I think I’m a fairly typical long-term Berkshire Hathaway shareholder, as much as there is such a thing.
One of the satisfactions of holding Berkshire over the years is that it’s a company that sets modest but fair objectives, then somehow over-delivers. Over a long period of time we’ve usually been pleasantly surprised at how it (Buffett) accomplishes things.
By the 1970’s we all became accustomed to reading that each ‘past year’s performance’ was an aberration that was unlikely to be repeated. It became a long-running line, with a wink.
Over the ensuing years, through a whole range of specific transactions we were always pleasantly surprised by the simple resolution of seemingly thorny situations. The resolution of the Blue Chip spider-web; the timely and clever exits from large positions Berkshire couldn’t possibly have unloaded on the open market (CapCities ABC; Gillette); and the adept handling of losing situations.
This all resulted in the company eventually received its highest form recognition – maybe the highest possible for any company - from sophisticated investors in the financial markets – the flight to safety in Berkshire’s shares versus even money market funds, immediately after the first TARP vote failed.
Succession planning has always been an open question. My seemingly safe assumption for years has been that like all things Berkshire, we’d be promised little but when the time came, a master-stroke of genius would be revealed. We’d see that once again, we’d all been either rightfully trusting or needlessly fretting, but that our expectations would ultimately again be exceeded.
For a long time we were comforted by the assurance that there were a handful of candidates – including a couple very wealthy people, presumably even by Buffett’s standards, on standby and willing to take the job. A common assumption, right or wrong, was that these people were not likely associated with Berkshire, and also that they knew who they were.
A further, more extended, assumption was that it would be someone we had all admired – a master capital-allocator in the Buffett mold; someone we’d be investing with if we weren’t already with Berkshire—maybe some modern-day Bill Ruane who had Buffett’s long-running and deserved respect --we’d just be left guessing which one. A reason we were all staying with Berkshire rather than jumping ship to one of the next generation of managers was that the smartest investor/capital allocator would always continue to be here.
Maybe that’s still the case and that assumption is still valid. But that assurance was certainly shaken by subsequent actions. References about succession in the SEC filings included references to internal candidates. But we knew that that’s just check-off-the-filing-requirements information. Maybe the references in the filings were useful information and maybe not. Subsequent actions and statements by Buffett gave that possibility more credence, however. Specifically the job-splitting, with a separation of CIO responsibilities. Then there was Buffett's proposed but deleted sentence in the Sokol press release suggesting Sokol was resigning because his chances for becoming CEO had diminished. Was that our glimpse into the plan?
The first sign of problems was with that open reality-TV style call for CIO candidates. After that passed, it looked like there was hope that that the episode might have just been some quirky indulgence. But then came Todd Combs. Nothing against the guy, but we learn that he was one of the cattle-call respondents - who didn’t get a call-back - who then badgered Munger for the job. Shortly after his hire, as investor reaction came in, we also saw a quick reframing by Buffett of this new position, versus the initial announcement.
Along with that, it comes out that one of those original first-choice ‘rich guy’ replacement candidates was Li Lu, according to Munger. Nothing against him either, but the revelation was not particularly inspiring. The message that came out, through Munger, was that since Li Lu was passing on it they were going with Combs. OK.
Everyone Berkshire shareholder, myself included, has their own few examples of who might be considered the current ‘world class’ investors and asset allocators -- people we would happily sign up with. So far, there’s no hint of those possibilities, and there seems to be a lot of indications that we’re instead going further down our possible ’dream-team’ depth chart.
The other red flag was Howard Buffett. I’ve only met him once, and he seems really pleasant. I admire his photographs. I’m sure he’d make at least as good a non-exec chairman as the next guy. But really, is this coming from the same Warren Buffett we’ve been following for decades? This is the best possible choice? This makes no sense.
Give us Gates, if he ever wants it. Even give us someone like Byron Trott, for heaven’s sake. Really. Our chairman-in-waiting doesn’t even travel on company business with his dad. Even Donald Trump’s kids get better on-the-job grooming in succession, if that’s where we’re headed. Tapping Howard is now starting to border on eccentric, especially given Buffett’s past highly publicized views on anatomical lotteries.
We’ve taken these indulgences pretty far. I think long-term ‘partners’ have been exceedingly accommodating and patient. But it’s probably time for some straight-forward explanation.
