Breaking Bread with Warren Buffett
We were among 20 lucky UC Davis MBA students selected for a fantastic opportunity to meet Warren Buffett, and tour a few of his subsidiaries in Omaha, Nebraska, in April 2017.
The Land of Couches, Mattresses, and Appliances
Nebraska Furniture Mart
The first day of a once-in-a-lifetime trip started bright and early at 8:00 a.m. sharp at the Nebraska Furniture Mart (NFM), a subsidiary of Berkshire Hathaway. NFM’s marketing director, Mark Hamilton, shared a brief history of the famous furniture mart, which is the largest home furnishing store in North America, selling furniture, flooring, appliances and electronics.
We learned that NFM was founded in 1937 by Rose Blumkin, who led the company until the jaw-dropping age of 103. Buffett loved how Mrs. B (as they call her) genuinely cared about giving her customers the lowest prices and how she was able to establish strong relationships with her employees. The tour started with a selection of mattresses and a joke about the mattresses endorsed by Buffett himself. Mark joked that sleeping on Buffett’s endorsed mattress will make you feel just as rich as him. A few of us definitely were tempted to buy a mattress that day!
After a good laugh, we moved to the recliners section where we gained knowledge about NFM’s mission to provide their customers with a wide variety of products at the lowest costs. It’s the same mission that Mrs. B held when she first opened the mart in her husband’s basement. The wide variety is a way to bring convenience to their customers so they don’t have to drive from store to store to compare their options. They can go to the NFM and see just about everything. With such a large inventory, our class wondered how they managed all their products and still be able to provide customer satisfaction. Mark explained that because they only have three locations with NFM being the largest, they are able to keep all their operations and storage local, resulting in higher inventory turnover and lower freight expenses.
Our last stop in the mart was electronics and appliances, where the NFM E-Commerce General Manager, Jeff Douglas explained how NFM maintains competitive pricing against online retailers by utilizing RFID technology. Every morning, their computer systems check the pricings of their competitors, and through the use of RFID tags and algorithms, the products are updated with new lower prices. The RFID tags are basically electronic price tags that have replaced the original paper tags and have saved the NFM team a lot of time. The team previously spent hours in the morning manually replacing all the price tags, but with RFID, the price tags can be instantly updated within minutes. But that’s not the only technology that NFM has implemented in their showrooms. They have also have an app that guides customers to products in the store, giving customers greater convenience. The tour was just a great taste of what NFM has to offer in selection and customer service, and we definitely know we’re coming back to get the full experience!
Baseball and Love with Warren Buffett
Finally, it was the meeting we had all been waiting for. At 10:00 a.m. we convened at Anthony’s Steakhouse for the Q&A lunch session with Warren Buffett. After we all settled in, Buffett sauntered in with a happy, excited look on his face, eager to talk to us. He jokingly offered us Coca Cola beverages (he holds a major stake in Coca Cola) and welcomed us to Omaha. There were eight business schools represented, 160 students total, and each schools’ group took turns asking Buffett questions ranging from topics of investing, to life advice, to how he runs his business.
One of the first questions was how Buffett evaluates his investments. His response was simple, yet profound. He said investing is simply the act of putting aside purchasing power today in the hopes that there will be more purchasing power in the future.
As an analogy, he cited Hall of Fame baseball player Ted William, who once said: “The most important thing in hitting is waiting for the right pitch.” As such, it is important for investors to know their perimeter of competencies, similar to a baseball batter’s strike zone, so there will be a greater chance at success. However, unlike baseball players, investors don’t have to worry about striking out when you are able to choose the companies you invest in. Therefore, the odds are always stacked in the investor’s favor and investors only have to wait for the right pitch.
When asked about his philanthropic ideals, Buffett revealed a more sentimental side. He identified that his first wife had a significant impact on how he donates to charity, while they compromised on when to donate. Buffett is very fond about the idea of compounding and would prefer to grow the money so they would be able to donate a larger sum in the future. However, his first wife stressed that a lot can be done with the money they donate even if they were to donate today. With the great love and respect he has for his wife, they were able to compromise, which resulted in his current plan to donate 5% of his wealth per year to the Bill and Melinda Gates Foundation.
