Warren Buffett promotes two successors, won’t invest in bitcoin

Warren Buffett says he’ll never invest in cryptocurrencies, as he promoted two top candidates to succeed him.

Warren Buffett names two successors but says he has no immediate plans to step down as head of Berkshire Hathaway. Pic: AP

Berkshire Hathaway is promoting the two top candidates to eventually replace CEO Warren Buffett to its board, but the 87-year-old investor says he isn’t leaving.

It comes as the famed investor said he will never invest in cryptocurrencies, which were headed for a “bad ending”.

“I can say almost with certainty that cryptocurrencies will come to a bad end

Mr Buffett and Berkshire’s 94-year-old vice chairman Charlie Munger will retain their positions on the board, which is expanding to 14 members from 12.

But Greg Abel and Ajit Jain will also become vice chairmen and take on new jobs overseeing Berkshire’s day-to-day operations.

Mr Buffett said on CNBC the new board members are “key figures at Berkshire” and “part of a movement toward succession over time.”

Mr Buffett said the move isn’t due to any looming concerns, saying he’s in “remarkably good health.” But at age 87, he said, “10 years would be a long time” for him to stay in the post.

Mr Buffett says Mr Abel and Mr Jain are the right choices as potential successors.

“They’ve both got Berkshire in their blood,” Mr Buffett said.

For years, Mr Buffett has said Berkshire had identified several internal CEO candidates who could replace him. He has refused to name them, but investors who follow Berkshire had long included Mr Jain and Mr Abel on their short lists.

This move makes the succession plan clear for investors, said Andy Kilpatrick, who has followed Berkshire for years while writing and updating “Of Permanent Value: The Story of Warren Buffett.”

“Now if something happens, they’re right there,” Mr Kilpatrick said.

Mr Abel, who leads Berkshire Hathaway’s utility unit, will now oversee all of the conglomerate’s non-insurance business operations. Mr Jain will oversee all of Berkshire’s insurance operations. He currently serves as executive vice president of National Indemnity Co.

Mr Buffett shot down the idea that Mr Abel and Mr Jain would share the CEO post once he’s no longer running the company, saying there would be one person in the position but not saying who it would potentially be.

Mr Jain, 66, has worked for Berkshire since 1986 and is famous for writing large insurance or reinsurance policies on unusual risks — such as last year’s agreement with American International Group to take responsibility for tens of billions of dollars in AIG insurance claims if they run unexpectedly high.

Mr. Buffett said at last year’s annual meeting that Mr Jain “has made a lot more money for Berkshire than I have.”

Mr Abel, 55, joined Berkshire in 2000 when Berkshire bought what was then called MidAmerican Energy Holdings, an Iowa-based utility. He has overseen a number of acquisitions for Berkshire, including a $US5.6 billion deal in 2013 for Nevada’s largest utility.

Some shareholders are confident that Mr Abel will be Mr Buffett’s successor, because he is younger and has more experience running nonfinancial companies. “The CEO has got to be somebody that knows an awful lot about operating businesses,” said Bill Smead, chief executive of asset management firm Smead Capital Management, which holds Berkshire shares. Mr Abel is “a better fit,” he said.

Berkshire owns more than 90 different companies in a variety of industries, including electric utilities, retail jewellers, insurance and BNSF railroad. The conglomerate also holds major investments in companies such as Coca-Cola, Wells Fargo, American Express and Apple.

The company is extremely decentralised with the subsidiaries largely running themselves on a daily basis.

Mr Buffett’s primary role as CEO is to decide where to invest Berkshire’s cash — either in its own companies, acquisitions or outside investments — and manage the executives who lead the subsidiaries. Berkshire has grown to employ roughly 370,000 people, but only 25 of those work at the conglomerate’s headquarters in Omaha, Nebraska.

Some parts of the company’s succession plan are well known. Mr Buffett’s oldest son, Howard, is a member of Berkshire’s board and set to take on the role of nonexecutive chairman in the future.

Meanwhile, Mr Buffett has taken a swipe at bitcoin, saying he will never invest in cryptocurrencies.

“I can say almost with certainty that (cryptocurrencies) will come to a bad ending,” Mr Buffett told CNBC.

“Now when it happens or how or anything else I don’t know, but I know this: if I could buy long term puts, if I could buy a five-year put on every one of the cryptocurrencies, I’d be glad to do it,” he said.

Though Mr Buffett said his Berkshire Hathaway will “never have a position in” digital currencies, he didn’t deny that the currencies were the business world’s latest interest.

“I have 11 schools coming on Friday,” Mr Buffett said, alluding to the regular visits he hosts with business-school students. “The questions will be on bitcoin. And I won’t know the answers.”

Mr Buffett’s comments come a day after JPMorgan & Chase Chief Executive Jamie Dimon said he regrets calling bitcoin a fraud, referring to comments he made at a banking conference in September.

Bitcoin has taken the investing world by storm, surging to a high of more than $US19,000 and created a divide on Wall Street about whether it is a legitimate financial instrument.

AP, Dow Jones, Reuters