On the surface, the over-arching strategy of Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB) — the $427 billion multinational holding company run by Chairman, President, and CEO Warren Buffett and Vice Chairman Charlie Munger — is pretty straightforward: Buy great companies (or stakes of those companies) at good prices. The value investing paradigm, first championed by Benjamin Graham and David Dodd at the Columbia Business School, which Buffett attended, saturates the company’s decision-making process.
The philosophy and process has served as an elegant weapon to help civilize investing. Berkshire Hathaway boasts a compounded annual gain of 19.7 percent since 1965, compared to 9.4 percent for the S&P 500 over the same period. Far from achieving these returns through the kind of dubious stopgap investment tactics used by people like Jordan Belfort — the former stockbroker whose story was used for the recent film The Wolf of Wall Street – Berkshire has effectively achieved the Holy Grail of investing: high returns with low risk, maintained over a long period of time.
But the nuances of the process at Berkshire are, in reality, somewhat mysterious. Like the businesses it acquires, much of its success hinges on the people. Buffett, Munger, and Berkshire’s other principals have earned themselves legendary reputations, but the guard inevitably changes.
One of the rising stars — perhaps the rising star — at Berkshire right now is a 29-year-old woman named Tracy Britt Cool. Buffett hired her right out of Harvard Business School, and over the course of five years, she has become one of the most interesting and increasingly important people in the business world. Here are a few things to know about Cool.
1. A juggling act
Cool oversees the turnaround efforts at Berkshire-owned companies with combined sales of more than $4 billion. The businesses that she chairs — which include paint company Benjamin Moore, picture-framing company Larson-Juhl, insulating and roofing company Johns Manville, and party-supply seller Oriental Trading — employ more than 10,000 people, and she is on tap to sit on the board of Heinz.
Her official title at Berkshire, according to CNN Money, is financial assistant to the chairman. She was first brought on board at Berkshire to keep tabs on the company’s purchase of a 50 percent state in Berkadia Commercial Mortgage, a commercial mortgage finance business. It seems fair to expect that Cool will assume more responsibilities as time goes on and she ascends into the upper echelons of Berkshire’s executive team.
2. A fixer
Cool doesn’t just oversee the operations of many companies, she oversees the operations of companies that are underperforming — and she is tasked with righting the ship. Many of the businesses she is involved with have flown under Buffett’s radar for a number of years because, as Buffett put it to Bloomberg in a phone interview, he has either been ”too busy or too lazy.”
“If you have 60 or 70 children, you’re going to have one or two that are going to be problems from time to time,” Buffett told the news service. “Part of her job is to make sure that, where there is some area where the companies can benefit from some interaction, they actually do benefit. I’ve never done anything along those lines.”
3. Busy, busy, busy
Being what amounts to a fixer, Cool has overseen the replacement of several chief executives and some fairly dramatic management overhauls during her time at Berkshire. Most of the companies under her supervision have been performing the executive shuffle, with Benjamin Moore burning through two CEOs in as many years in its search for the right person for the job.
For better or worse (her selections have a mixed track record), Cool has tapped her personal network for some of the replacements. She asked former classmate Drew Van Pelt to take charge at Larson-Juhl, where three senior executives were fired and others demoted as part of the overhaul. At Benjamin Moore, the husband of a friend served a stint as CEO before being rotated out for unclear reasons.
“I intend to hire a younger man or woman with the potential to manage a very large portfolio, who we hope will succeed me as Berkshire’s chief investment officer when the need for someone to do that arises,” wrote Buffett in his 2007 letter to shareholders.
There’s been some speculation that Cool could be the person to replace Buffett come his retirement, but it seems unlikely. Despite her rocket-ship trajectory, she wouldn’t be ready to fill his shoes in the near future. Buffett has announced that he has chosen a successor but has not yet revealed who it is, leaving the door wide open for speculation.
For his part, though, Buffett told Bloomberg: ”Tracy can be of particular value, I think, to my successor. She’ll have so much operational familiarity with the really dozens of companies, probably more than anybody else.”