What Spoils The Party?

11 May 2004

Warren Buffett and Charles Munger own the lion’s share of Berkshire Hathaway. Berkshire Hathaway owns Wesco Financial, and Charles Munger runs it. Whitney Tilson has covered and reported on the annual meetings of both of these companies in 2004. Here’s a link to his notes from the Wesco annual meeting, which was held on May 5, 2004.

The annual meetings for these companies are unlike other shareholder meetings. The legal and business details of the meetings are handled in less than fifteen minutes, but Buffett and Munger provide their insights and answer questions for as much as six or seven hours. If you ever have the opportunity to attend either of these meetings, it will be well worth your time.

Berkshire Hathaway has become one of the strongest insurance companies in the world. The company, via its subsidiaries, writes many types of insurance. From super-catastrophe to re-insurance and from auto to life, the company and it’s officers are uniquely positioned to see the kinds of risks that can occur in businesses. Often, the question arises in some form, ”what keeps you up at night?”

Here’s how Charlie Munger – via Whitney Tilson’s notes – answered that question:

Personally, I think the most important issue is still the threat that something really god-awful happens in terms of an atomic bomb or pathogens. Its so unpleasant to think about that people put it off, but if you think about whats likely to really spoil the party, thats far worse than a little inflation or one president vs. another.

What makes the Iraq thing so hard is that its hard to know whether weve reduced or increased this risk [of a WMD attack]. But I dont think we want to have a lot of really rich countries in the hands of nuts full of hatred. I think the policy of sitting back and doing noting is the wrong policy, because the nut will eventually do something awful.

The threat of bioterrorism and an atomic attack is still our worst problem. But people prefer to talk about workmans comp and corporate malfeasance…

Charles Munger
Wesco Financial Annual Meeting
May 5, 2004

Should such an attack occur, we’d grieve for a while, but it wouldn’t take twenty four hours before members of one political party would be accusing the other of having ”allowed” such a disaster through some form of negligence or mishandling of information. We will quickly forget why we elected whichever party might be in the White House or in control of Congress.

It won’t matter that we wanted more jobs or more education. It won’t matter that we elected this person or that because of oil interests or to repeal the Patriot Act. Once the kind of risk cited by Munger occurs, we won’t remember what was on our minds when we elected whomever our office-holders are.

It ought to be one of the things we (and they) are most concerned about as we think in advance of electing people.

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