Berkshire's Annual Meeting has not been improved by expanding the format

I have been listening to video of the 1994 Berkshire meeting which covers the Q&A.  As always, Warren and Charlie have some insights about investing and human nature.  Berkshire was quite a different business then than it is today.  It was more heavily in insurance and owned many fewer operating businesses.

My take is that the meetings were more interesting when shareholders asked questions and those shareholders were fewer in number and likely savvier investors, on average, as a group.  Questions were much more focused on investing and on business and much less about macro policy.  I have a sense that the celebrity interlocutors that they have brought in to ask questions have not improved the quality of the questions.  I get why they do it - there are just so many people now who have an interest in the business they need a way to filter things and to group questions.

I suspect that to a significant extent there are two factors at work.  First, that the new format encourages people to emphasize questions that are *popular* rather than useful.  If hundreds or thousands of people ask in one format or another, question X, then a tendency will be to ask that question because lots of people want the answer.  Media personalities are very concerned about the quantity of eyeballs more than the quality of eyeballs.  Second, and relatedly, I think there is greater awareness that the meeting has wide following in a community of interest much wider than that of shareholders and necessarily that audience has more utility in questions about what books to read or how to have a good life.  But of course, those are not necessarily the questions that help one understand how to value Berkshire which remains, I believe, the chief purpose of an annual meeting of shareholders.  Third (I know, I said two factors … but this is perhaps point 2b) I think the questioners, being sort of special invitees, just don't think it is their job to be that challenging.  The best question asked at this years' meeting came from an 8 year old shareholder who was at her second meeting and asked why BRK has moved from high returns on capital businesses to low return regulated utilities.

In any case, I think there probably is value in listening to them at these meetings.  This is how the circus really got going, after all.

Here is the link.


P. S. Bill Ackman and Carol Loomis asked questions.

Strategy and Political Economy

Strategy is actually the study of differential outcomes.  Why do some businesses succeed wildly while others, with similar talent and effort come to nothing?

This is an essential issue in investing; a few firms will produce excellent returns on capital and have almost unlimited ability to reinvest that capital.  They will (and have) become the dominant share of all tradable equity securities.  Finding just one, as an investor in an early phase pretty much guarantees you the ability to get fantastically rich without having to work all that hard.  (Depends on how lucky you get, in terms of finding said firm).

Occasionally you can find one of these firms who is essentially *known* to be a big winner trading at silly valuations and have a risk free ride to pretty good returns (though in most cases not nearly as good as some early investors, but Apple, Amazon, Bank of America, S&P Global, Microsoft, Bassett Furniture and Ford, among others have offered opportunities to earn staggering amounts for late entering shareholders).

The thing is - what is important to understand is how a business will compete within its industry, to understand the scale and scope of that industry and then to recognize that almost all of the gains will go to the top firms or people and that this is true in all fields of human endeavor, whether it is art, literature, sports or enterprise.  Riding the wave of the Pareto distribution is really the secret of success.  The problem is, it is extremely difficult to determine which actors (in the sense of one who takes action, not in the theatrical sense) will get to ride that distribution.  I am not sure it is possible to know with much certainty, although being marginally better at determining it can make you a very much better investor (because the irony is that there aren't huge differences between people at say the middle and top of the distribution in terms of starting talent and resources - at least early in the game.  After awhile of course, the compounding effects of opportunities, networks and resources tend to spin some far out the distribution).

Jordan Peterson, who is a political theorist and philosopher talks about why Pareto is such an important principle of societal organization and how deeply embedded it is in human experience.  While he is really talking about a critique of Marxist organization, he is illustrating the core challenge of investment; finding those opportunities that offer the investor the chance to spin off the end of the distribution while guaranteeing that one doesn't run the risk of winding up on the other end of the distribution.

A fantastic short excerpt and well worth one's time.

https://www.youtube.com/watch?v=i0iL0ixoZYo