Cathedrals & Casinos
With good reason, the Berkshire Hathaway annual meeting was dominated by Warren Buffett’s announcement that after sixty years as CEO, he would retire at the end of the year. This allowed Buffett, age 94, to outline his succession plan in a clear and coherent manner.
I have studied Buffett for 32 years and have taken the annual pilgrimage to Omaha to hear the super investor the last 22 years. You would think that after all these years, there would be no wisdom left for Buffett to share. And yet, he continues to be the consummate teacher.
My favorite question was when Buffett was asked if the US is still a good market to make investments. Buffett quickly replied, “The luckiest day of my life was when I was born in the US.” There is no other nation that allows a person to be born into nothing who can become anything.
Not only did Buffett affirm the US is the best market for capital investments, he elaborated that the US is a beautiful cathedral that happens to have a casino attached to it.
The cathedral is capitalism, designed to deliver benefits to 330 million Americans. The success of capitalism in the US is nothing short of remarkable. Over nearly 250 years, we have gone from zero percent of world GDP to a dominating 25%. As such, the American Dream remains alive and well.
Consider that a $1,000 investment in the broad US stock market over the last fifty years would now be worth $145,000. Since 1926 the market has grown 9.8% annually. More importantly, it has grown six percentage points over inflation allowing investors to truly grow wealth. Trying to get rich quickly results in never being rich. Attempting to get rich over decades is quite easy, but requires patience and discipline.
At the same time, Buffett cautioned that the casino aspect cannot distract from the positive powers of investing. In this analogy, the casino represents the numerous financial institutions designed to separate hardworking people from their money. This can come in the form of high-priced products such as mutual funds or annuities. It can also be present in things that sound exotic and exclusive such as “private” investments. When thinking about this, if these “private” investments are so great, why are they sharing them with you? Most likely, it is because they come with very high fees and their structures trap you with illiquidity.
Buffett also offered that trade should not be used as a weapon. Instead, enhance trade and capitalism with the rest of the world as it is the tide that lifts all boats. If trade and capitalism are not shared with the rest of the world, other nations are left behind. This incentivizes bad behavior similar to those that led to Germany and Japan to provoke World War II due to their bleak economic opportunities.
Buffett also reiterated wisdom shared many times before.
Be a lifelong learner. Continue turning pages daily. The more pages you turn, the more prepared you are when opportunity strikes. Go to bed a little smarter every day. In doing so, make your own luck in the process.
Although Buffett preaches patience over extremely long time frames, he has shown the ability to rapidly deploy capital. To be ready for moments of intense activity, prepare by reading, studying and researching over decades. Often, the wise investor appears to do nothing. Rather, they are merely building a database of knowledge, waiting for the right opportunities.
For young people trying to start their careers, the Berkshire CEO said to find a job that gives you experience as you find your passion. Be careful with whom you associate. Have high standards for those who have close access to you. Work with people you admire and enjoy; people who make you better. Don’t just copy people because they make a lot of money. Be helpful to others while surrounding yourself with people with a similar mindset. This creates a compounding effect of good karma. Find something you love, that you’d do if you didn’t need the money. Most likely, you’ll live longer, be happier and more successful.
Lastly, if interested in learning more about Buffett and his wisdom, the full Berkshire Hathaway archives can be accessed at: https://buffett.cnbc.com/warren-buffett-archive/
Dave Sather is a Certified Financial Planner and the CEO of the Sather Financial Group, a fee-only strategic planning and investment management firm.
(L-R: Dave Sather, Evan Martinez, Joe Olive, Dylan Swanson, Jon Zahradka, Warren Udd and William Errett)