Sunday, May 1, 2016

The Oracle?

Raphael's "School of Athens" - Socrates and Plato are the two men in the center of the painting.

Although I will agree it is satisfyingly alliterative, I would like to take exception with the accuracy of Omaha's most famous citizen's nickname.  After doing some reading on the historical oracles - I don't think the name fits.  First of all, oracles were always women.  Ancient Greece was a very paternalistic society, however the oracle - the only human voice of the gods were always female.

The Oracle of Delphi was the most famous of these women.  Socrates happened to be a contemporary of The Oracle of Delphi.  At his trial he recounted how his friend, Chaerepho, visited the Oracle and asked her whether there was anyone more wise than Socrates.  The Oracle answered no, that Socrates was the wisest man alive.  When Chaerepho communicated the news to Socrates he was dumbfounded.  He believed that the Oracle spoke for the Apollo - and he knew that she was infallible - but he did not think he possessed any special knowledge unavailable to other men.

So, he decided to ask all the great men of Athens about their knowledge.  He found that their main weakness was not their ignorance (or all humans are ignorant) it was their inability to come to terms with their own ignorance.  Therefore the reason that he was most wise is that he is the only one who knows he knows nothing.

The same can be said for Warren Buffett (age 85) and his side kick Charlie Munger (age 92).  Although they answered technical questions with incredible knowledge and detail - both of them quick witted and eloquent - what I came away with from watching them answer questions from financial journalists and shareholders - was that they know that they know nothing.  Ok "nothing" is probably an exaggeration - but they know that their knowledge is limited.

Buffett said that "investing takes no real knowledge or special skill" it is more about temperament.  One of the stockholders asked him about why they don't have teams doing due diligence.  The answer was that he didn't think all that extra work meant anything.  He talked about buying See's Candies in the 1970's.  He said that of course they enjoy analyzing the stores - looking at growth in year 1, year 2 etc - but what is most important to him is how the CEO is "going to behave" after he buys the company.  The human factor is much more important to him than the numbers.  The numbers can lead you astray - because you think you know more than you actually know.

There are a few things that stand out about Buffett after hearing him speak for several hours.  First of all, he is funny - sometimes it felt like it was a comedy show.  At the beginning he said - "My youngest great-grandchild is here today.  If you hear him crying it's only because his mother is explaining my philosophy of inherited wealth to him."  They talked about how they have had to change philosophies as the company grew.  Now that they are larger they have to invest in companies that require more capital.  Munger said that they actually have come to prefer that strategy - Buffett added with a wry smile "when something is forced on you it is helpful to prefer it."

The other is how humble he is - how much credit he gives to the managers of his companies.  There is very little ego.  He understands that he is only one person.  He feels that his job is to free the leaders of the companies he buys to do what they do best and not have to worry about spending all their time in front of investors.  He appears to be a very hands off leader.

Going to the annual stockholders meeting for Berkshire Hathaway feels like going into the belly of the beast of capitalism.  He is undeniably the most successful capitalist in the history of capitalism.  And yet he almost as liberal as I am on many issues.  I have to say that listening to him for several hours was inspirational - because it showed that you don't have to be a jerk to get ahead in this world.  Don't get me wrong - I'm sure that many of his competitors would say that he can be ruthless at times - but it is impossible to come away from hearing him speak without being struck by his humanity.

This shouldn't be surprising - business is all about humans - we may attempt to use statistics and numbers to make our decisions for us - but the most successful people understand that the most important skill that they have is their ability to read people.  Buffett often talks about how he is incredibly lucky to have been born at the time and place where he was.  He says that if he were born at a time when athletic prowess were required to stay alive he probably would be bear food.  But I disagree.  Listening to him speak it's apparent that he has a way with words and is an incredible leader.  He is very rational and yet not so devoid from emotion that he pretends it doesn't exist.  He doesn't take himself too seriously - he allows others to make jokes about him.  The meeting itself is a microcosm of his philosophy.  At 85 years old he doesn't need to be up there answering questions from journalists and shareholders.  He could have retired long ago to an island and told the world to leave him alone.  But instead he keeps doing what he loves.  He keeps engaging - even with those who disagree with him.  So to me - we should change his nickname from Oracle of Omaha to Socrates of the Savanna.  What do you think?

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