Another Berkshire shareholders meeting in the books. As always, I walked away slightly smarter. Yesterday, the Wall Street Journal posted a funny article “When Warren Buffett Takes the Stage, Try Your Hand at Berkshire Bingo”. If you’ve watched or attended the meeting enough times, you’ll laugh. It’s spot on.
Warren Buffett and Charlie Munger are successful because they stick to a handful of things they know and do well. This means those who pay attention have a rare opportunity to soak in wisdom from two of the world’s brightest minds, business or otherwise. Their simplicity also means that after you’ve studied them for a while, you can almost complete their sentences during the meeting’s Q&A.
After coming to the Berkshire shareholder meeting for a long time, I think the general discussion themes can be bucketed into the following areas.
Main discussion buckets
- The US economy will be just fine in the long run.
- Berkshire’s insurance float gives it a very rare cash advantage that no other company can match. If Einstein’s apocryphal quote that “compound interest is the 8th wonder of the world”, then Berkshire’s insurance float is the 9th wonder of the world.
- Buybacks will likely be more common in the future. As Munger said, “When it gets really obvious, we will be really good at it”. Whatever that means.
- Most investors should consider a simple low cost index fund. It’s even hard for Berkshire’s investment team to beat the S&P (especially in good times), so the average investor should just take the simple route. Set it and forget it.
- Warren and Charlie are thankful that Wall Street and business schools have short term groupthink. It’s less competition for Berkshire’s insanely simple business model.
- Berkshire succeeds in large part due to excellent capital allocation and overly generous decentralization. A handful of people at headquarters, and nearly 400,000 employees. I think the feedback loop of capital allocation and decentralization are more closely tied than people think.
- Berkshire is in very good hands when Warren and Charlie move on to the afterlife.
- Capitalism depends upon productivity gains and creative destruction. Technology will speed up creative destruction. In light of this, Berkshire’s methods for evaluating opportunities won’t change. Remember – stick with what works.
- Knowing one’s circle of competence and specialization is critical to success. As Munger said yesterday, “Find a specialty. Nobody wants to go to a doctor who’s half dentist, half proctologist.”
- Opportunity cost and Aesop. Aesop’s Fable from 650 BC is the only piece of business advice you need to know. “A bird in the hand is better than two in the bush”. Meaning, if you have a good thing right now, you need to seriously evaluate the opportunity cost for something possibly better. How far away is in the bush? How many birds are in the bush? Are they birds at all?
- Calculating intrinsic value is murky (and probably proprietary to Berkshire). But it needs to be done if you’re going to evaluate a business for the long term.
- All investing is value investing.
- Charlie Munger is the master of the intelligent one-liner. He’s got an uncanny ability to distill paragraphs of analysis into one or two sentences; his silence is equally educational. He’s my personal hero.
Thoughts on the 2019 Berkshire shareholders meeting
- It’s insanely crowded and busy. Gone are the good old days of freely walking into the meeting with zero security or crowds. It’s now insanely packed. The silver lining is that people still seem approachable, and you can make new friends.
- If you want to see Warren on Saturday in the convention hall, forget it. Unless you can stare at a sea of reporters and cameras and imagine Warren in the middle of the press hurricane.
But Friday? No shit – I turned around as he and his bodyguard strolled by. He’s like Bigfoot. Super elusive. If you see him, you’ll see him.
- No more newspaper toss. The tradition of Warren throwing a newspaper onto the porch of a Clayton home was something I looked forward to. Especially when Bill Gates would show up and feebly attempt something athletic, like throwing a newspaper. It was a quaint throwback (no pun intended) to a different era. But, I hear it got too packed and dangerous. Tragedy of the commons and all. Thankfully, there is now an app for the paper toss.
- I feel like the best days of the shareholders meeting are behind it. It’s become a raging Buffettpalooza. Still fun, but not as intimate.
- The line to the Fruit of the Loom booth is 5-6 lines deep to get in. For underwear and t-shirts! See above.
- Bookworm – awesome selection of books. Authors such as Robert Cialdini (Influence, Presuasion) are there to autograph, chat, and take selfies with you.
- Seating. Finding a seat is harder than ever. Thankfully a friend saved me one this year. The hilarious thing is that once the doors open, everyone clamors for a seat. Some of these people have waited in line since 3:00 am! By around 10:00 am, people start leaving their hard earned seats. I’m not sure if it’s because they’ve been sitting since 7:00 am, or if they’re bored? I get the impression that the questions can be a bit dry, and the material slowly eats away at some people’s patience.
- The first 45 minutes of the meeting is a stream of ads and mini-movies for Berkshire’s various companies. This year was pretty cool, and featured Tim Cook and Warren working hard at Apple HQ on something super important – The Warren Buffett Paper Toss app. Unless you want to watch these videos, the livestream may be a better option.
- Everyone is curious about the post-Warren/Charlie world. I’m wondering how many people show up in that era, and what the vibe will be like. Given the ages of Warren and Charlie, we’ll know sooner than later.
Tips for your next Berkshire Hathaway shareholder’s meeting
- Ok, don’t take this the wrong way – Livestream the event if at all possible. Stay home. Seriously. Unless you like waiting in line for hours, fighting for seats, overpaying for flights, hotels, cars, food, etc – stay home. Especially given that most people just watch the large videos screens anyway, you probably have a better view on the livestream.
Now, if you still decide to come to Omaha for the meeting, read on.
- If you want anything – a seat, a drink, etc – arrive early. Or late. There’s no glory being in the hordes. If you do, make friends who can save you a spot in line in case you’re hungry, need to use the restroom, etc. The buddy system is the name of the game. Or, get insanely lucky like me…
- Network and meet new people. There are lots of interesting people here from all walks of life. The common thread is we’re all interested in value investing and Berkshire. Say hi. Introduce yourself. Have a chat.
- Lunch. I suggest getting lunch in the Old Market around 11:30. The lunch rush is massive. Remember – you can live stream the parts of the meeting you miss.
- Gorat’s is the place everyone wants to eat. It’s supposedly Warren’s favorite restaurant. It may have been back when my then teenage dad was a busboy there (he’d tell me about Warren eating there back in the day), but I can’t imagine he still goes there. The food is…meh, unless you like lots of butter and grease. There’s better food in Omaha. Yelp is your friend.
- The shareholders events – receptions and picnics – can be a zoo. Borsheim’s and Nebraska Furniture Mart are absolute junk shows during the shareholder weekend. Parking is a nightmare. Ticketing is heavily enforced. Take a cab or Uber. Also, the Friday cocktail reception at Borsheim’s cuts off drinks at 8pm sharp. You can still get dinner until 9pm. The Sunday Borsheim’s event is pretty cool. You may see Warren playing table tennis. Or far more random things. I remember taking my then 5-year-old son to the bathroom in the back, and we walked in on Bill Gates’s bridge game next to the restroom. Because Bill keeps it real.
- Please respect Warren Buffett’s privacy! I get it. He’s a public figure. You came here to see him (though you very likely won’t). Don’t be a douchebag. We saw tour busses taking dozens of people past his house (my cousin lives just down the street from him). For the longest time, Warren had no security at this house – not even a fence. Now, he recently got gates and an armed security detail at his house.
- Book your flights and accomodations early. Omaha is a small place.
- Be respectful of the locals. I’m from Omaha, so I’ve got a bias to Omahans. Be nice. Have fun.
Until next year!