A $650,000 Lunch With Warren Buffett

What would you pay to have lunch with the richest man in the world? For me and Mohnish Pabrai — a friend who, like me, runs a U.S.-based investment fund — the answer is $650,100. That's how much we forked out for the privilege of dining with Warren Buffett on June 25.



It was worth every dime. Buffett is the most successful investor in history, yet he has reached that pinnacle while also being supremely ethical. As remarkable for his philanthropy as for his stock-picking, he's giving the bulk of his billions to the Bill & Melinda Gates Foundation; likewise, the fee for our lunch would go to the Glide Foundation, which helps the poor and homeless. Lunch with Buffett, we figured, would be a good way to give to charity, but it would also be the ultimate capitalist master class — a chance to see up close what makes the Sage of Omaha tick and to learn from his wisdom.

And so it was that my wife and I sat down for lunch with Buffett in a cozy, wood-paneled alcove of the Manhattan steakhouse Smith & Wollensky. Mohnish brought along his wife and two daughters, who sat on either side of Buffett. When the menus arrived, Buffett, now 77 years old, joked with the girls that he doesn't eat anything he wouldn't touch when he was less than 5. His order: a medium-rare steak with hash browns and a cherry coke — a fitting choice, given that his company, Berkshire Hathaway, is Coca-Cola's largest shareholder.

Characteristically, Buffett had done his homework: he'd found out in advance, for example, that my wife was born in Salisbury, North Carolina. But after a minimum of small talk to put us at ease, it was down to more serious matters. When I mentioned how difficult I'd recently found it to do the right thing by lowering the fees I charged my fund's shareholders, Buffett nodded sympathetically and observed, "People will always try to stop you doing the right thing if it is unconventional." When I asked if it would get any easier, he replied with a wry smile: "Just a little."

Buffett has made a point of doing business with integrity — and of working only with people who share his values. As we learned, he credits his father with teaching him early on to rely on his own sense of what's right, rather than looking for affirmation from others. "It's very important to live your life by an internal yardstick," he told us, noting that one way to gauge whether or not you do so is to ask the following question: "Would you rather be considered the best lover in the world and know privately that you're the worst — or would you prefer to know privately that you're the best lover in the world, but be considered the worst?"

When it comes to investing, nothing is more important than the ability to think rationally for oneself — and Buffett is unsurpassed on this front. In the late '90s, he was criticized for his refusal to invest in booming tech and Internet stocks — a decision that was vindicated when the bubble burst. Buffett has made a fine art of keeping this kind of distracting noise at bay: he said he even limits his contact with managers of businesses in which he invests, preferring to assess their companies' financial records — a more neutral source of information. Equally vital to his success, Buffett said he focuses only on investments that lie well within his "circle of competence." As a result, he confided, whenever he makes an investment, he has no doubt at all that he's right.

For most people, attaining the intellectual clarity and emotional detachment that investing requires is tough. But Buffett, for all his affability, is shrewd about disengaging himself to avoid any unnecessary distractions that might impair his judgment. People often try to convince him to meet with them so they can pitch investments to him, he said, but he sees through their many ruses — not least their flattery — and is comfortable saying no far more often than he says yes.

One thing Buffett wasn't about to say no to was dessert. He delighted in sampling an array of them, telling the waiter: "Just bring a couple of spoons, and I'll have a little of everyone's." His zest for life is clearly undiminished — indeed, in Berkshire's latest annual report, he wrote that he and his octogenarian partner Charlie Munger "tap-dance to work."

What better role model could you ask for than this? And how do you put a price on the opportunity to spend nearly three hours in his company? Well, two days after our meal, the auction closed on eBay for next year's lunch with Buffett. The winner, a Chinese money manager named Zhao Danyang, bid $2.1 million. So, that proves it: our $650,100 lunch was a total bargain.

Guy Spier is CEO of Aquamarine Capital Management

Buffett Concerned About Inflation

Warren Buffett is in Toronto as part of his world tour, trying to look for companies to buy.

What makes people want to sell their companies to Berkshire Hathaway?

The Berkshire Hathaway Inc. CEO replies that he tells a prospective seller to think of the company as a work of art.

