How Greg Abel may run Berkshire Hathaway differently than Warren Buffett

The master CEO showman just orchestrated his ultimate wow moment.

As the two-hour afternoon session of Berkshire Hathaway’s annual shareholder meeting wound to a close, the conglomerate’s chief of 60 years declared that he’d just gotten the “five-minute warning, exclamation point,” signaling that it was time to uncork a surprise known only to Buffett himself, and his children and board members Howard and Susan. Buffett declared that he would recommend to the directors at their meeting the following day that they name Greg Abel, the longtime heir apparent, to succeed the Sage of Omaha as CEO at the close of 2025. Buffett announced that “though I would hang around…and could be helpful in certain respects,” that in “the final word would be with Greg on operations, capital deployment…and acquisitions. Greg would be the CEO, period.”

The historic passing of power raised a sobering moment for the sundry shareholders who’ve so richly profited from Buffett’s stewardship as the most successful CEO in the annals of capitalism, and suddenly trained the spotlight on how well the relatively little-known Abel, who shared the stage with his mentor, could steer the highly unorthodox locomotive that Warren built into the future. Then Buffett rallied the stunned audience by stating that “I have no intention, zero, of selling one share of Berkshire stock…because Berkshire will be better under Greg’s management than mine.” The in-person audience of 18,000 packing the CHI Health Center in Omaha rose to their feet for two minutes of raucous clapping and cheering to close the celebratory weekend event on the highest of notes.

The following day, the board approved Buffett’s plan for Abel—who has served as chief of Berkshire’s non-insurance businesses since 2018—to replace his legendary boss at year-end.

Once the applause ceased, Berkshire investors began wondering how anyone other than Warren Buffett can profitably operate a sprawling amalgamation encompassing railroad BNSF, insurer Geico, residential construction stalwart Clayton Homes, and retailers from Benjamin Moore in paints to Dairy Queen for burgers and ice cream and See’s for candies? Indeed, conglomerates are now out of vogue, to put it mildly, and many of the big ones have split into multiple independent public companies, a gambit that’s provided big returns to their investors—think of GE’s fracture into three successful players, or UTX’s spinoffs of Carrier and Otis that turned the HVAC and elevator purveyors into major winners on their own.

It’s heartening to shareholders that Buffett is not retiring, and will remain as chairman after Abel ascends. Hence, the maestro, now 94, will provide strong oversight on any large transactions. The question remains: How much of the Buffett approach that’s performed such magic by building and running a wildly divergent portfolio—where the businesses enjoy virtual autonomy—will Abel maintain? And how much will he “modernize” Berkshire by imposing tough financial goals, and pushing the companies to work together in sharing top managers, technology, materials, and best practices?

Abel’s strengths are different from Buffett’s, as became clear when I profiled him for Fortune in January (you can read the full story here). While Buffett excels in picking stocks, buying full businesses at great prices, and allocating Berkshire’s retained earnings and insurance “float” to areas where they’ll garner the highest returns, including bolt-on acquisitions to the existing franchises, Abel’s ace is his skill as a manager. He entered the Berkshire orbit in 2000 when Buffett bought MidAmerican Energy, and built that midsize Iowa utility into what’s now Berkshire Energy (BHE), a powerhouse in utilities, natural gas, pipelines, and wind power that last year generated revenues of $26 billion and operating earnings of $3.7 billion. Abel has made MidAmerican a giant producer of wind energy in the Hawkeye State: On Earth Day 2024, its whirring blades supplied 100% of the juice for its 800,000 Iowa customers.

Abel shares with Buffett a sorcerous talent for dealmaking. The future CEO is especially adept at grabbing great assets at distress prices in rough markets. Notable examples are BHE’s purchases of pipeline and natural gas giants for a song in the early 2000s, after buyers intoxicated by deregulation such as Enron and Williams Companies vastly overpaid for them. The difference: Abel did the sweat-the-details stewardship that made the businesses better. Buffett famously didn’t get much into operations, relying instead on his one-of-a-kind knack for picking crack operators. And Abel’s one of his best.

So what is Abel most likely to retain from the Buffett playbook—and where might this genial but super-strong-minded figure go his own way?

