This column originally appeared on Real Money Pro at 10:48 a.m. EDT on April 29.NEW YORK ( Real Money) --
Becky Quick: Let's talk a little bit more about your letter and some of the things you put out in it. You mentioned that you were going to be doing some things a little differently this year at the Annual Meeting. Last year you added a panel of analysts who asked a lot of questions at the Annual Meeting -- along with three journalists who asked questions and all the questions that come from the audience. You say you are going to have one insurance analyst but you've added another analyst who will be looking at the other Berkshire companies and that you are looking actively for a bear on Berkshire Hathaway. Why did you add that?Warren Buffett: To make it more interesting. The crowd can hear somebody that thinks the stock is overpriced or that it's a house of cards or whatever it may be. And we want the media to be interesting. So that person will get six questions, and we now have that person because I said it had to be a credentialed bear, preferably one who was short the stock. Doug Kass is certainly a credentialed investor, and he said he is short the stock and he'd like to do it. Doug, you are on!Becky Quick: Does he know this?Warren Buffett: No, he just knows this now.... Doug, think of some tough questions. See if you can drive the stock down 10%!Becky Quick: Why, so you can buy more shares?Warren Buffett: Yes, that would be OK! -- CNBC's " Squawk Box" (March 4, 2013)In early March, near the end of Warren Buffett's 2012 letter to Berkshire Hathaway ( BRK.A)/ ( BRK.B) shareholders (on page 24, to be exact), Buffett wrote the following general invitation for "a credentialed bear" to address him and Charlie Munger:
Finally -- to spice things up -- we would like to add to the panel a credentialed bear on Berkshire, preferably one who is short the stock. Not yet having a bear identified, we would like to hear from applicants. The only requirement is that you be an investment professional and negative on Berkshire. The three analysts will bring their own Berkshire-specific questions and alternate with the journalists and the audience in asking them. -- Warren Buffett's 2012 letter to Berkshire Hathaway shareholders (March 1, 2013)I seized the opportunity and threw my hat in the ring that weekend. Upon dutifully reading Buffett's letter to shareholders, as I have routinely done since the early 1970s (beginning while I attended Wharton), I began preparing my proposal to be considered as Berkshire's "credentialed bear." In an email containing my response to that proposal (which both Andrew Ross Sorkin and Becky Quick were nice enough to forward to Mr. Buffett), I included my resume and a negative column that I had previously written in March 2008 about Berkshire Hathaway that had laid out my rationale for betting against the company and being short the stock. I also provided Warren Buffett with the names of several professional references, including Omega's Lee Cooperman, Oaktree's Howard Marks and Gamco's Mario Gabelli. I selected these three iconic investors because I knew that The Oracle of Omaha was acquainted with them and held them all in high regard. The following Monday morning, while watching an interview with Mr. Buffett and Becky Quick on "Squawk Box," I was shocked, surprised, honored and flattered to have been invited and selected as the "credentialed bear" to ask questions at the annual meeting in Omaha during the first week of May.
I Am Going to Disneyland -- I Mean, Omaha!As I mentioned in a recent New York Times article, my initial response was one of elation. Similar to the quarterback who wins the Super Bowl, I told the author of that article, Peter Latham, that "I am going to Disneyland -- I mean, Omaha!" After all, similar to so many, I have worshiped at the altar of Warren Buffett since the early 1970s, indeed my writings on TheStreet over the past fifteen years have often been punctuated with Buffettisms. As the weight of the invite to ask questions of Buffett/Munger about Berkshire on Saturday, May 5, sunk in, I became reflective.
I quickly recalled that, at 20 years old, I experienced the Woodstock Music & Art Fair in August 1969 on Max Yasgur's farm in Bethel, New York, and now, 44 years later, I am going to ask Mr. Buffett questions at " the Woodstock of capitalism" in Omaha, Nebraska. Going to the two Woodstocks in a half a century to me seems right, almost symmetrical and pretty cool. Over the next week, I will be memorializing my pilgrimage to Omaha, Nebraska, to the Woodstock of capitalism, Berkshire Hathaway's annual shareholders meeting. Today, I am going to chronicle how I went about doing my research on Warren Buffett's Berkshire Hathaway as well as outline what I expect to accomplish on Saturday (and what Mr. Buffett likely expects of me). On Tuesday, I will cite the similarities between Warren Buffett and myself -- I was surprised at how many things we have in common, though it certainly isn't our net worths! On Wednesday, I will outline a number of things I have learned about Warren Buffett (and his cabal) and Berkshire Hathaway -- many of which will surprise and shock you, some may even make you laugh. On Thursday, I go on the road to Omaha, and I will be sending out regular dispatches of the experience.
