May 3, 2024
By Eric Platt
During the 1990s, Greg Abel, then a high-flying energy industry executive, lived just a few blocks from Warren Buffett in Omaha, Nebraska, the home of Berkshire Hathaway.
The pair never met at the time, but three decades later Abel is in line to eventually succeed him at the top of Berkshire, handing the plain-speaking Canadian a challenge even more daunting than the one Tim Cook faced when he took the reins at Apple from Steve Jobs.
Buffett’s longevity means putative successors have either died or fallen by the wayside, but as Berkshire’s shareholders gather in Omaha for the group’s annual meeting on Saturday, the question of what the future holds when the legendary investor is no longer in charge is an ever more pressing one.
Abel, who joined Berkshire in 2000 and whose status as CEO-in-waiting was revealed by Charlie Munger, Buffett’s late business partner, at the 2021 shareholder meeting, will be tested on multiple fronts.
The 61-year-old will have to show he can allocate the nearly $10bn that flows from Berkshire’s operating businesses into Omaha each quarter just as the task of unearthing acquisitions, both big and at a good value to make a difference to the $862bn company, becomes harder.
At the same time, he will have to navigate a board on which two of Buffett’s children, Howard and Susie, as well as executives such as Ajit Jain, who heads Berkshire’s insurance business and has for years reported directly to the billionaire, sit.
Described by people who have worked with him as even-keeled and analytical, Abel had already assumed greater responsibility for Berkshire’s businesses since he was promoted to the board in 2018, taking oversight of companies including Precision Castparts, an aerospace group that counts Boeing as a customer, and Clayton Homes, America’s largest builder of modular housing.
It was his ability to wring out improvements in a company’s operating performance — as well as finding deal targets — that helped persuade Buffett he was the best pick.
As Buffett, 93, has gradually stepped back from the conglomerate’s day-to-day operations, Abel has taken on the role of chief problem solver.
During the past year, he oversaw a vexatious legal dispute over Berkshire’s $11bn acquisition of truck stop operator Pilot Travel Centers, according to people familiar with the matter. He also helped following the departure of one of Berkshire’s most senior employees, Tracy Britt Cool, who left before the pandemic to start her own investment firm. Abel took on the supervision of the businesses she had run, two people added.
Ron Olson, a Berkshire board director and one of the group’s main lawyers from Los Angeles-based firm Munger Tolles & Olson, said that Abel’s handling of the Pilot lawsuit, which they worked on closely together, gave him confidence that he was the right person to one day lead Berkshire.
“I could tell you that his preparation and thinking was impressive,” Olson said at an investment conference this past week. “He is strategic in his thinking. And he is decisive in his judgment.”
Shareholders have had limited glimpses of Abel since he joined the board, with the questions he has answered at recent annual meetings focused on specific businesses rather than Berkshire’s future.
But Buffett has said he and Abel “think alike on acquisitions. We think alike on capital allocation.” In a television interview last year, Abel conceded that working for him is “not the same as working for Warren” and “I’ve effectively apologized to them [Berkshire managers] many times for that outcome”.
However, “they also realize that they still have an opportunity to go run their businesses, what they love and what they wake up to do every day”.
Extracting better returns from Berkshire’s existing businesses is likely to take on greater importance as the game-changing deals that built Buffett’s reputation, such as the 1996 acquisition of motor insurer Geico, prove elusive.
Not only does Berkshire have to contend with deep-pocketed private equity buyers, but Abel will lack the draw that Buffett has had for family-owned businesses that are considering selling.
In his annual letter to shareholders in February, Buffett lamented the dearth of deals that could “move the needle”, noting that there was “no possibility of eye-popping” performance.
Darren Pollock, an investment manager at California-based Cheviot Value Management and a Berkshire shareholder, said that recognizing the conglomerate was now operating in a very different world to that enjoyed by Buffett in his heyday would be important when judging his successor.
The job for the next generation of leaders would not be “to shoot the lights out” like Buffett and Munger did as they built Berkshire, said Pollock, but instead to invest in steady and reliable businesses.
According to people familiar with the matter, Abel’s dealmaking is expected to receive more scrutiny from the board than that of Buffett, who for decades has been afforded a latitude not enjoyed by most CEOs. It enabled the billionaire to rapidly execute deals.
It was a point acknowledged by Olson this week, who said that the board would not “handcuff” Abel, but that Buffett’s successor might nonetheless have less discretion.
“Let’s not get too anxious about it,” Olson said of Buffett’s future. “He’s going to be around for a while. But once that happens, there may well be changes.”
While the board may pay more attention to big deals or those cut in the midst of a market crisis — something Buffett pulled off several times, most famously when investing in Goldman Sachs at the height of the 2008 financial crisis — preserving Abel’s authority would be crucial, two people added.
“Both Warren and Charlie were very clear on this,” one current Berkshire employee said. “You need enormous authority in the chief executive and investment professionals to let them do their job. And the moment you migrate to investment by committee, that’s when you end up with the lowest common denominator problem.”
Abel, who still plays ice hockey, adopts a collaborative approach in board meetings and often finds ways to resolve issues or build a consensus in smaller groups, according to one person who has worked closely with him for several years.