When I tell people we are headed to Omaha for the Berkshire Hathaway annual meeting, some vaguely nod their heads. Others ask why we go when we can watch Warren Buffett and partner Charlie Munger online.
I first started going to Omaha fifteen years ago. As each year passes, the experience becomes more impactful.
Although the trek is time-consuming, it is the most worthwhile endeavor for our professional team each year. It is deep immersion among some of the wisest, and most humble, minds on the planet. Furthermore, it is not limited to just investing. There are worthwhile discussions on philanthropy, healthcare and occasionally politics.
However, as much as I admire Buffett and Munger, our team now goes for the “side” events.
More than 50,000 people who appreciate value investing descend upon Omaha the first weekend in May. As such, a variety of other seminars and lectures have sprung up, beginning on Thursday evening and extending through Sunday. These lectures have no connection with Berkshire, but have everything to do with investing and how the world works. By the end of it, my brain is in overdrive and I am challenged to assess business models and consider how the discipline of investing can be done better.
Here are a few of my favorite takeaways.
Buffett is 87 and Munger is 94. Visually, you can see they are elder statesman. However, if you close your eyes and listen to the cadence of their voices and the content of their verbiage, you would think they are both fifty or sixty years old. Because they have stayed so engaged by reading and thinking, they have defied time.
Your brain is the most important muscle you have. Read and learn. Put your brain on a never-ending exercise regimen to stay relevant and engaged.
Many favorite takeaways came from Tom Gayner, the CIO for insurance company Markel. During a two-hour Q&A Sunday morning, he explained that in investing there are four main things you must get right:
- Find businesses with high returns on invested capital that deploy low levels of debt.
- Find businesses run by people with equal amounts of talent and integrity.
- Find businesses with a long runway. These have high opportunities to reinvest profits into their existing operations.
- Consider what price you have to pay.
Interestingly, Gayner emphasized that if you get the first three components correct, the price and valuation become the least important.
A thought-provoking lecture came from Brian Yacktman, CIO for YCG Investments. Yacktman highlighted research by Yale Professor Richard Foster analyzing the tenure of businesses in the S&P 500 Index.
In the 1950’s the average company in the S&P 500 Index had been in the index for 61 years. Today the average business in the index has been a component for 15 years. Research indicates that in the next 10 years, 75% of the S&P 500 could be entirely new companies.
Business models are compressing at a rapid pace. The day of Exxon and AT&T ruling for fifty years is over. That is not to say Exxon will vanish. Rather, other businesses—especially capital light businesses, will grow faster and bigger.
Author and investor James O’Shaughnessy made comments regarding time frames. O’Shaughnessy commented that in a world obsessing over minute to minute movements, having a long-term perspective, patience and persistence is the equivalent of having “investing superpowers.”
Great investors are not superhumans. For the most part, great investors are ordinary people who have created a process and environment that allow them to work around biases and distractions.
Lastly, knowing one’s circle of competence still seems to be one of the most important, yet difficult, tenets of investing. It requires discipline and humility to know what you don’t know—and then not go there. Additionally, my circle of competence will be different from others. It is hard to judge people’s competency by their performance alone, because people are different in so many ways: their process, worldviews, and objectives.
For anyone who is serious about investing or learning, the pilgrimage to Omaha is incredibly worthwhile. There are no sales pitches, infomercials or people screaming “boo-yah.” Rather, it is a fantastic opportunity to be challenged and to learn, all while meeting humble and intelligent people.