Pilgrimage to Omaha

PPFAS MF's Rajeev Thakkar on why value investors attend the Berkshire Hathaway Annual Meeting every year

Published 5 years ago on Apr 26, 2019 8 minutes Read

There are plenty of books written about Warren Buffett, Charlie Munger and Berkshire Hathaway. However there is a book with an intriguing title of “Pilgrimage to Omaha”. This I believe is an apt description to the phenomenon of investors from all over the world congregating in the mid-western of Omaha on the first weekend on May each year for the Annual Meeting of Berkshire Hathaway shareholders. Warren Buffett himself calls it “Woodstock for Capitalists”.

I have been to the Berkshire meeting a number of times and there are many stories which do not directly link to specific companies or sectors or the economy but are nevertheless important from an investing standpoint indirectly.

To put into context, Warren Buffett has been famous for being probably the most successful investor.  He is not only is good at what he does but he and his partner Charlie Munger have been very generous in sharing their investing insights with the public at large. They do this through the following:

  1. Annual letters to Berkshire Shareholders.
  2. Media articles and interviews.
  3. Annual meeting of Berkshire shareholders.
  4. Lectures to small group of students in a classroom setting and also visits by students to Berkshire office in Omaha where they get to spend time with Warren Buffett.

 While learnings from 1 and 2 have been easily accessible to all, learnings from the third avenue of the Annual meeting were accessible only to those who made the trip to Omaha each year. This is because there was no audio / video recording accessible to the public at large till the year 2015. It is only since 2016 that those learnings are accessible via live-streamed and recorded proceedings of the meeting. Learning from the fourth avenue continues to be hard to come by.

Given that today investors can access current and past recordings of the meetings at what are the extra learnings that an Omaha trip can provide?

Firstly, there will always be a difference between watching something on a screen versus going to the event venue. As any sports fan would attest, watching a game at the stadium is much more engaging than viewing even on the largest television screen. Similarly the energy at the meeting is to be experienced to be understood.

The most important benefits however are outside of the roughly 6 hours of the formal meeting. An attendee will typically spend 8-15 hours spent at the meeting venue (including the queueing up time!). In this time there will be numerous interactions with other investors and this can be a curated / semi-curated or serendipitous experience. Some people co-ordinate in advance who are the other people to meet before / after the event and who to stand with in the queue. There are others who just go with the flow and go with chance encounters. Either way it broadens the thinking in terms of getting to know experiences of investors from various regions and countries and of different age groups.

Visitors to Omaha quickly get to see the scale difference of a small town like Omaha as compared to the mega cities like New York or Los Angeles. It is clear that Omaha is not a financial hub. It has no stock exchanges, it does not have the headquarters of major investment banks and so on. One can argue these days that the physical location of an investment powerhouse is immaterial with telephones, television, internet, Bloomberg terminals and so on. However this ignores the fact that Omaha has been Berkshire's home for decades. This was true even at times when the internet was not around. In any case it is a fact that Buffett is not into Bloomberg terminals and internet usage for investment decisions (he does use internet to play bridge). The most that photographers have been able to capture in his office is a television screen which is on sometimes and plays CNBC (on mute usually). This is complete opposite of pop culture which portray investing as an activity requiring massive computing power and numerous screens and continuous activity.

One moves around town and visits Kiewit Plaza, the building where Berkshire has its offices and sees his home where he has stayed for decades (yes, that is a thing first timers to Omaha do! I admit to having done that). The one thing that you realise is that Buffett would not be getting stuck in rush hour traffic. His home and office are about 2 miles apart on one of the roads of Omaha called Farnam Street. The other surprising thing is the lack of paraphernalia surrounding his home or office. In fact it is easy to miss both if you are not sure what your are looking for. The home looks very similar to the others in the neighbourhood (somewhat larger than average) and the office is in a normal  looking building. There are no fleet of cars or massive layers of security for such a well known billionaire. An interesting takeaway from these visits is the simplicity of his living and clutter free mind that results from such simplicity.

At the meeting itself, a common thread which runs through most of the answers is to think like business owners and to think in decades rather than days or months in terms of investment decisions. There is hardly any opinion given on what will happen to interest rates, currencies, commodities, technological trends, political events and so on. If Buffett and Munger were to be asked typical business television questions, the answers to almost all questions would be I don't know. There is also a remarkable willingness to admit to past mistakes and in conveying the fact that not all investments work out well.

While Buffett is recognised as one of the greatest investors but equally important is the fact that both Buffett and Munger care immensely about society. Whether it is the fact that bulk of their money is going towards charity or that they do not want to be owning businesses which are profitable but which they would not feel morally comfortable owning, one gets lessons relating to broader aspects of life rather than just investing.

Another item on the calendar of most attendees is the annual meet of Markel Corporation which is somewhat in the Berkshire mode on a smaller scale. This meeting is held on the Sunday immediately following the Berkshire's Saturday meeting. This company's investments are managed by another renowned investor Tom Gayner who has recently been joined by our fellow Indian and ex-Googler, Saurabh Madaan at Markel. Attendees at this meeting get to interact with Tom Gayner and get his perspectives on sectors, businesses and companies.

There are various events and workshops which happen around the Berkshire weekend. These are typically called Value Investing Conferences and variants thereof and attract participation from professional investors and the sessions are taken by many fund managers, Buffett authors, professors and so on. These are paid events and one  has to register for them in advance to get a slot and also to fly into Omaha a few days prior to the actual meeting.

As a side note, given the limited airline and hotel capacity in Omaha, air tickets and hotel rooms get sold out months and in some cases a year in advance. Some hotels on check-out ask if the attendees want to book for the next year then and there.

Around the meeting however it is not all work and no play. Plenty of leisure activities are planned and Berkshire's shareholders can attend a reception with live music and cocktails on the Friday evening before the meeting. On the Sunday after the meeting there is a marathon run and also a shareholders event at Borsheim's  a jewellery store owned by Berkshire where apart from the chance to buy jewellery from Buffett himself as a salesman (be prepared to shell out real big bucks), shareholders can play chess against Patrick Wolff, a two times US chess champion or play table tennis against Ariel Hsing an Olymic level table tennis player. Shareholders also get to see Buffett, Munger, Bill Gates etc. playing bridge at close quarters. There is a picnic for shareholders at the Nebraska Furniture Mart and so on.

Readers may be wondering, “What is happening here?” Buffett and Berkshire are known for their frugality and why are they splurging so much money on a mundane thing like an annual shareholders meet? The answer to this question is that money is never far from Buffett's mind. While the numbers are not disclosed, I would expect the annual shareholders' meet to be net financially positive for Berkshire Hathaway rather than being a cost. The way it works is that the shareholders meeting is not just a meeting. It is an occasion to showcase the products of Berkshire companies and to pitch them to the attending shareholders. From GEICO car insurance, to NetJets fractional jet ownership, to Nebraska Furniture Mart furniture deals, to Borsheim's jewellery sales by Buffett everyone is tempting shareholders to splurge money on Berkshire's products. After all what better way to spend money other than to spend it in your own businesses?!

People who have read Buffett or seen videos or visited Omaha for a while keep getting asked this question. “What is the new thing that was said at this meeting?” In my view that is the wrong question to ask. Almost everything that they say is timeless and the reason for repeating the reading and viewing is that the best way to learn any subject is spaced repetition. The mind tends to quickly forget things and unless lessons are repeated periodically, the learning gets lost forever. Chances are that very little “new” stuff will get said at the 2019 Berkshire meet but watch it regardless.