2005 Tuck Trip

2005 Tuck Trip:

Trip Agenda:
8:15-9:45am         Nebraska Furniture Mart tour with Bob Batt, EVP
10am-11:30am      Discussion with Warren Buffett at Berkshire Hathaway, Inc.
11:45-2:15pm       Lunch at Gorat's Steakhouse with Warren Buffett

Summary:
For the 2nd consecutive year, 49 second-year Tuck students and Professor Robert Howell flew to Omaha, Nebraska for a two-hour Q&A session with legendary investor Warren Buffett, Chairman of Berkshire Hathaway. Mr. Buffett took us all to lunch at Gorat's steakhouse after our meeting. Prior to our meeting we took a private tour of Berkshire-owned Nebraska Furniture Mart with EVP Bob Batt.

We had high expectations for the trip and Mr. Buffett exceeded them. Please find below transcribed notes from the events followed by some brief reflections on our experience.

Tour of Nebraska Furniture Mart:
Upon entering the enormous furniture superstore, Bob Batt, along with employees Jeff and Kristen, greeted us with a sign welcoming the "#1 Business School in America" fresh from the Wall Street Journal article earlier in the week. During the tour we picked up several pointers from Mr. Batt:

On being open on weekends/holidays: "gotta be there when the customers are there"
Sam Walton: "If you don't care about your customers someone else will"
Furniture retailing in Omaha is now a global business, events in China and India will affect the bottom line.
Continuous cleaning is very important, nobody buys from a dirty store.
Target customers are women, they make the purchasing decisions.
"How credible are you when you're selling?"
Learned crowd control from Disneyland, keep people in line entertained.
There is no consignment, all inventory is owned: "cash is king" - furniture manufacturers will give discounts to customers paying cash
In 1975 NFM lost all stores in a tornado, they made a Red Cross contribution the next day.
NFM does not have employment contracts, has never fired an employee in 61 years.
When asked what market segment NFM targets, Mr. Batt replied "we want it all".
Television sales are highly correlated to Nebraska's football schedule.
'Adjacencies' are very important; having complementary items displayed near each other. For example, lamps and rugs near where chairs and couches sold.

After about an hour many students were planning kitchens and living rooms for their future houses. The story of NFM's founding was referenced multiple times, and was a recurring theme during our meeting with Mr. Buffett as well. Rose Blumkin, aka 'Ms. B', started NFM in 1937 with $500 of friends and family money in her basement. She couldn't read or write and had never attended school at any level but built the largest furniture retailer in the region. NFM was sold to Mr. Buffett in 1983. After a difference of opinion with the current management team, Mrs. B started another furniture store at age 97. She sold this new furniture store to Berkshire a few years later, at which time Mr. Buffett wisely required her to sign a 10-year non-compete agreement. Her greatest asset was her passion, a pre-requisite for business success according to Mr. Buffett.

Bus ride from NFM to Berkshire headquarters:
As we were riding through Omaha our driver got on the loudspeaker to let us know we were about to pass Mr. Buffett's house. We couldn't tell which one it was and our designated photographer snapped pictures of a few wrong houses before we got to Mr. Buffett's. It was not the largest house on the block. More context for this observation became clear later in the day.

Q&A Session with Buffett:
One of the few rules for our meeting was no laptops, so all notes were taken using pen and paper. Below is what I was able to transcribe from scribbled notes and memory, they should not be read as direct quotes from Mr. Buffett.

Intro
"When you checked into your hotel they gave you a pamphlet that said 'Things to do in Omaha…you're doing it'. At Notre Dame they have a sign in their locker room that says Play Like a Champion, at Berkshire we're putting one up that says Remember Your Helmet. Both are important for business. When the scientist Max Planck was touring Europe giving speeches about his theories, he gave the same lecture so many times that eventually his chauffer memorized the speech. For fun one day Max and his driver swapped clothes, and the driver delivered the speech flawlessly while Max looked on from the side of the stage in a chauffer's uniform. To open the Q&A the driver received an extremely complicated technical question from an audience member, shook his head, and said replied in an exasperated tone: 'that is such a simple question I'm going to let my chauffer answer it.' On that note, please ask me anything you want, simple or complicated, anything except for what I'm investing in." [Mr. Buffett also congratulated us on being named the #1 business school by WSJ.]

