Last weekend, I made a pilgrimage to Omaha, NE to attend the Berkshire Hathaway Shareholder Meeting and visit the Oracle of Omaha, Warren Buffett. It was a father and son trip with Caleb. It was the first time that Caleb and I had taken a trip together on an airplane, just the two of us.
On the way there, we talked a bit about investing and entrepreneurship. We talked about the two ways to save money – make money and don’t spend it! Together, we flipped through the Motley Fool’s Guide to Investment for Teens. The part that got Caleb’s attention was the section on starting a business. We brained stormed a bunch of ideas.
1. Caleb could tutor Andrew and teach him how to add.
2. We read that Warren Buffett bought a pinball machine when he was a child and placed it in a barber shop. Caleb wanted to buy an arcade game and see if he could find a high traffic place to put it. We talked about maybe sharing the money with the owner of the place that lets him keep his arcade game there. This was by far his favorite idea.
3. We talked about maybe a doughnut delivery service where he could take orders from local businesses and deliver doughnuts on certain days of the week.
4. We brainstormed ideas about selling lemonade and where he could do it. Our neighborhood would not be a great place. Maybe down at the Redondo pier. Then we talked about selling ice cream down there. We’ll have to do some research on what the laws are for peddling ice cream.
We got into Omaha around 6pm. It was HOT! In the 80’s. We got a cheap Kia rental car and Caleb thought that the car looked super cool.
We zipped over to the Mormon Trail Center at Historic Winter Quarters. Sister Davis, a missionary from Utah, presented a movie to us and guided us through the exhibits. I was amazed that they had built over 500 log cabins in one season to winter along the trail to Utah.
Caleb got to try his hand at pushing a handcart. Tough to imagine dragging all your belongings in a handcart over 1000 miles. On our way out, I perused some of the brochures and noted that there were a ton of historical LDS sites to visit around the area. I’ll have to try and convince my wife to go back there with an RV some time.
After we were done at Winter Quarters, we zipped down to downtown Omaha, where we ate at a restaurant called Jazz. As you would expect, they had some live jazz music that kept Caleb bopping throughout dinner. We finished dinner a bit after 8 (which was late for Caleb), but we decided we’d explore downtown a little bit. We walked toward the river and ran into the biggest swan we’ve ever seen. It was about as big as Caleb. He was a bit grumpy and was busy chasing ducks off of his turf. I had to keep Caleb from getting too close.
After walking around, we finally got to our Super 7 Motel which was about 15 minutes away in another town called Bellevue. I joked with Caleb that it wasn’t good enough to be called a Super 8, so it’s called the Super 7. When we checked in, the clerk told us unapologetically that we have a smoking room. There were 30,000 people in town for the shareholder meeting… There was nothing we could do. He knew and I knew it. I sighed and we trudged upstairs to our room. Caleb was quite concerned about the smoking room, but when we got up there, we found that there was no smell at all. Lucky!
I put in a wake up call for 7am and went to bed. Just in case, I also set my phone alarm. Lucky thing I did, because the Super 7 was not so good about remembering wake up calls.
We got in the Century Link Conference Center about 8am which gave us some time to look through the exhibits of Berkshire Hathaway Companies. We saw Coca-Cola, Dairy Queen, World Book, See’s Candy, Fruit of the Loom, etc. About 15 minutes before the conference was about to start, we made our way to the stadium. The first floor was already all full, so we had to go to the 2nd level. We found some decent seats pretty close to the front. They showed us an hour long movie – which was a series of skits and parodies about Warren Buffett and Charlie Munger. One of the most memorable segments was about Warren’s secretary. She got a lot of press this year because of the Buffett Rule. The skit basically showed her hobnobbing on the phone while Warren had to learn how to use the phone and answer all the calls. The kicker was that all the phone calls were for his secretary.
After the movie, Warren Buffett and Charlie Munger took their seats at the front of the stadium and started taking questions. Journalists, Analysts, and shareholders all took turns asking questions. There were a few questions about Warren’s health especially since he announced he had prostate cancer. Munger chimed in that he was a bit resentful because he felt he probably had more prostate cancer than Warren did… but he never lets them check.
There were some questions about Warren’s political activity around the Buffett rule. A shareholder said that he thought that Warren’s political activity was keeping the share price down because some people (like the shareholder’s father) will not invest in BRK due to the political activity. Warren answered unapologetically that it would certainly be an odd world where we only invested in companies that shared the same political idealogies, and suggested that his father invest in FOX.
Another memorable question was about BRK’s performance vs. Gold. Warren was quick to point out that when BRK started, both the company share and an ounce of gold were $15. Today, an ounce of gold is $1500. BRK is worth $120,000. He drove home the point that gold was a non-producing asset and that in a hundred years, an ounce of gold will still be an ounce of gold, whereas a producing asset like an acre of land will be an acre of land + what it produced over a hundred years.
Also, there was a question about what he thought about Apple and Google. Warren thought they were probably great companies. He would never invest in them because other people will know a lot more about that space then he ever would.
There was a comment about venture capitalists. Warren made a distinction between what he does and what VCs do. VCs buy companies to sell. BRK buys companies to keep. Both Warren and Charlie Munger iterated multiple times that they love forming long term partnerships with worthy companies and managers, and that it has been very profitable for them. They both kept driving home the point that you don’t need to know everything… you just need to know a few things and do them well.
Warren referred several times to the book, the Intelligent Investor by Benjamin Graham (Warren’s mentor). When there was criticism that the BRK share price may be undervalued, Warren replied that this is the beauty of the market. When you’re buying and selling stocks, you are in a partnership with a man named Mr. Market. Mr. Market is often drunk and psychotic. This is good, because if you can stay rational, then you can take advantage of this crazy behavior. He referred to chapter 8 of the Intelligent Investor. (When I got home, I dusted off my copy and started reading it through again. Definitely a must read. The first chapter on investing vs. speculation made a lot more sense to me this time around.)
We didn’t listen to the entire 6 hours Q&A session. We probably listened to about 1.5-2 hours until Caleb started getting a bit antsy. We went and got some snacks, then we went to the NetJets exhibit and got to sit in a corporate jet. Finally, we made a stop at the Nebraska Furniture Mart which was humongous. Caleb didn’t last too long there. We ended up going back to downtown Omaha and eating at a pizza joint (which Caleb chose). Then we went to a movie theater and watched Pirates which was fun. Finally, we retired back to our smoking room at the Super 7 Motel.
We had to wake up the next morning at 5am (3am Pacific time) to catch our flight. It was Sunday so we bought some food the previous night and Caleb ate a PB&J lunchable along with an Orange. It was Fast and Testimony Sunday so that made it easy for me. Most of the trip home we tried to catch a nap.
Fun trip. Hopefully, Caleb will pursue a few of his entrepreneurial ideas. As for me, I’ll probably be doing a little re-jiggering of the portfolio and ask the question – am I speculating or investing?