See Jonathan Papaik's account of the trip below:

Riding in Cars with Warren

Our Trip to Omaha

By Chad Riggs, Farley Reardon; special thanks to others.

The following is less a story and more a series of events that took place the weekend the FMA club traveled to Omaha and met with Mr. Warren Buffet. 

 We left Knoxville EARLY Thursday morning to fly to Omaha, NE.  We arrived at Eppley Airfield (self-proclaimed “America’s Cleanest Airport”) with little fanfare or trouble.  Farley Reardon was finally able to discern the appropriate Holiday Inn location and call for ground transportation, while the rest of our group retrieved the luggage.  While waiting for the shuttle, I spoke with an elderly tourism representative about the airport’s location in Nebraska, only to find it is on the eastern side of a landlocked island of Iowa.  He informed me that the river changed course frequently, in a time before the Army Corp of Engineers, and when the Corp came along to develop the area it just so happened they stabilized the river to the east of that part of town.  All the kids who live in this area go to school in Iowa but each school day travel through Nebraska.  The airport also displayed some interesting pictures of aviation pioneers, Tuskegee airmen from the area and references to the area being the home of U.S. Strategic Command.

  Finally, the shuttles arrived and transported us to Council Bluffs, IA to the hotel and casino area.  Omaha, by my estimation, is a large, historical city with older buildings mixed with a variety of new construction.  We drove by Union Pacific Railroad’s modern headquarters, Mutual of Omaha’s sprawling campus, the new Qwest Center, the Woodmen of the World building and the home of the College World Series and Omaha Royals on the way to our hotel.  Then we ate at the casino, relaxed, checked in and changed into our more formal attire to board our bus and go to meet Wally Weitz, who runs Weitz Funds.  Wally spoke informally with us at his office, as students asked questions he attempted to answer.  He had three of his analyst sitting behind us, listening and adding comments when he needed backup.  He spoke about value investing, his own investing strategy and some of the decisions he makes.  Both he and Mr. Buffett seemed to restate a thread I had heard many times before from successful investors: stick to what you know, what you understand.  I also learned from both that they were interested in fixing social issues.

 Wally answered questions about big banks and big Pharma.  He said companies like Pfizer and Merck were down, but each was a company which had been making so much money before but he did not think the companies were going to continue to do so as much in the future.  He saw some redistribution of the costs in that system, from the producers to the other areas of the industry, likely something similar to what happened in low cost retail.  He also mentioned that his value strategy often left them selling stocks before peak, but always trying to avoid the drop that follows to provide stable growth in his funds.  Both Mr. Weitz and Mr. Buffett mentioned that there is a temperament required for intelligent investing that requires going against the herd.  He advised us to always be humble, understand that someone is always more powerful than you are and you do not have to know everything – just work as hard as you can. 

 Another point I discovered was on the effects of tobacco.  Both Wally and Warren never came out and said anything negative about smoking, but it was interesting they both told stories about friends or loved ones, and mentioned mournfully those people who were smokers - implying among other things, they were taken before their time.

   We left Weitz Funds and headed back to the Hotel, but first we rode by Mr. Buffett’s home.  It was big and brown yet cozy and really nice.  Not the biggest home on the street and modest given his sizeable wealth.  When we got back to the hotel, we freshened up and headed out for dinner in Omaha’s Old Market district, and then back to the Hotel for some questionable finance related entertainment aboard a riverboat.   I tried it for a bit and I won $10 playing blackjack.  I quit after I realized I still had to pay for my beer… that was too bad.

We woke up early the next day and went to the Nebraska Furniture Mart, the largest furniture store in the world.  It was opened by a Nebraska mother during the depression in the basement of her husband’s pawn shop with $500.  Now it has one million square feet of furniture floor space and even more in warehouses, electronics and etc.  We learned that if you start off with a small thought, it can become a million dollar idea if you work hard and provide what others do not offer.  The grandson of the founder also emphasized that to consumers, dirty floors imply dirty merchandise.  The Nebraska Furniture Mart was an incredible and spacious campus that is the epitome of Berkshire Hathaway’s influence.

 Mr. Warren Buffett first spoke to us about the format for today and indicated he would take one question from each school at a time, and designated person would call on students for questions.  He indicated he did not want to be taped and that any thing was fair game: money, personal things, politics, etc.  He just did not want to be asked a multipart question.  He made a joke about a friend having a romantic dinner with his wife for the first time in years  The candlelight made the mood just right, so she told him, “Honey let’s go upstairs and make love.”  The husband looked really perplexed and she questioned, “What is the matter?”  He responded, “I can do one or the other but not both.”… Warren summed it up by indicating you could ask him about A or B but not A and B; he just can remember all that.