One of the satisfactions of holding Berkshire over the years is that it’s a company that sets modest but fair objectives, then somehow over-delivers. Over a long period of time we’ve usually been pleasantly surprised at how it (Buffett) accomplishes things.
By the 1970’s we all became accustomed to reading that each ‘past year’s performance’ was an aberration that was unlikely to be repeated. It became a long-running line, with a wink.
Over the ensuing years, through a whole range of specific transactions we were always pleasantly surprised by the simple resolution of seemingly thorny situations. The resolution of the Blue Chip spider-web; the timely and clever exits from large positions Berkshire couldn’t possibly have unloaded on the open market (CapCities ABC; Gillette); and the adept handling of losing situations.
This all resulted in the company eventually received its highest form recognition – maybe the highest possible for any company - from sophisticated investors in the financial markets – the flight to safety in Berkshire’s shares versus even money market funds, immediately after the first TARP vote failed.
Succession planning has always been an open question. My seemingly safe assumption for years has been that like all things Berkshire, we’d be promised little but when the time came, a master-stroke of genius would be revealed. We’d see that once again, we’d all been either rightfully trusting or needlessly fretting, but that our expectations would ultimately again be exceeded.
For a long time we were comforted by the assurance that there were a handful of candidates – including a couple very wealthy people, presumably even by Buffett’s standards, on standby and willing to take the job. A common assumption, right or wrong, was that these people were not likely associated with Berkshire, and also that they knew who they were.
A further, more extended, assumption was that it would be someone we had all admired – a master capital-allocator in the Buffett mold; someone we’d be investing with if we weren’t already with Berkshire—maybe some modern-day Bill Ruane who had Buffett’s long-running and deserved respect --we’d just be left guessing which one. A reason we were all staying with Berkshire rather than jumping ship to one of the next generation of managers was that the smartest investor/capital allocator would always continue to be here.
Maybe that’s still the case and that assumption is still valid. But that assurance was certainly shaken by subsequent actions. References about succession in the SEC filings included references to internal candidates. But we knew that that’s just check-off-the-filing-requirements information. Maybe the references in the filings were useful information and maybe not. Subsequent actions and statements by Buffett gave that possibility more credence, however. Specifically the job-splitting, with a separation of CIO responsibilities. Then there was Buffett's proposed but deleted sentence in the Sokol press release suggesting Sokol was resigning because his chances for becoming CEO had diminished. Was that our glimpse into the plan?
The first sign of problems was with that open reality-TV style call for CIO candidates. After that passed, it looked like there was hope that that the episode might have just been some quirky indulgence. But then came Todd Combs. Nothing against the guy, but we learn that he was one of the cattle-call respondents - who didn’t get a call-back - who then badgered Munger for the job. Shortly after his hire, as investor reaction came in, we also saw a quick reframing by Buffett of this new position, versus the initial announcement.
Along with that, it comes out that one of those original first-choice ‘rich guy’ replacement candidates was Li Lu, according to Munger. Nothing against him either, but the revelation was not particularly inspiring. The message that came out, through Munger, was that since Li Lu was passing on it they were going with Combs. OK.
Everyone Berkshire shareholder, myself included, has their own few examples of who might be considered the current ‘world class’ investors and asset allocators -- people we would happily sign up with. So far, there’s no hint of those possibilities, and there seems to be a lot of indications that we’re instead going further down our possible ’dream-team’ depth chart.
The other red flag was Howard Buffett. I’ve only met him once, and he seems really pleasant. I admire his photographs. I’m sure he’d make at least as good a non-exec chairman as the next guy. But really, is this coming from the same Warren Buffett we’ve been following for decades? This is the best possible choice? This makes no sense.
Give us Gates, if he ever wants it. Even give us someone like Byron Trott, for heaven’s sake. Really. Our chairman-in-waiting doesn’t even travel on company business with his dad. Even Donald Trump’s kids get better on-the-job grooming in succession, if that’s where we’re headed. Tapping Howard is now starting to border on eccentric, especially given Buffett’s past highly publicized views on anatomical lotteries.
We’ve taken these indulgences pretty far. I think long-term ‘partners’ have been exceedingly accommodating and patient. But it’s probably time for some straight-forward explanation.
