Wednesday, February 27, 2008

Going Home

After lunch with Warren the students queued up to have their pictures taken. It took well over an hour to have individual and small group shots with the Oracle of Omaha. He mugged for the camera, did different silly poses (he got down on his knee and acted as though he were proposing to me). He was so generous, and joyous, but by the end of 160 student photos he was looking a bit worn.

We hopped into buses to visit Borsheim’s, a large jewelry store owned by Berkshire Hathaway. The selection was amazing, and stories about the level of service were impressive: they will send a selection of diamond earrings to a customer in order to facilitate a choice – the customer returns the “extras.”

One of our students asked if they avoid purchasing “conflict diamonds,” those stones that have financed wars in Africa. The manager explained how they avoided conflict diamonds and then asked, “Are you from California? Californians always ask that question.” We were each given Borsheim’s catalogs and t-shirts with Warren and his partner’s images on the front. They may not be rock stars, but they have t-shirts. On the other hand, maybe with all of those diamonds, they are the real rock stars.

After the Borsheim’s visit we sorted into buses going back to the airport or back to the Courtyard Marriott. We were tired but exhilarated. What did the students value most? Warren’s charm, humor, intelligence and accessibility astonished them. They were happy to have those pictures so they could prove to others – and to themselves – that they had actually spent several hours with billionaire Warren Buffett.

At least as important, many said, was the opportunity to be with each other and to share the experience.

Students from all three of the UC Davis MBA programs planned the trip and traveled together, and for many they were meeting fellow GSMers from other programs for the first time. We tell them they all take the same courses with the same professors but I think for some this was the first time that they really believed it. They were comparing mid-term exams and favorite professors across programs as we waited in the airport lounge.

Two days later I got a letter from Warren Buffett on lovely, buff Berkshire Hathaway stationary. Warren once again praised the UC Davis students and noted with pleasure their volunteerism.

We’re on a roll - maybe next year I’ll ask for 160 students to meet with Warren.

Lessons from the Oracle

Warren went from one side of the room to the other listening to questions and returning answers. It was bit like watching a tennis match. One always wondered what the next question would reveal: a soft lob, a politically-pointed serve, a net ball requiring fast footwork?

This one was a soft lob: What was the most important year of his life? “The year I married my wife, Susie. She was 19 – I had to get her young.”

Warren said he had won “the ovarian lottery” by having been born in 1930 in the U.S. “There was a 50 to one chance of that” fortunate situation. “And I was born with a mind wired for capital allocation” Moreover his parents loved him so he considered himself, very, very lucky. He quoted Bertrand Russell, “Success is getting what you want, happiness is wanting what you get.” Warren is a happy man.

How about a political opinion? Warren is a lifelong Democrat and supports both Barak Obama and Hillary Clinton. He loves both of them, and recently he met with them separately. “You don’t put two people you love in the same room.”

Were there any difficult questions? Well, not really, as Warren Buffett is incredibly well-informed, a practiced story-teller, and very, very bright. But the NYU students kept asking very detailed financial questions about financial derivatives, sovereign funds, and “p.e.” which is private equity. They were showing off for Warren, and maybe for themselves.

The Davis students, who take finance from the same-caliber professors as the NYU students, were much more interested in big-picture questions such as his philosophy about philanthropy and his judgments about life. The difference between the two groups of questions was striking – neither better, but reflecting different school cultures I suspect. The Stern school is preparing their students well for positions on Wall Street while the UC Davis GSM focuses on developing the broad perspectives and tools needed in a changing economy and community.

Thursday, February 21, 2008

Q and A with Warren

Because UC Davis had many more students than NYU Warren decided to invite our students to ask two questions, and then one for NYU. Jamie Kitano, a UC Davis joint MBA-Law student asked the first question:

“What are MBA students today lacking? What do we need to do to raise the bar on our educations?”

Warren answered by saying what he thinks are the most critical skills that managers need today. First, everyone should have a good understanding of accounting. “Accounting is the language of business.” He said that he knew some very bright CEOs who faked it, but a thorough understanding of accounting measures and practices is critical to success.

Secondly, every successful business person should be able to communicate well in writing and verbally. “If you aren’t confident in communicating you will be at a terrible disadvantage.”

