What Warren Buffett’s Exit as CEO Means for Berkshire Hathaway

On today’s Big Take podcast: How the “Oracle of Omaha” changed investing and what comes next for the company Buffett built. ​​​​​

Warren Buffett Photographer: Scott Eells/Bloomberg Photo by Scott Eells /Photographer: Scott Eells/Bloomb

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Warren Buffett shocked shareholders when he announced he’d be stepping down as CEO of Berkshire Hathaway. The 94-year-old business giant had been running the behemoth company for more than 50 years, and his investment decisions have earned him the nickname the “Oracle of Omaha.” 

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On today’s Big Take podcast, Bloomberg senior markets editor and Opinion columnist John Authers unpacks how Warren Buffett changed investing, what it would take for successors to fill his shoes and whether Berkshire Hathaway is headed for a break-up.

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Here is a lightly edited transcript of the conversation:

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Sarah Holder: Over the weekend, Berkshire Hathaway held its annual shareholder meeting in Omaha, Nebraska. It’s famous in investor circles, nicknamed the “Woodstock for capitalists.” Every year at that meeting, the company’s CEO, Warren Buffett, takes hours of questions from shareholders, and dispenses investment wisdom that’s earned him international renown.

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John Authers: And one of the great benefits you get from owning as much as one share of Berkshire is that you get the right to go to his annual meeting and, uh, and ask him questions. 

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Holder: That’s Bloomberg senior markets editor and Opinion columnist, John Authers.

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Authers: So Warren Buffett himself still has, I think, more than a third of Berkshire Hathaway. But the sheer number of people who have bought just one share in Berkshire so that they can go along to, to see him in Omaha is very impressive. 

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Holder: But this year, Buffett shocked everyone – by announcing he’d be stepping down as CEO and naming a vice chairman at the company, Greg Abel, as his successor.

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Warren Buffett:  The time has arrived where Greg should become the chief executive officer of the company at year end. 

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Authers: Well, you can tell that I wasn’t expecting it because, I actually, I had a high school reunion this weekend and this was one of the few weekends I took off.

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Holder: John says that even though the timing of Buffett’s announcement was a surprise – the decision wasn’t entirely unexpected. At 94 years old, Buffett is the longest-running CEO in the S&P 500, and he’s been planning for Berkshire’s future without him for years. 

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Authers: You do have a very serious problem with Berkshire, which is, how do you replace Warren Buffett? There is an immense amount of value perceived in his continuing to be the CEO. So he has been preoccupied for quite a while with working out how this beast is going to continue.

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Holder: The move marks the end of an era for Buffett – and the beginning of another for Berkshire Hathaway, which has grown into a $1.2 trillion company. 

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I’m Sarah Holder, and this is the Big Take from Bloomberg News.

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Today on the show: how Warren Buffett changed investing – what it would take for successors to fill his shoes — and whether Berkshire Hathaway is headed for a break-up.

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Holder: John, first, the burning question: Why did Warren Buffett choose to step down now, after over 50 years as the CEO of Berkshire Hathaway? 

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Authers: I can only speculate, I haven’t talked to his doctor, I haven’t talked to him. People with, with emotional intelligence know when it’s time to, know that they’re not as good as they used to be and they should be standing down, and I assume it’s as simple as that. He has been working on succession for quite a long time. So he’s produced a, a vehicle that is now overwhelmingly strong at generating cash and all it needs is good, patient ownership and it should continue to be a very nice investment for somebody. And he’s confident in Greg Abel and the various other people he’s found around him that he’s got people who have what he sees as what’s necessary, the, the emotional intelligence to stay calm, uh, and stay within their boundaries. So I don’t think there’s anything ulterior other than a man in his nineties recognizes that he doesn’t have his curve ball, and it’s time to step back.

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Holder: Well, I wanna talk about Buffett’s legacy, you know, with a figure as historic as Buffett, I know there’s a lot to cover, but if you had to start the story of Warren Buffett’s rise to become the so-called ‘Oracle of Omaha,’ where would you start it?

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Authers: He went to Columbia Business School specially so that he could go to attend the class in value investing, run by Benjamin Graham, who wrote The Intelligent Investor and Security Analysis, basically the father of value investing. And he published in the 1930s, right at the bottom of the Depression and came up with these concepts for how the market might have gone down a lot, but if you use these metrics, you can find the companies that are actually too cheap, that even if everything goes wrong, you’re still gonna be fine. I think the phrase he used was cigar butts, people will finish their cigar and put it down when in fact there were still several good putts of that cigar to be had. Buffett was fascinated by this, worked out that this was a great way to make money and went to Columbia to learn at the feet of the master. And then I think the next thing you have to add to that is that he worked out how to adapt the value investing philosophy for when there aren’t lots of cigar butts lying around on the floor. So the concept he was fascinated in was of franchise value of companies that really have a great shot at keeping, earning more to an extent that they’re undervalued. So it wasn’t just a question of buying iffy companies that are way too cheap, he expanded it. And then I guess the other thing you have to to get to is that he really could be a chameleon. He really could be an opportunist. Particularly in the crisis of ‘08, but it’s happened again since then. He began to grasp that he was so big that he just had so much cash that he was such a safe, safe investment so he could afford to lend to people when others couldn’t. 

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Holder: He could afford to be an opportunist.

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Authers: Yes, he could afford to be an opportunist and he’d worked out, ‘this is my advantage at this moment. What can I do that others can’t?’

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Holder: And that value investing approach, I’m curious how that shaped Berkshire Hathaway’s success. What are some of Buffett’s biggest, most successful investments?

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Authers: Coca-Cola would be one of the classic examples, or Gillette. What he looks for are companies with what he calls a wide economic moat. Which he could very much argue is a folksy, populist way of saying he’s looking for really horrible, well entrenched monopolists. In the case of Coca-Cola, Pepsi does exist. Coca-Cola is a brand like virtually no other. If you continue to be able to sell carbonated water with a little bit of this, uh, a little bit of this syrup in it for a very big markup, because it’s got Coca-Cola on it, on the label, you are going to make money, which of course, Coca-Cola really did.

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Holder: John, you mentioned Buffett’s folksiness. He isn’t like a standard Wall Street investor type. How has that folksiness helped shape Buffett’s image over the years?

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Authers: I think it’s made him nicely immune to a lot of the criticism that somebody that rich could normally expect to get. I mean, if you compare him to Elon Musk, charm, self-deprecation and folkiness, definitely works much better at deflecting the kind of criticisms that come of great wealth than the approaches that, uh, Elon Musk has, has taken.

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I think he genuinely, even though he’s obviously a capitalist who is extremely motivated to make money, I think his basic democratic populist politics are genuine. I can remember many years ago when Hillary Clinton was running for Senator for the first time. He showed up to endorse her on a platform. And, he pointed out that he was very undertaxed and that he paid a lower tax rate than his loyal secretary does and you could argue, well, it’s not as though he spent a lot of time really working hard in the political trenches to, to correct that. But he was conscious of it. 

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Holder: So his, his sort of folksiness, his democratic populism has helped shield him from some criticism, but he is not immune from criticism. What are the biggest critiques of Buffett’s approach and his tactics?

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Authers: Okay I think the biggest criticism to be made of him does come from that notion of being a monopolist. Many of the entrepreneurs we think of are at least trying to do new things, innovate, expand. Warren Buffett doesn’t do that. He spots businesses that are well run and that have an inbuilt competitive advantage and buys them and holds on and makes sure they keep their competitive advantage and keep making money. So he doesn’t found companies and he doesn’t help disrupt industries that might need disruption. By providing so much capital to spotting the winners and sending money in the direction of monopolists. He’s contributing towards capitalism, not spreading its roots as widely as it should, and not creating as, uh, as diverse and vibrant an economy as it should. He’s worked out how to really make money using the rules of the game of capitalism as it works. And he’s done it so successfully that in many ways it’s quite embarrassing. 

