Friday, May 27, 2011

Berkshire 2011: Munger’s Revenge

Well, some things have certainly changed here in Omaha at the Berkshire Hathaway annual shareholder meeting.

Most striking, the crowd seems a trifle thinner than last year—not by a lot, and maybe not at all, but certainly the growth in attendance has stalled from the 15% compound rate of the last five years.

Perhaps this is one reason Warren Buffett did not announce the attendance figures at the start of the meeting, as he has always done; the other obvious reason being that he forgot. But Buffett doesn’t forget too many things, and he takes inordinate and deserved pride in the army of loyal Berkshire shareholders…

Whatever the reason, there’s another thing that’s different: the shareholders asking the questions are almost entirely Americans. That’s a big shift, coming as it does after years of a growing international presence. Two years ago, for example, 15 questions came from non-US shareholders, while last year there were six. This year there’s been one shareholder from Kashmir, and that’s about it.

I’ll ascribe this to Buffett’s switch to a lottery system for determining the shareholder questions, which was intended to eliminated the spleen-venting activists that began to appear at the microphones in recent years, not to mention the Buffett Adoration Society-types who were more interested in Buffett’s view on Life, Liberty and the Pursuit of Happiness—but has had the side-effect of eliminating the European shareholders’ key advantage: getting up at 4 a.m. Central Standard Time to be first in line was easy for them.

Of course, another thing keeping the international contingent at bay is the fact that once again, three reporters—Fortune’s Carol Loomis, The New York Times’ Andrew Ross Sorkin, and CNBC’s Becky Quick—are alternating with shareholders. Altogether, this has kept the “What Would Warren Do?”-type questions to a minimum, and put the spotlight on Berkshire and its businesses, which is where it belongs.

(Side note: an unusually high number of excellent questions are being posed by bright young financial analysts from the Greater Boston Area, which suggests somebody figured out how to game the “lottery” system anyway. Who says America has lost its competitive edge?)

But of all the differences between this year and others, the happiest is that Berkshire’s canny and sharp-tongued Vice-Chairman, and Buffett’s longtime business partner, 87 year-old Charlie Munger, is being unusually talkative. Indeed, by day’s end, Munger will have added his dry, acerbic commentary to all but two or three questions out of the 52 being asked. (In years past, Munger declined to answer, on average, a third of the questions.)

I’ll chalk this up to the presence of all the bright young analysts asking questions about Berkshire’s businesses and Buffett’s investing style—but another reason might well be the recent eruption of the David Sokol Affair and the attendant sharp focus on Buffett’s judgment in the matter, raising Munger’s rather substantial hackles and giving him the opportunity to rise, more than once, to his longtime business partner’s defense.

Indeed, my favorite moment thus far came when Munger practically grabbed the microphone from Buffett and—

But before we get to that, let’s say that the one thing that hasn’t changed is this: Buffett and Munger’s unique determination to spend six hours answering questions—some flattering, some not—without ducking, dodging, hesitating, or turning it over to the lawyers.

Now, back to the meeting…

(To be continued)

Jeff Matthews
Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing, 2011) Available now at

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The content contained in this blog represents only 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 investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.


Anonymous said...

The lottery system was, in fact, gamed. A large number of Fidelity analysts fanned out to different microphones to increase their odds getting through the lottery. That's why a lot of questioners were from the Boston area.

Anonymous said...

"Indeed, my favorite moment thus far came when Munger practically grabbed the microphone from Buffett and—

But before we get to that,"

This doesn't make readers want to read more. It's just annoying.

Jeff Matthews said...

Anonymous 1: I didn't want to name names, but, yes, you are correct.

Anonymous 2: Sorry, mate.


Anonymous said...

Jeff, regarding the decreased international presence, don't forget the effect of special reception for international shareholders that has been dropped last year. This is, at least, why my wife and I have stopped feeding US embassy in Poland with annual $100 fee for U.S. visa (never granted, anyway ;-) )