Greg Abel.
There’s a story Greg Abel likes to tell. Many years ago, when he was president of Iowa power producer MidAmerican Energy Holdings Co., he caught wind that George H.W. Bush was coming to town. The elder Bush needed a ride to Des Moines, where his son planned to announce his run for president. Mr. Abel manoeuvred to secure transportation on behalf of MidAmerican. The company was headquartered in Des Moines, after all, and there was an energy issue he wanted to discuss.
He was supposed to pick up Mr. Bush in Las Vegas. Mr. Abel arrived the night before and ate dinner alone in his hotel room. He’d been having an issue with a tooth. A crown, the result of an old hockey injury, had come off a couple of weeks earlier, and a false tooth was in its place. He removed that tooth before he ate and set it on the dinner tray. When he finished, he took the tray out to the hallway. Brushing his teeth that night, he stared at the black void between two pearly whites. He tore through the hallway in search of his tooth and implored hotel staff for help, but no one could find it.
Look more closely, and there’s a lot to like in Berkshire Hathaway and the aging Warren Buffett
The next morning, he approached the former president from an angle, not wanting to assault him head-on with his gap, and explained what had happened. Mr. Bush was understanding and put him at ease. But from then on, he referred to him as Greg Abel, the Canadian who has no front teeth.
The story is so disarming and self-deprecating you could almost forget this is a guy who has access to U.S. presidents. That’s probably the goal, in fact. Mr. Abel has an even more influential position today. Last year he was promoted to vice-chairman of non-insurance business operations at Berkshire Hathaway Inc., overseeing a sprawling portfolio that includes everything from a regional furniture store chain to global brands like Duracell, Fruit of the Loom and Dairy Queen, and earned a spot on Berkshire’s board of directors. He has spent much of his career at the company, and now he could be one promotion away from succeeding its legendary chairman and chief executive officer, Warren Buffett. As thousands of shareholders descend on Omaha, Neb., this weekend for the Berkshire annual meeting, the question of who could replace the 88-year-old Mr. Buffett will be, as ever, hanging in the air.
Mr. Abel is not the only contender. His colleague Ajit Jain was elevated last year to vice-chairman of insurance operations. The dual promotions set off a wave of speculation that Mr. Buffett was signalling his successor would be one man or the other. “Ajit and Greg have rare talents,” he wrote in his annual letter to shareholders this year, “and Berkshire blood flows through their veins.”
Mr. Abel has achieved his success mostly under the radar in the staid world of regulated utilities. He was a key figure in scaling Berkshire’s energy division from almost nothing to a business unit churning out almost US$20-billion in annual revenue. But he is far from a household name. Even some of his friends and associates have a little trouble nailing him down. He definitely has hobbies, they say – then struggle to name one. He’s got a sense of humour, but no one can recall him telling a joke. He surely has political views. It’s just that no one is quite certain what they are.
He doesn’t speak to reporters any more than he has to, which in the past three decades has been rarely. His corporate headshot dates back to 2005. When a camera crew from Fox Business Network caught up with him at a Berkshire charity run in Omaha last year, he was affable but offered only platitudes. “It’s business as usual,” he said, looking utterly unremarkable in a T-shirt and baseball hat. “It’s just great!”
Friends, though, describe him as a fiercely intelligent, hyper-efficient guy whose work is his life and who hides his talents behind a wall of humility. Mr. Abel, of course, declined an interview. (The Globe and Mail offered to fly to Omaha to talk to him. A spokesperson said he would consider a 10-minute interview, but only if it was off-the-record, and we declined.)
But he’s in line for a position that would undeniably put him in the spotlight, bringing a level of scrutiny he’s never experienced before, not to mention a monumental challenge: He could take the helm of a company worth more than US$520-billion and follow in the footsteps of the most famous living investor in the world. The successor, whoever it is, will constantly be stacked up against Mr. Buffett, every decision prompting the question: What would the Oracle of Omaha have done? There are countless investors who have put money into Berkshire Hathaway simply because of who Mr. Buffett is and what he has achieved. Few know much of anything about Greg Abel.
So it has to be asked: Are people going to put their faith in the Canadian with no front teeth?
