The tradition of a pilgrimage has been central to certain faiths and cultures for millennia. Such a journey exists in the investment profession as well. In early May, your scribe was one of approximately 40,000 people who descended on Omaha, Nebraska to attend the Berkshire Hathaway annual shareholders’ meeting. Some come to pay respects to Warren Buffett and Charlie Munger, who have made long-time shareholders wealthy beyond their wildest dreams1. Others come with the hope of gaining a nugget of investment wisdom from the greatest investors of a generation.
It was the first visit to Omaha for me. My host was attending for the 10th time. I met someone who was attending his 50th meeting. In the early days, annual meetings took place in the Berkshire lunch room. Today, they are held in the massive CenturyLink Center in downtown Omaha. The arena itself holds perhaps 25,000 people and there are overflow rooms for tens of thousands more to watch on closed circuit television. CenturyLink also contains a massive convention space where many Berkshire subsidiaries – from Fruit of the Loom, to Duracell batteries, to NetJets – have booths. You can get an auto insurance quote from Geico and a Dilly Bar from Dairy Queen.
Annual meeting day starts early – my alarm went off at 4:00 a.m. When we reached the venue at 5:15 a.m. several thousand people were waiting ahead of us. I learned that there is a thriving business in Omaha where locals will wait in line overnight to save a spot for keen shareholders. The 2017 rate for this service was $100.
At 7:00 a.m., the doors to the CenturyLink Center opened and the crowds began to enter. Our 5:15 a.m. arrival proved adequate as my host led us to front row seats in the first balcony – his favourite vantage point. It was a relief to sit down, three hours after the alarm went off. It’s still an hour and a half before the festivities start. To fill the time, several of us ventured down to the convention space to check out the booths of various Berkshire subsidiaries. I held off buying a new sofa from Nebraska Furniture Mart, but did buy some See’s chocolates. And just as we were about to head back to our seats, we bumped into Warren himself, wandering through the convention hall surrounded by a media scrum.
The main event starts with a movie, which is a humourous review of the year’s events featuring Warren and Charlie in starring roles. Following that, about 9:15, Warren and Charlie appear on the stage and take their seats at a small table on a dais at one end of the arena. Sound and video transmission of their remarks is excellent, but there are no props or decorations. At 93, Charlie accepts some help taking his seat, but over the next six hours he proves that his mental acuity is undiminished. Warren seems positively youthful at age 86.
The Berkshire meeting is not like other annual meetings. It is primarily a public question and answer period. Two other tables are situated at the end of the arena on either side of Warren and Charlie – one with three journalists seated at it, and another with three equity analysts. The journalists – Carol Loomis of Fortune, Becky Quick of CNBC and Andrew Ross Sorkin of The New York Times – pose questions that previously were emailed in by interested shareholders and other parties. The analysts ask more detailed questions on the operations of Berkshire. Each journalist and analyst asks six questions. The audience also gets the opportunity to ask 18 questions. In total, Warren and Charlie address 54 questions, coming at them randomly, over the next 6 ½ hours (with an hour off for lunch). They sustain themselves by drinking Coke and eating peanut brittle. At 3:30 they cut off questions to attend to the formal business of the meeting. Few stay for this.
What did we learn from the event? Was it worth the investment in time and money to travel to Omaha? In my opinion, the answer to the latter question is definitely, “yes”. The spectacle itself is something to see, and Warren and Charlie are quite the act. Warren takes the lead answering most questions. He loves to talk and answers most questions in about twice as many words as are probably necessary. Charlie is the straight man. He is economical with his words and interjects many “zingers”.
In terms of lessons learned, perhaps the most interesting thing was Charlie’s focus on their mistakes. In his view, they were blessed by making some truly horrible mistakes early in their career2 from which they learned life-changing lessons. And Charlie reminded people that they keep making mistakes. Several times he pointed out the fact that it should have been obvious for them to invest in Google. They experienced first hand how much money Google was making through the rates it could charge their subsidiary, Geico, to advertise. Yet they sat on their hands. Charlie even quipped that Berkshire’s motto might appropriately be: “we don’t miss ‘em all!” Google was one of a very few companies they mentioned specifically. Apple and Walmart also earned words of admiration. Perhaps the fact that these three companies have also been successful long-term holdings of Nexus proves the adage that great minds think alike! JCAS