Why should we care about some 85-year-old Ukulele-plucking, bridge-playing Nebraska billionaire, who seems to get richer and happier every single year? (As if that alone wasn’t reason enough to know everything about the man…)
I’m posing this question both for those who’ve barely heard of Buffett—or maybe never heard of him—and for those who know all about the man.
The reason for knowing about Buffett, and the case for caring about him, has a number of layers. Like Buffett himself, it’s a brief that is both simple and complicated. I've spent a fair amount of time with Buffett over the past four decades and I can tell you the man is an American original. He’s a homespun sophisticate, a modern-day Will Rogers or Mark Twain with thousands of acolytes who hang on his every word. There are dozens of books about him and or filled with his wisdom and zingers (“You can’t tell who’s swimming without a bathing suit until the tide goes out.”) Buffett is a polymath who survives on a diet of cheeseburgers and Coke. And as a counselor to CEOs, movie stars, athletes and presidents, Warren Buffett is one of the most sustainably consequential Americans of our time.
Let’s start with the more mundane, numerical stuff and then elevate to the conceptual. For starters Buffett is the CEO and the creator of Berkshire Hathaway (BRK-A, BRK-B), the fourth largest company in America—tucked in between Chevron #3 and Apple #5.) I say creator because he bought Berkshire in 1965, then a failing textile concern, but the company has moved so far beyond that, for all intents and purposes he is the founder as well. Berkshire is the only company among America’s largest five or 10 or 20 companies (Exxon, Walmart, GE) that is run by the person who built it. Berkshire today is a conglomerate that owns 62 companies some of them giant and or household names like such as BNSF (Burlington Northern and Santa Fe Railway), Geico, Fruit of the Loom, and Dairy Queen. The overall company has sales of almost $200 billion and employs some 350,00 Americans (though only 25 at headquarters.). It also has a substantial investment portfolio and owns big stakes in companies like Mars, Coca-Cola (KO), Wells Fargo (WFC) and Kraft Heinz (KHC). And Berkshire is one of the largest insurance companies in the world.
Berkshire is still growing too. I recently suggested to Buffett that it’s too bad Berkshire could never become the biggest company in America and he cocked his eye and said something to the effect of, "Why couldn’t it?”
Woodstock for capitalists
So you could make a pretty convincing case that Buffett is America’s greatest living businessman. It’s even more unassailable that he is the greatest investor of our time. This Saturday in Omaha, Buffett will preside over the 51st annual meeting of Berkshire Hathaway. The Century/Link Center will be filled with some 40,000 investors at what is known as Woodstock for Capitalists, a great many of these folks are millionaires—and a few of them billionaires—just by dint of owning Berkshire Hathaway stock. Even if you had gotten in at the halfway point you’d be sitting pretty.
A share of Berkshire 25 years ago today would have cost you $8,075. Today it’s worth $218,530. That's a profit of $210,455 or 2,506%. That means your $8,075 investment is now worth 26 times what it was in 1991. On an annualized basis, it's a return of 14.1% per year, every year, for 25 years. You've doubled your money, on average, every 5 years and 3 months.
Buffett is constantly buying low and either holding on forever as a company's stock continues to appreciate, or selling out when he thinks the game's up. How does it he do it? Again, it’s simple and complicated. When most of us fall prey to emotions when investing, he just relies on his golden gut and he won’t get swayed by any sort of sales pitch.
Here’s an example of his mind at work: “All investing is laying out cash now to get some more back in the future,” he says. “The concept of 'a bird in the hand' came from Aesop in about 600 BC. He knew a lot, but not that [he lived in] 600 BC. He couldn’t know everything. ... If you need to use a computer or calculator to figure it out, you shouldn’t [buy the investment]. Those types of [situations] fall into the 'too-hard' bucket. It should be obvious. It should shout at you, without all the spreadsheets. We see something better.”
Actually that’s a little too simple. Buffett has an amazingly acute numerical mind. Insurance is said to be the most complicated of all businesses when it comes to mind-boggling math and formulas. It’s no coincidence, then, that Buffett is a huge player in the insurance business with his Geico, General Re and United States Liability Insurance subsidiaries. He makes a ton of money there. Some say that Buffett, because of his reputation and the size of his company, has an unfair advantage in investing – as in, he can get deals that others can’t. And that’s true, he can get a company to issue a series of preferred stock just for him in return for an investment.
Often he uses all of these skills and advantages. In September of 2008, Buffett invested $5 billion in Goldman Sachs (GS) preferred stock, which paid him a 10% dividend. How did he decide to do this deal? First, that golden gut of his told him Goldman, which was in a precarious position at that point during the financial crisis, would recover. Second, he looked at Goldman’s complicated financial statements and liked what he saw. (This is not number crunching for mere mortals, trust me.) And third, he was able to get Goldman to do a deal no one else could get—i.e., issue him a special class of stock. And of course the investment paid off handsomely. That works, right?
Transcends the world of business
So Buffett’s the world’s greatest investor. But even more than that, Buffett transcends business and investing. He has become an American icon, figuring into sports, entertainment, politics and even the health of our nation. During the dark days of the Great Recession in 2008 and 2009, Buffett was talking every day to CEOs, and government officials from the Treasury Secretary to the president about saving our country’s bacon. They were all seeking his advice, or asking him to invest. In fact, I would submit that no American other than President Obama gets more of these types of calls or inquiries—even in the best of times. Buffett is constantly on the phone and visiting with those who seek him out. They don’t call him the Oracle of Omaha for nothing. If you pay attention you’ll see him vamping with or advising LeBron James, Jimmy Buffett (no relation), Jessica Alba, Tyra Banks, Arnold Schwarzenegger, the cast of "Breaking Bad" or "Entourage," politicians, students, heads of state, and every single Fortune 500 CEO who can get into see him.
Oh, and also: One of Buffett’s best pals is Microsoft founder Bill Gates and together they have been revolutionizing how rich people give away their money through the Giving Pledge program. No small thing that.
Buffett is loved overseas, in China in particular, and maybe appreciated more there than here.
Bottom line: On any list of greatest living Americans he has to be in the top 10. Maybe even top five.
I can also tell you from a fair amount of personal experience that he’s just fun to be with. He loves jokes and horsing around. Business can be fun! He’s always learning, always curious. He’ll ask questions. He thinks more about life and living more than just about anyone I’ve met.
Not everyone loves Warren, and of course he has his faults. He’s a big ham really, which is mostly endearing, but rubs some people the wrong way. He has his favorites, (is that really a fault?) And as I said, he uses his clout and scale. Some say he is a hypocrite, preaching about great leadership and then it being the case that some of the companies he has invested in, particularly lately, have laid workers off. And he's a committed Democrat and liberal and not shy about sharing his views, so you might not like that.
I recently spoke with billionaire oilman T. Boone Pickens about Buffett. Pickens is an outspoken conservative with a big ego and never shy about criticizing those on the other side of the political aisle. Not so about Buffett. “We're friendly,” Pickens says adding that he “definitely” respects him. “I think Warren is smarter than I am. I haven't seen him up and down, [like me.] He's [just] up. If the market's bad, of course he takes some hits, but you never see Warren down.”
I called Buffett earlier this week and started the conversation the way I always do, by asking: "How are you, Warren?" And he always answers that same way: “Never better, Andy.” And you know he means it.
That’s the kind of answer that’s nice to hear from someone you care about.
On April 30th, Yahoo Finance will have an exclusive live stream of the Berkshire Hathaway annual meeting. Click here for more information.
