As I flew back home from Omaha, Nebraska, I wrote as many notes as I could, hoping not to forget any of the enlightened dinner conversation exchanges I enjoyed the night before with the best capitalist in world, the Oracle of Omaha, Warren Buffett.
That night I had texted my wife and a few friends some pictures and some updates on my night with Warren. I felt like a little kid meeting a pro baseball player, a kind of giddy excitement I hadn't felt in a long time.
I had asked as many questions as I could, and got intriguing answers. Much of what he said tied in with what I have read or watched on CNBC where he often is a guest, but not all of it.
A client of ours at (Glastonbury insurance brokerage) Smith Brothers asked me a few years back if I could have dinner with anyone in the world, who would it be? My answer was John Wooden, the former UCLA basketball coach and the best teacher of teamwork and leadership that ever lived. I never got a chance to have dinner with Coach Wooden before he died. My second choice was Warren Buffett. Two years later I found myself sitting next to Warren and having dinner with him.
The opportunity came out of a simple business trip. I traveled to Omaha to meet with USLI, a wonderful Berkshire Hathaway Company we represent at Smith Brothers for unique small business risks (like wedding events and vacant building insurance). USLI is a profitable company run by a dynamic CEO, Tom Nerney. Tom and I played 18 holes of golf at Omaha Country Club, where Warren is a member (although he doesn't play anymore). Tom was hosting a business dinner to discuss USLI's strategy and invited several agents/brokers from around the country to a meet-and-greet with Warren.
Tom was gracious enough to have me sit with Warren for dinner and we, together with a few other industry peers, chatted about business and life.
At age 81, Warren sometimes needs help hearing some questions being asked around the table. I was glad to be his ears that night and I found Warren to be an energetic, genuine, funny guy who uses a lot of salt and likes ice cream. He got a piece of beef that was really rare and asked me for the salt, which he "poured" on his beef. Later when he got a vanilla ice cream with hot fudge (he usually does strawberry he told me), I jokingly passed him the salt; he got a kick out of that.
His approach is well documented in a host of books. His ability to stay unemotional in his approach to business and stay disciplined in his actions, consistent with his philosophy, have delivered a compounded rate of return of over 20 percent throughout Berkshire's history. He likes "boring" and is the classic contrarian.
Although he doesn't share stock tips, he shares his model and philosophy openly, stating that Wall Street and the general public won't have the discipline to focus on the basics and stay away from the emotional side of investing, causing themselves losses. His value-investing approach has allowed him to take less risk with more return. His net worth is over $50 billion.
But there's another side to Buffett.
He loves America and believes our best years are ahead. His conversations are refreshing, interesting and simplistic yet seemingly packed with wisdom. He answers questions with humorous story-telling, relating the story's plot to the answer he provided.
We heard stories about how deathly afraid of public speaking he was until he took a Dale Carnegie course and got the nerve to ask his then-girlfriend to marry him, which changed his life forever. We also heard about the "cold call" at the home office of GEICO where he was let in by a janitor and GEICO's investments director gave him an impromptu four-hour lesson on how an insurance company works and it changed his career. He later purchased GEICO and it remains one of his best investments.
He hosts groups of students in Omaha often and tells them that he would invest $100,000 in each kid today for 10 percent of the student's purchasing power for the rest of their lives. He offers it to them right there, demonstrating how each is worth a minimum of $1 million today, if he/she undertakes to improve themselves and become valuable. He added that a student can add an automatic 50 percent return if he/she learns how to communicate.
Almost all of the thoughts that Warren has seem to be math-related. He is superb at equating streams of potential income to value. I thought telling a group of young, anxious students that he, the best investor of all time, would invest in them today was a truly inspiring and hopeful message.
He feels intelligence is overrated. In fact, he jokes if you have a 150 IQ then go ahead and sell 30 points. He stresses human potential and being aware of how emotions (like fear and greed) of groups move markets and provides opportunities for those who do not let emotions drive their decisions is what counts. He says, "Be fearful when others are greedy and greedy when others are fearful."
Warren has 74 CEO's reporting directly to him. He told me there are only 23 people in Berkshire's home office and they spend their time on 17,000 pages of tax returns, Sarbanes Oxley regulation and the company's annual shareholder meeting in Omaha, where more than 40,000 people were showing up a few days after I left. Warren lets his CEOs run their own show, a clearly decentralized and autonomous approach to running a company. He told me he has learned that if you let the CEOs "do their own painting" and "applaud them a lot" that they will do just fine.
Tom Nerney is one of those 74 CEOs who reports to Warren. He told me Warren never asks for a meeting, a forecast or a budget, ever. And Warren is always available when Tom needs him. I couldn't understand how a publicly traded company like Berkshire Hathaway could get away with this. Tom explained that Warren tells the analysts he refuses to ask his 74 CEOs for a budget, that "they will sandbag anyways." What value is then reporting those sandbagged budgets to Wall Street as it has nothing to do with the value of the companies he runs? He tells the analysts he can't predict storms or short-term earnings, but he knows in 10 years all of the companies will be just fine.
One answer I got from Warren on a question I asked was most unexpected but the most intriguing to me. In all my following of him, I have never read or heard him say this. I asked him how he was able to drive forward through ups and downs and stay disciplined in his philosophy, which clearly has brought him success, a philosophy that does not follow the crowd and behaves contrary to "popular" feelings. His response on his key to success was his confidence that came from his father's unconditional love. He told me his father died many years ago and today he still feels sick when he thinks of his dad passing away.
He told me that the biggest investment a parent can give their kid is unconditional love. This was interesting because through what I read about him, I understand his kids had difficulty with Warren's lack of emotions. The same lack of emotion — which makes him a disciplined capitalist — maybe makes it difficult for him to communicate what he feels inside.
At dinner that night though, he was very clear that unconditional love will give a kid a lifetime of confidence and will unleash their potential. Unconditional love is the greatest investment, with the best return on investment that a parent can make.
I am lucky to be able to say that my dad (and mom) gave us unconditional love, the greatest gift/investment a kid might hope for, according to the Oracle of Omaha. My dad passed away a few years ago and I, too, feel a pit in my stomach daily because I miss him. My dad would have been the only guy I would rather have had dinner with that night in Omaha. Who would have believed that from my dinner with the best capitalist in a country, who runs and thrives on capitalism and materialism, I would take away such a reminder of unconditional love's intangible power.
Warren was also clear it was unconditional love you give the kids, not unconditional approval — so your children don't get any funny ideas.
Joseph B. Smith, president and CEO of Smith Brothers, an independent insurance and financial services organization in Glastonbury.