Sunday, May 04, 2008

What would you ask Warren Buffett with one question?

Just got back after a weekend in Omaha for the Berkshire Hathaway annual meeting. What a weekend. I've wanted to go for so long, and being in Kansas City it was just the perfect time to go. My friend Jessica met up with me and enjoyed it just as much as I did.

Hearing Buffett and Munger answer question for six hours made the whole trip worth it, but the best part - Jessica and I both got to ask him a question - in a packed arena and with 31,000 people there.

Now I've always dreamed of getting to ask him a question. I'd been thinking about it for a long time. But the more I thought about it, the harder it became. I read everything he says that I can get my hands on. It's the most bankable financial advice I've ever found. So I feel like I have a good idea of how he's going to respond to things.

I sat there in agony as the people before me (my question was 30th of the roughly 65 questions) asked some terrible questions.

"How can I grow my small business?", "How can I find good managers?", "What do you look for in a successor?", "What should I teach my class?". These among many others drove me crazy because he's answered them before and they come at the expense of much better questions. Also, people made their questions way too long. It drives me crazy when people are supposedly asking a question but really just want to say something. A few times Buffett politely cut people off to say, "is there a question?" Nobody wants to hear you talk, we all came here to hear Buffett people.

What I really wanted him to talk about was what he thinks about world trends and business trends. The closer those can be linked to actionable advice the better. But people weren't asking the right questions.

He invests $5+ billion in railroads and not one question? His earnings fall 2/3 the day before and nobody asks about it?

He'll let you ask about anything other than what they're buying and selling. No pre-screening, no other rules. It's quite an offer. I could list 50 questions I wanted to ask.

I thought about the time when one of my favorite bloggers Tyler Cowen offered to answer any single question for people that bought his book. At the time I thought that would be a good time to ask something personal because that's the only chance I would ever get. But I didn't particularly like my response. I realize I would have gotten a much better response had I just asked a basic open ended question about something I was curious about but which he hadn't addressed before.

Also, I wanted to ask my friend Jeff. He ended up suggesting something that I really liked and modified only slightly.

What did I finally settle on?

"Hi, I'm Ryan Johnson from Arizona. What do you think about the current food shortages in the world and what trends do you see in the next decade or two?

Notes on the actual question: a) it was one of those times when you're just completely in the moment. It felt like it was going so fast and so slow at the same time. Like I could think about three other things and still say my question clearly. b) they had a feedback speaker next to me so help correct for some of the delay between speaking and hearing it on the soundsystem. Now I know why at concerts there are always speakers pointed right at the band. c) my question was short and simple, just like it should be, and two people thanked me for my simple question immediately afterward. d) we were supposed to say our name and hometown. I spent a solid 10 minutes deciding where to say I was from. Dallas? No way. Phoenix? I haven't lived there in 6 years. Tucson? That's not quite right. I finally settled on just Arizona. I suppose I'll probably answer that way until at least age 30.

So that was the high of my trip. I'll probably never speak to nearly that many people again and my idol was listening to me and only me for those 5 seconds. The low: only Charlie Munger answered the question. Buffett had commented on nearly every question before me, but because it was 2 questions before lunch, they were hurrying along. Munger said some things about it and called corn ethanol "stunningly stupid" and then there was a pause and when Buffett would usually have chimed in, he said simply, "how about mic 6". I was bummed.

But you can't win them all. Jessica would have a question after lunch, and we had an hour to think about it. We came up with the following.

"In light of your involvement in the Wrigley deal, how do you evaluate brand equity and how does it go into your valuation of a company?"

Pretty good question, right? Well two questions before her, someone else brought up brands (albeit with a poorly-worded, rambling question) and basically killed that idea.

So we were deciding between asking about two industries we really wanted to hear about, railroads and coal. Me being at a railroad now and understanding the logic of buying railroad stocks very well, we decided whatever he would say would be already known. Better to ask about coal.

"What future trends do you see for the coal industry? Does the lower cost outweigh the environmental effects of its use?"

That got one of my favorite responses of the day. Buffett talked about how in the short term, we'll probably increase it's use. He said people might not realize how much coal we use in this country. I can't remember exactly what he said but I'm sure it'll be on some websites soon and I'll link them then. Then Munger said something really insightful. He talked about how the conventional wisdom on the environmental impact of coal may be misguided. He says he actually thinks we should use coal before we use oil. He said it's much cleaner than it was not too long ago and is getting cleaner, plus it has no other uses, unlike oil, which is an input for so many other things we need.

So that question turned out to be a winner. I've been thinking about what question I would ask if I had another chance. I'll let you know in a year, because I'll do whatever I can to go to the meeting again.


Anonymous Lange said...

RJ, bummer about not getting an answer directly from Buffet, but nonetheless badass you were able to attend and ask a question. I do like your question and especially like Jessica's "would have been" question about valuing brand equity - too bad she was sniped!

10:21 PM  
Anonymous Matt said...

RJ, while coal is 'cleaner' than oil from some standpoints, what is important is the substitutes either faces. Oil faces very few substitutes because its primary use is in the transportation sector. Coal (unless you talk about Coal-to-liquids technology, which is not yet commercial) cannot act as a substitute to oil in the transportation sector. Similarly, coal's primary use is in generating electricity. While there have been oil-fired power stations in the past, they have for the most part been phased out because oil is pretty dirty when burned for electricity generation. In the present day, coal doesn't face competition from oil in the electricity generation sector (though it does from nuclear, natural gas, renewables, etc).

I think the biggest competitive threat to coal in the American electricity generation market will come from nuclear.... and that's mainly contingent upon how willing our government will be in allowing nuclear to go mainstream again.

And then you have the issue of US policy with re: climate change, which could really hurt coal's prospects.

6:10 AM  
Blogger COOKIE said...


11:33 PM  
Anonymous JUNIOR LOPEZ said...


11:36 PM  
Anonymous Anonymous said...

Warren Buffett, dont you believe that we could erradicate poverty and homelessness in America if all multi-millionaires and billionaires would dig deeper into their pockets? Does anyone REALLY need to live in a 110 Million Dollar home, isnt a 1 Million dollar home good enough?

6:47 PM  

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