A paper sign on both doors that says
Not for hire
Double Yellow's Company Driver to Independent Thread
Discussion in 'Ask An Owner Operator' started by double yellow, Nov 5, 2014.
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Off topic for a bit, but I wanted to share my notes from the Berkshire meeting:
This isn't your average annual meeting. I estimate the total net worth in attendance at 1/2 trillion dollars...
I'm impressed with Buffett's stamina. Many in the audience napped at times, but he was energetic & sharp. Munger, 6? years Buffett's senior, has been impressive as well, though to a lesser degree. Bill Gates, on the other hand, struck me as a bit pale...
One of Buffett's analogies for the net negative effect of technology on business was that of a bystander standing on tippy toes to get a better view of a parade. The first to adopt the approach gains a short term advantage, but pretty soon everyone is on their toes with wobbly legs.
He said that in a speech in the late 90's, but it popped into my head seeing a crowd of people first straining on their toes and then holding cell phones in the air to record video & then a few early adopters using "selfie sticks" to get an even better vantage point.
Me taking a pic of everyone taking a pic
The irony of so many "contrarians" acting more or less in unison struck me more than the oxymoronic unofficial designation: "Woodstock for Capitalists."
I was advised to get here by 5am to get a good seat. Doors opened at 7am, the movie started at 830, and the Q&A at 930. Being my father's son I arrived promptly at 4.
Oddly, I was not alone, the main entrance line already exceeded the winding retractable fencing (like the kind used at bank & airport waiting lines) and people began lining up along the street. I had chanced upon a professional analyst covering Berkshire who attended last year and he let me know that the "baggage entrance," while farther from the elevators/escalators, was the better bet because all the doors to Century Link opened at one time so it was better to be inside the building a hundred yards from the escalator than be right next to the escalator but trapped behind the bottle neck at the door.
I took his advice and got a great seat -- about 10' above Buffett's level and 100 yards off to the diagonal/side. In fact the mirror-image section on the other side of the arena is reserved for VIPs.
Despite having about as good of a seat as possible, I still wound up watching the jumbo-tron instead...
I was surprised at the poor behavior of fellow attendees, many of whom broke out into a run once the doors opened and they were inside the building. One elderly usher was knocked off her feet by the stampede but was able to get up and out of the way before the mindless herd of mostly young men trampled her.
The people attending were surprisingly diverse, at least in country of origin. Chinese nationals may have outnumbered US citizens, but Australia and Germany were very well represented too. The US contingent tended to be from NYC, Dallas, or the midwest.
There seem to be 6 main types of people here:
1) Brokers of various sorts with slicked hair, plastic smiles, and suits with more sheen than my chrome bumper. These are the sort of folks who, upon seeing 500 people standing in an orderly line in front of a closed door, bump their way to the front of the line to try the door for themselves -- as if everyone before them lacked such insight. They then remain at or near the front of the line, having cut in front of all the unimportant people. Groups of them gradually form whereupon they boast of the size of their recent transactions, shout obscene jokes most truckers wouldn't whisper in public, and exchange business cards in a manner eerily reminiscent of American Psycho.
2. Students, mostly business college types but also from area high schools. International colleges are disproportionately represented especially from Hong Kong and Australia.
3. Locals -- Nebraska families who have had investments in Berkshire for decades. I overheard one of the slick broker types derisively describing group 3's apparel "as if they were heading out for a picnic." If there is a unit archetype it is a plainly dressed grandmother sporting ridiculously expensive jewelry, a dutiful son, a bored daughter-in-law, and two or three middle or high school aged grand children excitedly opening new running shoes or active wear.
4. Tourists. Like the daughter-in-law of group 3, these folks have no interest in Berkshire Hathaway, but are accompanying someone who does. They wander aimlessly, look bored, and tend to be the ones spending the most money at the various subsidiary booths.
5. Hobbiest investors. A motley mix of men in their 20's & 30's -- most of whom are here for the first time because of the 50th anniversary. Aside from this group rushing out of the gate, they seem to be the most interested in the company or sharing ideas (stock tips overheard, but not substantiated, include USB & EDEN). Typical attire is designer jeans with a dress shirt and jacket. Cheap --I sure hope-- cologne permeates (then again, I'm reminded of Dolly Parton saying "It costs a lot of money to look this cheap").
6. Journalists. TV, print, & bloggers -- they tend to be a bit circumspect about all the excitement. They are here because the story is about being here, but they expect no surprises. With the exception of the meticulously made-up TV folks, most in this group look as though they slept in their car in a bar parking lot.
And I couldn't help but notice an attractive, and I suspect marriage-minded, woman of about 35 shamelessly flirting with an group of awkward young stock analysts. Yes, value investors of all types descended to Omaha for the Berkshire Hathaway annual meeting.
You could be forgiven if you assumed Mick Jagger had entered the building based upon the applause when Buffett and Munger took to the stage. Munger, sporting thick eyeglasses that magnified his droopy eye and shuffling his feet like a convalescent escapee, looked every bit of 91. Buffett strode proudly, waving to the crowd as he took his seat.
