Buffett retires, who is the designated successor Abel
転載元： chaincatcher
05/06/2025·8DAuthor:Smart Investor
At 9 pm on May 3, Beijing time, the Berkshire Hathaway shareholders' meeting will kick off in Omaha.
This year, Greg Abel and Ajit Jain will still be with Warren Buffett on the rostrum, especially Abel, who is the successor, will accompany him throughout the journey.
The shareholders' meeting on May 1, 2020 was held online due to the impact of the new crown epidemic, while Abel and Jain represented non-insurance and insurance businesses respectively, and participated in the Q&A session with Buffett for the first time.
Since Charlie Munger passed away in November 2023, Berkshire has experienced the first annual conference without Munger (2024), and Abel has sat on the left hand side of Buffett as his successor.
In the shareholder letter in February this year, Buffett made a special mention of Abel several times.
When discussing Berkshire's capital allocation, Buffett praised Abel for showing similar patience to Munger in stocks and subsidiaries' investments, and for being able to take decisive action when opportunities come.
"Over time, our appreciation for these companies has deepened. Greg met with them many times and I also regularly follow their progress. I expect Greg and his successor to hold this portion of Japan's investment for decades."
Buffett reminds us that Berkshire's 10-K file has never been "empty sweet words and beautiful pictures" and Greg won't change that after taking over.
"I'm 94 years old, and soon Greg Abel will take over as CEO and start writing an annual shareholder letter. Greg, like me, sticks to Berkshire's creed that reporting is not just a routine of the year, but the responsibility of Berkshire CEO to shareholders. At the same time, he knows that once you start cheating shareholders, you will soon be able to cheat yourself."
Today, as the Buffett era approaches, understanding Greg Abel may be the key to understanding Berkshire 's trend in the next ten or twenty years.
This year, the February/March joint publication of Fortune magazine published a "Meet the man picked to succeed Warren Buffett" written by Shawn Tully, which is probably the most detailed introduction we have seen about Abel.
Abel is low-key and has a gentle and extroverted personality, and is highly sensitive to numbers. People who know him said that Abel is quite Warren-like, but he lacks the boss's signature performance talent.
As described in this special report, he does not prefer letting go management like Buffett, but pays great attention to details and the actual driving force for his subsidiary.
Former Brooks CEO Jim Webber once described: "If you perform poorly, Greg will tell you directly and give you a few months to adjust."
"Greg won't let the laggards continue to fall behind," said Larry Cunningham, a professor at the University of Delaware.
This style of focusing on execution and emphasizing improvement coincides with Berkshire's culture of always emphasizing actual results and opposing empty promises, and gradually won Abel's high trust from Buffett.
In this process, Abel showed three major qualities that were exactly the same as the "Prophet Omaha": the talent to build trust, the eye to discover opportunities, and the wisdom to avoid risks.
This article systematically tells how Abel has gradually accumulated today's trust and responsibility from the small Canadian prairie city of Edmonton to Berkshire's core, from energy business to overall group management.
Very rich and exciting.
Smart Investors (ID: Capital-nature) specially translated and organized this article, and would like to use it as a footnote to this special moment today.
01 About Tariffs and Global Trade
"Warren, who is your CEO successor?"
This question may be the most questioned but unsolved puzzle in corporate history.
At Berkshire Hathaway's annual shareholders' meeting, every year, in the live Q&A session hosted by Warren Buffett and Charlie Munger, shareholders always give this classic question. The usual response from the two helmsmen, "The board of directors has appointed a successor, but we will not name it." This, along with the 5-kilometer long-distance race and the coconut Bangbang candy dip sauce display of Xishi Candy, has long become an indispensable part of the shareholders' meeting weekend activities.
Until the afternoon of May 1, 2021 (at that time, due to the impact of the new crown epidemic, the shareholders' meeting was changed to be held online), the situation finally took a turn. Munger, who was 97, at the time, blurted out when answering questions about the company's future culture: "Greg will continue this culture."
This "missword" ended the mystery of the CEO's succession that has attracted the most attention and lasted for the longest time in business history.
Berkshire investors and observers immediately realized that "Greg" was referring to Greg Abel. Two days later, Buffett officially confirmed in an interview with CNBC that after he stepped down, Abel will take over Berkshire's helm.
This rule, which began in 1970, was swept through university campuses with the wave of anti-Vietnam War, and began with Nixon's first presidency, will usher in a new successor. This announcement sets an important navigation mark for Berkshire's future development path.
