Tuesday, April 30, 2013

My Take: Berkshire Hathaway Shareholder Meeting, Woodstock for Capitalists.

Omaha 2012

Just before six a.m. our hotel van delivered us to the CenturyLink Center in Omaha. As we joined a long line of attendees and others, I was reminded that this journey started much, much earlier... at age 11 to be exact.

As a pre-teen there were no bedroom posters or trading cards to express my passion for making money.  I watched Alex P. Keaton and Gordon Gecko but neither seemed like ideal role models.

In high school, and almost on cue, Donald Trump and his Art of the Deal became my personal textbook.  (I was so committed that I even owned the Trump board game and forced my college roommates to play if they wanted to borrow my car.) 

Even then I recognized Trump's value more as a promoter than his ability to genuinely make a difference.  If I was going to worship someone’s business acumen, I wanted him to be able to change the world (not just name things after themselves).

After reading the Making of an American Capitalist by Roger Lowenstein in the fall of 1995 I had a new deity – Warren E. Buffett. 

Hook. Line. Sinker.  And I was his perfect disciple. 

Delayed gratification?  Check. Sacrificing now for future gains later?  Check.  Buy for value? Check.  Hold for the long term?  Sign me up.  

Granted, I was in my early 20s and if I was ever "flush with cash" it was merely for a few moments on Friday afternoons.  Come to think of it, I probably only knew one or two people who were actually worth ‘four figures’!

No matter, I had big plans for myself and decided to accept Mr. Buffett as my personal mentor of capitalism and wealth creation.  It became somewhat of a one-sided relationship but I didn’t mind.

Fast forward almost 20 years and I found myself at the Super Bowl, Kentucky Derby and the Daytona 500 all rolled into the Annual Berkshire Hathaway Meeting.  I was overwhelmed.  There is truly no place I'd rather be and apparently I was not alone.  I was accompanied by 40,000 other fans – all “pulling for the same driver."

"Good thing we got here early..."

The doors didn’t open until 7 a.m. so I passed the time talking with the folks around me. I say folks because even though we may not have looked alike there was a distinct familiarity.   We were comfortable around one another because we all knew that we shared at least one common interest in the Oracle of Omaha.

I met a woman in her late 50s who had driven up from Lincoln the day before with her 80-year old parents.  "We do this about every year, I think it's our 10th or 11th meeting." 

The 70-year old divorcee from San Clemente was especially interesting.  Her father had given her Berkshire stock in the 1970s but during her divorce some 20 years ago her dad insisted that she give her ex "anything he wanted but don't let him touch that stock."

To say the place was electrified would be an understatement.  Between the sounds of Bach and Jack Johnson I watched the arena fill.  As I surveyed the predominantly older crowd as they took their seats I was reminded, that this is not some "Omaha Social Event" or a stereotypical crowd of Wall Street Brokers.   These "attendees" were the part owners of a very large corporation and Warren Buffet was their trustee.  He was one of them.  They identified with his ideals and more importantly, they relied on him to continue protecting their sense of financial security.  More obviously, these weren't people who had invested in a sole company, they had invested in sole person. 

The lights dimmed and the movie started at exactly 8:30.  A brief video intro from Buffet requested we refrain from recording the pending movies, even encouraging the audience to ask their neighbors to do the same.  Instinctively the entire arena looked around– everyone took the request seriously because no one was going to let Warren down.

What followed was a roller coaster of cartoons featuring Warren and GEICO commercials with Charlie Munger.  Parodies, video skits and shameless product placement were followed by nostalgic news clips from the early days in a downtown Omaha theater bursting with 1500 attendees.  The videos were low budget but the topics were current and entertaining.

The audience favorite was easily the clip of Warren in his wood paneled office seated at his overloaded desk doing a very poor job of answering the company phones.  

His longtime secretary, Debbie, (with feet propped on her desk and primping in front of a makeup mirror) couldn't be bothered.  After her quick rise in media fame due to the fact that she paid a higher percentage of her income in taxes than her boss, she was busy taking calls from Oprah, Vanity Fair, even the POTUS. 

Rolling her eyes and making the universal "gag me" sign when Warren tried to get her attention from the adjacent office had the crowd roaring with laughter.

