The 2023 Berkshire Hathaway Meeting: Buffett and Munger Talk China, Banks, and Elon Musk
/By Shelley Murasko
In early May, I traveled with my husband, Mike, to Omaha, Nebraska, for the 2023 Berkshire Hathaway Annual Shareholders Meeting. We arrived on Friday, May 5, along with thousands of other attendees. As fellow shareholders buzzed about the meeting, complained about the exorbitant hotel room pricing, and packed the local steak houses, it was apparent that the hype of multinational conglomerate Berkshire Hathaway and financial legend Warren Buffett continues to live on.
After waking at 4:15 a.m. on Saturday, May 6, we drove to the CHI Health Center Omaha in preparation for the 8:30 a.m. start. By the time we arrived, hundreds of people were already lined up at the arena entrance — all hoping to get seats that would give them a clear view of financial maven Charles Munger and Buffet, the “Oracle of Omaha.” Though CHI Health Center Omaha holds more than 18,000 people, latecomers were left with standing room only. Our tactic of entering through the Hilton Skybridge worked superbly for the fourth time, allowing us to claim good seats.
Unfortunately, my hunt for a good cup of coffee before the 7 a.m. entry had proved tougher. Lines of suited meeting attendees had wrapped around the block for both nearby Starbucks locations, despite their predawn openings.
As Mike and I had waited to order or morning caffeine, we met people from all over the world: New York, England, Kazakhstan, and Hong Kong. We also had an enjoyable discussion about our favorite companies with fellow investors from Portland, Oregon; and even met a guy who was getting paid $100 to stand in the queue for another Berkshire Hathaway shareholder. Yes, there is such a thing as a side gig for being a line placeholder!
At 7 a.m. sharp, the arena staff opened the various entry points and, after a quick security screening, we walked briskly, while others ran, to the first balcony seats adjacent to the stage. With all the running and excitement, you’d have thought that Buffett was giving out free cars to the first 100 visitors!
Once we settled in our seats, we guarded them like sentinels. While people who attend this event are generally respectful about saving seats for others, this code of honor cannot be completely trusted. In fact, a brawl nearly broke out mid-meeting between two men over seating matters!
Opening Movie
At 8:30 a.m., the meeting began with the traditional Berkshire Hathaway opening movie. Updated annually, it typically showcases key Berkshire Hathaway brands like Apple®, Coke®, and Geico® along with special guest appearances. In this year’s movie, the story line featured Buffett trying to get Jamie Lee Curtis’s attention while she had another “interest” in mind: Munger. She even tried to convince Buffet that he should change the company name to Munger Industries.
The movie also featured a montage of shareholders from past meetings asking about Berkshire Hathaway’s succession plans and what will happen after CEO Buffett, age 92, and Vice Chair Munger, age 99, are no longer in charge. What I found humorous was that these succession questions dated back decades.
“Incidentally, I think I’m in pretty good health,” Buffett said in response in 1994 when he was a young 63-year-old.
For the record, Greg Abel, Berkshire Hathaway’s vice chairman for non-insurance operations, is the firm’s appointed successor for the CEO position.
Taking the Stage
At 9:15 a.m., Buffett and Munger took the stage along with Abel and Ajit Jain, vice chair of insurance operations.
As usual, Buffet walked to his seat and was his typical down-to-earth, folksy self. Munger came on stage via wheelchair and sat next to his stash of See’s Candies® peanut brittle and Diet Coke. Despite their advanced ages, they seemed to hear, process, and respond to questions just as they have in previous years.
During the Question-and-Answer session, CNBC journalist Becky Quick shared the microphone with attendees in a back-and-forth format. She would ask a question, then someone from the audience would ask a question. This rotation went on for about 3 hours in the morning and another 2 hours in the afternoon.
While watching the sessions, I captured eight key takeaways that I’d like to share with you.
