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Business News/ Opinion / Views/  Warren Buffett’s legacy will extend well beyond wealth

Warren Buffett’s legacy will extend well beyond wealth

His investment principles have enriched others but what’s most remarkable is how lightly he wears his success

Even in the final lap of his career, Buffett remains alert to investment opportunities and good value.Premium
Even in the final lap of his career, Buffett remains alert to investment opportunities and good value.

Warren Buffett’s annual letters to shareholders are widely anticipated. A mix of self-deprecating humour and investment rules he lives by, they also offer an unusually candid look at his company Berkshire Hathaway’s successes and missteps during the year. His latest letter earlier this year began in a much more reflective mood, however. Buffett was contemplating legacy. He said he and his long-time business partner Charlie Munger were often filled with pleasure that Berkshire’s shareholders disproportionately passed on their shares to charities. “We believe Berkshire’s individual holders largely to be of the once-a-saver, always-a saver variety. Though these people live well, they eventually dispense most of their funds to philanthropic organizations. These redistribute the funds by expenditures intended to improve the lives of a great many people who are unrelated to the original benefactor," Buffett wrote. “The disposition of money unmasks humans." Famously, Buffett has bequeathed much of his wealth to charitable foundations, principally the Bill and Melinda Gates Foundation. “I don’t think I’m as well cut out to be a philanthropist as Bill and Melinda are," Buffett said to Fortune magazine in 2006. “What can be more logical, in whatever you want done, than finding someone better equipped than you are to do it?" It is hard to think of another businessman who would not want his name on a university, museum or charity funded by his wealth, or who can make for a better parable of humility amid such riches.

The late 20th and 21st centuries have business successes aplenty, but there has been only one Warren Buffett. As recently as last week, the reaction to Berkshire Hathaway’s strong second quarter results had brokers grappling afresh with a frequent dilemma in the world of investing: There were many more buy orders for Berkshire stock than sellers. In large part, this is because people who invest in the stock tend to buy and hold for decades—indeed in effect beyond their lifetimes. This emulates the Buffett modus operandi. For decades, he has bought superlative businesses such as The Coca-Cola Company and American Express (and later Apple), and been content to hold their equity for an eternity.

As he put it in his 2020 letter to shareholders, “Charlie and I want to own all or part of a diverse group of businesses with good economic characteristics and good managers. Whether Berkshire controls these businesses, however, is unimportant to us. Charlie–and also my 20-year struggle with the textile operation at Berkshire [the original business bought in 1965 that gave the company its name] finally convinced me that owning a non-controlling portion of a wonderful business is more profitable, more enjoyable and far less work than struggling with 100% of a marginal enterprise." This principle, a lesson in delegation in itself, has guided Berkshire even as its investments span a confectioner and chocolatier to a railroad service.

Even in the final lap of his career, Buffett remains alert to investment opportunities and good value. In April, Buffett, who is 92, visited Japan and announced substantial investments in five giant trading companies, including Mitsubishi and Sumitomo, but also pledged not to buy more than 10% of them. Berkshire’s second quarter results revealed it had substantially reduced its position in Activision, likely because its acquisition by Microsoft promises to be a long-drawn-out affair. He bought a large position in TSMC, the world’s largest chip manufacturer, but has mostly sold out of it in a nod to geopolitical tensions over Taiwan exacerbated by Beijing’s belligerence.

The perennial challenge for Berkshire is what to do with all the cash it has amassed, approaching $150 billion in cash and Treasury bills. This gets harder still in a market so richly priced. Last week, Berkshire revealed it had invested in three US home-building companies. Higher mortgage rates in the US mean homeowners are less likely to move; the market will be short of new homes. The homebuilders’ shares are moderately priced; yet, this doesn’t have the makings of a great investment story. Still, to expect a sequel to sustained success is expecting too much of someone who is 92 and whose close collaborator, Munger, is 99. The Japan investment, by contrast, could be a big winner because that economy is finally changing after decades of weakness.

The enduring Buffett lesson is not only of investment success, but of living life well. His shareholder meetings are famous for being a jamboree of fun as well as featuring a lively town-hall session on investment principles. The 2020 shareholder letter explaining an $11 billion write-down on an investment in an aerospace company put the blame squarely on himself, for overestimating its profit potential, while heaping praise on that company’s CEO.

My first distant brush with Buffett was as a fact-checking reporter for Fortune magazine in New York more than three decades ago. He was a legend by then. He spoke to the staff a couple of times and had lunch in the company cafeteria on occasion. I was in my twenties and hero-worshipped him from afar. I once called Buffett’s office to check a quote attributed to him about avoiding “elephant-bumping affairs." Buffett called back to patiently explain he meant avoiding Davos-style events where business tycoons with large egos bumped into each other. Part of his shining legacy is the example he set for being the very opposite.

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Published: 16 Aug 2023, 09:03 PM IST
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