You can sell it to Berkshire, and we'll put it in the Metropolitan Museum; it'll have a wing all by itself; it'll be there forever, or you can sell it to some porn shop operator, and he'll take the painting and he'll make the boobs a little bigger and he'll stick it up in the window, and some other guy will come along in a raincoat, and he'll buy it.

Buffett, 77, can afford to throw a little mud on his competitors in the private-equity industry. Wall Street's acquisition machine has seized up, while Buffett, in the valedictory chapter of a much-envied career stretching back more than 60 years, is on a buying spree.

He has $35.6 billion in cash to spend, and he's looking for companies that he can buy at a reasonable price, that have experienced managers he trusts and that sell products with strong market positions or other competitive advantages.

That he is doing so in one of the worst economies in memory makes his wheeling and dealing all the more amazing. But that has been Buffett's style, although he took time last week to express his concerns about the country's financial well-being.

He has been saying for months that he thinks the U.S. economy is in a recession, and now he says inflation should be a worry.

Buffett told CNBC in a live interview that all the data he sees from Berkshire Hathaway subsidiaries, which include home furnisher RC Willey and Rocky Mountain Power in Utah, shows the economy weakening.

Everything connected with construction and with consumer, I see weakness, and if anything, it's accentuating a little bit.

Buffett also said he thinks inflation is picking up, especially in steel and oil.

His concerns aside, Buffett is poised to make more strategic acquisitions. His biggest catch so far in 2008 was Marmon Holdings Inc., a conglomerate owned by Chicago's Pritzker family. In March, Berkshire bought a 60 percent stake for $4.5 billion.

In April, he agreed to pay $2.1 billion for an undisclosed stake in Chicago's Wm. Wrigley Jr. Co. as part of Mars Inc.'s $23 billion purchase of the gum maker. Buffett, who already owns See's Candies, is helping to fund the deal with $4.4 billion in subordinated debt.

"This is the kind of market where you would expect the pace of Berkshire acquisitions to pick up," says Keith Trauner, senior analyst of Fairholme Capital Management LLC in Short Hills, N. J. "In a weaker business environment, sellers moderate their expectations."

The Sage of Omaha, by his own count, owns 76 companies outright, a number that rises to about 200 if Marmon's 125 subsidiaries, which make everything from water treatment gear to brake drums, are taken into account.

Among the Buffett companies are names familiar to most Americans - Geico car insurance, Dairy Queen restaurants, Benjamin Moore paints and Fruit of the Loom underwear.

Berkshire also owns 8.6 percent of Coca-Cola Co., 13.1 percent of American Express Co., 36 percent of Anheuser-Busch and 8.8 percent of Wells Fargo & Co. Those three investments alone amount to nearly $25 billion.

Buffett's investment choices have yielded a conglomerate that's profitable in all kinds of weather. Through May, Berkshire's Class A stock, which traded last week in the range of $122,700 a share, has returned an average of 19.3 percent annualized
in the past 20 years, nearly double the 11.2 percent return of the S&P 500 Index. From June 2007 through last week, Berkshire stock rose 12.1 percent, while the S&P 500 returned a negative 10.8 percent.

As of Feb. 29, Buffett owned 28.1 percent of the combined value of Berkshire's Class A and B shares, worth $53.44 billion.

Still, Berkshire's growth is slowing. The annual median increase in per share book value, or net worth, averaged 10.3 percent in the eight years ended on Dec. 31, 2007, compared with 26.1 percent in the 1990s and 28.8 percent in the '80s

"Anyone who thinks we will come close to repeating our past performance should sell their stock," Buffett told investors at Berkshire Hathaway's annual meeting in May, attended by 31,000 investors. Not many are likely to take that advice.

Lunch With Buffett Now Costs $2.1 Million

A Chinese hedge fund manager paid $2.1 million for the pleasure of having lunch with Warren Buffett. The money was raised by an Ebay auction and will go to a non-profit foundation which fights poverty and homelessness.

Zhao Danyang topped the bids after an auction on the eBay website.

Mr Buffett has raised $4m in charitable donations by selling annual dinner invitations since 2000. Last year's winner Monish Pabrai, of Pabrai Funds, paid ONLY $650,000 for the pleasure.

Who says there's no inflation?