Chapter 11: Berkshire After Buffett
The Complete Financial History of Berkshire Hathaway | Adam J. Mead | ISBN: 978-0-85719-912-6
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Chapter 11 is Mead’s afterward. The “what happens when Buffett dies?” question is older than most Berkshire shareholders. But as Buffett entered his nineties while Mead finished the book, the question shifted from sudden bus accident to planned transition.
Buffett’s own line frames it: “If a business requires a superstar to produce great results, the business itself cannot be deemed great.” Berkshire was built to outlast one person.
Succession: already mostly decided
Day-to-day subsidiary management barely changes when Buffett leaves. The CEO role is the open variable everyone watches.
Mead lays out the three-way split:
- Non-executive chairman: Likely Howard Buffett, culture guardian, emergency check on a bad CEO hire.
- Investment managers: Todd Combs and Ted Weschler in place since 2010-2011.
- CEO: Greg Abel or Ajit Jain as vice chairmen since 2018. Abel looks like the favorite: capital allocation track record at Berkshire Hathaway Energy, more public-facing, younger.
Insurance stays Jain’s world. Capital deployment at the parent level probably tilts Abel.
The real question: what happens to the cash?
Operating earnings guarantee subsidiaries can reinvest locally. Headquarters will still collect excess cash. Future leaders cannot match historical percentage returns. So how is cash returned?
Mead lists three paths:
Dividends. Simple relief valve. Berkshire avoided them forever for good reasons (tax efficiency, shareholder choice, retention value above book). But at some earnings level, dividends may be necessary if buybacks are not attractive.
Repurchases. Best economics when shares trade below intrinsic value. Lets continuing holders increase ownership. Income seekers sell fractions of holdings. Drawback: price dependent. What if stock is fairly valued for years?
Hybrid. Small regular dividend (maybe 25% of normalized operating earnings) plus special dividends when cash piles up, plus opportunistic buybacks when cheap.
The 2018+ repurchase policy and 2019’s $5 billion buyback are previews. Not enough to drain $128 billion, but the tool exists.
Should Berkshire break itself up?
Wall Street analysts love sum-of-the-parts math. Apply peer multiples to each division, add them up, claim conglomerate discount, recommend spins.
Mead dismantles the logic:
- Tax hit on selling dozens of long-held businesses
- Lost tax-free capital movement between units
- Lost diversification that lets each business run without quarterly market pressure
- Lost deal optionality (stocks, bonds, whole companies, merchant banking)
- Reputation damage if families no longer trust Berkshire as permanent home
Spinoffs trade productive operating assets for cash. Shareholders then must reinvest in a expensive market. Buffett: “Truly good businesses are exceptionally hard to find. Selling any you are lucky enough to own makes no sense at all.”
Breakup value is a market appraisal game. Intrinsic value is future cash flows. Separating pieces does not raise those cash flows. It adds boards, filings, financing friction, and meeting time.
Where future value might still come from
Incremental gains will be small. But small edges compound:
- Time arbitrage when markets panic short term
- Private market discount for sellers who want permanence and autonomy
- Crisis lending (the “Berkshire blessing” after the “Buffett blessing”)
- Repurchases when the market misprices the forest
Governance after Buffett
Buffett’s estate will donate voting stock to charity over years, maybe a decade plus. That gives management time to prove the system works and lets Berkshire double again at a modest compounding rate.
Shareholders matter more post-Buffett. Early partners passing shares to heirs changes the owner base. Culture maintenance becomes a shareholder duty, not just a management one.
Lawrence Cunningham’s Berkshire Beyond Buffett gets a nod: momentum from culture separable from the founder.
Buffett’s quip on deals after him: “I like to think I’ll be missed a little bit, but you won’t notice it.”
Mead’s conclusion: the conglomerate will thrive without Warren Buffett. That is the highest praise for someone who started with a textile mill and built a institution.
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