Abel, 62, has been one of the favorites to succeed since early 2018. At that time, Buffett and Munger appointed him as vice chairman and director with another competitor, Ajit Jain.
Since then, Abel has been fully responsible for all Berkshire's non-insurance businesses—covering two major sectors: the leading companies in the energy industry in the fields of railways, aerospace and Abel's origins, as well as a series of well-known consumer brands including DQ, Brooks Running and Benjamin Moore paint.
This dazzling series of diversified businesses constitutes the largest non-financial balance sheet in the United States and contributes two-thirds of Berkshire's non-investment income. Jia En, 73, continues to be in charge of the insurance business segment.
Meanwhile, Buffett himself is still managing a huge portfolio—a portfolio of stocks, bonds and cash that has changed frequently in recent years—and his two long-time aides, Ted Weschler and Todd Combs, are also helping with the management. It is worth mentioning that these two assistants have also been regarded as "dark horse" candidates for successor CEO positions.
02 About Japan's investment
Abel and Buffett's intersection began when Berkshire entered the energy field a quarter of a century ago. Since becoming CEO of Berkshire Hathaway Energy Company (BHE) in 2008, he has gradually built an energy empire covering utilities, oil pipelines, natural gas plants, wind and solar power plants and a huge transmission network. This sector has now become an important pillar of Buffett's business kingdom.
Today, Abel's business under its jurisdiction has an annual revenue of approximately US$270 billion - if calculated separately, BHE can rank among the top ten in the Fortune 500 list, surpassing Microsoft and Chevron (Berkshire itself ranked fifth).
In the process of gradually gaining Buffett's trust, Abel showed three major qualities that were exactly the same as the "Prophet of Omaha": the talent to build trust, the eye to discover opportunities, and the wisdom to avoid risks.
As Buffett said in 2021: "There are many smart people in this world, but some smart people will do many stupid things. Greg is a smart person, but he will never do stupid things."
Of course, 94-year-old Buffett has not announced his retirement plan yet, and his wonderful performance at the shareholders' meeting in May 2024 proves that his thinking is still sharp.
But it cannot be ignored that Berkshire 's overall performance is no longer as brilliant as before . Berkshire's average annual return rate was as high as 19.8% from 1965 to 2003, surpassing the S&P 500 by an average of nearly 10 percentage points per year. However, over the past decade, Berkshire's average annual return rate was 11.6%, down from the S&P 500's 13.2%.
"The only reason for the existence of a comprehensive conglomerate is to outperform the S&P," said Dave Cote, who headed the diversified manufacturing giant Honeywell from 2002 to 2017.
For a long time, Buffett has successfully resisted the impact of radical investors who are trying to "release value." Even behind him, Berkshire will still maintain a strong defense system.
Although Buffett has donated more than half of his Berkshire stake to charities (mainly the Bill and Melinda Gates Foundation) since 2006, he still controls more than 30% of the voting rights.
In addition, he (last Thanksgiving) revised his will and decided to donate almost all of his estate to a charitable trust managed by his three children, Howard, Peter and Susan.
According to the will, the wealth will be allocated in batches to various charities (including foundations they manage themselves) within ten years of Buffett's death.
Therefore, the large number of Berkshire shares held by this trust will effectively prevent potential threats from radical investors to the company for many years to come. At the same time, Buffett has appointed Howard as his successor chairman, further consolidating Berkshire's defense system.
But as trusts' Class A shares are converted into Class B shares for charity, external investors, including fund managers, ETFs and individual shareholders, will gain more and more voting rights.
This transfer of power is likely to happen during Abel's tenure.
Although Berkshire's nearly one trillion-dollar market value makes it difficult for private equity funds or industry giants to instigate overall acquisitions, the diversification of voting rights may cause disturbances from radical investors.
03 About the cash in hand
In sharp contrast to the world-renowned Buffett, Abel's background, personal style and management philosophy are very little known to the outside world.
Except for one or two events he attended with Buffett, he has never accepted exclusive interviews with commercial media, and his main public appearances are limited to the past three Berkshire shareholders' meetings - he took over the podium seat of the late Munger (deceased at the end of 2023).
Berkshire Hathaway Energy declined the interview request for Abel from Fortune magazine, but Buffett responded to the email and said: "I am extremely satisfied with Greg's performance. But I no longer accept interviews. At the age of 94, I not only slowed my bridge playing speed, but many other activities have also been gradually reduced or completely cancelled. However, I still enjoy it and can still do a few things well."