#1: Berkshire Hathaway’s Access to Unique Opportunities
During the meeting, attendees asked Munger and Buffett about the future of value investing, which is the pair’s preferred style of seeking out companies that appear “undervalued” on paper. Munger replied that “we should get used to making less.” Yet in the same breath, he indicated that, if people are “ridiculous”, there will always be good investing opportunities. Munger has famously criticized investors for treating investing like gambling, trying to market time and pick investments without any intrinsic value.
Early in the discussion, the two partners shared a recent situation where they took advantage of today’s higher interest rates, making a special deal to invest in one-year U.S. Treasury bills at a 5.9% return, which is a full percentage point more than what regular investors can get right now.
#2: Emphasis on Key Tenets of Their Business
From owing stocks to owning operating companies, Buffett and Munger discussed the many facets of their business that make it unique.
For example, Buffett emphasized the $165 billion in “float” that they have. Float is basically the money they’ve taken in from their insurance customer premiums that won’t be paid out until sometime in the future. Buffett likened this to owning a bank, except they don’t have any employees, outgoing interest payments, or unexpected large withdrawals.
They can use this float money to buy businesses they want to own and operate. Or they can direct the money toward buying up large amounts of stock in companies they admire but don’t want to own.
A company that falls into the latter category is Apple, in which Berkshire Hathaway has invested 40% of its overall stock holdings. Recently, Berkshire Hathaway sold a small portion of their Apple shares, which Buffet called a mistake. According to him, Apple is a better business than any they own. He based his opinion on polls that asked Americans which item they would choose if asked to give up either their iPhone® or a second car. Most said they would give up the second car.
This type of brand and product loyalty is a key factor that Buffett and Munger look for in businesses. They call it having a “competitive moat” that makes it really tough for another company to come in and steal business.
Unlike private equity investors, Berkshire Hathaway likes to buy excellent management in the companies they acquire. They don’t want to be micromanagers of the businesses they own, such as Geico, BNSF®, Midwestern Energy, See’s Candies, and Dairy Queen®. Instead, they use a hands-off approach, allowing the managers of the individual companies to run the business.
#3: New Technology and Today’s Tech Leaders
Early in the session, Buffett and Munger were asked about their thoughts on artificial intelligence (AI).
Munger responded that he thinks AI will change many parts of the world and that “we won’t be able to uninvent it.” He even compared it to the invention of the atom bomb and how it changed the world. Yet he also added that he thinks “old-fashioned intelligence works pretty well” and that AI can change a lot “except how men think and behave.”
While discussing technology, an attendee asked Buffett and Munger what they thought of billionaire business tycoon Elon Musk. Munger replied that the SpaceX® founder and Twitter® owner has a high opinion of himself, but he is very talented and a “brilliant, brilliant guy.” He said Musk likes taking on impossible tasks, but joked that he and Buffett are different in that they look for easy jobs.
#4: China Tensions
When it came to China relations, the duo commented that there is tension on both sides and that we should work hard to get along with China. Munger stated that “any tension with China is stupid, stupid, stupid” and emphasized that we should exhibit kindness.
Both shared their concerns about countries having more tools of destruction today than in the past, including cyber and biological weapons. Thus, there are more reasons than ever before to choose diplomacy.
Buffett said the situation was “like playing chicken and driving toward a cliff.” He said that China and the U.S. should understand that both countries can prosper from their relationship.
China’s Taiwan Semiconductor (TSM) stock sale also came up during the discussion. Munger noted that TSM is one of the best managed and most important companies in the world, but that he and Buffett did not like the political risks of the location.
#5: Optimism
Despite Munger’s occasional negativity, both he and Buffett seemed generally upbeat about the prospects of investing in the U.S. They said it would take an idiot to screw up Berkshire after they’re gone.
Buffett stated that he would still rather be born in the U.S. today than in any other country or any other point in history. Going on to speak about politics, he said that while political partisanship has long been present in America, he’s concerned about the recent rise of the us versus them mentality of “tribalism.”