The movie was an entertaining 1 hour long montage of new and old footage of Berkshire's history and the growth in the meeting size. Every other clip was an advertisement for a Berkshire brand, many with cameos:
In one Buffett calls Munger from an old Bounder RV in the New Mexico desert, pleased to announce that Walt and Jesse of breaking bad have agreed to cook peanut brittle for See's. Buffett celebrates by taking a piece of brittle from the pan-- much to Walt's horror. "He just ruined the purity" Walt stage whispers to Jesse.
In another Buffett and Floyd Mayweather agree to a boxing match. After a long draw up, the screen cuts to the white and black TV antenna static just as Buffett and Mayweather are inches from landing simultaneous haymakers. The video cuts to Munger angrily calling his receptionist who forgot to pay his cable bill (Berkshire owns a big stake in Charter).
The Q&A came next, the format is a question from one of the 3 approved journalists (Carol Loomis, Fortune -- and personal friend of Buffett's; Becky Quick, CNBC; Andrew Ross Sorkin, author of Too Big to Fail), then a question from one of the three analysts (never heard of any of them, but they are apparently the elite in their field), & then a question from the audience asked by people who had won the raffle (I did not).
Loomis went first with a surprisingly pointed question from one of her readers about the Seattle newspaper's depiction of Clayton Homes as predatory lenders ( http://www.seattletimes.com/busines...ow-a-warren-buffett-empire-preys-on-the-poor/ ) as well as whether partnering with 3G Capital (known for "rightsizing" bloated companies) was consistent with the same company culture that kept Berkshire Hathaway textiles limping along for 2 decades because it was an important employer in New England.
While he wasn't tipped off about which questions anyone would ask, Buffett had expected the Clayton story to come up and had slides ready for presentation. He made a solid argument that Clayton isn't a predatory lender, that unlike most in the business Clayton isn't a mortgage originator who kicks the loan off to someone else who securitizes it and kicks it off again -- Clayton handles their own in-house financing. Most of Clayton's customers have subprime credit, yet only 3% (per year) default -- well below industry average even for Prime buyers. Furthermore, when Buffett bought Clayton a few years ago, he put an end to their 30 year mortgages (except those backed by fha). 20 years is the longest now and Buffett requires that all the loan details fit on one single page of normal type. He also challenged some of the facts in the article, notably the purported 20% profit margin. Actual margins are 2% post tax. He challenged anyone to find home ownership opportunities at $600/month at similar quality (and the Clayton home on display honestly seemed better constructed than the Pulte model homes).
As for 3G, he thinks they are great and that there is nothing wrong with employing 500 people to do 500 jobs. He pointed out that Berkshire Hathaway HQ employs only 25 and that no one would be served by creating unnecessary positions. Munger quipped that the Russians had that idea once, but it devolved into "they pretend to pay me, I pretend to work." Buffett furthermore said that during those 2 decades Berkshire's textile business struggled, he consistently closed factories, modernized machinery, & laid off workers. While he could have done more profitable things with his money, he was willing to continue investing in the textile operations as long as it could struggle along. But he sees no moral high ground in continuing to operate a business at a loss, so once it became clear (in the 1980s) that textiles would never again be profitable in New England, he closed things permanently.
There were numerous questions from audience members trying so hard to sound smart they neglected to realize they were asking something discussed in every annual letter or public appearance (things like what he looks for in a business, etc). When someone would ask a particularly convoluted question, Buffett would chortle in a friendly midwestern way and say he didn't know and that he wasn't that smart (and then proceed to answer anyway in a plain spoken manner).
Another shareholder asked that with holdings like Coke, See's, etc whether brk wasn't just long on sugar. They thought maybe he ought to set an example like he did when divesting from Phillip Morris. After an unusually long slurp from his cherry coke, Buffett responded that 1/4 of his calories come from Coke, that he eats what he likes, & that he wouldn't have lived this long on Asparagus. He took another sip, smacked his lips and said aaah, before asking with a smile "besides, have you ever seen a happy person shopping at Whole Foods?"
When asked why value investing isn't more popular, Buffett just shrugged and said "Charlie?" Munger responded "if people weren't so stupid, we wouldn't be as rich."
On the conglomerate structure, Buffett said it works well for Berkshire giving the example of wind energy. It isn't economically viable on its own, but with tax incentives it makes sense. If Mid America energy was its own company, it would maybe have 5% of its energy from wind. Because it shares the same tax return as Berkshire, he's been able to invest heavily in wind energy because it lowers Berkshire's tax burden too. By year's end, 60% of the energy in Iowa will be from wind power.
