He's there to maintain the very unique culture of the company. I think it's sort of like if they have his son there he of all people should know Buffett's/Berkshire's culture and be able to best maintain it. He's got a few years to figure out a successor. But yeah this is mostly about the unique culture they have.
Plenty of other charities in the world. Just because he stopped giving to the Gates Foundation over Epstein ties doesn't mean he won't send the money somewhere else.
Most of them seemingly have control problems where even if they do, it is in the form of a giant money pile still under their control that they give away the returns of, usually also completely under their control.
My hot take is that men with extreme wealth and power are desperate to keep it as part of their identity, where the women I mentioned do not have the same character and personality flaws, and therefore use it as a tool to do good because they are not optimizing for wealth and power: they are optimizing to do good. Doesn't always hold, there are exceptions.
"Power tends to corrupt and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority; still more when you superadd the tendency of the certainty of corruption by authority." -- Lord Action
One giant exception was Chuck Feeney, who made $8 billion on duty free shops and gave almost all of it away, much of it anonymously. By the end of his life he and his wife had a couple million and lived in a rented apartment.
Right, donating your present wealth because you expect to continue receiving an astronomical amount of wealth in perpetuity through your company ownership is not all that grand of a gesture.
Certainly better than many alternatives, but it’s not a gesture that should make the median income person feel like existing as an excessively wealthy person should be okay/legal.
In my opinion, personal wealth/asset control above a certain level deemed excessive (perhaps $100 million then adjusted for inflation moving forward) should be taxed at 100% and put into a special fund intended to help pay for social services, healthcare, housing the homeless, etc. In the case of asset control perhaps a good method would be to distribute excessively valued ownership stakes to employees or random members of the public (e.g., many of Elon Musk’s shares in his companies forfeited and distributed to others).
It’s not really a “loophole,” it’s a standard way to give away absurd sums of money.
Have you ever tried to donate billions of dollars? It’s actually extremely difficult.
You have to find causes you’re passionate about/things that society needs, find the correct charities to give the money to, make sure your money actually goes towards the thing they say it will (this is difficult), and then figure out how much you can actually donate (you can’t just give N dollars to company Y. They’ve got zero experience managing that much money, and no way to scale into doing it efficiently.)
What happens then is you have $100b to donate, and mostly only do it $10m at a time or less.
Warren’s kids are old now. They’ve all been donating money for YEARS (it’s a mandatory part of their trust).
So yeah, you receive tax benefits by transferring shares to a foundation you also control, but that money is now earmarked for charity. It doesn’t flow both ways, and the laws on this are very tight (bad actors will find a way, but what’s new?).
If it's so difficult, maybe they could take the easy option and, you know, properly fund the government to build the shared infrastructure on which we all rely by paying tax proportional to their wealth.
Sure that is the typical way to donate your wealth but there are many other ways than giving it with control to your children. I have no judgement but doing it this way is a nice way to move money within your family.
Everyone does it different and I have no judgement but you could just as easily pick a quorum of folks to do the job with a very explicit timeline. Charitable donations are quite broad in the US. So sure lots of wealthy folk don’t this way but not everyone!
Still leaves $1.5b, that's a hell of an income if you stick it in any widespread passive fund, and still 100 times more than even the 1% mark in the US.
I would be set for the rest of my life if I got half a mill falling from sky today, I guess I could even make it work with 250k.
Currently I am pondering how absurd amount of money a billion of dollars is. When loads of people can only -earn and eat through/spend not save- $1 million; working their asses off for something like 20 years.
For what it is worth, if you want your withdrawals to last for decades, then you are limited to around a yearly inflation-adjusted cap of around 3% of the original principal per year, gross of taxes, if you invest in low-cost passive index funds. That is a budget of $30K/year for every million you have invested in the market.
If you are interested, the /r/fire and /r/financialindependence subreddits are useful.
> but to oversee their family's share in the enterprise
Not exactly, he's there to oversee the culture of Berkshire and ensure it's continuity. Buffett is donating all of his wealth (and has already donated $66B), so there isn't a fortune to protect.
Berkshire is an institution of sorts at this point, and requires strong stewardship to prevent enshittification (for lack of a better word).
While I liked your comment enough to upvote, I then realized that Chairman isn't an operational position. It's more a position where the person can exercise ownership of a company (to put it in layman terms). In your analogy he wouldn't be the athlete, more like the person who gets the winning money (assuming his son also has shares) and chooses the trainer/coach of the athletes (which still needs skill btw).
Warren was CEO until 9 months ago. While yes, he's been chairman for 50 years, he's been an exclusive chairman for only 9 months. The role is ambiguous anyways and it's pretty obvious that someone else won't have the authority Warren has. And his son has been a director for 30 years so it's not like he's a new hire
He was chairman and CEO for a long time. Since he has only been a chairman for not that long I don't think it's fair to say that he's been a very active chairman for a long time.
there's nothing wrong with leaving things to your kids to run.
that's the point of the effort after all.
warren as smart as he is was tryna go against the grain of thousands of human evolution. if you train your kids - then most likely they would've values similar to yours. hit or miss but most times a hit.
A lot of rich men, when younger, say that they will not leave so much of the wealth to their children. Then they get older and realize what other old men realized.
"Company culture" at Berkshire Hathway doesn't mean the same as at most companies. BH buys companies and don't interfere with them. So while BH employs upwards of 100k people, the people whose culture the CEO cares about is probably under 100 people.
This is the answer. While it is very real to talk about "employee culture" as company culture, in this particular case, the "culture" I was talking about was from a corporate/investment/acquisition level. Howards job is not to understand how each company that BRK owns is run, that is the CEO's job. But Howards job is to look at BRK from a high level and make sure that the CEO is executing in the same way that Warren set up, namely – buying companies and stocks at a "fair" price or below, and not micromanaging the companies that they acquire. If the CEO is not living up to that, Howard's (and the board's) one card that they can play is to replace the CEO.
Yes, the powerful always do this. It might be challenging to find an exception.
It's not as rewarding to consider that you've reached your position by more good luck than effort, so you hand down advice from on high because clearly you're smarter than everyone else (doesn't help that many people treat you this was to gain access).
Then you continue to do whatever you want despite your own advice because of course... you're smarter than everyone else.
Buffett has been planning this since at least 2011:
CHICAGO (MarketWatch) -- Warren Buffett has told the CBS News program "60 Minutes" that after he dies, he wants his son to become non-executive chairman of Berkshire Hathaway. Howard Buffett, a farmer with no college degree, would be a good successor, the elder Buffett said, because he understands the values of the company.
Sat on a couple of boards and the non exec chair mostly just guards the culture and can fire the CEO. Abel runs the business. That's a very different job from Howard's.
There's a big difference between keeping all of your ownership and giving it to the son and paying a huge salary and making him non-executive chairman while giving away most of your wealth.
Not true. He bought his first stock at 11 by pooling money with his sister, and sold after it dropped 30% then bounced back up to a profit. The stock was "Cities Service" which became Citgo later.
I've read this years ago in "The Warren Buffett Portfolio", but couldn't find a definitive source for this response quickly, so here (https://www.fool.com/how-to-invest/2014/03/15/the-very-first...) is the reference I used to recount the details above.
Wording. That stock in question he first bought at 13 is Texas Pacific Land and he still owns it. It may not have been "his first ever" but he holds that one still.
Maybe someone can enlighten me, but what's the point of "never selling"? Stocks are not a collectible that you can just look at for fun. Their whole point is to sell for profit, at some time. Maybe it's just me but if you "never cash out", that seems a waste of capital. Or perhaps this is a marketing stunt wealthy people sometimes to? Akin to "I live in a small house".
this is such a funny comment, we are so tech-pilled that we forgot companies traditionally pay dividends and that’s the reason to invest, to share in the profits, not to speculate
I wish I saw this comment two years ago while the stock price of one of our local company is still cheap. I sold all my shared before the price slightly tanked, earning just around 14% profit. Now two years later the price has gone up ~100% and they paid dividends twice during the time.
Should have treated it the old-fashion way, not the modern day-trading way.
wealth needs to be kept somewhere. you can either keep it in cash where it inflates away. or in bonds that also inflates away but slower or stocks that is a hedge against inflation.
so the point is protecting your wealth against inflation and continuing the compounding over long stretches of time.
you can liquidate as required or even borrow against it like the very rich do.
If it pays a dividend there is income. Buy and hold is a very common approach to investing. Overtime the cost basis of a good stock will decrease. Some could be sold to invest in other things.
Buy and hold is a hedge against inflation as good if goods increases the the stock reflects the relative expansion of the money supply.
Technically you can borrow money against your share, if you think your share gains will be higher than the interest rate you essentially have free money (although, obviously, not risk free). So that is a use for never selling shares.
Because if you don't sell you don't pay taxes. You can instead borrow against the asset and get a credit for the interest you pay. The joys of being filthy rich.
A lot of negativity here on Buffett. I doubt any mega-billionaire is a total saint, but by comparison Warren seems like a guy who tried to do good in the world.
We should hope for fewer billionaires, but as long as we have them, we should hope for more Warrens.
Rags to rags in three generations, don't forget. These people are not Warren Buffett and most likely do not share his skill, luck, and psychological investment.
71 is way past retirement age in many countries. Also didn’t know Warren Buffett is 96 already. Maybe it’s time to pass the torch to someone younger from a different generation
Or it could be very beneficial - you don't need to know anything about finance to judge the quality of this particular decision, so it's easier to cast doubt on other gospels
1. The next generation has been groomed by Buffet Himself, passing on as much knowledge as he can, but of course, this successor didn't create the fortune, doesn't appreciate it as much, and doesn't have as strong of judgement. However, he is surrounded by the old guard and wise mentors. But as those wither away, he is unable to determine who the worthy successors in his circle should be, slowly the inner circle begins to weaken too.
2. The next successor gets an even less effective set of principles from the first, only knowing off-hand how the money was made in the first place, they are a manager only. They also have no idea how the original people were selected or what makes a good inner circle. Soon it devolves into yes-men and people who seem superficially qualified to manage things.
3. The next successor has little no skills, other than showing up to meetings and going with what advisors say. Because the decision making of the original Buffet mentality has been so diluted, they only know superficial / surface understanding, akin to anyone who read the short books on the subject. They don't know how to do the deep diligence that made BH great. The inner circle is all sycophants, climbers, and clingers. Bad investments, debacles, and poor judgment create losses. Investors begin to panic sell, soon the BH stock crashes in value, losing 90% of the fortune.
And so on... Not hard to see how its like handing off a complex but successful open source project to your progeny instead of the most qualified developers. Pretty soon, its just an unmaintainable mess. They don't understand why things are the way they are, maybe they aren't as good a programmer as great grandpa. They definitely don't know how to hire and keep the best talent that originally built the thing. Pretty soon complexity budget and community good will are exhausted, people move to something newer and more dynamic.
It probably will happen over time as entropy does its thing, but the structure is different than what you describe.
For one, Howard is not the successor, Greg Abel is. Howard is a Stewart of culture, but he is not the leader.
He also isn’t inheriting Buffetts fortune so the generational rot won’t be the same.
Next, both Greg and Howard have been at Berkshire for decades, and however is next up will likely be similar. So there is time to pass on the values.
Laslty, Berkshire is a decentralized company. The company itself has less than 50 employees. All of the companies they own have their own leadership structures and cultures, and Berkshire does not burden itself in managing it. This makes the successor problem a lot easier
Here's his Wikipedia page: https://en.wikipedia.org/wiki/Howard_Graham_Buffett
He was elected by the board too, rather than directly placed by Warren.
I don’t think the last name hurt his chances in 1993 either.
https://www.yahoo.com/news/politics/articles/warren-buffett-...
"Power tends to corrupt and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority; still more when you superadd the tendency of the certainty of corruption by authority." -- Lord Action
https://en.wikipedia.org/wiki/Atlantic_Philanthropies
Great human, thanks for mentioning.
Certainly better than many alternatives, but it’s not a gesture that should make the median income person feel like existing as an excessively wealthy person should be okay/legal.
In my opinion, personal wealth/asset control above a certain level deemed excessive (perhaps $100 million then adjusted for inflation moving forward) should be taxed at 100% and put into a special fund intended to help pay for social services, healthcare, housing the homeless, etc. In the case of asset control perhaps a good method would be to distribute excessively valued ownership stakes to employees or random members of the public (e.g., many of Elon Musk’s shares in his companies forfeited and distributed to others).
Have you ever tried to donate billions of dollars? It’s actually extremely difficult.
You have to find causes you’re passionate about/things that society needs, find the correct charities to give the money to, make sure your money actually goes towards the thing they say it will (this is difficult), and then figure out how much you can actually donate (you can’t just give N dollars to company Y. They’ve got zero experience managing that much money, and no way to scale into doing it efficiently.)
What happens then is you have $100b to donate, and mostly only do it $10m at a time or less.
Warren’s kids are old now. They’ve all been donating money for YEARS (it’s a mandatory part of their trust).
So yeah, you receive tax benefits by transferring shares to a foundation you also control, but that money is now earmarked for charity. It doesn’t flow both ways, and the laws on this are very tight (bad actors will find a way, but what’s new?).
Everyone does it different and I have no judgement but you could just as easily pick a quorum of folks to do the job with a very explicit timeline. Charitable donations are quite broad in the US. So sure lots of wealthy folk don’t this way but not everyone!
I would be set for the rest of my life if I got half a mill falling from sky today, I guess I could even make it work with 250k.
Currently I am pondering how absurd amount of money a billion of dollars is. When loads of people can only -earn and eat through/spend not save- $1 million; working their asses off for something like 20 years.
If you are interested, the /r/fire and /r/financialindependence subreddits are useful.