He also said that you will move in the direction of the people you associate with and the most pivotal force in the world is unconditional love. He said the message you give as a parent is so important because you don’t have a reset button for the relationships in your life.
After the two-and-a-half-hour Q&A session, we had lunch with ample amounts of Coca Cola products. Shortly after, we were the first group to shake hands and take pictures with Buffett.
It’s safe to say that for all of us, it was an incredible experience to hear the wisdom and advice from Warren Buffett.
Warren Buffett Whiskey Cubes, Anyone?
After being graced by the humble presence of Buffett and our bellies full of delicious Omaha steak, we were off to Borsheim’s, a jewelry company that Buffett added to his holding company in 1989. We were greeted by the Director of Marketing Adrienne Fay and quickly learned the store held over 82,000 pieces of merchandise, ranging from $6 party napkins to 10-carat diamond earrings priced at $400,000. Borsheim’s focuses on providing a larger breadth of products with the highest quality and lowest prices for their customers. We were graciously invited to shop around with the same discount extended to shareholders and advised to check out their novelty products, such as their whiskey ice cubes with Buffett’s face on them. The whiskey cubes looked like a spitting image of Buffett and their products were unique and stunning.
Rubber Duckies and Party Favors
Oriental Trading Company
Our last stop of the day was at the Oriental Trading Company fulfillment center, which is a direct merchant of value-priced party supplies, arts & crafts, toys, novelties and school supplies. Our first impression was that the facility was HUGE—in fact, we found out the facility could host 12 football games simultaneously.
When we walked in, we were surprised with two rubber duckies on each of our seats resembling Warren Buffett and his partner, Charlie Munger. Steve Mendlik, the CFO/COO and acting CEO gave us a presentation on the fun facts of the facility, the history of the company, and the changes in ownership that lead to Berkshire Hathaway acquiring the company in 2012. The facility can amazingly hold over 1 million products and there is over 4.5 miles of conveyer belt within the facility.
We then split up into several groups to tour the facility. Gant conveyer belts moved party supplies in various directions. One of the operations manager explained to us about the new technologies they recently implemented to make their processes more efficient and how they are always looking for ways to automate. The fulfillment process involves complicated methodology using both large scale machineries and workers to process the products. It was interesting to see how packages are fulfilled at the different steps and the amount of merchandise that flows through the La Vista facility.
Painting the Town Red
On Saturday morning, our group volunteered at Girls Inc., a local Omaha charity organization that Buffett and his sister care greatly about. Girls Inc. helps girls from ages 5 to 18 of all backgrounds develop key life skills by providing a safe and nurturing environment for the girls to grow. We were met by C.T., the director of health services, who led us on a tour of the historic site that was previously an elementary school. There many classrooms and each one hosted important growth opportunities for the girls. For example, science labs where the girls learn to grow sustainable vegetables, yoga studios where the girls practice calm mindsets, and a lunch room where they learn how to cook healthy meals. C.T. said they teach the girls money management and how to budget by issuing “She Bucks” whenever they help out a friend or even if they just had a good day. It was heartwarming to learn of all the girls who passed through those doors and the gift of a laptop they gave to each girl who graduates to ensure they are prepared for college. Buffett even taught ukulele classes at the site for an hour a week for 8 weeks straight. It’s worth noting that he never missed a session and when told he only had an hour with the girls, he would joyfully stay to teach them past the hour.
After the tour, we painted the doors and benches in the outdoor area of the art classroom. It was a fun opportunity to bond with our fellow classmates while helping out a meaningful organization. It was hilarious to see some of us wearing rain ponchos to avoid getting red paint all over our clothes. We were initially only assigned four doors to paint, but our group had a lot of fun and wanted to help paint the other doors that stretched around the building. In no time, we had completed our task and asked C.T. to take a group picture with us. We said our thanks and goodbyes, and told her we would be back again to volunteer in future years.