Memo on Meeting w/Warren Buffett

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Dear Partners, dear Readers,

I’d like to share with you my experience of attending the Berkshire Hathaway shareholder meeting for the first time and what learnings I drew from a meeting with Warren Buffet.
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This was my first time attending the Berkshire Hathaway shareholder meeting. Arriving early Thursday afternoon, we rushed from the airport to the famous Farnam 3555 office. What appeared to be just another office building was home to probably the most successful company in human history.

In a small office of 25 people on the 14th floor a crowd of every-day people run Berkshire Hathaway, the $500 billion conglomerate. Warren with his welcomingly warmth and humor, gave us a tour of the office. Walking through the aisles, you feel like you are traveling back in time, back to the 70s. The interior doesn’t seem to have changed even the slightest. Every monumental step of Warren’s 80- year career, every document and photograph has been captured in this narrow, 10 meter aisle. While the company has grown by 200 fold when this office was first incorporated, structurally not much changed. I think we all have a lot to learn from this culture based on frugal and lean humility.

After kickstarting my stay in Omaha with a meeting with Warren, it did not end there. In the brief 40 hours leading up to Saturday, I had the opportunity of meeting Charlie Munger, Bill Gates, and several other renowned investors and managers that corporate america houses. I can now say that I really met them all

What fascinates me most about all the “greats” I’ve met is the immense consistency that each of them has displayed throughout their lives. That seems to be the common thread that runs through all of these careers. The basics of focus, simplicity, persistence, total integrity, repetition of what works, picking good basic businesses, and having high quality people to associate with works anywhere.

Warren is the best example of how that consistency has worked really well.  Ever since Warren, as a twelve-year-old boy, bought his first stock, he has been a passionate and committed investor, following the same timeless principles and refining them as he came across adversities, but always striving for improvement. Over the years, not only did his knowledge compound into the wisdom that now sets him apart from millions of other investors, but so did his track record, with a cumulative return of 3,786,000%, compared to the S&P 500’s 24,700%.

None of this would have been possible if he had not been a lifelong learner who was staying true to his core values of consistency and humility. Thousands of Berkshire disciples have come from far and wide to embrace these values. It is a truly unique social phenomenon that Warren has created. It’s just not your ordinary shareholder meeting, it’s a festival!

However, as this era draws to a close, I don’t have much hope that the legacy of this annual shareholder festival will live on. I am very grateful that I was able to experience this once. A few decades from now, I will look back on that trip to Omaha as probably one of the very defining moments in my life that left me with a clear lense of where I want to go next.

As I listened to Warren and got a sense of what he got to spend his life on, I knew I wanted to be just like him. Not exactly like him, but I could immediately understand what joy is in involved in building a Berkshire.     I, too, want to spend my life building a collection of wonderful businesses led by extraordinary people I meet along the way.

I’m not wired the same as Warren and far from Charlie’s sheer brilliance, but the more I learn about the business of picking businesses, the more excited I get about all the opportunities it opens up. As an investor, you meet a whole bunch of people. I can’t think of a more enjoyable game than distinguishing the truly brilliant from the merely ordinary, and then selectively surrounding myself with those individuals I genuinely like.

I have a head start in many respects – but instead of being content assuming the path forward will be effortless, I want to use that head start to build something going far beyond what has been created to date. Will it be the next Berkshire? I don’t think so. Can my acumen make it happen? That remains to be seen.

And while life will try to throw rocks at big dreams like that, all I surely have is tenacious determination to get something done. Something big.

Let’s check the scorecards in 20 years time.

Best,
Richard

 

Letter to Shareholders

Dear Partners,

The year 2022 was a very formative one for me. I acquired the intellectual and emotional tools to finally become a more disciplined, long-term value investor.

I used to research prospects of physical growth in industries and followingly concluded what companies were good investments. Over the past two years, however, I’ve come to the realization that this kind of top-down thinking won’t get me very far. At the end of the day, I always pay for a company’s bottom line, not for an industry’s lofty visions.

Chasing Wall Street’s favorites in 2020: The Genome-Editing and „AI“ companies, I’ve come to the realization that unpopular and superficially “boring” companies are more likely to be a successful investment. The current market downturn and the high likelihood of a prolonged market sell-off in 2023 will expose me to wonderful businesses at a magnificient price. The market pendelum will swing too far into the opposite direction, of where it has been in recent years. Simply, no price seemed too high for stocks, because their future possibilities were „limitless“ – this has changed in 2022 and will “really“ play out in 2023.

The last decade has seen the emergence of many wonderful businesses. These businesses have it all: a wide moat, spectacularly high margins, and massive tailwinds for decades to come. Yet for all their popularity among the investment crowd, many have failed to understand the most basic principle: That the value of their investment is, and will always be, a function of the price they pay for it.

These “data” companies are indeed exciting and changing the way our world works. Everyone wants to be part of this revolution and exposed to the companies that seem to transform our world. While in the past I’ve tended to make the mistake of “being part of something”, this year I’ve learned that one shouldn’t be interested in “exciting” growth stocks when they’re most popular – but when things are going wrong. And what will very likely happen in 2023 is that this new generation of companies will experience what a recession feels like on their financial statement for the first time. Any price will be too high for these gamechanger-data-companies, as they are all headed for “extinction.”

An investor who has both, the affinity for technology, but also has the principles of value investing emobodied within him, will understand this unique bargain opportunity and is well equipped to become the next great investor of the century.

 

Tech is faster moving than anything the world has seen before. Staying humble about my forecasting power and strictly sticking to exceptional businesses, at the right price, will be key.

 

Greetings from Singapore,

Richard F. Schäli