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There really is no other company like Berkshire Hathaway. It’s largely the vision of one man with an idiosyncratic set of principles. Warren Buffett never, ever wants to sell a company, even the laggards. Dividends are an admission of failure. A stock split? Blasphemy. (A single class A share of Berkshire Hathaway trades for more than US$325,000.) He sits atop an organization with almost 400,000 employees (though only a handful at head office) and yet views his job with monastic simplicity: He ruminates on where to spend money to maximize returns. Someone who worked for Mr. Buffett for years likens Berkshire Hathaway to a museum, a collection of stolid businesses overseen by a discerning curator who ensures the collection is cared for but otherwise doesn’t meddle. Mr. Buffett is mostly consumed with what to add next.
He’s had plenty of resources to do so. Key to his strategy has been his purchase of insurance companies, so he can use the premiums paid by customers to make investments elsewhere, often buying firms outright. Some of his best scores have been family-run businesses bought with a vow to hold on for the long term.
As such, Berkshire Hathaway has become an eclectic and complex mix of companies and investments. There are a dozen main insurance subsidiaries, including Geico and General Re. There is a massive equity portfolio, with stakes in Apple Inc., the Coca-Cola Co. and Goldman Sachs. Finally, there is a bewildering set of 50 non-insurance companies. In no particular order, Mr. Buffett is in the business of underwear, bricks, jewellery, shipping containers, candy, batteries, specialty chemicals, mattresses, airfoil castings, ice cream, military uniforms, electronic sow-feeding systems, baby onesies, party supplies, pontoon boats, shoes and news for the Buffalo-Niagara region.
Somehow, he manages to keep the details of this elaborate enterprise in his head. At Berkshire’s annual meetings, where disciples gather at his feet, chances are he can provide insight into just about any one of his companies. And ever since being promoted last year, Greg Abel has been getting to know this odd assortment of non-insurance subsidiaries too. That means meeting the CEOs, understanding their capital needs and pitching in with smaller, bolt-on acquisitions. His position on the Berkshire board also gives him input into how the company will spend its money – though Mr. Buffett and vice-chairman Charlie Munger, 95, are still the authorities on that.
For executives, there’s a prestige associated with reporting directly to the Oracle himself. Now, all the non-insurance CEOs have to go through Mr. Abel. “I still see Greg running the business similar to Warren,” says Mary Rhinehart, CEO of Berkshire holding Johns Manvillle, a maker of insulation, roofing and other building products. “It’s on an as-needed basis. If I call or e-mail him, I get a quick response.” She sends a monthly report to Berkshire Hathaway (not that Mr. Buffett ever required it), and there hasn’t been any change under Mr. Abel. “He gathers a deep understanding really quickly,” Ms. Rhinehart says. “I may talk to him one time, and several months later, he’ll remember everything we talked about.” (Dozens of other Berkshire CEOs did not respond or declined interviews, saying they haven’t had enough interaction with their new boss yet.)
If his past is any indication, Mr. Abel has been approaching the job with characteristic intensity. “He’s an absolute workaholic,” says Dawn Farrell, CEO of Calgary-based TransAlta Corp., which has partnered with MidAmerican. “He does more in every hour of every day than any person I’ve ever met.” Mr. Abel has credited his mother for instilling that work ethic in him; as early as kindergarten, she would sit him down after school to review what he learned that day.
Born in 1962, he grew up in Edmonton, where his father worked for a fire and environmental equipment provider called Levitt Safety, eventually heading up the western region. His mother was a homemaker. He worked a series of odd jobs – distributing flyers, returning bottles for cash. Throughout high school and university he worked at Levitt Safety, filling fire extinguishers.
Abel’s school, Bonnie Doon Composite High, had a reputation for being a rough place where brawls between students would break out. In a video produced by the University of Alberta to coincide with an alumni award it bestowed on Mr. Abel in 2013 (a ceremony at which he told the missing-tooth story), his younger sister, Heather MacBeath, recalled a small party she threw that spiralled out of control when some revellers vandalized her parents’ washer and dryer. “One call to my brother, and within five minutes him and a bunch of friends are there. Had that house cleared out so fast,” she said.
Mr. Abel’s 1980 high school yearbook reveals he didn’t partake in many extracurriculars, other than playing football. He was not voted most likely to succeed. Compared to some of the goals set by his graduating classmates (“Stay out of jail,” “Get out of this hole” and “Get rich”), his plans were entirely practical, if less comedic. All he wrote was, “U of A.”
