Every year in the spring, thousands of people make the trek from all over the world to Omaha, Nebraska in order to see their investing idol – Warren Buffett – during the Berkshire Hathaway Annual Meeting. And when I say thousands, I mean over 30,000 people (closer to 40,000 this year I heard), most of whom are shareholders, analysts from Wall Street, fund managers, and students. I have only been one time before, back when I was in grad school, during which time I was fortunate to not only meet Mr. Buffett but receive a personal invitation I couldn’t pass up to go to an exclusive gathering in Omaha with his Berkshire Hathaway managers and his longtime partner, Charlie Munger. This year, sans special invite, my goal in going was simply to seek inspiration.
If you’ve actually read some of my earliest blog posts, you may have seen one about my simple thoughts on taking control of your investments based on my personal finance experience and past role as an equities analyst at a money management firm. I will be the first to admit that I’ve disengaged somewhat from being an active investor, with life seeming to always get in the way, but lately I’ve been feeling the yearning to clean up the cobwebs in my brain and stop being so passive. My hope was that by going to the shareholders meeting, being around industry professionals, and listening to the 5 hours of exclusive Q&A with Warren Buffett and Charlie Munger (meeting audio is never released), where the two often end up sharing wisdom both on investing and on life simply due to the nature of the questions, it would be the catalyst I needed to rev up my motivation. And, I think it worked!
The meeting is quite the circus. Most attendees arrive on Friday and settle in to their hotels, booked as many as 10 months in advance, some opting to attend the welcome reception at the Berkshire-owned Borsheim’s jewelry store. The actual meeting is held on Saturday at the Centurylink Center in downtown Omaha, conveniently attached to the convention center. Lines of the über-faithful start early when an arena has an approximate capacity for only 18,000 seats and twice that are expected to attend. Doors opened this year at 6:30am, a half hour before scheduled, because of the cold and rainy weather – I got there “late” at 7:15! If you want to sit anywhere on the lower level, it’s best to get there before the meeting starts at 8:30am because people save seats for large groups. Surprisingly, the honor system seemed to hold true, as my 4 seats were still there an hour after I placed sheets of the local newspaper on the back of them. Once seating is secured, it was time to hit the expo. The convention center space is filled with displays from Berkshire’s more popular companies, most offering exclusive merchandise for the shareholder meeting: See’s Candies had a special edition small chocolates box, Oriental Trading Company had Warren and Charlie rubber duckies for $2, Fruit of the Loom sold out by lunchtime of their $5 t-shirt with the famous Buffett saying “Rule #1: Never Lose Money. Rule #2: Don’t forget Rule #1”, and Brooks Running had special t-shirts to go along with Sunday’s inaugural 5k race. Of course, the $1 Dairy Queen Dilly Bars and Mini Blizzards were plentiful, and many people were scrambling to enjoy shareholder discounts on Justin’s Boots and The Pampered Chef kitchen tools. At the Clayton Homes exhibit, you could fold up a copy of a newspaper (BRK is a newspaper supporter) and throw it on the porch in an attempt to best Buffett’s throw to win a free Dilly Bar.
But, if you’re a regular attendee, you know a pre-meeting visit to the exhibit hall is an advantage because, besides knowing the inventory is available for souvenirs, this is the highest probability that you will bump into Warren Buffett as he makes his way around to visit the displays, Cherry Coke in hand to quench his thirst. You can easily spot the “Buffett Scrum” because of all the cameras, and it moves much like a tidal wave, sweeping people up as it passes by. If you happen to catch the scrum, you may also be lucky to see the most famous BRK boardmember – Bill Gates. You just need to make sure to make it back to your seat by 8:30, when the annual hour-long movie is screened that begins with a new animated cartoon of Warren and Charlie, then has various TV appearance clips, commercials from BRK companies (my favorite was the Geico Camel Hump Day ad), and skits with Warren, Charlie, and Hollywood celebs – this year featured a storyline of Warren wanting to be in the next Terminator movie with Arnold. Every year, the clip of Buffett testifying before Congress regarding the failure of governance at Solomon Brothers is played as a reminder of the results of insufficient oversight and reckless behavior.
Like I said, there is no audio or video recording of the meeting itself, though many analysts post their notes and analysis to the web the week following the event. Check out this great recap from Jeff Matthews, though I firmly disagree with his view on inviting a short-seller, Doug Kass, to be a part of the Q&A panel! Munger said it best, during the meeting, when he said (in response to Kass boldly asking BRK to give him money to invest): “The answer to your question is NO. We don’t like trading agony for money.” Speaking of Charlie Munger, if you’ve ever seen a Penn and Teller show you will understand when I say that Munger is Teller to Buffett’s Penn, though not as quiet. After so many years, the two have their act down pat. The 89-year-old Charlie started digging in to his box of See’s Peanut Brittle and cans of Diet Coke early into the Q&A session and patiently waited his turn to give his 1-2 sentence quip to conclude the question’s answer, most often to say his catch phrase, “I have nothing to add,” on Warren’s prompt “Charlie?” I think one of my favorite Mungerisms was in response to a question about whether or not The Pampered Chef operated like other deceptive direct-sales businesses (i.e., Herbalife), to which Charlie responded, “I think there’s likely to be more flimflam selling magic potions than pots and pans.”
