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Learnings from the 2021 Berkshire AGM: "What you prattle out, you pound in" ... "Economy is red-hot"

The 2021 Berkshire AGM was again streamed live via Yahoo Finance, it was the second year in a row we were unable to attend in person.

As many of our readers would know, our team have been long term followers of Warren and Charlie and the Berkshire Hathway success story. We have collectively attended 36 meetings in person, with my colleague, Sam Paradice making the trek to Omaha for 16 years straight.

We consider Buffett and Munger to be the all-time greats of our industry and consider taking the time each year to listen to their thoughts and opinion akin to a golfer getting a free lesson from Tiger Woods.

Berkshire ticked through $400,000 a share this year, representing a 22,222x return, or 19.56% pa return since Warren became the CEO, 56 years ago. Berkshire has not paid one dividend, as Buffett & Munger have masterfully allocated Berkshire’s retained earnings to new subsidiaries and stocks.

Our key learnings from this year’s AGM:

  1. The leaders 30yrs from now will be very different to the leaders today: Pointing to a list of the largest 20 companies in the world in 1989, Buffett highlighted that not one is still there today

  2. Size & Decentralization: “Yes, I don't think we're getting too big to manage. Because we're different from practically every other big corporation in the United States in that we are so excessively decentralized. We have decentralized so much and we have so much authority in the subsidiaries that we can keep doing it for a long, long time as long as it keeps working. And I would say so far that our decentralization has caused more benefits than defects, but nobody seems to copy us” (Charlie Munger)

  3. Fiscal and monetary stimulus: “There's a good chance that this extreme conduct is more feasible than anybody thought," Munger said, "but if you keep just doing it without any limit, it'll end in disaster." … Buffett also stated “What we do know, having a debt to GDP ratio of 100%, isn’t an issue”

  4. CEOs making public statements on strategy: “What's really interesting is the way you prattle out all the time, you're pounding back in even if it's wrong. And so one of my favorite remarks in the history of human remarks was by Sir Cedric Hardwicke, who is a great British actor. And he said, "I have been a great actor for so long that I no longer know what I truly think on any subject." And I think that happens to a lot of people. And it happens to virtually every politician.” (Charlie Munger)

  5. Economy is ‘red-hot’: "We're seeing substantial inflation. We're raising prices, people are raising prices to us. And it's being accepted. We really do a lot of housing. The costs are just up, up, up...It's an economy – really, it's red hot. And we weren't expecting it

Thanks for reading,

Lachlan Morgan, CFA.

Partner | Analyst


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