Warren Buffett on Who Should Replace Warren Buffett
The annual Berkshire Hathaway shareholders meeting held Saturday was a colossal event, which packed hotels and overwhelmed Warren Buffett’s two favorite steakhouses, as over 40,000 people celebrated Buffet’s 50-year run as head of the conglomerate.
Buffett, who is 84, fielded tough questions from journalists, including who would succeed him as chairman and CEO at Berkshire Hathaway. The conglomerate’s market capitalization is estimated to be over $353 billion, and its 60-plus subsidiary companies include GEICO Auto Insurance, Brazil’s 3G Capital, and International Dairy Queen Inc.
Although Buffett did not give hints as to who he had chosen, he did name several qualities his successor would need to have. For starters, Buffett emphasized that the candidate needed to have experience in operations.
“I would not want to put someone in charge of Berkshire with only investing experience and not any operational experience,” he said, explaining that through operations he had gained knowledge that staying only in investments would not have given him. Someone with experience in investing and operations would be ideal, according to the Wall Street Journal’s live blog.
Some speculated candidates include Matt Rose, executive chairman of railroad Burlington Northern, Berkshire’s largest non-insurance unit; insurance executive Ajit Jain, who joined Berkshire 30 years ago; and Berkshire Energy chief executive Gregory Abel, who spoke about renewable energy at the meeting.
Buffett talked about Ted Weschler and Todd Combs, two investment managers he had selected to stay involved after he leaves. He called them “very, very smart about investments as well as business.”
“They understand the reality of business operations and on top of that, they have qualities of character, which are terribly important to me and Charlie,” he added.
Character and trustworthiness were other qualities the candidate absolutely needed. Buffett and Vice Chairman Charlie Munger spoke of how although they met dozens of investment managers with excellent records, they lacked the important qualities the company chairs were seeking.
Munger, who fielded questions alongside Buffett, agreed, saying that the candidate needed more expertise than the average portfolio manager to head Berkshire.
“We really want people who do more than their share,” said Buffett. Weschler and Combs both help Berkshire make deals and manage the conglomerate’s stock portfolio.
Buffett’s comments Saturday echoed his sentiments about strong character expressed in a special letter written last year to shareholders, which also looked ahead at Berkshire’s next 50 years.
In that letter, Buffett said the Berkshire CEO had to be “a rational, calm, and decisive individual who has a broad understanding of business and good insights into human behavior.”
Buffett added, “He can’t help but earn money far in excess of any possible need for it. But it’s important that neither ego nor avarice motivate him to reach for pay matching his most lavishly-compensated peers, even if his achievements far exceed theirs.”
Those who know Buffett personally have agreed in past statements that the corporate culture of Berkshire is largely ethical, while lapses were the exception, not the rule.
In a Stanford Business School panel last February, Brad Kinstler, CEO of See’s Candies, one of the first companies Berkshire purchased, compared the culture to a football field, where you’re in the wrong if you go outside the lines.
“Warren’s philosophy would be, ‘We want to play down the center of the field. We don’t want to get anywhere close to the out-of-bounds lines. We simply don’t need to, and for our reputation, it’s best that we don’t,'” Kinstler said, according to a Stanford news article.
The conglomerate’s executives also give their employees a large degree of autonomy, to which they partly attribute Berkshire’s success. Buffett expressed confidence in the letter that the conglomerate would live on after him, thanks to the good business practices already embedded in the ranks of his employees.