When the third richest person in the world predicts that Hillary Clinton is going to run for the presidency in 2016 and win – people listen. And when that person is Warren Buffett, the influential chairman and CEO of Berkshire Hathaway – one of the world’s most successful companies – people listen no matter what he says.
It wasn’t always like that, of course. For the first 30 or 40 years of his career Buffett, 84, did not really go out of his way to cultivate a public personality or make political pronouncements that today tend to turn into instant fodder for the media and everyone else. He stuck to his financial knitting.
That’s a good thing, observes Lawrence Cunningham, whose new book, Berkshire Beyond Buffett: The Enduring Value of Values plumbs the depths of the $300 billion conglomerate’s corporate culture and the qualities of integrity, autonomy and “sense of permanence” that Buffett and vice chair Charlie Munger have developed over the years.
“Berkshire is a gigantic diverse organization with many priorities and issues that have nothing to do with political discourse,” said Cunningham in an interview with The Fiscal Times. “Buffett has had a pulpit for years but didn’t use it, until pretty recently. That’s a wise model to follow. Modesty, reticence and circumspection are appealing traits in leaders. Those qualities allow the person to grow in the job and focus on business operations without distractions.”
Cunningham, editor and publisher of The Essays of Warren Buffett: Lessons for Corporate America since 1997, says all of this is particularly important for succession. Whoever takes over Berkshire when Buffett steps aside “should begin as Warren did. Over time, as people succeed and mature, they earn the privilege of speaking out. It’s always interesting then to hear them speak their minds and evaluate their positions.”
Not that anyone can easily replace the iconic Buffett. “The company cannot be replicated and the man cannot be replaced,” Cunningham declares in his book. Yet it’s also a company that “promises to survive the man” because of its deeply ingrained and highly developed culture.
No successor has been publicly identified – as favorite a guessing game as that’s been among Berkshire aficionados – but Cunningham emphasizes the well-known tenet that Buffett’s job will be split three ways, into chairman, portfolio manager and chief executive.
“For chairman, Warren has said publicly he’d like that person to be a member of the Buffett family, and everyone understands that to be a reference to his son, Howard, who’s been on the board since 1994. Howard has been there for 20 years and would primarily sustain the Berkshire culture, and I think he would be very good at that. He gets that.”
The portfolio manager job may have several candidates, namely Todd Combs or Ted Weschler. “These are two people Berkshire hired as co-managers of the common stock investments” and they’re being groomed, says Cunningham, to take over that part of Buffett’s job, though it’s going to be tough. “It’s less and less easy to outperform the market.”
The third job of chief executive may be the hardest of all to fill, notes Cunningham. “It would be hard for even a person who’s smarter than Warren, because he was there at every acquisition. He knows every bit of Berkshire history because he built the whole thing – no one has that information.”
Whoever will have the new job of overseeing “this galaxy is at a huge disadvantage compared to him,” says Cunningham. “That doesn’t mean someone else can’t do it. But that person will not be able to do it as well as Warren automatically. It doesn’t have anything to do with skill sets. The key job will be to appreciate that the structure of the company is deeply autonomous with heavy decentralization, and the person in that job will not be in charge of operational decisions or even strategic decisions for the operating companies, but high-level oversight and a determination of what’s to be done with the capital of each of the subsidiaries.”
Buffett has said that Greg Abel, who runs Berkshire Hathaway Energy, and Matt Rose, who runs Burlington Northern Sante Fe (BNSF) railway, are “extraordinary managers.” They’re “proven successful managers at great industrial organizations and terrific leaders,” says Cunningham.
Berkshire has not absolutely identified the future leaders for good reason, says Cunningham. It’s to “discourage the notion there’s an heir apparent. That’s a business judgment that’s totally fair and respectable. The company doesn’t want to identify a number two. It wouldn’t work at Berkshire. It’s better for them to say, ‘Look, when and if the time comes, it could be this person, it could be that person.’ Decisions could also change over time depending on circumstances.”
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