2009: Whats the succession plan for Ajit?

ANDREW ROSS SORKIN: OK. We have a succession question. However, this one has a twist, coming from Ben Knoll.

“You famously said, quote, ‘You should invest in businesses that a fool can run, because someday a fool will.’ (Laughter)

“Given your reinsurance company’s capacity and inclination for big financial bets, can you provide us more reassurance about the risk once Ajit is gone?

“Do you have a succession plan for him?”

Ben says, “The Titanic-like ending at AIG, once Greenberg was gone, has me spooked.”

WARREN BUFFETT: Yeah, I would say that it would be impossible to replace Ajit. And we wouldn’t try. And, therefore, we wouldn’t give the latitude, in terms of size of risk or that sort of thing, that we give to Ajit.

No, we’ve got a unique talent, in my view there, and I think in Charlie’s. And so, when you get somebody like that, you give enormous authority to them after you firmly establish in your mind that that’s who you’re dealing with.

But that doesn’t mean that the authority goes with the position. The authority goes with the individual. And we would not — giving your pen away in insurance, as they say, is extraordinary dangerous.

And we have in this town, we have Mutual of Omaha, which in the 1980s, had been built up carefully over, probably, 75 years by that time, and become the largest health and accident association in the world, I believe.

And they got the idea that they should be writing property-casualty reinsurance. So they gave a pen to somebody within the place. And probably nobody had even heard the guy’s name, you know.

And in just signing a few contracts, they lost half their net worth in a very short period of time. And they were worried that they might have lost more than that.

So you can do enormous damage in the insurance business with a pen. And you’d better — have to be very careful about who you give your pen to. And we’ve given our pen to Ajit in a way that we wouldn’t give it to anyone else.

Now, it just so happens that I enjoy hearing about the kind of things he does. So we talk daily. But we don’t talk daily because he needs my approval on anything. We talk daily because I find it very interesting.

When he says, “How much should we charge to insure Mike Tyson’s life for a couple of years?” I mean, that’s the kind of thing I can get kind of interested in. I — (Laughter)

I asked him whether there was an exclusion in case he got shot by a woman that felt unhappy about her treatment or something, but —

And it makes a difference in the price, but —

I enjoy that sort of thing. But I’m not needed. And Ajit is needed. And we won’t find a substitute for him. And you know, there’s some things that have to be faced that way.

Charlie?

CHARLIE MUNGER: Yeah. What that quotation indicates is sometimes, stated differently, you say if it won’t stand a little mismanagement it’s not much of a business. Of course, you prefer a business that will prosper pretty well, even if it’s not managed very well.

But that doesn’t mean you don’t like even better when you get such a business that’s managed magnificently. And both factors are quite important.

We’re not looking for mismanagement. We like the capacity to stand it, if we stumble into it. But we’re not looking for it.

WARREN BUFFETT: Yeah, we will not do things that we think are — we will not assign tasks to people that we think are beyond their capabilities. And it just so happens that Ajit has enormous capabilities.

So he gets assigned some very unusual things. But you don’t see that prevailing throughout our insurance operation. And our managers don’t expect to operate that way.

That’s a one-off situation with Ajit. And he’s in good health. And, you know, we send him all the Cherry Coke or fudge that he wants. (Laughter)