After earning a small scholarship from Levitt Safety, he spent four years at the University of Alberta (he lived at home) and graduated in 1984 with a bachelor of commerce degree, later working as an accountant for PricewaterhouseCoopers in Edmonton before transferring to San Francisco.
One of the firm’s clients was a small geothermal company called CalEnergy Co. After some corporate reorganization, the company needed an internal accounting team, and Mr. Abel was the natural person to approach. “Greg had a very easygoing way about him and never got agitated,” says John Sylvia, the former chief financial officer who hired him. “He had a knack for being able to see where something was in the present, where it needed to be in the future and what needed to be done to get there.”
CalEnergy’s CEO at the time, David Sokol, has a reputation as an intense and hard-driving executive. Some employees simply didn’t last. “He’s just so demanding, so on top of stuff and moving all the time that people get exhausted,” says Thomas Mason, who later became CalEnergy’s president.
But those who were not easily flummoxed wouldn’t have a problem working for Mr. Sokol. That was Greg Abel. Mr. Sokol became one of the most important people in his career, and they remain friends. He recognized Mr. Abel’s ambition early on and knew he wasn’t content to remain a numbers man forever. He suggested Mr. Abel work as a controller at one of the company’s power plants to gain operational experience, taking a pay cut in the process. “He was one of the few people who recognized he had to take a step backward to move forward,” says Mr. Sokol.
In 1996, the company purchased a utility in the United Kingdom. Mr. Sokol made Mr. Abel his right-hand man during that process and later asked him to run the company. A month after the deal closed, Mr. Abel and his first wife moved to England with their three children, who were all under the age of seven. The formerly government-owned company was bloated and slow-moving, and Mr. Abel cut costs and improved efficiency. He was also quick to spot opportunities, acquiring another power producer in the U.K. and spinning off unwanted assets.
By 1999, CalEnergy had rebranded as MidAmerican after purchasing the Iowa-based utility, and Mr. Abel was back in the U.S. serving as company president. A personal tragedy struck Mr. Sokol that year when his teenage son died from Hodgkin’s disease. He wasn’t sure he wanted to run the company any more. He was already tired of operating a publicly traded utility, so he told the board he could step down and let Mr. Abel take over, or he could take the company private. The board gave Mr. Sokol the green light for a private buyout, but his enthusiasm waned when investment bankers only wanted to break up the conglomerate.
One of MidAmerican’s board members, Walter Scott Jr., suggested a meeting with Mr. Buffett. A childhood friend of great investor, Mr. Scott also served on Berkshire’s board. Mr. Sokol and Mr. Buffett had breakfast, and Berkshire soon acquired a 75-per-cent stake in a deal valued at US$9-billion. (Mr. Buffett has since increased his stake to 90.9 per cent. Mr. Abel maintains a personal stake in the energy division that can be converted into Berkshire stock valued at more than US$400-million in 2017, according to a regulatory filing.)
“Mr. Buffett very much liked what we were doing,” says Mr. Sokol. MidAmerican’s strategy was not far from Mr. Buffett’s own: hunting for quality assets that were undervalued. Berkshire’s backing gave MidAmerican access to capital for acquisitions without worrying about capricious public markets. With Mr. Abel as president and Mr. Sokol as CEO, the pair made dozens of deals over the next decade or so. The value of MidAmerican’s assets ballooned from about US$3.8-billion to US$47.7-billion between 2000 and 2011.
They kept a long list of potential targets and studied each one to figure out how to integrate it, should it ever be for sale. “By having those arguments ahead of time, you flush out what’s real,” Mr. Sokol says. “When the opportunity came, we could step in and make a deal very quickly.”
In his view, Mr. Abel possessed a rare combination of skills. He had the vision to spot opportunities, the patience to wade into details and the ability to assemble, manage and motivate teams. His skills at reading balance sheets were invaluable. Mr. Sokol recalls one purchase MidAmerican scored for a discount because Mr. Abel calculated the company had cash trapped on its balance sheet. “Greg understood their balance sheet better than they did,” he says.