Q: In one of your letters to shareholders you reference Byron Trott grudgingly as "an investment banker who earns his fee". What do you feel Wall St. does well and doesn't do well?

A: Wall St. makes money well. Per incremental unit of energy and IQ, you will make more money on Wall St. than anywhere else. Wall St. is very good at selling things and at auctions, they're good if you're selling a business. On the other hand, there are so many products that Wall St. has created and not all of them are good. There's a pervasive sense of 'if you don't do it someone else will'. There's an HBO movie coming out in October called Last Best Chance, it's about a nuclear crisis precipitated by a Russian soldier who is bribed by terrorists stealing a weapon. He almost didn't go through with it but they told him 'if you don't do it someone else will, so you may as well be the one to get the money'. This type of thinking has gotten people into trouble, like CEOs managing earnings. In 1985 a Cleveland firm, Scott & Fetzer [a conglomerate that included World Book encyclopedias] was selling their business, First Boston was their advisor and they sent pitches to twenty buyers without anyone biting. Berkshire didn't get a pitch, but I sent the seller, Mr. [Ralph] Schey, a letter saying we were interested and did the deal. Since First Boston was due a fee from any transaction, at a closing dinner they offered Charlie [Munger] their pitch book with pages of analysis, Charlie replied 'no thanks'. We only buy companies where the seller cares about where the business goes.

Q: How will the expensing of stock options affect entrepreneurship and small business?

A: Not much at all. Berkshire has never used options as compensation in our companies. At The Pampered Chef [a Berkshire acquired cooking utensil company], our employees value travel awards as a kind of extra compensation. Often the recipients of stock options don't place the same value on them as the giver does, or should. In the 90's when we were involved with Salomon Brothers instead of granting stock options to employees I offered to sell them options at 80% of their present value. They turned it down.

Q: Do you think oil is fairly priced given emerging market growth?

A: It's fairly priced given today's information. In 2004 when oil was at $35/barrel, the 2012 future was at $27. Today the forward curve is flat, the market thinks these prices are here to stay. There are currently 500,000 oil producing wells in the U.S., there isn't any more domestic oil left undiscovered. It takes about one hour of pumping out of a U.S. well to produce enough crude to make enough gasoline to fill the typical 20-gallon gas tank, which takes about a minute to fill up.
[The format was one question per person. At this point a student prefaced his question by stating it was a two-part question, here is Mr. Buffett's reply]

There was an older couple I knew, and they were what you would call romantically challenged. One night they sat down for an intimate dinner with candles and wine, and the wife felt stirrings she hadn't felt in a long time. She suggested to her husband that they go upstairs and make love. He replied 'I can do one or the other but not both.' That's sort of how I think about two-part questions.

Q: What is your view on the leverage in the economy?

A: We are currently an enormous debtor to the rest of the world. The danger is that our children and their children will not want to pay this debt, or said another way, will reject the costs that servicing this debt will impose on society. Let's say that during the Revolutionary War, the colonists were offered a choice: instead of fighting a bloody war that will cost thousands of lives, you can simply agree to pay King George 5% of total national income for perpetuity in exchange for full independence and political freedom. Now to the colonists this would have been a great deal, potentially having their lives spared and gaining freedom for only 5%/year. Decades later their children may not think it's as good a deal but will still have heard stories from their parents and will probably pay the fee. But eventually, three or four generations down the line, enough Americans will forget the original rationale for the deal and will in some way demand a change in terms - possibly go to war with England again to halt the payments. The danger today is that future generations of Americans will be unwilling to continue paying for today's spending and force political action with potentially negative consequences.

