It was a very warm Fall day as we filed into the Jordan Ball Room on the Boise State University Campus. Thinking I was early enough to get a good seat, I quickly learned that others had been waiting for an hour or more. Selecting an aisle seat near the back, I sat beside a young man holding a Pepsi bottle with a screw top lid. I greeted him as I retrieved my notebook, when we started chatting about the richest man in the world. Were we going to see Louis Vuitton briefcases and Tiffany cuff links? Was he going to share his "real formula" for success to a bunch of aspiring business students? Would I get extra credit for attending the speech?
After a brief introduction, the unassuming Warren Buffett, in his late 60's took the platform, said something witty to the master of ceremonies, then began his casual conversational speech. He shared the history of Omaha, Nebraska; told childhood stories of paper routes and owning pinball machines; compared The Wizard of Oz story to the life of its author, L. Frank Baum; and commented on the current state of the economy and other societal issues of the day. Time seemed to disappear as Buffett mixed humor and business. (If only some of my Profs were as clever, I thought to myself.)
After candidly discussing the 1991 Salomon Brothers debacle and Buffett's temporary role as Chairman, he invited us to participate in an open mike "Q and A," where we could ask questions. I thought about leaving the event at this point, believing I heard the best of Buffett already. As I gathered my belongings to depart, the first question was already being asked across the room.
"Mr. Buffett," a nicely dressed young man said, "Who would you hire and why?"
Buffett's answer came back in the form of interview questions. "Young man, have you ever been arrested? Do you take pride in your work and take personal responsibility? Who do you admire?" Then Buffett added, "It's important that you work for your heroes. Do not work for someone you cannot respect. Get a job that makes you want to get up every morning. The person that stands out in the crowd is the individual who is full of enthusiasm and character. IQ, GPA, or even one's station in life doesn't prepare you to be the best employee, but character will!"
As other questions were being asked, my seat-mate excused himself and while still holding his Pepsi bottle, walked to the microphone. Waiting to hear his insightful question, I decided to stay for the duration of the event. On his turn, my seat-mate asked, "If I could start investing today, what stock would you recommend for me to buy?"
Again, Buffett responded with more questions. "What are you holding there, young man? Do you always drink Pepsi? If so, I'd learn as much about that company and become an owner of Pepsi." (Buffett promotes the idea of seeing yourself as an owner of the company versus a trader of stock.)
My seat-mate's second question came as a surprise, "Mr. Buffett, I only drink Pepsi but don't you own Coca-Cola? Wouldn't that be a better investment?"
"For my benefit, please investment in Coca-Cola, but you didn't ask me what I would invest in. You asked me what you should invest in . . . . stay with what you know," Buffett said. "Your circle of competence will serve you well and you will understand what is happening." Buffett continued, "I don't understand technology and have been criticized for sticking with old economy stocks. However, when the dotcom bubble broke and money was lost, folks were still drinking Coke, chewing gum, and shaving."
Questions and responses went on for nearly an hour. Students asked every kind of question from the value of silver to what Mr. Buffett's personal goals were 30 years ago. Students asked accounting questions on how to record cost and compensation, to human rights issues in China, as well as what happened with Enron. Someone jokingly asked him about his relationship with the second richest man in the world, Bill Gates and if they played bridge over the internet. Buffett's reply, "Yes, as much as possible, if Melinda will let him." As you can imagine, that comment got a few good laughs.
I went home that evening and discussed to ad nauseam the importance of taking charge of our own money. For starters, I knew we should become owners of a particular coffee company that we frequently indulged in, and had studied the company's philosophy as well as their performance over time. Buffett's comments about becoming owners' not mere investors made sense, so it didn't take much convincing for my husband to get onboard. Since that day, I have been a big fan of Warren Buffett.
When Phil Eastman first stated, "the challenges we face today are not economic, environmental, social, or legal; they are challenges of character and leadership," I couldn't help but think back to Buffett's comments. "Genuinely successful investing requires both courage and character." Buffett had warned the business community about corporate excesses long before the collapse of Enron.
Buffett's definition of character includes honesty, integrity, loyalty, and longevity. When he invests in a company or hires someone, it is for keeps unless of course there has been an ethical breach. Those who invest in Berkshire Hathaway see themselves as a "privilege tribe" looking forward to the company's annual report that reads much like a personal conversation with the man himself.
In his book, Buffett: the Making of an American Capitalist, Roger Lowenstein writes of Buffett being born into modest circumstances, his childhood desire to be rich, value investing, personal character, and his strong belief that compound interest is the only sustainable path to wealth. Young Buffett's favorite book was 1,000 Ways to Make $1,000. By the time he was 11-years old, Buffett purchased his first stock with the money he earned on a paper route.
Buffett's investment style seems like common sense on the onset but many times is ignored when some "sexy" stock hits the market. Buffett's emphasis on research, analysis, and looking only to the facts of a company has proven to be a consistent winner for Berkshire Hathaway. The most radical investment strategy Buffett engages in is that once he chooses a stock, he hangs on to it for a very long time. Lowenstein notes, "Buffett craves continuity . . . his greatest dislike is change."
"Buffett is a risk taker in the sense he has been willing to bet a quarter of Berkshire Hathaway on one stock," writes Lowenstein, "but not a gambler because he only looks for sure-fire things." I believe it takes a special amount of courage to make that kind of decision when your outcome is not guaranteed, much like that of Ernest Shackleton's Imperial Trans-Antarctic Expedition.
Lowenstein believes that Buffett is like someone from another era. Buffett has laser sharp focus, obsessing over numbers and facts. He did well in school and was groomed by Benjamin Graham, a professor at Columbia Business School, and the genius pioneer of stock market analysis. Until Graham, selecting stocks was more like gambling than investing.
The way Warren Buffett lives and works is more like that of an artist or philosopher than it is from the lives of the "rich and famous." His favorite meal is a cheeseburger and Cherry Coke and he still lives in Omaha, Nebraska in an unpretentious neighborhood. When I met Mr. Buffett on that Fall day long ago, he wasn't carrying a Louis Vuitton briefcase nor did he have on Tiffany cuff links, but what he left with us was something that could be taken to the bank with compound interest if we only took his advice.
"Chains of habit are too light to be felt until they are too heavy to be broken. "~ Warren Buffett
