Monday, April 21, 2008

Pilgrimage Part II: The Newspaper Generation

Note: This blog was originally posted May 8, 2007, following a visit to the Berkshire Hathaway annual meeting.

Already your editor can see mistakes: "Berkshire Hathaway" is never hyphenated, as in the first paragraph below.

Nevertheless, mistakes, warts and all, we thought it worth reprinting for readers as a countdown to the 2008 meeting early May.

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What I notice while we wait for things to start at the Berkshire-Hathaway annual meeting in the Qwest Center near downtown Omaha, Nebraska is that almost every person sitting near me is reading a newspaper.

Most are reading the Omaha World-Herald, which was available free in the lobbies of the hotels, with a ‘Welcome Berkshire Shareholders’ wrapper. Others are reading the Financial Times of London, which was being given away when we came into the Qwest Center.

Or they’re reading USA Today, or the weekend Wall Street Journal.

What they are not reading is their Blackberry. Nor are they looking at their Treos or scrolling through songs on their iPods. They're not even on their cell phones.

I haven't seen this many people reading newspapers in so long that it’s a bit jarring.

Oh, come off it, you might be thinking. He’s gone off the New Economy deep end.

But I’m not being flip about this: it’s really different. It even looks different: the social and physical essence of a newspaper reader is entirely distinct from that of a Blackberry user.

To read a newspaper you have to sit up more or less straight with the page in front of you. If you wear reading glasses—which most newspaper readers do, by definition—your head tends to tilt back, away from the page. And you don’t move much, except when flipping the pages, because it takes a few minutes to read each page.

Reading a newspaper is an open, inviting, approachable kind of posture.

Now contrast that with a Blackberry user. To read a Blackberry you hunch over the screen because it’s small and you need to shut out bright light to see the contrast. Your head is bowed so you can’t see much around you. And you’re constantly clicking or scrolling to keep the sentences coming.

It is a closed, uninviting, not-very-approachable posture.

Now, I realize this meeting is taking place on a Saturday morning, and the markets are closed, so who knows how many of these newspaper-readers have left their Blackberrys back in the Doubletree, and are simply reading to kill time.

Furthermore, I can’t actually see what all the other 27,000 shareholders and their families and friends are doing. (The crowd is so big we don’t all fit in the main arena, so thousands watch on remote screens in satellite areas nearby.) Somebody somewhere in the building is, at this very moment, flicking compulsively through emails.

But the lights in the arena are dim enough so that I can see that on the floor of the arena there is only the occasional square spot of light—literally five or six—indicating a Blackberry or cell phone in use among the people in those seats, and I have not in years seen a gathering of so many individuals who appear to prefer the crinkled feel and larger typeface of a newspaper to the wireless urgency of a Blackberry, or the companionship of a cell phone.

I’ve gotten accustomed to seeing a bunch of hunched-over, head-bent, finger flicking, well-dressed Type-As—not rows full of relaxed, studious, reading-glass-wearing newspaper readers. The place just looks different.

It’s a bit of a step back in time.

So too is the day-planner handed to me by the Acme Brick Company mascot on our way into the Qwest Center.

That’s right: a paper day-planner for the year 2008, the approximate size and shape of a college exam booklet bound by a black cover with “Acme Brick Company” in embossed gold lettering.

On the inside cover is a picture of Warren Buffett holding an Acme Brick (“Since 1891”), describing how he came to buy the company nearly fifty years after buying his first and only house, which was made of—you guessed it—brick.

I took the Acme day-planner not because I will use it, but because it reminds me of the Depression-era day-planners my grandfather used to have around his house.

My grandfather was a veteran of both World Wars, a Colonel who marched at the head of the Topsfield (Massachusetts) parade each Memorial Day. The best days of his life were fighting Germans in the fields of France in 1918, and he could talk about those days like they’d happened last week. He was a war hero with a box full of medals whose significance he dismissed whenever we asked about them: “You wave a gun at a bunch of Germans and they surrender, and somebody gives you a medal, don't you know. Nothing else to it.”

