4 Key Takeaways From Omaha

Berkshire Hathaway Annual General Meeting: Insights on Investing in Celebrity Brands

Sandbox Studios had the privilege of attending the much-anticipated Berkshire Hathaway 2024 annual shareholders’ meeting in May, alongside 40,000 other investors, luminaries, and industry titans – including Tim Cook and Bill Gates. Warren Buffett, the revered Oracle of Omaha and CEO of Berkshire, held court for over six hours, offering his wisdom on topics ranging from his partnership with Charlie Munger to the strategic direction for Berkshire’s staggering $182 billion cash reserve.

This year’s AGM carried a poignant note, marked by the absence of Buffett’s longtime confidant and vice chairman, Charlie Munger, who passed away just shy of his 100th birthday, ending a remarkable partnership spanning over six decades.

Buffett’s musings on the day traversed a wide spectrum, delving into discussions on Tesla’s advancements in self-driving technology, the implications of artificial intelligence, and the urgency of addressing climate change. Amidst these reflections, there were invaluable insights pertinent to investing in celebrity brands. Here are our key takeaways:

1. Patience:

A recurring theme throughout Buffett’s discourse was the virtue of patience in investment decisions. He underscored the significance of waiting for the right opportunity, emphasizing Berkshire’s cautious approach to deploying its substantial cash reserves. This principle resonates deeply with Sandbox Studios, reflecting our own strategy of deliberate investment. Since our inception in 2021, we’ve deployed only 32% of our fund, guided by a commitment to discerning celebrity deals.

The landscape of celebrity investments is still evolving, with the trend of celebrities taking equity stakes gaining momentum only in recent years. However, success in this realm demands more than just star power; it requires astute patience and strategic alignment. With every outlier celebrity-brand success such as Kylie Cosmetics and Casamigos lies a graveyard of celebrity brand failures.

Waiting for the stars to align (pun intended) is just one piece of the puzzle, but an important foundational element to investing in this asset class.

2. Know Your Domain:

Buffett fielded several questions about artificial intelligence. While he stated the technology is profound he reemphasized that he “doesn’t invest in what he doesn’t understand, and AI would fit that definition”.

As much as we would love to ride the AI wave, or invest in the latest SaaS platform, it is not our experience. We rely on our 20+ years of building brands through the strategic execution of other people’s IP – specifically celebrity talent and brand partnerships.

As investors, we wish we could partake in some of the burgeoning industries that will undoubtedly create enormous wealth for many investors – but with little direct experience, it is a black box.

We want to be the best at what we do, not lucky in what everyone else does.

3. Leadership Matters:

Buffett’s adage on the importance of capable management resonates profoundly in the realm of celebrity brands. Effective leadership transcends mere business acumen; it entails adeptly managing both the business and the unique dynamics of celebrity talent. Sandbox Studios values not only competent managers but also those with exceptional interpersonal skills and emotional intelligence.

As Buffet stated at the AGM, “You can’t turn a bad business around with an excellent manager, but you can make an average business great with an excellent manager.”

This quote lends itself particularly well to celebrity-led brands because a good manager doesn’t just have to be good at managing the business, they also have to be great at managing the talent.

It is incredibly challenging to motivate people who don’t need to work for a living – because most people do need to work.

This is not the case with celebrities.

Not only are they often independently wealthy through whatever made them famous in the first place, they are also given a hundred new opportunities and new deals to make money a month. To keep a celebrity engaged, active, and motivated to continue to promote the brand beyond a potential exit in the future is no mean feat – and is often undervalued when conducting diligence for celebrity brands.

Sandbox Studios not only favors companies run by good managers, but we also favor good managers who have excellent communication skills and impressive emotional intelligence.

4. Seize Every Opportunity:

This picture says a thousand words. Warren Buffett and Charlie Munger knew the benefits of product placement and awareness – and never missed an opportunity.

When it comes to celebrities, they have thousands more opportunities to promote their brand than the average company. If they don’t use every chance they get, then it’s not worth the trade off in equity.

Finally, a huge thank you to our LP Thareef who not only brought this pilgrimage to our attention but supplied us with info, event lists, and even went so far to shipping us actual books to make proper use of the trip. We are lucky to have such a great LP base!