The most important general trait for Buffett’s successor as chief executive is a knowledgeable commitment to Berkshire culture, including permanence, autonomy, and acquisitiveness. Therefore, the best candidates are insiders, those now managing Berkshire subsidiaries, as Berkshire’s succession plan contemplates. Among these candidates, especially promising are individuals with strengths like lengthy service history at Berkshire; proficiency leading its largest, most sprawling operations; and experience running subsidiaries bearing most of the specific traits that constitute Berkshire culture. Experience leading a large public company would also be a plus.
Such factors explain why for many years observers correctly perceived that Buffett considered Sokol to be a top candidate, and many viewed Santulli that way, too. Santulli displayed earnestness and entrepreneurship in founding NetJets, taking it public, and selling it to and running it within Berkshire for a decade. But ultimately he seemed to show insufficient budget consciousness. Sokol built MidAmerican Energy into a sizable public company, made shrewd acquisitions for it as a Berkshire subsidiary for thirteen years, identified Lubrizol as a Berkshire acquisition candidate, was ruthlessly budget conscious at NetJets, and simultaneously participated in oversight at Johns Manville. But, in the end, Sokol was short on sensitivity to reputation.
There are a number of promising candidates. In my research for this book, including interviews and surveys of Berkshire insiders and shareholders, I was able to identify at least ten who are capable of executing acquisitions and allocating capital, cheerleading, advising, and occasional intervention. Ajit Jain of NICO is among the longest-serving Berkshire senior executives.6 He runs a powerful engine of Berkshire’s capital generation and is the executive Buffett showers with heaviest praise, although he has not run a public company. The CEOs of Berkshire’s largest subsidiaries are often identified as candidates: Greg Abel of Berkshire Hathaway Energy is among the most acquisitive Berkshire managers, and Matthew Rose of BNSF Railway is the one with the most extensive public company service, having served in executive positions at BNSF since 1997.
Perhaps the executive with the most germane experience is Frank Ptak of the Marmon Group, a genuine mini-Berkshire, who also offers an impressive acquisition record; experience as co-head of Illinois Tool Works, a public company; and investment knowledge as a director of Morningstar. Among many other exemplary managers mentioned: Tad Montross of Gen Re, who runs a large and prosperous company; James Hambrick, who led Lubrizol as a public company and has a strong acquisition record; Grady Rosier of McLane, who shoots the lights out year in and year out at a massive decentralized enterprise; Kevin Clayton of Clayton Homes, who plays all the positions; and Bruce Whitman of FlightSafety, who is among the longest-serving heads of a classic, prosperous, and once-public Berkshire subsidiary. This list could go on but these examples suffice to suggest the abundant talent available to fill outsized shoes.
In filling those shoes, Buffett’s successors could benefit from the example of what John Nichols did at the Marmon Group after succeeding Bob Pritzker: organize the company into sectors supervised by divisional presidents. Nichols’ reasoning applies equally to the challenge Buffett’s successor will face at Berkshire:
There’s a difference between a founder who has personally built an organization, acquiring entities and being intimately involved, and someone like me who comes in with a similar management style but not the intimate knowledge. Bob maintained very horizontal operations at the Marmon Group; at Illinois Tool Works, I believed in structuring operations into business sectors. So when I came [to Marmon], we built ten different sectors with a president for each. It gave me the ability to have a number of managers who day to day could create and implement strategy. With about 150 companies in a diverse set of ten specialized niches, there’s no way I could be there to make everything happen myself.7
And it worked:
While [Bob Pritzker and I] use many of the same management techniques, the [Marmon] organization was changed to build on the fundamental culture Bob had established. As a testament to our success, we have had virtually no management turnover.8
Berkshire could be organized along the lines suggested by the approach used in Buffett’s shareholders’ letters: insurance (especially GEICO, Gen Re, and NICO); regulated/capital-intensive companies (primarily Berkshire Hathaway Energy and BNSF Railway); finance (Clayton Homes, CORT, and XTRA); and the final sector, which could be subdivided into any of several different ways, including apparel (Brooks, Fruit of the Loom, Garan, H. H. Brown, Justin Brands); building materials (Acme, Benjamin Moore, Johns Manville, MiTek); and retail (Ben Bridge Jeweler, Helzberg Diamonds, Nebraska Furniture Mart, Star Furniture).