|Omaha notes: (L to R) Warren Buffet,
CEO, Berkshire Hathaway with Abhishek Dalmia and Wesco Chairman
has taken me 30 hours to reach the obscure town of Omaha from New
Delhi. It is still small enough to be called a town, although its
fame, thanks to its most illustrious citizen Warren Buffett, transcends
that of many large cities. But for the Fortune magazine, Buffet
may well have succeeded in maintaining a low profile. Despite being
the second richest man in the world, not counting Ikea's founder,
he continues to live in the house which he bought for $31,500 in
1958, drives a $20,000 Lincoln town car and operates out of the
same office he moved into, many decades ago. The total headcount
at the world headquarters of Berkshire Hathaway is 15.8 (one lady
works only 4 days a week). The company is now worth $140 billion
and employs about 175,000 people. All this has been built in just
under five decades by Buffett. To put things in perspective, an
investment of $10,000 in his partnership in 1956 is now worth $350
million, after all taxes, expenses and fees. Phew!
I am one of the 20,000 people who arrived in
Omaha from all over the world to attend Berkshire's annual general
meeting and listen to the man himself. To all of us, this is Woodstock
redux. Forty Australian men and women chartered a plane to fly into
Omaha and attend the AGM of a company that is neither part of any
significant index, nor has been tracked by the analyst community
at large. The queue for a good seat at the venue of the AGM, held
on Saturday, May 1-it has been held on the first Saturday of May
for many years now-starts forming at 1.00 a.m in the morning, the
low temperature (low single digits), notwithstanding.
Is material success (as summed up in the opening paragraph) the
reason for all this? I am not so sure: the attendance at Walmart's
AGM or Microsoft's pales into insignificance when compared to that
at Berkshire Hathaway's. So what is it that makes people spend many
precious hours of their lives to travel this great distance to spend
a few hours with the man? One reason could be that these people
recognise Buffett the manager as much as they do Buffet the investor.
As one shareholder put it, the man is a value investor and a values-driven
manager. Still, even this is inadequate when it comes to explaining
his cult status. Why are people willing to bid $250 on E-Bay to
gain entry into the AGM? Why have some shelled out $600,000 for
the opportunity to lunch with Buffett? There's more. Heard of the
Yellow BRKers? It is a club of long-time Berkshire shareholders
and Buffett fans. I met one more of the club at the meeting. He
told me that he bought the Berkshire share when it was trading in
the double digits (it now trades at over $90,000), and that he had
to sell a few to buy a $20 million house.
|Warren Buffett continues to live in the house
that he bought for $31,500 in 1958
To my mind, Buffet is living proof that good
guys do not always finish last. His ethical standards are legendary.
He has no ego at all (despite his achievements) and has consciously
cultivated a low profile. If you hop into a cab in Omaha and ask
to be driven to Mr Buffett's house, chances are, you will be asked
to provide the address. Another reason why the man appeals to people
is his selflessness. Early on, Buffett told his father not to provide
anything for him in his will. And he has made it clear that apart
from a small portion of the wealth created by him (which will go
to his kids), everything will go to a foundation he has instituted
that will support charities. Imagine doing this in the Indian context!
A third could be the simplicity with which he explains complex concepts
and his sense of humour.
The 15-minute AGM itself is a mere formality.
What all of us are here for is the almost six-hour Q&A that
follows. Some people consider this a rapid-fire mba programme. A
few shareholders have brought their children along. Some are encouraging
them to ask questions of Buffett. One such asks, "What is your
advice to the young?"
|An investment of $10,000 in the company in
1956 is now worth $350 million, after taxes, expenses and fees
"Avoid debt," says Buffett simply.
"Why don't you pay out some of the $30 billion lying with the
company as dividend, if there is no investment opportunity in sight?"
asks another shareholder.
The response is a bit longer this time. Buffet
says he does not believe in hyperkinetic behaviour and that he doesn't
get paid for activity-just for being right.
That's enough for several value investors in
the room-they dissect and analyse every word the same way bond traders
do with Fed Chairman Alan Greenspan-to conclude that a big market
crash could be coming. If it comes, is the reasoning, Buffett wants
to be ready with a pile of cash to acquire good businesses at a
|The total headcount at the HQ of Berkshire
Hathaway is 15.8 (one lady works only four days a week)
There's more of the same. Readers interested
in a complete transcript of the proceedings can get one simply by
sending me an email at firstname.lastname@example.org with
a brief note on your background.
At the AGM, we find out that Alice Schroeder,
the first analyst to write a detailed report on Berkshire Hathaway
five years ago-she was with Paine Webber then; she later moved to
Morgan Stanley and was the firm's star insurance analyst-has been
hand-picked by the man to help him write his autobiography. There
are hundreds of books on Buffet, including the most famous one by
Andy Kilpatrick, but the official autobiography, labeled "the
book project" promises to be something else. I cannot wait
for it to be out next year.
Abhishek Dalmia, a Warren Buffet fan and a
shareholder in Berkshire Hathaway, runs the Renaissance Group. He
is best known for his aggressive play for GESCO Corp.