The wisdom of Warren
At a time when the average Fortune 500 CEO is 57 years old and vulnerable to incessant challenges by shareholders and activists, Berkshire Hathaway Chairman Warren Buffett remains the sage beyond reproach. At 87, his stature, stamina and performance have eclipsed even the triumphs of the elderly Rockefeller, Carnegie and Ford, as Buffett’s wealth of knowledge – for running a corporation, for allocating capital, for mentoring future business leaders – keeps compounding on itself like Berkshire’s share price.
As he presided over his 52nd annual meeting in Omaha in May, one wondered if we were seeing Warren for the last time. So shareholders these days naturally try to prod Buffett into death-bed “tell-all” indictments of America’s and Washington’s wrongdoings. Instead, Buffett’s messages to shareholders remain timeless, agnostic and crisp. America has endured far worse social conditions and political divisiveness than today, he believes, and businesses and investors would do well to ignore the daily media and political sideshows that capture ratings. Rather, rivet your resources to your core strengths and rivet your attention to your long-term plans. During uncertain times, he said, “Never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy. It will also be unwarranted.”
Buffett sits atop the investing world with a net worth of $84 billion precisely because of this ability to keep passion and emotion outside the sterile proverbs of finance and mathematics. Following the 2016 election, for example, Buffett saw an economy ripe for rebound, took advantage of other investors’ uncertainty, and made key investments that earned his shareholders tens of billions of dollars. Alas, he is not finished.
Patience and optimism were the central themes at Berkshire’s annual meeting – optimism that Berkshire will thrive long after Buffett; optimism in the U.S. economy; in America’s political system and leaders; and that future generations of Americans and businesses will continue to thrive as no other nations’ generations. “Venturesome pioneers crafted a system that will deliver increasing wealth to our progeny far into the future,” he wrote to shareholders. “Yes, the build-up of wealth will be interrupted for short periods from time to time. It will not, however, be stopped Babies born in America today are the luckiest crop in history.”
No anecdote summed up Buffett’s exemplary life more than his first investment, made during the darkest days of World War II. Going against the “doom and gloom” pundits of the day who touted owning gold, Buffett bought a preferred stock for $38 and sold it four months later for a meager profit. After the war, the same stock traded for $200. That experience caused Buffett to embrace patience.
“If you had put $10,000 into a basket of stocks in 1942, you’d have $51 million today, and you wouldn’t have had to do anything,” Buffett told us. “All you had to do was figure that America was going to do well over time, overcome difficulties, and that if America did well, American businesses would do well You just had to make one investment decision in your life (to stay invested).” A $10,000 investment in gold, in contrast, would today be worth just $400,000, Buffett noted.
“We have operated in this country with the greatest tailwind at our back that you can imagine,” Buffett said. “You can’t really fail (at investing) unless you buy the wrong stock, or just get excited at the wrong time You do not have to know much about accounting or stock market terminology or what the Fed is going to do next time, and whether it’s going to raise rates two times or three times. None of that counts at all in a lifetime of investing,” he said. “What counts is having a philosophy to stick with, to understand why you’re in it, and that you forget about doing things you don’t know how to do.”
Indeed, part of the secret of Buffett, I’ve learned, is that when there is nothing that needs to be done, Warren is probably the best at it.
Timothy P. Vick is director of research at The Sanibel Captiva Trust Company.