Late this summer, before the stock market slowdown, Berkshire Hathaway Class A stock was trading as high as $84,000 a share. At press time, it was still around $68,000. When Warren Buffett took control of Berkshire in 1965, the share price was less than $20. Any questions?
Saturday, May 2, 1998 The meeting starts Monday morning but the party starts Saturday night. That's Berkshire Hathaway night at Rosenblatt Stadium in Omaha, home of minor league baseball's Omaha Royals. Thousands of shareholders filter up into the rows of seats clutching new T-shirts, gifts of their chairman, Warren Buffett. The shirts feature a caricature of Buffett as a Royals pitcher.
Even as they are being handed out, Buffett is on the field warming up his throwing arm. Sunshine has replaced the afternoon's wind-driven rain, but it's still a cool spring evening in Omaha. Promptly at 7 p.m., the 67-year-old investor, clad in a sweatshirt and khakis, walks to the mound and throws the first pitch. The game is on.
Buffett strides off the field, leading a troop of bodyguards and journalists toward the red seats, high up in the stands. He sits down and never gets another glimpse at the game. Cameramen position themselves in front of him, while shareholder after shareholder takes a seat next to him, smiles for a photo, gets an autograph. By the end of the first inning, there are more people in line than in the seats. Families, couples, and single shareholders gobble up one free hot dog each, craning their necks away from the field and up to the top of the stands. Who won? Everyone who made it to that empty seat next to their hero.
Welcome to My World "Mr. Buffett chooses not to take this meeting somewhere else, which I think is a statement about Omaha," says Jay Baum, executive director at the Omaha Convention and Visitors Bureau. "The rest of the world has a problem understanding that but I don't think his shareholders do." Indeed. Shareholders show up not just to listen to Buffett's wisdom but to immerse themselves in his Midwest, aw-shucks world. They cruise the streets in rental cars, pointing out Warren's unpretentious house, his modest downtown office, his favorite steakhouse.
Despite the down-home atmosphere, though, these annual meeting attendees "are not your typical weekend tourists," Baum points out. "This meeting has more [economic] impact than any other one-day meeting I can think of."
It's an impact that's only getting bigger. "I remember when the meeting was 1,800 people and it was surprising that it was that large," marvels Baum. Shareholders meetings, after all, rarely draw more than a few investors who usually witness a tightly scripted performance. Warren's meeting is anything but--and this year it drew an arena-busting 10,500 attendees. "It's a different kind of meeting. It's kept its family feel," says Baum, a 17-year veteran of the bureau who has never attended a Berkshire meeting. He has played bridge with Buffett, though. "He's just kind of like you and me I guess," Baum says. "Just a regular, nice guy."
Sunday, May 3 At an afternoon press conference the day before the meeting, reporters and cameramen jostle for position in a cramped office above Borsheim's, the Omaha jeweler owned by Berkshire Hathaway. "We have a good time," Buffett says in answer to a question about the phenomenal growth of the meeting, especially in the past three years. "We spend time with our shareholders, and get to know that they're real people. I like the idea of people who think they are partners of ours." Meanwhile, thousands of those partners are crowded three thick around the Borsheim's jewelry counters. On this day before the annual meeting, Borsheim's is open exclusively for them. Shareholder Sunday has become the store's biggest selling day of the year.
It's also a big night for Gorat's Steakhouse, Buffet's favorite hangout, which is packed to overflowing from 4 p.m. until the wee hours. As he promised he would do in his 1997 chairman's letter, Buffett arrives early for his usual T-bone with a double order of hash browns. Around 8 p.m., he gets up from his table and makes his way slowly to the door, stopping for handshakes and autographs. He's headed for Dairy Queen (owned by Berkshire), where yet another adoring crowd awaits.
Monday, May 4 Shareholders line up outside Aksarben Coliseum well before the doors open at 7 a.m. (Aksarben? It's Nebraska spelled backward.) Once the 8,000 seats inside the arena are filled, shareholders move into two additional rooms to watch the proceedings on monitors.
Having arrived two hours before the event begins, attendees wander among the exhibits in the arcade, making note of their many chances to keep the stock price high by buying the products of Berkshire-owned businesses--See's candy, Dexter shoes, GEICO insurance.
This is the second year the meeting has been held at Aksarben. "In 1996 we heard they'd outgrown the Holiday Inn Convention Center," says Kay Telford, Aksarben's director of marketing. So she invited the company to do a site inspection during a big corporate event and got the 1997 booking.
At 8:30 a.m. the movie begins--an annual montage of clips and advertisements for Berkshire's various investments. This year viewers get a glimpse of, among other things, Buffett's recent trip to China with the only guy richer than he is, Microsoft Chairman Bill Gates.
At promptly 9:30 a.m., Warren Buffett and Berkshire Vice Chairman Charlie Munger walk onto the stage and take their places at a single table, just two cordial old gents against a giant blue backdrop, a couple of ficus trees the only nod to decor. Buffett starts the meeting by introducing the directors in the audience. He proceeds to dispense with the formal agenda in 12 minutes. To each motion, the faithful respond, "Aye." It isn't exactly "Amen," but it's close. In this capitalist cathedral, Warren Buffett is the high priest.