The weekend concluded on Sunday with the inaugural Berkshire Hathaway Invest in Yourself 5K race on a cool and wet morning. This race was sponsored by Brooks Running Company, a BRK company, and the start was announced by Mr. Buffett himself. Of course I pretended I was in the 6 minute mile pace group so that I could get a good spot to watch the show.
As for the rest of the weekend, I was very fortunate to have a friend and former work colleague who recently moved to Omaha. We went out on the town with his other friends in for the meeting, spending hours catching up at the Crescent Moon Alehouse and downstairs biergarten, conveniently located across the street from BRK headquarters, and having obligatory steak dinners at The Drover Restaurant. Before my flight left on Sunday, I got a chance to explore the Old Market historical area near the river, with its cute shops, restaurants, and bars.
If you’ve never read anything about Warren Buffet or have no interest in investing at all, you may be surprised at how his philosophies easily translate into your life. Here are some fun Buffet-isms you might like:
Warren Buffett’s Rules of Success
(also posted on a wall of your nearest Jimmy John’s sandwich shop, by the way)
When you first make money, you may be tempted to spend it. Don’t. Instead, reinvest the profits. Buffett learned this early on. In high school, he and a pal bought a pinball machine to put in a barbershop. With the money they earned, they bought more machines until they had eight in different shops. When the friends sold the venture, Buffett used the proceeds to buy stocks and to start another business.
Don’t base your decisions upon what everyone is saying or doing. When Buffett began managing money in 1956 with $100,000 cobbled together from a handful of investors, he was dubbed an oddball. He worked in Omaha, not on Wall Street, and he refused to tell his partners where he was putting their money. People predicted that he’d fall, but when he closed his partnership 14 years later, it was worth more than $100 million.
Gather in advance any information you need to make a decision, and ask a friend or relative to make sure that you stick to a deadline. Buffett prides himself on swiftly making up his mind and acting on it. He calls any unnecessary sitting and thinking “thumb-sucking.”
Your bargaining leverage is always greatest before you begin a job – that’s when you have something to offer that the other party wants. Buffett learned this lesson the hard way as a kid, when his grandfather Earnest hired him and a friend to dig out the family grocery store after a blizzard. The boys spent five hours shoveling until they could barely straighten their frozen hands. Afterward, his grandfather gave the pair less that 90 cents to split.
Buffett invests in business run by managers who obsess over the tiniest costs. He once acquired a company whose owner counted the sheets in rolls of 500-sheet toilet paper to see if he was being cheated (he was). He also admired a friend who painted only the side of his office building that faced the road.
Buffett has never borrowed a significant amount – not to invest, not for a mortgage. He has gotten many heartrending letters from people who thought their borrowing was manageable but became overwhelmed by debt. His advice: Negotiate with creditors to pay what you can. Then, when you’re debt-free, work on saving some money that you can invest.
With tenacity and ingenuity, you can win against a more established competitor. Buffett acquired the Nebraska Furniture Mart in 1983 because he liked the way its founder, Rose Blumkin, did business. A Russian immigrant, she built the mart from a pawnshop into the largest furniture store in North America. Her strategy was to undersell the big shots, and she was a merciless negotiator.
Once, when Buffett was a teen, he went to the racetrack. He bet on a race and lost. To recoup his funds, he bet on another race. He lost again, leaving him with close to nothing. He felt sick – he had squandered nearly a week’s earnings. Buffett never repeated that mistake.
In 1995, the employer of Buffett’s son, Howie, was accused by the FBI of price-fixing. Buffett advised Howie to imagine the worst- and best-case scenarios if he stayed with the company. His son quickly realized the risks of staying far outweighed any potential gains, and he quit the next day.
Despite his wealth, Buffett does not measure success by dollars. In 2006, he pledged to give away almost his entire fortune to charities, primarily the Bill and Melinda Gates Foundation. He’s adamant about not funding monuments to himself – no Warren Buffett buildings or halls. “When you get to my age, you’ll measure your success in life by how many of the people you want to have love you actually do love you. That’s the ultimate test of how you lived your life.”
- “Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.”
- “Never invest in a business you can’t understand.”
- “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
- “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
- “It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.”
- “Only when you combine sound intellect with emotional discipline do you get rational behavior.”
- “Without passion, you don’t have energy. Without energy, you have nothing.”
- “It is better to hang out with people better than you … you’ll drift in that direction.”
- “I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
- “Someone’s sitting in the shade today because someone planted a tree a long time ago.”
- “Price is what you pay. Value is what you get.”
- “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
- “I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.“