At one point last week, Berkshire Hathaway leader Warren Buffett defended Jamie Dimon, the CEO of JP Morgan Chase bank after an announcement that the financial company made a $13 billion settlement with the United States government, specifically noting “this country is a lot better off because Jamie Dimon has been running JP Morgan.”
Buffett is particularly known for this quip: “I try to buy stock in businesses that are so wonderful that an idiot can run them. But sooner or later, one will.” We will now take a look at some of the main insights that Buffett values in management, and share the names of a few of the CEOs who personify these qualities. Even though his thoughts on CEOs aren’t heard that often, the brief words that Buffett shares can tell us a lot.
Coca-Cola CEO Muhtar Kent
Kent became a part of the Coca-Cola Company in 1978, and other than a six-year stint as the chief executive officer of a beverage company that distributed Coke and other types of products commencing 1996 to 2005, he has a long history with the company ever since. He became the company CEO back in 2008.
Warren Buffett actually owns 200 million shares of Coke, and is quite outspoken that he’s never going to sell even one of those shares – making a note during the most recent annual shareholders meeting sitting next to Kent, saying that he likes “to bet on sure things,” and his belief in Coca-Cola is considered one of those sure things.
In relationship to Muhtar, back in 2010 when Coca-Cola announced that it plans to buy its bottling operations for a total of $12.1 billion, many people were skeptical. It was a tough move because there were many major differences between Coca-Cola’s high-margin consumer and distributing and manufacturing’s low margin capital.
Here’s the way Buffett looked at the transaction: “Well, I think on balance I like it. I mean, Muhtar Kent has done a fabulous job with Coke, and there’s a lot of execution problems in doing anything like that… But with Muhtar, I feel confident in the fact that it will get carried off right now.”
When you take into consideration that Coca-Cola has beaten the S&P 500 in returns (without including dividends) by a margin of 50% to 30% since Muhtar took over as CEO, there’s no reason for Buffett to be anything but confident in the chief executive officer.
Geico CEO Tony Nicely
In 1996, in one of Warren Buffett’s letter to shareholders during an announcement saying that Berkshire Hathaway has fully acquired Geico, the chairman Warren Buffett had this to say about Nicely:
“When we moved to total ownership of GEICO early last year, our expectations were high-and they are all being exceeded. That is true from both a business and personal perspective: GEICO’s operating chief, Tony Nicely, is a superb business manager and a delight to work with. Under almost any conditions, GEICO would be an exceptionally valuable asset. With Tony at the helm, it is reaching levels of performance that the organization would only a few years ago have thought impossible…maximizing the results of a wonderful business requires management and focus. Lucky for us, we have in Tony a superb manager whose business focus never wavers.”
Nicely has been running Geico ever since, and the insurance provider has watched the volume of its premium grow from $2.8 billion, to a whopping $16.7 billion. They also watched their share of automotive insurance grow from 2.5% to nearly topping 10%. Warren Buffett has nothing but praise for Nicely in every one of his annual letters, and in the most recent letter Buffett said “The credit for GEICO’s extraordinary performance goes to Tony Nicely and his 27,000 associates.” And then he added, “When I count my blessings, I count GEICO twice.”
Berkshire Hathaway Reinsurance CEO Ajit Jain
You may be wondering and asking yourself who exactly is Ajit Jain? What does he do? The reinsurance business is basically the insurance that insurance companies take out in order to offset their risk, and Ajit has been handling this for Berkshire Hathaway since 1985, and he’s been doing it almost exclusively behind the scenes.
There’s no doubt that Buffett continuously sings the praises of Jain for his excellent work ethic. Within each letter to shareholders, Buffett will outline Jain’s success for that particular year. He did after all create a business with a $35 billion “float.” Float is the difference between what is paid out versus what is collected. Also, in the letters to shareholders, Buffett almost always ends by mentioning that Jain “has added a great many billions of dollars to the value of Berkshire,” and then typically ends off with a funny one-liner. Here are a few of the best:
In 1998, Buffett said: “While Charlie and I sleep, Ajit keeps thinking of new ways to add value to Berkshire.”
In 2000, he wrote: “It is impossible to overstate how valuable Ajit is to Berkshire. Don’t worry about my health; worry about his.”
In 2009, Buffett wrote: “If Charlie, I and Ajit are ever in a sinking boat – and you can only save one of us – swim to Ajit.”
In 2010, Warren said: “Even kryptonite bounces off Ajit.”
And finally in 2012, Mr. Buffett stated: “If you meet Ajit at the annual meeting, bowed deeply.”
There’s no question that Buffett is often quite demonstrative when singing the praises of his CEOs and showing gratitude, and there’s no question that Jain certainly receives special acknowledgment.
Buffett rarely talks about the specific three traits that he admires the most, or mentions the five things that he looks for most with his managers; it would be quite helpful for all of us to emulate. But he does continuously sing the praises of the managers that understand their businesses, and often in unassuming ways, do their jobs tremendously and continuously provide strong results. We should all seek to achieve such things.