Warren Buffett’s Wisdom: Why a Great CEO Can’t Save a Bad Business | Berkshire Hathaway 2024

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AUDIENCE MEMBER: Question is, what have your team’s greatest learnings been on business, capital allocation, stock picking, and portfolio allocation throughout the COVID-19 pandemic period over the last five years? And, Warren, appreciate it if you can get your views, as well as your representations on Ted and Todd, as well as directly from Greg and Ajit, too, on their respective businesses. Thank you.

WARREN BUFFETT: You know, I don’t think I want to give individual appraisals, but really what you’re doing is in terms of capital allocation, which is my job. I don't go out and sell insurance policies or anything of the sort. And you represent a group of shareholders, like we do represent. We are totally clear on our mission.

And, you know, it may be that other people don’t agree with them, but I would say that in a great many places, you know, I just don’t agree with their mission. (Laughs) You know, I would say that, for example, anybody that wants to retire at 65 would be disqualified from being CEO of Berkshire. They might get retired the next day if they were the wrong person. But there are just certain things we don’t want.

And we’re well fixed now. And that the odds are very good, though far from certain, that takes care of the next 20 years, you know. But you have to provide for the contingency. And there are several people on the board who know what I would do on that, but it’s up to Greg. But if Greg and I go at the same time, then you’ll move into making another decision.

You know, there are a few people who know my thoughts on that, but the job of the director is then to come up with the right CEO, and the right CEO can’t make a terrible business great. Tom Murphy, who was the best business manager I've ever known, he said the real key was buying the right business. And Murphy brought a million other attributes to it after that.

But, you know, Charlie, he always said — you know, what was this? He had a saying on that, but I don't (remember). Basically, we could have brought in Tom Murphy and told him his job was to run the textile business, and it would have done a little bit better, but it still would have failed. (Laughs)

And one of the reasons I stuck with the textile business as long as I did was that I liked Ken Chace so much, and I thought he was a terrific guy and a very good manager. If he'd been a jerk, you know, we'd have quit the textile business much faster, and we'd have been better off. So the answer was for him to get in the TV business, like Murphy had done and supported.

Murphy figured that out early, and he started with a struggling operation, a VHF in Albany, New York, competing against GE. He was operating out of a home for retired nuns, and he only painted the side that faced the street. He had one car dashing around town, and he called it news truck no. 6. But from that, he built an incredible company because he was the best manager I’ve ever met. Beyond that, he was in a good business.

The key will be to find another Tom Murphy and then hand them a bunch of good businesses, and he or she will know what to do with it. Now, that’s not as precise as you would get in most companies, but you really can’t get more precise than that. I mean, you can have committees and management consultants and everybody. But it wasn’t a management consultant that hired Tom Murphy.

And I forget whether he was doing. His sales volume was a couple thousand a week at first. And then as soon as he hit, that was his goal. It got to 2,000. He says, now my goal is 3,000. He kept doing that, and he surpassed all these people, like CBS and ABC, who had the world by the tail. And it was just a wonderful lesson in life to witness.

I learned an awful lot from what he said to me, but I just learned by watching him operate. I mean, it's like watching a great golfer or a great tennis player; you ought to learn something about the kind of swing you’re trying to develop or something of that sort.

So that’s not a great answer for you, but it's — so far, it’s worked, and I think it works. I'm very sure it works with Greg, and it's up to people in the future when, you know, I'm underground or wherever they put me, to really make a decision every 20 years or so. On average, it's the right decision, but correct it if it turns out to be the wrong decision.

That's what a board of directors is for. And we've got people on the board who understand that responsibility. They take it seriously, but they don’t take themselves too seriously, and so they don’t necessarily want to do a lot of things just to look busy. They aren’t using us as a stepping stone to get on other boards. We've got people that really believe in what we're doing, and they’re the ones that are going to have to make this place work.

If they get lucky on Greg's mortality, they can do just what everyone else did and go to sleep for 20 years or so and then make another decision. Berkshire has every tool in the world available to be what it is now and continue to be what it is now. I mean, we’ve grown from 20 million of net worth to 570 billion.

And, you know, there aren’t as many things to do, but we can do a few big things better than anybody else can. And there will be occasional times when we're the only one willing to act. At those times, we want to be sure the US government sees us as an asset to the situation, not a liability or a supplicant like the banks in 2008 and ’09, when they were all tarred with the same brush.

We want to be sure that the brush that determines our future is not tarred. And I think we're in the — I don’t think anybody’s got a better position to do it than Berkshire.
 

Source: https://buffett.cnbc.com/2024-berkshire-hathaway-annual-meeting/

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