Talk about Buffett-mania. This weekend, Berkshire Hathaway shareholders from all over the world flooded Omaha, Nebraska to catch a glimpse of Warren Buffett. And as always, the Oracle of Omaha did not disappoint.
He and long-time business partner Charlie Munger spent five hours in a Q&A session, discussing topics ranging from 3G Capital’s aggressive cost-cutting tactics to strategies for making friends. Buffett participated in the annual newspaper tossing contest with fellow billionaire Bill Gates, and attendees did their fair share of shopping – and then some – in the exhibition hall and at other Berkshire subsidiaries based in Omaha.
Here’s a look at three of Warren Buffett secrets to doing business – and living life – we learned at Berkshire 2015.
Honesty and Integrity Trump Brains
During the Q&A session, Buffett assured the audience that the culture of Berkshire Hathaway is not a force of personality but is instead institutionalized. It runs throughout every part of the conglomerate, from top to bottom.
Throughout their years, both Buffett and Munger have developed a keen sense of what makes an individual worth working with in building Berkshire Hathaway into what it is today. And they’re not just looking for smart people – they’re looking for kind, honest ones, too.
“Charlie and I have run into more dysfunctional people with 160 IQs than anybody,” Buffett said. Munger assured that “trustworthiness is more important than brains.”
The two also warned of the power of the ego in incentivizing misbehavior. Put simply, when they get their ego involved, people do things they shouldn’t.
Keep It Simple
Warren Buffett and Charlie Munger have orchestrated some of the most complex, multifaceted business deals in history. But their philosophies of investing and deal-making are, in fact, quite simple. “It’s an easy game if you can control your emotions,” Buffett said.
The pair made the argument that investment principles do not stop at borders, and Munger said he doesn’t think value investing “will ever go out of style.”
They also play a notoriously long game – Buffett has said in the past that his favorite holding period is forever. That doesn’t mean, however, that they’re not paying attention to what goes on in the middle. “We don’t ignore yearly results, we just don’t live by them,” Buffett said on Saturday.
It’s Okay Not to Like Everybody
Warren Buffett is a diplomatic guy, but it doesn’t mean he has to like everyone. On Saturday, he and Munger were fair – but honest – about practices and businesses they don’t love.
Buffett brought up the topic of hedge funds and his bet that an S&P 500 index fund would outperform five hand-picked hedge funds over the course of 10 years (a wager he’s winning). On Saturday, he took a jab at hedge fund fees. He recognized that hedge funds themselves haven’t done bad – their 2% management fee lands them plenty of cash. It is investors who ultimately pay the (hefty) price.
Buffett and Munger also took aim at the changing shape of the reinsurance business, which they believe has taken a turn for the worst and is often used as a “beard” for hedge funds. They’re not big fans of activist investing (Munger said he doesn’t think this age of activism is a “great age”), either.
The Oracle of Omaha pinpointed Whole Foods (NASDAQ:WFM) when talking about evolving consumer tastes with respect to healthy eating and the implications for Buffett favorite Coca-Cola (NYSE:KO). “I don’t see smiles on the faces of the people at Whole Foods,” he quipped.