Image credit: Berkshire Hathaway annual meeting, 2011, photo by Timbu via Flickr
By Jason Zweig | April 29, 2018 10:07 pm ET
With tens of thousands of investors from around the world about to converge on Omaha for the Berkshire Hathaway annual meeting next weekend, this seems like the perfect time to ponder the meaning of the event.
The following essay, a chapter in the delightful new book by Larry Cunningham and Stephanie Cuba, The Warren Buffett Shareholder: Stories from Inside the Berkshire Hathaway Annual Meeting, is adapted from an article I wrote in 2004. It seems oddly resistant to the passage of time. On that trip I made to Omaha 14 years ago, nearly every attendee I met talked about being inspired by Warren Buffett and Charlie Munger’s rare gift for cutting to the heart of just about any matter. By the end of my visit, I felt the same way myself. To this day, I recall looking out the window as my flight took off at the end of the weekend and realizing, in a shock of clarity, that the book I had been thrashing around trying to write for months was a stupid waste of time. After almost two days of listening to Buffett and Munger dispensing good sense and eviscerating nonsense, I had an epiphany: The only book I should write was the one that was already inside me, banging its fists on my ribcage, demanding to be let out. Instead of trying to work on a book other people said they wanted me to write, I should be working on the only book I wanted to write. The result, a couple of years later, was Your Money and Your Brain, my book on neuroeconomics and the psychology of financial decision-making. The crisp logic and simple common sense of the Berkshire meeting had cleared my head and enabled me to see that I had been doing something I had no interest in rather than something I would love. Creating a community of people with a shared interest in patience, good judgment, and lifelong learning may be Buffett and Munger’s greatest legacy. It will be interesting to see how it lives on in the years to come.
You Are Not Alone: The Berkshire Hathaway Annual Meeting
When my flight came slanting down into Omaha on a drizzly night in April 2004, a ceiling of rain cloud was clamped over the city like a thick pewter plate. But directly above downtown, the reflected light of Omaha’s skyscrapers reached a mile into the air to burnish the underside of the dark clouds with a dazzling silvery-white circle. Suddenly the ceiling of clouds looked like a floor — the floor of heaven. “My God,” a passenger gasped in the back of the plane, “Warren really does have a halo!”
Why do Berkshire Hathaway investors almost literally worship Warren Buffett and hang on his every word as if he were a religious prophet? What makes more than 19,500 people descend on Omaha from every state in the union and dozens of foreign countries?
Buffett’s astounding investment record — bolstered by the astute advice of his business partner, Berkshire vice chairman Charles Munger — is one reason people flock to Omaha to listen to him. But it is far from the only one.
Each year for roughly two decades, Buffett and Munger have urged shareholders to come to the annual meeting and speak out about whatever is on their minds. At the 2004 annual meeting, as dozens of Berkshire investors stepped up to microphones throughout Omaha’s giant Qwest Center auditorium, Buffett and Munger fielded questions for nearly six hours.
At most companies, the annual meeting offers about as much give-and-take as a session of the Supreme People’s Assembly of North Korea. So why does Buffett throw open the floor to all at Berkshire’s meeting? “Even though Ben Graham [Buffett’s mentor] had everything he needed in life, he still wanted to give something back by teaching,” Buffett tells me after the meeting. “So just as we got it from somebody else, we don’t want it to stop with us. We want to pass it along too.”
Sure, plenty of shareholders ask for Buffett and Munger’s views on stock and bond prices and a host of other investing issues. But others have broader questions: What’s the best book you’ve read lately? What was your worst mistake? How can I keep learning? Is mathematics “the language of God”?
When Justin Fong, a 14-year-old shareholder from California, asks for advice on succeeding in life, Buffett and Munger don’t mince words. “Hang out with people whose behavior is better than yours, and then you’ll drift in the right direction,” says Buffett. “If this gives you a little temporary unpopularity with your peer group,” adds Munger drily, “the hell with ’em.”
