Buffett’s secrets of success

By Staff Writer

By David Shapiro

Iwas among the 31000 shareholders crowded into the arena at the Qwest Centre to attend Berkshire Hathaway’s annual shareholders’ meeting 10 days ago in Warren Buffett’s home town of Omaha, Nebraska.

The formal proceedings, which took only a few minutes to complete, were preceded by a day of festivities that included a humorous and, at times, self-deprecating movie on the events of the previous year, followed by a five-hour session during which shareholders posed questions to the Sage of Omaha and his long-standing friend and partner, Charlie Munger.

It was a joy to observe two high-spirited, elderly gentlemen — Buffett, 77, and Munger, 84 — still finding so much pleasure in their work despite their immense wealth and extraordinary record of success.

“It’s the kind of job people should pay to do,” quipped Buffett.

One segment of the 80-minute movie was a cartoon that took a jab at the US election process, portraying Charlie, a brainy and sharp-witted man of few words, as a candidate representing the Party for Financial Independence. Pollsters discovered that the less he said the higher his ratings rose.

The shareholders’ questions were more serious, covering a wide range of issues from nuclear proliferation to the recent market dislocation.

At times the topics raised were banal and corny, but at no time did Buffett or Munger show impatience. They treated each enquiry with the dignity and respect usually reserved for loved ones.

It was a privilege to be in their presence and to glean life lessons and investment wisdom from gentlemen with country-style good manners and values.

They advised the younger generation to “read newspapers, journals, articles, everything you can. The more you understand about the things around you, the more you will want to learn.”

The best asset a person could own, they counselled a teenager, was himself.

Buffett also advocated a good marriage : “People behave better when they are happy.”

Communicating verbally was an important ingredient for success, said Buffett, regretting that it was a subject under-taught in colleges.

A great deal of time was devoted to questions on the credit crisis and the bad behaviour of the investment banks.

“Unfortunately, America has too many banks and not enough bankers,” Buffett said.

He reflected that banks had grown too large to administer appropriate risk-management techniques and that the officers in charge of them could no longer carry out their responsibilities adequately.

He doubted that the chief executive officers of some of the large banks comprehended the full extent of their business’s exposure to complex instruments in the current crisis — but they were too embarrassed to admit this deficit in their understanding.

Munger was more contemptuous: “So much easy money was reported on assets that were good until reached for.”

In the drugs industry, products are approved by the US Food and Drug Administration before being released to the public. Similar protection should apply in the world of finance.

Buffett’s last word on the subject was that the man at the top of a large investment bank needs DNA that will allow him to resist being influenced by his talented subordinates into pursuing trendy but risky ventures.

Buffett caught everyone by surprise when he deliberated about whether Americans needed to save. Even with a low savings rate, the value of the US continued to increase from decade to decade, so something good was happening.

“Maybe the US is such a rich country that it doesn’t need to save,” he mulled, “as opposed to those nations that still have to reach their potential.”

Berkshire Hathaway has a leadership succession plan but Buffett has no plans for retiring.

He wants, no time soon, people to say that he was the oldest corpse they had ever seen.

What is the secret of Buffett and Munger’s success?

They love what they do. They have great partners, managers and families.

Plus, they recommend a diet of Coca-Cola, See Candy and Mars bars — companies in which Berkshire Hathaway has large interests.

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