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Matt Rose succeed Warren Buffett? Not a bad idea

Posted by Fred Frailey
on Wednesday, March 2, 2011

In its 10-K annual report filing Monday, Berkshire Hathaway revealed there are four possible successors to 80-year-old chief executive Warren Buffett. The filing doesn’t name names, but if you read Buffett’s annual letter to shareholders, released last weekend, it’s obvious that the Oracle of Omaha has his keen eye on BNSF Railway’s Matt Rose. Buffett’s letters are always fascinating, and you don’t have to earn an MBA to understand and appreciate them. Click here to see for yourself.
 
In many respects, Berkshire Hathaway is one of the most successful and best-run companies in the world. Buffett gained control of this failing textile maker in 1965 and built a diversified company initially centered on insurance (GEICO, for instance) and now railroading as well. Which gets us to Matt Rose, the chief executive of Burlington Northern Santa Fe, parent company of the railroad and now a Berkshire Hathaway subsidiary.
 
Buffett’s letter calls the acquisition of BNSF “the highlight of 2010” and says that in a normal year the railroad should increase Berkshire’s earning power by 30 percent after taxes. He praises Rose’s acumen running BNSF and goes on to say this: “Over time, the movement of goods in the United States will increase, and BNSF should get its full share of the gain. The railroad will need to invest massively to bring about this growth, but no one is better situated than Berkshire to supply the funds required. However slow the economy, or chaotic the markets, our checks will clear.”
 

But what makes the 51-year-old Rose a possible successor to Buffett? He has no background in insurance or investing, two of the big money-making arms of Berkshire Hathaway. Rose is also new to Berkshire, having come to it with BNSF only a year ago. But all that may not matter. In his letter, Buffett says the job of chief investment officer should be separated from that of chief executive in the future, and is grooming someone for the role of CIO. And it’s widely known that the two men are close to one another and have been since Berkshire became a minority investor in BNSF several years ago. In fact, Buffett confessed to trains columnist Don Phillips that he’s a railfan (or as we sometimes say these days, a man who loves trains).

 
Most striking to me is the similarity of management style between Buffett and Rose. Both are masters at dealing with people and creating congenial corporate cultures that foster creative thinking. Buffett is fond of saying he doesn’t buy companies, but people. He finds good people and lets them do their thing with almost no interference, asking only that they jump on problems in their domains promptly and not let them fester. Some of the people running Berkshire subsidiaries he’ll barely speak to over a year’s time.
 

Rose has run BNSF in somewhat similar fashion. In an interview with trains last year, Rose said this: “If we all have the same sense of direction, our jobs become a lot easier. Part of the CEO’s job is knowing when to stand out of the way.” Sounds a lot like the Warren Buffett way of doing things, doesn’t it? — Fred W. Frailey

 

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