Chapter 99: What Are the Odds?

Tuesday, May 21, 1985

The meeting started with check-in at a series of tables outside of the Red Lion’s ballroom. The halls were filled with people. Most of the attendees were guys in business suits, but there were a reasonable number of women, and some of both groups were ‘business casual’ like us.

When we walked up to the check-in tables, it turned out we’d lucked out. One table was marked ‘M-S’, which covered all of us. There was no question in any of our minds that Angie should check in first.

Thus, she walked right up and said, “Angela Marshall.”

The woman at the table flipped through the list and checked her off. She then tapped her finger on a little star next to Angela’s name, turned, and called out ‘Carla? You put a note on this one!’

A middle-aged woman came right over.

“Ah! Ms. Marshall! I’d wanted to meet you and — well, how many of you are here?”

Angie smiled, extended her hand, and said, “Four of us, Ms...?”

“Carla Haskins,” she said, shaking Angie’s hand. “Six people with five different last names is a first for us at one residential address! We were all curious how that came to be?”

Angie smiled, and said, “I’ve been a follower of Mr. Buffett and Mr. Munger’s investing for ... mmm ... longer than you would believe, honestly...”

She gave a bit of a smile at that, then continued, saying, “And I convinced my friends we should all own at least one share of stock. I’d really like to own more, but ... well, still eighteen! There’s time!”

Carla blinked.

“Are you all eighteen?” she said.

Angie shook her head.

“Nah,” she said. “I’m the baby. All of the others are nineteen now.”

“I’m not sure we have many investors under ... oh, at least twenty-five!” Carla said, chuckling. “Quite surprising! And you came all this way from College Station?”

Angie nodded.

“Like I said ... years!” she said, chuckling. “Most of us are business majors, and if I can be half as good as either Mr. Buffett or Mr. Munger, that would be an incredible achievement. What better way to learn something than listen to someone who knows ... well, more than any of my professors ever will?”

Carla smiled and nodded.

“We’re pleased to have you all here.”

Angie blushed slightly, then said, “I should introduce you, since you’ll be looking up the badges anyway. This is my girlfriend Paige...”

That got looks from several people, including Carla, but no one appeared upset, at least.

“ ... my brother Steve, and his girlfriend Jasmine. Cammie and Mel couldn’t come this year, but hopefully next year.”

Carla smiled.

“It really is a pleasure to meet you, and I hope we’ll be seeing you for years to come!”

“I hope so, too!” Angie said.

By this point, the woman at the desk had found name badges for each of us. She had us show her our driver’s licenses (I suppose someone could try to sneak in, and it was an official corporate function) and sign in, then issued us a copy of the annual report along with the badges.

Once we were away from the tables, Paige made the obligatory joke about not needing any steenkin’ badges. We put on our badges anyway and headed into the ballroom. We didn’t want to sit right up front. Many of those seats were taken, anyway. Instead, we settled in the sixth row, which was the first where we could be on the center aisle.

After that, it was a matter of waiting. We got a few looks from people around us, but no one was really talking much with anyone else. Or, rather, the people who were seemed to be greeting people they already knew. Meeting new people didn’t seem to be the order of the day, or at least not yet.

On the other hand, it turned out we were going to do just that. A man, about my height, wearing a nice suit and with somewhat graying hair, came over and said, “Excuse me. Did I hear correctly that you are Angela Marshall?”

Angie blinked and said, “That’s correct. Do I ... know you?”

He chuckled and said, “No, I’m sure you don’t. My name is James Behrens.”

“Pleased to meet you, Mr. Behrens,” Angie said. “What do you do?”

He chuckled and said, “I’m an analyst at a hedge fund in Connecticut. It’s extremely unlikely that you’ve heard of us — which isn’t a slight to you at all. We just don’t advertise much at all. Anyway ... that’s actually beside the point.”

Angie nodded, looking quite curious.

“And ... I suppose I should get to the point,” he said. “My daughter Emma has talked about you for nearly a year, ever since she saw your picture — with you, Miss Seiler — in the newspaper.”

“Oh!” Angie said, slightly blushing. Paige blushed a bit, too.

“Emma ... well, she’s known she was a lesbian for quite a while, and she used your picture to successfully lobby to take her girlfriend Kelly to their senior prom. It was a bit of a news story in Hartford, but not much of one. I think you down in Houston have gotten all of the limelight for that, especially with all of this year’s news stories.”

“That’s wonderful!” Paige said.

“I’m very happy for her,” Angie said.

“So are we,” James said. “Kelly is a great girl and we’re happy for them.”

“Mr. Behrens...” Angie said.

“James, please!” he said.

“James, then,” Angie said. “Would you pass along an address to your daughter? Maybe to Kelly, too? It sounds like you may have heard, but a friend of ours has started a nonprofit called ‘PROMISE’...”

“The ‘Times’ article was quite flattering,” he said, chuckling.

“Having someone who would be willing to talk about their experience in Connecticut would be of great help,” Angie said. “By necessity, we’ve been pretty much focused on Texas, since that’s where we’re from.”

