Johnson Students Meet Warren Buffett

3/12/2012 4:07:00 PM

Andrea Menotti and Rahmila Nadi, both MBA ’12, write about their day with the “Oracle of Omaha”


Several times each year, Warren Buffett invites business students to come to Omaha, Nebraska, for a Q&A session and a steakhouse lunch. In January, Johnson was one of eight schools invited. We were among the 20 Johnson MBA students and recent graduates who had the rare opportunity to meet “the Oracle of Omaha.”

Since more business schools want to participate than can be accommodated, it had been five years since Johnson students last made the trek. Johnson graduate Emmanuel Franjul, MBA ’11, put Johnson on the waiting list while he was a student. Finally, the coveted invitation arrived, and a group of Cayuga MBA Fund student portfolio managers, as well as others from Johnson, were on our way to Nebraska.

The big day began with an early-morning visit to the Nebraska Furniture Mart, which is owned by Berkshire Hathaway. We met Vice President Bob Batt, the grandson of the original owner, who gave us a tour of the facility and explained the secrets of the giant furniture retailer’s success: “Give people a good price and tell the truth.”

We then went to a two-hour Q&A session, during which Buffett answered questions on a wide range of financial, political, social, and personal topics. He offered many pearls of wisdom, including “there is only value investing” and “I think investors should have a punch card. They only get to make 20 decisions. They would make much better decisions.”

Buffett also hinted at the perilous circumstances that led up to his famous bailout of Goldman Sachs: “In 2008, the economic machine came close to stopping. It was even worse than you think. Banks weren’t even willing to lend to other banks. But it’s recovered.”

One question from the Johnson group that elicited a particularly interesting response was, “How to you determine if a company has a durable competitive advantage?” Buffett spoke about the power of brand, and the ability of some brands to connect themselves with good feelings.

“[A brand] wants to be where people are happy,” he said, mentioning Coke and Gillette as examples. He also spoke of the importance of treating customers well, because they would always remember how they were treated—long after they had forgotten exactly what price they paid.

Buffett also talked about his own career trajectory. He showed his copy of “Moody’s Manual,” a hardcover tome the size of a phone book that he would, as a young investor, pore over in his quest for bargain stocks. He also spoke of his dogged pursuit of the opportunity to work for the legendary investor Benjamin Graham. When Graham finally said, “Stop by and see me the next time you’re in New York,” Buffet knew that opportunity was knocking. “I was there the next day,” he said.

Following the Q&A session, Buffett treated us to lunch at Piccolo Pete’s, a local steakhouse, and afterward posed for photos with each of the 160 students in attendance. He has become known for gag photos, and, true to form, he was willing to do any ridiculous pose the students wanted, from handing them his wallet to proposing marriage. He also took a group photo with us, belting out “Far above Cayuga’s waters...” (unprompted) just as the photo was taken.

Later that afternoon, we went to another Berkshire Hathaway business, Borsheim’s Jewelry. The President and CEO, Susan Jacques, talked about her experience working for Buffett, describing him in glowing terms as an accessible, trusting, and wise manager. We wrapped up our day in Omaha with a visit to a local non-profit personally supported by Buffett—Girls, Inc., where we met the staff, toured the facility, and watched a student performance.

Here are some final “words of wisdom,” we heard during our visit with Warren Buffett:

On the economy:

“The natural juices of capitalism will push us out of the recession. And when we come out, it will be because the system founded in 1776 is still working. The system has enabled us to improve our lives. It has enabled us to live in a world that couldn’t have been dreamt about by the people who wrote the constitution.”

“We will still have plenty of hiccups, and maybe something more than a hiccup in Europe, but it will get better.”

On America:

“If you could trade places with anyone anytime in history—this is the time to be born, here in the U.S. All of us are living better than John D. Rockefeller senior lived.”

“I’m very bullish on America.”

On corporate tax rates:

“For a long time after World War II, corporate taxes were 52%. We prospered under 52%.”

On investing:

“Be fearful when others are greedy. Be greedy when others are fearful.”

“You don't need 50 good ideas. A relatively few good ideas, pounded hard, are all you need.”

“Refrain from action until you see a strong reason for it, and when you see a strong reason for it, don’t be inhibited by anyone else around you.”

“Price action doesn’t mean anything, but it does affect emotions.”

“Your ability to separate yourself from the crowd is your #1 asset.”

“Go into things you really understand.”

“Aesop knew everything about investing. ‘A bird in the hand is worth two in the bush.’ Make sure the bush is full of birds before you give up the bird you have today.”

On high-frequency trading:

“Frictional costs are the enemy of investors. Investors are paying more for the privilege of shuffling things around.”

“American people own American businesses, but they don’t extract profits, because they get into all of these frictional costs.”

 

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