Warren Buffett and Charlie Munger share some billionaire wisdom Berkshire weekend
OMAHA — Berkshire Hathaway's annual meeting began, as only it could, with musings on romance from Warren Buffett.
“If you're choosing between two very old and two very rich guys,” Buffett deadpanned, “choose the one who is older.”
The audience roared. A video sketch had just played of a woman rejecting Buffett, 85, and running into the arms of his 92-year-old investing partner, Charlie Munger. Now, in riffing on it, Buffett had delivered the first great line of the weekend.
Berkshire’s annual meeting is, ultimately, theater: Buffett and Munger sitting on stage, chomping on peanut brittle from Berkshire-owned See’s Candies, swilling Coca-Cola and offering folksy summations on business, life and the economy. Part of what makes the six-hour gathering bearable is that the audience is always on the edge of its seat, waiting for the next clever retort or humorous quip from the world’s most-successful investors.
Zingers come frequently. Buffett and Munger tackled everything from the controversy at Valeant to the candidacy of Donald Trump Saturday, always finding ways to inject humor into their commentary.
A look at Berkshire weekend, as explained in the one-liners:
“If you really want to improve your longevity process — a guy in my position — you have a sex change.”
This one came as Buffett defended Berkshire’s investment in Coca-Cola. He consumes about 700 calories, or a quarter of his day’s total, in Coke. And he doubted whether switching to water and broccoli would help him live longer. For that, he cited census figures: About 10,000 men are 100 or older in the U.S., while there are 45,000 women centenarians. Thus the suggestion of a sex change. It got a big laugh, but it didn’t answer the question posed by The New York Times’s Andrew Ross Sorkin, who asked Buffett to explain why shareholders should be proud to own Coke even as it comes under repeated attacks for contributing to obesity.
“If you expect a lot of efficiency, financial efficiency, in higher education, you’re howling in the wind.”
This Munger line summed up a debate on how to expand access to college, in which Munger (a college dropout) said that his experience with universities had shown that larger endowments and increased fundraising rarely trickled down to students — but did help administrators boost their salaries.
Cows: “One of the worst businesses I can imagine.”
When a shareholder from Arizona, whose family runs cattle farms, asked if the billionaires might be interested in getting into that line of work, Munger pounced. “Not only is it a bad business; we have no aptitude for it.” Buffett tried to be optimistic, noting some had done well in it. “You have one good year every 20 years or something,” Munger shot back. The Arizona farmer didn’t back down, noting the two men did like steak. Yes, they replied, but not owning cattle.
“There’s no one you'll run into ... that says, with my same talents, ‘I wish I lived 50 years ago instead.’”
Buffett reminded the audience that, in his lifetime, the country's economic output per person had increased sixfold. So Berkshire could cope with a Trump presidency. “In the end, business in this country has done extraordinarily well for a couple hundred years," Buffett said. "It'll keep working."
“If you’ve got someone who lacks integrity, you want them to be dumb and lazy.”
This line came as Buffett described his ideal manager. He looks for someone intelligent, energetic and filled with integrity; if someone lacks the last trait, he’d just hope the person had little drive. He skewered Valeant Pharmaceuticals, describing its business model as “enormously flawed”; Munger called it “a sewer.” The Sequoia mutual fund, which Buffett has long recommended, bet big on the company. Buffett said Sequoia’s Valeant stake had been “very painful,” but that Sequoia had made changes to right itself.
“There's been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities.”
Buffett seemed to take obvious delight in pointing out that, an unmanaged, low-cost index fund tracking the S&P 500 outperformed the returns on a collection of hedge funds by more than 40 points since 2008. Invoking a Trumpism, he said that a “low energy” approach to investing — betting on stable-but-boring index funds and leaving them alone — proved to be far better than the flashier hedge funds, whose fees also eat into returns.
“A full wallet is like a full bladder; you may have the urge to pee it away.”
Here, Buffett referred to the challenges of wisely managing Berkshire’s billions in cash, but it’s a quote that could apply to personal finances, too. With companies, he criticized those that use their cash to regularly buy back stock, regardless of its price. No company would go into an acquisition saying, “we’ll spend $5 billion no matter the price,” a reason Buffett and Munger said they were baffled by buyback strategies that effectively did just that.
The last question of the day came from an audience member in the stands. He had sat through hours of Buffett and Munger bantering at this point, and wanted to know where the two men got their sense of humor. The audience could feel a joke coming.
“If you see the world accurately,” Munger delivered, “it’s bound to be humorous, because it’s ridiculous.”
Buffett called that a good note to close on.
Read more of our coverage from Berkshire Hathaway's annual meeting here.