Thoughts after Berkshire Meeting
Last weekend I attended the Berkshire Hathaway annual shareholder meeting held in Omaha. It’s my first time there, and perhaps it’s the last time Warren will host the meeting. Omaha is a tranquil town in the Midwest. It started as a settlement on the prairie, then exploded in growth during the transcontinental railroad construction, the eastern end started with Omaha, joining western end starting from Sacramento. The railroad jobs and millions of passengers it transferred transformed the settlement to the city we see today. During peak period the railroad saw 10,000 passengers transfer in and out of the Omaha station. Besides railroad farmers graze crops and herd castles, which later transported via railroad to ports. The town has been on decline since rail road was replaced by cars and planes as the preferred way to travel. The manufacturing jobs that were there later shifted to bigger cities like Chicago, were gone altogether due to de-industrialization. I walked around the town and it felt pretty modern, surprisingly. There were nice town centers, apartments being built, and theaters and convention centers. All thanks to Berkshire I assume. It’s quite unfathomable to think that a trillion dollar business resides in the middle of the prairie town. And that business only has 26 staff in its headquarters, while employing close to 400,000 internationally across its business line. The peak of Capitalism I guess.
The Berkshire meeting is the busiest time of the year. Besides that the town was really tranquil during the weekdays, and the weekends people from out of town, I assume farmer and ranchers would come in and party at bars or watch some shows. People really know each other. Imagine seeing Warren driving around to get burgers and ice cream or go to his favorite steakhouse. Warren is the local hero and people love him. Seeing the landscape it reminds me of the novel I saw, My Antonia. It’s also based in Nebraska. It’s beautiful, people have pure connections that we don’t see that often anymore, early settlers are independent and determined. It’s the definition of the American Dream.
I saw a quote by Jamie Diamond, he said “Warren Buffett represents everything that is good about American capitalism and America itself - investing in the growth of our nation and its businesses with integrity, optimism, and common sense.” I guess we all felt the same, Mr. Diamond.
Q&A: Apollo v. Bershire
Today someone asked a very interesting question: They said, “Buffett—well, right now there are many of these ‘search funds’ that find a great business and then they buy it at, say, a 12× multiple, and afterward the company is clearly more competitive in the market. So how does Buffett compete with these people?” I’ve also been studying search funds, and I think this is a challenge that Berkshire Hathaway faces over the long term: the market is definitely more competitive now than it used to be.
It’s not like in the old days when Buffett would say, “I bought a business for six million dollars, and two minutes later, one year later, I sold it at a one‑times multiple,” because back then it was often a private, owner‑run business whose founder had died and whose widow didn’t know how to run things. They’d say, “Whatever—let’s find somebody good to operate it,” and an 80‑year‑old gentleman would step in and run the show.
So Buffett acquired many of those “high quality, family‑owned businesses,” which were excellent deals at the time. But now there are plenty of search funds dedicated to targeting family businesses, refinancing them, and arranging acquisitions—and they have bankers marketing the deals to ensure they pay the highest possible price. Also family owned businesses tend to be smaller, it worked for Berkshire when it was 50B, a 1-2B acquisition moves the needle, but at current trillion dollar size, there is no family business on earth that could satisfy those demands.
I thought to myself: “Buffett’s competitive edge is shrinking. Once the original owner dies—like with The Godfather—many of those personal relationships disappear. It’s a relationship‑driven business, and those ties don’t always transfer to heirs.”
On top of that, there’s the rise of new investment models—search funds, PE firms, and the like—that are even more formidable competitors than banks. Back in the day, insurance companies didn’t know how to invest and investment firms didn’t have long‑term capital, so there weren’t many truly patient, long‑term investors. Now you’ve got firms like Apollo with $30 billion in cash ready to deploy—or $25 billion they’ve already earmarked just from life‑insurance float—and they can lever up if they want. Buffett, by contrast, typically uses little or no leverage, whereas these players pile it on.
You also have large teams of analysts and deal‑makers—thousands of people, dozens in each group—working on sourcing and structuring these transactions. Some say, “Sure, Berkshire has great talent,” but Apollo and others manage a portfolio of companies across industries—they’re basically PE shops, from insurance to manufacturing internationally—so they’re formidable competitors too. Marc Rowan and Henry Kravis are no fools neither, they are astute investors in their own rights.
Alternative Asset managers with their syndication machines, they can syndicate more deals that are smaller in size but builds up to significant amount, achieving diversification of risk and asset exposure. Buffett does not have that capacity. Alts have long term investment horizons as well, with their life insurance duration reaching decades long. And they use back leverage to generate attractive risk to return products to all stakeholders. Whether it’s athene, apollo, private equity or distressed credit investors.
I worry: Buffett’s aging, and new competitors have access to patient capital like life‑insurance float with ten‑ or twenty‑year commitments. True, that capital demands safety—regulators might balk if investments get too risky—but these firms have lobbyists advocating for clearer rules. They’re pushing to treat life‑insurance float as long‑term capital in retirement accounts, for example, because it can offer better returns safely.
There was also a question today about how AI might disrupt Berkshire’s core insurance business. If cars become fully autonomous, will we still need insurance? Or will automakers like BYD or Tesla offer their own coverage directly? It makes sense: insurance relies on driving data—demographics and crash probabilities. When autonomous‑driving companies know everything about usage and risk, they could offer lower prices directly to consumers, undermining third‑party insurers. That could revolutionize the industry within ten years. Geico and Bershire Hathaway are cornerstones of the empire, if those businesses began faltering, they have done so before, it would pose significant challenge.
Interestingly, Buffett noted that he’s made more money from Tim Cook than from Apple’s dividends—enough to say Apple has been more profitable for him dollar‑for‑dollar than any other investment. But he also wondered: what big opportunities remain? Can he still deploy $100 billion effectively? Bill Ackman said he expects a lot more buybacks and dividends coming from Berkshire, which are signs that Berkshire could not deploy those capital efficiently so its better to return to shareholders, does that mean Berkshire lost it’s magic touch?
