What makes Warren Buffett really special
Warren Buffett is still at it. Having received his COVID-19 vaccine recently, (two Pfizer shots according to Bloomberg), Buffett, 90, isn’t slowing down much (at least mentally) and seems poised to lead his company into the post-pandemic world.
In his highly-anticipated annual letter to shareholders, released at 8 a.m. ET on the dot this morning, Warren Buffett, one of the world’s richest people—equally blessed with wit and sagacity (more on that in a bit)—waxed on about the virtues (and blemishes) of the conglomerate he controls, Berkshire Hathaway, the nation’s sixth largest company.
Some of us were expecting, well, more news from Buffett today. A big acquisition. A scathing rebuke of crypto or SPACs. A succession announcement (more on that too.) But none of that.
Instead there was a tour of America through the companies that Berkshire controls. Some extolling of Berkshire’s Apple investment. A $24.7 billion stock buyback. Oh and the Berkshire annual meeting will be in LA this year, presumably to spare Buffett’s 97-year-old partner, Charlie Munger, from having to travel, and so Buffett and Munger can appear together unlike last year. But since the meeting is virtual, the change in geography isn’t particularly momentous for Berkshire shareholders.
The meeting will be livestreamed by your favorite business news website, (AKA Yahoo Finance), for the sixth consecutive year, on Saturday May 1st. (Be there!)
It’s been a relatively quiet year for Buffett. I’ve been communicating with him (and some other Berkshire folks) a bit during the pandemic, mostly about the Berkshire meeting, but that’s been about it. Buffett told me he wouldn’t be doing an interview with me this March before the annual meeting, (or any interviews with other news outlets for that matter), as he has done in previous years. I thought that was significant because Buffett is a creature of habit, but I guess not.
Buffett suggested that, "...with what I’m writing,” there could be a “record-breaking crowd” watching the livestream, and that “[CNBC’s] Becky [Quick] will be inundated with questions.” I’m not sure exactly what he was referring to, but I do know there will be a boatload of questions for Buffett and Munger, because there always are.
'Berkshire doesn’t need me'
Let’s shift gears here and talk about succession at Berkshire, because some were anticipating that Buffett would make an announcement in that department today. Instead he made no mention.
Last year the only other person sitting up on the stage with Buffett in the otherwise empty CHI Health Center in Omaha was Berkshire Vice Chairman Greg Abel. (Buffett’s daughter Susie, my wife and I were the only audience.) Charlie Munger would have been on the dais too, but instead stayed in California because of the pandemic. Ditto for Berkshire Vice Chairman Ajit Jain, who lives outside New York City.
It will be interesting to see who’s on stage with Buffett this year. It’s almost as fun as checking out the review stand at one of those Soviet Union military parades back in the Cold War, (though in this case it may be more a matter of the pandemic inhibiting travel than who’s up or who’s down.)
Discerning whether Abel or Jain will get the nod to succeed Buffett, has been a parlor game amongst Berkshire watchers since 2018 when they were both named vice chairmen. Along with many others, I think it may be the former because Abel, 58, is a decade younger than Jain who turns 70 in July. Also Abel is more, well able, (really has more experience) when it comes to mergers and acquisitions, which is a big part of Berkshire’s M.O. Finally the non-insurance operations, which Abel oversees, have historically accounted for some 80% of Berkshire’s profit.
Another horse in the race is Berkshire investment manager Todd Combs, 50, now also CEO of the company's insurance giant, GEICO. Or it could be an outsider, who knows.
Buffett has known for a long time that succession would be his most important job—or maybe his second most important, after first building Berkshire.
How long?
Well I realize I’ve been bugging Buffett about succession for almost 20 years. Amazingly, even then the question was old hat. This is from a story I wrote on Buffett from 2002.