Then Warren dropped back to tell a story that one could tell was a favorite. “A Dale Carnegie course changed my life. I have the diploma in my office – but not my undergraduate or graduate degrees.” He was so afraid of speaking that the first time he applied for the course he cancelled his check. The second time he paid in cash because he knew that then he would attend. Warren attributed the Dale Carnegie communication course with giving him the courage to propose to his wife Susie, a pivotal act in his life. He then admonished the students to stay in school until they were confident in their ability to communicate “both ways.” I was glad that we had just asked Dan Kennedy to teach more communications classes for us next year. I now feel pretty sure they will be full.

Is he worried about recession? No. “I don’t worry about it either way.” The students would likely be through “eight or ten in your lifetimes.”

And on and on. More wisdom told in charming and funny ways, often filled with numbers and facts that he pulled out of his vast store of knowledge. Perhaps the most interesting lecturette came in response to a question about the aftermath of the election. How would he advise the new president in January 2009?

“Change the tax code! We spend 20% of GDP to run the country, and we raise 18.5%. The real question is ‘Who do we get it from’?” Warren paid 17% tax on his $46 million taxable income last year and doesn’t use a tax advisor. He mentioned that his employees, whose incomes are primarily from wages, paid an average of 33% when his contribution as an employer paying payroll taxes is added in. So he pays half what his employees pay and doesn’t need an advisor. “The U.S. Congress takes care of me. They treat me like the California Condor or the Spotted Owl. ‘Let’s take care of Warren.’ [and keep his tax rate low]”. According to Buffett individuals contribute $2.1 trillion in taxes when payroll taxes are included. “The super rich are being favored.”

Wednesday, February 20, 2008

Warren Arrives

We pulled up to the Field Club, a very nice but understated country club. It’s the kind of place that clearly has seen generations of use and is kept in good repair, but it isn’t designed to impress. Just a comfortable place to meet friends and have a meal.

We were directed toward what probably normally serves as a banquet room. There were large round tables with white table clothes, buckets of Coca Cola products at the side, and a small table at the front with two cans of Cherry Coke, Warren’s drink of choice.

About 40 students from NYU’s Stern School of Management had already arrived and they checked us out as we spread out around the remaining tables. The tables had many copies of books by and about Warren Buffett that people had brought along for autographs. “Buffett Speaks” and “The Essays of Warren Buffett” were spread throughout the room, most of them well-thumbed. Indeed as everyone was uniformly dressed in dark business attire I had the incongruous remembrance of Mao speaking to his followers who clutched little red books of this thoughts on communism. Same admiration, but very different ideas!

At 10:12 am Warren Buffett arrived with an aide, a young woman, who directed him to the front of the room. He walked in to a standing ovation and immediately took charge of the audience. Warren Buffett is tall and energetic, and looked much younger than his 78 years. He was clearly energized by the students, and they returned the enthusiasm. We all felt that we were in for a special occasion.

Warren greeted us all and immediately thanked the UC Davis students for “what you did yesterday.” He was referring to the 100 students who, just as last year’s UC Davis students did, arranged to volunteer at area organizations – the Boys and Girls Club, Girls Inc., United Way, and the Girl Scouts. The NYU students look puzzled. What had UC Davis students done? Warren continued, “What you did will have an effect beyond the work you did, and will be an example for the girls.”

Warren started off with a comment about the economy sliding into near-recession and then launched into what would be the first of many jokes, some salty, and funny asides. “I was just talking to a young banker who went home to tell his wife that he would not be getting a bonus this year.” The banker told his wife she would have to learn to cook so they could fire the chef. The wife responded, “Well, I guess you’ll have to learn to make love so we can fire the gardener, too.”

Warren was off and running.

Monday, February 18, 2008

The First Visit

Despite having to pay their own expenses, the "Buffett Trip" was heavily oversubscribed and a lottery was run. The forty lucky students spent weeks studying Warren's investment strategy and biography looking for insights. They also decided to honor his philanthropy by arranging to volunteer at Girls Inc the day before meeting him.

