Buffett guests realize there is no free lunch

All for charity

Buffett's power lunch, traditionally held in a high-end New York steakhouse called Smith & Wollensky - which itself donates $10,000 to the cause for the pleasure of hosting the event annually - is legendary in the world of finance. When it started in 2000, interested parties simply had to fork out a paltry $25,000 for the food and the table talk. Today the price has risen more than 138-fold.

Given the fragile state of the US economic recovery - unemployment rose to 8.2 percent in May - and Buffett's announcement that he had been diagnosed with prostate cancer, the scale of this year's winning bid astonished many observers and bucked a run of low bids in the five-day auction process.

Observers adopted a cautious wait-and-see attitude as the bids rose slowly during the first four days of the five-day event. The last bid on June 7, the penultimate day of the auction, was just $410,000.

However, the proceedings saw a dramatic change on the final day as the amounts offered surged in the last 15 minutes of bidding, from $1,234,467 to a record-breaking $3,456,689 when proceedings wrapped up at 7:30 pm on June 8. Thus far, the only information available about the winner is their eBay ID, s***7 and their nationality is unknown.

Duan Yongping, the founder of both Subor Electronics Industry Corp and BBK Electronics Group, submitted a winning bid of $620,100 in 2006 and became the first Chinese to join the charity lunch.

In a video interview with the Internet portal Netease conducted soon after the meal, Duan said he did not think it was accurate to say that he had spent $620,100 on the meal.

"Actually no one paid for the lunch, except maybe Mr. Buffett himself because he tipped. It was more of a charity activity. He was helping the Glide Foundation (a nonprofit organization that provides aid for the homeless in San Francisco). We just had the chance to sit down and chat. It wasn't a business deal, so you can't say it was a loss or a gain," said Duan, an active philanthropist in China and co-founder of a nonprofit charity called Enlight in the US.

"And you cannot simply say that it was or wasn't expensive. I once did a rough calculation of Mr. Buffett's average hourly earnings and the number was around $3 million. My $620,100 secured lunch with him for more than three hours," said Duan.

Admitting that the lunch turned out to be very rewarding, even though he had not had any specific expectations, Duan said that afterwards his investment strategy remained almost unchanged.

Activity in China

Buffett once told investors, "The 19th century belonged to England, the 20th century belonged to the US and the 21st century belongs to China. Invest accordingly." However his own business activity in China has been limited, so far, and many investors are waiting for him to take his own advice.

Buffett has previously invested in the oil and gas producer PetroChina, and Berkshire Hathaway currently has a 10 percent interest in the aforementioned BYD, whose name stands for "Build Your Dreams".

In March this year, he announced plans to invest in a corporate aircraft joint venture in Zhuhai, Guangdong province, but that seems to be the limit of his involvement in the world's second-largest economy.

Despite this, the famously unostentatious Buffett is a familiar figure to many Chinese, partly through his visits to the country that have raised his profile with the general public and investors alike, and partly because of his, some would say bizarre, prerecorded appearance on China Central Television's New Year Gala, where he played the ukulele and sang a song about railroads.

However, apart from financial gain and a possible career boost - Ted Weschler, a 50-year-old former hedge-fund managing partner from Charlottesville, Virginia, who won the lunch auction in both 2010 and 2011, joined Berkshire Hathaway this year to help oversee the company's investment portfolio - most investors who expressed an interest in joining Buffett's table see it as an opportunity to learn from a world-class master of investment.

"It would definitely be good for me, if I ever get the chance to listen to Buffett's opinions face-to-face," according to Lu Wei, president of Mingyuan Investment Consulting Corp, who said that Buffett's investment strategy is not complicated, but few people really understand it.

Liu Jialei, a private investor who followed this year's lunch auction avidly, said few of the bidders in the initial auction 13 years ago would have guessed that the price would skyrocket. "I don't think that there is any real secret to Buffett's success. He just is able to stick to his simple investment principles," opined Liu.

Not every observer is convinced by Buffett, though. Wu Xiaobo, a Chinese finance writer, said the auction was like a show. "To understand Buffett's investing wisdom, reading a couple of books carefully is a better choice than a lunch. Very few substantial changes have happened after the bid winners had lunch with Buffett," he commented.

Meanwhile, Zhou Yixing, a Chinese observer whose blog is published on the website of the Hong Kong-based Phoenix TV, wrote that the true focus of Buffett's lunch auction should not be on the price, but on its nature that perfectly combines a commercial auction with social charity.

That view was amplified by the US investment legend Michael Steinhardt, who in April bashed Buffett and his hedge fund on a program on the US business TV channel, CNBC. "[Buffett's] reality is he is the greatest PR person of recent times and he has managed to achieve a snow job that has conned virtually everyone in the press to my knowledge," said Steinhardt.

China to take up the reins?

Despite the skepticism in some quarters, in the past 13 auctions Buffett has raised more than $11.5 million for the Glide Foundation, making the charity the biggest winner. Combining commerce platforms with charity works is becoming a growing practice.

Tyler Spalding, a corporate social responsibility professional from Edelman, the public relations company for eBay, which conducted the Buffett auction, said that he believed commercial platforms should empower and encourage people to support the causes they most care about.

"We think they are a really innovative way for nonprofits to leverage their high-profile relationships to raise unrestricted funds to support their mission," said Spalding.

That message appears to have gained some momentum in China. Umiwi.com, an emerging web TV company, initiated a similar lunch auction in 2010, selling a three-hour lunch date with Shi Yuzhu, the CEO of the software maker, Giant Interactive Group.

The bids eventually peaked at 1,899,999 yuan ($298,300). The funds raised were donated to the Happiness Project, a charity that helps to fund poor mothers in Southwest China.

Wang Lifen, editor in chief of Umiwi, said that the auction was held primarily to raise funds for charity, but admitted that it had brought in good publicity for the fledgling website. The auction has now become an annual event. Yuan Dibao, the president of a construction company in Shanghai, won in 2011 with a bid of 1,960,000 yuan.

In the light of China's economic rise during the past decade and the growing number of extremely wealthy individuals in the country, the stage may be set for them to organize their own "Buffett auctions" and emulate the US billionaire in more than just financial power.

Contact the reporter at maliyao@chinadaily.com.cn

Wang Jingshu in New York contributed to this story.