Wesco 2008 annual meeting

My wife and I began attending Charlie Munger's Wesco annual meeting last year, since I have relatives living in the area and since we were such big fans of Buffett's Berkshire Hathaway annual meetings. It's held in Pasadena, at the Pasadena Center, in a tent holding around 1000 attendees. The venue is similar, with microphones setup to allow anyone in the audience to ask a question. Munger kicked off the meeting with his own comments, which lasted about an hour. The session usually runs a few hours, from 2-5PM.


Below is a summary of some of Charlie's opening comments and answers:

• Berkshire Hathaway working model - Munger talked at length about how well Berkshire's version of the conglomerate model works so well and how no one else has been able to duplicate it. He reminded us that Berkshire only has 19 people in headquarters, and that the 'provinces' were kept happy without any envy or without retaliation against HQ. He mentioned GE as a company that also works well, but with much more central control and overhead.
• Derivatives - Munger definitely felt the use of derivatives was unnecessary, dangerous, and out of control. He felt the accounting industry was lax as well as the regulatory authorities. He thinks there will be a 'huge mess' and that the unwinding process will be very difficult.
• Investing returns - Munger thought it was amazing, 'hog heaven' as he phrased it, that returns had been so strong the last 25 years, especially with hedge funds/private equity, but did not feel it was sustainable, and thinks expected returns of around 4-5% are more likely.
• Management - He thought management at many financial firms had a tendency to follow the crowd and took unnecessary risks.
• Executive Compensation - Munger has felt for several years that executive compensation was excessive, and that executives should purposefully not fight for every last dollar.
• Berkshire Hathaway Earnings - Whitney Tilson got up to remark that at Berkshire's annual meeting how no one asked about the first quarter earnings, which had just been released the day before. Munger remarked that this was an example of the bond shareholders had with management, then went on to make some remarks about Berkshire's business.