 He opened with a question about day trading, saving and investing and told us all, in a Dave Ramsey style, that credit card debt was horrible.  He mentioned everyone there uses a credit card, but the idea of borrowing at 18+% and floating it versus investing in the market was not intelligent.  No matter how active you are you’re crazy to think you can get back the 18%, “Pay off those cards,” he said, telling us they were a hindrance to savings and can become an insurmountable debt.

 He echoed Wally’s sentiments, the Ben Graham philosophy, concerning value investing based on researching undervalued companies.  He said you need to educate yourself on the financial and operational positives and negatives of a company.  Make sure you do your homework- even if you are Warren Buffett - you may not know everything there is to know and do not invest in a company if you do not know how they operate.  Both men have the temperament and resist the temptation of trends and investing in things they do not know.

 He talked about Korean stocks, he had picked some out of a book for investment, and he did it just like he did 50 years ago by looking in a Moody’s manual.  The interesting thing he mentioned, that echoed Wally, was, “it is easier to invest and get good returns on small amounts of money.”  But small to Mr. Buffett is $100 million!

 He talked about the Chinese economy and his purchase of the Hong Kong traded shares of a large Chinese oil company.  He made a lot of money and the company produces a lot of oil, but he mentioned the need to know what you are getting into and that means cultural differences too.

 Weihua, a first year MBA, asked Warren a follow-up question about the Chinese economy vs. the stock market.  Since she was in the back, he moved closer and told a funny joke.  She was in the back of the room and he moved closer to her so he could better hear her.  He said he was worried about his partner, Charlie’s hearing.  He asked the doctor how he could check it, and the doctor recommended standing at different distances and asking a normal question in a normal voice then move closer.  He went in to see Charlie and stood about 30 feet away and said, “Charlie should we buy Microsoft at 26?” and got no reply.  He moved closer and asked, “Charlie should we buy Microsoft at 26?” and got no reply.  He moved closer and asked, “Charlie should we buy Microsoft at 26?” and Charlie said, “For the third time, YES.”

 When asked about technical analysis, Warren mentioned he used it in his younger days, beginning with a school club, but eventually moved away from those methods.  He also mentioned his first tax return when he filed he had to pay $72 and that was harder then the time he paid millions of dollars in taxes.  He left us with the impression that just because you are worth $41,000,000,000.00+, you don’t have to let everyone know it.  He also left us with the impression you shouldn’t overcomplicate investing with tools or equations, just read the financial statements and find value and then take care of it.

 We broke for lunch and Brittany Johnson and I were lucky enough to be selected to ride with him in his car to Gorat’s steak house.  We walked down two (older) flights of stairs to the main offices of Berkshire Hathaway and saw many wonderful pictures taken by his son Howie in Africa.  He said his son travels all over Africa, but owns a cheetah preserve in South Africa that is quite nice.  There were also receipts and paperwork framed along the secondary hall to show his history.  He showed us his somewhat modest corner office and we met Peggy, his co-worker (very nice, it was interesting how personable and small his staff was).  He pointed out the ½ scale Mars Lander sent to him and then showed us his signed Pat Summit Lady Vols ball.  He is an enormous baseball fan, and he peppered us with facts and statistics throughout the day.  He showed us his A-Rod signed bat and a uniform he used in a game, and mentioned he needed more space for all his stuff, he said his offices had been in the same place for more than 30 years but he has never filled out his office space.  I remarked he could end up filling it with all his memorabilia. 

On the way to lunch he asked us all where we were from and spoke to us individually, showing a great deal of interest in us and our locations.  I think he enjoys learning about people and figuring them out.  In the car, he also spoke about meeting Walt Disney, a short time before his death, mentioning he didn’t even seem ill, and he saw the park and the ride “Pirates of the Caribbean” was being built for $17 million dollars.  In the world of trading, a cost of 2-3x’s price to earnings Disney was trading at 5 times ride (That is right, not a typo, 5 times the actual price of the ride).  He mentioned the purchase of Pixar by Disney and said he didn’t think it was so much Jobs, but Lassiter that made it great.  He said he had been lobbied hard on both sides of that deal, and in the end it said it was a good company, but a really expensive way to get back into a business they just got out of.  He was nostalgic for the Disney live action feature with kids out on opening night downtown, and he anecdotally mentioned being on ABC’s board when Disney bought the company.  Someone remarked that all the news talent had negotiations that went on forever and was very costly, at least the mouse didn’t have an agent, and then he recounted that Mickey’s original name was to be Mortimer and his wife questioned whether or not that was too pretentious on their trip to California.

