2016: How will Berkshire maintain its culture after Howard Buffett steps down as Chairman?

AUDIENCE MEMBER: Hi. My name is Matt Clayborn from Columbus, Ohio. And thank you for putting this on for all of us.

My question is: you have said before that your role will be divided into parts for your succession, one of which will be the responsibility of maintaining culture by having [son] Howard [Buffett] as non-executive chairman.

What is the plan for how Berkshire will maintain its culture when Howard no longer fills the role, and what should shareholders watch for to make sure that the culture is being properly maintained decades from now when I am your age?

WARREN BUFFETT: Yeah. Well, that’s a question we’ve obviously given a lot of thought to, and although I hope that Howard is made chairman just for the reason that if a mistake is made in selecting a successor, it’s easier to correct it if you have a non-executive chairman. But that’s a very, very — I mean, that’s a 1-in-100 or 1-maybe-in-500 probability, but there’s no sense ignoring it totally.

It’s not a key factor. The main — by far, the main factor in keeping Berkshire’s culture is that you have a board and you’ll have successor board members. You have managers and you’ll have successor managers. And you have shareholders that clearly recognize the special nature of the culture, that have embraced the culture. When they sold their businesses to us, they wanted to join that culture.

It’s a — it thrusts out people that really aren’t in tune with it, and there are very few of them. And it embraces those who enjoy and appreciate it, and I think, to some extent, we don’t have a lot of competition on it. So it becomes very identifiable, and it works.

So I think the chances of us going off the rails in terms of culture are really very, very, very slight, regardless of whether there’s a non-executive chairman or not. But that’s just a small added protection.

So it’s — I think that the main problem that Berkshire will have will be size, and I’ve always — I thought that when I was managing money, when I first started managing money. Size is the enemy of performance to a significant degree.

But I do think that the culture of Berkshire adds significantly to the value of the individual components viewed individually. And I don’t see any evidence that there’d be any board member, any managers, or anything that would — could in any way really move away from what we have now for many, many decades. Charlie?

CHARLIE MUNGER: I’m even more optimistic than you are.

WARREN BUFFETT: I’ve never noticed it. (Laughter)

CHARLIE MUNGER: I really think the culture is going to surprise everybody — how well it lasts — and how well they do. They’re going to wonder why they ever made any fuss over us in the first place. It’s going to work very well.

WARREN BUFFETT: We’ve got so many good ingredients in place just in terms of the businesses and people already here, you know, that — at the companies.

CHARLIE MUNGER: That’s what I’m saying.

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: There’s just so much power in place.

WARREN BUFFETT: Another thing that’s interesting is how little turnover we get in it, too. So that — the number of managers that have been needed, that we’ve had to replace in the last ten years, are very few.

You know, without a retirement age, and I tend to bring that up at every meeting to reinforce the idea, the — but without a retirement age and with people working because they love their jobs — and they like the money as well — but their primary motive is that they really like accomplishing what they do in their jobs. And that means that we get long tenure out of our managers.

So the turnover is low, the directors are not here for the money, and so we have great tenure among the directors, and I would argue that’s a huge plus. It’s going to go on a very long time.