With Tom Manenti, Chairman of the Board, Chief Executive Officer and President at MiTek Inc, Contributor to The Warren Buffett Shareholder: Stories from inside the Berkshire Hathaway Annual Meeting
The Berkshire Hathaway Annual Shareholder meeting is right around the corner and the book The Warren Buffett Shareholder: Stories from Inside the Berkshire Hathaway Annual Meeting has just hit the shelves. There are many contributors to the book. The Steve Pomeranz Show is featuring a 5-part series on the different perspectives of Warren Buffett from these insider viewpoints.
One of those contributors is Tom Manenti, the President of MiTek, Inc., a company acquired by Berkshire Hathaway in the early 2000s. Tom explains what it’s like working with Buffett. He also provides insight into life at Berkshire when Buffett finally retires.
Doing Business With Buffett
Tom Manenti spent 40 years at MiTek as Chairman of the Board, CEO, and President. Years earlier, MiTek had been acquired by a British conglomerate in the process of looking for a bidder to sell the division.
Enter Warren Buffett, the conglomerate king. Gene Toombs, Manenti’s predecessor, pursued Berkshire as an alternative option and called Buffett. Within five minutes into the conversation, Buffett knew he wanted to buy the company. Gene Toombs asked Manenti to come out of retirement to help him take advantage of the new Buffett relationship.
What It’s Like To Work For Warren Buffett
Manenti decided to come out of retirement because of Warren’s unusual “hands-off” approach to his businesses. While some CEO’s rarely interact with Warren, Tom spoke with him whenever he needed to make a big decision. The response was usually,
“I don’t pretend to know your business. If you think that’s a good idea, I support your decision”
….and then he would talk about baseball.
What Does Berkshire Hathaway Look Like After Warren Retires?
It is hard to imagine Berkshire Hathaway without Buffett, even with a strategy in place. While no one knows who the successor will be, whoever does finally take over will be sure to preserve Buffett’s business model. Luckily, Buffett fans can expect the Berkshire culture to remain the same with or without Buffett. All involved want to preserve the culture as is.
Will We Ever Know Who The Successor Is?
Buffett has been slowly handing off responsibilities over time. For several years, Todd Combs and Ted Weschler have taken over managing 25 billion of Berkshire assets. A solid exit strategy and named successor are still unknown. Warren’s management style is unique, so it’s inevitable that some slight changes will have to be made going forward. It’s also notable that Howard Buffett, Warren’s son, is set to be Chairman of the Board, in charge of preserving Berkshire’s current culture and methods.
Tom points out, “I think that people will be surprised that it’s just really going to settle in because the legacy of Warren and Charlie is pretty powerful. And everybody wants to carry that out.” Until then, the successor will continue to be a mystery.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: As seasons come and go and rough winds do shake the darling buds of May, it’s time to think about the Berkshire Hathaway annual shareholder meeting. What else did you think I was talking about? This year’s meeting takes place on May 5th, and just in time, a new book is about to sprout and land in bookstores nationwide.
Its title is the The Warren Buffett Shareholder: Stories from inside the Berkshire Hathaway Annual Meeting. It’s a compendium of writers, speakers, managers, scholars, and more—all who have something interesting and useful to say about Warren, Charlie, and Berkshire. And I’m thrilled to say that my guest today is Mr. Tom Manenti who served as the Chairman of the Board, Chief Executive Officer, and President of MiTek Inc., which is a Berkshire Hathaway company. Mr. Manenti was a direct report to Mr. Buffett over a decade, so he knows Warren better than most. Hey, Tom, what a joy to welcome you on the show.
Tom Manenti: Well, thanks for having me, Steve, I appreciate it.
Steve Pomeranz: So let’s get a little bit of history here, I understand that in 2001 when MiTek discovered that they fit the criteria for acquisition by Berkshire, they started pursuing the course to be acquired. You were working for MiTek at the time; what was that experience like?
Tom Manenti: Well, it was a good experience. I spent 40 years at MiTek and, at the time, I was running MiTek USA, which was the largest business unit. And Gene Toombs, my predecessor as CEO, was the CEO at the time, and he locked onto pursuing Berkshire as a possible suitor to buy MiTek.
We actually got to the altar with another company in late 2000, and it didn’t work out at the 11th hour, which was very disappointing. So Gene took the initiative to make the phone call.
Steve Pomeranz: Why did you guys want to get sold?
Tom Manenti: Well, we were owned by a British company, a conglomerate (which was not very fashionable at the time in Great Britain) and they wanted them to divest of non-core businesses, and we were a non-core business. And we used to say, well, the only thing that we really contribute is money, is cash. So I thought that was a good reason to keep us, but they didn’t. So they were kind of forced to divest us.