“I ask him the inevitable question of succession. Or put less delicately, what happens when he dies? Buffett has been through this a million times, and he has a million lines—’I hope the stock doesn't go up too much’ being one of his favorites. But this time he turns serious. ‘Look, this company is going to outlast me for years to come,’ he says. ‘These businesses are going to run for 50 years. We have a great team of managers. They know how this company works. It's pretty simple really.’”
Buffett was 72 at the time. He turns 91 in August.
In 2012, I interviewed Buffett along with Fortune’s Carol Loomis, who edits Buffett’s shareholder letter and asked him about retirement:
“If I die tonight, tomorrow morning there will be a CEO named and the board knows exactly who it is. If for some reason that person is unavailable, they know another one. I mean, it's what we spend the majority of our time on.”
Note the italics I added: (“...what we spend the majority of our time on.”) In 2012. This, ladies and gentleman, was not a spur of the moment decision. It’s also critical to note that if Buffett had a plan in 2012 and a person in mind to succeed him then, it might be a different plan and person nine years later.
Here’s some more thinking on the subject from two years ago:
“The point is that Buffett’s had years and years to consider what happens after he’s no longer here. In fact, I can’t think of a single CEO, president or even dictator who’s had more time to plan for succession. (Well, maybe Fidel Castro, but he ended up just picking his brother!)"
"So here you have maybe the smartest executives on the planet, acutely aware of the stakes (he has some 389,000 employees, over a million shareholders and even more fans), with plenty of time to make what will amount to the decision of his lifetime. It’s a big deal, his biggest deal, and he knows it. I think that makes Berkshire succession a good bet.”
Buffett has been continuously assuring shareholders that he is not indispensable.
“Berkshire doesn’t need me,” Buffett told me last March in Omaha. “We’ve got somebody that’s extremely better than I am in many, many, many respects to succeed me.”
And this to shareholders: “Your company is 100% prepared for our departure."
And this from last August on Buffett’s 90th birthday where I noted:
“Of course everyone always asks what will happen to Berkshire once Buffett finally does retire or pass on. Buffett has heard this 90 million times, and for decades. And he’s been working on succession, and for decades. As my colleague Sam Ro points out, it’s almost as if Buffett wants us to focus on his succession plan because it draws more attention to Berkshire, something Buffett has been unapologetically P.T. Barnumesque about."
“And who’s to say the torch can’t be passed smoothly? Steve Jobs certainly did right by Apple when he picked Tim Cook, a point not lost on Buffett, particularly now that he owns $120 billion of Apple stock, worth almost 25% of Berkshire’s market value.” [BTW, that Apple holding has been reduced a bit, but those numbers are still pretty close.]
Significantly though, Munger said back in 2018 that “shareholders can probably expect another seven years for Mr. Buffett as CEO.”
Of course things could change, but if they don’t that would bring us to 2025. So we might have four more years of speculation!
Buffett’s sagacity
Let’s return to the shareholder letter. For those of us who count ourselves as Warren Buffett freaks, reading through his annual letter has become something of a late February tradition. As I said Buffett loves rituals, which in this case means a press release has already come out mid-week announcing the coming of the letter which drops like clockwork on Saturday morning. And then….WOOSH (as Tom Wolfe might write), thousands of us pore through it for the takeaways; breaking news and big Berkshire moves as well as manifestos on topics of the day.
Because Buffett has been mum since his four hour and 28 minute, straight, without a break, tour de force annual meeting soliloquy and Q and A last spring, there are a number of topics he hasn’t really weighed in on, including the election as well as the pandemic and the economic recovery.
Many of us would be curious also to hear from Buffett on Black Lives Matter and systemic racism, and Reddit, Robinhood and GameStop madness, SPACs, the resurgence of crypto, never mind the underperformance of BRK stock, plus buying back his own shares. All of which made this year’s letter and the upcoming meeting that much more anticipated.
We heard Munger’s views on some of these topics just this week when Buffett’s 97-year-old partner answered questions from Yahoo Finance’s Julia LaRoche at the Daily Journal Annual Meeting (VOD here.) Charlie most notably bashed Robinhood, saying the brokerage was essentially selling “gambling services” and that its business model is “a dirty way to make money.” Ouch.
