Navin's 30 seconds with Warren buffet

Navin was my class mate in school and my good friend of last 24 years,
here was his 30 seconds with warren buffet and the day long with BH shareholders,his advise to me only "fake people do a put on with costly suits",it shows their insecurity and the camflouge value, urchins... will be urchins .... but its true class and honesty that stands apart.
Here are the details
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I had one of the most amazing and exhilarating experiences of my life in Omaha, Nebraska, USA. I attended the Berkshire Hathaway (BH) Annual shareholders meeting. Warren Buffet (WB) hosts a day long open house session with 27,000 people at the Qwest downtown center. This had the feeling of a U2 concert or Nelson Mandela addressing a rally in Pretoria!

WB has a cult following with people from all over the world attending this ‘Mecca of finance’ event to listen to the sage of Omaha impart his wisdom. Amongst others, I got to see Bill Gates (who sits on the board of BH) and the legendary and the outspoken billionaire Charlie Monger (CM) (WBs long time best friend, vice chairman of BH and considered the right hand/brains behind many of WBs investments).

Omaha is a simple, laid back friendly town, one would never imagine this would be home to the second richest person in the world! WB, the oracle of Omaha, is a simple, down to earth guy. He has no personal body guard and happily mingles amongst people. I drove past his house on a Sunday. It is a simple and beautiful house which he had bought some 35 years ago and is the smallest house in his neighborhood. He has no gates or physical security outside his house and an old Cadillac is parked outside his front porch. He is often seeing mowing the lawns on his own! He is revered in Omaha and the local people admire his value system. He is often seen in the local restaurants, or takes the local taxi and is often seeing walking down the road like any regular guy! BH offices in Omaha (The Kiewit center) is a simple 10 storey building, not one of these fancy buildings that you would see on Wall Street. My personal takeaway on observing all this - never try to be ’flash’ or a fake fool – just be yourself and know your strengths and weaknesses.

I will first give you a recap of my 30 seconds with WB and then give you a summary of Q&A from the day.

WB and Charlie Monger meet all the International shareholders end of the day (on Saturday) for about 2 hours. I had a dollar bill which (CM) first signed and then I moved onto WB to get his signature. I actually wish I had an Indian rupee at hand!

Navin: Mr. Buffet, I am Navin from Chennai, India
WB: Hello
Navin: Can I shake your hand
WB: Sure (shakes my hand and then starts to sign the dollar note)
Navin: Mr. Buffet, have you visited India?
WB: No, but Ajit is my most valuable person (Ajit Jain runs BH’s insurance business) but Ajit is from New Delhi
Navin: Mr. Buffet, you must come and visit us
WB: Sure, find me a deal!
Navin: smiles, as the next person replaces him

Those of you visiting Chennai can see the dollar note with WB and CMs signature neatly framed on my wall!

Other interesting snippets from the weekend.
Those attending the weekend get to check out private jets (as they are part of Net Jets) owned by BH. During the day weekend you get 25% off any BH products (there are too many companies and products for me to list them here). There is a big bbq on Sunday where you get to shop at Borsheims (jewellery and watches 25% off) and you get to enjoy a picnic in the tent. WB visits and hangs out with the crowd. Apparently, the sales from this weekend are close to 100 million dollars.
You get to buy amazing books, and if lucky signed by WB and CM. I managed to picked up some good books – ‘Biography of Einstein’, ‘How the Scots invented the Modern World’, ‘The Dhandho Investor’, ‘Seeking Wisdom’, ‘The Essays of Warren Buffet: Lessons for Corporate America’ …etc.

For an investor what is my single key takeaway?
Buy very few stocks, know them well and invest in large sums for very long term.
Not very complicated right?! That is the essence of WB!


Q&A from the day: I have taken out any technical terms/questions/comments out of all my notes for ease of reading to all. I have bolded questions to my favorite answers

Q: View on Private Equity money vs. BH
BH is buying companies for the very long term, basic math needs to make sense. Private Equity managers are compelled to invest as they make their management fee and need to start a new fund once an existing fund has completed investing. Private equity money is not necessarily a bubble though as the lock up period is long and their companies are not valued everyday. If yields on junk bonds become higher that will slow down private equity.

Q: Why less participation by BH in overseas investments?
No bias against International. Just been a lot easier to get to know companies that have been closer to us. Also there are some ownership thresholds that make it harder, e.g. in some parts of Europe, when you own 3%, you have to report. So harder to take bigger stakes without disturbing price.

Q: View on executive compensation
Executives are overpaid! Envy is a big problem i.e. they are happy if they are making x$ but the minute they hear that the next person is making more money, they get envious and want more money. Envy is the worst of the seven deadly sins. No upside to envy. Not good!! Envy is silly. CEOs appoint their director of compensation that are generally cocker spaniels not Dobermans i.e. they are going to recommend higher compensation while wagging their tail.