On housing, let's pretend that Omaha passed a law saying that nobody could move in or out, that the birthrate exactly equaled the deathrate, and the only new housing construction allowed was to replace damaged or destroyed buildings. In other words, a completely stable real estate supply and demand. Now let's say that, in order to increase wealth, someone came up with the idea that at the end of every year, everyone would simply sell the deed of his or her house to a neighbor, and every year the town would increase the price of every house by 20%. Residents could borrow money from outside of town to finance the transactions, and the increased paper wealth allowed them import more luxury goods from outside of Nebraska. As you can tell, no real value has been created in the Omaha economy.

Q: What is your career advice?

A: If you want to make a lot of money go to Wall Street. More importantly though, do what you would do for free, having passion for what you do is the most important thing. I love what I do; I'm not even that busy. I got a total of five phone calls all day yesterday and one of them was a wrong number. Ms. B from NFM had passion, that's why she was successful. A few months ago I was talking to another MBA student, a very talented man, about 30 years old from a great school with a great resume. I asked him what he wanted to do for his career, and he replied that he wanted to go into a particular field, but thought he should work for McKinsey for a few years first to add to his resume. To me that's like saving sex for your old age. It makes no sense.

Q: In many of your letters you speak about the importance of looking through the windshield and not the rearview mirror. What issues do you think people today are mistakenly looking at through the rearview mirror?

A: Investors are always looking for the holy grail, the next great idea that will carry performance and pension returns for the several years. Right now its 'alternative investments' - private equity, hedge funds, the assets that have outperformed public equities for the past five years since the tech bubble burst. There's so much money chasing these ideas now that the returns in the future will probably not be as good. At some point, public equities will become good investments again and fewer people will be looking at them.

At Berkshire, we look at a lot of "super-cat" (super catastrophe) insurance business that few firms will write. The challenge is determining when there's a paradigm shift, when the future will no longer look like the past. It's probable that the next hundred years of hurricane activity will not look like the past hundred years. Another example, we write a lot of D and O insurance, Directors and Officers liability. Post Enron, I feel strongly that juries will award much harsher penalties to victims of corporate fraud, etc. than they would have five years ago before the average juror watched hours of news stories about all the scandals. There's no model that can quantify that added risk, but it's a risk that won't be captured looking at historical data.

Q: What are your thoughts on what happened to Hank Greenberg?

A: Hank is a great person, he grew up in upstate New York, fought at Normandy, works tirelessly traveling the globe on behalf of AIG. Hank also resented it enormously if people thought AIG was less than perfect, which may have contributed to his problems. To him accusing AIG of any wrongdoing was like calling his daughter ugly, he couldn't be objective about it.

Q: In your letters you speak frequently of the importance of not over-complicating things. What are your secrets to keeping your life simple?

A: When making investments, pretend in life you have a punch-card with only 20 boxes, and every time you make an investment you punch a slot. It will discipline you to only make investments you have extreme confidence in. Big money is made by obvious things. If using a discount rate of 8% vs. 10% is going to make or break an investment idea, it's probably not a good idea.

Back in 1951 Moody's published thick handbooks by industry of every stock in circulation. I went through all of them, thousands of pages, motivated by the hope that a great idea was just on the next page. I found companies like National American Insurance and Western Insurance Securities Company that nobody was paying attention to that were trading for far less than their intrinsic values. Last year we found a steel company on the Korean Stock Exchange that had no analyst coverage, no research, but was the most profitable steel company in the world.

Q: How does one become a successful general manager?

A: The first thing is that you have to know how you are wired. You have to pick the right environment. I can't imagine being responsible for hundreds of people and going to meetings all day, so I work with 17 other individuals. And, you have to have a passion for what you do.

Q: Do you feel global wealth is being transferred or created?

A: Too much intelligence and energy is being devoted to scraping the crumbs off the table of capitalism instead of preparing the meal.

