It was an amazing performance, and not at all what I was expecting. Which, in and of itself is pretty surprising after as many conversations as I’ve had with people who have been attending these meetings for years. The analytical fire-power, thoughtful commentary, witty remarks, blunt opinions and not-so-subtle humor offered up for over five hours by Warren Buffett and Charlie Munger goes a long way toward explaining why the Berkshire Hathaway Annual Meeting has truly become a pilgrimage for so many people. And the reason for the spectacular returns long-time stockholders have enjoyed.
First, these guys are clearly great friends and work brilliantly together as business partners. While perpetually self-deprecating, they have no problems teasing each other and they can be wickedly funny. At one point a question included “let’s suppose you each had a child in the next five years” that lead to a string of racy one-liners that brought down the house. I couldn’t help but wonder what could have happened if some of the great business partners were still working together like Buffett and Munger; Gates/Allen, or Jobs/Wozniak?
The Annual Meeting is now held in the Qwest Center in Omaha, with doors opening at 7:00 am for a meeting scheduled to officially start at 9:30. Most of the 50 people in the group I was with took the 6:00 or 6:45 am buses to get a good seat. Over breakfast in the hotel, at about 7:15, we got a text message letting the eight of us taking the late bus know the arena was already full. The Qwest Center seats over 18,000 people. Then we discover upon our arrival at 8:00 – a full hour and a half before the meeting even starts – that most of the additional 62,000 square feet of meeting spaces have video screens set-up to accommodate the overflow and were now mostly full. Every company in the BRK.A portfolio was represented in the trade show area, and it certainly appeared that every shareholder had a bag with purchases from those vendors.
Quickly realizing the futility of trying to find a seat with a view of the stage, I watched most of the opening film standing up. The movie was a hoot and a pleasant distraction for the hour before Buffett and Munger took the stage at 9:30 am. I ended up sitting with Rob on the third level, directly behind the stage. Our view of the top of the heads of Buffett and Munger was perfect and we were actually closer to them than most of the crowd. We sat eye-level with the three giant screens broadcasting their performance, the size of which made them both look every day of their 80-plus years.
As they introduced the Berkshire Hathaway board members, asking them to stand, it occurred to me that if a meteor hit the building at that moment, capitalism as we know it in America would have ended. Buffett showed just four slides, spent a lot of time on reinsurance issues, discussed the Sokol controversy in numbing detail and then started taking all manner of questions. Buffett did most of the talking, but when Munger did speak he was worth listening to. By the time I got back to the hotel, the WSJ already had several stories on the meeting, as did Morningstar and Bloomberg. So I’m just going to talk about the parts I found most interesting.
Buffett shared his sentiments about the future of America, and he did so several times and in ways that impressed me deeply. To an early question that consisted largely of a litany of the usual complaints – deficits, inflation, banksters, crappy government, loss of competitive spirit, etc – he offered this observation. If someone had visited him in the womb back in 1930 and told him what he could expect upon his arrival on this mortal plane, he could have been excused for not wanting to come out. In the midst of the worst depression in US history with 25% unemployment, the tragedy of the Dust Bowl in the Midwest, the Dow headed to 41 (yeah, that’s forty-one) down from a high of almost 300 and ominous rumblings coming out of Europe the future looked bleak indeed. Buffett’s response? Economic setbacks are to be expected, quit complaining and go do something to help make things better. Munger one-upped Buffet, “Go back further, the Black Death in Europe during the middle ages. One-third of the population died.” Toward the end of the day, Buffett said he’d rather be born today, in America, than in any other time or place.
He also put a spin on gold that had me laughing and thinking at the same time. “All the gold in the world would make a cube 67-feet square. And what would you do with it? Sit on it? Fondle it? Mostly, you’d just hope next year, or the year after, someone was willing to pay more than you did for it because it has no practical use.” Buffett later commented that for what all that gold was worth, about $11-trillion, you could buy all of the farmland in America, six Exxon-Mobiles and still have a trillion dollars in “pocket change.” He also noted that from Mars, the image of digging gold out of the ground in South Africa, shipping it to New York and then putting it back in the ground would likely appear to be very odd behavior. Munger said that you’d still need money to pay for an army to protect your 67-foot cube of gold.
For what’s its worth, Rob and I both agreed that Buffett went to great lengths to say good things about David Sokol. He did say, repeatedly, that Sokol’s behavior was both inexplicable and inexcusable, but it clearly discomfited him to admit it. The response from Sokol’s attorney immediately after the meeting seemed also inexplicable. Munger simply stated that all of us have moments when we aren’t rational. And he summarized his thoughts on the issue in one word; hubris.
Charlie Munger, constantly munching on peanut brittle, offered up forceful commentary on two topics in particular. The first was on the lousy job that business schools do. He had some really slick ideas on how business history should be taught, and why it isn’t done his way. I plan to follow-up on his suggestions and hope to write an Invest-notes in the not to distant future on my results. Munger was particularly critical of both the government, and especially, the financial industry. The government, for their failure to make any significant changes to prevent a repeat of the Great Recession (like Glass-Steagall after the 1930’s crash), “Both parties are working very hard to see who can do the worst job” (“and,” said Buffett, “succeeding”).
But Munger was particularly vehement about the greedy behavior of financial professionals and bankers that caused the financial meltdown of 2008-2009 – and every other major financial crisis of the last 150 years. He stated it was a national disgrace that one-quarter of the graduating engineers in this country go to work on Wall Street. Buffett went so far as to suggest that CEOs of companies “too big to fail” and who subsequently do, requiring public funds to save them, should be personally bankrupted. Board members of these companies should, at a minimum, be forced to return 5-years worth of board service compensation.
Immediately after the meeting, I talked with a couple of guys from Hamburg, Germany, one of who was attending his second Berkshire Hathaway meeting in the last five years. He said it was amazing how consistent the commentary and explanations were. The key to success, no doubt, is to have a plan and stick with it. Warren Buffett and Charlie Munger certainly appear to have been working the same plan for 52-years now, and I can only wish them every opportunity to continue doing so for as long as possible. Here’s hoping I’m as intellectually active thirty years from now as they are today.
Frankly, my head is still spinning from all the information, statistics, philosophies, suggestions, recommendations and clear thinking that I enjoyed during the meeting. I’ll be revisiting the collections of Buffett’s writings that have been recently neglected on my shelves, as well as tracking down some of Charlie Munger’s writings. Much to my surprise was the comment from both men hoping their legacy would be of having been good educators. “Continuous Learning” was a topic that came up repeatedly. As Munger sagely commented, “We owe it to ourselves to know more when we go to bed than we knew when we got up.”