Berkshire Hathaway's 50th

Hi, I’m Warren. He’s Charlie. He can hear, I can see. We work well together.
 
~Warren Buffett,
at the start of the 2015
Berkshire Hathaway annual meeting

Berkshire Hathaway held its 50th annual shareholder meeting on May 2, 2015. The company is a lesson in successful capitalism. Chairman Warren Buffett and vice chairman Charlie Munger have built the most successful investment partnership in human history. The list of wholly-owned Berkshire subsidiaries includes GEICO, Fruit of the Loom, Brooks Shoes, and See’s Candies. The company also owns large percentages of Coca Cola (9.16%), American Express (14.9%), IBM (7.82%), and Wells Fargo (9.01%).

Over 40,000 shareholders attended Saturday’s annual meeting. What draws so many shareholders to Omaha every year? The opportunity to learn.

The Meeting, In a Nutshell

The formal shareholders meeting only lasts fifteen minutes, from 3:30pm to 3:45pm. For the rest of the day (excluding an hour for lunch) Buffett (age 84) and Munger (age 91) answer questions from journalists, financial analysts, and randomly selected members of the audience.

The day starts at 8:30am with a movie.

Morning Movie

Each Berkshire meeting starts with a short movie. One year, the movie included information about a recent acquisition, a deal that had been completed just hours before the meeting. This year’s movie was a humorous montage of skits worthy of Saturday Night Live, woven with ads for Berkshire products. Berkshire brought in Hollywood director John Landis to direct this year’s opening movie. One skit included a boxing match between Buffett and Floyd Mayweather. Charlie Rose interviewed the pugilists before their bout. Mayweather and Rose played themselves in the skit.

Questions and Answers

Buffest and Munger answer questions from the stage while sipping Coke and munching See’s candy. Their answers tend to be short and direct, laced with wit. Snippets of wisdom from the Q & A session:

• Buffett: Investing is easy if you can control your emotions.

• Munger: I quit practicing law. Law firms are like a pie eating contest where if you win, you get to eat a lot more pie.

• Buffett: When it comes to investing, I prefer to be 100x too cautious, rather than 1x un-cautious.

• Munger: Both of us hate the idea of losing someone else’s money. It drives our caution.

• Munger: People want value when they buy something. But when they invest, they go for the quick fix. I don’t understand that.

• Munger (When asked if he would have preferred to be born in 2015 instead of 1924): I don’t like these overly theoretical questions. I’d rather answer questions where I can actively help somebody.

• Buffett (summarizing capitalism): Do what you’re best at. Let other people do what they’re best at.

• Buffett (on his long term perspective): I get monthly reports from all our companies and I read them with great interest. We don’t ignore monthly or yearly results. We just don’t live by them.

• Munger (When asked about Berkshire’s interest in investing in Germany): Germans work fewer hours and produce a lot more. We’d like to invest in Germany, but it’s difficult to penetrate family company ownership structure.

• Buffett (When asked about the NetJets pilots picketing outside the annual meeting): We have hundreds of labor unions in BRK. Three strikes in fifty years. Employees and employers sometimes disagree regarding pay. That’s human nature. We will resolve this disagreement.

• Munger (Predicting why the Euro will eventually fail): You can’t form a business partnership with your thriftless, drunken brother in law.

• Munger (On BRK borrowing money): We haven’t felt cash constrained in a long time. We would love to have an acquisition large enough to require us to borrow.

• Buffett (On giving up his private jet vs quitting the Internet): If I had to give up my plane or the Internet, I’d give up the plane.

• Munger (On why he and Buffett are so successful): We owe a considerable amount to the families we were raised in. We had great role models.

Giving Credit for Success

Throughout the Q & A period, Buffett praised several of the Berkshire managers by name. When a questioner said something good about American Express, Buffett praised Ken Chenault. When someone had positive words about Berkshire’s insurance holdings, Buffett credited Ajit Jain. Buffett and Munger share the credit for Berkshire’s performance. That’s a big reason why the companies perform so well.

Meeting People

When 40,000 investment-minded people gather, rich conversations will happen. After the meeting, I ended up having dinner with an asset manager from Brazil. Both of us arrived solo at Gorat’s, Buffett’s favorite steakhouse in Omaha. We decided to share a table when we realized that Gorat’s would seat a table for two faster than two tables for one. Capitalism, properly practiced, is about cooperation.

5k Run

About 1,000 people gathered for the 5k Invest in Yourself run on Sunday morning. The weather was perfect.

Looking Forward to the Next One

The Berkshire Hathaway annual meeting offers an inspiring, powerful learning experience each year. I look forward to the next one.