Not exactly, he's there to oversee the culture of Berkshire and ensure it's continuity. Buffett is donating all of his wealth (and has already donated $66B), so there isn't a fortune to protect.
Berkshire is an institution of sorts at this point, and requires strong stewardship to prevent enshittification (for lack of a better word).
- to prevent institutional degradation.
- to avoid cultural shift for the worse.
- to keep hold of and nurture that culture.
that's the point of the effort after all.
warren as smart as he is was tryna go against the grain of thousands of human evolution. if you train your kids - then most likely they would've values similar to yours. hit or miss but most times a hit.
I never saw our CEO in person, never saw our chairman even on a webinar.
And yes it's not their job to be that low level, but they can't have an idea of the culture either.
It's not as rewarding to consider that you've reached your position by more good luck than effort, so you hand down advice from on high because clearly you're smarter than everyone else (doesn't help that many people treat you this was to gain access).
Then you continue to do whatever you want despite your own advice because of course... you're smarter than everyone else.
CHICAGO (MarketWatch) -- Warren Buffett has told the CBS News program "60 Minutes" that after he dies, he wants his son to become non-executive chairman of Berkshire Hathaway. Howard Buffett, a farmer with no college degree, would be a good successor, the elder Buffett said, because he understands the values of the company.
http://www.marketwatch.com/story/warren-buffett-wants-farmer...
I’m not usually about hereditary succession, but this is an exception I could get behind.
What absolute humble beginnings ;-)
I've read this years ago in "The Warren Buffett Portfolio", but couldn't find a definitive source for this response quickly, so here (https://www.fool.com/how-to-invest/2014/03/15/the-very-first...) is the reference I used to recount the details above.
Should have treated it the old-fashion way, not the modern day-trading way.
so the point is protecting your wealth against inflation and continuing the compounding over long stretches of time.
you can liquidate as required or even borrow against it like the very rich do.
Buy and hold is a hedge against inflation as good if goods increases the the stock reflects the relative expansion of the money supply.
Also some shares pay dividends.
We should hope for fewer billionaires, but as long as we have them, we should hope for more Warrens.
Also, since the NYT says nothing else about the son: https://en.wikipedia.org/wiki/Howard_Graham_Buffett In context, his recent involvement in local politics seems rather odd.
They all seem very similar to the British "new nobility" in the mid-late 19th century, albeit with less syphilis and opium.
The grandson has a pretty successful career already anyways (helped obviously by his relation to Warren)
Squinting at a [Compact] 1971 Oxford English Dictionary - the pedophilic meaning postdates that edition.
A super comfortable life with enough money to get you to 105 years old that all you need.
That's what your personal executive team is for.
It'll all burn eventually.
1. The next generation has been groomed by Buffet Himself, passing on as much knowledge as he can, but of course, this successor didn't create the fortune, doesn't appreciate it as much, and doesn't have as strong of judgement. However, he is surrounded by the old guard and wise mentors. But as those wither away, he is unable to determine who the worthy successors in his circle should be, slowly the inner circle begins to weaken too.
2. The next successor gets an even less effective set of principles from the first, only knowing off-hand how the money was made in the first place, they are a manager only. They also have no idea how the original people were selected or what makes a good inner circle. Soon it devolves into yes-men and people who seem superficially qualified to manage things.
3. The next successor has little no skills, other than showing up to meetings and going with what advisors say. Because the decision making of the original Buffet mentality has been so diluted, they only know superficial / surface understanding, akin to anyone who read the short books on the subject. They don't know how to do the deep diligence that made BH great. The inner circle is all sycophants, climbers, and clingers. Bad investments, debacles, and poor judgment create losses. Investors begin to panic sell, soon the BH stock crashes in value, losing 90% of the fortune.
And so on... Not hard to see how its like handing off a complex but successful open source project to your progeny instead of the most qualified developers. Pretty soon, its just an unmaintainable mess. They don't understand why things are the way they are, maybe they aren't as good a programmer as great grandpa. They definitely don't know how to hire and keep the best talent that originally built the thing. Pretty soon complexity budget and community good will are exhausted, people move to something newer and more dynamic.
For one, Howard is not the successor, Greg Abel is. Howard is a Stewart of culture, but he is not the leader.
He also isn’t inheriting Buffetts fortune so the generational rot won’t be the same.
Next, both Greg and Howard have been at Berkshire for decades, and however is next up will likely be similar. So there is time to pass on the values.
Laslty, Berkshire is a decentralized company. The company itself has less than 50 employees. All of the companies they own have their own leadership structures and cultures, and Berkshire does not burden itself in managing it. This makes the successor problem a lot easier