In May, the Equity Mates team journeyed from Sydney to Omaha, Nebraska, immersing themselves in the 72-hour Berkshire Hathaway Annual General Meeting (AGM). Despite hurtling into the weekend after a serious long-haul flight, we gleaned essential insights from the prestigious event. It was a “bucket list moment” for all of us.
Warren Buffett and Charlie Munger are two lively nonagenarians, who impressed the team with their insightful discussions on a myriad of topics, ranging from the future of value investing to US-China relations, from the green energy revolution to Elon Musk’s recent antics. We unpacked all our thoughts in this episode. (link here: https://equitymates.com/episode/our-72-hours-with-warren-buffett/)
Here’s 5 of our key lessons:
1. It’s going to be harder to make money, but there are still opportunities.
The days of value investing aren’t over, but making substantial profits has become more challenging due to increased competition from a greater number of fund managers, alongside the rise of advanced technologies such as AI, which present compelling growth investment options.
Buffet said: “I think value investors are going to have a harder time now that there’s so many of them competing versus a diminished bunch of opportunities. So my advice to value investors is to get used to making less.”
But before you get too depressed, he did stress that he still thinks there’s going to be plenty of ways to make money. “New things coming along don’t take away the opportunities. What gives you opportunities is other people doing dumb things.”
2. Communication is key when it comes to relationships and finance – no matter how much money you have.
“In my family, I do not sign a will until my three children have read it, understand it, and make suggestions.”
Buffet’s ‘kids’ are fully grown adults in their 60s – so he acknowledges what they would have needed when they were in their 20s would have been very different. He also admits that there are thousands of variables and every family is unique.
“But I do think, if the children are grown, and when the will is read to them it’s the first time they’ve heard what the deceased thought about things, the parents have made a terrible mistake.”
3. Looking at investment opportunities? Don’t get caught up in the technical details – judge them on how they are meeting customer’s needs.
Does the individual want this product? Is the company delivering on their promise? Buffet says being a successful investor requires a strong understanding of consumer behaviour and focus on whether a business satisfies ongoing consumer needs. He warns that too many people fixate on the technical aspects.
4. Don’t expect large-scale structural change without a ‘wartime’ attitude.
Will nations transition to ‘renewable energy?’ Only if countries create a ‘unity of purpose’, and commit their significant resources and intelligence towards finding a solution.
Buffet recounted how during the 1940s, the USA gathered their best and brightest, and granted them ‘enormous power’ to find a solution to the challenges of the time – to build a war machine. As a result “they reordered the industrial enterprise of the United States in a way that was unbelievable, because they had the [full] power of the Federal Government and the ingenuity of American businesses.”
Buffett acknowledges we’re facing similar challenges to achieve energy transformation, but he worries it may not be possible, as we lack the societal and economic upheaval required to meaningfully transition to renewable energy. He was talking about the US, but it could just as easily be Australia.
5. Not everything that should happen does happen.
There’s big life lessons in every corner of the investing world. When Buffett was asked to comment on Microsoft’s proposed acquisition of video game maker Activision Blizzard, he conceded it didn’t look good.
That’s despite both companies doing everything within their power to make the deal work. ‘I think Microsoft have been remarkably willing to cooperate with governing bodies and have met the opposition more than halfway…. If it doesn’t go through, I don’t think it’s through any shortcoming of Microsoft or Activision”.
Life is surprising – even if you’re the ‘Oracle of Omaha’. When it doesn’t go your way, you take stock of the situation, pivot your solutions
Buffet finished with, “I don’t know how it turns out. What we’ll do will depend on a lot of things.” In response, Charlie Munger replied, “You kissed that one off beautifully”.
There’s a summary of our favourite clips from the AGM, and provided our thoughts in our recent episode of You’re in Good Company. Bryce, Alec and I recorded this episode as we sat in the park on Sunday morning, deliriously content having just completed the 5km Berkshire “Invest in yourself” fun run (after a few too many celebratory champagnes with fellow AGM attendees at the Hilton the night before).
Listen to the full recap with Alec, Bryce from Equity Mates together with Maddy from You’re In Good Company here: