2020 annual letter

[Guest longinvestor]

It’s that time of the year again.

 

What should we expect to see in it?

[LC]

My guess:  a combination of explanations of the cash balance (including diatribe about high valuations); performance of the stock portfolio (Apple); and a bunch of the regular feel-good history lessons.

[scorpioncapital]

An explanation for a long stretch of underperformance with a plea to 'trust me'?

 

 

[Guest longinvestor]

I am hoping for some commentary on what Abel/ Jain’s elevations will mean? How much capital do they get to deploy? T/T have 24 B , how much Abel/Jain? Who calls who to make lightning fast deals? Are they following the script of management by absentia?

 

I also would like to more color on board/insider ownership of Berkshire stock. Beyond statutory reporting. For example, we now know how much Jain owns, didn’t before 2018. The only good estimate of this is in Cunningham’s book.

 

And more on the possibility of owning 25% of banks now?

 

And oh I would like to know the name of the next Chairman.

[longterminvestor]

Next chairman is Howard Buffet.  Quote letter from Buffet on Berkshire "Past Present & Future":

 

"To further ensure continuation of our culture, I have suggested that my son, Howard, succeed me as a nonexecutive Chairman. My only reason for this wish is to make change easier if the wrong CEO should ever be employed and there occurs a need for the Chairman to move forcefully. I can assure you that this problem has a very low probability of arising at Berkshire – likely as low as at any public company. In my service on the boards of nineteen public companies, however, I’ve seen how hard it is to replace a mediocre CEO if that person is also Chairman. (The deed usually gets done, but almost always very late.)

 

If elected, Howard will receive no pay and will spend no time at the job other than that required of all directors. He will simply be a safety valve to whom any director can go if he or she has concerns about the CEO and wishes to learn if other directors are expressing doubts as well. Should multiple directors be apprehensive, Howard’s chairmanship will allow the matter to be promptly and properly addressed."

[frog03]

Kind of weird...  Howard is not able to do anything but fire the CEO....

[petec]

Kind of weird...  Howard is not able to do anything but fire the CEO....

 

V smart!

[John Hjorth]

Next chairman is Howard Buffett.  Quote letter from Buffett on Berkshire "Past Present & Future":

 

To further ensure continuation of our culture, I have suggested that my son, Howard, succeed me as a nonexecutive Chairman. My only reason for this wish is to make change easier if the wrong CEO should ever be employed and there occurs a need for the Chairman to move forcefully. I can assure you that this problem has a very low probability of arising at Berkshire – likely as low as at any public company. In my service on the boards of nineteen public companies, however, I’ve seen how hard it is to replace a mediocre CEO if that person is also Chairman. (The deed usually gets done, but almost always very late.)

 

If elected, Howard will receive no pay and will spend no time at the job other than that required of all directors. He will simply be a safety valve to whom any director can go if he or she has concerns about the CEO and wishes to learn if other directors are expressing doubts as well. Should multiple directors be apprehensive, Howard’s chairmanship will allow the matter to be promptly and properly addressed."

 

Your basis does not support your conclusion here, longterminvestor,

 

Suggested reading : Berkshire Hathaway Corporate Governance Guidelines [last amended January 28^th 2014], especially section 4 to 10 [both included].

[obtuse_investor]

Technically, you’re right John. However, I would be very surprised if his suggestion wasn’t accepted by the *board* without question.

 

He makes a suggestion because otherwise it would make him a hypocrite in the eyes of everyone who sees Buffett as a beacon of corporate governance.

 

I am sure the irony isn’t lost on Mr Buffett.

[John Hjorth]

Technically, you’re right John. However, I would be very surprised if his suggestion wasn’t accepted by the bird without question.

 

He makes a suggestion because otherwise it would make him a hypocrite in the eyes of everyone who sees Buffett as a beacon of corporate governance.

 

I am sure the irony isn’t lost on Mr Buffett.

 

Actually, I agree with you. I also would be surprised, if the outcome will be differently. Mr. Buffett wouldn't have written that in the "past-present-future" shareholder letter if it wasn't backed by the board. But time passes on, and things changes over time, so I think it's better to stay open-minded, like longinvestor's comment earlier in this topic also implied.

 

The most important thing is that we actually have seen real and material changes in management and the relation between management and board to the better for the future, so it won't eventually end like

[- after which "everything" dissolves & falls apart].

 

I can't help it - about Mr. Buffett's irony :

 

2000 Shareholder Letter :

 

... Identical reasoning guides our thinking about Berkshire’s investments. We will be buying businesses – or small part of businesses, called stocks – year in, year out as long as I live (and longer, if Berkshire’s directors attend the seances I have scheduled). ...