After The King

Can Warren Buffett really be succeeded?

On Monday Warren Buffett announced that he had found someone to succeed him as Chairman of Berkshire Hathaway. He’s just not telling us who it is. Yes, the person knows who he is, and the Board is enthusiastic. But Warren isn’t telling us.

Some might say it’s because of the embarrassment of the David Sokol incident last year. Sokol was widely assumed to be the next Berkshire Chairman, until the Lubrizol incident in which he effectively front-ran Buffett and then resigned in disgrace ostensibly to spend more time with his family’s money.

Alice Schroeder, author of Buffett’s biography The Snowball says it’s because Buffett loves the limelight. Once he names an heir-apparent, the focus will be on the heir, and not on Buffett himself. Buffett is, after all, 81 years old, and Vice Chairman Charlie Munger is 88 years old. They won’t be around forever. And when you run a $200 billion public company, succession planning is part of the job description.

But maybe Buffett is reticent about identifying his successor because he really can’t be replaced. Warren Buffett has been a legendary stock-picker; he’s applied the value-investing lessons of Benjamin Graham perhaps more successfully than anyone. But his firm is also immersed in crony capitalism. In September of 2008 he invested $5 billion in Goldman Sachs in exchange for convertible preferred shares yielding 10%–shortly before the government’s TARP program was announced. He bought Burlington Northern railroad just as the government was beginning a series of initiatives to expand rail service.

It’s been this way for years: the son of a four-term Nebraska congressman, he’s been especially adept at acquiring firms with deep government involvement—whether it was manufactured housing in mid-decade or the Washington Post in 1973.

I’m not saying that Buffett is gaming the system. But he does spend a lot of money on lobbyists while benefiting from grants and government contracts. Warren Buffett is a financial wizard. But even more so, he’s a political wizard.

By |2017-07-17T12:34:56+00:00March 1st, 2012|Global Market Update, Investing|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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