The two areas where Abel’s most likely to follow the Buffett template 

Both figures take a highly analytical, balance-sheet-centric approach to measuring how a business is performing. And it couldn’t be further from the typical Wall Street analyst approach of focusing on reported earnings per share. At the annual meeting, Buffett delved into this mindset, stating, “I spend more time looking at balance sheets than I do income statements. Wall Street doesn’t pay too much attention to balance sheets, but I look at balance sheets over an eight- or 10-year period before I even look at the income account because there are certain things that are harder to hide or play games with on the balance sheet.”

The idea for Buffett, who’s deeply knowledgeable in accounting, is that companies can inflate reported income by deploying too much capital by either floating new shares, boosting leverage, or generating subpar gains on retained earnings. What matters to Buffett is a history of adding lots of balance-sheet net worth without adding new shares and borrowings to generate it. That’s why he loves businesses surrounded by “moats” that enable them to dominate markets; a case in point is the BNSF’s exclusive hold on key points of delivery.

Abel was trained as an accountant, started as an auditor at PwC, and clearly uses the same criteria in assessing deals. At the meeting, he and Buffett stated that it’s critical—“meaning that morning”—to act almost instantly for landing a great buy. But Abel followed by emphasizing that before pouncing, he and Buffett have already conducted the kind of deep-dive balance-sheet analysis that enables them to move fast. “Never underestimate the amount of reading and work that’s being done to be prepared to act quickly," he avowed. That intense study of potential candidates before they come to market, Abel added, means that “when the opportunity presents itself, we’re ready to act.”

Buffett is famous for avoiding big risks. He generally shuns commercial real estate projects that usually entail high leverage, for example. Dicey financial instruments that can garner big windfalls are an anathema to this king of value investors. On the call, Abel related an anecdote that shows their kinship on sidestepping often obscure items that can blow a hole in the balance sheet. Abel recounted his first meeting with Buffett, who was then pondering a purchase of MidAmerican. “Warren had our financial statements in front of him,” recalls Abel. “I was expecting a few questions on how the business was performing. But Warren went directly to the balance sheet [and pointed out] that we had some derivatives contracts.” Abel then grinned and cited Buffett’s famous characterization of that species as “weapons of mass destruction.”

Buffett was concerned, says Abel, because of the shenanigans that had recently sunk such onetime energy titans as Enron. Abel explained that MidAmerican used the derivatives to “match certain positions” for hedging. “He wanted to know the underlying risk of it,” says Abel. His explanation satisfied Buffett, who then bought MidAmerican.

Then, around 18 months later, an energy crisis unleashed a big spike in electricity prices. Speculators who'd bet the right way were making tons of money on energy and gas derivatives. “Warren had a follow-up question…I knew it was just testing or checking, [he said], how much money are we making? Are the speculative positions in place?” Abel explained: “We’re not making any more money than we were six months ago, because all those derivatives were truly to support the business and weren’t speculative.” Abel implied that Buffett saw his prudent stance—despite missing that one-off bonanza—as the wise one for the long term. Going forward, Abel is most likely to continue Buffett's practice of spreading acquisitions and investments across diverse industries so that through the cycle, winners in rising markets offset the laggards in temporarily falling sectors, and he would never bet the franchise on the purchase of a single gigantic business.

Where Abel may deviate from Buffett

One of Berkshire’s big competitive advantages over the years: Buffett’s ability to offer companies he seeks to acquire virtually complete independence. That freedom is highly appealing to founders and families who weren't shopping their heirlooms, had no intention to sell, but got talked into joining Berkshire via Warren's pledge that they could keep running things their own way. Hence Berkshire can purchase profitable private businesses at far more favorable prices than if it bid at auction. The downside is that by almost guaranteeing that his subsidiaries can operate autonomously, Berkshire doesn’t reap the synergies other conglomerates often achieve through such practices as joint purchasing and sharing of lean manufacturing techniques.

At the annual meeting, Abel extolled the hands-off model, stating that the Berkshire businesses “run very autonomously, and that remains in place.” But he added an important nuance: that “if there’s an opportunity I see in one of their industries, we’re going to discuss it.” Abel appeared to be speaking about possible acquisitions that a Berkshire retailer or manufacturer could make to expand into a new market or achieve economies of scale. 

