Warren Buffett prepares to step down as ‘Father Time’ catches up

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Billionaire investor Warren Buffett has warned shareholders that his sprawling conglomerate, Berkshire Hathaway, will likely find it harder to outperform the market in the coming decades due to its immense size. The 95-year-old, who plans to step down as CEO in January, also acknowledged that “Father Time” is catching up with him.

In a new letter to shareholders, Buffett reflected on his life and health, announcing $1.3 billion in new charitable gifts. These funds are destined for the four family foundations run by his children, continuing a philanthropic effort that, alongside the Gates Foundation, has steadily distributed his fortune since 2006.

Berkshire Hathaway is renowned for consistently outperforming the stock market over the past 60 years under Buffett’s leadership, a feat that has earned him legions of devoted fans.

However, maintaining this level of outperformance has become harder in recent years due to the conglomerate’s sheer size. Its vast portfolio includes GEICO insurance, the BNSF railroad, several large utilities, and a diverse assortment of manufacturing and retail businesses, featuring brands like Dairy Queen, See’s Candy, and Helzberg Diamonds.

Despite these challenges, Buffett also reassured shareholders that he remains confident in his successor.

Buffett promised to keep in touch with shareholders through Thanksgiving letters in the future, but he confirmed that next year Greg Abel will take over Buffett’s famous yearly letter and answer all the questions at the annual meeting after he becomes CEO in January. Buffett will remain chairman.

Buffett said that “through dumb luck, I drew a ridiculously long straw at birth” by being born in Omaha, Nebraska, where he met many lifelong friends — including several who helped shape Berkshire’s fortune — and both his wives after attending public schools. He said he has been fortunate to have his life saved three times by doctors who lived nearby while managing to avoid the kind of calamities that often cut life short.

Buffett recounted spending several weeks in the hospital after having his appendix out as a child where he turned to fingerprinting all the nuns who were taking care of him just in case they turned to a life of crime later. Buffett previously battled prostate cancer in 2012, but that wasn’t considered life-threatening.

“Those who reach old age need a huge dose of good luck, daily escaping banana peels, natural disasters, drunk or distracted drivers, lightning strikes, you name it,” he wrote.

But now after decades of benefiting from the fickle nature of “Lady Luck,” Buffett said “Father Time, to the contrary, now finds me more interesting as I age. And he is undefeated; for him, everyone ends up on his scorecard as ‘wins.’”

Buffett said he is moving slowly and now has increasing difficulty reading, but he continues to go into the office five days a week to hunt for useful business ideas or deals that could benefit Berkshire.

Berkshire shareholders should have faith in Abel because Buffett said he has consistently met the high expectations he has for him. “He understands many of our businesses and personnel far better than I now do, and he is a very fast learner about matters many CEOs don’t even consider. I can’t think of a CEO, a management consultant, an academic, a member of government – you name it – that I would select over Greg to handle your savings and mine,” Buffett wrote.

Berkshire’s fortress-like balance sheet, highlighted by the $382 billion cash it holds, ensures the company is unlikely to encounter a devastating disaster, and Buffett said the board remains conscientious of shareholders’ interests, but still the company will have trouble outperforming.

“In aggregate, Berkshire’s businesses have moderately better-than-average prospects, led by a few non-correlated and sizable gems. However, a decade or two from now, there will be many companies that have done better than Berkshire; our size takes its toll,” Buffett said.