Weekend with Warren
The Oracle of Omaha is A-OK.
Warren Buffett dished out investing advice, bon mots and life wisdom in equal measure at the Berkshire Hathaway Annual Meeting last weekend, an event he calls the Woodstock of Capitalism.
At 31,000 attendance was up significantly from 2005 when 19,000 were on hand to hear Buffett and his long-time business partner Charlie Munger field whatever questions the audience threw at them for the better part of five hours.
The first shareholders meetings were in a basketball gym. When that venue became too small, the meeting was moved to the civic auditorium. Now the crowd overflows the Qwest arena in downtown Omaha.
Buffett and Munger are not unlike the companies they invest in: solid and durable. They exude Midwest, Hometown America values like rectitude, certainty, decency.
“We don’t want to trade away reputation for money,” said Buffett, who at a net worth of $62-billion is Number One on the Forbes list of billionaires. “I’m not unhappy with our batting average.”
It’s endearing to see Buffett and Munger succeed through a business model no other company seems to embrace and witness the triumph of perseverance and faith in yourself over the greasy fast-buck book-cookers who litter corporate America.
Fans of Buffet stretch around the world. Among the questioners were folks from Australia and Germany. I golfed Sunday with Marco from Finland.
People wait outside for the better part of the night for good seats to be treated, at 9:30 am, to the sight of two elderly men stepping from behind a curtain and seating themselves at a table and answering questions.
This year, candy bars from Mars, who Buffett helped finance its recent purchase of Wrigley’s, joined the usual See’s peanut brittle and Coca-Colas on the tabletop. Buffet says he sampled each candy bar. He owed it to Berkshire Hathaway shareholders, he insisted, before investing $6.5 billion of their money in the Wrigley purchase.
Buffett, 77, got asked twice – much more politely than this – if shareholders would still profit after he dies, down somewhat from the number of times he’s been asked the same thing at the three previous meetings. He has spelled out a succession plan at the back of this Annual Report for several years running.
“We still have a rising young man here named Warren Buffett. We’d like to see him reach his full potential,” said Munger.
“That’s the advantage of working with a guy who is 84. You always look younger,” Buffett replied.
He then explained that he and Munger’s average age is 80. “We’re aging at 1-and-one-quarter percent a year. That’s the lowest rate of aging in corporate America.”
The second time Buffett was asked about Berkshire’s future after his demise, Munger volunteered that when asked what he wants to have said at his funeral, Buffett’s answer is” That’s the oldest looking corpse I’ve ever seen.”
As for counsel on investments, Buffett recommended diversification if a person is a “know-nothing” investor. To a woman from Windsor, New Jersey who asked if different assets belonged in an IRA than a normal investment account, Buffett said to “look at the overall fiscal condition and not worry about where the assets will be.”
Munger said some assets are more suitable for the retirement accounts because of the tax deferral.
One questioner wondered if local or regional banks were a good investment after the post sub prime mortgage debacle.
“An institution is reflective of the kind of CEO you have. Know something about the culture of the management. (Be) immune from institutional stupidity. There are more banks than bankers. If you think about that for a moment you’ll see my point.”
Munger said regional banks were “promising territory” for investment.
“That’s a wildly bullish statement for Charlie,” Buffet shot back.
Buffett also repeated one of his oldies but goodies: “You want to buy stock in a company that an idiot can run because sooner or later one will.”
But, Buffett said, “The most important thing you can invest in is yourself. Your best asset is your own self.”
He illustrates the point when he speaks to students by telling them he will buy the student any car they want – they just have to keep it for the rest of their life.
Under those conditions, the car owner will change the oil twice as frequently as they need to and, overall, maintain the vehicle better than recommended by the owner’s manual. Then Buffett points out that each person is given one brain and one body that have to last for life.
When he speaks to students, Buffett says he also urges them to “go work for an organization you admire or a person you admire.”
Many of them subsequently become self-employed, he quipped.
But, he said, “The most important job you have is to be a teacher to your children. You teach by what you do, not what you say.”
More than once he stressed the importance of finding a good spouse. He illustrated the point by telling the story of man who spent 20 years looking for the perfect woman. He finally found her but unfortunately she was looking for the perfect man.
One questioner wondered what would happen when oil ran out. Buffett replied that oil wouldn’t run out.
“At some point daily production capacity around the world will first level off and then decline. If oil production is down 25 years from now it will be a very different world.”
Munger said, “Eventually you have to use the sun, there’s no alternative.”
Despite the high cost of gasoline, Buffett said America’s love affair with the car wouldn’t be supplanted by mass transit.
Asked about the presidential candidates Buffett said, “We have three pretty good candidates this time. They will behave better in office than on the stump. All three of them.”
The garrulous Buffett said that throughout high school and college he was terrified of public speaking but eventually conquered his fear through a Dale Carnegie course.
“The primary problem of mankind” is nuclear proliferation he said quoting Albert Einstein’s line that “the atom bomb has changed everything in the world except how men think.”
Has he accepted Jesus Christ as his savior, one investor wondered?
Buffett said he grew up in a religious household and if the question were asked of his parents there would be a different answer. He, however, is agnostic.
“I simply don’t know and someday I may know or not know. But that’s the nature of being an agnostic. I wish everyone well on their own.”
Asked how he maintained his health, Buffet held a loft a piece of fudge.
“I start with a balanced diet. Some Wrigley’s, some Mars, some See’s, some Coke,” he said, allowing that he works out with a trainer for 45 minutes three times a week.
“I’m doing what I love. How could you be sour about life being blessed in so many ways?”
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