More Good Vibes from Greg Abel
It's nice to know that Berkshire Hathaway will be left in Abel hands
Happy Monday and welcome to our new subscribers!
I’ve written about Greg Abel a time or two over the past few months — which hasn’t always been easy. The vice chairman of non-insurance operations at Berkshire Hathaway typically dodges publicity and sits for relatively few interviews.
There just isn’t a whole lot of information out there about the man who will one day succeed Warren Buffett atop the Berkshire throne.
His local newspaper, the Des Moines Register, publishes the occasional profile of Abel — and covers him more regularly than other media outlets — but rather inconsiderately locks most of those articles behind a paywall.
Nevertheless, all of the time I spent scrounging around for every last piece of available information on Abel has not been wasted. I’m more convinced than ever that Warren Buffett and Charlie Munger tapped the right person to take over Berkshire once they’re gone.
And I didn’t always feel that way…
Join hundreds of readers in learning how to get rich slow by subscribing to Kingswell for free!
Okay, that’s kind of a clickbait (or, in this case, scroll-bait) thing to write.
Greg Abel possesses a managerial acumen that borders on the preternatural. What he has done with Berkshire Hathaway Energy — nurturing the subsidiary from mid-level acquisition into one of the conglomerate’s crown jewels — is the stuff of legend.
But, no matter the heights that Abel has already climbed, his greatest challenge still lies ahead.
Replacing Warren Buffett will not be easy.
Just look at the difficulties faced by any sports coach who succeeds a legendary predecessor. Fans can’t wait to second-guess every decision and compare his inevitable missteps to the whitewashed memories of past glory.
You can’t compete with a memory — and, someday, Greg Abel will be asked to do just that.
I wouldn’t want such a thankless job. (Not like anyone’s offering it to me…)
I first heard Abel speak while watching the virtual annual shareholders meetings in 2020 and 2021. And, although he didn’t get a fair crack of time in front of the microphone, he didn’t exactly stand out either.
Granted, it’s nigh impossible to outshine Buffett and Munger while they hold court during those marathon Q&A sessions, but Ajit Jain managed to leave the audience in stitches with his zinger about insuring Elon Musk.
Abel appeared highly competent and well-prepared, but it seemed hard to imagine him leading future annual meetings in anywhere close to the same manner as Buffett.
Impossibly high expectations? Yes.
But welcome to the stultifying reality of being Warren Buffett’s hand-picked successor.
(1) Greg Abel: Budding media star?
Then, about ten days ago, @CGDMedici shared a video with me of Greg Abel interviewing the late Walter Scott, Jr., at Omaha’s Davis Global Center in 2020.
I’m not sure how @CGDMedici found it — there were only 26 total views on the video when I first clicked the link — but this hidden gem includes a lot of great insights into Scott’s life, his past in Omaha, and even a funny story about how he attended a party in California thrown by one of Buffett’s sisters in order to pitch Warren on buying MidAmerican Energy.
And, thus, Berkshire Hathaway Energy was born.
(Remember: Abel sold his 1% interest in BHE back to Berkshire for $870 million in June, but the Walter Scott estate still owns approximately 8% of the energy giant. Whether or not they’re interested in selling out, too, will be one of the first things I check for when Berkshire’s earnings come out next month.)
But the real star of this show was Abel.
He looked completely at ease up on stage with Scott, laughing and reminiscing with his longtime friend and mentor. Abel flashed a new, charismatic side completely at odds with the publicity-shy persona that I had expected to see.
Abel should do more media. He’s really good at it.
As The Rational Walk points out, Abel would likely demonstrate the same poise at Berkshire’s annual meetings if he got more of a chance to speak.
On the basis of this 2020 interview, I agree.
Still, I’m a little torn on that front. Realistically, Buffett and Munger will only be around for so many more meetings — and I’m loath to pare back any of their time to speak and answer questions in favor of Abel.
No offense to Greg, but our time with Buffett and Munger won’t last forever and we should cherish (and maximize) every second of it.
And, even though I’m happy to wait until after Buffett and Munger are gone for Abel to fully spread his wings and take center stage at the annual meetings, it’s nice to know that he has that media-savvy string to his bow.
(2) No anchoring bias here
Abel bought $68 million of Berkshire Hathaway (Class A) shares on September 29 at prices ranging from $405,800 to $408,514. No doubt about it — he grabbed the stock at a great price with Berkshire well off its highs from earlier this year.
But what really caught my eye was that Abel splashed the cash just a few days AFTER Berkshire traded below $400,000 per share.
In other words, Abel bought on an uptick.
It’s not easy for many investors to contemplate a purchase at one price, decide to wait (for whatever reason), see the price go up, and then buy anyway. There’s a great temptation to wait until the price drops back down to where you originally saw it, potentially missing out on a smart deal just because you’re trying to recapture an even better one from the past.
Abel cleared that common mental hurdle with ease.
He didn’t anchor his expectations to that sub-$400,000 price, shrugged off the 2% increase, and secured an outstanding deal for himself and his family.
So many investors — even Warren Buffett himself — struggle with this.
Buffett tends to buy on weakness. If a stock he has bought advances an eighth, he stops and reconsiders. He says that for him to buy a stock on an uptick is about the equivalent of the Second Coming. It has to be the world’s greatest idea. (He regards this as a quirk of personality, rather than a desirable technique, and adds that his best buys have been on a scale up when his conviction overcame his hesitations.)
The Money Masters (1980)
Of course, this situation won’t directly carry over to Abel’s eventual responsibilities as CEO of Berkshire Hathaway. Ted Weschler and Todd Combs will oversee the company’s massive investment portfolio, not Abel.
But it’s an excellent flex of his capital allocation chops — and shows a rare penchant for rational thinking.
Both of which should come in handy down the road.
While we’re on the rather macabre subject of post-Buffett Berkshire Hathaway, I think Warren and Charlie answered the question well at the 1994 annual meeting.
Even though Greg Abel didn’t even work for the company at this point, the overall points still apply.
Buffett: In terms of the managers we have, you have to come in and really want to mess it up, I would think. And we don’t have anybody like that, in terms of succession plans at Berkshire.
Then there’s the question of allocation of capital — and you could do worse than just adding it to some of the positions that we already had.
You didn’t see me out at Borsheims selling any jewelry the other day. That’s somebody else’s job.
Incidentally, I think I’m in pretty good health. I mean this stuff (Coca-Cola) will do wonders for you if you’ll just try it. (Laughs)
Munger: I think the prospects of Berkshire would be obviously diminished if Warren were to drop off tomorrow morning. But it would still be one hell of a company and I think it would still do quite well.
Buffett: It is one hell of a business that we’ve got here. If you saw what happened at Berkshire headquarters, you would not worry as much. There’s very little going on there that contributes to things.
Hopefully, as I said in a previous article, we won’t have to deal with a transfer of power at Berkshire until the 2030s at the earliest.
But it’s nice to know that the company will be left in Abel hands.
(I’ll see myself out.)
If you’ve enjoyed reading this issue of Kingswell, please hit the ❤️ below and share it with your friends (and enemies) so they don’t miss out. It only costs you a few clicks of the mouse, but means the world to me. Thank you!
Disclosure: This is not financial advice. I am not a financial advisor. Do your own research before making any investment decisions.