What Investing is about – Warren Buffett Non-Answer on his Coke investment

(Last Updated On: 17/05/2018)

Berkshire Hathaway held the 51st edition of its annual meeting on 30th April 2016, live stream globally.

During the meeting Berkshire CEO Warren Buffett and vice chairman Charlie Munger held court for six hours, fielding questions from journalists, analysts, and Berkshire shareholders.

What did they say? Lots of things.

Or in the eyes of some prominent commentators nothing, as usual.

‘Nothing’ in the sense that there’s nothing you can take home and apply directly to make money instantly.

Although, the feel good, well, feeling is there after you listened to the meeting. Watch the 7 hours replay here

warren buffett charlie munger 51 annual

The highlight, IMO, of this year’s meeting is Buffett’s basic refusal to answer Andrew Ross Sorkin’s question about whether Berkshire shareholders should be proud to own shares of Coca-Cola.

It was a classic “gotcha” question.

I was listening to it LIVE when the question was posed in front of global audience, and I too, was thinking “Oh shit!” if I were in Buffett’s place.

But you know what, Buffett simply eluded Sorkin’s question.

Instead Buffett talked about choice, about how much Coke he chooses to consume — four or five cans per day — and about how no one forces anybody to drink it. Munger, a lawyer by trade, argued that asking only about the negative impacts of Coke ignores the product’s advantages. Which are basically that it tastes good. Which makes perfect sense: it’s just liquid candy.

But as he has in the past and will in the future, Buffett argued that he simply drinks Coke because he likes it, adding that if you do what you want you’ll live longer.

Which is the perfect kind of unprovable life lesson that looks great on a poster, but in reality, in life you can’t just do what you want – like speeding, because that’ll kill you.

None of this, however, changes the fact that Coca-Cola is extremely bad for you and that Buffett is extremely unconcerned with this. You will be less healthy if you drink lots of Coke, and Buffett’s habits are, like his investing successes, yet another reason we will not be the next Warren Buffett. He really is one of a kind.

And this unapologetic attitude towards choice is, in short, the entirety of the applicable lessons one can glean from listening to Buffett talk about whatever it is he wants to talk about during the annual meeting:

Make your own decisions

At various points during the meeting, however, when Buffett was asked specific questions about the morality of Coca-Cola or the process he uses to determine what stocks to buy, he demurred, time and again.

The specifics, to Buffett, are not your business to judge and the results his alone to live with. In this much Buffett is clear: he does not care what anyone else, even other Berkshire shareholders, think about his choices.

Buffett’s daily routine of sitting in his office and quietly reading annual reports all day is the stuff of legend. But this also reveals the entirety of how much you’ll know about his investment process outside of tracking the actual investments he makes.

Buffett buys some things and doesn’t buy others; you, the Buffett-watcher, can figure out why on your own.

A good evidence is this: Bill Gates sits in the front row during the meeting, and we know how chummy Gates is with Buffett. But Buffett never had any Microsoft stock in his portfolio. Or Apple, Google, Facebook for that matter.

berkshire holdings dec2015

Here’s a breakdown of the sectors he invest in.

berkshire holdings dec2015 by sector

The Berkshire meeting, then, isn’t about listening to what Buffett actually says but about absorbing what he stands for.

Buffett sits there and preaches, giving the audience a window into his worldview, one which says everybody has to make their own choices and the government ought be there to help. You’re free to agree or disagree or agree to disagree.

Similarly, a client who engaged me for advisory can choose to follow or not follow the financial plan laid out for him. I will tell him my decision making process if I were in his shoes at that moment of time. But the final decision to execute the financial plan is for him to make, and the consequences/outcome is for him to live with by not following/following the plan.

And if you choose NOT to invest in stocks in KLSE (Carlsberg, British American Tobacco, Genting), you should not judge people who do invest in it because of the good dividends.  Because it if you do, this is akin to criticizing Buffett for its Coke investment. Don’t forget,  while investing in Coke is certainly far from an act of sainthood, Buffett is the founder of Giving Pledge together with his pal Gates,  an organization to inspire the wealthy people of the world to give the majority of their net worth to philanthropy, either during their lifetime or upon their death.

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