Last year I came out of the BRK annual meeting and thought that Greg Abel was not the right person to run Berkshire Hathaway. Abel lacked Buffett’s charisma, warmth, and humor. I remember telling a friend that listening to him at the annual meeting was like listening to another consultant-turned-executive: proper, boring, with a very narrow corporate-speak vocabulary. Greg Abel was not Buffett and he definitely was not Munger.
I was wrong.
Greg Abel is the right CEO for today’s BRK — actually, a better fit for BRK today than Buffett would be. My thinking changed when I started thinking about Tim Cook, who recently announced his departure from the CEO position at Apple.
Tim Cook is no Steve Jobs. But there is no other Steve Jobs. The probability of another Steve Jobs replacing Steve Jobs is nearly zero. As I look at Tim Cook’s tenure, I can see that if he and Steve had run Apple together, the company could have been a lot more successful. Tim, as Jobs himself described him, “is not a product guy,” and so he failed to come up with another product of the iPhone’s magnitude. The Apple Car, which could have been that product, was a giant failure with several changes of direction and eventual disbandment. Apple Vision Pro felt half-baked — I’m not sure Steve Jobs would ever have released it. Siri, revolutionary when it launched on the iPhone, today has the IQ of a toaster compared to other AI models. Apple just settled a class-action lawsuit for exaggerating the AI capabilities of its newest iPhones.
And yet, Tim Cook did an incredible job running Apple. Through small, incremental improvements, he cemented the iPhone as an indispensable device. In the Jobs era, the Apple ecosystem was its biggest competitive advantage — Cook doubled down on it, with all devices working seamlessly together. He extended Apple’s software advantage into hardware, abandoning Intel for in-house M chips, which power MacBooks with multiples of the battery life of the Intel processors they replaced, without sacrificing performance. Apple is no longer the most creative company in Silicon Valley, but everything works. Apple’s revenues are up nearly 4x since Jobs passed away.
I remember reading in Walter Isaacson’s biography of Steve Jobs that Jobs’s advice to Cook (paraphrasing) was: don’t ask what Steve would do — do you. That’s exactly what the people running Disney did not do after Walt Disney passed away, and they almost ran the company into the ground.
I’d argue that if we had to choose between Jobs’s creativity and vision and Cook’s ability to run an insanely complex supply chain and manufacturing operation, Cook was more important to Apple than Jobs at the time of Jobs’s passing. And then again, talent like Jobs’s is almost irreplicable, while Cook’s talent is much easier to replicate.
Companies need different CEOs at different stages of their lives, because they’re solving for different problems. This brings me to BRK.
BRK today comprises GEICO, a consumer auto insurer; the reinsurance operations run for decades brilliantly by Ajit Jain — who has now named Charlie Shamieh of Gen Re as his successor; BNSF, one of the largest railroads in the country; a collection of other operating businesses; a portfolio of marketable securities (Apple, Coke, Amex, etc.); and roughly $400 billion of cash.
BRK requires three skill sets today. The first is replacing Ajit Jain, who will be very difficult to replace — though the succession is now identified. The new CEO’s job is to make sure the right people are running that business. The second is running the rest of the BRK portfolio of private companies, and this is where BRK needs the most help. Buffett was never a traditional CEO. He loved investing (capital allocation), not managing people, and he avoided conflict at all costs. He bought businesses, let managers run them, collected the cash flows, and reinvested. Today, BRK has a collection of more than 100 operating businesses. BNSF and GEICO are the ones that matter most, and both have become hallmarks of mediocrity.
GEICO is being beaten up by Progressive, which is eating its lunch for breakfast, lunch, and dinner. Progressive overtook GEICO as the second-largest U.S. auto insurer — while GEICO was investing in marketing, Progressive was investing in technology, and GEICO is now stuck with hundreds of legacy IT systems while Progressive can reprice almost daily. BNSF is one of the most undermanaged and least profitable Class I railroads in the U.S.
Buffett famously said you want to own businesses an idiot can run, because someday one will. Both GEICO and BNSF have substantial moats and have survived under-management, but Buffett’s statement is less true today than it was decades ago. The half-life of a moat is shrinking much faster in the age of AI.
As an analyst, I can look at BNSF and GEICO numbers and see they are being under-managed. As a consumer, I can observe that Dairy Queen, a company BRK bought in the late ’90s, has been substantially mismanaged. DQ is a beautiful business: most of its stores are franchised, so they require no capital. Under the right management, it could have tripled in size. The quality of its ice cream has not changed, but the innovation in food and the look of the restaurants have declined under BRK ownership. Every store I’ve visited looks like it’s run by a mom-and-pop. But instead of micromanaging DQ, Buffett had more important decisions to make, like buying Apple or the Japanese trading conglomerates.
BRK has reached a size where, absent a real financial dislocation, capital allocation is unlikely to be the source of forward returns. The low-hanging fruit is improving the performance of BRK’s core holdings, and maybe even shedding companies that shouldn’t be in the BRK portfolio. Greg, a billionaire and a large shareholder of BRK, has proven to be a shrewd operator of BRK’s energy business. Choosing Greg was one of the most important decisions Buffett made in decades. At his first annual meeting, we could see why. A corporate Mr. Fix-It is walking through every business, identifying key performance indicators, installing the right incentives, bringing technology to them, and replacing managers who need replacing — doing things Buffett could not and would not do, but that need to be done.
Abel is not Buffett and that is okay. In fact, it is a good thing. Greg Abel may not draw 40,000 people to Omaha for the annual meeting. But he’ll make the difficult decisions Buffett didn’t want to make. He’ll make the trains run on time, literally and figuratively.
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