Berkshire Hathaway 2013 Annual Meeting Audience Question # 17

How Warren’s successor will be able to succeed

Warren Buffett:

OK.

Doug?

Doug Kass:

Warren…

Warren Buffett:

Doug.

Doug Kass:

Warren.

Much of Berkshire’s returns over the last decade have been based on your reputation and your ability to extract remarkable deals from companies in duress, as compared to the past, when you conducted yourself more as a value investor digging and conducting extensive analysis.

What gives you confidence that your successor’s imprimatur will be as valuable to Berkshire as yours has been?

Warren Buffett:

Well, the successor will probably have even more capital to work with, and they will have capital, presumably, from time to time, when markets are in distress.

And at those times, very few people… few people have the capital, and a lot fewer people have the willingness, to commit.

But I have no question that my successor will have unusual capital at times when… at turbulent times when… the ability to say “yes” very quickly with very large sums sets you apart from virtually anybody in the investing universe.

And I would not worry about that successor being willing to deploy capital under those circumstances, and being called upon.

I mean, Berkshire is the 800 number when there’s really, sort of, panic in markets, and for one reason or another, people need significant capital.

Now, that’s not our main business. You know, it happened a couple times in 2008. It happened once in 2011. But that’s not been our main business, but it’s fine. And it will happen again.

And I would think if you come to a day when the Dow has fallen 1,000 points a day for a few days, and the tide had gone out and we’re finding out who’s been swimming naked, that those naked swimmers may call Berkshire… they will call Berkshire… if they need lots of money.

I mean— and Berkshire’s reputation will become even more solidified, in terms of being willing to provide capital for sound deals at times when most people are frozen.

And when that happens when I’m not around, it becomes even more the Berkshire brand and not anything attached to a single individual.

Charlie?

Charlie Munger:

Well, I would argue that in the early days, Warren had huge success as a value investor in little-owned companies because his competition was so small.

If he stayed in that field, he would have to be in bigger companies, and his competition would be way more intense.

He’s gotten into a field, being a good home for a big companies that don’t want to be controlled in meticulous detail by headquarters, where there isn’t much competition.

So I would argue that he’s done exactly the right thing, and it’s ridiculous to think that the past is the thing he should have stayed in.

Warren Buffett:

Well, we will send— I think he’s probably referring to something like the Bank of America transaction or Goldman Sachs and GE… and there will come a time, in markets, where large sums… I’ve gotten calls on other things, too, but…

Charlie Munger:

Yeah, but other people are not getting the calls.

Warren Buffett:

Well, they don’t have the money and they don’t have the willingness to act immediately.

And Berkshire will… those qualities will remain with Berkshire after I’m gone.

In fact, in a sense, the area we occupy becomes more and more our own as we get even bigger, I would say, Charlie.

Charlie Munger:

That’s what I like about it.

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