Warren Buffett. Robert G. Hagstrom

Prologue

       Omaha, Nebraska. May 6, 2017.

      It's the first Saturday in May, and for those who follow Warren Buffett, that means just one thing: the annual Berkshire Hathaway shareholder meeting. In the investment world, there is nothing quite like it.

      For five straight hours (not counting a one‐hour lunch break), Warren, and Charlie Munger, chairman and vice chairman of Berkshire Hathaway, answer questions from shareholders in the audience, from finance journalists on behalf of their readers and viewers, and from securities analysts. No attempt is made to vet the questions ahead of time, and every one is answered fully and with candor, warmth, and the gentle wit that is the trademark of both men. There is nothing on the head table but water glasses, cans of Coke, See's candy and peanut brittle, and two microphones; no notes, no briefing books, just two men happy to answer questions and talk about their ideas. Some 30,000 people hang on their every word. I am one of them.

      Earlier that morning I had driven from my hotel to the Century Link Center in downtown Omaha, site of the event. The parking lot was nearly full. The 20,000‐seat arena was already filled with Berkshire Hathaway shareholders, with thousands more filing into the overflow ballrooms that surround the arena. Many had been in line since 4:00 a.m., waiting for the doors to open at 7:00. Once inside, many of them dash directly for the line of chairs set up at the 11 microphone stations scattered around the arena and the surrounding ballrooms; with any luck, the people sitting in those chairs will get a chance to ask their question.

There was a time I would have been in that early line with them. But I had stopped getting up at dawn years ago, and I was certainly too old to race down the grand hall, up the escalator then hop down the steps into the arena to grab one of the coveted seats. My routine was now more relaxed.

      Once inside, I took my time meandering around the giant exhibition hall, with its booths displaying all the businesses Berkshire owns. It's like an indoor shopping mall. You can stock up on snacks like See's Candies, Dairy Queen ice cream, and Coke. You can browse modular homes, boats and recreational vehicles. You can check out the new colors of Benjamin Moore paint and the latest style of Kirby vacuum cleaners. You can even sign up for GEICO insurance.

      Near 8:30 a.m., I head up to the second floor and walk into Grand Ballroom B, where I customarily take my seat. Several thousand chairs in the ballroom are divided into two sections, each with a massive television screen that will soon be showing the traditional Berkshire Hathaway movie before live streaming Warren and Charlie answering questions in the arena next door. I settle into the last row on the right‐hand side, stretch out comfortably, and smile.

      So far, everything seems exactly normal. There is no hint that at today's meeting, something remarkable will happen.

      The format for the question and answer period is well established. On one side of the main table, where Warren and Charlie sit, there is a station for the three journalists—Carol Loomis of Fortune, Becky Quick of CNBC, and Andrew Ross Sorkin of the New York Times. They will present questions from their readers and viewers. On the other side is a station for the equity analysts: Jonathan Brandt, research analyst at Ruane, Cunniff & Goldfarb; Jay Gelb of Barclay's; and Gregg Warren, senior analyst at Morningstar. And at those 11 stations, dozens of eager shareholders sit nervously in their chairs, mentally rehearsing their questions.

      Warren serves as master of ceremonies, calling first on one of the journalists, then one of the analysts, then one of the audience stations, in numerical order; then back to the journalists for the next cycle.

The morning session begins as usual. There's a question about driverless trucks and the threat it may pose to BNSF Railway or GEICO. Another question about Berkshire's reinsurance deal with American International Group. A discussion about technology stocks including IBM, Apple, Google, and Amazon. Warren was asked about the competitive nature of the airline industry, his thoughts on Coca‐Cola, and the continuing struggle with Kraft Heinz.

      Then, toward the end of the morning session, a shareholder at station 9 asked the 28th question, addressed to both Warren and Charlie. “The two of you have largely avoided the capital allocation mistakes by bouncing ideas off of one another. Will this continue long into Berkshire's future?” Although on the surface the question is about capital allocation, its focus is clearly on succession and who will be making capital allocation decisions in the future.

      Warren responds first. “Any successor that's put in at Berkshire, capital allocation abilities and proven capital allocation abilities are certain to be the uppermost in the board's mind.” He points out that CEOs of a great many companies get to the top from a variety of backgrounds, including sales, legal, or manufacturing. But once in a leadership role, the CEO has to be able to make the decisions on allocating capital. “Berkshire would not do well if somebody was put in who had a lot of skills in other areas but really did not have an ability to allocate capital.”

      What he said next made me sit upright in my chair.

      Warren begins, “I've talked about it as being something I call a Money Mind. People can have 120 IQs or 140 IQs or whatever it may be, and some of them have minds that are good at one kind of thing and some of them another. They can do all kinds of other things that most mortals can't do. But I have also known very bright people who do not have Money Minds and they can make very unintelligent decisions. That skill [capital allocation] isn't the way their wiring works. So we do want somebody and hopefully they've got a lot of talent. But we certainly do not want somebody if they lack a Money Mind.”

A Money Mind. I had never heard Warren say those words before. At that moment I knew that after all those years of studying Warren Buffett, I was only half right.