Buffett chooses his successor, why was Abel chosen?
■ Observer
Perhaps it was the outstanding performance in 2020 that prompted Buffett and the Berkshire Hathaway board of directors to finally select Abel.
The 90-year-old "stock god" Buffett finally revealed the mystery of who will take over Berkshire Hathaway.
On May 3, local time, Buffett said in an interview with US media: "The directors agreed that if I step down, Berkshire's non-insurance business vice chairman Abel will take over as the chief executive officer (CEO)."
This mystery is not surprising.
As early as 2018, when Buffett introduced Abel and Jain to Berkshire Hathaway's board of directors, outsiders speculated that both Abel and Jain might become successors.
But in the end, why did Buffett choose Abel?
With the outbreak of the new crown epidemic last year, Buffett's Berkshire Hathaway also suffered.
Although the annual net profit is still as high as 42.521 billion U.S. dollars, it is 47.8% lower than the net profit of 81.417 billion U.S. dollars in 2019, which is almost the same as cutting in half.
But the business sector under Abel performed well.
Abel is currently responsible for Berkshire's non-insurance business, which covers energy, utilities, automobiles, manufacturing, retail and other fields.
Among them, Berkshire Hathaway Energy has revenue of 15.556 billion U.S. dollars in 2020 and a profit of 3.4 billion U.S. dollars.
In contrast, the performance of the insurance business that Jane is responsible for has not increased significantly.
Berkshire Hathaway’s annual report stated: “In 2020, our underwriting business generated $655 million in after-tax income.”
Perhaps it was the outstanding performance in 2020 that prompted Buffett and the Berkshire Hathaway board of directors to finally select Abel.
In addition, it is also because Abel conforms to Berkshire's corporate culture.
Buffett's investment philosophy is that net profit depends on the endogenous creation of the enterprise, not on leverage.
He values the autonomy of enterprises very much.
Abel has fully practiced Buffett's investment and management principles, allowing its subsidiaries to be highly autonomous, focusing on inspecting M&A targets from management, and performing well.
It should be noted that although Abel is determined to be his successor, Buffett will not step down for the time being.
In fact, Buffett has never revealed when he will step down.
Buffett continued to take charge of Berkshire Hathaway, giving Abel time to deal with the relationship with his peers.
The most important thing is his relationship with Jain.
Obviously, Buffett hopes that Abel and Jain will develop into a relationship like that between Buffett and Munger.
But Jain made it clear at the shareholders meeting that the relationship between Buffett and Munger is difficult to replicate.
This indicates that the top management of Berkshire Hathaway will have a certain degree of uncertainty in the future.
Another problem that Abel wants to solve is what to do without Buffett's aura.
After all, Buffett has the halo of "stock god".
Buffett’s investment’s annual rate of return is as high as 20% throughout the year, but the average annual rate of return of the energy and other business sectors managed by Abel is only about 10%. In the long run, this will affect investors’ trust in Berkshire Hathaway. .
Can Abel continue the brilliance of Buffett?
Only time can give the answer.
□ Xu Lifan (Columnist)