Buffett vs. Bitcoin: A Tale of Corporate Governance and the Rise of the Bitcoin Standard

Warren Buffett has an annual general meeting (AGM) in Omaha, Nebraska, specifically for Berkshire Hathaway shareholders. This event, coupled with his annual letter, represents the sole occasion for external investors, or “partners.”

Over the years, the gathering has grown substantially. Last year witnessed an estimated 40,000 people flooding Omaha, Nebraska, leading to the event gaining recognition as the ‘Woodstock for Capitalists.’

For those unfamiliar with the experience, when Warren Buffett steps onto the stage, a standing ovation ensues, creating an atmosphere that seems to stretch for an entire day.

In FMT’s view, he unquestionably merits the accolades. I believe Buffett’s most notable legacy, when the history books are written, will be the best execution of sound corporate governance for outside shareholders in the world.

If a benchmark were ever set for corporate governance, it was Buffett who established it, elevating it to a level that nearly every company, both past and present, struggles to reach.

I contend that Buffett’s alignment of interest, coupled with his investment acumen, is the primary reason behind the hour-long standing ovation (allow me some embellishment) from the tens of thousands attending his AGM.

Most individuals rarely delve into a company’s annual and quarterly reports, let alone the proxy materials. Berkshire Hathway’s proxy materials stand out, providing a unique perspective compared to any others by a large margin.

Buffett’s policy of never granting stock options and maintaining an annual income of $100,000, despite overseeing one of the world’s largest companies, underscores his commitment to shareholder value.

Most of his wealth stems from owning Berkshire stock, constituting 99% of his net worth. Those adopting a similar approach to their salary and reinvesting in Berkshire Hathaway over the years would have enjoyed the same value accrual benefits that Buffett has amassed over decades.

Furthermore, anyone investing in Berkshire Hathaway shares experiences a nearly 1:1 equitable and proportional distribution of Berkshire’s value accrual.

Buffett’s controlling stake extends the requirement for other corporate officers to operate on an equal playing field as well. Board members receive modest compensation, with a prerequisite to have the majority of their net worth in Berkshire’s stock. Compensation for board duties is virtually non-existent, except for reimbursed expenses.

This ethos ensures value accrual for insiders aligns equitably with every outside stakeholder of Berkshire Hathway, a guiding principle behind the structure of FMT Advisory’s business.

In simpler terms, if one seeks fair treatment and an equitable distribution of value accrual from a company, Berkshire Hathaway sets the standard, akin to the Bitcoin standard.

What? A Bitcoin standard?

Yes, the Bitcoin standard.

In Bitcoin, all wealth and value accrual are 100% equitable. Someone investing $1 billion in Bitcoin receives the same proportional value accrual benefits as someone allocating $1 to the monetary network.

With more long-term certainty than Berkshire, Bitcoin imposes a hard cap of supply—no more than 21 million bitcoins will ever exist.

Given there are no insiders in Bitcoin that receive salaries or stock options, and the monetary network lacks other value accrual costs to coin owners, there is significantly less friction before value accrues compared to even Berkshire (assuming demand surpasses supply).

Global enthusiasts who truly comprehend Bitcoin likely outnumber Berkshire fanatics by a large margin, possibly because Bitcoin is global while Berkshire isn’t. Bitcoin, being a global monetary network, and Berkshire, a company, are undoubtedly distinct assets. Nevertheless, in a scenario of demand exceeding supply, it becomes challenging to surpass the value accrual benefits of Bitcoin for most companies, even if governed and managed as effectively as Berkshire Hathway.

Hence, in a mere 15 years, Bitcoin has exceeded Berkshire’s total market value, a feat that took decades for Berkshire to achieve its current market cap. From my perspective, it won’t be long before Bitcoin laps Berkshire more than just once.

Due to its global nature for monetary protection (wealth savings), I am confident that if Satoshi Nakamoto held AGMs, they would need to select one of the largest venues globally.

I have little doubt that the standing ovation as Nakamoto took the stage would endure as long as Bitcoin has been in existence.