This is what Berkshire’s shareholders say they love most: the interchanges that show what Buffett and Munger are made of. David Lin, 35, a Nashville radiologist, has come to the meeting seven of the past eight years. “It helps me refocus,” says Lin. “I’ve learned what things Warren thinks are important. Things like friendship, morality, developing good habits, how to live a happy life — and it’s not just about money.”
Alex Rubalcava, 24, a venture capitalist in Los Angeles, says, “Warren and Charlie talk constantly about how you don’t have to do anything just for the sake of doing something. They’ve taught me the importance of saying no to things in investing and in life.”
“You wouldn’t believe what a good feeling you get when you listen to Warren and Charlie,” says Mike Loisel, 56, a retired electrical contractor from Minneapolis. Adds his wife Connie, 55: “You feel like you’re part of a group of people who share the same values — solid, honest people, hard workers.”
Buffett has thought a lot about why so many people come to his meetings. “First, they come to have a good time,” he tells me afterward. “Second, they come to learn. And they really feel as if they’re partners in the enterprise.”
Why do so few investment firms educate and treat their clients this way? “It’s a joke, isn’t it?” answers Buffett, adding that fund managers and brokers “don’t judge their success by investment results. They judge it by how much they can gather in assets. So they don’t want the shareholders to think of themselves as owners. They want them to think of themselves as customers.” [Here, Buffett is invoking the important distinction that Benjamin Graham insisted on, in Chapter Ten of The Intelligent Investor, between “customers” of a business and clients of a profession.]
Most pundits talk about how important value is to Buffett as an investor. What they miss is that values are even more important to him. Buffett understands the heart of the matter for all of us: Money is not just pieces of paper or electronic blips with prices attached. It is far more: our fondest hopes, our most fervent dreams, our worst nightmares, all balled up into an explosively emotional package. Investing can be exhilarating — or terrifying.
Consider, too, that the English word “invest” derives from a Latin root that means to dress, clothe, wrap in robes, surround or envelop. To invest means, literally, to wrap yourself in a financial asset and hold it close. No wonder investing arouses such intimate and elemental emotions as fear and greed, surprise and pain, hope and pride. As Peter L. Bernstein, the financial historian and investment consultant, once wrote: “Believe me, when people have told you about their money, they have told you the most important fact about themselves. Their sex lives, problems with their children, their political views, are all secondary.”
How profoundly odd it is, then, for the investment-management industry to take it for granted that clients should be willing to send their money off to a faceless, often even nameless, stranger — or a group of them.
It is ironic — if not downright outrageous — that mutual-fund companies refer to their menus of offerings as “fund families.” What kind of family consists of people who have never met, and never will, so long as they live?
The most basic act in the relationship between a client and a portfolio manager — committing your capital — requires you to consign your financial future into the hands of someone whose hand you cannot shake, who will not hold your hand, whom you can never look in the eye.
In a stock market that feels like a madhouse at best and a war zone at worst, investing is a lonely, alienating, often frightening task. Fund “families” are far too impersonal to offer any solace, and the typical financial adviser is often too harried to be able to comfort every client. All too many investors have to settle for a chirpy email, a hasty phone call, or even just a few moments of watching their fund manager pontificating on CNBC.
Few things make humans feel worse than being alone. Buffett knows that no one wants to face the uncertainties of investing all by our lonesome. We want to be comforted and feel we’re part of a community. That’s the greatest gift he gives his investors: not massive wealth or brilliant insights but the deep-rooted solace of knowing that they belong, that they are in this together with others, that they are not alone.
For further reading:
Lawrence A. Cunningham and Stephanie Cuba, The Warren Buffett Shareholder: Stories from Inside the Berkshire Hathaway Annual Meeting
Roger Lowenstein, Buffett: The Making of an American Capitalist
Alice Schroeder, The Snowball: Warren Buffett and the Business of Life