(BRK.A), (BRK.B)
Despite Warren Buffett being a spry age 84, and Charlie Munger a youthful 91, the question of the successor or successors that will lead Berkshire Hathaway continues to be on analysts’ and commentators’ minds.
“Both the board and I believe we now have the right person to succeed me as CEO — a successor ready to assume the job the day after I die or step down,” Buffett has said.
Now, in his letter published in the 2014 Annual Report, Charlie Munger seems to hint that Ajit Jain or Greg Abel could be in line to provide the leadership that will carry Berkshire forward.
“For instance, Ajit Jain and Greg Abel are proven performers who would probably be under-described as “world-class.” “World-leading” would be the description I would choose. In some important ways, each is a better business executive than Buffett.
And I believe neither Jain nor Abel would (1) leave Berkshire, no matter what someone else offered or (2) desire much change in the Berkshire system.”
While neither Buffett nor Munger has officially revealed the next leader or leaders of Berkshire Hathaway, both Jain and Abel would seem to fit the bill.
First, they would be promoted from inside the company, and thus are steeped in Berkshire’s unique corporate culture.
Secondly, they are both young enough to have long reigns at a company that certainly has no interest in a mandatory retirement age, and each of them would bring essential skill sets to the job.
Both have played important leadership roles heading two of Berkshire’s largest units.
Ajit Jain, as the man who has built Berkshire’s insurance and reinsurance empire, is better equipped than almost anyone in the world to take on the important task of making sure Berkshire’s insurance companies don’t try to grow by taking on undue risk.
Greg Abel, as the head of Berkshire Hathaway Energy, certainly knows about capital allocation. Under his leadership, BHE has grown into one of the world’s largest energy providers and a leader in renewable energy generation. He also sits on the Board of Heinz, and BHE includes Berkshire Hathaway Home Services, Berkshire’s rapidly expanding real estate sales unit. Both of these companies give him additional insight into consumer markets.
As for their ages, Jain is age 63, and Abel is only 52, so they hopefully would have many years to put their stamps on Berkshire.
So which one is it?
Why not both of them?
Well, while Buffett spoke in the singular, he has already stated that his replacement would probably see his various roles filled by several people.
The job of managing Berkshire’s $125 billion and growing stock portfolio will almost certainly fall to Ted Weschler and Todd Combs, who Buffett has been grooming by giving each a multi-billion dollar stock portfolio to manage.
Together, Jain and Abel would also be sounding boards and counter balances for each other in much the same way that Buffett has used Munger.
While Warren Buffett rightly gets the lion’s share of credit for Berkshire’s phenomenal growth, Charlie Munger’s sage advice has often been overlooked by the press.
It certainly hasn’t been overlooked by Buffett.
While the latest buzz comes from Munger, Buffett has repeatedly praised both Jain and Abel.
On Jain, Buffett said “It is impossible to overstate how valuable Ajit [Jain] is to Berkshire. Don’t worry about my health; worry about his.”
On Abel, Buffett has highlighted the impact that he and Mathew Rose (CEO of BNSF) have had on Berkshire, stating “I am also both proud and grateful for what they have accomplished for Berkshire shareholders.”
So, if Ajit Jain and Greg Abel are indeed the future leaders of Berkshire, shareholders can look forward to continued smart and capable leadership.
And we shouldn’t forget BNSF’s executive chairman Mathew Rose, who is only in his mid-fifties. He is certainly a prime contender as well.
© 2015 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.