I'm not sure how it happened but the local newspaper got wind of UC Davis MBAs paying tribute to Warren Buffett's extraordinary philanthropy by cleaning files, fixing computers and generally trying to be helpful at one of the Omaha organizations that he supports. The students made the front page of the Omaha World-Herald and Warren seemed very taken by their gesture. (To those cynics out there this was quite a natural offering - the UC Davis MBA students volunteer regularly at the Boys and Girls Club of Sacramento and for The Special Olympics.)

A few days after they returned I received an e-mail, followed by a letter, from Warren Buffett saying he had never met better MBA students - and I could use his letter as I saw fit. A stunning endorsement of their intellect and character and I was ready to buy a billboard I was so proud!

Months later, in August, I received an e-mail from Warren's assistant: Mr. Buffett would like to see UC Davis students again this year. Would that be possible? After regaining composure I decided to see how far I could push: UC Davis students would love to come back to Omaha, but could we bring a few more? Two days later I got the word that this year Mr. Buffett would see 120 UC Davis students - not 40!.

We still had to have a lottery but there are 120 students, Professor Barber and I gathered in Omaha's Courtyard Marriott getting ready to meet with Warren Buffett tomorrow.

The Invitation

Two years ago I received an inquiry from warren Buffett's office. Mr Buffett would be in the Sacramento area and he would like to speak to area business students. Would that be possible?

We hosted a visit from a Berkshire Hathaway aide and negotiations ensued; a date and place were decided upon, and we envisioned hosting the Oracle of Omaha at the 1700-seat Mondavi Center on campus.. The dream didn't last long though: a schedule change forced cancellation of Buffett's visit and we could not reschedule.

We were given a consolation prize, however. Mr. Buffett would be opening a new RC Willey furniture store in the area in a few months and several of us would be invited to meet Mr. Buffett at the opening. Would we care to attend? We would.

The store opening took place in the summer when students were generally working so our party for the ribbon cutting included me, a few business people, and a couple of faculty members. We were lighthearted as we approached the large cement tilt-up building and were directed to the rear inventory stocking area where Mr Buffett was greeting visitors.

And there he was, apparently having a great time joking and shaking hands amidst stacked furniture. What was I doing shaking hands with a multi-billionaire in a furniture warehouse? What's more, what was he doing?

The scene was so incongruous as to make one smile. The atmosphere was funny and festive. Warren (I now felt I could call him by his first name) handed me his wallet for a photo op but whisked it away before I could hang on. He gave stock tips like candy and generally seemed to be enjoying himself fully.

That could have been the end of it but Assistant Professor of Finance Katrina Ellis wrote to Warren asking if she could bring students to meet him in Omaha if he couldn't come to Davis.

A letter came inviting 40 students to meet Mr. Buffett at Berkshire Hathaway headquarters in February 2007.

Sunday, February 17, 2008

Taking Off To Bask in the Aura of the Oracle of Omaha

It is 5am Sunday morning and I am on my way to Omaha to see Warren Buffett, one of the world's wealthiest men and most successful investors. His holding company, Berkshire Hathaway, has had an extraordinarily long run of success and a single share of its Class A stock is worth $143,500. This week Buffett has offered to backstop insurance companies weakened by the subprime loan mess, added to his Wells Fargo Bank holdings, and bought a big chunk of Kraft Foods. Not bad for a week's work.

Buffett has agreed to meet with UC Davis MBA students at his Omaha headquarters and 120 of them, along with finance Professor Brad Barber, are already in Nebraska. They have been preparing for this visit for weeks and there has been a real buzz of anticipation in the hallways and online. Warren Buffett is known as the Oracle of Omaha, a reference to his apparently otherworldly ability to pick winning investments. This trip has the feel of a journey to a charismatic, in the sociological sense of charisma - an otherworldly characteristic usually attributed to religious figures or those who are somehow "above" mere mortals, people such as Gandhi and the Dalai Lama. Visits to charismatics are both a tribute to their special gifts but also a desire to bask in their aura in hopes of transformation.

The ancients travelled to the Oracle at Delphi to seek wisdom and we are travelling to the Oracle of Omaha for - what? stock tips? an insight about economic trends? A chance to meet a wealthy man who gives most of his wealth away to philanthropy? We shall see what this Oracle has to teach.