2006: How do you train your successors?

AUDIENCE MEMBER: Greetings to all of you from the Midwest of Europe. I’m Norman Wintrop (PH) from Bonn, Germany.

Thank you very much for writing your shareholder letter in such a way that we feel treated as partners.

Warren, in the shareholder letter, you ended with your thoughts on managing Berkshire Hathaway in the future.

May I ask you, how do you train your successors? What do you tell them? How do you summarize to them what is important to you?

And how, if you are able to do so, how would you measure whether or not they have lived up to your expectations?

WARREN BUFFETT: Well, that’s a good question.

And, I think, actually, in reading that letter — you know, that’s part of the — part of the reason it’s written — is to convey, not only to our partners, our shareholders, but also to our managers and anybody else in the public, you know, what Berkshire is all about.

This meeting, you know, in terms of what we do is intended to give a personality and a character to Berkshire. And we don’t say it’s better than anybody else’s, necessarily, but we do think it’s us.

And we think — we want managers to join us who believe in the sort of operation we have, a partnership with shareholders, a lifetime commitment to the businesses. We want those people to join us.

We want what they see after they join us to underscore the values we have. So everything we do we hope is consistent with what most people would call a “culture” at Berkshire.

So the written word, what they see, what they hear, what they observe. And that is training in itself.

It’s the same sort of training you get as a child. I mean, you — when you are in the home and you’re learning something every day by the behavior of these terribly important people, these big people that are around you.

And a home has a culture. A business has a culture. To some extent, a country can have a culture. And we try to do everything that’s consistent with that. We try to do nothing that is inconsistent with that.

And, believe me, if you’re a bright Berkshire manager — and they are bright — you know, they buy into it to start with, they see that it works, you know, and it doesn’t require formal lessons or mentoring or anything of the sort.

I mean, if you talk to our Berkshire managers, you would find that they think consistently with how, in effect, Charlie and I think.

There are plenty of people that don’t, and they don’t join us.

I mean, you know, we hear all the time from people — I’ve got one coming in a little while, actually, that, you know, nothing is going to come of it because this guy — I mean, his brain processes things different than mine does.

And I’m kind of interested in learning about his business, so we’ll get together, but it wouldn’t fit. You know, it would just not — it would be a mismatch.

And the nice thing about it is our culture is so well-defined that there aren’t many mistakes, in terms of people entering it or behaving in a way inconsistent with it. So I think that — I don’t think there’s any formal training necessary.

I mention in the annual report the fact that, if I die tonight, there are three obvious candidates to take my place.

Now, the board knows which one of them they would agree on tonight. Might be different three years from now, but any of those three would not miss a beat in terms of stepping into the culture that I hope we have here, because it’s theirs too.

Charlie?

CHARLIE MUNGER: Well, you know, if Warren has kept the faith until he’s 75 years old in maintaining a certain kind of culture and a certain way of thinking, do you really think he’s going to blow the job of passing the faith on?

What could be more important, in terms of his duties in life? You all have something — (Applause)

You all have something more important to do than worry about the fact that the candle is going to go out at Berkshire just because some people die.

This is a place where the faith is going to go on for a long time.

Of course, at headquarters, we aren’t training executives. We find them. And they’re not hard to find.

You know, if a mountain stands up like Everest, you don’t have to be genius to recognize that it’s a high mountain. (Laughter)