Just about anyone who has worked with Mr. Abel has come away impressed. “Greg can flip a discussion from a very strategic level to a detailed discussion about a particular issue in a particular plant,” says Steve Snyder, a former CEO of TransAlta. Mr. Snyder recalls Mr. Abel talking through some concerns he had about running additional transmission lines for a project in California. Mr. Abel didn’t see why landowners on the route would sell their properties. “This would have been a very small part of MidAmerican at that time,” Mr. Snyder says, “and here’s a guy who’s worried about the landowner on a piece of property in California.”
He’s not a micromanager, however. Richard Walje, a former president of a MidAmerican subsidiary, once suggested to Mr. Abel that they change the name of a newly acquired holding. “He just said, ‘That sounds good enough to me,’ ” says Mr. Walje. “That kind of decision would never have been done by any of the other executives I’ve worked for.”
By 2007, Mr. Sokol wanted to step back from MidAmerican and allow Mr. Abel to take over as CEO. Mr. Buffett wasn’t thrilled at the idea, but not because he had doubts about Mr. Abel. “It’s just Warren’s nature. He doesn’t like change,” Mr. Sokol says. About six months later, he went back to Mr. Buffett. Mr. Abel was practically doing the work of CEO already, without the title. Mr. Buffett still wanted to put off the discussion. Mr. Sokol then brought the matter to the entire Berkshire Hathaway board. He recalls Mr. Buffett flashed him a look, but he didn’t oppose it. From 2008 on, MidAmerican was essentially Mr. Abel’s company to run.
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The gruelling hours required to oversee a multibillion-dollar energy company have not left Mr. Abel with much free time. Friends say what little downtime he does have is spent with his family. He has three grown kids from his first marriage and a young son from his second. One of his friends in Des Moines was shocked to see him out on a field one day coaching his son’s lacrosse team. He also coaches hockey. A kid from the Prairies, Mr. Abel is unsurprisingly a hockey obsessive and has a family connection most others do not. His uncle was Sid Abel, a Hall of Famer who played for the Detroit Red Wings starting in 1938 and later provided television commentary.
Despite his low profile, he’s a social guy. He’ll often invite friends to professional hockey and football games, and he and his wife host an annual Thanksgiving event with an open-door policy. He’s a regular at the Iowa State Fair – the event for Iowa power brokers – and organizes a quail hunting trip to Georgia each year with a close group of friends.
He is not flashy about his wealth (though he does own a share of a private plane through Berkshire holding NetJets), and his philanthropic efforts are so under the radar as to be almost impossible to verify. His friends insist he has helped numerous employees who have run into serious health issues, for example. Mr. Sokol says Mr. Abel even put the two children of one employee through college after a death in the family. “He didn’t want anybody to know about it,” he says.
When Mr. Abel settled in Des Moines after the acquisition of MidAmerican, he made an appointment to see the governor, then a Democrat named Tom Vilsack. The governor recommended he meet with two local players on opposite ends of the political spectrum to learn the lay of the land – a real-estate mogul named William Knapp and an entrepreneur named Jim Cownie. Mr. Abel followed the advice and remains close friends with both of them.
His own politics, though, are a mystery. “It’s something he holds pretty close to his chest,” Mr. Knapp says. Mr. Abel has donated significant sums of money at both the state and federal level over the years, but with no strong party affiliation. Working in a regulated industry requires him to get along with politicians of all stripes.
A case in point is Mr. Vilsack, who was governor between 1999 and 2007. Early in his tenure, he considered deregulating the electricity industry to encourage renewable energy development. Mr. Abel, working for a dominant incumbent, wasn’t in favour. But he talked at length with Mr. Vilsack about the governor’s goals, which is rare for business leaders who are used to giving orders. “Greg is good at listening because he wants to avoid the circumstance where there’s a winner and a loser,” Mr. Vilsack says.
He backed off the deregulation plans, while MidAmerican agreed to replace an aging coal plant with a modern facility and build out wind energy. MidAmerican now has more than 4,400 megawatts of wind power, helping make Iowa the largest producer of that form of energy in the U.S.