Between wars he worked at the Topsfield Co-op, which prospered even throughout the Great Depression because, as he told me once with a kind of Buffett-like simplicity: “Farmers had to feed their chickens, don’t you know.”

He even built his house during the Depression: “Gave a few men some work, that did.”

His words come back to me as I flip through the Acme Brick Company day-planner, because it looks and feels like the Topsfield Co-op day-planner he used to keep by the telephone. I saved one and keep it in a fire-proof safe.

This Acme Brick day-planner is quaint and I will never use it, but I’m going to hang onto it as a keepsake of this meeting.

Meanwhile, the arena keeps filling up, with more couples finding seats around us. They are polite, expectant, and part of something bigger. One genuine cowboy walks up the steps behind his wife, holding a plastic Wal-Mart bag, looking for seats.

At 8:20 a.m. a voice announces "The movie is going to start in ten minutes," and people on the floor of the arena—who have been mingling and moving about easily—start taking their seats, while those around us take off their reading glasses and start putting away their newspapers.

At 8:25 we notice a bustle in the center aisle on the floor, a sudden activity that generates a kind of collective arm-grabbing, finger-pointing, whispering: a man in a rumpled dark suit with unruly white hair is walking casually up the aisle towards the center of the arena, led by an efficient-loooking woman.

It is The Great One. The King. The Boss. It is John, Paul, George and Ringo all in one. It’s The Chairman of the Board himself—and quite literally, too.

It’s Warren Buffett, Chairman of the Board of Berkshire-Hathaway. The Oracle of Omaha.

He sits down in a reserved row halfway up the center aisle, presumably to have a good view of the movie on the giant screens above the small stage where he and Charlie will sit and conduct the meeting. A crowd forms around his chair, and that’s when the camera flashes start going off. Polite, nicely dressed men and women approach, timidly, to snap pictures and then retreat into the crowd which is building larger.

The flashes go off rapidly now, and the crowd closes in on the man who is sitting casually, one leg over his knee, and chatting with the efficient-looking woman who led him to his seat.

Then the voice announces "The movie will start in two minutes," and suddenly young men in suits appear and start disbursing the picture-takers, but the flashes keep going off and the men in suits do their job a bit more forcefully, pointing people to their seats, and the crowd breaks up as the lights go down and the place gets dark.

Then the movie begins.

It starts with a cartoon—a fairly long one—that plays on the well-worn theme that Berkshire’s annual meeting is a Woodstock for Capitalists.

The cartoon's central premise is that two young hippies named Warren and Charlie drive their VW Wagon to a music festival where they swap their Fruit-of-the-Loom T-shirt collection for a "groovy" soft drink called Coke, of which they sell out immediately, and use that windfall to buy a van full of See’s Candies.

During the respective selling and buying of these Berkshire-owned brands, the two hippies meet a young Bill Gates talking gibberish (to them) about some new fad called computers, a singer named Janis asking if they've seen “Bobby McGee,” and a guitarist named Jimi looking for a riff to go with the lyrics of a song he has written about “Purple Haze.”

The cartoon-Charlie Munger provides the famous riff, and Jimi goes off to play it.

Now, when I was 11, my sister made me lie down on the floor with a pair of speakers on either side of my head. “Listen to this,” she said. Then she put on an album full blast.

It was Jimi Hendrix, “Are You Experienced?

I’m not going to say that album changed my life, because it didn’t. Still, I did grow up on it, particularly the very first song she exposed me to that day—namely, “Purple Haze” (coolest part, Jimi coughing just before singing the opening verse).

And I have to believe that anybody who likewise grew up on that album knows that the core demographic of the Jimi Hendrix Experience is not exactly the Berkshire Hathaway demographic I have earlier described.

The crowd gathered in this arena to listen to two thoughtful, scary-smart, elderly men expound on the meaningless of ‘beta’ in portfolio management (“It’s nonsense”) and the folly of naked-short-selling crusaders (“There are more people bull-ing stocks for phony reasons than people bear-ing stocks for phony reasons") is not exactly out of the Woodstock Nation.

