The Woodstock of Capitalism

As has been stated by Warren Buffett in the past the Berkshire Hathaway annual shareholders meeting is the woodstock of capitalism. Having just returned from said meeting I will now give my report.

The meeting started Saturday morning with the yearly movie. Apparently the movie has always been a very enjoyable part of the day's events and this year's movie did not disappoint. Interspersed between the numerous entertaining commercials from Geico, Coke, and a myriad of other Berkshire holdings were various snippets of a mock interview with a high ranking investment banker, who spent a good deal of time laying out the stupidity of his peers while commenting that it actually only affected everyone else as he and his peers made out very well.

Following the movie we jumped right into the question and answer session. The Berkshire Hathaway meeting is somewhat different than other shareholder meetings in that the bulk of the meeting (9 AM to 3 PM) is a q&a with Warren Buffett and Charlie Munger. As opposed to other years, the majority of questions centered around Berkshire and it's holdings, but we were also entertained by the Oracle's answers to other questions ranging from inflation, to the Chinese economy to personal investing style.

At one point a question was asked about how we can attempt to teach high finance to the upcoming generation as they are obviously financially illiterate. Warren jumped on that by stating that the current generation is financially illiterate. Charlie followed by noting that it may not be possible to teach high finance to those who cannot handle credit cards. I believe at least 30 of the 35 thousand in attendance were laughing heartily at this point.

As is custom both Warren and Charlie took their shots at American business schools. When asked how he would change the business education in this country Warren quipped that he would teach two classes and get rid of all the rest. What are his two classes? The first class would be a securities analysis course detailing how to value a business and how to stay within one's circle of confidence. Fans of Buffett are very familiar to this concept though I'm not sure many do it well. The second course would teach students how to think about market fluctuations. In thinking about the market Buffet stated that a great deal of emotional stability is required. On the same subject Charlie wondered out loud what exactly has been taught in business schools especially back in the heyday of the efficient market theory: "I mean what do you teach when you believe the markets are efficient? You arrive at class, state that the markets are efficient, then have nothing left to add for the rest of the hour let alone the rest of the semester."

When questioned about how Bershire would change now that they had suffered their biggest one-year drop in the history of the country Charlie calmly stated: "I don't get too excited about these things that come around every 50 years".

There were questions about why Berkshire does not webcast the annual meeting like so many other companies. Warren went on about the personal touch of being present at the meeting. While I agree there was definitely a personal touch being at the meeting I'm convinced that the real reason is that a webcast would encourage more shareholders to stay home and the many Berkshire businesses that benefit heavily through the weekend would suffer. Buffet likes his shareholders to spend money at their businesses.

Buffet answered a question about how to protect against inflation from an 11-year old boy by saying: "The best protection against inflation is your own earning power. The second best is a wonderful business."

Throughout the meeting I was impressed with the ability of Warren and Charlie to use simple analogies to desribe investing. Towards the end of the day a question came up of how to determine when to buy a company in this economy while stock prices are falling. Warren used the example of a burger stating that he knows he's going to be buying a lot of burgers in the future and if the price tomorrow is less than the price today he is happy, not worrying that he paid more for the same burger yesterday.

As an added bonus I sat next to an investor who had flown in from Ireland for the meeting. Before the show we got to talking about healthcare. Ireland has a combination private public healthcare system like many European countries. He stated that currently they are set up so that visits to general practicioners are a flat 50 euros and the GPs determine who should and shouldn't be admitted to the hospital, unfortunately many people have stopped going to their GP as they do not have to shell out the 50 euros if they go directly to the Emergency Department (sounds very familiar to me). I asked him about surgery wait times and he stated that it is very normal for someone without private insurance to wait for 2 years or more for a hip replacement. Somehow I don't think the average taxpayer is going to accept that here in the states.

Overall it was a wonderful day and certainly worth the trip. I hope to return many times in the future.