The movies ended, stage lights came up and through the center of the blue curtain Warren and Charlie Munger entered the stage.  The arena was jubilant and I found myself grinning uncontrollably.  Taking their seats at a 6-foot table draped in black, Buffet and Munger were side-by-side and looked like Randolph and Mortimer from the movie Trading Places.  As they spoke this was anything but a joke.  At 81 and 88 they immediately took command of the proceedings.  It became all business as the meeting rules were laid out.

Over the course of five hours, with a lunch break, Warren and Charlie answered about 60 questions.  I can only liken this experience to listening to my very favorite band play to a sold-out concert, but instead of playing from their newest album we enjoyed the audience requests. It was fascinating.

As expected, one of the first questions was regarding Warren’s health.  Candid as always, he reassured a somewhat tense audience that he was more likely to get shot by a jealous husband than get taken out by prostate cancer.  

Munger quipped that Warren gets all of the attention and that he too probably has prostate cancer but won't let the doctor touch him “there”...  Again, the crowd roared with applause and laughter.

Their table started out neatly organized with two ice buckets filled with Cherry Cokes for Warren and Diet Cokes for Charlie.  They took turns working through the See’s Candy (fudge and peanut brittle) and a cooler full of Dilly Bars.  We couldn’t help but snicker everytime Charlie cracked open another can of Diet Coke: Heard through his mic and resonating through the arena the way a beer can sounds in a quiet movie theater.

I knew very little about Charlie before the event.   He is obviously brilliant and was very much a crowd pleaser because of his no nonsense replies, quick one liners and the equal opportunity with which he offended everyone from politicians and attorneys to fund managers and ivy league schools.

Warren usually spent a few minutes thoughtfully answering a question then instinctively turned to Charlie, “anything you want to add?”

Munger consistently replied with, “you've covered it” or a simple five-word phrase that perfectly summed up Warren’s longer explanation.  

Warren told us that he "sleeps well" with $20 billion in the bank but he's itching for a deal.

When asked about his successor he reassured a pensive crowd that his replacement would be much better than he.  He followed with heaps of praise on his current managers.  Restating that they are the best, from their culture to compensation and incentives, he trusts his team and they will always be the reason for Berkshire’s success.

Questions that I found most compelling included the argument that his vocal comments regarding taxation and the “Buffet Rule” were bad for Berkshire's brand.  “Where does it say that my citizenship has to be in a blind trust?” Buffett replied.

Another audience member relayed to the stage that she was upset that Berkshire doesn’t enact a dividend.  His response:

“For the past 47 years you'd be better off selling 2 percent of your stock instead of taking a dividend; we’ve done the math, we make much, much, more by continuing to invest that cash. Maybe this just isn't the right stock for you. Next question?"

The crowd nodded in agreement.

As our 3:30 p.m. cut off neared I could see why the meetings have grown more each year. What started as a "one time thing" for me could easily become something of a routine as I make a note of the 2013 Annual meeting and start planning the next trip in my head.

Munger and Buffett know they aren't going to live forever and so do I.  After seeing these two interact I recognize that the annual meetings won’t be the same with one and not the other. 

While I plan to attend another meeting I don't know when. Fortunately with all great adventures, the memory will forever be vivid and an experience I plan to share for a long, long time.

Planning a trip?

-      First things first, you’ll need to one at least one share of Berkshire Hathaway stock.  BRK-B is trading at $105 (Apr 23)

-      Hotels near the the Century Link Center and Downtown Omaha can get expensive.  Consider Council Bluffs, Iowa.   Directly across the river from Omaha with rates under $100/ night in some cases.

-      Feeling lucky?  Council Bluffs has a number of Casinos including Harrahs, Ameristar and Horseshoe.

-      Transportation was a breeze with the hotel courtesy vans.  Nothing was more than a 10 minute drive, including the airport.  Early morning shuttles to the Century Link center the morning of the event start leaving the hotel at 5am.

-      Flying?  Book early or consider leaving on the first flight out of Omaha Sunday morning and save at least $100.

-      Downtown Omaha.  Better than you think.  Great Downtown districts with many open air seating, live music and a diverse set of restaurants and interesting shops.

-      Your Berkshire hosts provide a ‘visitors guide’ with specials, deals and an agenda for all of the pre and post meeting events.   Additionally, the ‘entire’ City will welcome you with open arms – they are proud to be the world headquarters of this iconic firm.

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