{"id":571,"date":"2012-05-01T05:00:56","date_gmt":"2012-05-01T12:00:56","guid":{"rendered":"https:\/\/masonmyers.com\/?p=571"},"modified":"2015-01-28T12:58:46","modified_gmt":"2015-01-28T20:58:46","slug":"berkshire-ceo-succession-warren-buffett","status":"publish","type":"post","link":"https:\/\/masonmyers.com\/berkshire-ceo-succession-warren-buffett\/","title":{"rendered":"Berkshire Meeting Week: Berkshire CEO After Warren Buffett"},"content":{"rendered":"<p>I believe the next CEO of <a href=\"http:\/\/www.berkshirehathaway.com\/\">Berkshire Hathaway<\/a> is hiding in plain site.\u00a0 There is a person that is\u00a0very obvious, but no one (as far as I have read) has mentioned him as a potential candidate.\u00a0 Tomorrow, I make my prediction.\u00a0 Today, I have fun thinking through the decision as a mini case study in the culture of Berkshire Hathaway.<\/p>\n<p>Most of the time, we only know of a decision that Buffett faced after the fact.\u00a0 We can then analyze the decision, but it is\u00a0sort of impossible to think in an unbiased way about whether we would have bought the Washington Post or See&#8217;s Candies or Burlington Northern because we know how the story unfolds.\u00a0 For the CEO decision, however, we all know that Buffett is thinking about it and we can make a prediction without the bias of knowing what happens.\u00a0 It is\u00a0more fun to try and match our thinking with Buffett&#8217;s in this circumstance\u00a0&#8212;\u00a0it is the power of the case study.<\/p>\n<p>As Buffett and the Berkshire board considers whom should be the next CEO,\u00a0 I think it is the ultimate statement about the culture of Berkshire Hathaway.\u00a0 Here are some things about the Berkshire culture that I think are particularly relevant to the decision:<\/p>\n<ul>\n<li><strong>The culture is not one where the business unit managers aspire to Buffett&#8217;s CEO position<\/strong>, so looking at internal managers is looking in the wrong place.\u00a0 When asked about Berkshire&#8217;s history of retaining talented managers even when they are very wealthy or could easily gets jobs elsewhere, Buffett has often said that they are happiest in their current positions and furthermore, they are not looking to get the Berkshire corner office.\u00a0 It is my guess that this description fits Ajit Jain perfectly (I don&#8217;t know him and am just guessing) &#8212; probably the manager having the most similar mental outlook on allocating capital to Buffett.\u00a0 I don&#8217;t imagine that he would ever want the Berkshire CEO job.\u00a0 He has probably built his small team in Connecticut to be exactly how he wants it.\u00a0 He probably could have had his pick of a number of financial services positions throughout the years.\u00a0 The Berkshire CEO position\u00a0would\u00a0be much less fun and interesting for him.\u00a0\u00a0On the other hand, would\u00a0Jain do it if the Berkshire Board asked him to?\u00a0 My guess is absolutely yes.<\/li>\n<li>Buffett likes best a situation where you can<strong> judge the track record of the company and of the management together<\/strong>.\u00a0 He knows that picking a great CEO for a particular business\u00a0out of a list of great CEO&#8217;s is still a decision that is very difficult &#8212;\u00a0better to\u00a0assess someone with a track record in the same position.\u00a0 So, I would guess that Buffett would prefer to not\u00a0pick a great manager of\u00a0an existing Berkshire business\u00a0(Jain, Tony Nicely, or Matt Rose) and place him in a new situation as Berkshire CEO.\u00a0 By the way, this is also why he is basically trying out Todd Combs and Ted Weschler as Berkshire money managers\u00a0before giving them an even bigger portfolio of money.\u00a0 And, the David Sokol situation, in my opinion, turned out great for Berkshire because he was tested in the limelight of Berkshire for a couple of years before cracking (better that he stumbled now than later).\u00a0 So, how does he find someone with a track record running something similar to Berkshire?\u00a0 He can get close (find a\u00a0CEO of a large\u00a0conglomerate) and someone who knows Berkshire well, but this\u00a0will be\u00a0the most difficult characteristic for Buffett to find.<\/li>\n<li>The new CEO needs to understand the\u00a0<strong>seriousness of Berkshire&#8217;s prior\u00a0commitments to acquired companies<\/strong> not to re-sell, dipose, or &#8220;surprise&#8221; those companies &#8212; he needs someone strong enough to know this is non-negotiable.\u00a0 In the 1985 annual report, Buffett wrote &#8220;I have told [our managers] that there will be no surprises, and these agreements put Berkshire&#8217;s signature where my mouth is.\u00a0 That signature also means the managers have a corporate commitment and therefore need not worry if my personal participation in Berkshire&#8217;s affairs ends prematurely (a term I define as any age short of three digits).&#8221;\u00a0 Still, a new CEO may be tempted to sell some of the businesses if he didn&#8217;t know better.<\/li>\n<li>The culture of Berkshire is one with <strong>a &#8220;rather extreme delegation<\/strong> of operating authority to a number of key managers at the individual company or business unit level&#8221; as Buffett wrote in his 1979 annual letter.