There's been this large growth in interventional psychiatry clinics, primarily delivering things like ketamine off-label or J&J's internas as ketamines Spravato, about 4,500 clinics around the country that are certified to do this. We think that the infrastructure and those standards for monitoring patients are very similar to what we would expect on the real world. If anything, they're more burdensome than what we would expect for our product based on the development data so far.

Ricky Mulvey: Is there any data from phase 2 or phase 1 trials that you can share with listeners about some preliminary results you've seen and how LSD has affected people with depression and anxiety?

Robert Barrow: We did a phase 2 study is about 200 patients enrolled at 20 sites around the US, and we put out these data just about a year ago. We showed the patients who come in with severe anxiety on average. Hamilton anxiety scale is the scale we use to measure anxiety symptoms of 30, which is quite severe. After a single dose of MM120 of LSD, we monitor the patients for 12 weeks thereafter. The next day we saw a multi-category drop in disease severity. As measured by something called the CGIS, and 12 weeks later, we saw a 21.6 unit drop from baseline. Taking patients from 30 to under nine on average in the Hamilton anxiety scale. To put that in perspective, most of the approved drugs have about a 14-point drop over 8-12 weeks, and that's taking a drug every day. An effect that was more than double the standard of care.

A placebo-adjusted effect of 7.6, points over placebo. We're seeing about double the efficacy after a single intervention, and then that seems to persist indefinitely. Again, we monitor patients for 12 weeks. We saw no loss of activity on average. In phase 3, we're looking much longer and perhaps able to even show something that is well beyond three months in terms of the durability of effect.

Ricky Mulvey: I don't know if you can answer this, but it's something I'm curious about. I think you're in these studies, folks, in some cases, are getting 100 micrograms of LSD, which is it's difficult to describe what a standard and an unstandard dose is, but I think that's an accepted standard dose. How do you do a double-blind study with this where, there's an intense difference between the drug that you're testing versus, like, a kidney medication where you don't really know if you've taken it? If you take LSD, it becomes incredibly apparent that LSD is happening within your system.

Robert Barrow: It's a great point. It's something that for those of us who work in psychiatry research are very used to think of the same dynamic with ketamine or S ketamine or Xanax, for that matter. Another drug approved to treat generalized anxiety disorder. Patients who take four milligrams of Xanax reliably know that they're getting the drug. As it turns out, in studies that have assessed, even for SSRIs, over 70% of patients who are taking an SSRI can accurately guess. The big difference here is that we're being asked to look at it very closely. I think the subjective effects. The nature of the effects is certainly different. That's not surprising to anybody. LSD is different than an SSRI or a benzodiazepine.

Fundamentally, from a research perspective, though has very little impact that is different than what we are very much used to in conducting these clinical trials. You're right. There's nothing we can do about the reality that someone takes 100 micrograms of LSD. They're going to know that they're on the drug and we show this in phase 2. The cool thing we showed in our phase 2 program is that we also tested two lower doses, and we showed that at 50 microgram dose, 90% of patients knew they were getting drug, but they didn't have any clinical benefit better than placebo. They know that they're getting drug, didn't get better, whereas our actual go-forward dose, they know that they're getting drug, but they do get better. That can't be explained by just knowing that you're getting something. We've already established that there is a real dose-response and that it's not just knowing that you're getting drug that's driving the large clinical effects that we're seeing.

Ricky Mulvey: There's been an intense amount of skepticism within the FDA about how psychedelic drugs can help people. Another company, like those therapeutics, was studying the result of MDMA or ecstasy on folks with post-traumatic stress disorder, and they found that basically two-thirds of people who received three sessions of MDMA in talk therapy no longer qualified for a PTSD diagnosis at the end of two phase three clinical trials. Yet the FDA did not approve the drug. For reasons that you may know, for reasons that I do not know, is that institutional skepticism something that you've experienced, or do you have any comment on what went through with that?

Robert Barrow: I actually think it's quite different. We ourselves and I've previously been involved with another program that has received a breakthrough therapy designation from FDA. And that's something that in our field in the drug development field is extraordinarily rare and something that in its very nature, by definition, means that there is institutional alignment and support to try to expedite the development of the most promising therapies. The fact that FDA and this requires going to a very senior level at FDA, the fact that they're giving a breakthrough therapy designation to LSD for the treatment of generalized anxiety disorder, I think is what we very much feel on a day-to-day basis, which there's an extraordinary partnership and engagement and openness to trying to introduce new drugs is a recognition of the incredible need and the incredible burden of mood and anxiety disorders.

The Lykos situation is something that played out very publicly, and we have good friends at Lykos and obviously, I think the real unfortunate outcome there is that if, in fact, MDMA has that level of benefit for patients, it's unfortunate that patients don't have access to a promising new therapy. Unfortunately, the basis of that rejection was something, at least the advisory committee as far as we understand it and what was expressed during that committee, is that there were challenges with that program. The data gaps. There were problems with the way the studies were conducted that ultimately led to the issues at the heart of the Advisory Committee not recommending for approval. That's something that very much is why we exist in some ways.

We want to hold ourselves the highest ethical and research standards. We need to present the most robust data possible, treating this like as any other drug, but holding ourselves to even higher standard because of the history and the surround of what we're doing here. We have been laser-focused on getting this right to the highest quality and standing up to any standard that we or others could be held to.

Ricky Mulvey: What do you think about the potential for LSD is not a cure, but maybe a treatment for early stage dementia? There's an author, Norman Ohler, who wrote Tripped. He wrote another book called Blitzed. Within Tripped, and this is an anecdotal example, but he gave his mom who had dementia, LSD, and some of the things he noticed was just that basically the color in her cheeks, her occasional oppressive lethargy and apathy were swept away and five months later after the process started, he went to go visit her for Mother's Day. What he noticed was that she had picked up a local newspaper and was going through it and reading full sentences. For anyone who has had a loved one with dementia, you know that's it's an incredibly heartbreaking thing as you see that loss of focus and connection with basically the ability to follow thoughts and ideas. That's an anecdotal example, and I know you're within the clinical treatment business, but what do you think about the potential for LSD and early stage dementia?

Robert Barrow: I think there's a lot that we have yet to fully know and understand both about the brain and about neurodegenerative disorders, also about these drugs and LSD and their potential. We do know that there are broad mechanisms at play here. The acute administration model that we're after to treat anxiety-depressant disorders is a thing we think has extraordinary promise. There's other activity of LSD and similar molecules, and some of the things we're interested in exploring over the long term is other applications, those other mechanisms, how they could intersect with other disease processes. While we aren't there yet in terms of the science to say definitively one way or the other, we are very much in the early innings of understanding the full potential, and we as an organization are dedicated to trying to understand and realize that full potential.

Dylan Lewis: As always, people in the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against don't price so anything based on language here. All personal finance content follows Motley Fool's editorial standard. It's not approved by advertisers. Only picks products they did personally recommend a friends like you. Bill and Lewis signing off here, we'll be back tomorrow.

Charles Schwab is an advertising partner of Motley Fool Money. Dylan Lewis has no position in any of the stocks mentioned. Ricky Mulvey has positions in Charles Schwab. Tim Beyers has positions in Apple, Berkshire Hathaway, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Charles Schwab and Johnson & Johnson and recommends the following options: short March 2025 $80 calls on Charles Schwab. The Motley Fool has a disclosure policy.

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