My trip to visit Warren Buffett
Pearson International Airport – Nov. 20, 11:00 AM
In grade 7, my class had a school trip to Kearney, a campsite near Algonquin Park. For many of us, this was our first trip away from home by ourselves and the mood on the bus was full of anticipation, excitement, and anxiousness. The main topic on the bus was what everyone would do when they got to Kearney. Would there be campfires (yes), marshmallows (no), hikes (yes) and canoes (no)?
As I sat in the boarding area waiting to board our flight to Chicago, the atmosphere made me feel like a kid again. Some of my classmates had trouble sleeping the night and was now drinking copious amounts of coffee to stay awake while others gathered around Professor Kirzner to hear his stories from past trips to Omaha. The burning question in everyone’s mind was, “what are you going to ask Warren Buffett?” I personally wanted to ask Warren what motivates him and drives him to work so hard every day. After more than 50 years in the investment industry, it had to be more than money. By many accounts, Warren is not driven by material needs; he chauffeurs himself in a Cadillac and he still lives in the same house he bought in 1958. So what drives him?
Flight to Omaha – Nov. 20, 4:00 PM
An interesting thought crossed my mind. If a pilot navigating the skies is analogous to a Portfolio Manager navigating the stock markets, then shouldn’t there be a flight school for portfolio managers to make sure they can fly?
Westroads Mall – Nov. 20, 6:00 PM
Tad, Monica, Leila and I decided to explore Omaha while we wait for dinner. After a twenty minute cab ride, we arrived at the largest mall in Omaha (according to the cab driver). The mall is anchored by Von Maur (Neiman Marcus-lite?) and J.C. Penney, and there’s a multitude of smaller stores like Abercrombie & Fitch and American Eagle. Let’s go shopping!
Unfortunately, the shopping experience left much to be desired. Every store we stepped into only had a handful of patrons. In fact, it appeared that store employees outnumbered customers in most stores. It’s one thing to read about weakening consumer demand in the financial news, but it’s something different altogether when we see it with our own eyes. I wonder if Warren Buffett would talk about the economy tomorrow.
Omaha Prime Steakhouse – Nov. 20, 8:15 PM
The significance of the trip only dawned on me during dinner when we had journalists from Fox Business News come interview our class for a Buffett special they were preparing. Fox Business News was going to interview all six business schools before tomorrow’s Q&A session with Warren Buffett to get a sense of the excitement and anticipation. During the interview, I stammered a hasty remark on how difficult it was to enroll in the Value Investing class that has the opportunity to meet with Warren Buffett. Now I know what television personalities must feel like; do I look fat on TV? Should I have said something different?
By the way, when the interviewer asked us what questions we were going to ask Warren, Scott Mitchell, one of my classmates, asked the question I had be preparing, only he was much more articulate and eloquent. Now I have to come up with something else to ask.
Random Buffett trivia – according to Professor Kirzner, the 20-oz T-Bone steak is Warren Buffett’s favourite steak.
Doubletree Hotel – Nov. 21, 4:00 AM
Eureka! I just came up with two brilliant questions to ask Warren (at least they sounded brilliant at four in the morning):
1. After more than 50 years in the investment industry, what is the single-most important piece of advice that you can give to the students?
2. You have obviously been very successful in your investment career. However, are there lessons from your past mistakes and failures that you can share with us, to make us better investors?
Berkshire Hathaway – Nov. 21, 9:15 AM
In our excitement upon arriving at Berkshire headquarters, many of us took a photo with the Kiewit logo in the building lobby, thinking it must have some connection with Berkshire. Our sincere apologies to the Kiewit employees we held up in the elevator lobby. (As an aside, I also took pictures of the building across the street as we got off our bus, but I digress)
Cloud Room – Nov. 21, 9:30 AM
Rotman was the first school to arrive and proceeded to take pictures of every aspect of the conference room. Some of us even took pictures of the boxes at the back of the room where we dropped off our books for Warren’s signature. As ten o’clock came and went, I got a little nervous and anxious. Is that Warren’s assistant going up to the podium to tell us Warren is canceling the Q&A session because of the market volatility? (No, it was someone from Fox testing the microphones)
One minute we were nervously chatting, and the next, Warren Buffett appeared at the front of the room like Houdini and went into a two and a half hour marathon session of answering questions. The six schools asked a total of 28 (yes Berkeley, I noticed your first question was really two) questions and Warren proceeded to answer each and every one of the questions with an in-depth response.