\u00a0 The new CEO will have to be very comfortable supporting his managers when needed, but basically leaving them alone to run their businesses.\u00a0 This will take an unusual degree of self-restraint for most normal people.\u00a0 To do it, it will take a person with a deep appreciation and understanding of the intelligence and effectiveness of this strategy for Berkshire.\u00a0 Although most of the Berkshire business managers are probably very stable individuals, they will be hyper-sensitive to any meddling or extra questions that signal more Berkshire corporate involvement in their affairs.\u00a0 Furthermore, this new CEO may also need the self-restraint to begin a dividend or stock repurchase program rather than try and match Buffett&#8217;s track record in allocating the mountains of capital that will be generated by Berkshire.\u00a0 This restraint will be easier for someone who doesn&#8217;t yet have to prove himself as a manager, an international CEO, or business thinker.<\/li>\n<li>Buffett&#8217;s ultimate statement is that the <strong>Berkshire business and culture thrive after he is gone<\/strong> and that Berkshire maintains its reputation as being better than\u00a0a typical company on many fronts.\u00a0 Buffett does not want the public&#8217;s reaction to be a grudging or\u00a0unremarkable acceptance of the new CEO &#8212; a possible risk if the new CEO were unknown or merely a manager of a Berkshire business unit (no offense intended to those talented individuals).\u00a0 I think Buffett will want us to be impressed with the quality and the unexpectedness of the selection &#8212; sort of how Buffett made the thoughtful decision to give his wealth to the Gates Foundation.\u00a0 It seemed totally novel (give your money to a different foundation) but makes imminent sense once we all thought about\u00a0the decision.<\/li>\n<li>Buffett wants the earnings to continue, so <strong>he won&#8217;t disrupt the internal companies<\/strong>.\u00a0 To make that happen, he wants his business unit managers in placing and working.<\/li>\n<li>For Berkshire to succeed after the initial shock and stock price drop with Buffett&#8217;s departure, the person also needs to have enough business stature, character, and business intelligence\u00a0for the broader community, the media, and potential new acquisitions to trust him.<\/li>\n<\/ul>\n<p>So, where can we find someone who deeply understand the Berkshire culture, has a track record in a job big enough and similar enough to\u00a0overseeing Berkshire&#8217;s collection of businesses, is confident enough to maintain the Berkshire culture of restraint\u00a0and\u00a0&#8220;extreme delegation&#8221;,\u00a0and\u00a0will not create a large management hole\u00a0in one of the Berkshire operating companies?\u00a0 Stayed tuned\u00a0tomorrow for my\u00a0best\u00a0guess . . . . . . .<\/p>\n<p>Related Post: &#8211;<a href=\"https:\/\/masonmyers.com\/stephen-burke-next-ceo-berkshire\/\">Predict Stephen Burke as next Berkshire CEO<\/a>\u00a0May 3, 2012.<\/p>\n<div class=\"postmeta_wrapper\">\n<div class=\"postmeta classifications small\"><span class=\"post_categories\">Categories:<a href=\"https:\/\/masonmyers.com\/category\/hr-culture-is-strategic\/\" rel=\"category tag\">Culture Is Strategic<\/a>, <a href=\"https:\/\/masonmyers.com\/category\/warren-buffett-berkshire-hathaway\/\" rel=\"category tag\">Warren Buffett &amp; Berkshire Hathaway<\/a><\/span><br \/><span class=\"post_tags\">Tags:<a href=\"https:\/\/masonmyers.com\/tag\/berkshire-hathaway\/\" rel=\"tag\">Berkshire Hathaway<\/a>, <a href=\"https:\/\/masonmyers.com\/tag\/business-growth-strategy\/\" rel=\"tag\">Business Growth Strategy<\/a>, <a href=\"https:\/\/masonmyers.com\/tag\/financial-strategy\/\" rel=\"tag\">Financial Strategy<\/a>, <a href=\"https:\/\/masonmyers.com\/tag\/hr\/\" rel=\"tag\">HR<\/a>, <a href=\"https:\/\/masonmyers.com\/tag\/human-resources\/\" rel=\"tag\">Human Resources<\/a>, <a href=\"https:\/\/masonmyers.com\/tag\/succession-planning\/\" rel=\"tag\">Succession Planning<\/a>, <a href=\"https:\/\/masonmyers.com\/tag\/warren-buffett\/\" rel=\"tag\">Warren Buffett<\/a><br \/><\/span><\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>I believe the next CEO of Berkshire Hathaway is hiding in plain site.\u00a0 There is a person that is\u00a0very obvious, but no one (as far as I have read) has mentioned him as a potential candidate.\u00a0 Tomorrow, I make my prediction.\u00a0 Today, I have fun&hellip; <a class=\"more-link\" href=\"https:\/\/masonmyers.com\/berkshire-ceo-succession-warren-buffett\/\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,112],"tags":[30,91,84,40,82,113,29],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Company Culture, Business Strategy | Warren Buffet, Berkshire Hathaway | Mason Myers Business Blog for Owners, Investors<\/title>\n<meta name=\"description\" content=\"Business owner and investor Mason Myers writes about company culture &amp; business strategy, including Warren Buffet &amp; Berkshire Hathaway, on his business blog.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/masonmyers.com\/berkshire-ceo-succession-warren-buffett\/\" \/>\n<meta name=\"twitter:card\" 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