2006: Would Buffett allow his successor to become CEO while he remains Chairman?

AUDIENCE MEMBER: My namaste and good afternoon to Swamiji and respected Charlie Munger. Yes, I did say “Swamiji.” I see your inner dress crowned by your truth, by your humbleness, by your simplicity.

But your outer dress — I mean your wealth — is for the needy, at large. So you look upon us, your children, your friends, and your partners.

My name is Shekhar Agarwal. I’m from Sugarland, Texas, suburb of Houston.

Since May ’99, I got interested in Berkshire Hathaway. And I have read a lot of what you have written. So, I can judge a little about you.

By the way, I bought B shares March 3, 2000, at 1410 before they hit the low on March 10, and it became at that time 40 percent of my portfolio, and I still own all those shares and many more.

As you tell the students who come to Omaha to run a portfolio with real money to have a real feeling and real learning, I had the same experience with you.

You know, three years back, I had a chance, with my wife, my daughter, and my 6-year-old son, who is with me today, to spend a few minutes with you when you came to Houston during the opening of a new Star Furniture store.

As we were posing for a family picture with you, my 6-year little one was standing just beside you, while you were sitting on a high-bar chair. And you said to this stranger, “Son” — you said — “Son, you come and sit in my lap.” Sir, Swamiji, that is your simplicity. That is your humbleness.

And you talk about the contribution of Ajit Jain and ask us to bend really down if we see him, or name our children Tony to honor his contribution. Well, 40 years of selfless services to this corporation and to the humanity, you rightly deserve this distinction or this title of ”Swamiji.”

There is a beautiful, beautiful — (Applause) — beautiful prayer in the Holy Vedas that says “tvam jīvehiṁ śaddhā-śataṁ.” It means, “The Almighty God says, ‘Oh, my child, may you live hundred and longer peacefully.’”

So that’s my wish. That’s my prayer on your 75th birthday. And, Swamiji, I’m waiting for my chance to touch your feet and get your blessings. (Applause)

WARREN BUFFETT: Thank you.

AUDIENCE MEMBER: Let me finish, please. Swamiji, I have a question anyway. (Laughter)

A lot of business people have a great amount of respect and trust for this 75-years-young teenager girl who is sitting by the phone waiting for it to ring, and now and then that phone rings.

I have no concern about the next CEO of Berkshire Hathaway to take this company forward, but I do wonder about this phone. It may not ring as often as it does now, until the new CEO earns the respect and the trust of these phone dialers.

Do you see that a concern? And do you think it is a good idea that you may become the only chairman, and let someone else become the CEO, and let him earn the respect and trust under your umbrella while you are still young and healthy? Thank you very much.

WARREN BUFFETT: Yeah. Thank you. (Applause)

I don’t think there’s any question, but — that my successor, you know, will go through, sort of, a media probation-type affair for a year or so.

And people will, understandably, wonder whether the culture is going to be different under the successor than it’s been at this point.

That’s going to happen. It won’t be the end of the world. It will mean that the phone will — it — the phone probably won’t ring less, it will just be a different kind of suitor that is calling.

The investment bankers will all try out this guy to see if he’s softer than I am and wants to participate in auctions and all of that sort of thing.

But I think it will become evident — and it will take a year, two years, maybe — I think it will become evident that the culture is the same, that the yardsticks, the metrics, the attitude towards shareholders, the whole thing, will not change, the board will not change.

But I think there will be a hiatus of sorts where people do not have the same feeling immediately that joining Berkshire is going to be the same experience as it — with our companies — as its been in the past. But it won’t last long.

I can tell you that the successors that the board has in mind — you know, they’re very smart. They understand. They’ve bought into the whole corporate personality we have.

And they will develop — be somewhat different in style, but they will — they will develop the confidence of the world that — and to possible sellers of businesses — they will develop the confidence that it’s going to be the same Berkshire going forward.

But it’s a good question. And there will be — there will be a period when the phone won’t ring for a while until people realize that Berkshire is, sort of, one-of-a-kind, and it’s continuing to be one-of-a-kind.

I don’t think it would work well, you know — but it’s the kind of the thing we talk over with the board, though — but I don’t think it works well to have, sort of, a half-and-half arrangement.

I mean, you could say that I could handle, or encourage the handling, of the deals and somebody else could, sort of, be the operating guy. But the truth is, we don’t need an operating guy.

You know, we’ve got people running the businesses that are running them, and they’re very good at it. And the main thing to do is to not destroy or damage the spirit they bring to it and the fact that they like this method of operation.

So it would — I’m not sure what a chief operating officer would do at Berkshire except expose the fact that I wasn’t doing anything. (Laughter)

And as long as I’m around, they’re not going to get the calls on the deals. I mean, people are going to want to talk to me. I mean, that’s not a handoff that would work.

So I think we’ll go along in this mode. And, you know, you will have a period, everybody — there will be stories a year after I die that, you know, says one year later and what’s happened and all that sort of thing, but that will fade out.

And my successor will put his own particular stamp on the place, but he won’t mess with the culture. They’re too smart. They’ve seen it work too well. So that — the calls will start coming in again after a while.

We will still represent, sort of, a one-of-a-kind place for the owner that really cares about the future of his business.

For one reason or another — tax reasons, family division of shares or something — you know, they have to — they have to solve the ownership problem.

But they want to solve it in a way that really doesn’t change the psychic ownership of the place and the management of the place. And they can’t find that elsewhere, and they’ll continue to find it at Berkshire.

Charlie?

CHARLIE MUNGER: Well, speaking for the Munger heirs, I would rather the current method of operation continue to wring the last drop of good out of Warren. (Laughter)

WARREN BUFFETT: At low pay.

CHARLIE MUNGER: Yes, yes.

WARREN BUFFETT: Part of Charlie’s instructions under all circumstances.

No, if we — if we thought there was some better way to make this place function better or to even make the transition easier to the next person, you know, we’d be delighted.

But I really think it’s going to work pretty darn well. If I die tonight, the person who will take over tomorrow will not get as many phone calls for a while, perhaps, but very, very smart people. Know the business. You know, they know a lot about all businesses. They’ve got a general business knowledge.

I use “they” because there’s three candidates, but there would be one specific one in mind. They know how to make deals. These people are plenty deal-savvy, and they know how to avoid other kinds of deals, which is equally important.

And the world would not fully grasp that for a year, maybe even two years. But once it happened, you can argue that it would be even stronger than before because at that point people would realize that it was institutionalized and not just a person.

You’ve got a — kind of a hat — I mean, I don’t want to compare myself because it’s not in the same league, but, you know, everybody, when Sam Walton died in, I think, 1991 or something, wondered whether Walmart would continue in the same tradition.

Well, the fact that it did has made that place a lot stronger than if it had just depended on the guy in the pickup truck. I mean, it was not — it was the creation of one person at Walmart, but it was not required for the continuation at all. And we’re not in the same league, but it’s the same idea.