This crowd is of the Elvis Generation, and the Jimi Hendrix/Woodstock cartoon is a dud that can’t end too quickly.

Fortunately, a video of ukelele-playing Warren singing “Ain’t She Sweet” with ersatz-relative Jimmy Buffett picks things up, and is followed by an interesting film visit inside the Israeli plant Warren and Charlie got with their purchase of Iscar last year (no humans in the place—not one—and night shifts can be operated online, from the plant manager’s home).

As you'd expect, there follows plenty of Berkshire company ads, including one laugh-out-loud Geico commercial with Charlie giving a very dry customer testimonial, backed by a maniacal Little Richard.

There are very bizarre moments, like the showing of the “Mean Joe Greene” Coke commercial from 1979—almost thirty years ago—for no apparent reason at all, as well as seemingly random film clips of Nebraska football highlights.

There are also very terrific moments, like the interview with Lorimar Davidson—the GEICO executive Buffett famously interviewed on a Saturday morning in Washington D.C. after a janitor let the 21 year-old Buffett into the locked and otherwise deserted building—taped the year before Davidson died.

Mostly, the movie is a visual and audio shrine to Warren Buffett and the values, both investment and otherwise, he has consistently espoused over his consistently successful investment career. When it finally ends, we get to see Buffett in the flesh.

Only it is Jimmy Buffett, the singer, who now appears on stage with a guitar, a pair of bifocals on the end of his nose and some prompt cards on the floor at his feet, and he is attempting to play “Wasting Away in Berkshire-Hathawayville” with lyrics like “Some people say that Charlie Munger’s to blame…”

(I say “attempting” because he can't read his own lyrics and has to start over at one point.)

The song finally over, Jimmy introduces the Buffett everybody has come to see and hear, along with Charlie Munger. The two men, in conservative suit and tie, emerge from a curtain behind the stage to great applause, sit down at the table, and Warren starts the meeting.

First he introduces the directors (including Bill Gates) seated in the roped-off section down front, and then reviews in a sentence or two the quarterly earnings just announced.

It is clear right away we are in for something quite unlike your standard dog-and-pony show: rather than take credit for the wonderful first quarter results, Buffett makes sure to point out that 2008 insurance profits aren't likely to stand up to their 2007 peak (“It couldn’t get any better than it was last year, from our point of view.”)

That done, he lays out the general ground rules for the questions that will be asked by the shareholders who have lined up at a dozen or so microphones around the arena. More than thirty questions will be taken in the course of the five-plus hours, from investors of all ages (including a 10 year old girl from Kentucky) and from many countries (including an American Indian tribe).

Buffett will answer them all thoughtfully and in full—rarely discoursing for less than five minutes on a topic, and sometimes as much as ten, before asking his quiet, reserved partner, “Charlie, you have anything to add?”

The first question from the first shareholder is about the Private Equity boom. More specifically, “What could cause it to bust?”

In a gruff, folksy, matter-of-fact voice, Buffett starts to speak.



To be continued…


Jeff Matthews
I Am Not Making This Up

© 2007, 2008 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.



14 comments:

todd-fogarty said...

Great reporting. Great pacing! Can't wait for the next installment in the series. Such an exceptional blog, Jeff.

Sam E. Antar said...

Jeff:

I guess idol worship still exists.

Respectfully,

Sam E. Antar (former Crazy Eddie CFO & convicted felon)

PS: There is only one God.

jeff said...

Jeff, keep em coming. I find this facinating. I 'll have to go next year.

Ryan said...

Actually, the "Mean Joe Greene" Coke commercial was shown for a reason. As you probably recall, there was an "updated" version of the commercial towards the end of the movie that featured LeBron James in place of Joe Greene. Thanks for the great blog.

Tim Knows How to Make Stuff Up said...

I withdraw the prior analogy to Dickens. The cliff hanger was newspapers? Weak.

Go to many hotel lobbies across the country during the week and you will meet a similar fate. Why? Because the newspaper readers were recently provided with a free newspaper. Believe it or not, most people will actually take a look at a free newspaper. It's not any more complicated that that. In addition, at the time of the morning when you observed this "phenomenon," there generally isn't a lot of email for a BB user to read/respond to. Bottom line: you, sir, are no Dickens. But that's ok, too, because Dickens is... well, Dickens.