Mr. Abel’s association with renewable energy makes for a tidy narrative, given he started at geothermal producer CalEnergy. Berkshire’s energy division has spent US$25-billion on clean power too. “Mr. Abel has had a long-standing passion for renewable energy,” according to a spokesperson. But practicality may have more to do with it. “More than being renewable energy evangelists or enthusiasts, we were independent power producers trying to find a way to make a living,” Mr. Mason says of CalEnergy. Mr. Sokol credits Mr. Abel for getting the company deeply into renewables, but says, “I don’t think he did it just because of some view of saving the planet or anything. You need to work with the customers and the regulators and understand what it is they want to accomplish."
Some in the environmental community are not heaping praise upon Mr. Abel. “His leadership on advancing a clean energy economy is not what you think it is,” says Elizabeth Katt Reinders, a deputy director for the Sierra Club’s Beyond Coal Campaign. MidAmerican retired four coal-fired generating units in the past four years but still operates five plants in Iowa and has no plans to phase them out. According to data crunched by the Sierra Club, MidAmerican is among the top 20 producers of coal-fired power in the U.S. “They’re still responsible for massive carbon emissions,” Ms. Reinders says.
Not all of his political donations are those of an environmentally progressive executive, either. Between 2015 and 2018, he dropped US$55,800 on campaign and political action committees associated with Republican Senator Joni Ernst, who has made many baffling comments about climate change, casting doubt on the consensus that it’s driven by humans. “Our climate always changes,” she told CNN last year after the release of a U.S. government report on the consequences of global warming. “We see those ebb and flows through time.”
A spokesperson for Berkshire Hathaway Energy (BHE) declined to directly answer a question about Mr. Abel’s own views on climate change or why he has supported Ms. Ernst – which is a pretty strange thing for someone passionate about renewables. But Mr. Abel’s aversion to saying anything controversial (or anything, really) is a powerful force. “Under Mr. Abel’s leadership, Berkshire Hathaway Energy has been working for more than a decade to reduce the impact our operations have on the environment,” the company said in its response. Ms. Ernst, the spokesperson added, is also a childhood friend of Mr. Abel’s wife, Andrea.
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Speculating about Mr. Buffett’s successor has been a parlour game of sorts for years. Mr. Sokol was once said to be a top contender, though he says he never wanted the job. (Mr. Buffett did not float the idea with him.) His exit was one of those events that could have tested his friendship with Mr. Abel, if Mr. Abel were a different kind of person.
Mr. Sokol voluntarily left Berkshire Hathaway in 2011 after running NetJets, but a rare scandal ensued. It was later revealed he purchased shares in chemical producer Lubrizol Corp. two months before Berkshire bought it for US$9-billion. The Berkshire board accused Mr. Sokol of misleading them about his interest in Lubrizol and violating company standards, which he denied. (The SEC investigated but did not pursue charges.) “Warren stabbed me in the back in the end,” Mr. Sokol says. “None of us expected [that].” He hasn’t spoken to Mr. Buffett since.
For Mr. Abel, his bosses had lambasted one of his closest friends on ethical grounds (Mr. Buffett claimed Mr. Sokol’s actions were “inexcusable,” and Mr. Munger said “hubris” was at play), potentially putting him in an awkward spot. But he made one of the first phone calls to Mr. Sokol after the news broke. “He knew it wasn’t true,” Mr. Sokol says. “He said, ‘I don’t understand this, but we’re friends and we’ll always be friends.’” (This anecdote is “non-confirmable and cannot be validated,” according to the BHE spokesperson.)
The incident apparently didn’t shake his faith in Mr. Buffett, either, as Mr. Abel continued to prosper as MidAmerican’s president and CEO. He expanded the company’s geographic footprint, snapping up Las Vegas-based producer NV Energy in 2013 in a deal valued at US$10-billion. He ventured back home into Alberta, too, with the US$2.7-billion purchase of electricity transmission provider AltaLink LP in 2014. (Berkshire rebranded the division as Berkshire Hathaway Energy the same year, and Mr. Abel remains the executive chairman.)
Under his watch, the division now has roughly US$92-billion in assets and contributes about 8 per cent of Berkshire Hathaway’s revenue and pretax earnings. His track record with acquisitions is something to envy. Some 40 per cent to 60 per cent of buyouts fail, but Mr. Abel has yet to have one blow up in his face. “MidAmerican was a rare exception,” Mr. Snyder says. “And Abel is in the power industry. It’s one of the slowest, most laid-back, most conservative businesses in the world.” The division generates power and operates natural gas pipelines throughout the U.S., distributes electricity in the U.K. and Alberta and operates an array of renewable energy projects in multiple states, plus the Philippines. Since 2012, the unit’s earnings have roughly doubled, and it has benefited from Mr. Abel’s pursuit of renewables, thanks to favourable tax treatment in the U.S. Last year, BHE received an income tax benefit of US$452-million.
