At the Berkshire Annual Meeting, Charlie Munger Stole the Show
"You can tell us apart, because he can hear and I can see."
--Warren Buffett on he and Charlie Munger (Berkshire annual meeting, 2017)
The Berkshire Hathaway (BRK.B) annual meeting has come and gone.
As it has for decades, this annual pilgrimmage to Omaha, Nebraska, had a familiar organizational ring. Starting with a humorlessly prepared video, the meeting morphs into a lengthy question-and-answer period in front of about 40,000 in attendance, followed by a brief, perfunctory discussion of shareholder recommendations and voting on those issues. (Adjacent to the auditorium is a large presentation from Berkshire subsidiaries where you can by all sorts of products sold by the company).
In the main, the Berkshire meeting is truly a " Woodstock for Capitalists," in which the aligned audience of shareholders applaud and enjoy the banter and wisdom of Warren Buffett and Charlie Munger.
There is, however, a difference between The Woodstock for Capitalists and theWoodstock, The Music Festival, in 1969. The later (The Woodstock Music Festival) was a spontaneous and serendipitous event; the Berkshire Hathaway annual meeting is heavily orchestrated.
Most importantly and from my perch, Saturday's weekend questions have become far too predictable, commonplace and lacking creativity, rendering the meeting to a love fest of Berkshire/Buffett devotees, which is not a bad thing.
But it could be made more interesting.
Breaking tradition, four years ago, Warren Buffett called me a " credentialed bear" and had me sit on the dais with him and Charlie for the purpose of asking difficult questions. I spent the better part of two months structuring questions (with two of my analysts) that would be respectful but hard-hitting and would provide a new view and insight into Berkshire and Buffett -- difficult, considering how well-researched and combed over Berkshire and Buffett's strategies and their life cycles have been chronicled.
I believe my questions were challenging and different than most any asked over the decades.
Future meetings would benefit from more critical questions to the company, whether they are delivered by me or someone else.
As is customary, the annual meeting started with a 30-minute video. This year's video included Paul Anka and Warren Buffett singing a parody of " My Way" with such memorable lines as:
* "To our owners so devout like Michael Sam, you all came out."
* "Such a crock, to pay with stock."
* "Deb (Bosanek) does it all, except Dallas."
* "Failures few..., you must not know of Dexter's Shoe."
But the real show in 2017 was performed by the 93-years-and-four-months-old Charlie Munger, who stole the show with his zingers. Here are my favorite 20 quotes from the weekend:
1. "We were young and ignorant then; Now we're old and ignorant."
2. "Bought a department store in Baltimore: experience is like eating cockleburs - it really gets your attention."
3. "The investment world has gotten tougher. Maybe now we have small statistical advantages, when before it was like shooting fish in a barrel. It's OK to have things get a little harder when you are filthy rich."
4. "In the future, with our present size, in terms of rates of return will be less glorious than the past we keep saying it now we are proving it. But it is still a collection of businesses on average that has a better investment return than the S&P 500."
5. "A lot of other people are trying to be brilliant and we are just trying to be rational. Trying to be brilliant is very dangerous, particularly when gambling"
6. "If you protect your heirs from stupidity of others, you may have some good system, but I am not much interested in that subject."
7. "Over the extremely long term, all hydrocarbons will be used, including all the coal - they are huge resource for all of humanity and have no good substitute. I am all alone on this one, but I want to save them for the next generation. We will use every drop sooner or later, even a chemical feestock. I expect natural gas to be short in supply eventually."
8. "I have avoided compensation consultants all my life. I hardly can find the words to express my contempt."
9. "I don't think we mind killing chickens and I do think we are against nuclear war."
10. "We don't want to go back to subsistence farming. I had a week of it and hated it growing up. I also don't miss the elevator operator sitting there with a crank. Why would we do it -- fire people? We had to in the past when businesses were dying. There's some political fallout, but nothing that isn't moral."
11. "I give you golf lessons while you dye my hair. It's like the royal family of Kuwait. We can't have all the work so concentrated to leave so many at leisure. But a few percent per year of gain is a wonderful thing. No one has ever complained about the advent of air conditioning. I am worried more about the change not being fast enough."
12. "We'll miss out on more, but that's our secret - we don't miss out on them all."
13. "It's a very good thing that Warren bought Apple. Either he's gone crazy or is learning. I prefer to think he's learning."
14. "Fish where the fish are. A good fisherman can find more fish in China; it's a happier hunting ground."
15. "It's deeply immoral. Doctors are feasting like a bunch of jackals on a carcass. A bunch of cardiologists in Redding got the idea that heart was a widow-maker and recommend heart surgery to everyone and got great results, because no one comes through heart surgery better than a man who doesn't need it. This department at Redding became a model for the whole system and then a priest didn't believe it and blew the whistle (of course he didn't - a dead priest wouldn't have a widow). The doctors thought what they were doing was good for people. The delusion that comes into people as they make money and do god-awful things should never be underestimated. You'd think hospital CEO would notice heart surgery rates were twenty times higher than normal and did they ever notice - they wanted the rest of the branches to perform more surgeries too. Disgusting!"
16. "To make teaching endurable, it has to have enough wiseassery in it. And we do."
17. "You've understated the horrors of the subject (depreciation) and the disgusting nature of people who brought that term to business; its like a real estate broker who said a 1,000-square-foot apartment was actually 2,000 square feet. Nobody in his right mind would think depreciation is not an expense. Now they are teaching it in the business schools - that is horror squared."
18. "Unemployment insurance exists for that exact reason. The capitalist system always hurts some people; there is no way to avoid it."
19. "Don't start spending the money yet. Otto von Bismarck said there are two things that no one should have to watch: the making of sausage and the making of legislation."
And my favorite Munger quote - when asked what is your dream?
20. "Oh, to be 90 again; if you've got anything you really want to do, don't wait until you are 93 to do it."
These quotes incorporate much wisdom, and Charlie and Warren's comments onSaturday provide important and value-added insights for investors around the world.