And when they did, they were looking for just other investors because we would have been a good investment for anybody, it just didn’t work out. And when Gene picked up the phone and called Warren, he actually wasn’t there, but he did call back. And Warren told me, he said, within five minutes, I knew I wanted to buy this company.
So that was in, I would say, the early spring of 2001 and the closing was on July 31, 2001, and we were acquired, and that was the first time Warren ever set foot in the company. In fact, we had very little due diligence that I ever saw. I spent a little time with Deloitte, I think it was at the time, and talking about intangible assets. And he’s really a remarkable person in how he evaluates companies and decides to buy them.
Steve Pomeranz: Well, he did have some knowledge because I think Gene sent him a very sharp piece of metal by mail when…
Tom Manenti: It’s true.
Steve Pomeranz: So I’m worried that Buffett wasn’t going to hurt himself, so I don’t know how deep. It’s interesting you mentioned that back in 2001, that the British company, that conglomerates were not in favor. And there was a period of time when the whole conglomerate idea fell out of favor. It was very popular in the 60s, companies were acquiring other companies. And then it realized that a lot of those companies really kind of failed at their mission of trying to bring these companies together, so it fell out of favor.
And I think it’s fascinating that, in the face of that, Warren Buffet was actually creating a conglomerate counter to what everybody was thinking, the best thinking of the time.
Tom Manenti: Yeah, yeah, the irony really was not lost on us, and we were happy to fall on his lap. That’s all I can say.
Steve Pomeranz: So you ended up retiring and then—Buffett always says that he hires managers who don’t have to work because they’re already financially set. They work because they want to. But you came back in 2009. What was the reason for you to come back? And did that fit your description, that you didn’t have to work but you just wanted to?
Tom Manenti: Yeah, I didn’t have to work; I didn’t have to come back. There were some jokes, well, Tom ran out of money in the financial crisis so he came back.
Steve Pomeranz: Okay, yeah.
Tom Manenti: None of that was true, but no, it really was, as I said, I ran a business unit for MiTek. But when I was asked to come back to succeed to become the CEO of MiTek, that really intrigued me. And it intrigued me from the stand-point, not just to be able to say I report to Warren Buffett, but because of the way Warren operates.
And it really is better than owning your own company because, even though you have to manage the risk, you always know that there is a safety net behind you. So I came back really to have exactly what Warren had done over 40 some years at the time, and that’s allow managers to lead autonomously in their own style and just do what they know best. And Warren had said to me on numerous occasions, I don’t pretend to know your business. If you think that’s a good idea, I support your decision and those are short conversations, and then we like to talk baseball after that and that’s it.
Steve Pomeranz: Well, he is notoriously a hands-off owner, which is very rare. So what interactions did you actually have with him? And how frequent where they? And what where some of the most memorable?
Tom Manenti: Well, they’re as frequent or infrequent as you want them to be, that’s how it is with Warren.
I know Berkshire CEOs that rarely talk to Warren or see him. We were a bit more of an acquisitive company, so I spent a little bit more time talking with them on the phone, mostly on the phone, just talking about a potential acquisition, agreeing on a price that we would offer, and then following that were it would lead.
So that would happen in my tenure as CEO, we acquired 20 companies. I think overall since Berkshire acquired us, we’ve acquired about 45. And so I had about 20 conversations about acquisitions, but occasionally there were things—Warren likes bad news first and if there’s something, especially somebody who is killed in action, so to speak, you’re going to get a phone call.
We had a high executive who suddenly died of heart attack; I needed to have a conversation with him about that. So anything like that is the first thing you call him about. But he truly is there as a resource if you just want to kick something around and say, what do you think about this, and he is happy to chat with you about that.
Steve Pomeranz: Did he help you determine the price for acquisitions?
Tom Manenti: On a couple of occasions, he pretty much liked what I would send up to him, I would always not blindside him. I would send up a package of some information and call him the next day. And I think on two occasions maybe he said, well, maybe we ought to try this number and see how this goes, and it was rare, though. He pretty much knew we did our homework and he saw it the way we saw it.
Steve Pomeranz: So everybody talks a lot about Warren and others and the businesses and so on. How important would you say that Berkshire Hathaway shareholders are to the culture and to operating the business in a successful way?
Tom Manenti: I’m sure that it varies from shareholder to shareholder, but the shareholders, somebody asked me…matter of fact, Larry Cunningham and I had this conversation when he was writing his last book, Berkshire Beyond Buffett, about will it prevail? Will the culture prevail?
Steve Pomeranz: Yeah.
Tom Manenti: And my answer to that, the short answer was yes because the managers want it to prevail. The managers like this ability to lead autonomously, to be trusted, to empower their people and not have to worry about a lot of repercussions from the corporate office. So the fact that the managers like that, I would have to think that because that would continue going forward. I believe that the shareholders are just as important in the culture of Berkshire because they like the way Berkshire operates, and they wouldn’t really have any reason to change their investment strategies in a post Warren/Charlie era.