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Holder: Warren Buffett’s personality and investing philosophy have made Berkshire Hathaway one of the most successful firms in the world. But Buffett’s influence extends far beyond the performance of his company. We talk about the extent of that influence, and the possible future for Berkshire, after the break …

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Beyond his legendary investment acumen, Warren Buffett is one of the most well-known financial figures in the world. He has vast personal wealth. He’s a reliable media presence. He has political heft. He’s someone people often turn to, to help process the ups and downs of the economy. And he’s stepping aside at a moment of economic uncertainty. I asked John Authers…. can Warren Buffett be replaced?

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Authers: No. I’m not sure he can, I mean, there are other people who have something like something akin to his status in different ways. The most obvious example being Jamie Dimon, who has had mistakes in his career, but on balance has been a startlingly successful banker for a very long time. Bill Ackman, who I think does regard himself or used to regard himself as a value investor. And you can see his vehicle as being an something akin to what Berkshire Hathaway has been. Partly because Bill Ackman’s an extremely successful investor and partly because, Ackman also is very good at getting his view across. But if you looked at all the other investors that have ever just bought stocks long, so every other guy who’s tried to do what Warren Buffett has done in history, you would look at those and then say, if somebody, if you then got told there’s also this other guy who’s done this, you would say, no, there isn’t. That’s impossible. What Buffett did at Berkshire is completely off the charts and nobody else is gonna do that, I don’t think.

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Holder: Right. Impossible as it might seem irreplaceable as Buffett. May seem to be he has chosen a successor, Greg Abel, the former CEO of Berkshire Hathaway Energy, to replace him as CEO. Tell us about the Berkshire that Abel is inheriting at this moment and the challenges and opportunities he has right now.

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Authers: Well, basically, he’s inheriting an enormous conglomerate with a lot of cash on the side. It’s a conglomerate that is quite US-centric. He has a company that is pretty heavily based in insurance, that’s the business that Buffett particularly felt that he understood, that does have pretty significant exposure to industry. He does have this massive cash pile. But I think it probably does become more of, you know, an industrial behemoth rather than the great investment vehicle of Warren Buffett. 

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Holder: Does the, a breakup of Berkshire Hathaway seem likelier under Abel?

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Authers: You would think so because it no longer has the Warren Buffett connection that people aren’t going to rush out to buy it just because it’s Warren Buffett. It’s possible that it’s in fact going to continue making money for a very long time because he has found a bunch of companies that are very well supported, that he’s got good managers, uh, with, with very strong, reliable profits. But yes, you, you’d still have to think that, um, taking it apart as a, as a vehicle becomes more likely now that the great man is moving on.

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Holder: Is there a sense that Abel will continue to sort of toe the line set by Buffett or that he’ll shake things up?

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Authers: I would imagine he would tow the line. Um, he has an investor body that passionately believes in the way Warren Buffett does it and will not be happy with him if he really tries to change things. And Warren Buffett has chosen him because he knows that he’s gonna do the right thing. I mean I suppose Buffett, for everything else, is ultimately an opportunist a, a disciplined one. And I think he’s appointed a, a successor who he sees as a kindred spirited, a disciplined opportunist.

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Holder: John, we’ve been talking a lot about Buffett’s legacy, but obviously this isn’t an obituary. He’s still very much around. He’s still very much a part of the company. He’s staying on as chairman. What do we expect Buffett’s role to continue to be in the company?

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Authers: I imagine he’s going to, if he thinks he spotted a, a great investment idea, he’s going to point it out. I imagine, he’s probably very happy to leave day-to-day running decisions to other people because the man’s 94, he could do with less wear and tear. If we have another 20, 30% market break later this year, and plenty of people think that’s possible, I suspect he’s, you know, he’s got his eye on various franchises he thinks might become a compelling buy. He’s probably going to do something about it if that happens. If we get a compelling opportunity, I could easily imagine Warren Buffett in six months time when fear about tariffs has really got people scared, pouncing, you know, working out that this is the time to pounce and buying, buying something we haven’t thought of. I can, I can easily imagine that.

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Holder: Still the oracle after all.

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