Olza M. “Tony” Nicely, once considered a potential successor to Warren Buffett as CEO of Berkshire Hathaway Inc., now has his own successor in line.
Buffett praises Nicely regularly for his work as chairman, president and CEO of Berkshire's Geico auto insurance division, a job he has held for 20 years. “The credit for Geico's extraordinary performance goes to Tony Nicely and his 27,000 associates,” Buffett wrote to his shareholders this year. “When I count my blessings, I count GEICO twice.”
Nicely remains CEO and chairman, but last week Geico promoted Bill Roberts to president and chief operating officer. Nicely said Roberts would “take on a greater role in managing Geico's day-to-day operations. I will continue to be very actively involved in the overall management of the company, but I could not be more confident that Bill is ready to tackle these new responsibilities.”
Becoming president and COO of a company is usually the last step before the top job, and the two men's ages seem to line up, uh, nicely. Geico wouldn't disclose their ages, but one listing showed that Nicely turned 70 last month. Their age difference, judging by career timelines, appear to be about typical for a CEO and the next-in-line executive.
Such considerations don't seem to matter with Buffett, who turns 83 at the end of this month. His succession plan is in place, but the name of his current designated successor is being kept secret by Berkshire's board of directors.
At one time, Nicely may have been on the list of candidates to succeed Buffett, but he seems to have “aged out” as the years went by without the job coming open. Buffett has said he hopes his successor has a “long run” as CEO, a job he has held for 48 years.
Nicely, meanwhile, had a long run of his own, joining Geico as a college student 52 years ago.
Leaders of 'start-up'
You can watch for some praise, or at least a progress report, about four new Berkshire executives in Buffett's letter to shareholders next year.
The quartet left American International Group last spring to form a new commercial insurance division within Berkshire.
Peter Eastwood, David J. Bresnahan, David Fields and Sanjay Godhwani are in the midst of something relatively new at Berkshire: Building a company from scratch, this one in the commercial business category.
OK, not exactly from zero. In this case, there's plenty of scratch — namely, Berkshire cash to back up the risks that their new business will accept as it enters the $30 billion market for commercial insurance. But it's still a “start-up' for Berkshire, which usually buys companies with a successful track record.
“They are very, very good insurance people, and we would like to get into the commercial insurance business very big time,” Buffett told Bloomberg TV earlier. “I think we have the group to do it.”
The four experienced executives fit Buffett's model of having good managers in place to run new Berkshire divisions.
Buffett said the four came to Berkshire with the plan, although AIG's CEO, Robert Ben-mosche, disputed that in another Bloomberg interview. Benmosche also said that AIG still has 94 percent of its top performers on staff.
Bearish on Buffett
Seattle investment adviser Paul Merriman wrote for the Wall Street Journal's MarketWatch website that he wouldn't hire Buffett to manage his money, “and I don't think you should either.”
Merriman wrote that he admires and respects Buffett and his investment record but that his method of buying underpriced stocks with long-term growth potential, known as value investing, does not always work.
Merriman wrote that Berkshire's stock price grew rapidly until 15 years ago but since then has averaged a compound annual gain of 5.3 percent, less than some value-oriented mutual funds. He disclosed that he owns shares in some of the value funds he listed as examples.
Investors probably can do better than Buffett, he said, by “diversifying into low-cost value indexes and passively managed funds. ... For my money, I have to wonder whether Warren Buffett is as good as he is made out to be. If his management really 'adds value' to value investing, why don't his results at least equal the performance of passive value index funds?
“And if he can't do that, what makes individual investors (who have far fewer hours and resources than he does) think they can?”
To beat Buffett, Merriman wrote, “All you have to do, at least over the past 15 years, is invest in value index funds. What's so hard about that?”
For years, Buffett himself has recommended that people who don't have the time, ability or interest to investigate individual stocks as potential investments should put their money in low-cost mutual funds. He recommends those that mirror the broad stock market, such as the Standard & Poor's index of 500 stocks.
In Warren's words
Buffett's pithy quotes about naked swimmers, Rule No. 1 and idiots running businesses keep capturing people's interest, even after all these years.
Among the classics listed recently by Wall St. Cheat Sheet:
“Rule No. 1: Never lose money. Rule No. 2: Don't forget Rule No. 1.”
“I like buying quality merchandise when it is marked down.”
“Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway.”
“Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.”
“You only find out who is swimming naked when the tide goes out.”
“Our favorite holding period is forever.”
“With Wrigley chewing gum, it's lack of change that appeals to me. I don't think it is going to be hurt by the Internet.”
“Time is the friend of the wonderful business, the enemy of the mediocre.”
“The best thing that happens to us is when a great company gets into temporary trouble. ... We want to buy them when they're on the operating table.”
“I will not trade even a night's sleep for the chance of extra profits.”
“I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”
The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.