It’s not just for stock pickers
Last week I went to Omaha.
Joined by thousands of others from every imaginable walk of life, from cowboy hats to 3-piece suits, we all descended upon the small-ish city to join in the often described “Woodstock of capitalism”, all to try to catch a few nuggets of wisdom from a couple of dudes in their 90’s.
Well, that’s not entirely true.
People come for a variety of reasons. Some do come to try and learn from Warren and Charlie, some come to use the crowds to refill their value-investing enthusiasm tank, and some come as a sort of religious-ish annual pilgrimage to pay homage to the man who made them fabulously wealthy.
Many others simply come to enjoy all the meetups surrounding the big event, using it as an eligible tax write-off to hang out with like-minded people.
I personally came for a blend of it all. Facing the facts that Warren and Charlie are both quite ancient, there is always a very real chance that the duo might not be back together next year. I’ve learned more than I can ever possibly express from those two, so there is personal meaning behind the voyage.
I also, most certainly, go for the meetups. There are a fair amount of very peculiar individuals who end up in these halls, but there is also a swarm of people doing fairly interesting things in their professional careers. Fund managers, private equity, entrepreneurs, VC’s, real estate developers, finance professionals, and a hodgepodge of hybrids like myself who do a bit of everything.
Now, frankly speaking, being packed in rooms full of the above people can generally feel a bit… icky, but for some reason the crowds of these particular finance people at Berkshire events always seem to have a bit less ego and a touch more self awareness than the common finance-bro.
(Although there are still WAY too many Patagonia vests flying around)
Some stuff everyone will enjoy, and some will only make sense to the Berkshire nerds like myself.
Stuff I Observed
On trying to beat the market
I was a bit amazed at the amount of people I talked to whose stock portfolios were almost 100% index funds. These aren’t your neighborhood plumber, these are Wall Street professionals, successful VC’s, and exotic options traders who all keep most of their net worth in a few index funds, and maybe a little Berkshire.
The kind of people who you would expect to try and beat the market, effectively saying that they can’t, or at the very least it’s not worth their effort to try and do so.
If they don’t try and beat the stock market, why should I?
On connecting with people
There are a ton of interesting people at the events and meetups surrounding the big day. But how does one connect with them?
Well I noticed something fascinating.
If you’re interested in making friends, and creating deeper relationships with them, then you might think you should share your investing philosophies or some special opportunity.
Wrong.
That is precisely how not how to do it. Past a certain point, most people in the room are somewhat sophisticated and already doing this every day. Everyone has different focuses, but most can speak the same language investing-wise.
The way to actually connect is by sharing perspectives on things outside of investing. Living an interesting life, being generally curious, and sharing experiences that we can all relate to.
Everyone (myself included) was far more interested in that than some sort of hot tip (no one ever trusts those anyway).
As an example, I just happened to run into William Green, the author of one of my favorite and most frequently gifted books: Richer, Wiser, Happier (? get it).
We had a lovely chat on our shared experiences living in Asia, the mindsets and energy gained from certain locations, and some of the hard to explain wisdom of spouses. I believe that he liked my understanding that his book was less about investing, and more about how to reliably live a rich life filled with meaning and fun challenges. Investing was just a way of expressing it all. “Collecting points”.
Not once did we talk about how to invest in anything in particular, and I believe if I had even tried to, it would have killed the vibe.
Value investing is a mindset, not a strict technical style
This means investing in fundamentals of companies, not forecasting prices or trends. Being patient, calm, and rational. It’s business. It’s not speculation. It’s avoiding crowd mentality.
This is why value investing and its teachings can be so useful to someone like myself, who invests in all kinds of stuff, but doesn’t really focus on buying equities in public markets. The mindset transfers to all walks of life.
The exhibit hall feels… slimy
The event is not all sunshine and rainbows. The exhibit hall is packed full of Berkshire subsidiary companies, but it feels a bit like an amusement park gift shop trying to lure children in to pitch fits so their parents give in and buy something dumb. Lots of elderly people getting caught up in the hype to be part of the crowd.
Plus side: There were far fewer Patagonia vests clogging up this area.
