Berkshire Hathaway: Jain And Abel In Buffett's Succession Story

Cain and Abel were the two successors of Adam and Eve. At Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRKb), the succession story has Jain and Abel in the lead.

The search for a successor to Warren Buffett, the CEO and chairman of Berkshire Hathaway, was on for a long time. In the annual letter released on Feb 28, the iconic investor disclosed that he has nearly finalized the heir to the conglomerate.

The prime candidates for the coveted position are most likely Ajit Jain, a top insurance executive at the company, and Greg Abel, the head of Berkshire’s energy firm.

Charlie Munger, the vice-chairman of Berkshire Hathaway, described both contenders as world-leading and better business executives than Buffett himself.

Though the options are open, odds are Jain would win out versus Abel. But Buffett is just not on the lookout for someone to fill his shoes; he is looking to entrust the conglomerate he has built over several years to hands capable of handling unforeseen risks thrown by increasing economic uncertainties.

Jain fulfills this criterion better than Abel since his unblemished insurance career spans over three decades, giving him risk management expertise. As Berkshire Hathaway grows ever larger, the upcoming CEO would be faced with greater risks than before.

Buffett described Abel as an “extraordinary manager” in last year’s annual letter. In the annual letter this year, Buffett praised Jain stating, “his mind is an idea factory that is always looking for more lines of business he can add to his current assortment.”

Buffett also has also clarified that he wants a younger successor for his company who can hold the reins for a longer tenure. Jain is 63 and Abel is 52. In terms of age and expected tenure, Abel has the advantage.

However, Buffett sounded a bit apprehensive when he said even the strongest company dwindles if it is not managed tactfully. He gave examples of the fateful turns at General Motors (NYSE:GM), IBM (NYSE:IBM), Sears Holdings (NASDAQ:SHLD) and U.S. Steel (NYSE:X). He made it clear that his successor should have the ability to fight the ABCs of business decay: arrogance, bureaucracy and complacency.

Though Berkshire Hathaway will need to function without Buffett someday, the two are so closely interlinked that any news relating to Buffett’s succession is bound to make headlines and spark investors’ concerns.

It will be interesting to see whether Jain wins or Abel does, particularly because there is no one-horse race between them.

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