Subject: DJ Up And Down Wall Street
This is from my online broker’s newsletter.

DJ Up & Down Wall Street: Warren Buffett Is One Of a Kind. But He Has Brothers in Arms. -- Barron's


By Andy Serwer

May has started off as a momentous month, with milestones -- expected or otherwise -- coming and going nearly every day. Refreshingly, many of these occurrences aren't coming out of Washington. (Sorry, Elon.) Instead, these are narratives tied to larger-than-life, iconoclastic business leaders who've made their careers out of upsetting the status quo, going their own way -- and even helping out the little guy.

Firework No. 1 is Warren Buffett's retirement bombshell. "There won't be another Warren," says Seth Klarman, CEO and portfolio manager of value-focused hedge fund Baupost. "Warren could remind people that through thick and thin you should try to hold on, and that America is a great place to invest."

There's more here, though, than just Buffett exiting the stage, including a shared birth date of storied rival firms and the passing of the godfather of shareholder activism. By the latter, I'm referring to Robert Augustus Gardner Monks, whose obituary notes that his family line "was intertwined with prominent Boston clans such as Peabody, Lowell, and Gardner." But Monks was best known as the founder of Institutional Shareholder Services, and while some take issue with what ISS has become, it ushered in a new sensibility of holding CEOs and companies accountable.

Did you miss celebrating the 50th anniversary of Mayday this year? We're referring to May 1, 1975, when the New York Stock Exchange eliminated fixed-rate broker commissions. Traditional broker-dealers predicted the apocalypse: According to a Fairfield University white paper, " Morgan Stanley chairman Robert Baldwin, a former Navy lieutenant, ominously labeled the coming deregulation as Mayday -- the international distress call," and the name stuck. (For more on Mayday, pick up a copy of The Last Days of the Club, by Chris Welles.)

Mayday didn't sink any Wall Street aircraft carriers like Morgan right away, but it did rock them. Deregulation also supercharged a minnow of a firm, Charles Schwab, which became one of the biggest success stories on the retail side of the business. Not long ago, founder Charles Schwab waxed about his firm's origins (which now has some $10 trillion in assets) in a short film. "That was the magic day, May 1," he said. "That democratized [the business] and brought it open to anybody. If you got 100 bucks, you're in."

"We do consider this to be our 50-year anniversary," Schwab CEO Rick Wurster told me. "I spoke to Chuck over the weekend, and he shared some history about Mayday. Then he told me about three or four ideas he thought we should be doing. Chuck is 87, but don't try to play golf against him. He'll take money off you."

Fifty years ago, Schwab described himself as "a pariah" who begged friends and family to invest in his company. Those who didn't pony up "regretted it later on," he said with a chuckle. Today Schwab is the company's second-largest shareholder, with 5.8% of its shares outstanding, worth some $8.9 billion.

Who is Schwab's largest shareholder? Not surprisingly, index fund behemoth and competitor Vanguard Group, which coincidentally also celebrated its 50th anniversary on May 1. Vanguard is the house that Jack Bogle built, another giant in the investing business.

Bogle, who died in 2019 at age 89 and was the great proselytizer of indexing, not only created what became Vanguard -- which also has $10 trillion in assets -- but jump-started the entire indexing business. Two memorable Boglisms on indexing: "Don't look for the needle. Buy that haystack," and "Don't just do something. Stand there."

Besides focusing on indexing, Bogle's other genius was structuring Vanguard as an investor-owned enterprise, kind of like a local food co-op, which produces no profits but instead plows money back into the business and lowers fees, which has forced other fund companies to cut fees to compete. One analysis calculated that this "Vanguard effect" has saved investors over $1 trillion.

I first met Bogle back in 1991. I thought Vanguard -- then with $80 billion under management -- had become a Goliath. Little did I know, it was just the beginning -- though what Bogle said to me might have given me a clue. "The marketing strategy of my company just happens to be giving shareholders the best deal possible," he said, "and it works wonderfully." Like Schwab, Bogle built an incredible business -- helping Joe investor.

Warren Buffett was a big fan of Bogle's -- and the feeling was mutual. Bogle complimented Buffett on his investing prowess and doing business "the right way," while Buffett called out Bogle at a Berkshire Hathaway annual meeting and wrote about him as well.

