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Let's Hear From Buffett's Big, Happy Berkshire Family

Tara Lachapelle
Let's Hear From Buffett's Big, Happy Berkshire Family

(Bloomberg Opinion) -- Warren Buffett has started allowing his successor candidates a higher profile internally at Berkshire Hathaway Inc. Now, he needs to do so publicly.

One month from Saturday, a Coca-Cola-sipping Buffett will take the stage at Berkshire Hathaway’s annual shareholder meeting alongside his right-hand man, Charlie Munger, and a box of See’s peanut brittle. Between bites, they’ll take questions from an audience of some 40,000 investors and adoring fans, who travel from all over the world to Omaha, Nebraska, to hear the billionaires’ business and investing wisdom. That’s the routine, as it’s been for decades. And I mean decades: Here’s the two of them doing exactly that in 1998, when Buffett was just 67 years old and Munger 74.

At its core, the event has become a celebration of Buffett himself, the now 88-year-old chairman and CEO of Berkshire. Aside from Munger, now 95, there are few others with whom Buffett will share this limelight. But I’ve said it before and I will again: It’s time that he expands the Berkshire VIP list, and next month’s meeting is the perfect opportunity. It would be a logical next step in what is already happening organically within the $502 billion conglomerate. 

Berkshire has numerous, disparate subsidiaries – See’s Candies, Geico insurance, Brooks running shoes, Fruit of the Loom underwear and Duracell batteries, to name a few of its more recognizable brands (though these are puny within the empire). One of my favorite stats about Berkshire is that among its almost 390,000 employees, only about two dozen work at the headquarters. But while synergy was never the goal in building his conglomerate, lately its executives have discovered the benefits of closer working relationships.

Top Berkshire executives – whose home bases are dispersed around the country and whose businesses wouldn’t necessarily have reason to interact – have started a new tradition of regularly convening in Omaha to share ideas and strategies, according to a Wall Street Journal article on Thursday. The collaborative efforts are “grass roots,” Buffett told the Journal. “I’m certainly glad to see it, but I don’t promote it.”

It’s an interesting bit of color on how the inner workings of Berkshire are beginning to change as new leaders take charge and prepare for a day when they aren’t working for the world’s most admired investor. Buffett has joked that he’s already semiretired, which isn’t even close to true – he’s busy searching up and down for an acquisition candidate that would let him put some of the company’s $112 billion cash hoard to better use. That said, he has handed over more operational responsibility to his potential successors in the last year, with heads of Berkshire’s subsidiaries reporting up to Ajit Jain and Greg Abel, rather than himself. 

Jain, 67, is the head of Berkshire’s reinsurance business who was promoted to vice chairman of all insurance operations in January 2018. Abel, 56, runs Berkshire’s energy division and was made vice chairman of anything non-insurance-related. Presumably, they’re being groomed to be the next Buffett and Munger. And yet, more than a year later, investors have still heard little from them. Todd Combs and Ted Weschler, Buffett’s lieutenants on the investing side, have similarly put their own touches on Berkshire’s market portfolio, but rarely interact with shareholders or the press. Ditto Berkshire’s roster of management atop its varied businesses.

Of course, Berkshire shareholders probably prefer to hear from Buffett, and many are quick to come to his defense when things like this are questioned. It’s a different standard to which these same investors would likely hold other CEOs who don’t have Buffett’s celebrity. But that’s exactly the point: A turnover at the top of Berkshire will be the most consequential moment in the company’s history, so Buffett should be doing more to help shareholders get comfortable with it before the time comes. It will make for an easier transition, and that’s just good corporate governance. 

I think some, including Buffett perhaps, don’t fully appreciate what it will mean, for example, when at a future Berkshire meeting, the greeting is, “Hi, I’m Greg Abel, CEO of Berkshire Hathaway.” Whether or not future leaderships sit for an hours-long Q&A like Buffett and Munger do, they’ll have to answer to shareholders. It won’t hurt to have built up some familiarity and trust on their own.

Berkshire, despite all its pieces, runs like a well-oiled machine, and that’s probably not going to change after Buffett is gone. Instead, the biggest quandary of a Berkshire without Buffett is what happens with its war chest. The amount of cash it has is both an asset and a burden – even for a dealmaker like Buffett. He’s uncharacteristically turned to small share repurchases and unusual stock picks as he struggles to find Berkshire’s next megadeal. 

The notion of sharing the stage with Abel and Jain in May – and even offering the microphone to others in management – isn’t about wanting to see Buffett go. Quite the opposite: It’s about making sure his presence will still be there someday even when he’s not. 

To contact the author of this story: Tara Lachapelle at tlachapelle@bloomberg.net

To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tara Lachapelle is a Bloomberg Opinion columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.

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