Sermon on the Mount 2.0

"The Bible says that the meek shall inherit the earth. But the question is will they stay meek?" Warren Buffett's elaboration on the Sermon on the Mount neatly captured the worry nagging away beneath the superficially upbeat mood at this year's meeting of shareholders in Berkshire Hathaway, the firm he runs. You can think a person has the right character to handle inheriting the earth—or, more to the point, the institutional structure of Berkshire Hathaway, once the octogenarian Mr Buffett moves on—but you never really know how the power and responsibility will change them.

Mr Buffett prefers to effect a cheery denialism when it comes to the Grim Reaper. "How would you like to be remembered in 50 years?" asks one shareholder. "For old age," Mr Buffett replies. But one day, maybe not too distant, his hands will no longer be on Berkshire's tiller.

What is clear is that Mr Buffett wants his son, Howard, to take over as "independent chairman" of Berkshire, an odd application of the hereditary principle by a man who misses no opportunity to denounce "the lucky sperm club" approach to succession. No one doubts that the younger Mr Buffett is a man of good character, yet it was in the context of discussing his role as chairman that his father made his reference to the meek inheriting the earth.

Questions of character lay at the heart of the discussion of the fall of David Sokol, who left Berkshire abruptly, after admitting to buying shares in Lubrizol shortly before he (successfully) recommended that Mr Buffett buy it. "Inexplicable" was Mr Buffett's description of Mr Sokol's behaviour, especially as early in his Berkshire career Mr Sokol had selflessly given a chunk of his likely bonus to a colleague that was far bigger than he stood to gain from his Lubrizol shares. Yet given Mr Buffett had identified Mr Sokol as one of his potential successors, and enthused about him as recently as in the latest Berkshire annual report, it was hard to be particularly reassured by Mr Buffett's declaration that the man currently in line to succeed him was of good character. ("Will they stay meek?")

By the by, Mr Buffett said he mishandled the announcement of Mr Sokol's departure, not least by issuing a poorly worded press release that failed sufficiently to communicate his "outrage". He also predicted that the "damning facts" provided both to the public and the SEC will "cause all sorts of problems for him for years to come"—mentioning "insider trading" a few times but not making any specific allegation against Mr Sokol, who has said he told Mr Buffett in advance that he owned some Lubrizol shares.

The Berkshire movie that kicked off the meeting included a clip of Mr Buffett testifying during a scandal two decades ago at Salomon Brothers, an investment bank in which he had just become a shareholder and board member. In it, Mr Buffett said, "Lose money for the firm, I will be understanding; lose a shred of reputation for the firm, I will be ruthless"—a rule he said is generally applied at Berkshire. As well as inexplicable, Mr Sokol's behaviour had been "inexcusable". Yet shareholders should perhaps worry more than they appear to do about the ability of Berkshire's famously light-touch corporate governance to continue its impressive performance, as the business gets ever bigger (now up to over 260,000 employees) and more diverse. Perhaps Tom Peters, a management guru, is right to argue that "maybe only Buffett can 'manage' Berkshire," and after him it may be "best to break it up and sell off the bits".

That is for another day. The mood this year at Berkshire's Woodstock for Capitalists was simply too upbeat to dwell on such long-term worries. They applauded loudly as Mr Buffett declared himself congenitally optimistic about both Berkshire Hathaway—"nowhere I'd rather put my money"—and (despite his prediction of an ever-weaker dollar) America, thanks to the irresistible “power of capitalism".