At the Omaha airport on Saturday, we will have the usual array of aircraft from NetJets available for your inspection. Just ask a representative at the Civic about viewing any of these planes. If you buy what we consider an apprpriate number of items during the weekend, you may well need your own plane to take them home. And, if you buy a fraction of a plane, we might even throw in a three-pack of briefs or boxes.
Though Enron has become the symbol for shareholder abuse, there is no shortage of egregious conduct elsewhere in corporate America.
One story I’ve heard illustrates the all-too-common attitude of managers toward owners: A gorgeous wman slinks up to a CEO at a partyand through moist lips purrs, “I’ll do anything – anything – you want. Just tell me what you would like.”
With no hesitation, he replies, “Reprice my options.“
Al Ueltschi at FSI is now 83 and continues to operate at full throttle. Though I am not a fan of stock splits, I am planning to split Al’s age 2-for-1 when he hits 100. (If it works, guess who’s next.)
Finally, there is the negative that recurs annually: Charlie Munger, Berkshire’s Vice Chariman and my partner, and I are a year older than when we last reported to you. Mitigating this adverse development is the indisputable fact that the age of our top managers is increasing at a considerably lower rate – percentage wise- than is the case at almost all other major corporations. Better yet, this differential will widen in the future.
The usual baseball game will be held at Rosenblatt Stadium at 7pm on Saturday night. This year the Omaha Golden Spikes will play the Iowa Cubs. Come early, because that’s when the real action takes palce. Those who attended last year saw your Chairman pitch to Ernie Banks.
This encounter proved to be the titanic duel that the sports world had long awaited. After the first few pitches – which were not my best, but when have I ever thrown my best? – I fired a brushback at Ernie just to let him know who was in command. Ernie charged the mound, and I charged the plate. But a clash was avoided because we became exhausted before reaching each other.
Ernie was dissatisfied with his performance last year and has been studying the game films all winter. As you may know, Ernie had 512 home runs in his career as a Cub. Now that he has spotted telltale wwakenesses in my delivery, he expects to get #513 on April 29. I, however, have learned new ways to disguise my “flutterball”. Come and watch this matchup.
I should add that I have extracted a promise from Ernie that he will not hit a “come-backer” at me since I would never be able to duck in time to avoid it. My reflexes are like Woody Allen’s, who said his were so slow that he was once hit by a car being pushed by two guys.
In 1985, a major investment banking house undertook to sell Scott Fetzer, offering it widely – but with no success. Upon reading of this strikeout, I wrote Ralph Schey, then and now Scott Fetzer’s CEO, expressing an interest in buying the business. I had never met Ralph, but within a week we had a deal.
Unfortunately, Scott Fetzer’s letter of engagement with the banking firm provided it with a $2.5 million fee upon sale, even it it had nothing to do with finding the buyer. I guess the lead banker felt he should do something for the payment, so he graciously offered us a copy of the book on Scott Fetzer that his firm had prepared. With his customary tact, Charlie responded: “I’ll pay $2.5 million not to read it.”
At Berkshire, our carefully-crafted acquisition strategy is simply to wait for the phone to ring. Happily, it sometimes does so, usually because a manager who sold to us earlier has recommended to a friend that he think about following suit.
Analogy by Warren Buffett on boosting earnings via acquisitions.
At other companies, executives may devote themselves to pursuing acquisition possibilities with investment bankers, utilizing an auction process that has become standardized. In this exercise, the bankers prepare a “book” that makes me think of Superman comics of my youth. In the Wall Street version, a formerly mild-mannered company emerges from the investment bankers’ phone booth able to leap over competitors in a single bound and with earnings moving faster than a speeding bullet. Titillated by the book’s description of the acquiree’s powers, acquisition-hungry CEOs – Lois Lanes all, beneath their cool exteriors – promptly swoon.
What’s particularly entertaining in these books is the precision with which earnings are projected for many years ahead. If you ask the author-banker, however, what his own firm will earn next month, he will go into a protective crouch and tell you that business and markets are far too uncertain for him to venture a forecast.
The numbers on the facing page show just how poor our 1999 record was. We had the worst absolute performance of my tenure and, compared to the S&P, the worst relative performance as well. Relative results are what concern us: Over time, bad relative numbers will produce unsatisfactory absolute results.
Even Inspector Clouseau could find last year’s guilty party: Your Chairman. My performance reminds me of the quarterback whose report card showed four Fs and a D but who nonetheless had an understanding coach. “Son”, he drawled, “I think you’re spending too much time on that one subject.”
Borsheim’s normally is closed on Sunday but will be open for shareholders from 10am to 6am on May 2nd. On annual meeting last year, the store did an incredible amount of business. Sales were double those of the previous year, and the store’s volume on Sunday greatly exceeded volume for any day in Borsheim’s history. Charlie attributes this record to the fact that he autographed sales tickets that day and, while I have my doubts about this proposition, we are not about to mess with a winning formula. Please give him writer’s cramp. On last year’s Sunday, Borsheim’s wrote 2501 tickets during the eight hours it was open. For those of you who are mathematically challenged, that is one ticket every 11.5 seconds.