Warren Buffett is the folksy godfather to millions of investors, offering sage and often humorous been-there-done-that wisdom.
Who can forget, after writing off millions because of his investment in USAir, his saying that if a “farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”
Or “Rule No. 1: Never lose money. Rule No. 2: Never forget rule number one.”
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There isn’t another who has been as honest about his losses as his winners, or as willing to share his journey as openly and candidly as Warren Buffett. It’s little wonder that his annual shareholder meetings in Omaha draw tens of thousands of visitors who refer to it as a pilgrimage, or that his annual letter to Berkshire Hathaway owners is one of the most read reports produced by any CEO.
Given his penchant for humor and his plain-spoken nature, his latest note to investors explaining his decision to step down from his perch atop Berkshire Hathaway, clearing the way for Greg Abel to take the spotlight, and begin transferring his $150 billion net worth to charitable foundations, is a must-read.
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Warren Buffett offers two words on his future at Berkshire Hathaway
Warren Buffett is once again setting an example worth following. Rather than shaking his fist at the sky in defiance and clinging to his throne, he decided many years ago to set the stage for a smooth transition at Berkshire Hathaway.
Warren Buffett timeline:
- 1930: Born to Howard H. Buffett and Leila Buffett.
- 1951: Bachelor of Science in Business Administration, University of Nebraska.
- 1951: Master of Science in economics, Columbia University.
- 1951 to 1954: Worked as an investment salesman at his father’s firm, Buffett-Falk & Co.
- 1954 to 1956: Worked as a securities analyst at Graham-Newman Corp under legendary value investor Benjamin Graham, his former Columbia professor.
- 1956 to 1969: General partner of various investment partnerships, which eventually merged as Buffett Partnership Ltd. in 1962.
Acquired the first shares of Berkshire Hathaway, a textile manufacturer, in 1962. - 1965: Acquires control of Berkshire Hathaway.
- 1967: Warren Buffett begins pivoting Berkshire Hathaway away from manufacturing toward insurance with the purchase of National Indemnity Company.
Berkshire Hathaway officially closed its final textile manufacturing plant in 1985. - 1986: Warren Buffett’s net worth exceeds $1 billion.
- 1995: Warren Buffett’s net worth exceeds $10 billion.
- 2021: Warren Buffett’s net worth exceeds $100 billion.
Source: Various, Wikipedia.
Buffett, now 95 years old, is ready to step back from being the primary figurehead at the company he acquired control of in 1965 and transformed into a global capitalistic juggernaut with a market capitalization exceeding $1 trillion.
In a letter to Berkshire Hathaway investors, he invoked his natural humor regarding his decision:
Buffett explained that while he will cede his role in writing his annual Berkshire Hathaway letter and the stage in Omaha to Abel, he will thankfully not entirely disappear from public life.
Instead, Buffett plans to “continue talking to you” via his “annual Thanksgiving message.”
Warren Buffett makes major move with Berkshire Hathaway shares
A significant reason for Buffett’s letter is to explain firsthand why he has decided to convert a substantial amount of Berkshire Hathaway “A” class shares to “B” class shares.
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Buffett has long maintained that his goal is for his wealth to be used for charity. His decision to convert his shares enables him to pass them along to foundations run by his children, which will execute his vision.
Overall, Buffett converted 1,800 A shares into 2.7 million B shares worth $1.34 billion. He gave 1.5 million shares to The Susan Thompson Buffett Foundation and “400,000 shares to each of The Sherwood Foundation, The Howard G. Buffett Foundation and NoVo Foundation.”
Warren Buffett’s children’s foundations:
- The Susan Thompson Buffett Foundation: Susan T. Buffett, Warren’s first wife (deceased). The foundation provides educational scholarships. Susan A. Buffett is the chair of its leadership board.
- The Sherwood Foundation: Susan A. Buffett, Warren’s daughter. The foundation aims to “make Nebraska a better place to live, work, learn, and play.”
- The Howard G. Buffett Foundation: Howard, Buffett, Warren’s middle child. The foundation targets “food security, conflict mitigation and combating human trafficking.”
- NoVo Foundation: Peter Buffett, Warren’s youngest son. The foundation aims to support women and children.
“My children are all above normal retirement age, having reached 72, 70 and 67. It would be a mistake to wager that all three – now at their peak in many respects – will enjoy my exceptional luck in delayed aging,” wrote Buffett. “I need to step up the pace of lifetime gifts to their three foundations. My children are now at their prime in respect to experience and wisdom but have yet to enter old age. That “honeymoon” period will not last forever.”
Buffett remains committed to Berkshire Hathaway, Abel
Buffett’s decision to accelerate his gifts to his kids’ foundations is rooted in timing, rather than an indictment of a shift in his confidence in Abel or Berkshire Hathaway’s future.
He spent much time in the letter talking about his advanced age and mortality, and the need to ensure that his children fully have the reins on his wealth before his passing away.
The Oracle of Omaha made it clear that he has unwavering support for Abel, and that he plans to continue to assist Berkshire Hathaway behind the scenes when helpful.
“Greg Abel has more than met the high expectations I had for him when I first thought he should be Berkshire’s next CEO,” wrote Buffett. “I can’t think of a CEO, a management consultant, an academic, a member of government – you name it – that I would select over Greg to handle your savings and mine.”
Ostensibly, his reassurances are designed to keep his loyal followers in the fold, supporting Berkshire Hathaway and its stock price even after he’s gone. He devoted time to explaining that his vision for Berkshire Hathaway includes long-tenured leaders, advising the company to “avoid those whose goal is to retire at 65, to become look-at-me rich or to initiate a dynasty.”
Instead, he suggested leaders like Abel focus on opportunity and risk, with a steady hand on the rudder. He also reminded investors that the market is fickle and that inevitably, there will be good and bad times, suggesting they remain focused on the long haul despite the market’s whims and whispers.
“Our stock price will move capriciously, occasionally falling 50% or so as has happened three times in 60 years under present management. Don’t despair; America will come back, and so will Berkshire shares.”
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