A quick note before we begin. I don’t normally like to do posts about stuff like this. You people don’t come here for a diary of my life. You come for interesting finance information and those shirtless pictures I totally didn’t just Photoshop my face onto. So I’ll try to weave in some lessons about what I learned from the Berkshire Hathaway annual meeting along with the trip recap stuff.
Like any investor, I idolize Warren Buffett. I’ve read the living crap out of The Snowball probably about three times now. I’ve read hundreds of articles about the guy over the years. And he’s probably entered my head thousands of times.
Buffett doesn’t need an introduction, but screw it. He’ll get one anyway. Buffett is the greatest investor the world has ever seen. He killed it as a micro-cap stock investor in the 1960s, starting a hedge fund before that product was really a thing. He then switched to more of an intrinsic value kind of guy, and then he killed it that way too. Along the way Berkshire Hathaway acquired all sorts of whole businesses, moves that have turned out pretty well. Oh, and Buffett happens to be one of the best insurance operators out there.
Is there anything the guy can’t do, besides limiting himself to fewer than three Cokes a day?
Buffett isn’t getting any younger, so I figured that if I was going to go down to Omaha to the Berkshire Hathaway annual meeting, this year would probably be a good choice. Both Buffett and his right hand man Charlie Munger could easily die tomorrow. They do have a combined age of 177, after all. Last I checked that’s a lot, especially for guys who don’t seem particularly healthy.
So I went to Omaha. But not without some difficulty.
It all started a few days before I left. Our hotel got struck by lightning, which caused a fire. The hotel was fine, but sprinklers and fire hoses soaked the place to the point where the place was inhabitable. Naturally, I found this out from a source other than the hotel, and on the morning I was supposed to leave.
You can imagine my shock. Here I was with non-refundable plane tickets about to go to a smallish city on the biggest weekend of the year. This was going to cost a fortune. Fortunately, Berkshire’s decision to live-stream the annual meeting brought attendance down about 10% compared to the year before, which meant there were rooms available. The total hotel cost was $700 for four days, split with my traveling companion. So that was reasonable.
As an aside, he had his own problems getting to Omaha. First his plane was delayed two hours due to mechanical issues, and then the plane couldn’t land through the crazy storms Omaha was having that day. The plane went back to St. Louis, refueled, and then was able to get to Omaha.
Once we made it to Omaha without God smiting us directly with His wrath, things went much better.
Friday was dedicated to the Berkshire Hathaway trade show. Dozens of different Berkshire Hathaway-owned companies filled Omaha’s conference center selling everything from NetJets memberships to Dairy Queen dilly bars. This year’s marquee item were the Berky boxers, made by Fruit of the Loom, which cost a grand total of $8. That was a bit of a rip-off considering I bought five pairs of regular boxers for $7, but what am I supposed to do, not buy these bad boys?
The strategy behind this trade show is really quite simple. Berkshire rents out a giant hall, stuffs it full of products that it owns, and then encourages people with money to show up for the good deals. For all the money they lose selling Dilly Bars pretty much at cost, the company gains back by selling those Berky boxers or t-shirts with the Geico logo on it.
“I can’t believe I just paid money for a t-shirt that says Geico on it.” — an actual quote
The biggest takeaway I got from the trade show was just the power of knowing your customer. Some 40,000 people show up each year in Omaha, eager to hear Buffett talk about all sorts of stuff. They’ve already shown they love the guy just by showing up. You could sell them anything with Berkshire logos on it.
Friday was just a warm-up to the main event, the shareholders meeting on Saturday.
The doors were supposed to open at 7:00am, and word was you had to get there early to ensure a decent seat. We got there shortly after six, fighting a torrential downpour the whole way. The doors opened at about 6:30 to let people out of the rain.
Overall, our seats weren’t bad. We were just a little too late to get floor seats, but we did secure decent seats about 20 rows up. We were probably 150 or so feet away from Warren and Charlie up on the stage. We could have probably gotten closer, but we really didn’t care. Getting a few sections nearer to the stage wasn’t about to make things much more enjoyable.
After the hilarious shareholder video–which included cameos from Jamie Lee Curtis, some of The Office cast, Bryan Cranston, and others–it was non-stop Warren and Charlie. Questions came from the audience, media, and analysts. Buffett and Munger answered all of them.
Buffett gets all the attention, and rightfully so. He’s been the guy who’s built Berkshire into what it is today. He didn’t disappoint either, switching between insightful and funny with ease. But he tended to ramble on a little too long and repeat himself somewhat. He also had a habit of only sort of answering questions. He’d address one part of a question and not another.
I’d almost say Munger was the highlight of the event. He probably said a tenth of the words Buffett did, but his words were very purposefully chosen. None were wasted. Charlie made his point succinctly, and he’s just as funny as Buffett. It’s criminal that Buffett gets so much of the limelight and Munger gets almost no public credit.
I could spend another 1,000 words saying what I learned from Charlie and Warren. Instead, I’ll just do some quick summaries.
Dismiss bad ideas quickly
At one point, a cattle rancher asked the two whether they’d invest in cattle. Charlie dismissed the idea as quickly as it showed up, saying he can’t think of a worse business.
The lesson: Don’t spend time on crap ideas. Punt them to the curb as soon as you can and move on.
Don’t be a macro guy
When asked about macroeconomic factors, Charlie Munger had this to say. “Microeconomics is what we do, macro is what we have to put up with.” Both Buffett and Munger repeatedly pointed out they have no idea about macroeconomic issues, and they don’t really spend much time thinking about them.
The lesson: You might think stocks are expensive, rates are going to go up, or the Eurozone is about to collapse. But you don’t know for sure. The easiest way to minimize these risks is to just invest. Dollar cost average into good ETFs or great companies and call it a day. Don’t bother trying to be an economist. Actual economists have trouble with this stuff. What chance do you have?
Berkshire has a simple company policy. When shares get below 1.2 times book value, the company buys back stock. Buffett stated that if shares ever got back below 1.2 times book, he’d back up the truck and aggressively buy back shares.
There are very few companies with that kind of discipline. Most buy back shares when the price is expensive, because times are good. That’s when they have the most cash. This doesn’t work out well, for obvious reasons.
The lesson: Don’t be reactive. By setting ground rules when you’re thinking clearly, you can take advantage of opportuntites later.
Should you go?
I really enjoyed my time in Omaha, but I probably won’t be going back next year. If you’re a hardcore investor it’s probably worth your time to make the pilgrimage at least once, but it’s mostly for the atmosphere. Omaha isn’t a very exciting city, and it turns out you can’t get very close to Warren Buffett’s house. But hey, it was fun.