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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Over the weekend, Berkshire

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Speaker 1: Hathaway held its annual shareholder meeting in Omaha, Nebraska. It's

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Speaker 1: famous in investor circles, nicknamed the Woodstock for capitalists. Every year,

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Speaker 1: at that meeting, the company's CEO, Warren Buffett, takes hours

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Speaker 1: of questions from shareholders and dispense's investment wisdom. That's earned

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Speaker 1: him international renown.

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Speaker 2: And one of the great benefits you get from owing

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Speaker 2: as much as one share of Berkshire is that you

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Speaker 2: get the right to go to his annual meeting and

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Speaker 2: ask him questions.

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Speaker 1: That's Bloomberg Senior Markets editor and opinion columnist John Authors.

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Speaker 2: So Warren Buffet himself still has I think more than

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Speaker 2: a third of Berkshire Hathaway, but the sheer number of

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Speaker 2: people who have bought just one share in Berkshire so

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Speaker 2: that they can go along to de Seeman Omahi's is

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Speaker 2: very impressive.

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Speaker 1: But this year Buffett shocked everyone by announcing he'd be

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Speaker 1: stepping down as CEO and naming a vice chairman at

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Speaker 1: the company, Greg Abel, as his successor.

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Speaker 2: The diamonds arrive were.

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Speaker 1: Gregg should become the chief executive officer of the company

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Speaker 1: earlier in.

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Speaker 2: Well, you can tell that I wasn't expecting it because

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Speaker 2: I actually I had a high school reunion this weekend,

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Speaker 2: and this is one of the few weekends I took

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Speaker 2: off completely.

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Speaker 1: John says that even though the timing of Buffett's announcement

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Speaker 1: was a surprise, the decision wasn't entirely unexpected. At ninety

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Speaker 1: four years old, Buffett is the longest running CEO in

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Speaker 1: the S and P. Five hundred, and he's been planning

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Speaker 1: for Berkshire's future without him for years.

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Speaker 2: You do have a very serious problem with Berkshire, which

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Speaker 2: is how do you replace Warren Buffett. There is an

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Speaker 2: immense amount of value perceived in his continuing to be

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Speaker 2: the CEO, so he has been preoccupied for quite a

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Speaker 2: while with working at how this beast is going to continue.

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Speaker 1: The move marks the end of an era for Buffett

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Speaker 1: and the beginning of another for Berkshire Hathaway, which has

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Speaker 1: grown into a one point two trillion dollar company. I'm

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Speaker 1: Sarah Holder, and this is the big take from Bloomberg

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Speaker 1: News today. On the show, how Warren Buffett changed Investing,

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Speaker 1: What it would take for successors to fill his shoes?

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Speaker 1: And whether Berkshire Hathaway is headed for a breakup. John, First,

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Speaker 1: the burning question, why did Warren Buffett choose to step

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Speaker 1: down now after over fifty years as the CEO of

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Speaker 1: Berkshire Hathaway.

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Speaker 2: I can only speculate I happen't to his doctor. I

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Speaker 2: haven't talked to him. People with emotional intelligence know that

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Speaker 2: they're not as good as they used to be, and

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Speaker 2: they should be standing down. And I assume it's as

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Speaker 2: simple as that. He has been working on succession for

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Speaker 2: quite a long time. So he's produced a vehicle that

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Speaker 2: is now overwhelmingly strong at generating cash, and all it

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Speaker 2: needs is good patient ownership and it should continue to

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Speaker 2: be a very nice investment for somebody. And he's confident

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Speaker 2: in greg Abel and the various other people he's found

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Speaker 2: around him that he's got people who have what he

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Speaker 2: sees is what's necessary, the emotional intelligence to stay calm

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Speaker 2: and stay within their boundaries. So I don't think there's

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Speaker 2: anything ulterior other than a man in his nineties recognizes

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Speaker 2: that he doesn't have his curveball and it's time to

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Speaker 2: step back.

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Speaker 1: Well, I want to talk about Buffett's legacy, you know,

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Speaker 1: with a figure as historic as Buffett. I know there's

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Speaker 1: a lot to cover, but if you had to start

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Speaker 1: the story of Warren Buffett's rise to become the so

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Speaker 1: called Oracle of Omaha, where would you start it.

