Speaking of Buffet

Berkshire-Hathaway’s annual shareholder meeting was held last weekend. Buffet invariably has a great line on any topic, and it looks like his designated successor right-hand man, Charlie Munger, is pretty good too. Here’s Warren and Charlie on expensing stock options:

On stock options

“… Write your congresspeople giving them your views on whether options should be expensed,” said Buffett. “It was a disgrace 10 years ago when Congress bludgeoned the SEC and the [Financial] Accounting Standards Board to override FASB’s decision to expense options. It accelerated the anything-goes mentality of the 1990s.”

Buffett then told the crowd a story about a 19th-century bill in the state of Indiana that sought to “change” the value of pi.

“It seems there was a fellow who discovered some new relationship between circumference and diameter that would help students learn a better kind of geometry, so he wrote a law to change the value of pi from 3.14159 etc. to 3.20. It passed the Indiana house — until the Indiana senate finally thought better of it.”

After the audience stopped laughing, Buffett came to his point about options, “The U.S. Senate concluded that the world was flat, because their their contributors paid them enough to say the world was flat.”

Then Munger weighed in: “It’s worse than that. Those people who wanted to round pi to 3.2 were stupid. These people [the opponents of expensing options] are worse than stupid. They know it’s wrong and want to do it anyway.”

Another good line arose in their discussion of CEO pay when Munger quipped, “I would rather throw a viper down my shirtfront than hire a compensation consultant” (compensation consultants are usually hired by the CEO and their prospects of being rehired in the future often depends in no small part on how much they recommend the CEO be paid.)