However, by interviewing people familiar with Abel, reviewing his past personal experiences and management philosophy shared in public, and the actual report card he handed over at Berkshire, a clear image gradually emerged: he is a leader who is extremely close to Buffett in terms of spiritual temperament, but is likely to embark on his own path.
Ultimately, for all those who follow Berkshire, there is only one real concern: Warren Buffett once built the greatest wealth creation machine on Wall Street ever. But after him, even if he was the successor he personally appointed, could he control this behemoth?
If Buffett chose the successor with simple and friendly qualities, no one would be surprised. People familiar with Abel said that he has a Warren style, but lacks the boss's signature performance talent.
Abel grew up in the Canadian prairie city of Edmonton, a city known as the "oil capital" of the country and is known for its economic prosperity and bust cycles. His mother was a housewife who served as a legal assistant and his father worked in fire extinguisher sales.
"People sometimes worked and sometimes lost their jobs," Abel recalled in an interview with the Horatio Alger Association, an organization that provides scholarships to students with extreme poverty, and Abel is a long-time supporter. "But family and close friends always give you the power to dream."
His first business adventure was to deliver advertising leaflets from door to door on his bike, paying 0.25 cents per copy.
Abel from childhood—who can be seen in the photo with a messy Beatles-style hairstyle—and then began collecting discarded soda bottles. He keeps looking for better routes to go home so that he can find more discarded bottles along the way. Every time he gets up to 5 bottles after school, and by weekends, his room can be filled with 20 bottles, worth about $1.
After entering high school, he helped in the company where his father worked, and was responsible for filling fire extinguishers.
Teenager Abel's lifelong love for hockey began in his hometown of Edmonton, a city known worldwide for Oilers legendary star Wayne Gretzky.
His hockey enlightenment came from uncle Sid Abel, the hockey legend who was inducted into the Hockey Hall of Fame, played for 14 seasons with the Detroit Red Wings and the Chicago Blackhawks.
Little Greg trained at the ice rink every day until his parents urged him to finish dinner. This rough sport allowed him to understand the true meaning of team spirit. "Playing ice hockey will make you understand that fighting for a team is much easier than fighting alone," Abel said.
Until his mother Bev died at the end of 2022, he would call his mother on July 1 every year to analyze the signings and mistakes of the Oilers during the offseason.
Abel's simple central values are perfectly in line with the urban temperament of his current residence, Des Moines (where Berkshire Energy's headquarters). He coached his son's youth hockey team at the Abel ice rink, which was built at his own fund, located in the RecPlex, a large sports complex in Des Moines. This year, he stepped down as head coach and moved to an assistant coach to relieve some of the pressure.
According to his friends in Des Moines, if you meet Abel at the Iowa Fair or Calgary Cowboy Festival, you are more likely to think he is a local teacher or bank employee than a person who is about to take over the most important position in the business world in the United States.
“His affinity can fit into any occasion,” said Mark Oman, a former Wells Fargo executive. "As a neighbor, he is the kind of person who is not arrogant and down-to-earth, and is best suited to watch the Oilers or NFL football games together."
Abel has a great sense of humor, Oman added. Last year, when they watched the Olympics together, Abel joked that he finally found a game that he could win: "I can go to the Iowa Curling Championship." He quipped that in Hawkeye State there were few competitors in curling.
04 About Insurance and AI
Those who know Abel said that he is good at establishing deep interpersonal relationships. "He becomes friends when he first meets people," Oman described. "Although he is not outgoing, he is 100% friendly. No one is better at creating a party atmosphere than Greg - not by exaggeration, but by personalized care to make every guest enjoy it."
Even though the business is busy, Abel is happy to provide selfless advice.
"He has extraordinary wisdom, but the wonderful thing is that you will never feel stupid or irrational in front of him. He always makes people feel like spring breeze."
Dawn Farrell, the current chairman of the pipeline giant Trans Mountain, has formed a friendship with Abel for business cooperation and often seeks advice: "If I need strong advice on certain business issues that are not related to him, he will always take time to help me figure out my thinking."
In the eyes of former Honeywell CEO Dave Cote, Abel was particularly impressed by the Horatio Alger Association's investment. The institution provides scholarships for extremely poor students, many of whom have suffered abuse, slept in a car with their mothers, or witnessed family members die of their families due to drugs.
Abel served as chairman of the organization in 2018 and still plays an important role in the Executive Committee.
“He did a lot for these kids,” Cotter said. In addition, he believes that Abel is not only passionate about charity, but also humble and sincere. "In his position, he could have chosen to be indifferent and distant, keep a distance to protect himself. I have seen too many people who are far inferior to him, but act more high."