Mr. Abel regularly earned plaudits from Mr. Buffett in his annual shareholder letters, with the Oracle of Omaha gushing that he’s an “outstanding” CEO and “extraordinary” manager. In January, 2018, Mr. Buffett promoted both Mr. Abel and Mr. Jain to vice-chairs. (Each one earned US$18-million in compensation in 2018.)
Mr. Jain, born in India and a graduate of Harvard Business School, joined Berkshire in 1986. “I didn’t know how to spell ‘insurance’ or ‘reinsurance,’” he said in 2003. But he was a quick study and developed a reputation as a mathematical genius. (Mr. Buffett even wrote to his parents in New Delhi asking if they had another one like him at home.) He previously oversaw the company’s reinsurance division, paying out damage claims from natural disasters. Mr. Buffett has been unsparing in his praise, writing that Mr. Jain’s mind is “an idea factory that is always looking for more lines of business he can add.”
Despite his adulation for both men, Mr. Buffett has recognized that no single individual can entirely fill his shoes. He’s written that when he leaves there will be one CEO in charge of operations, while responsibility for the investment portfolio will go to “one or more” executives. Together this select group will make decisions about new acquisitions, subject to board approval.
Mr. Abel looks to have the edge when it comes to CEO. He’s about 10 years younger than Mr. Jain, for starters, and Mr. Buffett wants someone who will be there for the long run. Personalities are another factor. “I don’t think Ajit would either seek or want the CEO role where he’s got to be the public face at Berkshire,” says Paul Lountzis, founder of Lountzis Asset Management in Pennsylvania, which owns Berkshire shares. “He just wants to do insurance.”
The insurance portfolio is still the heart of Berkshire Hathaway, accounting for a quarter of the US$247.8-billion in revenue generated in 2018 and throwing off billions in float that Mr. Buffett has relied on to make investments. The division is so important that Mr. Buffett might be inclined to leave Mr. Jain running it, given his aversion to unnecessary change.
After listening to Mr. Abel’s friends and colleagues fawn over the man, his suitability for the job becomes apparent. He’s got a history of deal-making and astute judgments on where to allocate capital. He can soak in huge volumes of information and easily grasp details, but he also knows when to step back and let others manage. And as someone who has worked within Berkshire for two decades, he has fully absorbed the company culture.
But is anybody really equipped to run a company like this? One of the biggest challenges facing Berkshire is how to spend its US$112-billion cash pile. Berkshire is already so huge that finding meaningful investments is becoming almost impossible. “How many companies out there would make a difference?” Mr. Lountzis says. “If he bought a US$3-billion business now and it doubled, who cares?” The last big purchase was the US$32-billion acquisition of industrial components maker Precision Castparts Corp., and that was almost four years ago.
These challenges could force the next CEO to do things Mr. Buffett would never dream of. That’s not necessarily a bad thing. A fresh face is an opportunity to reconsider some elements of Berkshire’s orthodoxy. Mr. Buffett has long opposed offering a dividend, contending that the company can deploy its cash more effectively through investments instead of giving it back to shareholders directly. But the longer Berkshire goes without a major acquisition, the more investors will grow antsy, especially with a relatively unproven CEO in the seat. “Investors may be more supportive of that if Buffett’s no longer around,” says James Shanahan, an analyst with Edward Jones.
The successor may even have leeway to consider selling a business. Mr. Buffett almost never does so – one exception was a doomed textile holding in the 1980s – even when a company is underperforming. That might hurt Berkshire’s financial performance, but he derides tossing companies aside as “gin rummy behaviour.” Besides, part of the promise he has made when acquiring companies is that he will hold them for the long term. For family-run companies, his word carries a lot of weight. (The company does sell publicly traded stocks it owns sometimes.)
