Notes on Berkshire’s 2013 Annual Meeting
posted by Lawrence Cunningham
Spent the weekend in Omaha with my wife at the Berkshire Hathaway shareholders’ meeting, one of many I’ve attended since my first in 1998 after publishing The Essays of Warren Buffett: Lessons for Corporate America. The pace is always busy and has gotten hectic as I’ve gotten to know more people and the scale and size of the meeting expands.
For us, this meant, besides the meeting, which takes place from about 9 to 4 on Saturday, various interviews (Yahoo! Finance Friday, USA Today Saturday afternoon and Motley Fool Saturday evening); book signings (conference at U. Nebraska Friday evening, the Bookworm Sunday early afternoon and Hudson Books later Sunday); and social gatherings (a party given by hedge fund manager Whitney Tilson Friday evening and Warren Buffett’s brunch for out of town friends on Sunday).
The result was catching up with scores of people I know through this world, including both luminaries and students, those I’ve known for decades and those I’ve gotten to know more recently. One comes away with reflections, during such occasions, and herewith a few of mine.
The More Things Change. . . .
The strongest theme I discerned concerned the future, Berkshire beyond Buffett. But it’s a question that’s been asked for 20 years and the answer remains the same. I liked Buffett’s point: “Introduce something foreign into Berkshire’s culture and the company will reject it.”
Berkshire’s distinctive culture is the partnership model, viewing shareholders as co-owners of the business, managers as stewards of their capital, and directors as guardians of that conception. Berkshire buys subsidiaries but does not sell them and does not close operations to obtain short-term gain.
BRK shareholders’ meetings reinforce the same lessons year after year. The philosophy is so simple and clear, and simply and clearly stated, that people who have studied Buffett’s letters and attended two or three meetings are able to correctly anticipate the substance of all answers.
Overall, what that means is abundant assurance and reassurance about the state of Berkshire today and its prospects for the very long road ahead.
I thought it was a good idea in principle to invite a professional investor who is bearish on Berkshire to ask questions as part of the panel. I had no opinion about Doug Kass.
I thought Kass’s questions in the morning (about culture, succession and size) were more useful than those in the afternoon (especially an absurd question about Howard Buffett’s skill set and an out-of-place pitch to manage money for Berkshire).
Next year, I’d skip having the bear and let shareholders ask the questions.
The journalists tend to ask questions that give a good structure to the meeting. I particularly value what Carol Loomis adds (such as when asking about book value and its relation to market price).
But I’d be happy to go back to the traditional meeting approach of letting shareholders ask all the questions.
I know of two important questions that I wish had been asked but weren’t.
One concerns the transition process from Buffett as controlling shareholder to absence of a controlling shareholder. Will the process of transferring shares to the Gates Foundation and other charities change Berkshire policies in any way?
The other concerns Berkshire’s board, which has been famous for eating its own cooking, meaning having a large amount and percentage of their net worth in Berkshire stock. But this year’s proxy statement suggests that may be less true than historically.
Reasons to Go.
I like the meeting not only for the two Q&A sessions but for all the other events and activities that create learning opportunities and occasions to meet with other Berkshire devotees.
This year I had the chance to chat with Bill Gates about the future of Berkshire from the perspective of the person likely within the foreseeable future to become Berkshire’s largest shareholder. He gave me resounding reassurance about the future, including teaching me a lot about the first question I wish had been asked at the meeting.
I also had the chance to get acquainted with Todd Coombs, as likely to become a chief investment officer. Our chat reinforced my confidence in Berkshire’s long-term future. He comes across as a smart, solid ordinary guy.
Meeting Todd reminded me of one of the most important lessons I’ve taken from Buffett over the years: only go into business with people you “like, trust and admire,” those you’d be happy to have your daughter marry. I can see how Todd passes this son-in-law test.
Concerning Berkshire beyond Buffett, as Warren first said 20 years ago at a meeting and wrote shortly afterwards in a letter, all in all, Berkshire is ready for the truck.