Daniel in the Lion's DenLet me start by making an observation. Inviting a bear to an annual shareholders meeting is unusual; it might even be unprecedented. But, to me, it shows the uniqueness of Warren Buffett. It also, as seen in this Star Trek video, underscores the measure of the man (intelligent, self-aware and willing to be judged by how he treats others). Bears are not invited to annual shareholders meeting -- as personae non gratae, they are more apt to be quarantined from earnings calls and conferences, let alone be invited to ask hard-hitting questions in front of legions of admirers that descend upon the auditorium in Omaha. This is the challenge. Both Berkshire Hathaway and Warren Buffett already have been scrutinized thoroughly by analysts, journalists, pundits and biographers -- there is little unknown about both. The difficult challenge I face is to ask original questions (some that have never been asked) that might divulge new information and insights about Berkshire and Buffett.
I approached my research assignment as an investigative reporter. Fortunately, I had some background in this, as, while getting my MBA at Wharton, I was one of Ralph Nader's "Raiders." I coauthored Citibank (along with Ralph Nader and The Center for the Study of Responsive Law), which was published in 1974. This background and my analytical history and experiences have helped me discover some facts that others have failed to find. Part of my research was spent in interviewing people who were familiar with the business of Berkshire Hathaway and/or personally knew Warren Buffett. In addition, I prepared for next Saturday by rereading many of the more important books written about The Oracle of Omaha. I found the best books to include Roger Lowenstein's Buffett: The Making of an American Capitalist, Jeff Matthews' Pilgrimage to Warren Buffett's Omaha (coincidentally I had previous endorsed the back cover of JMatt's book!) and Alice Schroeder's The Snowball: Warren Buffett and the Business of Life. Importantly, I read everything that Fortune's Carol Loomis (who has edited and assisted Mr. Buffett in the preparation of his annual letter since 1977) ever wrote on Buffett and Berkshire -- Tap Dancing to Work was particularly rich in information. Without revealing too much before Saturday's meeting, my research underscored that Buffett is more than an iconic figure in investments, in philanthropy, in humor and in storytelling. He is complex. His interests are more varied than many know. He has an enormous amount of energy. He is a loyal friend. But he can be controlling. I was surprised to find out how much time he puts in to preparing for Berkshire's annual meeting. He is resilient. I was especially surprised by how many investment obstacles he faced and endured over his remarkable career -- whether it was the general market or specific problems in portfolio holdings. Warren Buffett likes people to ask for things, rather than the other way around, and that helps to explain the manner in which the invitation for a "credentialed bear" was delivered in his letter. As evidence of this, in his 2002 letter he invited shareholders who thought they were qualified to send him a letter to nominate themselves to Berkshire's Board of Directors. Again, in 2006 in the Chairman's letter to investors, he advertised for a successor to Geico's investment manager, Lou Simpson. "Send in your resume," he wrote.
What Do I Plan to Accomplish at the Meeting?
"Praise by name, criticize by category." -- Warren BuffettI take Warren Buffett on face value. I like to think that he selected me for the purpose of having me ask hard-hitting, pointed, thoughtful, original, perhaps even uncommon questions in order to spice up the Q&A session of the annual shareholders meeting. My plan is to ask a series of unique questions on a variety of topics. (I don't want to spill the beans. As well, I am still compiling the questions in my mind based on my research!) I plan, in the process, to be courteous and respectful, and I fully recognize that I am Daniel in the lion's den of tens of thousands of Berkshire and Buffett admirers. I am likely the sole bear, wading in a sea of Berkshire enthusiasts. I also plan, at times, to approach the questions with the same sort of levity and wit that Mr. Buffett writes his letters to shareholders. I am certain that my humor will pale in comparison to The Oracle, but I will try! So, my primary objective is to go where no questioners have previously gone and to elicit responses to some important questions facing the company that have never been asked. To say that I face an uphill fight is an understatement. It is fair to say that the odds are stacked up against me - similar to Herb Stempel, who was defeated by Charles Van Doren in the television quiz show "21," the fix is on! I am prepared for derision, some raspberries and even several Bronx cheers from the fans of Berkshire Hathaway and Warren Buffett. And I am prepared to have Charlie Munger call me a chump. Nevertheless, I am up to the challenge. Finally, in the interest of total honesty and disclosure, I am very excited. And my biggest thrill will be to take a picture with The Oracle and my son, Noah (the Huffington Post writer, " Ask Noah" columnist for TheStreet and soon-to-be PhD candidate at the University of Pennsylvania), who I am lovingly taking along on my pilgrimage to Warren Buffett's Omaha.