Buffett commenting on the picketing netjet pilots: he said he has had 100s of union companies and only 4 strikes in his 50 years at the helm (one was at a Berkshire mill). Occasionally management and labor disagree about compensation, but they'll work it out. Netjets pilots work 7 days on, 7 off and their average income was $140,000/year. Charlie Munger commented that he has talked to several pilots and while he may not always get the full story from people, every pilot he talked to was happy so Munger thinks the union wasn't actually representing the pilots' best interests. (My note: my understanding is that pilots were upset that the normally hands off Buffett effected a management change after some disappointing years at netjets. The new management has cut personnel while simultaneously upgrading their perfectly serviceable fleet to the latest/greatest. Those now without work believe they should have kept their jobs and old planes instead).
Munger on why BRK didn't use leverage: "It's crazy to sweat at night."
...pause...
Buffett: "about finances"
Buffett on LTCM*:
"It is better to be competent day to day with occasional flashes of brilliance than to try and force brilliance every day."
*LTCM = long term capital management -- a firm headed by 2 nobel laureates and whose employees had a purported average IQ of 160. From 1992-1997 they averaged something like a 30% annualized return even after exorbitant fees. In 1998 they had to be bailed out by mega banks to prevent a financial collapse.
Munger: "There is nothing more important than behaving well, especially once you start doing well."
Buffett: (paraphrasing someone else) "As you get older you get the reputation you deserve."
After Buffett -a democrat- commented that he believes Orrin Hatch will reach a compromise in the next year to increase corporate taxes in a rational way, Munger -a republican- added that he thought most taxes aren't as bad as businesses make them out "except California -- they're just nuts. A 13% non-deductible tax on long term capital gains? Why on earth would you want your wealthiest to flee to Florida and Hawaii?! Think how many endowments wind up out of state. Its just nuts." (Munger lives in the LA area)
Buffett on things he learned from Adam Smith: that a specialized society is generally the most productive. He's happy to let someone else mow his lawn.
Munger: "and clean his colon."
Munger on a 78 year old couple not getting an attractive insurance quote from Geico: "If you find yourself not deteriorating as much as your peers as you age, you probably will pay more for insurance than you deserve. I'd happily take that tradeoff."
Buffett summarizing Munger's approach to finding a wife: "Forget about beauty, intelligence, & personality. Look for someone with low expectations."
Munger: "and don't try to change them."
Munger on the Eurozone: "You shouldn't go into business with your shiftless drunkard brother-in-law." (a reference to Greece doing pretty much whatever it wanted at the continent's expense)
Munger on the idea of their newly acquired auto dealerships selling Geico insurance: "That's a dumb idea and we're not going to do it." Buffett tactfully noted that Geico has a wonderful low cost direct to consumer model and that having expensive dealership salesmen acting as middlemen would quickly eat any profit.
Buffett, when asked (again) about what his death would mean for Berkshire: "I reject such fatalism."
Munger, when asked how to best teach financial literacy to school children: "I can't get my own family to save, I have no advice for you."
Buffett, who didn't even have a PC until this millennium -- and then only used it to play bridge -- made a rather dramatic departure by saying: "I love the internet. Being able to *web search* has made such a difference in my daily life. You know, it costs maybe $100/year and if I had to decide which would least affect my life, I'd give up my multi-million dollar private jet, which I absolutely love, before my internet."
Note: I haven't heard anyone use the phrase *web search* in ages, but friend Bill Gates (chairman & large shareholder in BRK) was staring from the front row...
Munger on college degrees being valuable: "It is a fallacy 70% of people believe. Kind of makes you question your fellow man."
Munger of lessening Chinese corruption: "They actually shot some people. That gets people's attention."
Buffett on Capitalism and China: 300 years ago China and America were not so different. Neither was smarter or harder working than the other. America grew to become 25% of the world's economy while China was irrelevant until 40 years ago. And look how fast they've come around once they began adopting capitalism. America, and the world, will do even better as China does better -- that's something our leaders need to remember in times of differences."
Munger, when basically asked the meaning of life, essentially said for him it was to be rational. "I think it is immoral to be stupider than you have to."
Both men acknowledged that they got a very big head start not only by being born white men in america, but also by coming from prominent families (Munger's grandfather was a judge, Buffett's father was a senator). Munger still has his father's briefcase. Buffett sits behind his father's desk at BH headquarters.
And that's all of my notes. Overall I had a great time, but I have no desire to be there in person again. I'd much prefer to see a web cast, though Berkshire's stance against reproduction makes that unlikely.
An article with much better pictures on the experience: http://www.businessinsider.com/berkshire-hathaway-annual-meeting-2015-2015-5?op=1
Oh, and just before the lunch break Buffett updated announced the standing of his million dollar bet with hedge fund manager Protege Partners after 7 of 10 years. Basically Buffett bet that no one could pick a portfolio of hedge funds which would outperform the S&P 500 over a 10 year period -- after fees. Currently the S&P has returned 60% to the hedge fund's 20%.
The proceeds from the bet will go to charity.Last edited by a moderator: May 9, 2015
iledbett, csmith1281, Pumpkin Oval Head and 8 others Thank this. -
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Trucking Jobs in 30 seconds
Every month 400 people find a job with the help of TruckersReport.
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