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Commentary: The 'Oracle of Omaha'-live! "Only know-nothings diversify." -Warren Buffett, May 3, 2008

June 2, 2008

Last September, I instructed my retirement plan to purchase two of the very expensive Berkshire Hathaway (A) shares so I could attend the annual meeting of shareholders and participate in the numerous peripheral activities.

Actually, I could have purchased just one share of the B stock for much less and still have been entitled to four credentials. Warren Buffett, one of the richest men in the world, and his partner, Charlie Munger, are retail hucksters. They have created the perception of exclusivity to entice the masses to their carnival of Berkshire products for sale. Christmas comes to Omaha twice a year. I attended the May 2008 meeting with buddies John Thompson and Bruce Jacobson-and 31,000 other trekkers to Nebraska.

The activities began on Friday evening with a cocktail reception at Borsheims, a merchant offering to indulge any fine taste a credentialed shopper may have-at a shareholder discount. I'm referring to that stuff my wife, Janie, might buy from time to time, like Lalique and Waterford crystal.

I managed to navigate through the bargain hunters and find a clerk to sell me a 500-piece jigsaw puzzle titled "Warren and Charlie's Neighborhood" for $20. It was touted as the least expensive way to stroll the Berkshire Hathaway exhibitors' hall, mingle with millionaires, and browse some of the world's best companies, including Geico, Fruit of the Loom, Dairy Queen, See's Candies and Nebraska Furniture Mart. What a bargain.

The shareholder meeting was held in Omaha's Qwest Center on Saturday at 8:30 a.m. We opted for a leisurely breakfast rather than queuing up at 7 a.m. for a floor seat. When we arrived a half-hour before the meeting, we were directed to the upper bleachers. If it had been a basketball game, I would have gone home and watched it on television.

After a humorous video highlighting the prior year, The Warren and Charlie Show took the stage and began a question-and-answer session that I'm told lasted until 3 p.m. We lasted until 11:30 a.m. Buffett was unflappable as he dealt with a variety of questioners, including American Indians and environmentalists who assailed him with the accusation that a Berkshire company dammed up a river and caused the collapse of a salmon habitat. At 77, Buffett was sharp-witted and cool.

After an hour and a half, I started to doze, but then Buffett fielded a question regarding the merits of portfolio diversification. Buffett declared, "Only know-nothings diversify," and explained why professional investors should shun diversification.

"If you see an opportunity that you really believe in, there is nothing wrong with putting 100 percent of your net worth in that investment. Good opportunities do not come along very often and you should take full advantage of them," Buffett said.

I have espoused this philosophy and have often repeated the quote, "Put all your eggs in one basket and watch that basket." (According to Google, that advice should be credited to Mark Twain or Andrew Carnegie.) I've never had the guts to put the theory completely into practice, however.

Buffett concluded that it is not shameful to be a knownothing investor and counseled that if you have no real knowledge of investing, purchase mutual funds and similar investments. Let the professionals handle the work for you.

This week, my retirement plan sold the two shares of Berkshire Hathaway for a profit equal to the cost of the trip, the jigsaw puzzle and a box of See's candy I purchased on the way out the door for Susan Roederer, my assistant. But the trip was better than break-even-we had a good time in school with the "Oracle of Omaha." I am waiting for that big opportunity to risk it all.

Sure.



Maurer is a shareholder in IBJ Media Corp., which owns Indianapolis Business Journal.To comment on this column, send e-mail to mmaurer@ibj.com.
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