4 Lessons from Warren Buffett and Charlie Munger
Hello and good morning.
I hope you’re well - today is another day to be thankful for the air in your lungs!
This last weekend I had the pleasure of attending the Berkshire Hathaway shareholder meeting in Omaha. The pilgrimage was an effort to listen to Warren and Charlie speak at least once before they get too old (Warren 92, Charlie 99). It blew my expectations away not only with these old duffers clarity of thought, but the community they brought to Omaha.
Format today will be a little different - my top four takeaways from listening to them talk along with some quotes and pictures!
Business is about people
Part of the territory of being a publicly traded company is the scrutiny of analysts whose jobs rely on predicting company earnings. CEO’s need to remain on analysts good side in hopes of being painted in a positive light with an ambitious price target of where the stock price could go. Warren Buffett is not one of these CEOs.
On several occasions throughout the meeting, Warren referenced the real reason Berkshire Hathaway is in business.
“We don’t care about analysts. We care about the shareholders which is a reason to celebrate.”
And a celebration it was. More than 30,000 people attended the meeting this year - the only requirement to enter is that you are a shareholder or accompanied by someone who was. Those in attendance was quite shocking to me; only probably half were stuffy finance people in suits. The rest were average joes who have no doubt been made extremely wealthy over the years of ownership in Berkshire Hathaway.
I struck up a conversation with a woman behind me in line while purchasing a t shirt souvenir. She was older, perhaps mid 60’s, and grinning from ear to ear. She showed me her shareholder pass from 2000, her first year in attendance and hasn’t missed a year since.
During the meeting, a gentleman prefaced his question for Warren with a brief story.
Back in 1990, Warren stepped into the CEO role at Salomon Brothers after the US government threatened to shut down the company for security violations. Warren’s efforts revitalized the company and turned the business around.
The man presenting the story had been waiting since that moment and flown all the way from Japan to thank Buffett for not firing him and how it saved his family from destruction.
The crowd ERUPTED in applause.
My takeaway was that Warren sees what is behind the tables, charts, and numbers of a business and that’s its people. Those who work there and the shareholders of that business. When you look after both parties livelihood and respect their money, the amount of goodwill that can be built is unmatched. Compound interest works not just in money, but in your relationships with people as well.
Unity of purpose
It’s incredible what can be built by uniting under a common goal. The military is a prime example of this; train a bunch of people under difficult circumstances and point them all in a single direction and you get a magnificent force.
This doesn’t apply to just military personnel however. Buffett made several mentions in the meeting of circumstances surrounding WWII. The entire country was aligned under a common purpose. Not only were the soldiers out fighting for that cause, we put the ingenuity of American business behind that front.
The Lionel toy train company started producing items for warships, including compasses.
Ford Motor Company produced B-24 Liberator bombers.
Alcoa, the aluminum company, produced airplanes.
The Mattatuck Manufacturing Company, which had made upholstery nails, switched to making cartridge clips for Springfield rifles.
By the end of World War II, half of the world's wartime industrial production was in the United States.
Succeeding in business requires similar efforts; you need buy in at every level and there should be no question about the objective being pursued. Buffett used this example when it comes to looking at the transition to clean energy, which his portfolio company Berkshire Hathaway Energy is involved in.
Thanks for reading. I write something similar to this every Saturday. If it’s your first time reading and enjoyed it, don’t let it be the last.
He said that the lack of progress towards clean energy is driven by the lack of unity on objective. There are too many differing opinions and despite looming climate change, we lack a single uniting force. What I thought was interesting is that he said money was not the issue and that there is plenty of money to do it. What we are lacking is much more difficult to achieve.
I don’t wish bad things to happen, but it’s often those bad things that unite us the most. Don’t let hard times go to waste.
Create your own vision of the future
Succession for Berkshire Hathaway has been on the minds of shareholders for years. At the meeting they showed a video of all the times Warren and Charlie were asked about their successors over the years, starting in the early 90’s. Their answers have largely been the same; summarized, and to quote David Senra “Death is the exit”.
I find it sad that people spend their entire lives complaining about working jobs they don’t like but make no concerted effort to work towards a job they do. Religious views aside, assume this is only life you get. You spend 1/3 of your life sleeping, and another 1/3 working. That’s a recipe for misery if you don’t find joy in what you do.
Warren and Charlie are textbook definitions of loving what you do. In what other circumstance would you be willing to your “job” until you die.
A question about succession asked this year was what the 100 year vision for Berkshire was. The answer surprised me.
“We want society to believe Berkshire is good for the world. We want to be an asset for this country and not a liability.”
That is a noble cause and shows that money, through superior capital allocation, shouldn’t be evil in the eyes of the world and can be a force for good.
What also sets them apart is the willingness to play only the game they want to play. The world is ripe with opportunities, all that is needed a superior understanding than the majority of others involved. If you understand your circle of competence and are willing to wait for opportunities, you can make a lot of money.
Avoid those more interested in selling ideas than actual investing.
There has never been a better time to be alive
Warren has always attributed his success to being born in America. One of the sole drivers of this is the power of American business. Capitalism provides incentives to grow the pie and become wealthy in the process.
Buffett in 2016: “The babies being born in America today are the luckiest crop in history.”
A question was asked about what could undermine the success of the United States followed by several questions relating to the advancements in AI.
“We have better technology which allows us to see the problems we have better like a more enhanced microscope, but this is still the best place to live by a mile. We started this country out with half of 1% of the world’s population but now represent 1/3 of the world’s GDP.”
We have become much more critical of all policies, laws, and social norms but not to recognize how far we’ve come and what’s allowed us to be more critical is what Buffett called the “refinement of democracy”.
While facing seemingly different problems, how we think largely hasn’t changed. Buffett referenced Einstein on the atom bomb and how its changed everything except how men think.
I came away from the weekend rejuvenated and inspired. I met some of the smartest people I think I’ve ever met and was a good reminder of last weeks piece - hang out with who you want to be like. It was also a reminder of the big problems the world has today that are worth solving.
If you got something from this piece, I’d appreciate you sharing it with someone who would benefit from reading it. Consider it a favor to me.
Here’s a picture of a giraffe I met at the Omaha Zoo as a thank you for sharing. HIGHLY recommend the zoo there if you have the chance of going - was by far the best I’ve been to.
If you missed it, this week I hosted Rodney Adams on the podcast to talk about starting and scaling a home repair business. We talk about why scale is everything in home services, businesses benefiting from veteran affiliation, and some potent advice for young men’s marriages.
I also dropped a new episode on Youtube from the archive with Kate Germano.