I’m again from what has develop into over the previous 20 years an annual pilgrimage to Omaha.
What’s fascinating about this journey is that it has every thing and nothing to do with Warren Buffett. The principle occasion that pulls everybody to Omaha – the Berkshire Hathaway (BRK) annual assembly – is definitely the least vital half. I might have watched the shareholder assembly livestreamed on YouTube from the consolation of my lounge sofa.
The emergence of the Berkshire phenomenon jogs my memory of China’s manufacturing evolution. China initially attracted capital due to its low cost labor. However over time, China took this capital and plowed it into infrastructure. Factories have been constructed subsequent to one another, every specializing in sure areas. A specialised ecosystem emerged.
As we speak, Chinese language labor is now not low cost. It’s been changed by automation, and now China is a powerhouse for manufacturing something and every thing.
The transformation that the BRK weekend has undergone adopted the same development. Initially, the one method to soak up Buffett and Munger’s knowledge was to come back to Omaha, because the occasion was not streamed. However then one thing fascinating occurred. The BRK weekend attracted individuals who shared the identical worth system, and friendships have been fashioned. Quite a lot of smaller occasions started to be scheduled all through the identical weekend throughout Omaha, and an equally specialised ecosystem emerged.
The shareholder assembly started to be streamed about ten years in the past, however that has had no impression on attendance. That is one motive why I feel Buffett is at peace with the thought of now not presiding on the assembly – folks will nonetheless come to Omaha the weekend earlier than Mom’s Day.
The BRK weekend now options dozens of wonderful occasions.
I spoke at a number of, together with an investing panel at Creighton College, alongside the fantastic Bob Robotti, a die-hard worth investor who runs Robotti & Co. I’ve recognized Bob for years – at 72, he reveals the identical enthusiasm for shares as somebody a long time youthful – and this panel was a superb instance of what the BRK Omaha ecosystem has produced.
Bob and I’ve very totally different approaches to worth investing. He loves cyclical companies, whereas I usually shun them. Bob talked about that he’d purchase a really low cost enterprise run by a mediocre supervisor, whereas I’d not contact it with a ten-foot pole.
There may be completely nothing improper with both strategy; certainly, there is a vital lesson in it. Your funding philosophy and course of have to suit your character and your EQ. In my case, I get nervous (and thus irrational) after I personal firms run by imbeciles who don’t have both pores and skin or soul within the sport. However the beauty of the BRK weekend is that I study from Bob each time I spend time with him. He’s a considerate and genuinely type human being.
From the skin, the BRK weekend could seem to be a spot the place folks merely need to discover ways to get and keep wealthy. However this gathering transcends worth investing and capitalism and genuinely celebrates human values. Individuals (like me) deliver their children to this occasion. And identical to on the principal occasion, on the Q&A breakfast I hosted for my readers, many questions centered on life reasonably than investing.
My first Omaha reader meetup match round a small restaurant desk. This 12 months, to my shock, 450 folks packed right into a venue with standing-room solely. I answered questions on each possible matter for simply over two hours, and by the top I used to be exhausted.
This gave me even larger admiration for Buffett, who’s 4 a long time my senior, but nonetheless fielded questions for 4 strong hours. I used to be delighted to listen to Warren give the same reply to at least one I had given the day earlier than when requested what recommendation he’d give to graduating college students:
“Don’t fear an excessive amount of about beginning salaries and be very cautious who you’re employed for as a result of you’ll tackle the habits of the folks round you.”
(By the way, we’re going to host our subsequent Q&A Breakfast on Could 1, 2026. You possibly can join it right here. It’s free, however I recommend you join early, because it fills up quick.)
I additionally participated (as I’ve for over a decade) in an investing panel at YPO (Younger President Group) within the stunning Holland Efficiency Artwork Heart with Tom Gaynor, CEO of Markel (typically described as a child Berkshire Hathaway) and Lawrence Cunningham. Lawrence authored maybe an important e-book about Buffett, The Essays of Warren Buffett, masterfully enhancing Warren’s annual letters right into a cohesive quantity. This 12 months’s panel was a kind of events the place I discovered myself listening intently to my fellow panelists as a substitute of talking extra.
Lawrence has met Greg Abel – Buffett’s designated successor – and feels optimistic about him. He’s in all probability proper – this was one among Buffett’s most vital selections, which he didn’t make flippantly. But I can’t think about sitting for 4 hours listening to Greg Abel. I’m certain he is a superb CEO, however he’s neither Buffett nor Munger – few people possess a lot worldly knowledge and talk it with such readability and humor.
This brings me to the purpose of this observe: the dramatic (but not sudden) announcement that Buffett is stepping down as CEO of BRK on the finish of the 12 months.
