Wisdom From Omaha
Tens of thousands of shareholders gathered in Omaha, Nebraska, in early May for the annual meeting of Warren Buffett’s company, Berkshire Hathaway, where Buffett and his partner Charlie Munger answered questions for five hours. Here are some nuggets, paraphrased.
• On the threat of automation killing jobs: Buffett isn’t worried, pointing out that it would have been terrifying for someone 200 years ago to learn that most farming jobs would disappear. But American ingenuity has always created new jobs that have replaced obsolete ones. “This system works, and it will continue to work.”
• On why they haven’t been able to make big acquisitions lately: Buffett explained that they only want to buy companies that want to be bought by them. They don’t always offer the highest price, but they do promise that management can stay in place, and that Berkshire won’t turn around and sell the company, as others might. He noted that Berkshire can spend $100 billion easily, and that many deals can be made quickly.
• On China and America: Munger said, “Think how stupid it would be if the two countries didn’t get along. (It would be) stupid on both sides.” Berkshire already does business in China, via its Dairy Queen subsidiary, and Buffett expressed interest in doing more there: “It’s a big market, and we like big markets.”
• On failing banks: Buffett opined that CEOs of banks that end up needing a government bailout should, along with their spouses, lose their net worth. He explained that the government tends to get paid back, but it’s the shareholders who pay. Asked about Wells Fargo’s recent problems, he said it looks like the company had been incentivizing bad behavior, something that many companies do.
• On finally buying stock in Amazon.com: Buffett explained that one of his investing lieutenants bought the shares, and that buying richly valued technology stocks can be consistent with his value investing style — which is all about buying something for less than you think it will be worth in the future.