Table of Contents
1. Legacy
2. Investing Intensive
3. Reflect
Quick Reminder: The Berkshire Hathaway shareholder meeting is next Saturday, May 1, at 1pm Eastern. Send questions to BerkshireQuestions@CNBC.com. It will be live online this year, with Warren Buffett and Charlie Munger both in California instead of Nebraska. Different! Or possibly exactly the same just in a different location! Only one way to find out.
1. Legacy
I read the 2020 Berkshire letter as soon as it came out. It led me to a weaving and winding practice, and nothing makes me feel happier than jumping like a frog from lily pad to lily pad, wandering from pleasant new idea to amazing discovery. This illness has kept me from researching companies the way I used to – which was online, mostly – and I’ve felt like a part of me is missing. On one level, that’s a nice feeling, because it confirms my time in investing practice is well spent on something I love. On another level, it’s just…terrible. It feels good to land on a nice lily pad.
Getting to focus on the text of Mr. Buffett’s letter and the ensuing work it created for me feels a bit like I’m starting to re-grow the piece that’s missing, especially because it’s a callback to the beginning of my investing practice. I’ll get to that. First, the letter.
This year’s letter from Mr. Buffett was about legacy.
He focused on making sure readers understand that his company, Berkshire Hathaway, is decidedly NOT a conglomerate.
“As I’ve emphasized many times, Charlie and I view Berkshire’s holdings of marketable stocks – at yearend worth $281 billion – as a collection of businesses…Berkshire is often labeled a conglomerate, a negative term applied to holding companies that own a hodge-podge of unrelated businesses. And, yes, that describes Berkshire – but only in part. To understand how and why we differ from the prototype conglomerate, let’s review a little history.”
Warren has heard a lot about how other people view him. Probably as “leader of a huge conglomerate” and “greatest stockpicker of all time,” which most of us wouldn’t mind having connected to our names.
However, he clearly chafed at the thought, and spent his letter’s word count letting us know that (1) “conglomerate” is a dirty word and Berkshire is different because it doesn’t need the control over its businesses, and (2) that his work has been in choosing wonderful businesses (not stocks) to own in various ways, and he encourage those businesses to provide wonderful services and products that improve the world in various ways. Family businesses, railroads, insurance, tech, and renewable energy are the businesses he particularly highlighted in the letter, and he’s justifiably proud of them.
“Recently, I learned a fact about our company that I had never suspected: Berkshire owns American-based property, plant and equipment – the sort of assets that make up the “business infrastructure” of our country – with a GAAP valuation exceeding the amount owned by any other U.S. company. Berkshire’s depreciated cost of these domestic “fixed assets” is $154 billion. Next in line on this list is AT&T, with property, plant and equipment of $127 billion.”
How incredible. I reflected on that infrastructure statement for a second. To be able to write a letter after being alive for almost a century, and point to an infrastructure legacy that will last well beyond him. I can try to imagine the feeling, but it’s pure imagination. The only other person alive who knows what that legacy feels like is Charlie Munger. Truly unique to the two of them.
As I read through this story of the past and the compounded success Berkshire enjoys now due to Berkshire’s good decisions in the past, I kept wondering about the details of what happened. I’ve got the broad strokes of the Berkshire story. I’ve read a Buffett biography or two. However, the letters themselves tell the story of this company. In many ways, they tell the story of the markets for the last forty years.
The last time I read the letters to shareholders was back when I was just a few months into investing practice. I called it my Investing Intensive.
2. Investing Intensive
The Investing Intensive is a term I came up with to define the intense two-week period in which I read all of the Berkshire letters to shareholders that were available to me online at the time.
I think I named it because having a pretentious name for my idea made me feel like I was DOING SOMETHING that was IMPORTANT. I had no idea what on Earth I was doing, of course, and reading the Berkshire letters was a way that I could become more familiar with the language and the terminology of value investing. It was also a way to try to learn more about this person who was so venerated by value investors. I wanted to try to understand why Mr. Buffett is the seminal figure in the financial world.
That Investing Intensive project is one I remember quite clearly from the beginning of my investing education. Reading the letters was confusing, weird, filled with information that overwhelmed me, and also I could tell I was on to something here. This investing thing was about more than investing, and Mr. Buffett’s letters celebrated how investing could make the world better. The experience stuck with me, even if the content did not particularly.
I got my book, Invested, off the shelf today and opened the Investing Intensive section up, in Chapter 4 – April. I was shocked. It’s such a tiny bit of the book. I remember it being a fairly heavy project. In the book though, it’s just a page or two of description about how I read the Buffett letters. It looms far larger in my memory than the book represents.
I’ve been thinking all day about why I wrote about it in a truncated way. Perhaps it’s because at the time of writing the book, not long after that experience, I didn’t really know what to make of reading them. It hadn’t settled in. At the time, I was banking more investing practice, wherever I could get it, however I could find it, with the cumulative results yet unknown. No clue where it would lead.
I also think I’m so surprised at how unimportant it is in the book because literally for years, I have thought about doing a more detailed re-do of that Investing Intensive. One in which, now that I know a lot more about Buffett and Berkshire Hathaway and Charlie Munger, would be educational for me in a more contextualized way.
Reading this year’s letter really brought those thoughts home. Buffett’s perspective in his writing was backwards-looking, and very much interested in what he had accomplished to make Berkshire what it is today. I want to go on the same journey he went on when writing this year’s letter. Back in time.
Those letters were basically gibberish to me five years ago and now they’re an old friend. I want to go meet my old friend and start back at the beginning, again. I’m going to redo my Investing Intensive.
3. Reflect
I’m not starting immediately. I want to give us some time so you can prepare, and so I can prepare. This is definitely a Project.
I’ll start in a few weeks, in mid-May, unless yet more life craziness shows up. (Dear Universe: Please no more life craziness.) But aiming for mid-May Investing Intensive start, and for maybe one letter or so per day. I’m not up for the three-letters-per-day regimen I did the first time. But if you are, and that’s how you want to do yours, fabulous! Go for it.
I’m going to send you details and my plan shortly. In the meantime, think generally about whether you want to join me. Check out Mr. Buffett’s 2020 letter if you haven’t already and notice as you read whether you’re curious for more.
If you are just starting your practice, as I was when I first read the letters, I can tell you that reading them was a fantastic way to learn language to get a sense for what value investors consider important, and start to realize how much interesting information is out there to know. It will be too much, but it will also be an amazing way to end up with a huge list of tidbits to chase down and learn.
If you’re well into your investing practice, and if you’ve already read all the letters, think about reading them again with me. My aim is to deepen my checklist so I can hopefully not make the same mistakes Mr. Buffett and Mr. Munger made for me. My second goal is to create a reliable overview for myself of the varying economic situations in which they found themselves, and what they did about it at the time…and what they thought about it later.
If an Investing Intensive is not right for you in the next few months, honor that in yourself and just follow along with me here. You’ll always have the issues in the Archive if you decide to do your own later.
As always, this is your investing practice. Choose what is right for you.