2015: Could Berkshire's next investment chief be the same person as its next operating chief?
JONATHAN BRANDT: Warren, you have up to this point said that Berkshire in the future will have a chief executive officer and one or more chief investment officers.
You haven’t explicitly said that a chief investment officer cannot be the CEO, but that has, for me at least, been implied.
Berkshire has been successfully managed for 50 years by a chairman and vice chairman whose principal experience was in allocating capital amongst a number of businesses and industries with which they were familiar and whose attributes they could compare.
Since capital allocation is the key skill needed for a company structured the way Berkshire is, why couldn’t the company’s principal decision maker in the future also be someone who is experienced in choosing among different reinvestment options, with perhaps a second outstanding person expert in operations acting as chief operating officer, albeit a route of the hands-off one, given Berkshire’s extreme decentralization?
WARREN BUFFETT: That’s a very good question.
It’s not inconceivable. It’s very unlikely, Jonny, that — but as you say, the — a chief investment officer has a — will have — or should have — a significant array of skills that would be useful, also, for a chief executive officer.
But I would say, also, that I would not want to move — if I were voting on it — I would not want to vote to put somebody whose sole experience had been investments in charge of an operation like Berkshire, who had not had any, also, significant operating experience.
I’ve said that I’m a better investment manager because I’ve been an operating manager, and I’m a better operating manager because I’ve been the investment manager.
But the — you — operations — I’ve learned a lot through operations that I wouldn’t have learned if I’d stayed in investments all my life. I would not have been equipped to run it.
I learned a lot of things about operations by being in operations. So if you had somebody that had the dual experience and was very good at investments, but had a lot of experience in operations, that would be conceivable. Otherwise, I wouldn’t vote that way.
Charlie?
CHARLIE MUNGER: Well, every year at Berkshire, as now constituted, the owned and controlled businesses get more and more important, and the measurable securities are relatively less important.
So, I think it would be crazy not to go with the tide to some extent.
And we need more — we need expertise beyond that of a typical portfolio analyst.
WARREN BUFFETT: Yeah. But the CEO should have some real understanding of investments and investment alternatives and all that.
I’ve seen a lot of businesses run by people that really don’t understand the math of investing or capital allocation very well. So having a dual background is useful, but actually our operating managers know — some of them know — a lot about investing.
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