My son William and I just got back from Omaha, Nebraska, the site of Warren Buffett’s Berkshire Hathaway annual shareholders meeting.
This annual event has developed into quite the spectacle. Over the decades, the meeting has grown from a small gathering in a cafeteria into a weekend-long event, which this year had close to 40,000 attendees from all parts of the world. Attendees included Apple CEO, Tim Cook, Bill Gates, and former Yahoo! CFO Susan Decker. Shareholders began lining up as early as 4:00AM in hopes of getting the best view possible of Warren, and his long-time business partner, Charlie Munger, who serves as Vice Chairman of Berkshire Hathaway.
Paul & Apple CEO, Tim Cook
The meeting began at 8:30AM with an often-humorous video that included appearances by Tiger Woods, Amy Poehler, Tim Cook and Bill Gates. Throughout the day, attendees could visit the attached convention center, where several Berkshire owned companies, including Kraft-Heinz, Duracell, Dairy Queen, Fruit of the Loom, Geico and See’s Candies had set up displays for shopping.
Paul & William at the Kraft-Heinz booth
The meeting itself is quite simple, and is a Q&A format, with Warren and Charlie sitting on stage at a single table taking questions from shareholders, journalists, and analysts.
Far from a typical shareholder’s meeting, this annual event is more of a celebration of Berkshire and its unique culture and principles. These principles include but are not limited to an appreciation of the long-term nature of investing, honesty, humility, simplicity, and making decisions based on rational evidence rather than emotions.
I’d like to expand on two of these principles, as they provide great lessons for the everyday investor.
Throughout the meeting, consistent with their past writings, and interviews, both Warren and Charlie continue to display large amounts of humility. Despite being arguably the two greatest investors of all time, Warren and Charlie never boast or attempt to take credit for their success. Instead, they consistently attribute their accomplishments to luck, patience, and the people around them. Warren and Charlie always like to remind people that they have no clue what the stock market is going to do tomorrow, next week, or even over the next year. Further, they each like to proactively remind people that they are not infallible, have made many mistakes in the past, and will continue to do so.
This stands in stark contrast to investment “experts” often seen on TV or read in the newspapers who like to act as if they are certain they know what the stock market is going to do, and regularly make gloom and doom predictions.
To build on this theme, in the 2018 shareholder’s letter Warren wrote about his first ever investment. On March 11th, 1942, Warren used his savings of $114.75 to invest in the stock market. Now, keep in mind that this was in the middle of World War II, just three months after the Japanese bombed Pearl Harbor. Imagine the headlines at that moment in history!
Warren looked back and determined that if his 1942 investment of $114.75 had been invested in a S&P 500 Index Fund, by January 31st, 2019 it would have grown to $606,811. However, if in that time of great distress for the country he had panicked and sought to “protect” himself from the stock market, and instead had bought gold, his investment as of January 31st, 2019 would be worth $4,200. $606,811 vs. $4,200! Which was really the “safer” investment?
The point of this is to show that there will always be negative headlines. The key to investment success is to ignore all of this and stay level-headed amongst the noise. Warren summarizes this perfectly,
“Since 1942, we have had seven Republican presidents and seven Democrats. In the years, they served, the country contended at various times with a long period of viral inflation, a 21% prime rate, several controversial and costly wars, the resignation of a president, a pervasive collapse in home values, a paralyzing financial panic and a host of other problems. All engendered scary headlines; all are now history.”
These simple, yet incredibly effective investment strategies continue to be the focus of our West End Wealth Planning team.
Thanks for reading