Shareholders seeking returns might not be so sentimental and could welcome some pruning of the portfolio. “While that would be somewhat of a violation of trust, frankly I think some of these decisions are long overdue,” Mr. Shanahan says. He points to McLane Co. Inc., a supply-chain services company for the grocery and convenience store industry. “They have enormous sales, but they’re hardly profitable.” The company’s earnings of US$246-million last year don’t look that bad until you realize that’s on the back of roughly US$50-billion in revenue, a pretax margin of less than 1 per cent. The media holdings, which include the Buffalo News and the Omaha World-Herald, look dicey too. Mr. Buffett himself is pessimistic about the future of newspapers, saying recently most of them are “toast.”
There’s also a chance that Berkshire Hathaway will be pressured to improve its disclosure practices under a new CEO. “Their disclosure is quite bad,” says Meyer Shields, an analyst at Keefer, Bruyette and Woods Inc. Gleaning insight about the operating companies from Mr. Buffett’s folksy musings can be a fruitless task. While investors flock to Omaha each year for Berkshire’s annual meeting, where Mr. Buffett holds court and dispenses investing wisdom, it’s really the Warren Buffett and Charlie Munger Show. The operating-company CEOs might make an appearance, but they’re not on stage answering questions.
“Warren Buffett is a unique animal,” Mr. Shields says. Investors own the stock not because they’re enamoured with the operating companies but because they trust Mr. Buffett. He doesn’t get the same level of scrutiny as other CEOs, and his successor may not be so lucky. When he leaves, long-time shareholders could cash out, believing the best days are over. Between 1964 and 2018, the per-share value of Berkshire Hathaway gained more than 2,400,000 per cent, compared with 15,000 per cent for the S&P 500. It would be hard to blame long-term investors who decide to take some cash off the table.
“I assume there will be a stampede for the door,” Mr. Shields says. “If he’s not there any more, then you actually have to make a case for why these businesses are worth owning.” Berkshire Hathaway will no longer be able to trade on the cult of Buffett. It will have to rely on results, like every other company.
When the day of Mr. Buffett’s inevitable departure comes is anyone’s guess. He hasn’t given any indication and he probably won’t go willingly. “I don’t think he’ll ever step away,” says Mr. Sokol. He’ll have to be dead or otherwise incapacitated.
And while Mr. Abel looks like a very strong contender, his ascendancy is not a guarantee. It’s not even clear that he wants the position. Friends describe him as a private person, and following Mr. Buffett would make him one of the most prominent executives in North America.
Asked if Mr. Abel enjoys the spotlight, Mr. Sokol says, “I don’t think ‘enjoy’ would be the right term.” Most of his career has been effectively spent within a privately held firm. He’s had comparatively little exposure to analysts, investors and the media, and the unrelenting quarterly grind. It will take someone supremely confident, maybe even a little egotistical, to pen that sacred Berkshire Hathaway shareholder letter every year and to assume Mr. Buffett’s seat at the AGM to get grilled by investors for hours on end.
Mr. Sokol adds, though, that Mr. Abel doesn’t hide from attention. He’s personable, not shy; there just hasn’t been a need for him to be out front. “He will be different than Warren, but that would be true of any choice,” he says. Shareholders should not expect a ukulele serenade, in other words.
His friends say Mr. Abel has to be prodded into talking about the potential of becoming CEO. Mr. Knapp has been bold enough to ask. “He says, ‘You know, if it was offered to me, I would take it. But I wouldn’t lobby one minute for it.’ ” Mr. Abel’s view, according to Mr. Knapp, is that he has to earn it. The official response from BHE, by the way, is that Mr. Abel “has never and will never comment on succession speculation.” Mr. Knapp’s characterization, meanwhile, “should not be attributed to Mr. Abel in any way.”
More than one friend insists that if Mr. Abel doesn’t get the nod, he would be perfectly content to stay in his current role, saying he’s not the type to turn bitter. It’s a little hard to believe. A guy spends his life climbing the ranks at Berkshire Hathaway, comes within spitting distance of becoming the next Warren Buffett and takes getting passed over with a shrug? But the one trait many who know Mr. Abel emphasize is his humility. “You kind of want to shake him and say, ‘You’re one of the most successful business people in North America,’” Mr. Vilsack says. “Take a victory lap.”
If Mr. Abel ever allows himself that moment, rest assured, you’ll never hear about it.
Joe Castaldo