The quote is from King Lear. The subject is succession.
I suspect there aren't many people comparing the fortunes of Berkshire Hathaway (NYSE: BRK-B) and Apple (Nasdaq: AAPL). But I'm going to today, because these are two extraordinary American companies. Combined, they account for more than $400 billion of market capitalization. Berkshire Hathaway accumulated that gradually over the last 30 years. Apple stormed to its present valuation over just the past five years.
I know it's an unnecessary hypothetical, but I'm wondering, "Which would you invest in today -- Berkshire Hathaway or Apple?"
Naturally, you'd want to know what time frame you'd be holding the shares. So let me take this hypothetical one step further. Let's say we're going to buy shares and hold them for the next 15 years. What then? Warren Buffett will be 95 years old. Steve Jobs will be 70 years old. It's possible that both will still be the CEOs of the companies they created -- the companies into which they've put nearly every ounce of their creative energy and their professional career. But even in that event, the market will only more seriously and intensively focus on the next generation of leadership.
Let me explain why, in this scenario, I would buy shares of Berkshire Hathaway. For more than 15 years, Buffett has had to answer to questions about his successor. And everything Buffett has done has been geared toward creating permanent value for all the partners of his company.
He has proven out his approach through economic mayhem and misery, through magic and sweet music. And I know that during the multi-decade growth of Berkshire's market capitalization, Mr. Buffett has been musing on how to create an everlasting gobstopper for his partners. (Frankly, I think he should name his next CEO, act as a strong-hand chairman, and prepare the marketplace for the next 50 years of greatness. But one thing is for sure: He's been thinking a lot about this for a long time.)
Against this, you have Steve Jobs -- the greatest innovator of our generation. A mastermind. A fierce and fearless leader. A man who demands the very best of everyone who works at Apple. A man who has led his company to some of the most dramatically rapid growth in cash flow, customer counts, customer satisfaction, employee rewards, and shareholder gains in American history. But the danger of such rapid growth is that the culture cannot keep up with it. The long-term danger is that the replication of this genius and of this culture of growth could prove extraordinarily difficult to achieve over the next 15 years.
Two world-beating American companies. Two astoundingly great leaders. But for long-term buy-and-hold investors, I think the choice is relatively easy. For decades, Berkshire Hathaway has built its culture to sustain greatness.
Agree or disagree in the comments section below. Perhaps we should bet a Fool ballcap on it!