Ajit Jain is an incredibly impressive individual
Joining Buffett and Munger on the stage this year were the two vice-chairmen of Berkshire, Greg Abel and Ajit Jain. To overly simplify, Jain is basically the head of everything insurance, and Abel is the head of everything else.
Some of the questions were thrown up to the two vice-chairmen. I wasn’t impressed with Abel’s answers at all. He sounded a bit like a politician who uses a lot of words, but with very little real substance.
Jain on the other hand really captivated the audience. Such clear responses that just overflowed with intelligence. No fluff, just patient explanations, and (in typical Berkshire fashion) he was blunt on both the good and the bad.
I loved him.
Most of Berkshire’s success boils down to what they don’t do.
Berkshire seems to sit on their hands a lot. They have been criticized for not deploying more capital the last couple of years (and maybe rightfully so). It seems like ages go by without hardly a blip of action.
Then, they strike like lightning.⚡
At the meeting Buffett said [paraphrasing] that during the first half of the quarter Berkshire deployed only tiny bit of capital ($2B) out of its war-chest, then in only the course of three short weeks they were able to deploy a staggering $40 Billion dollars.
Buffett followed up by saying “and now we’re back somewhat in our more lethargic mood”.
They really do just sit around, watch, learn, and wait. They are extremely opportunistic, a trait that I’ve also noticed the best entrepreneurs I know encompass. They move like lightning, bet heavily, and take massive action when an opportunity or idea presents itself.
So what’s going on here?
What Berkshire does not do is play games they aren’t well suited for. Since their investing core mostly revolves around finding good, stable, profitable businesses at decent prices and buying those, they “miss out” on big runs of more speculative companies that can post massive gains for a while, but many times, eventually, fall back to earth.
They are okay looking foolish, hearing that they’ve lost their touch, and that the game has changed. They wait for the pitches that make perfect sense for them, and simply ignore all else.
Munger has famously said
“Invert, always invert: Turn a situation or problem upside down. Look at it backward. What happens if all our plans go wrong? Where don’t we want to go, and how do you get there? Instead of looking for success, make a list of how to fail instead. Tell me where I’m going to die, that is, so I don’t go there.”
What Berkshire is inverting here?
To begin with they are starting from the first principle of simply avoiding companies that don’t make solid profits (revenue and hope be damned!). They are ok missing some winners, as long as they avoid more losers. They know one of the best ways to lose is to bet heavily on some big potential winners that don’t end up living up to the hype. So they simply avoid those.
In doing this they miss things like the Googles and Amazons, but they make up for it having a stable and nearly bulletproof base.
I’d like to add that their style isn’t always the only strategy out there. Venture Capital for example is the complete opposite, in that it’s a game of requiring you to hit just a few winners in spite of having lots of losses. Berkshire is just playin the game that they know, and know best. And they just chill the rest of the time.
They focus on what they know, and ignore all else.
The crowd felt vindicated
It really was fantastic timing for this meeting. With all the market insanity the last couple of years with stuff like meme-stocks ($GME, $AMC, etc) and crazy valuations, it was great for the shareholders to get together for a “home-team win”. With markets everywhere crashing and coming back to reality, Berkshire is standing like a fort.
Berkshire’s performance had just recently eclipsed the once wildly popular (and highly speculative) ARK Innovation ETF, (while the anti-ARKK ETF is booming).
Time after time over the decades this scene has repeated itself. Berkshire refusing to bend its principles, while markets go wild with speculation. And time and time again, after enough time has passed, the speculators always have to eat their words.
Munger in particular ripped into the speculative gambling mania that had taken over so many people. He has long been outspoken against RobinHood, and the options-first gambling parlor it had enabled the last two years.
When the topic of RobinHood, which is down 86% from its high, was brought up on Saturday Munger said:
”It was disgusting. Now it’s unraveling. God is getting just.”
The crowd loved it.
Will I go again?
I’m not sure, probably. This was my 2nd pilgrimage, and it was nice, but not anything crazy. I actually enjoyed my solo-Sunday visit seeing the traveling Wicked musical far more than the event itself, so take that however you want to.
If you’ve never been before and you’re a Buffet fan, I do believe it is worth it to go at least once.
If I go again next year, I’d probably try and pack even more private events and meetups into the few days. That really is where most of the value comes from IMO.
Thanks!
-Travis Jamison
