Lessons from Buffett-palooza: Six months in
Sure, there were the prosaic T-shirts with Warren Buffett’s face at the annual Berkshire Hathaway meeting this May. But there were also boxers. Ketchup bottles. Rubber ducks. Why not? The country’s most famous investor is also its most consummate pitchman – only one of the distinctions that differentiate Berkshire Hathaway from other companies.
Of course, Warren Buffett is so iconic an investor that the word “iconic” seems inadequate. He’s the fourth richest person in the world, an avuncular-seeming investor who nonetheless made money off Goldman Sachs, who themselves are hardly pushovers. He’s got a humble, down-to-earth demeanor and a personal fortune somewhere around the entire GDP of Croatia (WB: $65 billion; Croatia, around $60 billion).
It’s now been six months since I started covering Berkshire, and it’s been a learning experience, to say the least. Covering this company is not like any other (can you imagine AIG selling out of Bob Benmosche-emblazoned shirts? How about just giving them away?). Below I’ve compiled a roundup of things the Berkshire beat has taught me at the half-year mark, along with things to watch for in the rest of 2014 and beyond.
1. While Buffett’s been rightfully lauded for his investing track record, his biggest gift might simply be in hiring. In his annual letter to shareholders, he lavishes praise on managers such as Ajit Jain (Berkshire Hathaway Reinsurance Group), Greg Abel (at MidAmerican Energy, now Berkshire Hathaway Energy) and Matt Rose and Carl Ice (BNSF), but many, if not all, the analysts, shareholders and more to whom I speak echo those words. And on the investment side, he’s got Todd Combs and Ted Weschler, as well as rising star Tracy Britt Cool. Buffett makes a big deal of finding the right people because he knows he can let them handle things without his constant interference. That’s part of what makes Buffett able to head up such a sprawling company – Berkshire Hathaway includes dozens of businesses and employs, in total, more than 330,000 people. That’s larger than the entire city of Cincinnati.
2. Buffett is very aware he’s not going to live forever. He’s 83 years old (turning 84 in August), and he knows that his time left at the head of his company is limited. He’s consciously shifting the company to run without him in the future, toward operating businesses with solid managers that do not need him to keep running smoothly. While he hasn’t publicly disclosed his designated successor, he (and his business partner, 90-year-old Charlie Munger) have gone out of their way to reassure investors that the board has eyeballed Berkshire’s roster and has picked out some potential heirs. Whoever takes those reins will, I’m sure, be very competent… but they won’t be Buffett. The kinds of deals that Buffett has managed to pull off have come in part on the strength of his considerable fame. Think of the Goldman Sachs deal during the crisis; it was a big boost for Goldman to be able to say that the most famous U.S. investor had given them a sort of de facto vote of confidence (at what would become a nice profit). Buffett’s lieutenants do not have that same fame, and they won’t be able to command that sort of fame premium that Buffett does.
3. Do not underestimate the power of Buffett. At the annual meeting in May, I talked to people who waited in line for hours in the dead of night to get good seats in the stadium. Extra credentials for the meeting went on sale on eBay. People completely ignored Bill Gates on the exhibit floor to strain on tiptoes for the merest glimpse of Buffett. Some of this makes me wonder how much some of his shareholders really know about the company. I would certainly hope large fund managers are combing through the company’s data, just as they would with any other company. But are they? And what about retail investors? I talked to plenty of people at the stadium who said they skipped most of the Q&A and shareholders’ meeting so they could go shop among the various booths for Berkshire businesses, from NetJets to Geico to Dairy Queen to Clayton Homes. Clearly, Buffett’s investors trust him. But some of them do so blindly.
4. Doing nothing can be a lot harder (and therefore a lot more lucrative) than doing something. Buffett et al. are just as good at sitting on a giant mattress of cash as they are at making deals. They will take the pain of waiting until the right thing comes along. There’s much to be said for that approach. Because his shareholders trust him so much, he can wait on a $50 billion pile of money until the right target comes along. He has nothing to prove to anyone. He will wait until he’s ready, thank you very much.
5. Berkshire is not the only Berkshire to ever Berkshire. On Tuesday, I saw at least one tweet about how Buffett is buying Portillo’s hot dogs… except it’s actually Boston-based private equity firm Berkshire Partners, not Omaha-based conglomerate Berkshire Hathaway. (One woman at Berkshire Partners told me that her parents are convinced she works for Warren Buffett…)
6. Get a selfie with Warren Buffett at every opportunity.