 He talked about the social implications of outsourcing or off-shoring, in his example; he talked about the largely Portuguese fishing town of New Bedford, Mass.  He was talking about what you have to do with a 55 year old Portuguese speaking worker who has worked in the same industry his whole life and cannot really be reeducated or retrained

to do another job that provides him with similar benefits.  Ultimately we shouldn’t rely on welfare programs but he mentioned something similar to the WPA programs of the 1930’s- something where existing workers can be paid to begin laying the groundwork for new industry or something.  It is a difficult by-product of the flattening world and one we should consider, it isn’t easy.

Warren asked his wife, the daughter of a college professor to marry him and to quit college.  This was a tricky maneuver for obvious reason; however, Warren had the inside track because he played the ukulele and her father played the mandolin, so he didn’t want to loose his musical partner.  For a variety of reasons I think he deeply misses his wife and others who may have passed, but enjoys having groups like ours come out.  He likes hanging out with the young people and like the rest of us, enjoys Dr. Auxier.

 Warren also mentioned his interesting succession plan.  He currently has a foundation set up that upon his death will become fully endowed and the largest in the world.  He has left instructions on how it should be spent, for instance it should be used to do big things, and not for things that already have sources of funding, such as universities or large pharmaceutical corporations.  He also discussed the plan at Berkshire Hathaway, and in both cases he mentioned a team of six people who would carry on his work.

  Overall, our trip and Mr. Buffett were inspiring in many ways; however, the time and attention he gave is was the most thoughtful and appreciated.

 After lunch at Gorat’s steakhouse, we went to Borsheim’s Jewelry and toured the large showroom.  Some of our more successful classmates took advantage of the sizable Berkshire Hathaway shareholder’s discount, extended to us, and made a purchase.

 We then loaded up, rested and cleaned ourselves off back at the hotel for one final foray into downtown Omaha, checking out the city and enjoying ourselves in a variety of ways- pizza, beer, Celtic music, swing dancing, spending time with a few friends with Mohawks or trying one last time at the casino.  Just wrapping up and enjoying ourselves one last time before the journey back the next day.

2006 Trip to Omaha, by Jonathan Papaik

Thirty-three FMA students and two distinguished finance professors caught a 6:00 a.m. flight out of Knoxville on January 26, 2006, eagerly anticipating their annual meeting with famed investor Warren Buffett.  After arriving in Omaha and a quick wardrobe change, we were off to our first meeting with Wallace (Wally) Weitz of Weitz Funds.  Weitz Funds manages over $6 billion for the Weitz Funds, individuals, corporations, pension plans, foundations, and endowments.  The two hour question and answer session at Weitz corporate headquarters turned into a wealth of information outlining his investment strategies.  Mr. Weitz stressed the importance of staying in his “circle of confidence” when choosing his investments.  If a member of FMA asked him a question outside of that circle, he quickly replied “I need to do more research on that topic.”  One of the topics out of his circle was international investments.

We were free for our first evening in Omaha and found ourselves in the Old Market District.  We found a great Italian restaurant to have dinner and took in the relaxed culture of the Midwest.

Leaving the hotel promptly at 7:30 a.m. we were on our way to the Nebraska Furniture Mart to take a tour and meet with a son of the founder, Mrs. B.  With over 1,000,000 square feet of space we toured through furniture, appliances, electronics, and even passed a Burger King.  We were also shown the Berkshire mattress collection they sell at the Furniture Mart.

At 10:00 a.m. we were arriving at Mr. Buffett’s office and ushered to the top floor conference room that had an amazing view of downtown Omaha.  Mr. Buffett was welcomed with great applause and quite a few camera flashes as he took his place in the front of the room.  He spoke on an array of topics ranging from his investments in Korea to when he was a young boy at the age of eleven who was graphing stock prices. It was an amazing two hour session and a wealth of information.  He even commented on his locally owned company, Clayton Homes, and had wonderful things to say about its CEO Kevin Clayton.  Mr. Buffett had invited us to eat at his favorite steakhouse for lunch, Gorat’s, and two students even got the opportunity to ride with him there.  Arriving at Gorat’s Mr. Buffett ordered his usual Cherry Coke, and treated us all to the luncheon steak.  We took about an hour after lunch to take pictures with Mr. Buffett and present him with a beautiful print of the Smoky Mountains that Mrs. Murphy had picked out for him.

The day was coming to an end, but we had one more stop before heading home.  We toured Berkshires own Borsheim’s Jewelers.  We were given a brief overview of the company and then were able to browse through the store.  We were offered the Berkshire shareholder discount (20-25%) off anything purchased.  A couple members on the trip were able to take advantage of the discount and came home with new watches.

Overall the trip to Omaha was quick, but amazing! The students that attended the trip were grateful to the University Of Tennessee for giving us the opportunity, and of course to Warren Buffett for spending the afternoon with us.  The students also thank FMA advisor Suzan Murphy and retired professor Dr. Al Auxier for accompanying them on this trip.