Straight Talk The fervor of the shareholders is fascinating, because Berkshire itself has no product. The company is Warren Buffett, plain and simple. Fourteen members of the Town and Gown Investment Club (all women) came in a chauffered van from nearby Lincoln, all for the first time. But they'll be back. "Definitely. Next year, we'll stay at a hotel and shop at Borsheim's," says Helen Eckholt, queuing up at a coliseum concession stand. "It's marvelous."
Alongside amateur investors like Eckholt are professionals like Tom Russo, partner, Gardner Investments, in Lancaster, Penn. Russo has been attending Berkshire annual meetings since the mid-1980s, when they could fit into charming venues like downtown Omaha's Orpheum Theater. Back then, in an audience of only a few hundred other shareholders, Russo recalls being awestruck by Buffett's style. "I was spellbound by the candor, the insight, and the breadth of his responses," says Russo. "I've learned something from him every year."
That's the thing about Warren Buffett and this meeting. However much he seems driven to make money, he also seems to love sharing his ideas, his strategies, his philosophies. His chairman's letters in the Berkshire Hathaway annual reports are legendary for their candor, clarity, and wit.
As are his answers to questions asked over the course of more than five hours during the annual meeting. This is what everyone has come for. Eleven microphones are set up around the coliseum, and Buffett calls for questions from each one in turn. Questioners are from all over the world and include an eight-year-old girl who wants a viewpoint on campaign finance reform. Forget what you've heard about attendees being unable to sit still for more than an hour at a time. Forget the formulas about using visuals to maintain audience interest. From the first question to the last, when Buffett is speaking you can hear a pin drop in the packed coliseum.
When he is asked for the umpteenth time what he looks at when valuing a company for purchase, Buffett gives just as patient and clear an answer as he has given to every question so far. The funny part is, shareholders who have been paying attention or who have ever read a Berkshire annual report could easily answer the question for him. So why, if he gives the same answers year after year, do attendees come back to hear it all again? Buffett himself offers the answer: "What we do is simple, but not easy."
At noon, Buffett calls a break for lunch and attendees flow out into the hallways to buy sandwiches and Cokes. (Coca-Cola is 8.1 percent owned by Berkshire.) The box lunches are part of the atmosphere. "They do things right, but this meeting is not frilly," says Aksarben's Telford.
Back in the meeting, Buffett is asked how Berkshire manages the heads of the companies it owns. "We have no formal system of meetings with managers, no operating plans that must be submitted to headquarters," Buffett replies. "There's more than one way to get to business heaven. We have never imposed anything from the top on the people running our companies. . . . Charlie?"
Munger sums up: "We have decentralized power to a point just short of total abdication."
So it has gone for hours. Half the time when Buffett looks to the poker-faced Munger for a response, his 74-year-old partner leans up to his microphone and says, "I have nothing to add" or "You said it wonderfully." The crowd loves it.
A certain cheerfulness is not surprising for a coliseum full of people who own a stock with such off-the-charts growth. But the aura of the meeting goes beyond that. It's a particular glee in knowing that this success has come not at the hands of some slick Wall Street type, but rather from Omaha's own brilliant, straight-shooting, rumpled Columbo of an investor, Warren Buffett. To witness it is remarkable, to share in it, well . . . who could stifle a giggle?
Buffett on taxes: "I'd rather be a huge taxpayer than be at the other end of it--having to rely on the government to give me a check."
On a falling market: "We don't want to sound like undertakers during the Plague, but we're having a good time when the market's going down. It's a better chance to deploy capital."
On valuing high-tech companies: "If I had a class, on the final exam I'd ask them to value an Internet company. I'd flunk anyone who gave me an answer."
On leaving money to your kids: "If you're quite rich, leave your children enough so that they can do anything but not enough so that they can do nothing. I would make inheritance taxed heavily as a luxury. Why should you get advantages because you chose the right womb?"
On investing in a college education: "I was able to save everything I made in my teens. I was fortunate that I didn't have to pay to go to college. I probably wouldn't have gone to college if I'd had to pay for it."
As the questions got under way in earnest at the Berkshire Hathaway Annual Meeting last May, Vice Chairman Charlie Munger offered this aside: "I also want to say proudly that we have no mission statement."
Perhaps not. But Buffett has written a lengthy "owner's manual." The first of its 13 principles begins, "Although our form is corporate, our attitude is partnership. Charlie Munger and I think of our shareholders as owner-partners . . ." The second: "We eat our own cooking." Number 13: "Though . . . unwilling to talk about specific stocks, we freely discuss our business and investment philosophy."
The owner's manual also covers the way Berkshire businesses are managed. "Most of our managers are independently wealthy," Buffett writes, "and it's therefore up to us to create a climate that encourages them to choose working with Berkshire over golfing or fishing."
Munger may not call it a mission statement, but Buffett has gone to some effort to make Berkshire's mission clear.