He nodded.

“Emma would be happy to talk, and it’s hard to keep Kelly from talking!” he said, chuckling. “I’ll be happy to pass along your contact information. Honestly, the whole thing has been very special to our family. Emma really never believed she could go to her prom until that other couple ... Janet and...”

“Lizzie,” I said.

“Lizzie! Yes!” he said. “Until they went. Even then, it felt a bit far-fetched. But, when you two repeated it, that made it more real to her.”

“Please pass along our regards,” Angie said, smiling. “And tell her we were in her shoes until Janet and Lizzie went. That’s really our goal — to make that a thing of the past and let everyone feel like they can just go. It shouldn’t be ‘special’ for some kids to get to do something every other kid gets to do!”

He smiled and nodded.

“Quite a surprise, meeting you here, and a fortunate one! What are you studying in college?”

Angie fished out a couple of cards. One was one of our MNMS cards, while another was from PROMISE. Both used PO Boxes, not our home address. Angie wrote our personal number on the MNMS card along with her name.

“Quantitative analysis,” Angie said, while handing him the cards. “Not that there’s a formal program in it, but...”

She shrugged and smiled.

“Far too much math for me, I’m afraid!” James said.

“I’m in Business Analysis,” Paige said.

“I am, too,” I said.

“While I’m the odd one out,” Jasmine said, chuckling. “I’m in Journalism.”

James gave a little smile and said, “Actually, my undergraduate degree is in Communication, which is — more or less — Journalism. It takes all kinds. Never forget that!”

“I won’t!” Jas said, smiling widely.

“I see a few people I need to talk to,” James said. “Thank you so much for your time, and I wish you all the very best!”

“The same to you, and to Emma and Kelly!” Angie said. “And to all of your family!”

After he left, Angie quietly said, “How unlikely was that?”

I thought about it for a second and said, “You’re ahead of me on probability. How unlikely was it?”

Angie started to say something, then froze. After a second, she bit her lip.

“Um...” she said. “It’s ... less improbable than I thought.”

“Really?” Paige said.

“Okay,” Angie said. “Approaching this as a probability problem, there are ... what ... maybe 200 people in here?”

“Looks like,” I said.

“Based on my guess of their ages, at least two-thirds are old enough to have teenage children. Let’s assume a third of those do, maybe. That’s ... roughly fifty. Many will have two, if they have any, so that’s one hundred children. If we use the Kinsey guess, that’s ten gay kids or so. Since we’ve been in the national press, it’s hardly unreasonable that one or two of them would have heard of us. The real unlikelihood is one of them remembering our names, but a bunch of people heard me say ‘girlfriend’ and looked, so ... yeah. It’s still unlikely, but it’s in the range of odds people bet on in Vegas. Far more likely than winning a lottery!”

Paige giggled.

“This is why I’m not looking forward to probability!”

“You’ll kick ass at it,” Angie said, grinning. “Just like you do at everything!”

The meeting itself started promptly at one. I was pretty sure the timing was designed to allow time for those who wanted to eat lunch. We’d had enough for breakfast to be good until dinner.

The first hour or so was fairly dry. Berkshire’s secretary, Verne McKenzie, presented excerpts from the annual report, highlighting various things they deemed noteworthy enough for the shareholders’ meeting.

Right at the start of that, though, we all got a glimpse of Warren Buffett’s humor. As Mr. McKenzie was getting started, he said, “One, two, three,” into the microphone.

Warren Buffett quickly keyed his own microphone and said, “One million, two million, three million.”

The crowd, predictably, roared with laughter.

The question and answer part was where things got interesting. It was, after all, a big part of why we’d come all this way: to see two men who increasingly defined American investing and conglomerate-building, and would continue to do so for decades to come, speak directly to their shareholders, answering as many questions as anyone cared to ask. I wasn’t aware of anyone else who had ever taken this open of an approach to corporate communication, at least not someone operating on this scale.

There were no bad questions. By that, I’m not referring to the old saw ‘There are no stupid questions.’ It would have been entirely possible for someone to ask a lousy question, but no one did. Most likely, everyone here was aware that Buffett, or Charlie Munger, would very politely and deftly make it clear that the question was foolish and a waste of time, all while answering it in detail. That alone was enough to stay many tongues, I’m sure.

One of Buffett’s guesses was interesting. Someone asked about the risk of ‘runaway inflation.’ That was definitely a big worry right now. Buffett (correctly, if my view of history played out) said he wasn’t much worried about that, but wouldn’t be surprised to see ‘moderate’ inflation in the 7% range return.

In fact, as best as I could recall, we hadn’t hit 7% again until things broke down late in my first life, and even then it might not have been quite that high.

One of the investors asked what would happen if Buffett passed away unexpectedly. His response was certainly correct: “Berkshire will not be sold and parts of it will not be sold.” I found it amusing because Buffett and Munger had both outlived me during my first life. I had little worry about either of them leaving us in the next few decades.

