Pilgrimage to Warren Buffett’s Omaha,” by Jeff Matthews

“Pilgrimage to Warren Buffett’s Omaha,” by Jeff Matthews, (New York: McGraw Hill; 2009), 298 pages.

Pilgrimage to Warren Buffett’s Omaha is hedge fund manager Jeff Matthews’s account of his trip to the 2007 and 2008 Berkshire Hathaway Annual General Meeting in Omaha, Nebraska. The book is an expansion and revision of Matthews’s reports previous made on his blog, “Jeff Matthews Is Not Making This Up.” Matthews’s book expands on more than just the Berkshire Hathaway Annual General Meeting. He also writes about his difficulty in getting to Omaha, his impressions of the city, events in Omaha secondary to Annual General Meeting, the comparatively unexciting procedural matters of the Annual General Meeting, and what everyone was in Omaha for, the famous five hour question and answer session presided over by Berkshire Hathaway Chairman and Chief Executive Officer Warren Buffett, and his friend and business partner Berkshire Hathaway Vice Chairman Charles Munger. Much of Matthews’s book is Matthews provides a detailed reconstruction of the question and answer session, where Buffett and Munger answer questions from shareholders, unscripted, and without assistance from lawyers, public relations people, or other types of people you normally see at annual general meeting who seem to have the job of filtering out uncomfortable or embarrassing questions for management. Matthews not only reconstructs the question and answer sessions, but adds considerable background, analysis and commentary based on his extensive knowledge of Berkshire Hathaway, Buffett and Munger, and the various Berkshire Hathaway businesses that he has come to know and study during his three decades as a professional investor. The every-curious Matthews also includes many of his own findings and observations of Berkshire Hathaway gained during conversations with managers, discussions with shareholders, and a visit to one of Berkshire Hathaway’s famous subsidiaries, the Nebraska Furniture Mart. Matthews also includes some difficult and uncomfortable questions that came to him during his 2 visits to Omaha, questions about the entire “Woodstock for Capitalists” experience (a euphemism coined for the Berkshire Hathaway Annual General Meeting) such as the divergence between Buffett’s speeches and sayings and his actions, and the performance of various business units within Berkshire Hathaway and what this says about Buffett’s way of doing business.

Matthews’s great strength in Pilgrimage to Warren Buffett’s Omaha, and what sets it apart from nearly all other books is that he hasn’t bought into the cult of personality that surrounds Berkshire Hathaway, Warren Buffett and Charles Munger. Many books on Buffett tell the story of Buffett’s success (i.e. how to invest like Buffett, how Buffett made his fortune), but few, if any, take a rational and clear eyed view at the subject. Don’t be mistaken in thinking that Matthews’s book is an attack on Buffett: it isn’t. Matthews is full of professional praise for Buffett’s success in achieving unparalleled investment returns, the unique way in which he and Munger handle annual general meetings, and their willingness to identify irrational and foolish conduct in the business community. Nonetheless, Matthews raises some questions of his own that other shareholders failed to ask (in fact, Matthews is somewhat curious that some shareholders ask Buffett and Munger questions unrelated to the performance of the Berkshire Hathaway Businesses (such as “what should I do with my life”). Matthews’s questions include the following.

• Has Buffett’s tight-fisted or thriftiness impeded the growth of the businesses he owns? How come Nebraska Furniture Mart, a company Buffett purchased about the same time that a one-store Minnesota company changed its name to Best Buy, and since then, Best Buy has grown to 1000 stores with $40 billion in sales whereas Nebraska Furniture Mart has 3 stores and $1 billion in sales?

• Buffett, who is critical of board executive compensation committees, has been on many boards, but no executive compensation committees. Why hasn’t he asked? What company would risk the publicity of refusing to have Buffett on their executive compensation committee?

• How has Buffett managed to escape any collateral damage from scandals that occurred on his watch (i.e. the “gallon pushing” accounting anomalies while serving on the board at Coca Cola in the 1990’s, and the criminal prosecution of managers he praised at Berkshire Hathaway subsidiary General Re?

• How does Buffett, the very rational conservative investor, explain his well-known social progressiveness/liberalness to his predominantly lily-white shareholder audience of ageing baby-boomers?

• Will Berkshire Hathaway survive in its current form when Buffett passes away?

• Is Buffett a hypocrite by outwardly praising meritocracies, and opposing inherited dynastic wealth, yet when he buys family businesses he retains family business managers? Did Nebraska Furniture Mart fail to become a national business because it is family run?

• How can Buffett call derivative financial instruments “financial weapons of mass destruction,” yet he has purchased numerous derivative contracts and claims he will make money on every contract?

• Buffett likes businesses that aren’t capital intensive, so why has he recently purchased capital-intensive companies such as power utilities and railroads?

Pilgrimage to Warren Buffett’s Omaha is an essential book for the student of Buffett and any person interested in the unique company that is Berkshire Hathaway. Matthews is both full of praise for Buffet and Berkshire, yet does not shy away from raising some difficult and legitimate questions that while acknowledge Buffett as an exceptional or even unique investor, recognize that he too is prone to human foibles, frailty and error. Few books on this subject have done this, and for this reason alone is a reason to buy this book.