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Speaker 2: He went to Columbia Business School, specially so that he

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Speaker 2: could go to attend the class in value investing run

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Speaker 2: by Benjamin Graham, who wrote The Intelligence Investor and Security Analysis,

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Speaker 2: basically the father of value investing, and he published in

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Speaker 2: the nineteen thirties right at the bottom of the depression.

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Speaker 2: Came up with these concepts for how the market might

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Speaker 2: have gone down a lot, but if you use these metrics,

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Speaker 2: you can find the companies that are actually too cheap

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Speaker 2: that even if everything goes wrong, you're still going to

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Speaker 2: be fine. I think the phrase he used was cigar,

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Speaker 2: but people will finish their cigar and put it down,

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Speaker 2: when in fact there was still several good puffs of

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Speaker 2: that cigar to be had. Buffett was fascinated by this,

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Speaker 2: worked out that this was a great way to make money,

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Speaker 2: and went to Columbia to learn at the feet of

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Speaker 2: the master. And then I think the next thing you

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Speaker 2: have to add to that is that he worked out

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Speaker 2: how to adapt the value investing philosophy for when there

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Speaker 2: aren't lots of cigar butts lying around on the floor.

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Speaker 2: So the concept he was fascinated in was a franchise

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Speaker 2: value of companies that really have a great shot at

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Speaker 2: keeping earning more to an extent that they're undervalued. So

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Speaker 2: it wasn't just a question of buying if he companies

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Speaker 2: that are way too cheap. He expanded it, and then

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Speaker 2: I guess the other thing you have to get to

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Speaker 2: is that he really could be a comedian. He really

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Speaker 2: could be an opportunist, particularly in the Crisis of eight,

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Speaker 2: but it's happened again since then. He began to grasp

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Speaker 2: that he was so big. But he did have this

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Speaker 2: huge advantage. He just had so much cash that he

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Speaker 2: was such a safe, safe investment, so he could afford

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Speaker 2: to lend it to people when others couldn't.

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Speaker 1: He could afford to be an opportunist.

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Speaker 2: Yes, he could afford to be an opportunist. And he'd

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Speaker 2: worked out, this is my advantage at this moment. What

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Speaker 2: can I do that others.

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Speaker 1: Can't, and that value investing approach. I'm curious how that

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Speaker 1: shaped Berkshire Hathaway's success. What are some of Buffett's biggest

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Speaker 1: most successful investments.

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Speaker 2: Coca Cola would be one of the classic examples of Gillette.

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Speaker 2: What he looks for are companies with what he calls

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Speaker 2: a wide economic moat, which you could very much argue

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Speaker 2: is a folksy populist way of saying he's looking for

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Speaker 2: really horrible, well entrenched monopolists. In the case of Coca Cola,

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Speaker 2: pepsi does exist. Coca Cola is a brand like virtually

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Speaker 2: no other. If you continue to be able to sell

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Speaker 2: carbonated water with a little bit of this, a little

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Speaker 2: bit of this syrup in it for a very big

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Speaker 2: markup because it's got Coca Cola on it on the label,

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Speaker 2: you are going to make money, which, of course Coca

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Speaker 2: Cola really did.

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Speaker 1: John, you mentioned Buffett's folksiness. He isn't like a standard

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Speaker 1: Wall Street investor type. How has that folksiness helped shape

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Speaker 1: Buffett's image over the years.

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Speaker 2: I think it's made him nicely immune to a lot

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Speaker 2: of the criticism that somebody that rich could normally expect

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Speaker 2: to get. I mean, if you compare him to Elon Musk, charm,

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Speaker 2: self deprecation and folksiness definitely works much better at deflecting

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Speaker 2: the kind of criticisms that come of great wealth than

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Speaker 2: the approaches that Elon Musk has taken. I think he

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Speaker 2: genuinely even though he's obvious a capitalist who is extremely

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Speaker 2: motivated to make money. I think his basic democratic populist

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Speaker 2: politics are genuine. I can remember many years ago when

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Speaker 2: Hillary Clinton was running for Senator for the first time.

