After more than six decades, Warren Buffett has announced that he will step down as CEO of Berkshire Hathaway at the end of this year. He will hand over the reins to Greg Abel. The announcement followed the annual shareholders’ meeting in Omaha, Nebraska. Buffettologists Pieter Slegers and Ansgar John Brenninkmeijer traveled to what may have been their last meeting.
“The farewell was emotional,” said Pieter Slegers, author of the investment newsletter Compounding Quality, which has over 465,000 subscribers. ”I owe it to Buffett that I am now writing about quality investing.”
For years, he used the head of the “Oracle of Omaha” as the logo for his online profile. Until, when his channel reached hundreds of thousands of followers, he was kindly asked by Berkshire Hathaway to remove the logo. “Some readers thought Warren himself was behind the account.”
He described the atmosphere at the annual meeting as unique. “You might bump into Bill Gates. If you want to chat with these people, you can. I had a quick chat with Bill Ackman about the stock market. Everyone there has something interesting to say.”
There is a note of sadness in Slegers’ voice when he speaks to Investment Officer by phone from Heathrow Airport on his way home. It was the last time Buffett himself addressed shareholders as CEO. Next year, for the first time in decades, the stage will belong to someone else.
Greg Abel
Buffett had already indicated that Greg Abel, the 62-year-old vice-chairman who has been seen as the crown prince since 2018, would be his logical successor. That confidence is widely shared within the organization. Slegers: “He is steeped in Buffett’s culture. The philosophy will remain the same.”
Nevertheless, it will be difficult for Abel to follow in the footsteps of Buffett and his partner Charlie Munger, said Slegers. Not only because the pair formed a unique partnership for decades, but also because Berkshire has evolved in size and complexity into a cumbersome oil tanker. “The scope for making substantial acquisitions or finding other good investments is much smaller. And you can already see that in the outperformance.”
That view is shared by Ansgar John Brenninkmeijer, founder of the Dutch ValueMachinesFund. He also returns to Omaha every year, although he doubts whether he will do so again next year. “The magic is still there, but it will be different.”
Management style
The biggest challenge for Abel lies in his management style, he said. Buffett and Munger relied on maximum decentralization and complete autonomy for Berkshire’s companies. As Munger himself described it: “decentralization almost to the point of abdication.”
That hands-off approach is shifting. “Greg Abel is intervening more, speaking directly with CFOs of subsidiaries, and steering more actively toward synergy between holdings.” This could transform Berkshire from a patchwork of independent companies into a coordinated group. “That fundamentally changes the dynamic,” said Brenninkmeijer, who regularly speaks with the CFOs of Berkshire’s portfolio companies.
“They say that they now have to answer to Abel much more often than they used to with Buffett and Munger. There was hardly any direct interference.”
Self-financing as the secret ingredient
Buffett earned his status not only because of his long-term vision, but also because he does what active fund managers often fail to do: consistently beat the market. According to Morningstar data, only 9.1 percent of active managers in the US large-cap value segment have outperformed their benchmark over the past 20 years.
However, Brenninkmeijer and Slegers emphasized that this success is often misunderstood. According to Brenninkmeijer, the emphasis is too often on Buffett’s reputation as a brilliant stock picker. “What really makes him unique is that he has built a corporate structure and reputation that has allowed him to invest in ways that others simply cannot replicate.”
The key lies in Berkshire’s insurance activities. The acquisition of insurer National Indemnity in the 1960s provided the conglomerate with a steady stream of premium income. That capital, which was available at extremely low cost for decades, was the lever behind Buffett’s investment strategy.
“The debt on the balance sheet has essentially been Buffett and Munger’s play money,” explained Brenninkmeijer. Another handy feature is that insurance customers don’t call for margin calls.
Other investors have tried to copy the model, including by buying up insurance companies themselves. But no one has been able to replicate the combination of scale, reputation, and cautious risk management. Even competitors such as Markel are not allowed by regulators to invest as much in stocks as Berkshire, says Brenninkmeijer, who spoke with CEO Tom Gayner in Nebraska.
War chest of $350 billion
With a war chest of around 350 billion dollars, Berkshire still has unprecedented firepower at its disposal. Buffett even seems to be hoping for another crisis, like the one in 2008, when he helped Goldman Sachs stay afloat on terms that were favorable to his shareholders.
That attitude reflects one of Buffett’s best-known pieces of wisdom, Slegers said: “Be fearful when others are greedy, and greedy when others are fearful.”
And also: invest for the long term.
“Buffett looks ten years ahead, even now that he may not have that much time left,” said Slegers. “Wall Street looks to the next quarter. The two don’t speak the same language.”
The paradox of the pilgrimage
Nevertheless, there is a certain irony in the annual pilgrimage to Omaha, according to Brenninkmeijer.
“As a fund manager, you stand there among Midwestern farmers, small investors, and other enthusiasts. Everyone openly shares their investment mistakes and successes. It’s disarming.”
At the same time, Buffett has always been critical of active fund managers and their high costs. He himself earned 100,000 dollars a year. Abel gets 21 million dollars. If Berkshire charged a 1 percent fee, that would yield 8 billion dollars a year.
“Asset managers like me are sometimes disparaged a little. Perhaps rightly so,” said Brenninkmeijer. “We earn our money from the model that Buffett publicly criticized.”
And yet, year after year, they come for the lessons, the atmosphere, the encounters. And for the man himself. Slegers admits it candidly. ’I shed a tear there.”