Having said that, I still enjoyed reading the rest of the installment. Keep up the good work.
Tim

Chris Fischer said...

I have an idea where this might be going..

MyDailySlice said...

I faithfully use Covey planner, and have for 20 years. I find hand-writing something down versus thumb-clicking-in an event to a crackBerry is a grounding, back-to-basics experience.

Thomas said...

Jeff, is this a warm up for a novel? If so, you need to choose better material. The pacing is alright but a thriller it ain't. The Berkshire meetings have all the dramatic architecture of a Jim Lehrer Newshour. Snore. Most of the questions hurled at Buffet are bland and uninformed. Agreed, it's good and nice that so many people are interested in long-term investing. Don't know what to make of people reading newspapers in Omaha--but don't really care. Most of the things that Buffet says are common sense and yet because he says them people nod and assent as if hearing the Delphic oracle. At least the sibyl spoke in verse AND predicted the future! Buffet does neither. In any event, I've been to a few Berkshire meetings and never heard one piece of truly "investable" wisdom. Frankly Jeff, I get more ideas from your blog than from Buffet...but that's because none few of us invest like Buffet. Or can invest like Buffet. It surprises me that few who make the pilgrimage to Omaha every year are aware that Buffet's company behaves like a giant private equity fund that does not monetize its investments with liquidity events. Furthermore, Buffet's time horizon is unlike any other manager I've ever known. Only the Vatican has a longer time horizon than Buffet because the R.C.C. thinks in terms of centuries. Both of these are as integral to his success as his stock picking prowess. And I'm not poo-pooing that--it is formidable. As for entertainment value, the meetings excite me as much as watching a pile of money onstage for six hours.

Gordon said...

Newspapers are an interesting datapoint for me. When the newspaper stocks began to hit new lows last year, I started taking a long look at them. I am a huge consumer of newspapers; I read the WSJ, the NYT, FT, and my local paper every day.

I gave a summer intern a few projects within the newspaper industry, a guy in his early 20's. He never read newspapers. None of his friends did, either. While when I was in undergrad in the early 80's, most everyone subscribed to the local paper, if only for the Sports page and the comics. None of the college kids of today did.

I didn't buy anything.

Today, Dow Jones notwithstanding, the newspapers stocks are even lower, and even with the earnings decline, the valuations are still better than last summer. I can't shake the thought, though, that old school newspaper companies are dying along with their market. If they aren't doing something to monetize their online business, they're dead.

Thomas, you may be bored by Buffett and newspapers, but I find it fascinating.

whydibuy said...

I'm curious. Are you actually a stockholder of a share or two or did someone provide you with their stockholding credentials to sneak you in. Or did you just crash the gate Woodstock style? Seems most Berkshire people expound on Buffett speak often in their own chatter. I don't see that from you ever.

Mrk2Mrkt said...

I'm mid 20s, and I much prefer reading the WSJ in newspaper form. I find I catch everything that way, and I also read stories I would normally not read online. It's a much more enjoyable way to read. When I read WSJ online, I end up only reading about 20% as much.

Then again, this might be more representative of my generation:
http://longorshortcapital.com/the-prince-of-papers-now-a-frog.htm

mh497 said...

Jeff:

Great blog, been reading for while.

Did anyone ask him to explain the rationale on his railroad investments? Did he disclose the other two names? Did anyone ask about energy/oil? Charlie Munger has commented on it in the past, at the Westco (?) meetings.

Thanks.

punchcard said...

Excellent writing so far. I subscribe to all the value rags but their reviews of the Berkshire meetings are seriously lacking in critical thought. Financial reporters often try to fill this gap, but they don't know the subject well so their criticisms are usually irrelevant and silly. I was therefore quite excited to see that a financially savvy, non-groupie like yourself was going to write about the meeting.

Looking forward to the next installment.

Jon said...

at this pace, we should get to the conclusion of the event by 3Q09...