2009: Why hasn't Buffett named his successor?

BECKY QUICK: This is a question that follows up on the succession question. This one is a, in particularly, though, addressed to the three candidates for CEO. It comes from Irving Fenster who writes:

“Running Berkshire is very complex and complicated. Give us some insight for your reluctance to bring in your replacement to give him the benefit of your training, instead of his having to tackle the myriad of problems of the transition on his own.

“The benefits for Berkshire, your replacement, and you, are so compelling your reluctance is puzzling. Having him on board may relieve some of the stress on you and help add many, many more years of good health for you.”

WARREN BUFFETT: Irving is a friend of mine in Oklahoma. Went in in my partnership 40 years ago, Irving and Irene. And he’s been writing me on this for 30 or 40 years. And he’s had — (laughter) — he’s had no luck with me. So he decided to write Becky, apparently. (Laughter)

If we had a good way to inject somebody into some role that was — would make them a better CEO of Berkshire, we would try it.

But the truth is that the candidates we have are running businesses. They’re making capital allocation decisions. They’re doing things every day of an operating nature. And these are major businesses.

And to sit around headquarters while I’m sitting in there reading and on the phone and, you know, who knows what else, they — it — there just is — there wouldn’t be anything to do.

I mean, we could meet every hour. You know, I could say, “Here’s what I’m thinking about now. What do you think about this?” and — (Laughter)

It’d be a waste of talent. It’d be ridiculous.

And Irving has this notion that somehow, that they would be absorbing all these things that I’m doing. I just throw The Wall Street Journal to him after I’m done reading it, and I’d throw him The New York Times and I’d throw him the FT. (Laughs)

And these are people that know how to run big businesses. They run businesses that make many, many, many millions, or even billions, of dollars.

So, they are ready for the job right now. I wouldn’t be happy unless we have — they are 100 percent ready. They know how to allocate capital.

The biggest job they’ll have is the fact that they will have to develop relationships with potential sellers of businesses, with the world, generally, with you, the shareholders, with other managers. That takes some time, not an extraordinary time.

But that — you know, they will have to become acquainted with people. But — different constituencies. But that — there’s, you know, that is nothing that really needs to be hastened along. It’s nothing terribly important.

I mean, they know how to run businesses. And they would do many things much better than I would. The biggest — probably the biggest challenge, because we have all of those talented managers that you saw during the movie.

And those people have different styles. And they have different needs to some degree. They have different ways of operating. They’re all successes.

But you know, some of them bat left-handed. Some of them bat right-handed. Some of them stand deep in the box. You know, some of them crowd the plate. I mean, they all have a little bit of variation. But they all hit terrifically.

And for the CEO of Berkshire, it does require some knowledge of the individual personalities. And which ones like to run by themselves totally and which ones like to check in occasionally and all that.

But that is no reason to take a talent that’s now running a business very successfully and building value and to have them sit in an office next to me and have us chew over the day’s events.

I mean, Charlie and I worked together now for decades. And I’ve learned a lot from Charlie. But I haven’t done it by, you know, having him sit next door and have hourly meetings or anything of the sort.

What do you think, Charlie?

CHARLIE MUNGER: Well, I think, averaged out, you’re more likely to be qualified to be a CEO by running a subsidiary with an enormous amount of discretion than you are to being around headquarters watching somebody else do it his way.

A lot of the models that have worked well in the world, like Johnson & Johnson, are quite Berkshire-like, in that they’re decentralized and they let these people pop up from the subsidiaries. They don’t try and just create CEOs in a hothouse in headquarters.

WARREN BUFFETT: We have an unusual situation at Berkshire that most of the people at the top, virtually all of them, are doing what they want to do. I mean, they like running their businesses.

That’s what they came in expecting to do. And that’s what they’re doing, and we’re letting them do it the way they like to do it.

And so we don’t have 50 people that all think they’re on some pyramid to get to the top. And Irving would like me to name — he’s talked to me about it. He would like to me name who it would be. But that could change in the future. It could create some possible —

Well, we saw it at General Electric, I mean, when Jeff Immelt got appointed from among three, the other two left. And I don’t really see any advantage in having some crowned prince around. But Irving will keep writing me, I can promise you that. (Laughter)