Berkshire Hathaway 2009 Annual Meeting Audience Question # 47

Warren and Charlie have had “good luck with managers, not perfect”

Warren Buffett:

Well, on that hopeful note, we’ll move on to Carol.

Carol Loomis:

This is a question from Peter Poulson, spelled P-O-U-L-S-O-N.

He says, “When you acquire companies, they come equipped with managers. And in general, Berkshire has done a great job putting the right leaders in the right roles.

“But occasionally, you have to hire someone for an executive spot. Please describe an interview that you might have with a prospective Berkshire operating executive. What do you look for? How do you evaluate a person’s potential to become a great manager?”

Warren Buffett:

Well, usually, we hire people that have already proven they’re great managers. I mean, when we buy a business, very… a very high percentage of the time, the management comes with it.

When we buy an ISCAR, you know, we get the group that had been knocking the ball out of the park for years and years and years.

And the real question we have to ask ourselves is, you know, will they be with us in the future? Will they keep… will they be feeling the same way after the deal as they did the day before the deal?

And we’ve made occasional mistakes on that. But overall, that does come through. So it’s… we’ve had good luck with managers, not perfect.

And, the toughest part is, since we have no retirement age, is when managers lose the abilities that they had at an earlier age.

And that… it doesn’t relate to… there’s no yardstick you can use up and down the line for that. So it’s… people age, at least in business ability, they age in very different ways and at different paces.

And Charlie and I have the problem of figuring out, sometimes, when somebody has… does not have the same managerial ability that they had at an earlier time.

And then we have the responsibility for doing something about it. And we hate it. But it’s…

Charlie Munger:

By the way, we’ve been slow in those.

Warren Buffett:

We’ve been slow every time.

Charlie Munger:

We’ve been slow. If we really love the guy, we’re really slow. We are far from ideal.

Warren Buffett:

Yeah, well, it’s very… well, we had a manager, you know, a wonderful… I mean, a guy we both loved at Wesco.

And he got Alzheimer’s. I mean, it… you know, and we didn’t want to face it. We finally did. But it took us probably an extra year, year and a half, didn’t it, Charlie?

Charlie Munger:

Sure.

Warren Buffett:

Yeah.

It’s the only part of my job that I don’t like, basically. I mean, I hate it. But… I’d pay a lot of money not to have to do it. But occasionally, it happens. Fortunately, it doesn’t seem to happen that often at…

We find people who love their businesses, you know? I love Berkshire. I… you know, I go to work every day, and I’m excited about it. And we… you can spot that in people.

I mean, I think most of you would probably realize that that’s the way I feel about it. And I realize that’s the way the managers of our subsidiaries feel about it.

I mean, Tony… Tony Nicely… went to work at GEICO when, you know, he was a teenager. And he’s as excited every day about GEICO as I am. It hit me the first time…

I saw him yesterday at lunch. And the first thing he does is hand me the figure, which he knows I’m waiting for. You know, ”(the audio in this part of the video is inaudible), we’re up 505-thousand,” and he carries it out all the way, “policyholders.”

And, I mean, I get excited about those numbers. He gets excited about them. You know, we talk about state-by-state, whatever it may be. And, you can’t put that into somebody.

But we do recognize it when it’s there. And we do our best to make sure that we don’t do anything that dampens that in any way.

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Q&A with Warren Buffett and Charlie Munger: A Compilation of All Shareholder Questions and Answers from The Berkshire Hathaway Annual Shareholder Meetings

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