Warren Buffett will address his followers on Saturday for the first time since the U.S. began implementing the state-by-state lockdowns that have upended the economy and life as we knew it.
Technically, it’s the annual Berkshire Hathaway Inc. shareholder meeting, though much will be missing from this year’s event — people, for starters. Even so, the main draw of the weekend lives on: the chance to pick one of the most brilliant brains in business.
In a live-streamed interview that evening, Buffett will answer questions submitted by investors, including presumably how the conglomerate’s various lines of business have been affected by the pandemic. But what listeners are really tuning in for are the Oracle of Omaha’s broader views on the world during a time like this.
Here are five questions for him:
1. Is it time to name a successor?
Or has he essentially done so? For the first time, Buffett is doing the Q&A jointly with Greg Abel, a Berkshire vice chairman, rather than his usual sidekick, Charlie Munger, who is 96 years old and resides in California. Buffett, who will turn 90 in August, even joked in his February letter to shareholders that he and Munger are in “the urgent zone.” All signs point to Abel being the next CEO of Berkshire, but Buffett hasn’t spelled out the succession plan yet. It was going to be hard enough for shareholders to get comfortable with anyone other than him someday being the steward of their money. With all the uncertainty caused by the pandemic, now is a good time for Buffett to clarify why Abel is best suited to manage the conglomerate, even through a crisis like this.
2. Could the concept of a “new normal” alter what kinds of investments Berkshire makes in the future?
If Buffett isn’t using his enforced isolation at home to hunt for another elephant-sized acquisition, is that because the COVID-19 shutdowns are causing him to reevaluate what types of businesses will recover? Or is he perhaps grappling with the potential for long-term changes in customer behavior? Taking a stake in the Kroger Co. supermarket chain late last year proved to be prescient; buying preferred stock in oil producer Occidental Petroleum Corp. not so much. Those circumstances would still seem to be temporary. Air travel, on the other hand, is an example of an industry where a return to normal could take awhile — or never even come.
3. Will the airline industry ever rebound?
Buffett has a tormented history with airlines. After getting burned once by a US Airways investment, Buffett swore off the industry in 2001, saying: “Now if I get the urge to invest in airlines, I call an 800 number and I say: Hello, my name is Warren, and I'm an air-o-holic.” Well, Buffett apparently lost that number and went all in on airline stocks in 2016. Berkshire is now the largest shareholder of Delta Air Lines Inc., the second-largest owner of United Airlines Holdings Inc. and Southwest Airlines Co., and has the third-biggest stake in American Airlines Group Inc. They’ve all plunged this year as the pandemic wreaked havoc on air travel — or any travel at all.
On March 10, during a Yahoo Finance interview, Buffett said he “won’t be selling airline stocks.” That was before the shutdowns. A few weeks later, Berkshire reduced its Delta and Southwest positions, although it’s still the No. 1 and No. 2 investor in each. An update on his thinking would be especially illuminating now.
4. COVID-19 has forced the nation to reassess and recognize what it means to be an “essential” worker. Does that warrant new ideas for solving wealth inequality?
Buffett himself employs a lot of essential workers: They’re manning freight trains that are still pushing goods around the country, as well as manufacturing Duracell batteries. Lubrizol — which makes chemicals used for everything from coating car interiors to yoga pants — has helped to produce hand sanitizer, while Fruit of the Loom switched to making protective face masks. Berkshire is also the largest shareholder of food giant Kraft Heinz Co., one company helping to keep supermarkets stocked.
In that same March interview, Buffett discussed the wealth gap, saying it’s a reflection of the fact that workers are rewarded based on the skills that are valued by the market:
You get this pushing of extreme rewards to people who are very, very good at something the market demands. And people demand entertainment. They demand people apparently that arbitrage securities. There's certain specialties.
But they demand lots of basic things, too, as this pandemic has shown.
Even though Buffett agrees with letting the system function the way it does, “we don’t want people left behind,” he said. The billionaire has often advocated for an expansion of the Earned Income Tax Credit as a better way of putting more money in the pockets of low-income families than through hiking the minimum wage. That’s because the latter could backfire by increasing unemployment. The EITC just doesn’t have the same ring to it as $15, and it’s not as easily understood as earning more per hour. Buffett has also called for higher taxes on the ultra-wealthy, like himself.
5. Do America’s best days still lie ahead?
Buffett has seen his share of crises, and they’ve never seemed to shake his optimism that the U.S. will continue to prosper in the long run. “America’s best days lie ahead,” is a mantra he often repeats in his annual letters to shareholders. But Buffett has been unusually quiet during the pandemic — in terms of a lack of both TV appearances (perhaps due to virus fears) and deal activity. Investors could use a reminder of how the country’s biggest cheerleader and hungriest dealmaker feels about its long-term prospects. Is it possible they are changing?
Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.
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