The best wager is that Abel will impose tougher operating goals on the businesses, then help diplomatically steer their CEOs toward the best route for getting there. Jim Webber, former head of Brooks, disclosed that Abel visited the running-shoe maker’s Seattle headquarters several times a year for strategy sessions. “If you’re not performing, he’ll tell you, and you have a few months to get on track,” Weber said during an interview at the 2021 annual meeting. Adds Larry Cunningham, a professor at the University of Delaware, who knows Abel well, “If you underperform, you’ll get a call from Greg." Abel is also taking a closer look at how much the subs are spending on new plants and other capex. Says Adam Mead, who wrote the definitive book on Berkshire’s financial history, “a couple of the CEOs told me that he’s imposed a kind of advisory cap on capital spending. Go over the limit and it triggers a conversation with Greg.”

According to Mead, the Berkshire unit heads view Abel as an “informed observer” who “listens to what you’re not saying,” and will keep politely probing until he gets the full picture.

During the annual meeting, Abel acknowledged, “I would say it’s more active, but in a positive way”—an admission that drew chuckles from Buffett. Abel, however, sees himself not as an enforcer but as a coach. Once again, his role model was sitting to his right. Onstage, he praised his boss as “a remarkable teacher, and I benefit from that every day. If I had to be remembered for something right now, I’d want to be remembered…as a great coach, and that goes to the kids I coach in hockey and baseball or whatever it may be.” If anyone can strike the artful balance between prodding his CEOs to lift their results, and still afford the liberties that attract so many outstanding players to the Berkshire empire, it’s Abel. And his talent for coaching, his ability to get company heads to feel they're getting helped, not pushed around, might be the elixir that keeps the Berkshire model a winner.

Successful conglomerates from Danaher to Honeywell attain efficiencies by pooling the buying power of diverse businesses to purchase raw materials and components at the best prices. Before the big split, GE engineered a stunning comeback in part by deploying Japanese “kaizen" production practices across jet engines, boilers, and other products to achieve major gains in efficiency. Today, Berkshire does garner synergies, and they’re big—but mainly financial. Headquarters can lend to Clayton homes and other subs at rates far lower than they’d pay to banks or bondholders, for example. But Berkshire apparently does little or nothing along the lines of encouraging its subs to buy steel or semiconductors in concert, or cross-selling Geico insurance.

Such opportunities seem too big for a manager of Abel's pull-all-the-levers abilities not to exploit. At the annual meeting, he dropped a hint that Berkshire’s units could benefit from sharing best practices. Abel cited that Geico is going through a “technological transformation,” and that other Berkshire businesses could learn from its experience and perhaps adopt similar improvements. Berkshire needs to “figure out how to benefit from prior improvements," he concluded.

Berkshire prides itself on harboring an extremely light, flat corporate structure that minimizes bureaucracy and speeds decision-making. But maybe the looseness has gone too far. The only two organizations overseeing specific business categories are BHE, which holds virtually all the fully owned energy businesses, and the insurance arm assembling Geico, General Re, and other units under the brilliant leadership of Ajit Jain. Abel should also get big help from Todd Combs and Ted Weschler, who manage the giant, almost $350 billion portfolio of stocks and bonds. Yet dozens of manufacturing, retail and transportation companies aren’t structured in industry groups, and they probably should be. “Greg can’t manage 80 portfolio companies,” says famed CEO coach Ram Charan. David Kass, a professor at the University of Maryland, believes that Abel could divide the non-insurance businesses into several groupings of say-so units in each sector.

“Greg won’t have forced monthly meetings,” says Mead. “Anyone can reach him. Berkshire will still operate on the decentralized, trust-based system that’s succeeded so well in the past. But I wouldn’t be surprised if he installs heads of operating divisions to manage this thing well. By the way, I’d like to know who Greg’s number two will be.”

Whatever that choice, it’s unlikely that Berkshire will face another CEO succession for many years to come. Just a few months ago, Berkshire's stock performance over the past 10 years lagged that of the S&P. But it fared so well during the tariff turmoil that its shares hit an all-time high the day before the annual meeting, and it's now beating the index 14.1% to 12.4% over the past decade.

So Buffett and Abel are on a roll, and their triumph’s a tribute to the solidity of the Berkshire model. Abel’s the ideal candidate to adapt and perpetuate Buffett’s business model. He’s a highly likable figure whom partners trust. But the Berkshire wizardry rests as much on Buffett’s magnetic personality as his investment acumen. And it’s that intangible asset, worth a kings's ransom but nowhere recorded on Berkshire's balance sheet, that may be hardest to replace.

This story was originally featured on Fortune.com