Omaha is where it’s at

The company’s annual shareholder jamboree is worth the jet lag, not to mention the cost. At $330 a Berkshire B share, why not go?

● After Covid, working from home and online meetings have become the world’s way. Personally, I don’t like it; but sometimes it’s much more convenient to log on to Teams than to jump in your car and drive 30 minutes each way for a one-hour meeting. And if it would take 24 hours of travel to attend a meeting, a live-streamed option becomes even more attractive.

But it’s different when considering a trip to Omaha to attend the annual Berkshire Hathaway shareholder gathering.

The “meeting” is revelatory; being among 45,000 people packed into an indoor stadium to listen to two nonagenarians is a unique experience.

So why do all these people and I go?

Berkshire Hathaway is run by Warren Buffett, 92, and Charlie Munger, 99. In 1964 they took over a textile business called Berkshire Hathaway and immediately started diverting its cash flows into other, more promising, investments. Since then, the share price has compounded by 19.8% a year, compared with the S&P 500’s annual growth of 9.9%.

To put that in perspective, $1 invested in Berkshire in 1965 would be worth $3.8m today, vs just $25,000 if you invested in the index. Even over the past 10 years, during which Buffett has repeatedly warned that the company’s sheer size would work against high returns, it has generated 16% growth a year, matching the index. This has made them both, and many of their shareholders, extremely wealthy.

As US author Morgan Housel pointed out (quoting film producer and screenwriter Matt Damon): “You retard socially and emotionally the moment you become famous. Your experience of the world is never the same. The same may be true and far more common for those who become wealthy.”

Not in this case.

That these two men are still around is remarkable. It is even more remarkable that they are still willing to spend six hours answering random questions from shareholders. But the most remarkable thing is how down to earth they are, given their wealth and achievements.

Anyone who has compounded capital at the rate they have could only have done so by applying a sound business philosophy and by consistently implementing sensible processes over a very long period. And that’s why we go to Omaha; to listen to these two great people explain how they have done it and continue to do it.

Buffett and Munger are exemplars. By its very nature, very few such people emerge from the financial world. It’s worth taking a good look at the rare occasion when a system with such perverse incentives produces outliers.

Many commentators have summarised the meeting by now. The key takeaways for me were:

● Emotional decision-making is your biggest enemy in investing;

● Wealth compounds over time, be patient and don’t do things that will take you out of the game;

● If you want to figure out how to live your life, write your obituary and spend your life living up to it;

● You need to know how people can manipulate others and then you must resist the temptation to do it yourself;

● Buffett said: “I’ve never known anyone who was basically kind who died without friends. But I’ve known plenty of people with money who have died without friends

[and without] their family”; and

● On artificial intelligence (AI), Buffett commented that many new things had come about in his investing lifetime, but the company’s biggest investment opportunities came from human misjudgment. And even AI won’t change that.

Buffett and Munger also shared their views on politics, markets and stocks, but these were just their opinions, some of which will prove correct and others wrong, so I won’t repeat them here.

During the morning session, both Buffett and Munger were on form Buffett, as usual, came across with his unique combination of optimism and realism; Munger added his biting insights every so often. For example, when asked about his estate planning advice for Berkshire shareholders, he said: “Just hold the goddamn stock.” The three-hour session flew past.

In the afternoon session, it became clear that both were tiring; Munger became even more monosyllabic while Buffett started rambling a bit. Understandable and excusable given their age. By 3pm I think they were both relieved to call a halt to the proceedings.

Again, one has to ask the question: why not just stream the event?

In my case there were two reasons. The most important is that I took two of my sons to the meeting. Both are in their early 20s; in the formative years of their careers.