Q: How do you identify extraordinary business ability?

A: Again, passion. When Ms. B's son was fighting in World War II, they exchanged letters every day…about the furniture business. When Berkshire acquired a 90% stake in NFM in the 80's, Ms. B and I shook hands and signed a two-page agreement. There was no audit of the books, no due diligence, I trusted her integrity. When Wal-Mart sold me one of their operating units, their CFO came to my office, I gave him a price, he called Bentonville [Arkansas - Wal-Mart headquarters], and that day the deal was done. I know how Wal-Mart conducts business [very well], and when we took over the division, it was exactly how they described it. So integrity is a requirement. One of Berkshire's businesses is FlightSafety, the founder is dedicated to preventing deaths, he's not motivated by the next quarter's numbers.

Q: What is your view on education?

A: Bill Gates thinks we're [America] falling behind. [Mr. Buffett speaks with Bill Gates frequently]. I had a great advantage when I went to public school compared with kids today. When I was in school there were very few career opportunities for women, so an enormous number of very talented women became teachers, and I benefited from their instruction. Today there are many more career opportunities, and as a result the pool of potential teachers has shrunk.

Q: You've spoken about the importance of getting on the right train early in your career, how do you identify the right train?

A: Don't pay attention to beginning salaries. My first job with Benjamin Graham I accepted before I even knew what the salary was. Do what you're passionate about.

Q: How important are China and India to the US economy?

A: The odds for me to have been born in the US were 1 in 50. I won the ovarian lottery. If I had been born in Bangladesh, the chances are that I would not have had such great opportunity. As human beings, we should want China and India to succeed, although it will certainly create dislocation for many people in the US.

Q: Do you have any regrets?

A: I'm so lucky. It would be a mistake to look back and say that I should have turned right or left. If you hit a hole in one on every hole, you wouldn't play golf for very long. I believe that it pays to look forward.

Gorat's Steakhouse
After our session in his offices, Mr. Buffett treated us to lunch at Gorat's steakhouse about 10 minutes away. Groups of students politely rotated to his table over the course of the meal. The drive over to the restaurant was when the lessons of the trip came together for me. Mr. Buffett took five of us with him in his car, three in the front, three in the back, he drove (no radio) and pointed out some Omaha businesses and landmarks on the way over. Mr. Buffett was so thoroughly disarming, friendly, and apologies for an overused cliché…'down to earth', that I had to remind myself who I was sitting next to. It felt like my friend's dad was driving us home from soccer practice.

The major themes Mr. Buffett spoke about--do what you're interested in, have passion, always act with integrity, don't follow the crowd, respect your community, the best ideas are the obvious ones…all crystallized in the car ride. The binding ingredient was the credibility that Mr. Buffett carries. He isn't living in a tower, surrounded by an entourage, dispensing advice on how a 'regular' person should conduct business and live life. Rather, during our session he was simply describing his own life, his experiences, what he's observed works and doesn't work in business and investing, and his concerns for the future. The effect on all of us was not merely admiration for Mr. Buffett, but renewed confidence and excitement in our own abilities to stay true to ourselves and define our personal visions of success. Perhaps the ability to inspire is Mr. Buffett's most valuable quality.

2004 Tuck Trip:

Trip Agenda:
8:15-9:45am         Nebraska Furniture Mart tour with Bob Batt, EVP
10am-11:30am      Discussion with Warren Buffett at Berkshire Hathaway, Inc.
11:45-2:15pm       Lunch at Gorat's Steakhouse with Warren Buffett
2:30-3:30pm         Borsheim's tour with Susan Jacques, President and CEO

Complete Notes:
Nebraska Furniture Mart and Borsheim's Visits:

"Sell cheap and tell the truth." -Ruth Blumkin, "Mrs. B", NFM Founder
"Take care of your customer, and they'll take care of you." -Ruth Blumkin, "Mrs. B", NFM Founder
"Successful business is about managing the moments of truth." -Bob Batt, EVP of NFM
"The key [in furniture retail] is not what you sell for, but what you buy for." -Bob Batt, EVP of NFM
""Most business people forget the importance of being friendly and building a rapport with customers." -Bob Batt, EVP of NFM
"Getting business advice from Warren Buffett is like getting physics lessons from Albert Einstein." -Bob Batt, EVP of NFM
"Stay within your circle of competence." -Warren Buffett
"Mr. Buffett likes businesses that are low-cost producers in industries where he believes there will be stable or growing demand into perpetuity. Nebraska Furniture Mart and Borsheim's are two prime examples." -Susan Jacques, President and CEO of Borsheim's

Buffett's Introductory Speech (paraphrased):
If there's one thing that you leave here with today, it should be this: And I'll start with a question to get to my point. If you could pick 10% of one person in this room to own or 'go long' for the next 30 years, who would it be? It wouldn't be the person with the highest IQ; it wouldn't be the star athlete; you would look for certain other qualities… And if you had to pick one person to 'short' for the next 30 years, who would it be? Now ask yourself why you have made those selections. If you've considered these questions properly, the person you've gone long is probably someone who is honest, courageous, and dependable; the person you've shorted is probably someone who is egotistical and likes to take the credit. The point is that success is mostly dependent upon elective qualities, not anything with which you are born. You can choose to be dependable or not. And it's not easy to change, so choose correctly now. Bertrand Russell once said, "The chains of habit are too light to be felt until they're too heavy to be broken." So ask yourself, "Who do I want to be?" At the end of this process you should determine that the person you want to buy is yourself. You all are holding winning tickets.

Q&A Session with Buffett (paraphrased):
Q: What do you believe are the greatest successes and shortcomings of capitalism?

A: Of the clear successes of capitalism, a greater abundance of things we want and need, and considerable improvements in the standard of living are good candidates. The standard of living in the U.S. has increased almost seven fold in the last century. One century is a speck on the greater timeline, and such an increase in productivity in the standard of living is surely unprecedented. Another noteworthy success of capitalism is that it is surely better than any alternative system at allocating resources and getting the best people to their most appropriate places. Consider this: in 1790, the first global census was conducted; there were 290m people in China, 100m in Europe, and 4m in what is now the U.S. Now the U.S. holds 4.5% of the world's population but is responsible for 30% of global GDP. I believe the great American book is yet to be written and will be the one that manages to capture how spectacular this growth has been; again 214 years is just an instant. When we think about such growth, I don't believe the causal factors are the people; it must be the system. The smartest people in Guam are as smart as the smartest people in Iceland are as smart as the smartest people in the U.S. Being born in the U.S. is more important to my success than anything that has happened since.

Q: Following up on the last question, what do you see as the shortcomings of capitalism?

A: Capitalism, like any system, is imperfect, but it's getting better and we're getting closer to goals such as equality of opportunity and learning how to deal with those that are hurt by the system. But capitalism is surely a free marketplace, a dog-eat-dog marketplace in many ways. And a marketplace implies losers. Early in my career, I bought a textile mill in New Bedford and the vast majority of the mill workers were Portuguese and could not speak any English. Over time, textile mills in other parts of the world were able to operate more efficiently and we simply could not compete. I had to shut the plant down and fire everyone; the workers were casualties of the system. You can't retrain or save those people; they'd had it. So the real challenge with capitalism is that you can't throw sand in the gears of greater output but you also want to care for the casualties. If you look around, it's clear that most people are burdened with real fear; fear is terrible and people shouldn't have to live with it. We should want to reduce societal fear of the things that they should never have to worry about - fear of going hungry, fear of going without medical care. These are the problems you should be thinking about solving.

Q: In your opinion, how should we take care of those who are harmed by the system, like your former textile mill workers?