Earlier than I touch upon this, let me inform you a narrative. Think about you’ve got been watching a cleaning soap opera for 17 years. You arrive dutifully yearly to look at each episode in particular person. And then you definitely miss the final 5 minutes of the explosive finale earlier than it goes off the air. That is what occurred to me when Buffett introduced his retirement as CEO.
A couple of minutes earlier than midday, whereas Buffett was answering a query I’d heard earlier than and seemed to be winding down, I instructed we slip out early for lunch to keep away from the crowds. Once we got here again, I found that the assembly had gone on till 1 pm, and simply earlier than it ended, Buffett introduced that he would step down on the finish of the 12 months. Seventeen years of watching Warren communicate and I missed probably the most dramatic second of all, adopted by a five-minute standing ovation.
I feel Buffett has engineered his exit brilliantly. He’ll nonetheless stay chairman, and even earlier than the announcement he was not managing BRK’s day-to-day operations. As a set of a whole lot of firms that usually have completely nothing in widespread with one another, BRK is already extremely decentralized. Buffett’s principal contribution has been capital allocation.
Giving up the CEO title whereas he’s nonetheless alive means Buffett has introduced in his alternative in an orderly means and created a easy transition. However I’ve a sense that on January 1, 2026, when Greg Abel formally turns into CEO, nothing will actually change, and Warren will proceed doing what he’s been doing for so long as he can. If Buffett is ready – he’ll be 95 – he’ll nonetheless drive to the workplace and cease by McDonald’s for a breakfast sandwich (there’s a whole lot of knowledge find pleasure in little issues). His son Howard Buffett will develop into chairman after Warren, along with his solely job being to protect the tradition.
I’ve been requested what I consider BRK inventory. We purchased the inventory in the course of the pandemic. It has completed higher than I anticipated, partially due to the robust efficiency of Apple, which was BRK’s largest holding. However BRK immediately is an unexciting funding at its present value. In all honesty, it’s a conglomerate with some good and a few merely okay companies.
As a client, I get a (small) glimpse into how BRK companies are being run by visiting Dairy Queen. BRK owns DQ, and I like their soft-serve ice cream (although I solely eat it after I journey). My favourite a part of analysis!
DQ has (or possibly had) a robust model and operates on a capital-light mannequin as a franchisor. However most shops I’ve visited appeared like they’ve been uncared for and want contemporary paint. To make certain, I perceive the constraints of this “evaluation,” and DQ general quantities to a rounding error on BRK’s financials. However little issues typically reveal a lot about massive issues.
BRK’s massive companies, from what I can glean by way of their financials, are usually not significantly effectively managed – GEICO and BNSF (railroad) have positively been undermanaged recently. BNSF is just not practically as environment friendly as its opponents that embraced precision railroading, and till not too long ago GEICO was dropping market share to Progressive.
BRK’s reinsurance enterprise, a big supply of BRK’s profitability, is run by the extraordinary Ajit Jain. Ajit is in his 70s and sadly it appears he’s not in nice well being. Is his alternative going to shoot the lights out, like he did? We don’t know. However Ajit might be extra vital to BRK immediately than Buffett.
BRK is just not going to soften into oblivion after Buffett is gone, however its greatest days are behind it. As Buffett has acknowledged, simply its measurement alone makes it very troublesome for BRK to develop. Reality be advised, even when Buffett have been thirty years youthful and continued to run BRK, I’m not certain the outcomes can be a lot totally different than what I feel the long run holds with Abel on the helm.
Buffett and Charlie Munger had an amazing impression on me as an investor and human being. I’m extremely grateful to each.
I hope Warren is there subsequent 12 months, however, in both case, I might be. As worth buyers say, “subsequent 12 months in Omaha”.
Key takeaways
- The Berkshire Hathaway assembly itself has develop into the least vital a part of the Omaha weekend – what really issues is the ecosystem of occasions and connections that has emerged round it, much like how China developed from providing low cost labor to changing into a specialised manufacturing powerhouse.
- Warren Buffett’s announcement that he’s stepping down as CEO on the finish of the 12 months represents a brilliantly engineered exit, although I believe he’ll proceed his capital allocation function whereas Greg Abel takes the official title.
- The BRK weekend transcends mere investing recommendation – it celebrates human values and knowledge, evidenced by the truth that each at Buffett’s Q&A and at my very own reader occasion (which surprisingly drew 450 attendees), many questions centered on life reasonably than simply investing.
- Your funding philosophy should match your character and EQ – as exemplified by my pleasant debate with Bob Robotti, the place we revealed utterly totally different approaches to worth investing that each work as a result of they align with our particular person temperaments.
- Berkshire Hathaway at its present value is an unexciting funding with its greatest days behind it – even with Buffett’s extraordinary affect, its sheer measurement makes progress troublesome, and a few of its companies like GEICO and BNSF seem undermanaged in comparison with opponents.