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Speaker 2: He showed up to endorse her on a platform and

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Speaker 2: he pointed out that he was very under taxed and

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Speaker 2: that he paid a lower tax rate than his loyal

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Speaker 2: secretary does. And you could argue, well, it's not as

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Speaker 2: though he spent a lot of time really working hard

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Speaker 2: in the political trenches to correct that, but he was

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Speaker 2: conscious of.

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Speaker 1: It, right, So his sort of folksiness is democratic populism

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Speaker 1: has helped shield him from some criticism, but he's not

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Speaker 1: immune from criticism. What are the biggest critiques of Buffett's

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Speaker 1: approach and his tactics.

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Speaker 2: I think the biggest criticism to be made of him

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Speaker 2: does come from the notion of being a monopolist. Many

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Speaker 2: of the entrepreneurs we think of are at least trying

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Speaker 2: to do new things, innovate, expand Warren Buffett doesn't do

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Speaker 2: that he spots businesses that are well run and that

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Speaker 2: have an inbuilt competitive advantage and buys them and holds

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Speaker 2: on and make sure they keep their competitive advantage and

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Speaker 2: keep making money. So he doesn't found companies, and he

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Speaker 2: doesn't help disrupt industries that might need disruption. By providing

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Speaker 2: so much capital to spotting the winners and sending money

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Speaker 2: in the direction of monopolists, he is contributing towards capitalism

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Speaker 2: not spreading its fruits as widely as it shoulds are

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Speaker 2: not creating as diverse and vibrant an economy as it should.

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Speaker 2: He's worked out how to really make money using the

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Speaker 2: rules of the game of capitalism as it works, and

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Speaker 2: he's done it so successfully that in many ways it's

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Speaker 2: quite embarrassing.

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Speaker 1: Warren Buffett's personality and investing philosophy have made Berkshire Hathaway

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Speaker 1: one of the most successful firms in the world, but

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Speaker 1: Buffett's influence extends far beyond the performance of his company.

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Speaker 1: We talk about the extent of that influence and the

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Speaker 1: possible future for Berkshire after the break. Beyond his legendary

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Speaker 1: investment acumen, Warren Buffett is one of the most well

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Speaker 1: known financial figures in the world. He has vast personal wealth,

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Speaker 1: he's a reliable media presence, and he has political heft.

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Speaker 1: He's someone people often turned to to help process the

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Speaker 1: ups and downs of the economy, and he's stepping aside

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Speaker 1: at a moment of economic uncertainty. So I asked Bloomberg's

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Speaker 1: John Authors, can Warren Buffett be replaced?

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Speaker 2: No, I'm not sure we can. I mean, there are

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Speaker 2: other people who have something akin to his status in

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Speaker 2: different ways, the most obvious example being Jamie Diamond, who

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Speaker 2: has had mistakes in his career, but on balance has

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Speaker 2: been a startlingly successful banker for a very long time.

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Speaker 2: Bill Lackman, who I think does regard himself or used

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Speaker 2: to regard himself as a value investor, and you can

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Speaker 2: see his vehicle as being something akin to what Berkshire

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Speaker 2: Hathaway has been. But if you looked at all the

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Speaker 2: other investors that have ever just bought stocks long so

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Speaker 2: every other guy who's tried to do what Warren Buffett

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Speaker 2: has done in history, you would look at those and

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Speaker 2: then say if somebody, if you then got told there's

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Speaker 2: also this other guy who's done this, you would say, no,

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Speaker 2: there isn't that's impossible. What Buffett did at Berkshire is

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Speaker 2: completely off the charts, and nobody else is going to

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Speaker 2: do that. I don't think.

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Speaker 1: Right impossible as it might seem irreplaceable. As it may

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Speaker 1: seem to be. He has chosen a successor, Greg Abel,

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Speaker 1: the former CEO of Berkshire Hathaway Energy, to replace him

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Speaker 1: as CEO. Tell us about the Berkshire that Able is

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Speaker 1: inheriting at this moment and the challenges and opportunities he

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Speaker 1: has right now.