Abel 's ability to win in the competition for successors is perhaps the closest to Buffett because of his gentle and outgoing personality - a similarity that contains a significant business advantage.
Of course, you won't see Abel dancing with the University of Nebraska cheerleaders like Buffett, riding a bull through the streets of Omaha, or singing "My Way" in the Today Show - these classic scenes have created Buffett's legendary image.
But Abel showed the "big charm" in a unique way: he calmly held a microphone and shuttled through the Berkshire annual meeting audience, analyzing the technical details of the utility in popular language; he inherited Buffett's true sincerity, a trait that helped the latter win the trust from regulators to stubborn founders—the founders are willing to entrust their lifelong efforts to trustworthy people.
Auman pointed out that Abel has "massive information digestion ability" . Business partners revealed that he can even "speed read" the balance sheet and profit and loss statement to quickly capture key data.
Buffett was amazed at his enthusiasm for his work, jokingly saying that "Greg discovered a space-time crack in Des Moines that lasted more than 48 hours a day."
Abel's deep understanding of the operational mechanisms of business, especially the flow of each dollar, started when he was studying at the University of Alberta. He initially focused on his finance major and then turned to an accounting major in order to better understand the relationship between the balance sheet and the statement of cash flow.
After graduating in 1984, he joined the Edmonton branch of PWC. A few years later, he was sent to his San Francisco office for a short-term escort.
In 1991, Abel became the auditor of CalEnergy, the second largest geothermal power producer in the United States. This experience shapes his management philosophy and meets a key career mentor.
05 About Patient Investing and Decisive Swing
At that time, Buffett's childhood friend and Berkshire's board member Walter Scott hoped to diversify his engineering company Peter Kiewit Sons' by acquiring the debt-burning CalEnergy. He already had the right person in his mind to run the company - that is David Sokol.
Sokol, the 35-year-old business wizard, just founded a waste power company in Omaha and successfully went public, making a lot of money.
Kiwitt acquired the controlling stake in CalEnergy for $28 million, and Sokol immediately took office and appointed 28-year-old Abel as the company's accountant.
The Kiwitt culture has profoundly influenced Abel's working style and negotiation style.
This company advocates a simple and practical spirit: employees work for life and participate in the construction of dams, bridges and oil platforms in various places.
Sokol became Abel 's trading mentor, and Scott, 20 years older, set an example of leadership for him.
In 2020 (the year before Scott's death), Abel interviewed his former boss at an Omaha charity event, guiding Scott to recall his childhood swinging sickles on the farm, mowing grass on the farm, sleeping in the shed while mapping the Monticello Dam during the summer vacation of college, and working 18 jobs in 12 years.
Abel admitted that he loved to visit landmarks such as St. Lawrence Seaway and Garrison Dam. These projects Scott had fought in fascinated him. He listened to Scott's memories in admiration on the stage, and exclaimed from time to time: "It's great, I like this story so much!"
David Wit, a tech entrepreneur who was then the director of CalEnergy, witnessed the operation of the iron triangle of Scott (Chairman), Sokol (CEO) and Abel (Financial Architect). He was amazed that this team dared to take risks in the acquisition, and insisted on deeply understanding the target financial data and predicting potential risks before taking action.
"Scott has a unique vision," Witt told Fortune, "Greg has both affinity and acumen: humble and diligent, without the arrogance of the elite, and more importantly, truly understanding numbers."
During this period, CalEnergy began a series of acquisitions, including a British utility, which Abel successfully built into a profitable machine.
This result won Scott's high praise, and Scott also recommended Abel's talents to his friend Warren Buffett.
They later acquired major power suppliers and renamed the company to MidAmerican.
But utilities remained unpopular in the late 1990s energy market frenzy -investors were keen to pay high premiums for companies such as Enron, AES, Calpine, etc., as these companies continue to acquire transmission networks, power plants, pipelines and utility assets to cater to the fully liberalized energy market.
China-US Energy focuses on acquiring regulated assets that are ignored by the craze, and its monopoly position and stable customer base are exactly what emerging companies lack.
Scott was keenly aware that these "cash cow" assets were in line with Buffett's appetite.
In an interview with Andy Sewer in Fortune in 2002, Buffett recalled: Scott, who had left Keewet and turned to the fiber optic company Level 3, flew from Omaha to Carmel, California, and pulled him into the room at Buffett's sister's family dinner to lobby for the acquisition of Sino-US energy.
"Walter pulled me into the room and told me that the utility had been trying to explain its business model to Wall Street analysts, but the analysts were not interested because they were more concerned about companies like AES and Calpine that had fast-paced transactions and frequent M&A," Buffett recalled.
Scott asked Buffett if he was willing to privatize China-US energy with him and Sokol and Abel teams.
Buffett has always liked reverse investment, and he is very excited about this idea. In October 1999, Berkshire announced the acquisition of controlling stake in Sino-US Energy, while Scott joined as a minority shareholder.
With the full liberalization of the energy market turning to a crisis, China-US energy has quickly become the "high-quality buyers" in the disposal of assets of major companies.
In 2002, Williams Companies sold the Cohen River gas pipeline to China-US Energy for $960 million, a pipeline connecting the Rockies, Las Vegas and California, a price that is hundreds of millions of dollars lower than the valuation two years ago.
That same year, Sokol and Abel acquired Northern Natural Gas Co., a 17,000-mile network of natural gas pipelines that connect Texas's Diedian Basin and the Upper Midwest U.S. The deal costs about $600 million less than Dynegy bought from Enron a few months ago.
Servo reported that Buffett was "as excited as if he had caught a giant tuna" when he talked about these achievements.
06 About the depreciation of the US dollar
Since 2007, Buffett has begun to send Sokol to rectify the problematic subsidiary of Berkshire, and has successively taken over insulating material maker Johns Manville and business jet operator NetJets.
The following year, Abel was promoted to CEO of China-US Energy.
Sokol's outstanding performance as the "fire-fighting captain" once made many investors think that he is the most promising CEO successor. However, in 2011, Sokol resigned suddenly after being questioned about individually purchasing his shares on the eve of recommending Buffett's acquisition of Lubrizol (Lubrizol) (Berke Hill later completed its acquisition of Rubisol). Fortune magazine tried to contact Sokol by email without a reply.
After Sokol left, Abel's promotion was a foregone conclusion.
After taking charge of the energy sector, he continued his strong profit growth momentum, cleverly used Berkshire's strong balance sheet to acquire assets at a low price, and used all cash flow for business expansion, creating the compound interest miracle that Buffett cherished.
In 1997, CalEnergy's revenue was US$2.3 billion and its profit was US$139 million; by 2022, Berkshire Energy's revenue soared to US$26.4 billion, with its profit reaching US$3.9 billion.
Abel also avoided Berkshire's potential PR crisis on environmental issues with a visionary negotiation and further consolidated the company's image in the minds of environmentalists and regulators.
At that time, hydropower dams along the Klamath River in Oregon and Northern California caused damage to the Indian tribe's fishing resources. Abel, with a patient and flexible style of negotiation, led to an agreement: China-US Energy will shut down these dams, but only if it can continue to operate for a while to recover some investment, while paying for demolition costs through state bond issuances and a slight increase in electricity prices.
The largest dam removal project in history was completed earlier this year, and the Klamas River has now resumed free flow and is expected to usher in a new fishing harvest soon, benefiting fishermen from local Aboriginal tribes.
Abel summed up his negotiation style in a 2015 video interview: " The key is, how do you get the other party involved? How can we become long-term partners?"
Whether he served as the CEO of China-US Energy from 2008 to 2018, or was fully responsible for all Berkshire's industrial business segments since then, Abel has demonstrated a strong and hands-on management style and has become an important promoter of the construction of green energy infrastructure in the United States.
Under his leadership, Berkshire made a huge move into the solar sector, and also became the largest regulated wind power utility in the United States, operating numerous wind farms in Texas, California and the Midwest (particularly Iowa).
At Berkshire's annual shareholders' meeting in May 2024, Abel announced that on Earth Day just a few weeks ago, strong wind powered the wind turbines, meeting the full electricity demand of more than 800,000 Iowa customers in China and the United States. (In mid-2022, Berkshire acquired 8% of the BHE shares held by the Scott family and Abel for US$8.7 billion, and Abel cashed out 870 million in 1% of the shares.)
Abel has also brought significant improvements in the manufacturing, service and retail sectors (sized as US$165 billion, covering dozens of subsidiaries such as NetJets, Benjamin Moore, Clayton Homes, and other than railway and energy businesses), increasing its operating profit margin from 4.9% in 2017 to 7.6% in 2023.
Unlike Buffett who "let go of management", Abel does everything himself and never tolerate inefficient performance.
Jim Weber, former CEO of Brooks Running Shoes, revealed that Abel visits the company's headquarters in Seattle several times a year to discuss company strategies with management. "If you perform poorly, he will tell you directly and give you a few months to adjust." Weber said in an interview at Berkshire's annual shareholders' meeting in 2021.
"Greg won't let the laggard continue to fall behind. If you're not doing well, you'll get a call from him."
Buffett himself also admitted in an interview with CNBC in 2023: "Greg may be tougher than me in terms of execution. He can leave with a smile after the execution, and the person being executed can also feel good."
07 About the work of the efficiency department
From an external perspective, Abel seems to be about to take over a stable and well-managed business empire, but in fact, Berkshire faces many challenges.
The overall performance in recent years is acceptable, but it has declined significantly compared with the brilliant performance in the past. Some once-bike subsidiaries are currently performing weakly:
Auto insurance giant GEICO is far behind its competitor Progressive in terms of pricing risks using Internet of Vehicles technology, resulting in market share loss;
BHE's profits fell from its peak in 2022 due to wildfire compensation;
Its railway company BNSF ranks at the bottom among the five major railway companies in the United States in the past two years. Buffett has publicly stated that BNSF urgently needs to "significantly reshape the cost structure."
Buffett himself also admitted that some of Berkshire's companies have performed poorly for a long time and have some business segments that are "stopping back".
In the face of these challenges, how will Abel deal with it and can it continue Buffett's legend? This is not only about Berkshire's future, but also about Wall Street's confidence in this "wealth machine".
Abel can boost performance through a three-pronged approach and rejuvenate those underperforming businesses. However, these initiatives will inevitably affect Berkshire's long-standing competitive advantage—the high degree of independence of its subsidiaries, which is the core of Berkshire's business ecosystem.
Under the traditional model, Berkshire grants full autonomy after acquiring high-quality companies at reasonable prices. This "non-interference" allows it to act as the "last buyer" in times of crisis. This is Berkshire's key competitive advantage, according to Adam Mead, an investment manager who writes the authoritative book on Berkshire's financial history.
Strategy 1: Set profit targets and replace CEO if necessary
Buffett rarely sets profit indicators for the CEO of his subsidiary, and will not directly replace management due to poor performance. However, Abel may challenge this approach.
“He will put pressure on us like any good manager,” said Troy Bader, CEO of Snow Queen (DQ).
Recently, Abel's management style has been reflected. He sent Adam Wright, a 47-year-old executive who had successfully managed Sino-US energy, to take over Pilot Travel Centers, the largest truck service center chain in the United States.
Wright was a NFL halfback, and Buffett praised him as a "outstanding executive." At present, Wright has begun to renovate old convenience stores and optimize the company's financial and financial situation.
Strategy 2: Establish an operation management team
This architecture is the first time in Berkshire's history, but it is likely to be a necessary move.
It should be noted that Abel will receive a lot of help - in the insurance business, experienced Ajit Jain continues to take the helm; in the management of huge stock and bond portfolios, he can also rely on Todd Combs and Ted Weischler.
Legend CEO coach Ram Charan pointed out: "It is impossible for Greg to manage 80 subsidiaries personally." David Kass, a professor at the University of Maryland, believes that Abel can divide non-insurance businesses into industries, with about 20 companies in each group, and coordinated and managed by a dedicated person.
Strategy 3: Integrate procurement and operational resources
Successful corporate groups like Honeywell and Danaher have achieved economies of scale by centrally purchasing raw materials and parts and promoting "best practices" in various factories.
By contrast, Berkshire's current synergies are mainly reflected in the financial level, such as the headquarters can provide financing for Clayton Homes at interest rates below the bank or bond markets.
As Mead pointed out, Berkshire has not integrated on the procurement side, for example, discouraging its subsidiaries from jointly purchasing aluminum or semiconductors, nor has it promoted cross-selling of GEICO insurance.
Buffett admits that with Berkshire's scale expanding, it is impossible for the company to reappear in its super high returns in the first 40 years.
However, he believes that Berkshire is still expected to perform 1 to 2 percentage points higher than the S&P 500. The most likely situation is that Abel will generally continue the basic formula that makes Berkshire successful:
In times of crisis, as the “last buyer”, the ability to write billions of dollars checks;
When the stock market is sluggish, increase equity investment, and reduce holdings in time when the valuation is too high;
Actively repurchase shares when the company's market value is lower than its intrinsic value.
And what is Berkshire’s true “inner value”—perhaps no one is closer to the correct answer than Greg Abel, except Buffett himself.
