Chris Davis, A Model for A Well Lived Investing Life

My biggest takeaways from his interview with William Greene about Berkshire, Trust, Dale Carnegie, and Staying Away From Weakness.

In October of 2021, Chris Davis was named to the Board of Directors of Berkshire Hathaway.

If you need a seal of approval in the world of business, this is it.

But for someone who comes from a family with investing in their blood, holds a large personal stake, and has a proven track record for being an incredible steward of capital for families, he was made for it.

The investing started with his grandfather, Shebly Callum Davis who turned $50K, which he borrowed from his wife, into a $800M fortune over his lifetime.

His father Shelby Davis, started David Advisors where Chris is currently the Chairman. If you had invested 10K into the Davis New York Venture Fund at inception in 1969 it would be worth ~$3.3M today vs $2.2M if the same amount was invested in the S&P.

Their family is the subject of the biography, The Davis Dynasty, which chronicles 5 decades of investing and is a favorite book in value investing circles.

Chris sat down for a podcast interview with William Greene and spoke about a wide array of topics and if you have the time I encourage you to listen to the entire thing.

But for those who want just the pearls, here are my favorite takeaways.

Sitting In A Boardroom with Buffett

We all see the happy grandfather-like figure on stage at the annual meeting. But what is he like behind closed doors?

The way a board meeting works at Berkshire is a little opposite to the annual meeting. During the AGM, shareholders get to pose questions for Warren to answer. During a board meeting, it’s the other way around, He tells you what he is thinking or surfaces any problem with a subsidy that the board should know about.

Chris outlines two big benefits of giving the mic to Warren and letting him go:

“One, Warren tells you what he is focused on and he thinks in this moment, at this meeting, these are the issues that he thinks are very important for Berkshire. He obviously takes questions as, as long as anybody has them.”

“The second thing that I would say is… from the outside that there is no CEO in America that thinks about risk in a more profoundly broad way than Warren and Charlie.”

We have seen in the annual meeting Warren touches on the tones of ordering the affairs of Berkshire in a way that they can sustain any eventual reality but it is always with a soft touch.

During a board meeting, you get it straight.

Warren talks about capital markets shutting down, nuclear weapons, and bioterrorism for example. The low-probability events that don’t take up much thought from the CEO are front and center in the mind of Buffett.

He wants Berkshire to be resilient in all situations.

“it is an incredible privilege to just see that mind at work in that way”

Berkshire has been able to thrive during the market meltdowns because it focuses on the downside and prepares accordingly. If Warren wasn’t so focused on it their growth would not be anything like it has been.

I think we could all prepare a little more for downturns so when they arrive we can make the most of them.

The Job of Berkshire’s Board After Buffett

What Warren and Charlie have built will not be replicated.

It would be irrational for the board to continue to try and match the past performance. An impossible feat that even the maker might not be able to do over again.

With this in mind, the focus shifts to preservation and protection.

A large number of investors have most of their net worth in Berkshire Stock which influences the partnership ethos of the company that will outlive it’s creators.

If this was their only asset what plans would they put in place to protect it?

“John D. Rockefeller was a bigger, larger than life….. But you didn’t need another one after that. What you needed was people that were protective of the assets and the culture. And I think that is how I think of Berkshire, and how I think of the board’s job and the management’s job.”

How to Architect A Life Around Weakness

One of the biggest lessons Chris has learned from Warren and Charlie has been to make the effort to know yourself and then architect your life so your weaknesses do not slow you down.

He relates it to a story about Tiger Woods.

Woods had a reputation for not doing well in sand traps. With the British Open on the horizon, a course known for having the worst bunkers, Woods went to the range and practiced his drives and low irons.

The press wanted to know why was he practicing his irons and drives instead of his sand shots. To which he replied,

“I don’t want to go into the sands”

Woods went on and played the entire British Open without hitting a bunker one time.

We can observe this type of mental framework from Warren and Charlie too.

As Chris observes it, Charlie is known for his Bluntness.

But this trait might not have served him well as the CEO of a Fortune 500 or manager of a ton of people. This role could have proven to be difficult for Munger, which is why Charlie has structured his life the way it is.

Warren has done the same.

He is an amazing communicator and exudes warmth and love. But he has a hard time with the hard conversations of firing or replacing people. So he rarely does it.

They both have structured their lives to minimize the effect of their weaknesses.

“I think there’s a very powerful lesson for people to carry out is not to necessarily obsess on your weaknesses but to do your best to structure your life so that you can avoid a lot of them.”

Carnegie is Not Dead

There is a portion of the world that believes the famous book, “How to Win Friends and Influence People” conveys a message that lacks integrity.

Chris disagrees.

A major principle of effective communication is to make sure you are not giving someone a message you did not wish or intend to communicate to them. You might win an argument but in the process, you humiliated the other person and now they resent you. Was this effective?

Effective communication is about building goodwill with the person you are working with.

Warren learned how powerful this “goodwill” can be by watching his father, a congressman, work his way around the world attempting to build it.

“Imagine the record that he’s achieved with almost no enemies. Can you name another fortune that was built where there wasn’t a significant consensus or a significant view in the world?”

It is not a joke when Warren shows off his Carnegie certificate to others.

It is one thing to be a good investor. But, the hidden variable in the success of Warren and Berkshire has been his ability to communicate effectively. One does not build a business around, “picking up the phone” unless you cultivate the relationships around you to the point where they want to become your partner.

This type of outcome wouldn’t happen if Warren wasn’t a student of Carnegie.

Trust is a Superpower

Business doesn’t operate in a vacuum.

It is a world built on handshakes and relationships. Without this underlying virtue for one another bureaucracy grows, there are extra costs, and every move made is double-checked to make sure one is not taking advantage of the other.

Imagine the energy wasted.

“I think Berkshire is an example that all of the foregone due diligence trips and investment banking and auditors and so on would not have produced an outcome that would have raised returns or avoided fraud. In a way, trust ended up being a superpower on it.”

Cultivating this web takes a lifetime and the way to do it is by going first.

The best way to be trustworthy is to deserve to be trusted and then go trust someone else. It is in the nature of man to want to reciprocate.

We can see how this has played out with Berkshire as they operate with a tiny number of people at headquarters, delegating the majority of the day-to-day decisions to the operating managers.

Imagine if Warren wanted to be involved in all of the decision-making. It would be impossible and slow everyone down.

A large amount of bureaucracy in the system equates to a low level of trust. Berkshire is built with the complete opposite view in mind.

A Life Well Lived

“I was riding a bike and had a little flashlight and I was coming up to the house and the lights were all on inside. So I could see in the windows and, what I saw was my three kids and their significant others and some friends of theirs and they’re all sitting at our dining room table laughing and carrying on and that moment of feeling like I’d almost don’t need to go in.

I would mark it at that particular moment. One of the happiest moments of my life, just looking in that window and seeing all that.”

I hope one day to be in the same situation.

I highly recommend you check out the entire interview with Chris. The Richer, Wiser, Happier podcast is a favorite of mine and this is a great episode.

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Please be advised, Wall St Gunslinger is not an investment adviser and does not give personal investment advice. All content is for educational and entertainment purposes only and should not be interpreted as anything other than such. Investing entails a lot of risks and should be managed appropriately. Please do your own research and consult with an investment professional before making any investing decisions. Thank you.