As I arrived in Omaha on May 4th to attend Warren Buffett Berkshire & Hathaway (NYSE:
Investors, family offices, insurance groups, endowments and hedge funds gather in Omaha annually during this time of the year to network, share business insights, make deals, and most importantly get market strategies and wisdom from the two billionaire investors. As I went for business dinners, I also spotted the usual attendees including Tim Cook, the CEO of Apple.
Business and Life advice: Berkshire CEO Warren Buffett and vice chairman Charlie Munger gave away the usual business and life advice during Saturday’s annual meeting. Munger’s “great lesson in life” is to cut out toxic people who can hinder your path to success.” Munger continued and said “It’s so simple to spend less than you earn, and invest shrewdly, and avoid toxic people and toxic activities, and try and keep learning all your life, and do a lot of deferred gratification”. If you do all those things, you are almost certain to succeed according to the two guru investors. Similarly, Buffett commented “I’ve never known anybody that was basically kind that died without friends,”. “And I’ve known plenty of people with money that have died without friends.” These are the typical advice that has been recurrently shared by the two partners over the last ten during their shareholder’s meetings.
What strikes me about the duo partnership, is that they built a business based on friendship, removing unethical people from their team, and making kindness and focus the driving force of their empire building. As Munger puts it, toxic people can threaten your path to success. Monger said during the meetings on Saturday, “The great lesson of life is get them the hell out of your life and do it fast”.
Warren Buffett and Charlie Monger Track Record
The long-term track record of Berkshire Hathaway is unmatched. In the 58 years from 1965 to 2022, Berkshire Hathaway stock appreciated at a 20.1% compound annualized rate. To better explain the power of compounding, that amounted to a 3,741,613% return for Berkshire shareholders compared with a 30,209% return for investors in the S&P 500. This high performance is due to the duo’s extreme focus on their area of expertise, investment shrewdness, and long-term focus. Some criticize Berkshire for not taking advantage of tech opportunities provided by the market over the last 20 years, and while some of these are valid points, Berkshire continues to outperform its competitors by a long shot. Additionally, Berkshire Hathaway’s $158 billion investment in Apple (22% of Berkshire Hathaway’s total market value) is an example of tech capital allocation that has paid massive dividends for Berkshire’s shareholders.
The Saturday public Q&A:
This year’s gathering attracted 40 thousand shareholders across about 50 countries. We were all there to Warren Buffett, Charlie Munger, and their successor, Greg Abel’s market strategies. This was my seventh shareholder’s meeting, and I have never seen the arena so packed. Key questions asked included the future of AI, value investing, US-China relations and the US banking crisis. Both Munger and Buffett discussed AI on several occasions and they both expect robotics to have a large role to play in business and in our society. They did however stress that there are a lot of AI companies that will not go anywhere. On value investing Monger stressed that we need to prepare to make less money. On US-China relations, both stressed the importance of the two superpowers getting along, as free-trade between the two countries are indispensable for economic growth. On the banking crisis, Monger and Buffett repeated that the US regulators did the right thing to rescue SVB and other regional banks. This was critical to prevent a general banking panic. They did however say that holding banking management accountable is a must to prevent moral hazards going forward.
Final Thought: Berkshire and Hathaway’s annual meeting was cheerful, and calm and optimism was evident throughout the 3 days meetings. The two billionaire investors however, delivered mostly bad news. The economy will slow down, value investors will make less money, and the cost of capital will stay high. The key takeaway to deal with market uncertainty and economic weakness was to invest in yourself, learn to do more with less money and focus on what you know best.