It was another question that was the most interesting for us, though. Someone asked Buffett how he learned about companies. Was it more from reading, or more from talking to people at the company? Certainly the latter option wasn’t one ‘just anyone’ could take advantage of, but few people would refuse to talk to Buffett.

Buffett made no bones about it. First, as a tangential answer, he pointed to the work of Benjamin Graham and Philip Fisher, neither of whom I was especially familiar with, as people who were good guides to learning about investing. I think all of us put them on our summer reading list right there and then!

After that, his answer was simple: reading. He specifically pointed to annual reports and the trade press as being key sources of information, and that they were far more important than talking to people at the company. Indeed, he said he’d just made a sizable investment in Exxon without talking to a single person at Exxon, remarking, “You’re not going to get any brilliant insights walking into the building.”

He also made the point that larger businesses were easier to understand than smaller ones. A smaller one is far more at risk of a single event throwing them off course. Imagine a gas station compared to a chain of gas stations. A single station may have its entire financial plan thrown into chaos if a competitor opens across the street. A chain would hardly be threatened by that happening to a few stores. Every store, certainly, but that becomes highly unlikely.

It was no surprise to any of us that Angie hopped up to ask a question just after that. She waited through two other questions (‘Will the federal deficit be reduced?’, answered with ‘I’ll believe it when I see it!’, and a question about whether Buffett prefers to invest in or buy companies, which drew a somewhat long answer, the gist of which was they always preferred to buy companies when possible). When it was her turn, she stepped up to the microphone and said, “Mr. Buffett, I’m going back to a previous question. You said it’s better to read about a company than talk to them. I’m curious about how you see stock performance in that analysis. It’s said that ‘figures don’t lie, but liars figure’...”

That got a small smattering of laughter.

“In this case, I mean companies manipulate their returns as best they can. Still, one can view stock performance as a consensus of how others see a company’s value. They may well be wrong, of course! So: Is a low market valuation of a company that seems solid on the basis of financial statements and performance an indication that investors as a class are wrong, or is it a red flag for their financial statements?”

About halfway through the question, Buffett started shaking his head slowly, but there was a tell-tale slight smile on his face, too.

“First, might I inquire as to your age?” he said.

“I’m eighteen, Mr. Buffett,” she said. I think she managed to keep from blushing, but I didn’t have the best angle.

“Out of the mouths of babes,” he said, chuckling. “Charlie, we might want to hire this one before she takes us on!”

Charlie Munger smiled and laughed.

“To answer your question more fully,” he said, “That’s exactly the dilemma we face. If you’re trying to purchase value, you can do one of a few things. You can underpay for it. That’s good! We like that!”

The crowd chuckled.

“But it often doesn’t happen, because people do recognize value. If you can’t do that, you pay a fair price for it. That’s a lesson Charlie taught me years ago: it’s much better to buy a good company at a fair price than ten bad companies at bargain prices. You can make money doing the second, but you cannot make much money doing that. It’s unsustainable at a certain size, and we’re far larger than that.”

People nodded along.

“The third, of course, is to overpay. Overpaying is bad! We don’t like that!”

More laughter.

“Your point, though, is extremely well taken. The stock market has its own way of valuing businesses, and it’s often wrong, because the prices are often set by people who look at things entirely the wrong way from a value perspective. When the market is bad, and prices are low, what do people do? Sell! The market is crashing! Get out! But that’s not a good plan if you have the money to ride it out. Even more so if you have the money to get in. If you can get in at a low, do it! Meanwhile, when prices are high, people might take their profits. Taking profit is all well and good, but if the company is good today, and you have no reason to believe it will be bad tomorrow, in the long term staying in is always better.”

Angie was nodding along.

“So, to me, the market is ... tricky. I’m often not very concerned with it. There is a lot of money to be made there — don’t get me wrong! — but some of that money is much more about reacting to other investors than it is to intrinsic value. We don’t do that. It’s very hard to react to the market fast enough to do that. There are people who believe it to be theoretically possible, but — to me — that’s playing poker, not investing. Poker is a lot of fun, but you have to be prepared to lose.”

Another round of laughter, but it wasn’t spread evenly. Many of the people in the room were highly involved in the stock market, after all, and Buffett had just implied they, or some of their peers, were gamblers.

“We have passed on some opportunities for a time because other investors ‘bid up’ a very good company, only to return years later when the natural ebb and flow of the market changed valuation. If you take a long view, things like that are possible. Many investors don’t do that because there is an inherent pressure to ‘do something.’ The hardest thing to do is ‘nothing,’ but ‘nothing’ is often exactly the right thing to do.”

That got a fair number of people applauding.

“Thank you for the question, young lady, and may you have a long and successful career.”

“Thank you, Mr. Buffett!” Angie said, deftly splitting the difference between ‘respectful’ and ‘fangirl.’

“And may your looks hold up much better than mine have!” he concluded.

That got Angie blushing and nodding, while the audience laughed.

She came back to her seat, where Paige immediately gave her a quiet, understated high-five. Maybe a ‘middle five,’ since Paige’s hand stayed below the top of our chairs?