Bloomberg Audio Studios, podcasts, radio news. 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 dispense's investment wisdom. That's earned him international renown.
And one of the great benefits you get from owing as much as one share of Berkshire is that you get the right to go to his annual meeting and ask him questions.
That's Bloomberg Senior Markets editor and opinion columnist John Authors.
So Warren Buffet 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 de Seeman Omahi's is very impressive.
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.
The diamonds arrive were.
Gregg should become the chief executive officer of the company earlier in.
Well, you can tell that I wasn't expecting it because I actually I had a high school reunion this weekend, and this is one of the few weekends I took off completely.
John says that even though the timing of Buffett's announcement was a surprise, the decision wasn't entirely unexpected. At ninety four years old, Buffett is the longest running CEO in the S and P. Five hundred, and he's been planning for Berkshire's future without him for years.
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 at how this beast is going to continue.
The move marks the end of an era for Buffett and the beginning of another for Berkshire Hathaway, which has grown into a one point two trillion dollar company. I'm Sarah Holder, and this is the big take from Bloomberg News 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 breakup. John, First, the burning question, why did Warren Buffett choose to step down now after over fifty years as the CEO of Berkshire Hathaway.
I can only speculate I happen't to his doctor. I haven't talked to him. People with emotional intelligence 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 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 is what's necessary, the emotional intelligence to stay calm 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 curveball and it's time to step back.
Well, I want to 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.
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 Intelligence Investor and Security Analysis, basically the father of value investing, and he published in the nineteen thirties right at the bottom of the depression.
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 going to be fine. I think the phrase he used was cigar, but people will finish their cigar and put it down, when in fact there was still several good puffs 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 a 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 if he companies that are way too cheap. He expanded it, and then I guess the other thing you have to get to is that he really could be a comedian. He really could be an opportunist, particularly in the Crisis of eight, but it's happened again since then. He began to grasp that he was so big. But he did have this
huge advantage. He just had so much cash that he was such a safe, safe investment, so he could afford to lend it to people when others couldn't.
He could afford to be an opportunist.
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, 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.
Coca Cola would be one of the classic examples of Gillette. What he looks for are companies with what he calls a wide economic moat, which you 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, 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.
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.
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 folksiness definitely works much better at deflecting the kind of criticisms that come of great wealth than the approaches that Elon Musk has taken. I think he genuinely even though he's obvious 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 under taxed 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 correct that, but he was conscious of.
It, right, So his sort of folksiness is democratic populism has helped shield him from some criticism, but he's not immune from criticism. What are the biggest critiques of Buffett's approach and his tactics.
I think the biggest criticism to be made of him does come from the 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 make 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 is contributing towards capitalism not spreading its fruits as widely as it shoulds are not creating 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.
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. 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, and he has political heft. He's someone people often turned to to help process the ups and downs of the economy, and he's stepping aside at a moment of economic uncertainty. So I asked Bloomberg's John Authors, can Warren Buffett be replaced?
No, I'm not sure we can. I mean, there are other people who have something akin to his status in different ways, the most obvious example being Jamie Diamond, who has had mistakes in his career, but on balance has been a startlingly successful banker for a very long time. Bill Lackman, who I think does regard himself or used to regard himself as a value investor, and you can see his vehicle as being something akin to what Berkshire
Hathaway has been. 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 going to do that. I don't think.
Right impossible as it might seem irreplaceable. As it 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 Able is inheriting at this moment and the challenges and opportunities he has right now.
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 an industrial behemoth rather than the great investment vehicle of Warren Buffett.
Does a breakup of Berkshire Hathaway seem likelier under able, 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 with very strong, reliable profits. But yes, you'd still have to think that taking it apart as as a vehicle becomes more likely now now that the great man is moving on.
Is there a sense that Able will continue to sort of toe the line set by Buffett, or that he'll shake things up.
I would imagine he would tow the line. 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 going to do the right thing. I mean, I suppose Buffett, for everything else, is ultimately an opportunist, a disciplined one, and I think he's appointed a successor who he sees as a kindred spirit, a disciplined opportunist.
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.
I imagine he's going to If he thinks he's spotted 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 ninety four could do with less wear and tear. If we have another twenty thirty percent market break later this year, and plenty of people think that's possible, I suspect he's yeah. He 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 can easily imagine Warren Buffett's in six months time, when the fear about Terrence has really got people scared, pouncing here working out that this is the time to pounce, and by buying something we haven't thought of like, I can easily imagine.
That still the oracle after all. This is the big take from Bloomberg News I'm Sarah Holder. This episode was produced by Julia Press with support from Alex Tie. It was edited by Tracy Samuelson, Patty Hirsch, and Kat Shaglinsky. It was fact checked by David Fox and mixed and sound designed by Alex Suguia. Our senior producer is Naomi Shaven. Our senior editor is Elizabeth Conso. Our deputy executive producer is Julia Weaver. Our executive producer is Nicole Beamsterboor Sage
Bauman is Bloomberg's head of podcasts. If you liked this episode, make sure to subscribe and review The Big Take wherever you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back tomorrow