For those that have never heard Warren speak live, I would highly recommend searching on YouTube for some clips to put what I write into context. Warren is an amazingly articulate and funny speaker. He has an innate ability to explain exceedingly complex topics using simple everyday language (which I believe, is a good sign of true understanding).
The topics ranged from technical (how to value intangibles) to political (would he be treasury secretary under an Obama administration), but for me, the most important takeaways were his personal and investment philosophies.
For example, Warren Buffett firmly believes he is successful because he was born in the right place at the right time with the right wiring. If he were born in another era, he would not be as successful (he might even end up as dinner for some wild animals!) In fact, he believes a lot of successful people do not appreciate what they have. Warren gave us the following anecdote to ponder:
Consider life as an imaginary game where your attributes and skills are determined by a ticket. There’s a giant barrel with 6.5 billion tickets. If you can throw you ticket back into the barrel and choose another set of attributes and skills from a hundred randomly selected tickets, would you do it?
Before you decide, let’s consider some facts. Only 5 tickets would be for the United States. Of the 5, only 2 would be of a particular sex (assuming you prefer one). Of the 2, only 1 would have above average intelligence or free from infirmity, etc. Would you still throw your ticket back?
Warren also had advice for graduate students. Instead of trying to find a job with a high salary, they should find something they love doing. They should consider working for an organization or an individual they respect. While I find it odd for an investment guru to impart philosophical advice, the words of wisdom from Warren were strangely refreshing and to the point. My favourite quote from Warren is:
Success is getting what you want. Happiness is wanting what you get.
While this is not an original Warren quote, it does put his entire philosophy and approach to life into context. I believe Warren is truly happy doing what he does, and he would be investing even if he was not the CEO of Berkshire Hathaway.
Finally, what is a talk with Warren Buffet without some insight into his investment philosophies? Needless to say, this is what everyone came to Omaha for. In five simple steps, I believe Warren’s investment process is:
1. Focus on your circle of competence (find industries or businesses you understand)
2. Identify good companies in circle of competence in terms of management, track record, etc.
3. Value the company by discounting the income stream from the business using an appropriate discount rate
4. Compare the value with the market price; if the value is higher than the price by a margin of safety, invest
5. Repeat step 1
While the above is an over-simplification, it does demonstrate two key tenets that Warren emphasized at the end of the Q&A session:
Investing is not like Olympic gymnastics, you do not get rewarded for degree of difficulty; know one or two things well, if you hit hard when they come up occasionally, you will make money.
Piccolo Pete’s – Nov. 21, 3:00 PM
Warren, what I meant to say when I gave you the certificate was:
As a gesture of our gratitude, The Rotman School of Management and Zerofootprint Solutions Inc. bought carbon offsets in your honour to offset the carbon emissions our trip from Toronto to Omaha produced.”
Although I cannot recall what I said, I am pretty sure it did not come out right. I will enroll myself in a Dale Carnegie public speaking course to improve my communication skills as soon as possible.
Omaha Airport – Nov. 21, 5:00 PM
More than an hour after I shook hands with Warren Buffett at Piccolo Pete’s I still cannot believe I had just met one of the greatest individual investor of the past century. It’s a surreal experience, to say the least.
The three questions I had for Warren were answered fully during the Q&A session. What motivates him is his love for investing. His advice for students is to find something we love doing. Finally, everyone makes mistakes, and it is ok to make mistakes as long as the process that led to the mistakes is correct.
posted by J @ 9:07 PM
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