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By Jason Stipp | 04-25-2011 03:58 PM

Is Berkshire Narrow-Moat Without Buffett?

There would be some period of time post-Buffett before Berkshire's advantages would get diluted, says Morningstar's Paul Larson.

Jason Stipp: I'm Jason Stipp for Morningstar. With the Berkshire Hathaway Annual Meeting coming up this weekend, we're checking in on some of the big themes for the company.

Today, I'm talking about the succession issue with Paul Larson. He is a Morningstar equity strategist and also the editor of Morningstar StockInvestor.

Thanks for joining me, Paul.

Paul Larson: Thanks for having me.

Stipp: So, this is an issue, it seems like we talk about every year. It's kind of the recurring issue that's on people's minds, and especially around this time of the year with the meeting coming up.

Can you give me a rundown quickly: where are we with the succession issue? Is there any new news that we should have on our radars that we didn't have maybe a year ago?

Larson: Well, there has been certainly a lot of news. The basic structure is still in place in that Buffett is basically going to divide his role into two different people. There is going to be a chief investment officer, which may actually be two to three different people that are going to handle the investments for Berkshire, and then there is going to be a COO, who may actually be the CEO in name but someone who operates the underlying operating businesses.

Now, we did find out who one of the investment officers is going to be, Todd Combs, that was back last fall, and we're still waiting to see who else might join him on that side of the branch. And then on the operating side just within the last month or so with the resignation of David Sokol--he was a front-runner to take the helm of Berkshire on an operational side, and with his resignation I think there is certainly a whole lot of question regarding who and what might happen there.

Stipp: So, at different points there have been a short list of some folks, and you had mentioned David Sokol had been on that short list, but isn't anymore. Are there any other names that are floated out there either for joining Combs on the investment side or to take up the operations side? Any names at all, are we just grasping at straws at this point?

Larson: It's definitely a black box on both sides here. One name that has come up on the operational side is Matt Rose, who currently runs the BNSF Railroad that was acquired about a year ago. He is the right age. He is 51 or thereabouts, and certainly has experience running a relatively large and diverse operation.

Also I wouldn't be surprised, frankly, if it was someone that came from the outside to take this operational role. It's a very specialized role, because there are not many people that have the experience of running such a large and diverse organization. There are also not that many people that frankly have the skill set that Buffett is looking for and are going to want to step into his old shoes, so to speak. Typically, people who have this skill set are going to want to build something on their own, and this is something that David Sokol mentioned as part of his resignation. He wants to be a builder not an inheritor.

It's definitely going to be a challenge.

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