2016: How does Berkshire do succession planning at subsidiaries?

GREGG WARREN: Warren, the announcement earlier this month, that Ajit Jain would be taking over responsibility for all of Berkshire’s reinsurance efforts once Tad Montross retires from General Re, has raised some questions about not only the change in leadership structure but succession planning.

Given the state of the reinsurance market, it makes sense to have Ajit overseeing both businesses, especially if the pricing environment expected to be difficult for another ten years, and there are duplicative efforts that can be streamlined.

Given this move and the change in responsibilities we’ve seen at several of Berkshire’s subsidiaries the last few years, I was just wondering if you could just give us some color on how succession planning is handled at the subsidiary level, and any insight you could give us into what led you to finally decide to have Ajit oversee both of Berkshire’s reinsurance arms, and whether or not it will change the amount of work you’ll be doing on the specialty side of the business, would be greatly appreciated.

WARREN BUFFETT: Yeah. Well, Tad Montross, after 39 years, has done an absolutely sensational job for Berkshire. You know, originally — (applause)

Gen Re was a problem child for a while, as you know. Some brought on by itself and some external. But the — and Tad is — I mean, he’s sensational, and I tried several times, maybe successfully in terms of months but not in terms of years, to get him to stay on longer.

As you say, it makes sense to have the reinsurance operation under Ajit. Ajit’s ability to handle more and more things in insurance — he oversees a company called GUARD, which most of you have never heard it, and we bought it a few years ago, and it’s doing terrifically. It’s based in Wilkes-Barre, Pennsylvania.

It’s doing a great job with small business policies, primarily workers’ comp, around the country. And it’s flourished, you know, being put under Ajit.

He started the specialty operation a couple years ago, and under Peter [Eastwood], that is going gangbusters.

And I have found — and this is interesting, but it’s true — I have found with really able people, they can handle so much.

I mean, they almost — well, just take Carrie Sova, that put this meeting together.

You know, if you have some preconceived notion that an annual meeting that’s going to have 40,000 people therefore needs, you know, to spend millions of dollars with all kinds of organizational planning and meetings and meetings and meetings, but really able people — my assistant, Debbie Bosanek, she can do anything.

So there’s just no limit to what talented people can accomplish. And if I had something else in insurance tomorrow that needed doing, I’d probably call Ajit on that, too.

So it has no — you know, in terms of my succession, that’s something — we’ll have a board meeting on Monday, but we’ll talk about it as we always do at every meeting and — you know, when — we haven’t — our thoughts are as one on that, and everybody knows why it makes the most sense.

But five years from now, something different could make sense. That’s one reason for not announcing any names. I mean, who knows what happens in terms of the time when it happens or what happens to the person involved? Maybe their situation changes.

So it’s not a — there are no tea leaves to read in the fact that Ajit is supervising Gen Re from this point forward. Charlie?

CHARLIE MUNGER: Well, and there’s an obverse side of that. Not only can the able people usually do a lot more, but the unable people by and large you can’t fix. So —

WARREN BUFFETT: That is for sure.

CHARLIE MUNGER: I think you’re forced to use our system if you have your wits about you.

WARREN BUFFETT: And we don’t feel the need to follow any kind of organizational common view as to, you know, you do this and you have — only so many people can report to you or any of this sort of thing.

Berkshire — every decision that comes up, you know, we just try and figure out the most logical thing to do at that time. But we don’t have some grand design in mind of, you know, like an army organizational chart or something of the sort, and we never will.

CHARLIE MUNGER: Warren and I once reached a decision we wouldn’t pay more than X dollars for something, and the man who was subordinate to both of us who was working on it just said, you guys are out of your minds. This is really stupid. This is a quality operation, you ought to pay up for it. We just looked at one another, and did it his way.

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: We don’t pay any attention to titles or —

WARREN BUFFETT: He was right, too.

CHARLIE MUNGER: He was right, yeah, of course. (Laughs)

WARREN BUFFETT: OK. I’m sorry. Have you got —?

CHARLIE MUNGER: If a charwoman gave us a good idea, we’d accept it cheerfully.

WARREN BUFFETT: Actually, one time the woman that does clean my office came in, and I think she’d been kind of wondering what I did, you know, based on — and I’d see her frequently, and her name was Ruby.

And finally one day she decided to really get to the heart of the matter, and she said, “Mr. Buffett, do you ever get any good horses?” Apparently thought this is where I was really making my money, was at the track, but — (Laughter)