There Will Never Be Another Warren Buffett

0:05If everyone will please take their seats.

0:13Once a year, the financial world turns its collective attention to Omaha, Nebraska. That's where Warren Buffett, the longtime CEO of Berkshire Hathaway, lives, and where he holds the company's annual shareholder meeting. Thousands of people flock to the city of Nebraska from all over the country, but also all over the world. Our colleague Karen Langley covers Berkshire Hathaway. She spent her weekend among the crowd gathered at Omaha's convention center. Many, if not most of them, are shareholders of the company, but also people who are just really fascinated by Warren Buffett, who are interested in hearing what he has to say.

0:55You could see very long lines the day beforehand for people picking up their meeting credentials. the morning of the annual meeting, well before the sun came up. It's very noticeable in Omaha that Berkshire Hathaway is having its meeting. It sounds kind of like Coachella for finance nerds, except like fewer crop tops. Buffett has famously called it a woodstock of capitalism. Fair, okay. People talk about that kind of comparison, a festival-like atmosphere. year, there are certainly parties and events surrounding it. This year was Buffett's 60th shareholder meeting, and he marked the occasion with a mic drop.

1:42But I think it's the time has arrived where Greg should become the chief executive officer of the company at year end. This was Buffett's last annual meeting as CEO, and he named longtime executive Greg Abel as his chosen successor. I would still hang around and could conceivably be useful in a few cases, but the final word would be what Greg said. Abel helped build Berkshire Hathaway Energy into one of the company's most significant businesses. And he's been the heir in waiting for years. But the timing of the announcement came as a surprise. What was the reaction in the room when he said that?

2:36It was fascinating. I was way up in the nosebleed seats in the press box. But it felt to me like this huge arena filled with many thousands of people went silent as Buffett started to deliver those words. And I think people realized that this was a moment of a lot of gravity, that that was taking place. And so the room fell so quiet, despite how many people were there. And then when he finished delivering his announcement, people started to stand and applaud. And there was this big standing ovation. That's the news hook for the day, folks. And thanks for coming.

3:25Buffett is considered by many to be one of the greatest investors in American history. So how will Berkshire Hathaway and the world of investing fare without him at the helm? Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Monday, May 5th.

3:51Coming up on the show, the Oracle of Omaha is stepping down as CEO, and he's leaving big shoes to fill.

4:13Would you say that Warren Buffett is the goat of investing, the greatest of all time? If he's not, it's kind of hard to think of who his competition would be. That's our colleague Jason Zweig. He's covered Warren Buffett for more than 20 years. What really makes Buffett so extraordinary is not just the degree of his outperformance, but the length of it. I mean, we're talking about somebody who made his first investment in 1942. And so there are plenty of people who have better performance, better track records as investors over the past 10 years, the past 20 years, maybe even the past 25 years.

5:05But 60 years? Right. I don't think so. And it's just kind of unparalleled. Among investors, Buffett stands alone. Not just for how long he's been in the game or how well he's done, but also for his investing philosophy, which he's been honing since he was 11 years old. He bought, I think, three shares of what then was called City's Service, which was an oil company. He recalls that his sister got nervous, I think when the price went down a few months later, so he sold it. And, you know, it went on to, you know, make thousands and thousands and thousands of percent, teaching him the lesson that, you know, selling too soon can be a huge mistake.

5:57I mean, 11 is, I'm not sure I knew what a stock was when I was 11. 11 is pretty early. Yeah. And so tell me about how his career started out. What kinds of investments was he making in those early days? In 1956, he started his own investment partnership out of his bedroom in his house in Omaha. And so he worked at home for much of the early years and he bought some of the smallest, most obscure stocks you could possibly imagine and just made a ton of money doing it. And how did he discover those obscure companies and investing opportunities? Could you talk about sort of the way he approached investing?

6:48Yeah. And this is another example of how unusual Buffett was. Of course, today, nobody would do it this way because you wouldn't need to because there are commercial databases and you could just ask AI to do it for you. Right. But what Buffett did was he had these immense volumes of Moody's industrial manuals, which were these gigantic hardcover books that consisted of thousands of pages of financial information on publicly traded stocks. And he started with A, and he read every page until he got to Z. Wow. Oh, my gosh. In those books, Buffett looked at a company's assets and the size of its debt, and he'd go beyond the numbers, talking to suppliers and customers.

7:47And if he liked what he saw in combination with the financial information, he would buy the stock no matter how small it was or how long it took. Wow. So it's almost like he was reporting on these companies, right? Doing the groundwork and then being patient about the returns. Yeah, exactly. I once asked Buffett what he would have done if he hadn't become an investor. And he said, I probably would have become an investigative reporter.

8:21Buffett's strategy paid off. And as he gained success, he started expanding Berkshire Hathaway's portfolio. He bought much larger companies when they had temporarily fallen out of favor, like American Express, The Washington Post, which then was a major public company, Coca-Cola. The other thing Buffett did was buy private companies outright. Companies like Seize Candies, Dairy Queen, and Duracell. A large part of Berkshire Hathaway's market value today consists of the private companies that Buffett bought. And that gave him the flexibility of buying in public markets when he felt stocks were cheap, but not having to when he felt they were overpriced.

