Sage of Omaha's fans ponder a future without Buffett

They are the Two Ronnies of American capitalism. Warren Buffett and his sidekick Charlie Munger, with a combined 165 years between them, sit themselves down, settle their audience, and launch the show with their catchphrase: "I'm Warren, this is Charlie. He can hear, I can see, we work together for that reason."

They are a live act who can pack out a sports arena, and they had a crowd of 40,000 rolling in the aisles this past weekend. This was the annual shareholder meeting of Berkshire Hathaway, the company controlled by Mr Buffett, with Mr Munger as sounding board and deputy, and as usual Mr Buffett played the loquacious and optimistic one, with Mr Munger as the laconic cynic.

But between the jokes this year, a palpable sense of a pair trying to explain their achievements and protect their legacy. For all the familiarity of the event they call "Woodstock for capitalists", where Berkshire subsidiaries tout their wares and the faithful hang on every word of Mr Buffett's investment advice, there is change a-coming.

To be clear, this is not a prediction related to either man's health. (There's no other company in the S&P 500 whose chief executive could announce, as Mr Buffett did, that he'd just had a physical and "came out fine", and then get a long round of applause.) But shareholders' minds are turning to the question of what Berkshire might look like "After Buffett", who turns 80 in August. The Omaha native grew Berkshire from a tiny textile company he bought in the Sixties into one of the world's largest conglomerates, worth more than $190bn (£165bn). The book value of the company has risen by an average 20 per cent a year, twice the growth investors would have got buying the S&P 500 stocks. It is a giant in the insurance and reinsurance industry, and now in US utilities and railways, but also still contains a grab-bag of little businesses loved by Mr Buffett, including a chocolate maker, local newspapers and furniture stores.

By its own account Berkshire is no ordinary conglomerate. Its companies are given a wide degree of autonomy, Mr Buffett talks of loving his managers, he picks his acquisitions without reference to business school models. What does it become without his homespun wisdom and investment smarts?

"I'm not the most optimistic of the people up here," Mr Munger understated, "but I'm quite optimistic that the culture will greatly outlast the founder. I think it's going to work."

Mr Buffett said it will come down to the enthusiasm of Berkshire's managers. "They love it and I think they'll love it after we've gone." The audience applauded. "Don't clap that."

The pair took up the theme later in the weekend, meeting reporters. "We start with the principle that Berkshire is a partnership," said Mr Buffett. "The people who come to this meeting, and our managers, are partners, and they are not to be taken advantage of. We have a board of directors who do well when shareholders do, something that was not true at Citigroup or Fannie Mae or Freddie Mac. We don't buy directors liability insurance, because we think that should have the downside.

"Our managers can take pride in our culture and our difference from other organisations, and that makes it hard to come in and break it up. I don't think that will erode over time, I think it will strengthen, that we will show the durability of it and that it is not a function of one person."

The name of the next chief executive is on a Post-it note somewhere, Mr Buffett has joked. Most observers now assume it is David Sokol, chairman of the Berkshire subsidiary MidAmerican, a power company, who went in to bat on Capitol Hill for Berkshire last month, trying to shape financial reform so as not to impact the company's derivatives holdings.

There are also four investment managers playing with some of Berkshire's money, from whose number will be picked a new "chief investment officer" for the company After Buffett.

It is hard to imagine shareholders turning out in their tens of thousands for the wit and wisdom of someone other than Mr Buffett. And if the cult of personality dims, does that mean that this loyal shareholder base begins to sell out?

"There's only one Oracle of Omaha, and I'm sure you won't have this cult following," says Janet Lee, a banker from New York who made the pilgrimage to Nebraska for the weekend. "It will be a sea change, and you know that successors are never as good as the original, but they do have such a strong culture and they will still be able to grow and to generate all sorts of different opportunities. People are putting money into Berkshire because it is a sound company."

Ms Lee represents the subtle change in the landscape under Mr Buffett's feet. In order to get his hands on Burlington Northern, the US railway business that was Berkshire's largest acquisition ever, Mr Buffett had to issue stock (something Charlie and I like doing "about as much as we relish prepping for a colonoscopy", he said) and also to split Berkshire's shares, making them easier to trade. You still have to shell out $115,000 for a single Berkshire A share, but the B shares, which come with fewer voting rights, are now trading at just $77 apiece. That brought them within Ms Lee's reach this year.

"It has created a new generation of younger investors, and given them an opportunity to learn about Mr Buffett's investment philosophy."

What makes it cheaper to buy in also makes it easier to sell out. But the mood on the exhibition floor at the annual meeting was that shareholders fully intend to stick with Berkshire into any new era.

Jim and Kathy Boyd, who travelled from Arkansas, are sitting amongst shopping bags. They've been stocking up on See's chocolates, which can't be found in their home state, and on Warren Buffett T-shirts to give to their grandchildren. Despite being shareholders for 15 years, this is their first time at the annual meeting. They "didn't want to wait" any longer to see the Buffett & Munger double act.

The couple say they have every intention of sticking with Berkshire, even if they disagree about whether there could be changes under Mr Buffett's successor. "I think there could be spin-offs," says Mr Boyd. "Being a conglomerate may not be to their liking, in some applications."

His wife is shaking her head, though. "There are people who have been there long enough to follow in his footsteps."

Scott Leslie, a twentysomething with a few investments of his own, who was attending the Berkshire meeting with friends, said: "It is analogous to the comments Mr Buffett made about the people in his insurance business. The manager is talented, but he has also instilled a lot of their ideas in the people around them – and that will endure."

Ralph Whitkin, a semi-retired businessman from Connecticut taking time out for lunch, agreed, and said the one thing that had worried him most about the succession is being resolved for him. He had feared that Mr Buffett's huge stake in the company would be sold suddenly by any charitable foundation after his death, but the billionaire has been slowly giving the stock away already to the Bill and Melinda Gates Foundation, so any sudden moves that could hit the stock are less likely.

"The company has gotten to be very well known, and there is a greater understanding of the company now, especially thanks to the internet, where you can read Warren Buffett's annual letters and so on," Mr Whitkin said. "The subsidiaries will get by fine without him. The insurance business will be fine. And by the way, I've been coming for 15 years and it is a question that comes up every year – and he's still here."

At the meeting on Saturday, the billionaire indicated once again that he had no intention of retiring. A student from Vienna asked what he needed to do to become Mr Buffett's successor – and got a typically comic answer from the Oracle. "You should probably shoot me," he said, with a chuckle.

BON MOTS: BUFFETT'S WISEST WORDS

* 'Only when the tide goes out do you discover who's been swimming naked.'

* 'Derivatives are financial weapons of mass destruction.'

* 'If past history was all there was to the game, the richest people would be librarians.'

* 'Rule No 1: Never lose money. Rule No 2: Never forget rule No 1.'

* 'Price is what you pay. Value is what you get.'

* 'We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.'

* 'It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.'

* 'Risk comes from not knowing what you're doing.'

* 'Someone's sitting in the shade today because someone planted a tree a long time ago.'

* 'When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.'

* 'I buy expensive suits. They just look cheap on me.'

* 'You do things when the opportunities come along. I've had periods in my life when I've had a bundle of ideas come along, and I've had long dry spells. If I get an idea next week, I'll do something. If not, I won't do a damn thing.'

* 'I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.'

* 'It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.'

* 'Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway.'

* 'We enjoy the process far more than the proceeds.'