Berkshire Hathaway’s 50th Anniversary Gala notes – thanks to a reader for sending these,
OMAHA, May 3 — It was a generally mild morning for the Berkville at 50 gala except for oddly threatening flashes of lightning over the insane lines that stretched all around the Century Link Center by 6:30 a.m.
By 7, when the doors open, they had doubled back on themselves and taken up the opposite sidewalks on adjoining streets. Those who thought they could saunter in around 8 a.m. to catch the movie at 8:30 were hit twice — by a drenching cloudburst and, wandering around vacantly in soaked shirts, a full house.
Although the building has been full in recent years, there was generally a sense of decorum about finding seats. Woodstock is supposed to be a metaphor. If you were there when the doors opened, you could afford to be leisurely. This was more like Black Friday at Best Buy. A couple from Malaysia standing behind me in line had flown 30 hours to attend the meeting and will fly 30 hours home tomorrow. All the seats were taken, all the overflow rooms in the building were filled, and extra overflow rooms in the Hilton across the street were also full. Buffett apologized after lunch to those who had to wait for the usual lunch defectors to find seats.
I am pleased to say they ditched the “YMCA” number in favor of rewrites of “Sgt. Pepper’s Lonely Hearts Club Band” and “With a Little Help From My Friends,” which are almost as old as the partnership they were celebrating (released in ’67). There was a bit about Charlie Munger’s infatuation with Hollywood in which he said, “Slick, yo.” There were appearances by Jamie Lee Curtis (in bed), Arnold Schwarzenegger, Little Richard and, of course, the Breaking Bad guy. They showed Buffett acting as a salesman for Borsheims last year convincing a couple to look at a ring that turned into an arranged proposal. There was a bit from the Ellen Degeneres show in which she had one of her people pretend to be a See’s Candy salesperson and do weird stuff. Acme Brick apparently set up a lot of bricks as dominoes for some reason. They dubbed in “Geico” for “plastics” in the famous scene from The Graduate. Buffett did his version of “I’d like to teach the world to sing” with a ukulele.
The big bit in the movie was a tale about Buffett taking on Floyd Mayweather for the welterweight championship. Director John Landis (Animal House, Trading Places, Blues Brothers) wrote and directed. It was fairly clever; Buffett and Mayweather being restrained from going after each other at the weigh-in, interspersed training scenes of Mayweather on the light bag and Buffett using an ancient adding machine at high speed. Buffett wears his glasses (and a white T-shirt) to the fight, apparently on the theory nobody hits a guy in glasses. Just as it’s about to begin, the cable goes out.
Following the rewritten Sgt. Pepper’s and Little Help From My Friends, which were accompanied by spotlights wandering over the crowd illuminating glitter confetti falling from the ceiling, Warren and Charlie emerged at 9 to the strains of Joe Cocker’s cover of Help From My Friends. They got a mostly standing ovation.
“I’m Warren,” Warren said. “This is Charlie. He can hear. I can see. We work together.” He introduced John Landis, who was there.
Carol Loomis took a little of the air out of the self-congratulatory balloon by choosing as her first question an indictment from a Texas shareholder who wrote that he’d always considered Berkshire Hathaway an ethical company, but was no longer so sure after reading the Seattle Times piece on Clayton Homes last month . . .
. . . here it is if you missed it: http://www.seattletimes.com/business/real-estate/the-mobile-…
. . . and following Berkshire’s new bff relationship to 3G Capital, which he described as doing “brutal takeovers.”
Buffett was prepared for the Clayton Homes question, although he insisted the ready availability of slides to aid his argument was not because he knew it would be the subject of Loomis’s question but only because he knew it would come up at some point. He went to considerable lengths to demonstrate that the reporter had confused gross margins with net margins, but didn’t address many of the other complaints specifically. He said 3 percent of Clayton mortgages default, and that most people find it a good way to own a home on a modest income.
“I make no apologies whatsoever about Clayton’s lending terms,” he said. “I’m proud of the Clayton management.”
Added Munger: “We can’t make lending to poor people for houses completely successful.”
On 3G, Buffett said no Berkshire Hathaway company has a policy of employing more people than it needs. Munger found in the question a presumed paean to socialist economics and an opportunity to recount his quote about the Russian economy: “They pretend to pay us and we pretend to work.”
“I really tip my cap to what the 3G people have done,” said the cap-less Buffett, borrowing the most overused cliche in sports.
I missed the next question as a police officer came to the section where I was sitting in the balcony and loudly ordered the overflow sitting on the steps to clear out. Some were Japanese who may not have understood him, but that only made him louder.
Judging by the answer, it had to do with Berkshire’s purchase last fall of the Van Tuyl Group of auto dealerships, and in particular what they thought of dealers trying to eliminate haggling and set fixed prices.
“People seem to want to negotiate,” said Buffett, expressing skepticism that the traditional model of car-buying is going to change in a big way anytime soon.
“It’s been amazingly resistant to change for my whole lifetime,” Munger said.
I found this interesting mainly because the fixed-price model in used cars is what convinced Buffett emulator Tom Gayner to invest in CarMax for Markel, a very successful play.
As always, there were a lot of people who wanted to be told how to be successful. Someone asked for five characteristics of a company that would permit him to project earnings growth for 10 years. Buffett turned to Munger.
“No one size fits all,” Munger said. “They’re all different. We can’t give you a formula that will help you.”
The next question was directed at Munger, wanting to know if he saw the IBM investment as similar to investing in the textile business back when it all began and whether he tried to talk Buffett out of it.
“The answer is no,” Munger said. “I think IBM is a very creditable company. We own a lot of companies that have had temporary reversals.”
“When we bought it, it was a 2-0 vote,” Buffett said.
This also allowed Buffett to make his well-worn point that people should want the price of securities they like to go down, not up, so they can buy more.
“Warren, if people weren’t so often wrong, we wouldn’t be so rich,” Munger said.
Someone cited Munger’s letter in the annual report and wondered why he thought Buffett would be unlikely to replicate his early success in insurance if he had it to do over. Buffett agreed, saying three very lucky things happened to him