It might seem odd that Bogle and Buffett were so simpatico, given what they espoused and practiced could be considered opposites. Bogle said picking stocks doesn't work, and Buffett did just that, and it did. While I suspect Bogle would say that Buffett was the exception that proved the rule, Buffett and Bogle do have at least one common cause, or concern -- that being fees, which Buffett wrote about in the 2016 Berkshire annual report.

"For decades, Jack has urged investors to invest in ultra-low-cost index funds....He has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned," Buffett wrote. "He is a hero to them and to me. Over the years, I've often been asked for investment advice....My regular recommendation has been a low-cost S&P 500 index fund. To their credit, my friends who possess only modest means have usually followed my suggestion. I believe, however, that none of the mega-rich individuals, institutions, or pension funds has followed that same advice when I've given it to them. Instead, these investors politely thank me for my thoughts and depart to listen to the siren song of a high-fee manager."

Speaking of Buffett, let's return to May's biggest moment: his announcement at his shareholder meeting that he will be stepping down as CEO at the end of the year. "The timing was a surprise, typical Warren Buffett," Ron Olson said to me. The Berkshire meeting was consequential for Olson, too, as he concluded his service on the Berkshire board after 28 years. A name partner of Munger, Tolles & Olson (the late Charlie Munger being another one), Olson had acted almost as a consigliere to Buffett.

"Warren has always had so much respect for his shareholders and has been consistent with his behavior from the get-go," Olson said. "I thought the announcement at the meeting was absolutely consistent with that. Instead of getting some cold public notice, the shareholders, many of whom had been with Berkshire and Warren for decades, were there for that moment."

"I got choked up," says Tom Gayner, CEO of Markel Group, a holding company that resembles a mini Berkshire Hathaway, and who's gone to every Berkshire meeting since 1991. "It's as if you were at Yankee Stadium for the Lou Gehrig moment."

Trying to simply sum up Buffett isn't easy, because perhaps the defining facet of the man is that he is both simple and complicated. "When you think about the 10 things about Warren that made him special, you keep coming up with new ones," says Klarman. "It's almost like peeling an onion. The deeper you go, the more layers you find."

At my prompting, Klarman began to peel. "The unique thing is probably the combination," he said. "He ran the overall company and he was a great investor, which he was wired to do. His shareholder letters, with financial pearls of wisdom, historical allusions, and jokes, and a clarity of thinking that was not available anywhere else, that raised everybody's game. Then there's his patriotism.

"He also didn't do this so he could live an opulent life," Klarman said. "He felt guilty about flying a NetJet, and he owned the company. All he's really done with his money is give it away. In a way, he popularized buying stocks. People emulated that and then some of them wanted to give money away, like Warren. And then he formed the Giving Pledge to get other wealthy people to do philanthropy, and went internationally with it. He just lived by example -- a really good example."

For Gayner, sports metaphors come to mind: "Buffett had a 60-year run of double-digit compounding returns," he says. "That's a record I don't think will be broken. It's like Coach John Wooden at UCLA when he won 10 NCAA basketball titles. Maybe unbreakable, but does that mean other coaches can't try? Same thing with Buffett. We should keep trying to learn from him; embracing rationality and acting with a long-term time horizon. To me, it's certainly the path and the way."

Speaking of basketball, you may have missed that Gregg Popovich, 76, coach of the NBA's San Antonio Spurs, also announced his retirement -- the same weekend as Buffett. As the NBA's all-time winningest coach, with five league titles, Coach Pop is the Warren Buffett of pro basketball. Beyond just the winning, the Spurs have been incredibly consistent and a team-first, everyman's club. Popovich, who led the Spurs for nearly 30 years -- the longest-tenured head coach for any major sports league in the U.S. -- is plain-spoken, sometimes humorous, and famous for not putting up with phonies. He helped put his medium-market city on the map.

Sound familiar?

In basketball, as in business, the vast majority of leaders are either just mediocre -- or worse. Only a tiny handful are truly exceptional, decade after decade. This May, it's time to consider how truly special some of those outliers have been.

Write to Andy Serwer at andy.serwer@barrons.com