Greg Abel has passed his first test since taking over from Warren Buffett as Berkshire Hathaway Inc.’s new chief executive officer. In his introductory shareholder letter, he emphasizes that Berkshire’s culture runs far deeper than a single man. Yet, almost in the same breath, he tells us not to worry — after all, Buffett is still lurking around the office.
Here’s Abel:
[Buffett] is more than an investing guru. Warren built Berkshire into an enduring enterprise with his business partner Charlie Munger. They combined world-class capital allocation with the vision and leadership to create a business fully equipped to transition from founder-led to one well-positioned for the next 60 years and beyond.
And here he is slipping in some extra reassurance for those who still can’t come to terms with a post-Buffett Berkshire:
We are fortunate to have Warren as Berkshire’s Chairman, in the office five days a week, and available to us as we underwrite insurance, operate our non-insurance businesses, and deploy capital including equity investments. Warren also continues as an owner of Berkshire (although his shares will all go to philanthropy over the 10 years or so following his passing).
Abel is following a proven communication strategy for successions. His letter hearkens back to some of the language Apple Inc.’s Tim Cook used after taking over from Steve Jobs in August 2011 (shortly before Jobs’ death that October). Like Cook, Abel portrays himself as the next steward of a company with a strong culture built to outlast its leader. Buffett may be a singular investor (just as Jobs was a singular tech visionary), but by the end of their CEO tenures, their magic had become part of their organizations. At least, that’s the message their successors sought to convey.
It’s a sensible message. No great company has ever survived without evolving, but Abel can lean on the continuity message for as long as he needs to minimize volatility and turnover in Berkshire’s vaunted shareholder base. At 95, it’s hard to imagine Buffett reporting “five days a week” for many years longer (although many people were saying as much 15 years ago, and Buffett is only now taking his first big step back). For now, his presence may keep some of those shareholders from departing while Abel’s track record is being established.
Of course, in the Apple analogy, Cook would go on to chart something of his own path, starting just a few months later in March 2012, when he announced the company’s first dividend in 17 years. (Jobs, much like Buffett, always rejected dividends, which can be tax inefficient and limit corporate flexibility.) With time, he also became associated with critical evolutions across the company’s supply chain and new strategic initiatives, including the Apple Watch. Cook managed to move forward while keeping a lot of the “Steve Jobs aura” around the company. He expanded a culture-first ethos and allowed the company to become less personality driven. Abel can follow a similar model.
In general, Abel’s opening letter is reverential and respectful of the Buffett legacy, and tries to pay homage to the Oracle’s folksy style. He mentions Buffett’s affinity for Hall of Fame baseball player Ted Williams, who “divided the strike zone into 77 segments and tried to swing only at pitches in a much smaller ‘happy zone,’ resulting in a .344 career batting average and a historic .406 season in 1941.” Abel concludes: “Similar discipline, patience, and judgment define Warren’s investing: determining preferred pitches, waiting for them, then swinging decisively.” Opening the letter that way reminded us immediately that we were reading a Berkshire text; the Ted Williams reference comes straight out of Buffett’s 1997 letter. It shows that Abel is a practiced Buffettologist, not someone trying to be a folksy writer in his own right.
Abel departs from the Buffett brand in subtler ways. His letter is chock-full of conventional management jargon. He sees his role as ensuring that “liquidity levels and capital deployment remain intentional and deliberate,” and he wants to “pursue operational excellence” across operating businesses. On the whole, the text tilts slightly away from Omaha, Nebraska, and toward Wall Street — and that’s okay. Abel was born in Canada and lives in Des Moines, Iowa, so the ultimate image that he grows into as an executive probably won’t be at either extreme.
With time, he’ll leave his imprint on Berkshire with how he conducts acquisitions and navigates challenging times. But he doesn’t need to become an investing legend in his own right — the Berkshire template is already in place. For now, he should aim to be the guardian of the culture that Buffett and Charlie Munger built.
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