Saturday was the second day of the 2022 New Orleans Jazz and Heritage Festival -- an event of music and celebration that attracts people from all over the country. Yet there was a different and more reflective jazz festival taking place about a thousand miles northwest, at Berkshire Hathaway's (BRK.A +1.36%) (BRK.B +0.93%) annual shareholder meeting in Omaha.
Miles Davis said that "it's not the notes you play, it's the notes you don't play." And that feeling rang true at Berkshire's meeting.
Despite Berkshire being up 8% on the year compared to a 13% loss for the S&P 500 and an over 20% loss for the Nasdaq Composite, there was little to no showboating from Chairman Warren Buffett or Vice Chairman Charlie Munger. Instead of bragging about the outperformance of value stocks over growth stocks, their attention was on protecting shareholder capital paired with a deep sense of responsibility to keep cash on the balance sheet and exhibit discipline during an uncertain time of high inflation and rising interest rates.
Here's what Buffett and Munger didn't say that spoke volumes at the 2022 Berkshire shareholder meeting.
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Invest in yourself
Buffett said that the best vehicle you can invest in is yourself. "Nobody can take away from you the talent you have," he said. "The truth is, the world will always need to do something and some people will not have skills and they will get less of the product of the society than somebody who has other skills. Sometimes that has something to do with education, but a good bit of the time it doesn't have anything to do with education."
It's a theme Buffett returned to frequently, especially in his comment that "you ought to be a better person in the second half of your life than the first." Compounding wealth isn't just financial -- Buffett seemed to imply that the best defense against inflation on the personal level is to make lifelong contributions to the world.
Speaking of which ...
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Key Data Points
Invest in companies with wide moats
Buffett also may have been indicating that the best companies to own are the ones that are also exceptionally good at something and do whatever they do better than their competitors. This doesn't always mean their stocks will go up or even outperform the market. But it does mean that over the long run, these companies are developing the kind of foundation that outlasts economic cycles and delivers long-term growth.
If we look at Berkshire's top 10 list of public equities, it's very clear that every single one of them, from Apple to Chevron, is a leader in their respective industry.
Can Berkshire last forever?
A writer named Charles Michael Palahniuk famously said, "We all die. The goal isn't to live forever, the goal is to create something that will." That seems to be the feeling that Buffett, who will turn 92 on Aug. 30, has right now.
Although Buffett is still sharp as a tack, no one knows when the last Buffett-led Berkshire meeting will be. When asked about his succession, Buffett didn't focus on the inner workings of the board of directors, or the voting power of the shareholders, or even the strategy of the investment team. Rather, he talked extensively about the Berkshire culture almost as an embodiment of his values that will carry on even after he and Munger are gone.
"Berkshire is built forever. There is no finish point. We have no one thinking about if their options are vested," Buffett said.
It could be that Buffett believes the superiority of the Berkshire culture is hidden right now because all the spotlight is on him, and that when he's no longer in charge, folks will begin to realize why people like to work for Berkshire and why it's a business that is so much more than just Buffett and Munger.
Life-changing wealth
The individual investor can take away the importance of building an everlasting portfolio that will continue to grow even after we pass. Buffett is big on the power of compound interest and routine saving. In fact, by starting with $0 and investing $10,000 per year into a retirement account for 50 years at a compound annual growth rate of 10%, an investor would end up with $11.64 million. This long-term mindset can lead to generational wealth using a relatively attainable savings plan.
As for Berkshire Hathaway, it's likely that Buffett's leadership and investing philosophies have the staying power to transcend his lifetime too. For that reason, Buffett seems less concerned with the performance of Berkshire versus the S&P 500 into the future, and much more focused on ensuring his company culture remains intact.
