How Will Warren Buffett Know It's Time To Step Down? Charlie Munger Revealed The Berkshire CEO Told People To 'Speak Up'

Jul 3, 202415:14 UTC

The death of Charlie Munger in 2023 and the rising age of Warren Buffett could bring a renewed spotlight on the success plan at Berkshire Hathaway Inc (NYSE:BRK) (NYSE:BRK), the company Buffett has run for decades.

In a 2019 interview, Munger shared that Buffett has a straightforward approach to determining when it might be time to step down: he has encouraged colleagues and board members to "speak up" if they notice any decline in his decision-making abilities.

"Warren has told people to speak up when the time comes," Munger revealed, emphasizing Buffett's commitment to rationality and transparency until the very end.

This open-door policy underscores the culture of accountability and open communication that both leaders have fostered within Berkshire Hathaway. By empowering those around him to voice their concerns, Buffett aims to ensure the company's future stability and uphold the high standards of leadership that have defined his tenure.

"I think you'll be surprised at how well both Warren and I are capable of stepping back when we feel that our powers are too far deteriorated," Munger said during the 2019 interview.

Known as the Oracle of Omaha, Buffett has produced market-beating returns with the Berkshire Hathaway conglomerate for many years.

Over the last 10 years, shares are up over 216% as viewed in the chart from Benzinga Pro below.

Read Also: Charlie Munger Once Told People To Be Happier, Recalled Living Through The Great Depression: ‘Life Was Pretty Brutal’

Who Leads Next?: The topic of succession is not merely theoretical; it's actively integrated into Berkshire's operations.

Munger noted that the next generation of leaders, including Greg Abel and Ajit Jain, are already deeply involved in managing the company. This gradual transition ensures continuity and stability, aligning with Buffett and Munger's long-term vision for Berkshire Hathaway.

"It's amazing how good this next generation is, and they're steeped in our non-bureaucratic ways," Munger said.

Abel is viewed by many as the heir apparent to Buffett at Berkshire Hathaway. In 2023, Buffett said that he was "100% comfortable" with Abel taking over.

"Greg understands capital allocation as well as I do," Buffett said.

Abel is the chairman of Berkshire's Energy segment and vice chairman of non-insurance operations. At the energy segment, Abel controls several companies owned by the conglomerate.

Jain is the vice chairman of Insurance Operations at Berkshire.

If Buffett steps down from the company, the new leader would be tasked with operating the company and trying to produce similar returns to Buffett. The new leader would also be tasked with controlling the portfolio of investments, which includes large stakes in Apple Inc AAPL and other publicly traded companies.

Berkshire has been adding to its stake in oil company Occidental Petroleum OXY since investing in the company in 2019. The chart from Benzinga Pro below shows shares of Occidental are up 27.8% over the last five years.