Alice Schroeder: The Hidden Meaning Behind Buffett's Hiring

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"A phenomenal article", per Guy Spier

 

Weschler may be the most important hire Buffett has made in decades. He isn’t just an investor, though his $2 billion portfolio returned 1,236 percent to Peninsula investors over 11 years. “He plays all the instruments in the orchestra,” says Steve Blaine, who served on the board of Virginia National Bank with Weschler.

 

He does, in fact, cover all the bases: finding acquisitions, financing them, overseeing management of acquired companies, designing their compensation, allocating capital of the entity that owns the businesses, and understanding lending and credit markets from a bank’s perspective. He also knows how to finance acquisitions in special situations such as bankruptcies; manage long-tailed risks like his former employer W.R. Grace & Co.’s asbestos liability; and control equity- portfolio risk in a volatile market using positioning, derivatives and moderate leverage.

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Involvement by the board is a very welcome sign of progress. The press release announcing Weschler’s new role contained some other subtle signs that changes at Berkshire may be forthcoming. Buffett himself wasn’t quoted. The statement said he will continue to manage most of Berkshire’s $100 billion of funds “until his retirement.”

 

This is the first time, as far as I can tell, that it has ever been confirmed that Buffett would retire, instead of trying to outwork Rose Blumkin, who ran Berkshire’s Nebraska Furniture Mart until age 103.

The press release contains another tantalizing hint. Twice, it refers to the period “after Mr. Buffett no longer serves as CEO.”

 

These cues are subtle -- way too subtle to mean anything definitive. But it makes me wonder whether, at some point, Buffett is going to appoint a CEO while retaining the nonexecutive-chairman role.

 

That would be a move the business world has definitely not been expecting. It’s also one that may make sense, for Buffett as well as Berkshire. He would remain the company’s most valuable asset -- making the phone calls that get those lucrative deals done, playing the world’s economic statesman, and flattering business owners into selling their companies to Berkshire. Meanwhile, Weschler and Combs would have the primary responsibility for investing Berkshire’s $10 billion a year of cash flow and constantly compounding pool of assets -- in the most turbulent market since the 1930s.

http://www.bloomberg.com/news/2011-09-15/schroeder-the-hidden-meaning-behind-buffett-s-hiring.html