And Then There Were Four... In The Race To Succeed Warren Buffett As CEO Of Berkshire Hathaway

warrenbuffett concerned tbi

Warren Buffett has chosen a successor (to run the company with his son, Howard) — we just don’t know who it is yet.

He announced the news in an investor letter this weekend, and though he didn’t say exactly who the next leader would be, he did give us a clue that narrowed the list of potential successors down to four people.

Here’s the bit:

One additional point about these two new arrivals. Both Ted and Todd will be helpful to the next CEO of Berkshire in making acquisitions. They have excellent “business minds” that grasp the economic forces likely to determine the future of a wide variety of businesses. They are aided in their thinking by an understanding of what is predictable and what is unknowable.

He’s referring to Todd Combs and Ted Wechsler, two Berkshire hedge fund managers.

That leaves Li Lu, another Berkshire hedge fund manager; Greg Abel, the CEO of MidAmerican; Matthew Rose, the CEO Northern Burlington and Ajit Jain, the Insurance-Division President at Berkshire Hathaway still in the running.

It should be noted that Buffett had great things to say about Jain in his letter:

“From a standing start in 1985, Ajit [Jain] has created an insurance business with float of $34 billion and significant underwriting profits, a feat that no CEO of any other insurer has come close to matching. By these accomplishments, he has added a great many billions of dollars to the value of Berkshire. Charlie would gladly trade me for a second Ajit. Alas, there is none”

Maybe another clue, but not even Jain could tell us if that’s true. The successor doesn’t even know they’ve been chosen.

*This is a reproduction of a piece previously run on Business Insider. Katya Wachtel no longer works at Business Insider

Li Lu: Hedge Fund Manager

Why he's not:

  1. Buffett's successor is almost definitely going be recruited from within the Berkshire family.
  2. He declined to join the firm last year.

Why he is:

  1. Munger told the WSJ: ''In my mind, it's a foregone conclusion' that Li Lu - a Columbia graduate and hedgie, would become a top investment manager at Berkshire.
  2. Munger rarely makes those type of complimentary comments.
  3. He made a killing by investing in Chinese battery-maker and car company, BYD.
  4. Timing is everything and a no in 2010, doesn't mean a no in 2020.

Source: Vanity Fair

Ajit Jain: Insurance-Division President at Berkshire Hathaway

Greg Abel: CEO of MidAmerican

Why he's not:

  1. His name has been thrown around as a possible successor, but not like Combs or Sokol's name had been thrown around.

Why he is:

  1. He's in the family - CEO of MidAmerican.
  2. He knows how to manage mammoth companies - in fact, he's CEO of four.
  3. He is 'responsible for the evaluation of opportunities relating to acquisitions and project development' - a major part of Berkshire's business model.

Matthew Rose: CEO Northern Burlington

Why he's not:

  1. Like Abel, his name has been thrown around as possible successor but not with the same vigor as Sokol or Combs.

Why he is:

  1. He has experience in running a massive company - one of the most profitable of Berkshire's holdings.
  2. He's relatively young.
  3. Buffett has repeatedly praised the job Rose has done at Burlington.

OUT: Ted Weschler, Hedge Fund Manager

Why he is not:

  1. He's never run a publicly traded company.

Why he is:

  1. Weschler, 50, recently joined Berkshire Hathaway as an investment manager to run the equity and debt portfolio for the firm.
  2. He has experience in private equity. Weschler previously served as an executive officer at the private equity fund Quad-C so he definitely knows a thing or two about buying businesses.
  3. He graduated with a bachelor's degree in economics with concentrations in finance and accounting from the Wharton School of Business at the University of Pennsylvania.

Source: Fortune

OUT: Todd Combs, Hedge Fund Manager

Why he's not:

  1. Combs hasn't had more than 3 years experience running a company.
  2. Combs is more suited to the role of CIO and the likely scenario is for Buffett's job to be split in two - one CEO; one CIO - when he goes.

Why he is:

  1. He's young and can be moulded - 'Our goal was a two-year-old Secretariat, not a 10-year-old Seabiscuit' he told Vanity Fair.
  2. Buffett describes Combs as a 'good, smart human being. He understands investments, and he understands limitations. He will never do anything really dumb.' Ie. He's not into high-risk, and neither is Buffett.

Source: Vanity Fair

OUT: David Sokol, former head of Berkshire subdiaries NetJets and MidAmerican Energy

Why he's not:

  1. He resigned for trading activity surrounding Berkshire's acquisition of Lubrizol.

Why he is:

  1. He's Buffett's Mr. Fix-It - that means he trusts him.
  2. He's within the family.
  3. He knows how to manage and turn-around companies.
  4. In the foreword to Sokol's book, Buffett writes, 'He brings the business equivalent of Ted Williams' .406 batting average to the field of business management.'

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.