If Warren Buffett is to be believed, his announcement after Saturday’s annual meeting of Berkshire Hathaway that he plans to step down as chief executive at the end of the year was news to all but a few close members of his family.
Neither non-family directors, nor the tens of thousands of shareholders assembled at the annual “Woodstock for capitalists” in his native Omaha had an inkling about the precise timing.
They probably should have done. His longtime business partner and acerbic sidekick at the Omaha meetings, Charlie Munger, died in 2023, aged 99. In February, in his most recent letter to shareholders, Buffett wrote: “At 94, it won’t be long before [chosen successor] Greg Abel replaces me as CEO.”
“Buffettologists”, as close observers of his every move style themselves, have been speculating and worrying about succession for at least a quarter of a century. I wrote an analysis headlined “Shareholders ponder life after Buffett” after the 2003 Omaha gathering, when Buffett was a 72-year-old stripling. I quoted his remark that if he started “losing [his] marbles”, it would be up to his family to convince him to step down. “Probably it will take the whole damn family,” he added.
The inevitability of his departure has done nothing to mitigate the shock. Among Buffett’s most devoted followers, it is comparable to the recent death of Pope Francis.
Buffett’s letter to shareholders, while not referring directly to Donald Trump’s second term as president, did appeal to “Uncle Sam” to spend judiciously the billions of tax dollars Berkshire sends to the US Treasury: “Never forget that we need you to maintain a stable currency and that result requires [his emphasis] both wisdom and vigilance on your part.”
At a time of extraordinary geopolitical and economic change around the world, the same question shareholders were concerned about in 2003 still applies: can anyone replicate Buffett’s performance? The core class of Berkshire “A” shares closed on Friday at a record $809,808.50, up 20 per cent on the year. When Buffett gained control of what was then an ailing textile manufacturer in 1965, the shares were worth less than $20.
With the self-deprecation that has always marked him out from self-aggrandising fellow CEOs, Buffett has long attributed much of this success to the “ovarian lottery” that saw him born white, male and relatively well off, with the ability and capacity to invest at an auspicious time for US capitalism. He has likened the effect to a snowball — the title of Alice Schroeder’s excellent 2008 biography — that “just happens if you’re in the right kind of snow . . . You’d better be picking up snow as you go along, because you’re not going to be getting back up to the top of the hill again. That’s the way life works.”
But this self-analysis underestimates the steely persistence, perfectionism, focus and intellect that lie behind his public folksiness. For instance, when he invested in Goldman Sachs, helping to shore the investment bank up during the 2008 financial crisis, he did so on terms highly favourable to Berkshire, exemplifying one of his best-known maxims: “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
Such bons mots are likely to be recycled for as long as financial markets exist, though we have almost certainly read the last of the wonderful letters to shareholders that remain the best, and best-written, guide to Buffett’s philosophy of life and investment.
Replicating the philosophy will, however, be a vast challenge. Whatever the talents of Greg Abel, selected in 2021 to step into the biggest shoes in US investment history, and the board’s commitment to guarding the same culture and ethos, Berkshire is no longer the nimble vehicle that Buffett and Munger used to sweep up undervalued corporate assets in the last quarter of the 20th century. At times, even they struggled to find investments big enough to “move the needle” for their shareholders, as Buffett put it last year.
Still, volatility has always created opportunities. Evidencing that he has not in fact lost his marbles, Buffett is leaving behind a vast, and growing, war chest of $348bn. At some point, he said on Saturday, Berkshire would be “bombarded with offerings that we’ll be glad we have the cash for”.
As Buffett’s snowball rolls to a halt, his successors have the resources to create a new one. Will they have the momentum, the conditions and the skills to direct it as the Sage of Omaha has?