Buffett expanded on this thought by explaining that, when his dad was in Congress in the 1940s, the country was a mess as it struggled to recover from the Great Depression. During the Civil War in the 1860s, President Abraham Lincoln likely had moments when he felt disheartened as well. Although the future can look discouraging, an unwillingness to work together can worsen the situation.
With tribalism, Buffet said, “you don’t even hear the other side, and tribalism can lead to mobs.”
#6: Bank Runs
When asked about the state of the banking industry, Buffett said the situation is very similar to what it’s always been in banking: that “fear is contagious, always.” He continued to say that, historically, sometimes the fear was justified and sometimes it wasn’t.
Munger reminded us that after World War II, there were 2,000 bank runs in one year. He added that the FDIC is necessary, and there probably won’t be major bank runs today. Yet both agreed that the recent communication about bank failures has been poor.
#7: Lifelong Lessons
It wouldn’t be a typical Berkshire Hathaway meeting without some life lessons passed along as well.
At one point, Buffett brought up his favorite college professor, Benjamin Graham. Known as the “father of value investing,” Graham’s teachings had a huge impact on Buffett during his years studying at Columbia University’s Business School. Buffett alluded to the fact that more people should be like Graham: “Planting trees for others to sit under them with nothing expected in return.”
As a manager, Buffett mentioned that he has always tried to praise by name and criticize by category. In a setting where a team has exceeded expectations, he will recognize each person by name. Whereas, in the event of a problem or failure, the department would face the heat instead of individuals.
He also reminded us that kindness is the key when it comes to making friends. Buffett said the way to avoid making mistakes is to "write your own obituary" and live up to it.
There were also several indications that people should find their passion and work at it for decades, not just until their 60s. Though Munger pointed out that young people should apply their brains more to science and engineering and less to wealth management.
Munger also shared his philosophy for achieving success: “It’s so simple to spend less than you earn and invest shrewdly and avoid toxic people and toxic activities. Try and keep learning all your life, and do a lot of deferred gratification because you prefer life that way. And if you do all those things, you are almost certain to succeed. And if you don’t, you’re going to need a lot of luck. And you don’t want to need a lot of luck. You want to go into a game where you’re very likely to win without having any unusual luck.”
#8: Succession Planning
Abel and Jain, the succeeding team to the Buffett-Munger duo, participated in the Question-and-Answer session for the first half of the meeting.
While both individuals are intelligent and have proven experience running a successful business, their presentation skills could use a little pep. I don’t expect either one of the succeeding leaders to have the wit or charisma of Buffett or Munger. Perhaps some of that comes with age. But in my opinion, they could use some work on their presentation skills.
Abel and Ajit were boring and dull in most of their responses. I don’t see how they’ll ever fill arenas to even half of capacity based on their current presentation skills. Granted, they’re both smart as whips; but considering that Buffett was a huge fan of public speaking pioneer Dale Carnegie, I would expect that he’d encourage them to take up some training in that area.
Also, when Buffett and Munger were asked to share stories about their successors’ character, neither had any anecdotes at the ready. In my view, this should be an area that the current leaders focus on as they prepare their replacements to take the helm. Although I don’t expect either successor to live on McDonald’s breakfast sandwiches the way that Buffett does, a shared anecdote of how they treat people or demonstrate brilliant business or life habits would go a long way toward building confidence in these two.
Abel does have skin in the game, however. He recently loaded up on Berkshire Hathaway shares with his personal assets. The 60-year-old vice chairman added to his stake in the company in March, bringing the total value of his holdings in the company to about $105 million.
In summary, the trip to Omaha was well worth it. When I first attended in 2014, I was told that I should do so since, actuarially speaking, these two might not be around much longer. Yet here we are nearly 10 years later, and the duo continues to pull in record audiences from around the world. The Berkshire Hathaway Dynasty clearly lives on.