A: I would start with the tax system. It would not be easy to implement, but some form of a steeply progressive consumption tax for the wealthy makes a lot of sense to me. For instance, when I fly my private jet I use hundreds of gallons of jet fuel but I'm not taxed at a higher rate. Flying in a private jet is usually unnecessary, excessive consumption and I should be taxed appropriately via a higher consumption tax. Here's another example: I could easily hire 20,000 people and pay them $50,000 per year to sit here and paint portraits of me all day in search of the perfect one. Not only would that be ridiculous, but it would pull 20,000 productive contributors out of system and I should pay highly for that. Other than figuring out ways of reallocating money to the 'bottom 20%,' we need to focus on finding ways to help people be useful and feel useful. This means finding people jobs, keeping them involved in society, and the like.
Q: I worked in the paper and packaging business this past summer and really enjoyed my experience. None of my classmates are interested in the paper business and the company I worked for has not had MBA interns in years. Clearly the paper business has its challenges, but do you see this as an opportunity or a roadblock?

A: Well, you've got it right that the paper business is challenged. High capital intensity, low margins, cyclical. It is a brutal business; no one cares who made the box their Dell computer came shipped in. In general, commodity businesses, even you're the low-cost producer, are difficult. There are generally two recommendations I offer to college and business school graduates. The most important thing about where you work is that you admire/love it. So it sounds like you liked your experience, and that's great. But we come to my second recommendation, which is to get on the right train; that is, moving in the right direction. There's no course in business school called "Getting on the Right Train", but it's really important. You can be an average passenger but if you get on the right train it will carry you a long way. You want to learn from experience, but you want to learn from other people's experience when you can. Managing your career is like investing - the degree of difficulty does not count. So you can save yourself money and pain by getting on the right train.

Q: With the recent changes in the global political economy and surges in terrorist activity, some would argue that uncertainty is increasing for all types of global markets. Where do you think things are heading and how should we deal with this heightened uncertainty?

A: Human beings don't change very much over time. But until recently, most dangerous people had limited ability to harm others in scale…. I think the terrorism issue is one problem to which there is clearly no solution. I'm confident that we'll solve everything else out - we making progress on cures for major diseases and all that - but terrorism, it seems to me, is impossible to solve because there will always be troubled people seeking to do harm to large masses of people. The intent is surely there. And knowledge of how to inflict terror is spreading. If you have intent and knowledge, the third aspect of terrorism is 'materials and deliverability.' This is harder to come by for the terrorists and what we should be working to prevent. If I knew we could devise a solution to terrorism, I would dedicate 100% of my foundation's funds to this effort; but I'm just not sure there's a solution.

Q: After all your accomplishments, what legacy do you want to leave behind?

A: I think an example is the best thing you can leave behind. Obviously, you want to leave the right example. I mean, Wilt Chamberlain's tombstone may say, "At last, I sleep alone," and that's probably not the example you want to leave. If what I've done with Berkshire Hathaway - running a unique and independent company in true pursuit of shareholder value - persists and people learn from it to improve the way they invest and run their companies, that would be a fine legacy to leave.

Q: When you consider an acquisition, what are the first things you look for in a management team?

A: Well, what do you look for in a girl? Seriously, you look for the logical things - passion, an interest in running the business, honesty. Such as, do they love the business, or do they love the money? This is the first filter. I mean real passion; Mrs. B ran Nebraska Furniture Mart until she died at the age of 103 - that's passion. If temperament is the most important personal asset in managing money, in business, it's passion. Secondarily, if you've been doing it a while, you get to know how to do it. But obviously no management team is perfect, so you're often stuck making a judgment call. You don't want to wait forever to find the perfect team. Incidentally, a friend of mine spent twenty years looking for the perfect woman; unfortunately, when he found her he discovered that she was looking for the perfect man.

Q: I have worked in various technologies businesses, but I understand that you do not typically invest in the technology sector. Why is that? How do you view technology as an individual and as an investor?

