The Omaha Experience – attending the annual shareholders meeting of Berkshire Hathaway - Part 4

Previous part 3 of this series is here. Continuing further..

The Content – what I took away from the day’s proceedings.

?To begin with, there was a reinforcement of the fundamental principles of value investing, expressed in direct and indirect ways, through the day. That made for good reinforcement that my investment framework to a good extent, was in alignment with the ideas that are shared by Buffett and Berkshire!

?Beyond that, some highlights for me:

1.??????? An amazing tribute for Charlie Munger. As was only expected in this, the first AGM after his death, and where he would not be present! A good film covering his background, how Buffett and Munger met, how they got along brilliantly well, how they made a fantastic pair, how they almost never disagreed, some clips of Munger from these annual meetings of the past, some appearances of Munger in popular shows of the times like The Office, Desperate Housewives, etc. There was a recorded tribute for Munger from Buffett, which was a part of the film, but later, in response to a question in the Q&A, there was some more interesting and little more emotional sharing that Buffett did, about Munger. It does seemed to me that I had missed an opportunity to listen to Munger, having not come to this event, while he was around!

2.??????? Berkshire puts great people in charge of businesses, and then lets them be. By and large. This also aligns with their culture to stay invested in businesses for long, long time, tending to “forever”. The underlying thought being that once you have identified a good person or a good business, trust them and give them the reins and empowerment and let them run. In spite of occasional challenges that they may face, they would generally be able to turn things around.

3.??????? Businesses like their railroads business or the energy business have not been doing so good in recent times. In response to questions, there was no contesting this fundamental issue. That showed total transparency that they have with their shareholders. And yet, there was no question of exiting the businesses or anything. They fully expect the respective team that manages those businesses to figure their way out and bring the businesses back to good shape.

4.??????? That they cared totally for their shareholders, who were constantly described as “owners” by Buffett was also seen from Buffett’s comments on how they don’t bother about meeting analysts etc. as other public companies do. They’d rather present to this group of shareholders and talk to them than go and answer questions of analysts!

5.??????? There was a question on how the data analytics aspect of Geico had not made the necessary progress and was sub-par for the industry. Ajit Jain, who heads the insurance businesses, didn’t offer the smallest defense on this. He admitted that they were lagging and said that they had now got good people and were working to catch up with the industry levels. That said, Buffett did add that their positioning on Geico is to provide the best rates for insurance to their customers, and they have kept costs low, and which still brings the customers coming back to their business.

6.??????? From Buffett and coincidentally, also from Mohnish Pabrai on the previous day, I heard how they accepted when things were outside their circle of competence. And they were clear that if things were outside their areas of interest or competence, they would not want to offer any serious viewpoint as they would not know better. And moreover, how, due to that gap, they would not invest in those areas for sure. When Pabrai for example, was asked about opportunities in China, he had this to say. And likewise, when Buffett was asked about AI, or some other geographies, he had the same to say.

7.??????? In fact, when asked about certain geographies, Buffett said clearly that those places could have great opportunities, but they (Berkshire) didn’t have any differentiated advantage in terms of knowledge or connections there, that could make a difference. And as against that, they understand the US very well, and there is ample opportunity here. So, they would continue to have their focus largely on the US. It was good learning – a) to accept when you don’t have the competence, and b) not to get dragged along in some market momentum, to invest in areas where you lack that competence!

8.??????? When later however, someone asked a pointed question about India, Buffett did not quite brush that away in the same way that he had done about other areas where he lacked competence. Here, while he confirmed that he did not have the required skills and competence for India, he acknowledged that India could indeed be a great big opportunity for them. Earlier, they have established a good presence in Japan, and India could be another of those kinds. However, he said that this needed a lot more energy than what he had to offer at the moment, and he would leave that to the next management at Berkshire Hathaway to consider and take up.

9.??????? As could only be expected, there was a question on Gen AI. To which his views were very clear: a) that he did not understand Gen AI much, and he’d rather not answer the question, b) that it was like a genie that was out of the bottle now, much like nuclear weapons earlier. And that, while there are possible advantages, there are a lot of risks and dangers as well. But it is too late now, since the genie is out anyway and c) that he had experienced a deep fake video of his, which was AI generated, and he realized the huge dangers of the medium.

10.? On the other hand, in response to a question on AI and is likely impact on their insurance businesses, he again started by saying that he does not have the competence to respond much, but also added that he has full faith in the management teams at his insurance businesses, to understand and utilize AI as best as they could. This was again a strong reaffirmation of the trust in the team.

11.? There was a lot of discussion around succession at Berkshire Hathaway and transition. On the insurance business, there was confirmation and emphasis that Ajit Jain is the best you can have. In fact, Buffett acknowledged how their insurance business (which had owned for long) really took off after Ajit joined in 1985. But then the next worry was about Ajit Jain himself. If he is so good, what is something happened to him! And which is where Ajit also elaborated how he has regular interactions with the Board, about succession after him, should say, “a truck hit him suddenly” some day. It was amazing to hear that, as also how Buffett ensured a good transition to Ajit Jain, from the time he was anointed to take over and manage the insurance business.

12.? In much the same way, there was discussion around how Greg Abel, the new CEO is managing the entire business – including the energy, railroad etc businesses that they own, as well as the investments that they make in other companies. For anyone concerned about someone new coming on board, in place of Charlie or later, Buffett, there was clarity given that Greg will manage it all, and they had full trust in Greg doing a good job. Also how, Greg at 61, had many years ahead of him, and is well suited for the role.

13.? There was mention in passing, across the many questions that were asked and replied to, about fundamentals that they live by, such as staying invested in a company for long, how Coca Cola and American Express have been good long term holdings, about See’s Candies and the margins they earn, about their Apple bet that happened when they saw the right opportunity to enter and how it might be their biggest holding at the end of this year, and of course, about the benefits of compounding!

14.? Buffett said that he still reads a lot, though not as fast as the used to do earlier. This was one of the few points where he indicated that he may be slowing down. I am not sure if this happened in earlier years too, or was this some emotional context to not having Munger with him anymore? I would not know that. But two of the most poignant moments for me, by Buffett, were:

a.??????? When early in the day, after completing his response to a question, and turned towards Greg to add more, but ended up saying, “Charlie.. ?” as if to cue his long-term partner Charlie Munger in fact!

b.??????? And towards the end as he was thanking all those who were present and as would be a normal thing to say, he added that he looked forward to having everyone here next year as well. But quickly added, “I hope I come next year”. Again, the crowd went wild! Was this in jest, or are there any plans afoot for him to finally retire, or whatever, we are not sure.

?All in all, it was excellent interaction on the Q&A across a variety of topics, all of which were answered with complete openness and clarity.

?That covers my summary of the Omaha experience – the Woodstock of capitalism, my financial pilgrimage!

?Would I go again? I am not sure. Definitely a great experience and many keep visiting year after year. Will I be one of those? We will see..

?Would I purchase Berkshire Hathaway stock after this? Again, I am not sure. While I appreciate the principles of their business, and also see the amazing growth the stock has had, I would not impulsively say yes. Because that will go against the value investing principles, which demand study and understanding, before making a commitment!

?Will I continue to improve my diligence towards value investing as a framework for my investments? Hell, yes!

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