Book Excerpts

Berkshire After Buffett – An Excerpt from The Complete Financial History of Berkshire Hathaway

The Complete Financial History of Berkshire Hathaway distils over 10,000 pages of research material, including Warren Buffett’s Chairman’s letters, Berkshire Hathaway Annual Reports and SEC filings, annual meeting transcripts, subsidiary financials, and more. The analysis of each year is supplemented with Buffett’s own commentary where relevant, and examines all important acquisitions, investments, and other capital allocation decisions.

Read an excerpt:

 

The question of Berkshire Hathaway after Warren Buffett has been asked since the beginning of his tenure running the company. It had more validity during the early years when a large part of the conglomerate was comprised of stocks, which Buffett managed. Back then, the question wasn’t age but the proverbial bus.

What would happen if Berkshire’s shareholders woke up one morning to find Buffett no longer able to run the company? No one can argue that Berkshire would have been quite different if Warren Buffett left the scene prior to, perhaps, the mid-2000s.

As Warren Buffett instead entered his tenth decade of life as this book was being finalized, different questions face Berkshire Hathaway and its shareholders. Buffett turned 90 years old in 2020. Biology guarantees Berkshire will one day be without the man synonymous with creating one of the world’s most admired businesses.

Buffett guaranteed the conglomerate had a bright future by hiring skilled investment managers, continually seeking companies with sound economics, and widely sharing his business principles. After all, as Buffett himself said, “If a business requires  a superstar to produce great results, the business itself cannot be deemed great.”

Management Succession

Not much will change in the immediate period surrounding Buffett’s departure from Berkshire. Management of the individual business units will continue unchanged. The question of who will take over Buffett’s role has already been partially decided. Buffett’s role as chairman, CEO, and chief investment officer will be split into three parts:

1. Non-executive chairman : Buffett has strongly suggested his son, Howard Buffett, be chosen for this role. His sole purpose will be to ensure that the culture of Berkshire remains intact. That includes serving as a safety valve of sorts in the remote chance that the next CEO is unfit for the job.

2. One or more investment managers : The addition of Todd Combs in 2010 and Ted Weschler in 2011 largely completed this step.

3. Chief executive officer : The addition of Greg Abel and Ajit Jain in 2018 as vice chairmen supervising non-insurance and insurance operations, respectively, solidified the suspicions of outside observers that one of those two men would succeed Buffett.

The background and skill set of Greg Abel suggests the board will choose him as CEO. The primary reason is his extensive experience with capital allocation. During his time running Berkshire Hathaway Energy, and later as vice chairman overseeing non-insurance operations, Abel oversaw many acquisitions. He is also much more comfortable in the spotlight, and about ten years younger than Jain, which would give him a longer run at the helm. Jain, by contrast, is a brilliant handicapper more comfortable evaluating insurance risks (though he is also one of the best executives in the world, having overseen acquisitions of his own).

 

To read more, order your copy of The Complete Financial History of Berkshire Hathaway today!

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