If there is something upon which anyone in the world can agree, it’s that there is simply an overwhelming amount of “information” out there that is thrown in our faces via constantly evolving and additive distribution channels directed at all human senses.

The not quite equal but opposite force is probably sitting through a Berkshire Hathaway meeting. While pontificating on the meaning of life is probably a bit much for this space, I will point to the idea of “True Norths” in regard to one’s personal life, one’s business and business practices, and of course investing. Nonetheless, True North is merely a general direction, one which differs greatly from the philosophical or process rigidity that clearly plagues many of us who are awake—or woke.

What I personally got from Saturday’s Berkshire meeting was a re-infusion of some of the True North issues that I have watched, studied, appropriated, and developed into what has made Cove Street Capital tick over its first decade. (Oh yes, there will be many words on this subject towards the end of June.) Much of the content was predictably tedious, repetitive, and dumbed down for a global audience that might conceivably include one million shareholders. Of all activities, the hardest thing for a human to do is sit quietly in a room for three hours. Try it with paper and pen.

Having said that, here are the themes and concepts that stood out:

• Patience as an enduring virtue
• The acceptance of humility in regard to personal expectations of the future
• The way that history so clearly rhymes with the present and thus demands so much more respect than it presently receives
• The way tidal waves of change remain stubbornly off spreadsheet
• The way that “those in the ring” deserve so much more respect and attention than those who have unlimited internet ink with which to kibbitz on the failings of others
• Respect for the real processes and legitimate expectations of the duration required for companies or industries to change decades of accepted practice and billions of dollars of infrastructure
• The absolute need to study, work, and think for yourself rather than regurgitate the nonsense du jour that changes day-to-day
• The need to weigh all considerations of business, value, and people
• The importance of having a Devil’s advocate
• Having the temperament to invest like no one is watching and like there is no playing the role of a clock, at least to the best of your abilities. (Of course this requires the right client—please contact PHinkle@CoveStreetCapital.com for account papers.)

In addition to those high-level—and oft-repeated—themes, I particularly liked the pop quiz which asked the trick question, “Here are the top 20 most valuable public companies in the world, how many were on the list 30 years ago?” (Zero.) Oh, and for a country that apparently invented every human failing that can be conjured on a college campus, we seem to have a pretty magical and material representation on that list.

And Buffett: “First, I will give some Berkshire background to either new Berkshire shareholders or the millions of new owners of stocks in general that have emerged in the pandemic. You might want to listen before placing 30 trades on your cell phone today.” And, “Yes, SPACs are making it more difficult for us to do deals.”

The most legitimate and interesting set of questions involved the seeming lack of movement by Berkshire at the March 2020 lows. I personally found the answers weak. It seems incredible that Berkshire barely moved—they didn’t even purchase the S&P 500 index fund that Buffett touts all day? Not even the classic Templeton 1930 play of “buy me every stock at $1 and under?” Nothing in high yield? Or mortgages? Obviously, big deals weren’t going to be done, but Buffett’s answers were rambling, with some fumbling that showed a lack of conviction. A simple, “Well obviously we should have” would have sufficed. (Where were you Charlie?) They did present an interesting notion about their sale of airline stocks near what proved to be the bottom: “If we owned 10% of the big four, which we did, would they have received the same government support, or would we have been left holding the bag?” (Author’s Paraphrase #4) While they also noted that big boys need big moves, $5 billion gains here and there can add up over time.

What qualifies as “asinine” (their words this time, though I agree) came in regard to the two shareholder proposals regarding the inevitable calls for more reporting on climate change and diversity issues. On climate issues, the impressively competent odds-on (and now official) CEO favorite set to succeed Buffett, Greg Abel, went through a brief presentation regarding Berkshire’s utility plans to phase out coal by 2050. He also highlighted the fact that they declared a quantitative target, based on Paris Climate Accord related goals, and achieved them ahead of schedule, and that these plans—numerical targets and target dates—have been on company websites, which apparently no one who drafts shareholder proposals bothers reading.

Our two cents is that the last thing “we” need is more disclosure on nearly anything, as what comes out of them is usually so lawyered and nonsensically obvious as to render it completely useless. Go read a 10-K. Yes, that’s right, read. Quietly. For an hour. Any company. Did your world turn by reading any of the risk disclosures? If you are invested in an insurance company and need to be told by the company that you are at risk of X probability that climate volatility can produce more insurance losses, then you seriously need to find another vocation.

Conversely, it was pleasantly sobering to listen to experienced executives with boots on the ground making common sense statements about what it takes to decarbonize and how long it might rationally take. Hey people, wind and solar at scale is an insanely enormous proposition and it’s not just about money. Like coal, wind and solar, and even geothermal production, tend to be located very far from where Pricilla and Johnny turn on their lights and charge the Tesla. How is it getting there? Oh, thanks Joe, we will build massive new transmission grids. Through whose backyard? And across what state lines? Can you say lawyers for 50 years? Both sides of the issues have them. If the most progressive state in the country cannot even build the first 119 miles of a train track from Merced to Bakersfield (tickets are selling fast!) because of environmental and eminent domain issues, then one can assume that even the most thoughtful green change plan should be closer to a 40-year process than an “emergency” with internet sirens. So who is in for a science- and business-based plan, a legitimate time horizon, and something that meets the aforementioned Paris accord? Or listen to three people who left a pension plan and set up a climate consultancy or an 18-year-old from Sweden?

On diversity reports, Buffett and Munger simply noted that they have a highly decentralized structure, and almost any plan to collate data across the company would be useless, either as a number or as a plan to move the number. Again, I will note that the overwhelming number of CEOs I have met are not card-carrying members of something evil and most are incredibly focused on creating and maintaining an environment that attracts and retains employee talent. This is arguably the hardest job in today’s environment, and most are not well-read in history or philosophical study and thus are not intimately active in perpetuating historical problems, nor are they the font of wisdom to fix what needs societal fixing. Okay, can they do better? Of course, and who can’t? To paraphrase Buffett and Munger: if you are expecting perfection in your spouse or an investment, you will be disappointed.

And Buffett noted that at the time of the signing of the constitution, the U.S. had a population of four million, 500,000 of which were shamefully enslaved. Is it possible that we are better off now en masse? What are needed are bottom-up efforts, not grand and embarrassing statements drafted by PR consultants. Trust me, being a CEO is not a merit badge that enables you to have ANY license to successfully improve humanity. These people need to stay focused and do the best they can to focus on their own business or they or their company won’t be here to do anything of any consequence in the future. We see daily reports that this isn’t as easy as it looks. Also, see the top 20 quiz that was referenced at the meeting. And yes, in today’s day and age, doing well by “stakeholders” is mostly a prerequisite for doing well for shareholders. It just doesn’t have to make EVERY special interest group or Elizabeth Warren happy.

Buffett/Munger: “Most people who are responsible today for voting shares have never read an annual report in their life and don’t have a dime in the investment. To whom shall we answer: 1 million shareholders of Berkshire or the village pitchforks? We do plenty of asinine things because we are required by law and that’s what we will continue to do.”

So we own Berkshire in size in all non-small cap accounts. It is basically at all-time highs and represents reasonable value in a world that seems indiscriminately not reasonable. You can do worse than big, cheap, safe, and run by experienced adults with skin in the game.

Next week, this writer is going to physically attend the Markel annual meeting in Richmond for likely more focused huzzah about value investing and commonsense. Report to follow. Also, as an FYI, we will go nearly anywhere in the flesh if you are interested in having civilized discourse in person. We are vaxxed and ready to resume where we left off.