Wednesday, March 3rd, 2010
pictures with warren

Modest Mussorgsky wrote Pictures at an Exhibition as a tribute; it was structured as a series of piano pieces imagining a stroll though an exhibition of his late friend’s paintings.Never published in Mussorgsky’s lifetime, the composition didn’t hit the charts until it was orchestrated by Maurice Ravel.  Listeners looking for a somewhat edgier treatment can try the Emerson, Lake, and Palmer version. It’s time for us to take a similar journey.

The title of this posting refers, of course, to Warren Buffett.  I have written extensively about investment gurus in previous postings;the research puzzle | Here are some examples for would-be members of a guru’s gang. Buffett is in a class by himself.

In our gallery, we have many pictures of Warren.  Graham and Dodd disciple extraordinaire.  Investor without peer.  Cheapskate, as much as a multibillionaire can be.  Folksy, happy — the word “avuncular” seems to have been made just for him.  A lovable capitalist.

In fact, that list shows that our little exhibition doesn’t really have enough angst to it — and amounts to variations on a smiley-faced theme — that is, until you walk around the back of a two-sided canvas and see a profile of a predator.  You quickly search the catalog; how could this work be here?

Every now and again, a renegade does offer a more penetrating view of Buffett than the standard fare, going beyond the flat abstractions toward a portrait that features depth and nuance.The Pragmatic Capitalist | See, for example, this posting titled “The Many Myths of Warren Buffett.” Such renderings are important for us to see, because the complexity of Buffett and his creation, Berkshire Hathaway, are often overlooked amid the simplistic sketches.

Most ventures into gurudom include trying to copy an Old Master by using a paint-by-the-numbers technique.  Mimicry can be dangerous, as many holders of Coca-Cola can attest.  Thinking that Buffett’s stamp of ownership meant a stock could be bought and held, “Coke was it” for many in the Nineties.  But it became wildly overvalued, and value destruction was never quite so classic in its unfolding.  In 1997, Buffett called the company one of “the Inevitables,” destined to dominate its business for decades.  He was right on that front:  The Coke machine marches forward, but these many years later it still isn’t close to the price it sold for back then.  Perhaps Buffett used derivative strategies against the firm’s position to cushion the blows and, in any case, the damage was sheltered by his winners; those that adopted the idea as their own likely suffered a worse fate.

One of the difficulties in assessing Buffett’s work is that many of the pictures of Warren are pictures by Warren.  He has always been a master of the catchy phrase and the well-choreographed show.  As a legend, he gets to paint his own portrait most of the time, and the media can be as fawning as art critics are with the star of the day, distorting our perceptions of the man.  Is he the one who warns of the “financial weapons of mass destruction” or the derivatives savant?  Is he the “snatch ’em up when they are cheap” guy or the one who has bent value into many different shapes?  Is he the “buy America” cheerleader or someone who can talk his book in a way that belies how much his firm has on the line?

A significant element of Buffett’s greatness has been his malleability and willingness to address a complex world in new ways, which is quite apart from the iconic persona normally presented.  Do we see who he really is?

It is time to go to the last area of our exhibit.  Don’t walk down the hallway to the left.  That leads to the natural history wing and a diorama depicting the return of the sandhill cranes to the Platte River basin every spring.  Turn instead to the right, for photographic evidence of the other great migration to Nebraska — to see and touch the Oracle.  The throngs show up in May, but throughout the year there are smaller pilgrimages as well, usually of business students that Buffett has made time to see.

As you enter the cavernous final room, you witness from floor to ceiling thousands and thousands of those travelers, in individual pictures with Warren.  The snapshots are remarkable in their similarity, and a significant number depict the stranger in the photograph holding Buffett’s wallet.  The effect is dizzying, a montage of sameness that is an echo chamber for the eyes.

It is very hard to look past allegiance and admiration when doing investment analysis.  I don’t know whether Berkshire Hathaway is a buy today or a sell, but I know that if I keep staring at the pictures at the exhibition — or imagining myself in one — I’ll never figure it out.