Last night, after spending time at Starbucks I drove to the Harrah’s In Council Bluffs, IA, directly across the Missouri River from Omaha. I played blackjack for a couple hours, which culminated in me making a $120 bet (double losses or break even) and luckily recouping the night’s losses .
After leaving the casino, I slept in the parking lot of Harrah’s with the possible plan of waking up today and just walking across the Bob Kerrey Pedestrian Bridge to the CenturyLink Center. It was raining in the morning, so I instead decided to drive the RV and park at one of the convention center parking lots. My concerns regarding a potential lack of parking didn’t end up materializing, possibly because I arrived at 7AM, about 90 minutes the start of the Berkshire Hathaway movie.
The BRK movie was a combination of short cartoons, commercials, and short skits displaying BRK’s culture, managers, and subsidiaries.
Afterwards, in front of an audience of 18,000, Questions were asked on topics ranging from Berkshire’s succession plans, BRK’s investment in Coca-Cola (in spite of Coca Cola’s role in obesity), questions about controversial issues about specific companies, lack of diversity among BRK staff, nuclear/biological attacks, Warren’s/Charlie’s personal stock portfolio, stock buybacks, the real estate market and more.
Warren provided lengthy, detailed, and verbose answers, which were usually followed and reaffirmed by Charlie’s blunt, metaphorical words/wise-cracks delivered in his dead-panned, expressionless manner.
Here are some ideas/quotes from the meeting:
- We’re not two fellows who think we can predict commodity prices (oil, sugar, cacao)., we don’t try hedging bets by placing bets or predicting.
- Jealousy is a huge problem when it comes to investing. You shouldn’t look at stories of people making money day trading or through IPOs. For every one of those people, there are many who lost money and paid taxes in order for them to be able to make money. You should have the mindset that you’re reading short term stock but rather buying an entire business to hold forever. As with a business, you wouldn’t run around appraising your business every day. So too, don’t worry about stock market fluctuations, just comfortable long-term value
- Widening the moat: long-term approach for value preservation and creation
- When looking for someone to run a company, the person should have intelligence, be energetic, and have integrity. Without integrity, make sure they don’t have the first two
- Size is the enemy of performance but Berkshire’s subsidiaries benefit greatly from being part of Berkshire in ways ranging from capital allocation, lack of distractions that come from being a public company,capital availability, bolt on acquisitions/synergies, and more.
- Longbets.org
- Seritage Real estate investment trust (warren buffett owns this stock personally)
- “Chemical/biological/nuclear/terrorist attacks are the only external threat to BKR” (just generally or because of BRK’s involvement in insurance). If I could find a way to reduce the probability of an attack by 5%, all my money would go to that cause.”
- Charlie Munger: “Microeconomics is what we do and Macroeconomics is what we put up with.”
- Charlie Munger: “We really try to disprove our own ideas.”
- Charlie’s reasons for why Berkshire is successful:
- Patience and opportunism
- Trying to behave well and fairly (not involved in tobacco, gambling)
- Charlie: “If you have a dumb incentive system, you get dumb outcomes.” “People need to be motivated in a way that aligns them with the goals of the organization.”
- Everyone in a specific company is paid bonuses calculated that are specific to the particular businesses, it’s challenges, and more. (Calculated by a grid Of growth through policy AND ….)
- Bad example of compensation is “% of profit approach” that is used in investment banking
- Buffet admitted that he paid a higher price for acquiring Precision Castparts because of the low interest rates. If interest rates were higher, he said he wouldn’t have had to pay as much. (Sometimes in markets with lower interest rates and more attractive economics, you might need to pay more for an asset, which shouldn’t be a deal breaker)
- Warren about the real estate market: “Market isn’t what it was like in 2012 (not as attractive). Certainly properties that are being sold for low cap rates. I don’t see a nationwide bubble in residential real estate now at all.”
- Charlie Munger on his humor: “I think if you see the world accurately, it’s bound to be humorous, because it’s ridiculous”
After the Q&A session, there was an extra 45 minutes to review a shareholder proposition. The proposition requested that BRK conduct a risk analysis to fully understand the risk that global warming poses to Berkshire’s insurance business.
During the formal proposition, several shareholders (green activists) gave short speeches in favor of the proposition. Once they began speaking, the absurdity of their proposal arose. The activists suggested implementing carbon taxes, exiting from the crude business, and asking for Warren to make a public statement about the economy’s vulnerability to global warming. It was a pathetic proposal/presentation, and if Charlie and Warren entertained these environmentalists for even a second, these activists/bullies would latch on and cause destruction/trouble for years to come, using their connection/validation with Berkshire to pursue extreme measures. Charlie and Warren abruptly voted down the proposal and it was laid to rest on the spot.