Buffett didn’t weigh in much on Robinhood and the like, but I expect he will be asked about it on May 1st. Still, today’s letter, like the 55 that have come before it, contains all manner of deep thinking and analysis. And that’s why after speed-reading the letter along with everyone else this morning, I go back over it again, after the smoke clears for something deeper. Sort of like I come for the news, but I stay for the wisdom.
Which brings us back to something I noted in the beginning of this article about Buffett’s sagacity, because that’s at the core of what makes him special. It’s worth digging into that a bit, particularly as it relates to the rest of us less-wise, because wisdom is really what sets Buffett apart from other investors, CEOs and business leaders.
It seems to me that wisdom is the intersection of being smart and being right. It goes without saying that all kinds of smart people make the wrong choices. (Enron senior management comes to mind.) Other people do the right thing, but not because they are smart. (Like winning the lottery.) Being both smart and making the right decisions, and doing so consistently, is rare. Which speaks to a third element of wisdom, experience, which really means being smart and right over time.
Who else besides Buffett has wisdom? Well, Buffett’s partner, Charlie Munger, though it’s a slightly different flavor, and perhaps Buffett’s pal Bill Gates. There are others of course, maybe like Nobel Prize winner Jennifer Doudna, as well as writer Chimamanda Adichie, and maybe even National Youth Poet Laureate Amanda Gorman—though she’s still pretty young.
While these individuals get their due, I sometimes wonder if we in America don’t really revere wise people enough. We love our renegades and rogues, entrepreneurs, or “the crazy ones,” as Steve Jobs called them. There’s a narrative arc here too. Successful people often start off as rebels, and we love them. Then once they become successful, or too successful—John D. Rockefeller, Buffett, Gates, or Mark Zuckerberg come to mind—we tear them down. Not that in many cases they don’t deserve some tearing. It’s just that it’s become a naive, blanket reflex.
Social media now makes it that much easier to berate and belittle folks like Gates and Buffett. Again, I’m all for calling out hypocrisy and double-dealing, but some of the things trolls say about Gates and Buffett on Twitter reflects poorly on us as a nation and as people.
It’s probably the case that in China that wise people are revered more than rebels, even wise businesspeople, which may be why Buffett is appreciated in China in a way that I sometimes think he isn’t in the U.S.
Which isn’t to say there aren’t multitudes of Americans who respect and even cherish Warren Buffett. It’s just that I think it’s almost in spite of ourselves we do.
Thomas Tull, one-time Hollywood mogul, now part owner of the Pittsburgh Steelers is an unabashed fan though. Tull now operates a holding company, Tulco, structured a bit, well, like Berkshire Hathaway, (though Tull insists he’s not “in the same paragraph” as Buffett and Munger). In any event, Tull did get a chance to speak with Buffett not long ago and was on the receiving end of some wisdom.
“I had the privilege of sitting with Warren for almost two hours in his office in Omaha,” recalls Tull, “and there was a moment where I was describing the business model and how I thought about something, and I said, ‘we're trying to be smart about…’ and he stopped me and said: ‘I gotta be honest. For years, Charlie and I have always asked, ‘What's the dumb thing we could do here?’ And I kind of laughed, and he said, ‘No, I'm dead serious. We always ask. We don't want to be in the clever pile. What could we do here? That would be the dumb thing, and how do we avoid it?’ Honestly, it actually has had a fair amount of impact on the way that I assess and think about situations. It's something that I'll treasure forever.”
And wisdom Tull will never forget.
Here’s hoping that Buffett keeps delivering it. And that we appreciate it. Until 2025 and beyond.
This article was featured in a Saturday edition of the Morning Brief on February 27, 2021. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
.Andy Serwer is editor-in-chief of Yahoo Finance. Follow him on Twitter: @serwer
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