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Speaker 2: Well, basically, he's inheriting an enormous conglomerate with a lot

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Speaker 2: of cash on the side. It's a conglomerate that is

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Speaker 2: quite US centric. He has a company that is pretty

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Speaker 2: heavily based in insurance. That's the business that Buffett particularly

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Speaker 2: felt that he understood that does have pretty significant exposure

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Speaker 2: to industry. He does have this massive cash pile, but

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Speaker 2: I think it probably does become more of an industrial

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Speaker 2: behemoth rather than the great investment vehicle of Warren Buffett.

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Speaker 1: Does a breakup of Berkshire Hathaway seem likelier under able, You.

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Speaker 2: Would think so, because it no longer has the Warren

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Speaker 2: Buffett connection that people aren't going to rush out to

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Speaker 2: buy it just because it's Warren Buffett. It's possible that

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Speaker 2: it's in fact going to continue making money for a

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Speaker 2: very long time because he has found a bunch of

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Speaker 2: companies that are very well supported, that he's got good

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Speaker 2: managers with very strong, reliable profits. But yes, you'd still

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Speaker 2: have to think that taking it apart as as a

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Speaker 2: vehicle becomes more likely now now that the great man

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Speaker 2: is moving on.

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Speaker 1: Is there a sense that Able will continue to sort

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Speaker 1: of toe the line set by Buffett, or that he'll

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Speaker 1: shake things up.

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Speaker 2: I would imagine he would tow the line. He has

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Speaker 2: an investor body that passionately believes in the way Warren

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Speaker 2: Buffett does it and will not be happy with him

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Speaker 2: if he really tries to change things. And Warren Buffett

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Speaker 2: has chosen him because he knows that he's going to

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Speaker 2: do the right thing. I mean, I suppose Buffett, for

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Speaker 2: everything else, is ultimately an opportunist, a disciplined one, and

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Speaker 2: I think he's appointed a successor who he sees as

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Speaker 2: a kindred spirit, a disciplined opportunist.

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Speaker 1: John We've been talking a lot about Buffett's legacy, but

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Speaker 1: obviously this isn't an obituary. He's still very much around,

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Speaker 1: He's still very much a part of the company. He's

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Speaker 1: staying on as chairman. What do we expect Buffett's role

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Speaker 1: to continue to be in the company.

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Speaker 2: I imagine he's going to If he thinks he's spotted

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Speaker 2: a great investment idea, he's going to point it out.

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Speaker 2: I imagine he's probably very happy to leave day to

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Speaker 2: day running decisions to other people, because the man's ninety

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Speaker 2: four could do with less wear and tear. If we

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Speaker 2: have another twenty thirty percent market break later this year,

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Speaker 2: and plenty of people think that's possible, I suspect he's yeah.

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Speaker 2: He he's got his eye on various franchises he thinks

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Speaker 2: might become a compelling buy. He's probably going to do

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Speaker 2: something about it if that happens, If we get a

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Speaker 2: compelling opportunity. I can easily imagine Warren Buffett's in six

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Speaker 2: months time, when the fear about Terrence has really got

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Speaker 2: people scared, pouncing here working out that this is the

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Speaker 2: time to pounce, and by buying something we haven't thought

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Speaker 2: of like, I can easily imagine.

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Speaker 1: That still the oracle after all. This is the big

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Speaker 1: take from Bloomberg News I'm Sarah Holder. This episode was

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Speaker 1: produced by Julia Press with support from Alex Tie. It

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Speaker 1: was edited by Tracy Samuelson, Patty Hirsch, and Kat Shaglinsky.

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Speaker 1: It was fact checked by David Fox and mixed and

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Speaker 1: sound designed by Alex Suguia. Our senior producer is Naomi Shaven.

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Speaker 1: Our senior editor is Elizabeth Conso. Our deputy executive producer

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Speaker 1: is Julia Weaver. Our executive producer is Nicole Beamsterboor Sage

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Speaker 1: Bauman is Bloomberg's head of podcasts. If you liked this episode,

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Speaker 1: make sure to subscribe and review The Big Take wherever

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Speaker 1: you listen to podcasts. It helps people find the show.

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Speaker 1: Thanks for listening. We'll be back tomorrow