9:12Then he could go to private markets and buy at a negotiated price rather than what he calls the auction price that exists in the stock market. In addition to smart buys, Berkshire Hathaway, under Buffett's leadership, became known for rescuing businesses in distress. During the 2008 financial crisis, the company famously bailed out General Electric and Goldman Sachs. Around that time, Buffett became the world's richest person, dethroning Bill Gates. Today, Buffett is still the fifth richest person in the world. So how significant is it that Buffett decided to step away from Berkshire Hathaway at the end of this year?

9:58You know, I think if you're an investor in Berkshire Hathaway, it's probably not as significant as you might think. You know, the assets of the company are in place. The investments that Buffett has made over the years are part of the company's holdings. So it's going to run on autopilot based on the decisions he's made over the decades. Still, Buffett's successor will have to take Berkshire Hathaway into the future. The man he chose for the job? That's next.

10:54For years, Buffett has been touting the accomplishments of his eventual successor, Greg Abel. Here's our colleague Karen Langley again. So Greg Abel is a former accountant who's from Canada. He became involved with Berkshire more than two decades ago when the company invested in a utility company from Des Moines where Able worked. And Able, as part of the Berkshire organization, helped to build out that company, which became known as Berkshire Hathaway Energy through a series of acquisitions. So it sounds like he was able to successfully grow this arm of the business. what else did Buffett see in him over the years?

11:37Warren Buffett has for a long time really praised Abel saying that he's both a deal maker and a manager which really are like some of the highest words of praise coming from Warren Buffett. We think alike on acquisitions. We think alike on capital allocation. I mean, he's a big improvement on me but don't tell anybody. He's really praised Abel's knowledge of the business. I should say that a few years ago, Warren Buffett made Greg Abel a member of the board and also put him in charge of overseeing Berkshire's many subsidiary companies that are outside of the insurance field. When I've talked to CEOs of those subsidiaries who report to ABLE, they similarly have said that, you know, he has more than 24 hours in his day, that he's so available, but like really gets their business and has like a great feel for business.

12:34And how does his leadership style compare with Buffett's? Warren Buffett is somebody who is such a personality, who is a storyteller, has so much charisma, and Abel presents as a bit more of a buttoned down person. He clearly knows so much about the businesses when he's asked about the details of various Berkshire operating companies at the annual meeting. He clearly knows all of that stuff. I'd say he seems more reserved. So I think we'll have to see as he steps into the CEO role, if that continues to be the case, if he evolves in that manner or whatnot. What does that tell us about how ABLE plans to lead the company?

13:20Berkshire is such a huge company. And so, like, of course, I mean, ABLE has been overseeing so many of its subsidiary companies. But now he will also be the final word with matters like investing. Warren Buffett famously is the main person in charge of Berkshire's stock portfolio. And so what Warren Buffett said a year ago at the annual meeting that he would anticipate that Greg Abel should be in charge of what they call the capital allocation. So meaning either acquiring companies in full or investing in the stock market. There are also investment managers working at Berkshire Hathaway. But Warren Buffett described Greg Abel as being kind of the final word, if you will, on the capital allocation going forward.

14:10And then, of course, you know, Warren Buffett has been the face and the voice of Berkshire Hathaway. But as CEO, Abel will be, you know, stepping into those shoes. Abel told shareholders on Saturday that he plans to continue to let each of the company's subsidiaries run autonomously. He added that he does plan to look for growth opportunities and help identify risks. Earlier today, Berkshire Hathaway confirmed that Warren Buffett will stay at the company as chairman of the board of directors. It's not yet clear what Buffett's new role will entail, but what is clear is that Warren Buffett's mark on the company will last long into the future.

14:48When Warren Buffett is not in as prominent of a role at the company, if so many people continue to want to be there, Berkshire has a big shopping exhibit that's also a draw for many people at this annual weekend. And you could see all kinds of memorabilia that were, you know, in the shape of Warren Buffett, like a bobblehead or a rubber ducky, etc. I didn't spot those for Greg Abel. And so I think we're going to have to see going forward if the vibe really changes in the future.

15:18Buffett has not only left a mark on Berkshire Hathaway, but his tenure as CEO has also changed the world of investing. Here's Jason again. I think his legacy is that he leaves a really clear roadmap that pretty much anybody could follow if they chose to on how to be a better investor. Ignore the short-term fluctuations of the market. Focus on your own long-term goals and the potential of the assets you hold to have long-term growth. Try to take the other side of the emotions of the market. When the market is euphoric, you should be skeptical. when the market is fearful, you should be optimistic.

16:16And above all, you should be patient and focus on the long run. And, you know, nobody has ever exemplified those principles better than Buffett. And I think he would probably hope that that would be his legacy. And certainly he has spelled those principles out very clearly for anyone who wishes to follow them.

17:11Thanks for listening. See you tomorrow.