How Buffett decide on CEOs?

In Buffett’s 2024 Berkshire Hathaway shareholder letter, I will now quote directly (in italics) some of the considerations he personally believes are important when he decide on CEOs.

I suggest you read my post of: “How does Buffett manage Berkshire?“, before move next.

Table of Contents

It’s hard to find great manager

Every company doesn’t have an easy-to-understand business and there are very few owners or managers like Pete. And, of course, I expect to make my share of mistakes about the businesses Berkshire buys and sometimes err in evaluating the sort of person with whom I’m dealing.

Note: Pete Riegel sold Forest River, which he founded and managed, to Berkshire in 2005.

But I’ve also had many pleasant surprises in both the potential of the business as well as the ability and fidelity of the manager. And our experience is that a single winning decision can make a breathtaking difference over time. (Think GEICO as a business decision, Ajit Jain as a managerial decision and my luck in finding Charlie Munger as a one-of-a-kind partner, personal advisor and steadfast friend.) Mistakes fade away; winners can forever blossom.

Degree are not considered

One further point in our CEO selections: I never look at where a candidate has gone to school. Never!

Of course, there are great managers who attended the most famous schools. But there are plenty such as Pete who may have benefitted by attending a less prestigious institution or even by not bothering to finish school. Look at my friend, Bill Gates, who decided that it was far more important to get underway in an exploding industry that would change the world than it was to stick around for a parchment that he could hang on the wall. (Read his new book, Source Code.)

Not long ago, I met – by phone – Jessica Toonkel, whose step-grandfather, Ben Rosner, long ago ran a business for Charlie and me. Ben was a retailing genius and, in preparing for this report, I checked with Jessica to confirm Ben’s schooling, which I remembered as limited. Jessica’s reply: “Ben never went past 6th grade.”

I was lucky enough to get an education at three fine universities. And I avidly believe in lifelong learning. I’ve observed, however, that a very large portion of business talent is innate with nature swamping nurture.

Pete Liegl was a natural.

Leaderships mistake impact big than financial

At other times, I’ve made mistakes when assessing the abilities or fidelity of the
managers Berkshire is hiring. The fidelity disappointments can hurt beyond their financial impact, a pain that can approach that of a failed marriage.

Cheat shareholders eventually cheat yourself

At 94, it won’t be long before Greg Abel replaces me as CEO and will be writing the annual letters. Greg shares the Berkshire creed that a “report” is what a Berkshire CEO annually owes to owners. And he also understands that if you start fooling your shareholders, you will soon believe your own baloney and be fooling yourself as well.

Buffett decide on CEO — credit: Ideogram

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