A: Technology is clearly a boost to business productivity and a driver of better consumer products and the like, so as an individual I have a high appreciation for the power of technology. I have avoided technology sectors as an investor because in general I don't have a solid grasp of what differentiates many technology companies. I don't know how to spot durable competitive advantage in technology. To get rich, you find businesses with durable competitive advantage and you don't overpay for them. Technology is based on change; and change is really the enemy of the investor. Change is more rapid and unpredictable in technology relative to the broader economy. To me, all technology sectors look like 7-foot hurdles.

Q: What do you think about all the money flowing into private equity and hedge funds? And do you see the future of buying businesses changing based on the considerable increase in private equity activity?

A: I'll tell you what I think of hedge funds. Hedge funds are a huge fad. You can pick any ten hedge funds and I'll bet that on average they will underperform the S&P over the next ten years. You can't create more money out of American business than the business itself creates; so most of these hedge funds will not be able to justify their outlandish fees over the long-term and they will disappear. On Wall Street, there are innovators, imitators, and total incompetents. I'm afraid that the majority of hedge funds around the globe now are run by the latter two categories of people.

Brief Reflections on the Trip:
On the plane to Omaha, I reflected on a question that Jack Byrne had asked some classmates and me during a phone conversation the prior night. Mr. Byrne is the former Chairman and CEO of GEICO, a Berkshire Hathaway portfolio company, and a close friend and colleague of Warren Buffett's over the past twenty-five years. He had opened our conversation by asking, "What do you hope to get out of your visit to Omaha? What is your goal for the trip?" Mr. Byrne continued, offering excellent advice on what he thought were the most poignant topics to discuss with Mr. Buffett; the purpose of the call was to help us get the most out of our time with Mr. Buffett. Thanks to Mr. Byrne, we did. I continued to consider Mr. Byrne's first question; what did I hope to get out of this chance to speak with Warren Buffett? It was clear to me that I was not traveling to Omaha for an autograph or to get a picture I could hang on my office wall; like many of my classmates, I had read a good deal of the Buffett literature and I was seeking a deeper understanding of Mr. Buffett's investment process: how does he value potential acquisition candidates? How is his investment process different from average active investors? How has he learned from mistakes along the way? During the course of the day we spent in Omaha, it became clear that Mr. Buffett doesn't have any "secret" answers to these questions. Looking back on it, it seems simplistic to think there might be secrets that would bring it all together or explain Buffett's unparalleled success as an investor. Secrets aside, what the Tuck students came away with was considerably more valuable; we left with a better understanding of how one of history's greatest business leaders and investors approaches the world, how he frames problems, and what he values. There were a few central themes that spun through our discussion with Mr. Buffett:

1. "Stay within your circle of competence." Clearly much of Mr. Buffett's success has stemmed from his disciplined focus on investing in businesses that he understands and avoiding those that he doesn't. He counseled us to ask questions constantly and never assume that we have achieved "expert" status in anything.

2. There's still time for you to choose your own path; tell the truth and be independent.
One of Mr. Buffett's central messages was that success is dependent upon elective qualities, not something anyone is born with. He reminded us that we each get to choose whether or not we're dependable, honest, and compassionate.

3. There's no free lunch.
With most things in life, those who work harder and think more clearly are ultimately rewarded. If you're willing to roll the dice on a business or life decision, then you should be willing to accept a wider range of outcomes, including failure.

4. "The meaning of life is to do everything you can to make sure the people you care about love you back."
On the return flight to Hanover, I reflected on the day with some classmates. Many said it was the highlight of their Tuck experience and worth several credits of business school education. I was thankful for the opportunity to spend time with Mr. Buffett and his colleagues and to learn from their experiences. Alice Schroeder, a former Institutional Investor-ranked insurance analyst at Morgan Stanley turned journalist (and currently writing the "final" book on Warren Buffett), was in attendance for much of the day. Alice has attended several recent visits from MBA students, and specifically commented that the Tuck students were "by far" the most prepared of any MBA group that has visited Berkshire Hathaway in recent years.