Q: View on Executive power?
Too much power not good. Infact too much power is counter productive. All things can be over abused. E.g. fall of Roman Empire!

Q: Effect of credit contraction on BH?
BH benefits. But no real credit crunch, that’s why Fed established. Quoting Mark Twain ‘History Doesn’t Repeat itself but Rhymes’

Q: View on Corporate profits going up?
Historically corporate profits have been 4 to 6% of GDP. Now going higher, that means someone else’s share is coming down.

Q: View on naked shorting?
No problem with it but shorts generally have a tougher time!

Q: View on gambling companies?
People like to gamble; it is essentially a tax on people’s ignorance. It is socially revolting that a Government preys on people’s weakness. It is a dirty business and not for BH!

Q: How does one become a better investor?
Read every book! Reading is good. Will fill you with competing thoughts! Then jump into water if you like it and it turns you on!

Q: What are your criteria/standards for owning a business?
It has to be a business that we understand. Reasonable valuation.

Q: View on healthcare
Too complex, We don’t try tough things. We do very little in healthcare insurance.

Q: View on private equity investors in companies vs. BH
Private Equity companies are too short term oriented. From us, you hear only once a year.

Q: Best way to value company?
Not easy. There are multiple techniques. You need a lot of experience. Can’t become a good investor rapidly. Competitive position, dynamics of industry impt. We’ve never had any system. Just do basic math.e.g if you are buying farming land in Nebraska, just do the math on what the total costs are to do farming and if the returns from that add up and justifies your purchase of the land go for it, otherwise don’t! Not too fancy or complicated.

Q: What is BH looking for to replace WB?
1 or a group of people. People that can see risks haven’t occurred. Many smart people have gone broke. Similar to 1969 when he identified 3 very smart people except that WB is at a different age cohort now and has to understand the current generation.

Q: View on Global warming?
It is a problem! Has to be taken seriously. Don’t know enough.

Q: China vs. Japan?
Great question. Don’t understand.

Q: View on silver?
Bought too early, sold too early otherwise perfect trade!

Q: Regarding returns?
Easier to earn large returns on smaller sums of money. Hard to earn on larger sums. Big ocean liner had disadvantages.

Q: Good management vs. Good Business?
Good business more important first!

Q: Expectations for equities?
Not very high expectations but expectations greater that yields on bonds.

Q: View on NYSE/Euronext merger?
Don’t understand.

Q: How do you trust somebody?
Body language important, need luck. We’ve had over 90% luck. When something is too good, be wary!

Q: Will you look at Hedge fund managers for BH?
Unlikely, people come from a certain bent of fee structure that is different from BHs view of thinking. Unsure about quality of people as long term investors.

Q: How do you handle issues of hurdle rates/discount rates?
It is very fuzzy. So much nonsense is printed. Most presentations do what listeners desire i.e they are bullshit. They are meant to please the boards of companies. Someone says 20% return, why? Because people won’t choose you otherwise. Pension funds are gullible and believe this nonsense.

Q: View on Railroad industry?
Not that exciting but competitive position has moved up.

Q: What is the best way for a 10 year old to earn money?
Deliver papers. WB tired 20 different jobs. Higher the chances of success in business the earlier you have had experience in your life. Be reliable, hard to fail!

Q: $ decline?
Expects to decline

Q: Interactions with board of directors (BOD)?
Historically BOD were potted plants. Many companies don’t really want board to interfere. Main job of BOD is appoint the right CEO, to make sure that the CEO doesn’t over leach! BOD needs to bring independent judgements to the CEO. Big deals in America are often contrary to shareholders. Nowadays bankers and lawyers have so much momentum that they determine the fate of companies and deals. BOD should own stock on their own and it should be an owners board!

Q: View on partners?
Don’t like to do deals with partners. Like to do investments on own.

Q: L/T view on commodities?
No view, invest in it coz it offers a lot of value at certain moments. Like business that have low capex. E.g. Sees Candy.

Q: Newspaper business?
Gotten a lot tougher! Imagine if there was cable and internet only and no newspapers and someone were to start a newspaper business from scratch, most people would not be up for it as it would be too complicated and simply not worth it.

Q: There was a question about BHs investment in Petrochina due to their links in Sudan and (indirect?) links to Genocide?
It was a very passionate topic. I got two takeaways from the 30 minutes this topic was discussed. ‘’Elie Wiesel (Nobel Laureate): We must take sides otherwise it helps the oppressor’’; Martin Luther King ‘’We will not be silent’’


(C) Navin Ram
www.originwave.com



Navin Ram is an entreprenuer and the Founder CEO of Origin Wave ,He was a successful investment banker with Gold Man Sachs before the entreprenurial bug bit him

David Bowie Bonds & IP Securitization

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