David Mortenson

Woodstock for Capitalists

This is what Warren Buffett appropriately calls his Berkshire Hathaway Annual Meeting.

My 77-year old shareholding mother was the impetus for my first pilgrimage to Omaha in May of 2018. It has been on her bucket list for a while, and when Jeff Prouty and his team said they had two spots open on their annual field trip, we couldn’t pass up this unique opportunity.

In the weeks leading up to the trip, we found ourselves filled with the same kind of childlike excitement that accompanies a 12-year old’s anticipation of a trip to Disneyland. It was going to be a whirlwind, an action-packed 36 hours that would leave us wishing we had stayed longer and yearning to return next year.

Warren’s sense of humor, Charlie’s unabashed and frank commentary along with the video clip that always starts the meeting were legendary. That part was like your favorite band playing your favorite song at the concert. And while Warren and Charlie certainly did not disappoint, it was what surrounded the meeting that left me really yearning for more.

We arrived at the arena at 4:15am, partly because we wanted a good seat and partly because we couldn’t sleep anymore. Not surprisingly we were not the first to arrive. Sleeping bags were being rolled up, cheap folding chairs unfurled and a constant buzz of conversation was already vibrating through the air.

The official meeting started promptly at 8:00am when the Berkshire mini-movie hit the big screen; part self-deprecating humor, part British Arrow Awards, but 100% just plain fun. That was the other thing I didn’t realize. This isn’t a snazzy PowerPoint presentation. It is simply the world’s longest and most interesting Q&A session. Just Warren, Charlie, a couple of cans of Coke and a box of See’s Candies taking questions from analysts, the media and the audience, for SIX hours.

But, I think in order to avoid an excessive number of questions about politics and an increasingly divisive America, Warren started by providing an opening statement, which was just a restatement of his fundamental underlying investment strategy for nearly 70 years. Over the long-term, there is no better place for business to thrive than the democratic and capitalistic soils of America. As a result, there is no better place to invest.

He set the stage by showing the front page of The New York Times in the spring of 1942. Talk about a tumultuous, uncertain time. At 11 years old he made his first investment on March 10, 1942. A person investing $10,000 in the S&P 500 in the spring of 1942 would today be worth $57 million dollars. There have been 7 democrat presidents and 7 republican presidents since WWII. We have seen recessions and great expansions, technological revolution and globalization. Nothing is ever perfect. The pendulum swings consistently.

I took six pages of notes over the next six hours of Q&A and here are some of my favorite insights:

Gem #1: Passion

“Passion is more important than intelligence” when it comes to managing a business. This is because “(passionate leaders) inspire people to march up the hill even when they can’t see over the top.”

They own companies like Dairy Queen, See’s Candies, and The Furniture Mart, often because they bought them from owners who needed a transition but wanted a caretaker with the same Berkshire long-term vision and culture. The passion for the business is natural from the owner and entrepreneur, but what is really important is that they see the same passion in management. He wants “management that acts like they are the owners.”

Gem #2: Curiosity

“You have to keep learning. What you formally know will never be enough.” As result, Warren spends 5-6 hours a day reading. Charlie, in typical fashion has the most direct assessment of the importance of learning. “If you aren’t constantly learning you end up like a one-legged man in an ass kicking contest.”

Gem #3: Surprise and Delight

Good businesses make it easier and better for their customers. Value and loyalty is created when you “are able to surprise and really delight your customers.” In order to unlock this value chain, you have to “think like a customer and burn some shoe leather doing so.” Innovation is the only way to create lasting competitive advantage, but being the low-cost producer is the certain way to secure it.

Gem #4: Be Humble

This is probably not easy to do when you are the second richest man in the world. But when asked if he ever expected to be where he is today, he pauses, looks a bit contemplative and then simply says, “no.” He could never have imagined.

When asked what he attributes his success to, he unequivocally starts by saying, “luck.” Luck to have been born into a stable, loving household, lucky to have grown up in the zip code he grew up in, and lucky to have been a white male in the 1950’s because he had a lot more opportunities than his two sisters.

Gem #5: Bureaucracy

It is like a cancer. Decisions are better without it. Berkshire tries to never to do unnecessary things and with only 28 people overseeing businesses that generate $5 billion of EBITDA a quarter, you just plain don’t have time for it.

Final Gem: It’s About the Atmosphere

I enjoyed the camaraderie surrounding the annual meeting the most. This was the unexpected encore. Omaha was awash in Buffett dead heads. New friends emerged at every turn because people were excited to share their excitement. I had long conversations with people from Brazil to China, from The Netherlands to India, with students, with investment professionals, with people who traveled on their own and some in groups of nearly 100.

It didn’t matter whether you watched Fox News or CNN, whether you came from the coast or the heartland, for three days in Omaha there was no divide, no divisiveness, no irrational and dogmatic positioning. We were there to celebrate all the things that have always made America great. We were capitalists stomping in the mud at the Buffett Munger farm, dancing with newly made friends, and bathed in the hospitality of Omaha.

I can hardly wait until next year…
 

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