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Warren E. Buffett may no longer have a stake in Walt Disney, but he didn't lose his magic touch when he sold his shares in the Magic Kingdom. He's probably the only CEO in the world who could attract 14,000 shareholders to an annual meeting in out-of-the-way Omaha, Neb., where Berkshire Hathaway (BRK.A
) makes its headquarters.
The three-day weekend -- an annual cult event attended by the faithful each year -- kicked off on Friday, May 3, with cocktails hosted by Borsheim's, the upscale jeweler owned by Berkshire. Over the weekend, admirers from around the world mingled to swap Buffett stories, eat Dairy Queen ice cream, shop (with discounts) at various Berkshire stores, and watch a ball game where tradition calls for Buffett to throw out the first pitch.
EARLY BIRDS. On Saturday, the day of the actual Berkshire Hathaway shareholders' meeting, the buzz starts well before dawn. Joe Dorison, 43, and his eight-year-old son Charles have been standing in line since 4 a.m. to get into the Omaha Civic Auditorium, where the meeting is held. It's probably the only event of the year that the Dorisons will get up so early to attend. But it's worth it, says Dorison, because they can be in the front when the Sage of Omaha is dropping his pearls of wisdom.
"There's just so much to learn from the man -- everything he says we take at face value," raves Dorison, who has been coming every year for 15 years. By 6:30 a.m., the lines outside the auditorium are more than a block long.
Berkshire kicks off the meeting at 8:30 a.m. with a spoof of a James Bond movie. A cartoon version of Buffett plays Agent 008, who has been sent to track down Hasa Been Rotten (a play on Osama bin Laden). Also featured in the cartoon is Buffett's partner and alter ego, Charlie Munger, who plays the role of C. As Q does for 007 in the movies, C equips Agent 008 with exploding gadgets.
CHUTING IN. But these are made out of popular items made by companies in Berkshire's porfolio, such as See's candies and a can of Coke. When Agent 008 finds Been Rotten and explodes him, Buffett ejects from his car and descends courtesy of an ennormous pair of Fruit of the Loom underwear that serves as a parachute. Applause breaks out.
When the real Buffett takes the stage, he doesn't disappoint. He and Vice-Chairman Munger sit at the podium, munching See's chocolates and sipping Coke while they patiently answer shareholders' questions from 9 a.m. to 3 p.m.
Buffett starts with a video tour of what he jokingly refers to as Berkshire's "world headquarters in Omaha." A reflection of his few-frills lifestyle, the company that produces $37 billion in revenue occupies just one floor in Building No. 14 on Omaha's Kiewit Plaza and has 15.8 employees -- the 0.8 refers to accountant JoEllen Rieck who works four days a week. Of course, Berkshire employs a total of 130,000 people in subsidiaries that include insurance companies GEICO and General Reinsurance, Nebraska Furniture Mart, and underwear maker Fruit of the Loom.
"NOW OR NEVER." One of the first question from the audience is why Buffett got into the underwear business by purchasing Fruit of the Loom. To their delight, he replies: "What better way could there be to cover the asses of the masses?" He follows that up by saying for years, Munger has been pestering him that it was time to get into women's underwear. He figured that since Munger is 78, it had to be "now or never."
On a more serious note, Buffett notes that Fruit has 45% of the men's underwear market and a reputation for high quality. "It's a low-cost producer of a very basic product," Buffett says. Its bankruptcy filing also has freed Fruit of the Loom from much of its debt, placing it in a better position to perform well.
For the first time in 37 years, in 2001 Berkshire recorded a loss: $6.1 billion, mostly from insurance. Buffett devotes a good deal of time explaining the business. The company took a huge hit from the terrorist attacks of September 11, which came on top of weak pricing in previous years at General Reinsurance, its largest unit.
FROZEN BUFFETT. However, Buffett notes that the business is already showing signs of turning around. General Re had $88 million underwriting loss in the first quarter, significantly better than its $3.67 billion loss for all of 2001. Overall, the insurance operations made a $20 million first-quarter profit, he announces.
Both Buffett and Munger rail against stock options, calling the system "immoral." At the same time, however, Buffett admits that it would be hard to reform the way options are now doled out because few CEOs will vote against being paid more.
Many shareholders express concern about Buffett's age (71) and succession plans. Indeed, Otto Schwarzwaelder says he traveled from Germany just to be assured of Buffett's health. A shareholder from Palo Alto, Calif., offers an innovative suggestion: Would Buffett consider being cryogenically preserved until a cure can be found for whatever kills him?
EXPLOSIVE PREDICTION. "At 71, I can't recall having any more fun than I'm having now," Buffett declares, but he jokes that there seemed to be very little downside to the suggestion. Munger butts in, saying that it would use too much electricity. Buffett gently reminds him that Berkshire makes electricity -- it owns MidAmerican Energy of Des Moines.
Buffett surprises some with his prediction that a terrorist attack on American soil more devastating than September 11 is "virtually a certainty." He says, "We're going to have something in the way of a major nuclear event in this country. It will happen. Whether it will happen in 10 years or 10 minutes, or 50 years...it's virtually a certainty."
Later at a press conference, Buffett once again tries to be reassuring about the future of his company. Without naming names, he refers to four people at Berkshire who would be good for the top job once he's gone. "Our culture is very strong," he says. "It would be unnatural to have that fall apart." But could any new CEO draw 14,000 faithful to Berkshire's annual love-in...er, annual meeting every year? Seems doubtful.
By Pallavi Gogoi in Omaha Edited by Thane Peterson
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Copyright 2002 , by The McGraw-Hill Companies Inc. All rights reserved.
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