If you had bought a single share of Berkshire Hathaway Inc. class A stock on this day 25 years ago, you would have made about $300,000 by now. Four shares and you’d be a millionaire.
Warren Buffett, among his many achievements and gifts to the world, has made a lot of people rich. But the outlook is different for future investors. The 88-year-old chairman and CEO won’t be there much longer, and already the stock’s gains have begun to slow, with a four-year return that’s trailed the U.S. market.
Buffett and the executives who will likely succeed him need to start thinking about how to court the next generation of Berkshire investors. It’s something management never had to give much thought to before. And coming off a weekend where fans raced just to get seats up in the rafters of Berkshire’s annual shareholder meeting, it’s understandable that Buffett’s team may not yet fully grasp that need.
Tens of thousands flocked to Omaha this weekend for the experience of simply having some proximity to Buffett and Charlie Munger, his 95-year-old business wingman, and to celebrate their value-investing doctrine alongside like-minded folks. The crowd ranged from suited-up fund managers to individual investors who tapped into their savings to buy “baby Bs,” the company’s more affordable class B stock. Aside from the cost of travel and hotels, there’s the trade-show-style shopping spree, where investors stand in lines to purchase everything from Brooks sneakers and Geico insurance, to boxes of See’s Candies adorned with Buffett’s face and rubber duckies made to look like him and Munger. Anything to feel connected to the investing gurus at whatever the price.
On my flight, though, which was filled with Berkshire meeting attendees, and then later at the packed arena, as I looked out at a sea of graying hair, I couldn’t help but wonder: Where were the millennials? It’s something that may not have registered as much with Buffett and Munger. Among their amusing exchanges during the Q&A portion of the meeting was this:
Munger: “Warren and I are a little older than some people.”
Buffett: “Damn near everybody.”
This may be considered blasphemy to the pair’s loyal followers, but it seems to me that many younger people – Americans, in particular – don’t have quite the same fascination with Berkshire or even as strong an appreciation for Buffett’s form of value investing in general. That’s not to say there weren’t younger people present. I did see kids here and there (there was also at least one crying baby in the stands), and I met some professional investors from the under-50 crowd. Many of them spoke of how they were brought up learning about Buffett, with dads who run asset-management firms or were early Berkshire holders, for example. Some young retail investors seemed more intrigued by Berkshire’s latest tech stock picks, Amazon.com Inc. and Apple Inc., and asked for selfies with Tim Cook, the iPhone maker’s CEO, during the event.
The fact is, to buy into Berkshire through class A shares nowadays, you have to already be rich. And shares of Berkshire are unlikely to repeat the sharp ascent they’ve had in the past. Even Buffett is struggling to find ways to deploy the company’s endlessly expanding hoard of cash and is increasingly embracing stock buybacks. His last “elephant,” a term he gives to megadeals, was in 2015, when Berkshire agreed to buy Precision Castparts, an aerospace parts supplier, for $37 billion.
If any of Berkshire’s operations – a list in the dozens – were to suffer significant challenges after Buffett’s gone, it’s not inconceivable that an activist would look to break up the company or that investors less loyal to the next CEO would push for a change at the top. Greg Abel, considered his most likely successor, turns 57 next month, while the other candidate, Ajit Jain, is nearing 68 and is said to face health challenges. That means neither one may run the company for very long anyhow. Furthermore, the average age of Berkshire’s board – excluding Buffett and Munger – is 70. And since Buffett has committed most of his wealth to the Bill and Melinda Gates Foundation, a topic that repeatedly came up in my investor interviews, there’s also a question as to what happens when the charity sells off those holdings and how that redefines the shareholder base.
A bulk of the younger demographic this weekend appeared to be those who traveled from Asian countries, and in fact, with each passing year the Asian audience is likely to be the fastest growing. Several individual investors from China and India told me Buffett’s wisdom is instilled in them from a young age, not just in business school or the finance field – perhaps a cultural contrast to the West. They may be more inclined to adopt the Buffett-like belief in “giving up something today to get more tomorrow,” according to Tom Russo, whose firm Gardner Russo & Gardner owns Berkshire shares among its $10 billion of assets.
The annual meeting’s surge in visitors in recent years is partly due to the realization that each one could be Buffett’s or Munger’s last. The first meeting without Buffett might just draw record attendance. But after that, it will probably start to taper off and could eventually look like just another investor conference.
Jennifer Oppold, who founded Alpine Peaks Capital in 2017, reflected on the significance of her first Berkshire shareholder meeting nine years ago: “It just seemed like all the luminaries were here, and I was shaking the hands of all the people I’d read about.” After Buffett’s gone, she said, “it just won’t be the same.”
Will the luminaries continue to fly out? And if not, what’s the draw for the average investor? Buffett may feel good about his own succession planning as he rounds 89 years old, but much of Berkshire’s followers are aging, too.
Tara Lachapelle is a Bloomberg Opinion columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.
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