Can his successor maintain Berkshire’s success?

Replacing Warren Buffett may be the ultimate poisoned chalice. With him at the helm, Berkshire Hathaway Inc. (BRK.A, BRK.B) has returned an impressive total return of over 5,500,000% to shareholders since Buffett took over the company in 1965.

This track record, combined with his humble and down-to-earth personality, turned Buffett into a Wall Street icon and the most famous investor on the planet. His replacement, Greg Appel, has the most senior position in finance to hold, a job that some say is impossible to succeed.

Caliph: Who is he?

Buffett chose Abel to replace him. The 62-year-old Canadian has worked at Berkshire for 25 years and currently serves as president and CEO of its energy business and vice president of non-insurance operations.

Appel began his career as an accountant, then in 1992 joined utility company CalEnergy, which was eventually acquired by Berkshire Hathaway. Under Appel’s leadership, Berkshire Hathaway’s energy business has grown into a large utility conglomerate and a major money generator.

Abel’s practical discipline, leadership, and ordinary personality helped him rise through the ranks. Buffett says he is a better manager, while his trusted business partner and architect of Berkshire’s success, Charlie Munger, describes him as “impressive at being a business leader”, “amazingly good at getting things done smoothly through other people”, and a “tremendous learning machine”.

Challenges of following Buffett

Appel’s credentials, references, and the fact that he was personally selected by Buffett helped calm investors’ nerves. He was shaped to be in charge for a long time and Berkshire and its culture were ingrained in him.

The biggest problem is investor sentiment. Appel has the experience needed to continue growing Berkshire, and will be surrounded by capable advisors, including Buffett himself. However, he is not as popular as his predecessor – in the week after the official announcement of the handover, Berkshire’s stock price fell by almost 5%.

No matter how successful Abel becomes, he likely won’t match Buffett’s popularity – who can? Timing is also difficult. There is too much cash on the balance sheet for investors to want to spend, expectations are high, greater risks must be taken to move the dial, and Buffett and Berkshire’s investment philosophy is no longer as fashionable as it once was.

Compare Buffett vs Abel

Buffett said he chose Abel to succeed him because they shared the same values. They both believe in value investing, long-term thinking, cash generation, and strong balance sheets.

Appel told the media that he has no plans to make major changes to Berkshire’s operations. One of the biggest differences is their management styles. Abel is said to be more experienced than Buffett.

The upside is that Abel is known for getting the most out of the business. The downside is that Berkshire has long succeeded by granting the companies it acquires semi-independence.

Bottom line

Abel knows Berkshire Hathaway well and has the experience and qualifications necessary to succeed as its CEO. People who work with him praise him, and Buffett claims he will do a better job than he did.

The problem is that investment acumen may not be enough. Buffett is adorable. Knowing that he was the one calling the shots, he attracted hordes of investors to buy shares in Berkshire. Aside from that, for many the company is losing its most valuable asset.