What's going on?
The winds of change are blowing at Berkshire Hathaway, the massive conglomerate led by Warren Buffett, who is paving the way for someone else to eventually take the reins.
What does this mean?
Berkshire comprises about 60 businesses across multiple sectors; for the last fifty years, it’s been run by the legendary Buffett, now a near-Biblical 87 years of age.
There’s been speculation for a while about who might take his place as patriarch, and on Wednesday the company all but confirmed existing suspicions about the succession plan: it raised Gregory Abel and Ajit Jain, two longtime Buffett lieutenants, to the company’s board of directors. As the good book says, if thou doest well, shalt thou not be accepted?
Why should I care?
For markets: It’s set to be a two-horse race for the top job between Jain and Abel, who sit on very different sides of Berkshire.
Berkshire’s many acquisitions over the years have largely been financed by income from the company’s insurance operations. Bringing in tens of billions every year, Jain has massively grown the amount of ready cash Berkshire has stockpiled to invest — Buffett has even said that Jain’s probably made more money for the company’s shareholders than he ever has. Abel, on the other hand, has plenty of experience across Berkshire’s various operating businesses. But what’s arguably most important to shareholders is that the handover at one of the world’s largest companies goes off in a well-planned and deliberate manner.
The bigger picture: A new generation of conglomerates may be emerging.
Berkshire has quite a bit in common with other historic conglomerates like General Electric or Siemens — all are large corporate groups which bring vastly different industries together under one roof. Now, however, there are plenty of signs that big tech may be adopting the conglomerate model, with the growth of companies like Google parent Alphabet and Amazon (which both have various large but disparate business lines).