Abel hands: Buffett says “it won’t be long” before succession

Buffett also discussed mistakes, and helping those that “get the short straws in life.”

Warren Buffett, the chairman and CEO of Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) posted his annual letter to shareholders on Saturday along with the fourth quarter and year-end earnings release.

It is an annual opportunity for investors to hear from the Oracle of Omaha, who has run Berkshire Hathaway for the past 60 years. Not only is the letter insightful; it is also an interesting read, as one would expect from the hand of this one-of-a-kind investing icon.

Buffett touched on a few interesting topics in the letter, including the succession plan after he retires. On the one hand, Buffett just turned 94 and has guided Berkshire Hathaway since 1965.

On the other hand, his long-time partner, the late Charlie Munger, didn’t stop working until he died in 2023 at the age of 99.

Buffett did not suggest any timeline as far as when he might step down, but he did say it “won’t be long.” The firm already has a succession plan in place with 62-year-old Greg Abel, currently a company vice chair and CEO of Berkshire Hathaway Energy, set to take the reins.  

“At 94, it won’t be long before Greg Abel replaces me as CEO and will be writing the annual letters,” Buffett wrote in the letter. “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.”

Mistakes, he’s made a few

Buffett also discussed some of the mistakes he’s made over the years. While he didn’t mention it specifically, one wonders if he’ referring to the recent decision to buy, then sell, Ulta Beauty stock in just six months.

“Sometimes I’ve made mistakes in assessing the future economics of a business I’ve purchased for Berkshire – each a case of capital allocation gone wrong,” Buffett wrote. “That happens with both judgments about marketable equities – we view these as partial ownership of businesses – and the 100% acquisitions of companies. 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.”

In fact, by his count, Buffett has mentioned mistakes or errors 16 times in the last five shareholder letters.

“Many other huge companies have never used either word over that span,” he wrote … “Elsewhere, it has generally been happy talk and pictures. I have also been a director of large public companies at which “mistake” or “wrong” were forbidden words at board meetings or analyst calls. That taboo, implying managerial perfection, always made me nervous.”

Help those who “get the short straws in life”

Another interesting passage from the letter centered on the record $26.8 billion that Berkshire Hathaway paid in corporate taxes in 2024, more than 5% of what all corporations made last year.

“Berkshire would not have achieved its results in any locale except America whereas America would have been every bit the success it has been if Berkshire had never existed,” Buffett wrote. “So, thank you, Uncle Sam. Someday your nieces and nephews at Berkshire hope to send you even larger payments than we did in 2024. Spend it wisely. Take care of the many who, for no fault of their own, get the short straws in life. They deserve better. And never forget that we need you to maintain a stable currency and that result requires both wisdom and vigilance on your part.”

Finally, Buffett mentioned the massive cash pile that is now up to $325 billion, about twice what it was a year ago.

“Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities – mostly American equities although many of these will have international operations of significance,” Buffett wrote. “Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned.”