Steve Pomeranz: I think that shareholders would be extremely vigilant when looking at, let’s say post Warren Buffet era, looking at changes and with a view towards, what would Warren do?
Tom Manenti: Exactly.
Steve Pomeranz: Yeah.
Tom Manenti: I think especially earlier on in the early days and years in the post Warren and Charlie era. I think you are right; I think they will be more diligent, and then I think, and I said this, I think, in my little essay, I wrote in Larry’s book, that I think that people will be surprised, that it’s just really going to settle in because the legacy of Warren and Charlie is pretty powerful. And everybody wants to carry that out, I think both managers and shareholders.
Steve Pomeranz: My guest is Mr. Tom Manenti. He was in direct report to Mr. Buffet over a decade as he served as Chairman of the Board and Chief Executive Officer and President of MiTek, which is a Berkshire Hathaway company.
I’ve been to many shareholder meetings and, of course, I don’t get to sit in the VIP section like you did. But I have to tell you, I have my own secret way of getting a terrific seat, and I’m not telling anybody. But the experience of attending a meeting in person is something special.
Can you describe that? Because when you kind of attended your first meeting, I mean it truly was in the VIP section and so on, but what was that experience like for you?
Tom Manenti: Well, I really didn’t know what to expect and I just expected it to be a pretty dry, you sit, you get a whole lot of information, and Warren and Charlie, I heard they sat there for hours answering questions.
Steve Pomeranz: Yeah.
Tom Manenti: It was such a great combination of entertainment and information that its being the most unique thing. I mean, I’ve never gotten tired of it, every time I’ve gone, I’ve sat through it. And the anticipation, kind of the first one, building up to the video that they showed, the beginning of the meeting. And they always do this kind of video parade of the Managers across the screen and-
Steve Pomeranz: Wait a minute, let me stop you here for a moment.
Tom Manenti: Yeah, yeah.
Steve Pomeranz: Because the year that you started, I think there was a take on the Sergeant Pepper’s album and album cover, and you appeared on that, right?
Tom Manenti: Yeah, actually that was in the year of the 50th anniversary, so that was 2015. And none of us, well I can’t say none of us, I certainly didn’t see that coming. And then, all of a sudden, they’re doing this Sergeant Pepper’s theme and I’m listening to the words and it’s all Berkshire related words.
Steve Pomeranz: Yeah, right.
Tom Manenti: And they have this album cover up there on the screen, that at first glance, it looks like the Sergeant Pepper’s album cover. But if you look closely, what was the Beatles, both in the old era and the newer era, Sergeant Pepper’s era, well, that was Warren and Charlie. And then all the faces behind were the Berkshire managers. So once I picked up on that, I thought, I wonder if I’m on that montage of faces.
And you start looking, and my wife was great, Kathy just said, there you are, right there, just above right center, and it was.
Steve Pomeranz: Well, and if you work for another company and your face wasn’t on there, that would have been a bad sign.
Tom Manenti: That’s true.
Steve Pomeranz: All right, let’s talk about the future of Berkshire as you see it. Now I know you don’t have any secret inside or anything like that, but you’ve kind of been around. Now I know that Berkshire has been planning a succession strategy for 20 years and the name of the successor is not known, but what do you think that strategy looks like?
Tom Manenti: Well, Warren always felt that he was going to have to divide up the responsibilities. I don’t know any organization, other than Berkshire Hathaway, where the CEO of the company has 75 to 80 direct reports, and it’s as unique as it gets. So it just stands to reason, and Warren has said this in a couple of settings, that whoever it is that comes in will probably structure things a little differently just to facilitate communication a little bit better and better serve the business units. So I see that sort of thing happening, but I really do believe that knowing the potential candidates that had been bantered about—and I have no idea who that will end up being—I don’t see them really changing the underlying, I guess, the sense of the way things have been for the last several decades.
And they’ll want to preserve that as best they can even though the official organizational structure will change. So Warren started by appointing two guys to be doing a lot of the investments and that’s been going on now for, Todd Combs and Ted Weschler have been doing that now for several years.
It’s been publicly stated that Warren has said that he would like Howard to be the Chairman of the Board. That helps to preserve the culture and the what would Warren do type of leadership on the board. And then, as to who’s going to look after the business units as CEO, and that’ll come in due time.
Steve Pomeranz: The title of the book is The Warren Buffett Shareholder: Stories from inside the Berkshire Hathaway Annual Meeting. In light of the meeting coming up, we’re going to have a number of the authors of that book, or those who added their material, to come on the show with us so we can get some further insight to what goes on behind the scenes, so to speak, at Berkshire Hathaway.
My guest, Tom Manenti, was a direct report to Mr. Buffet, as I said before. And served as President and Chief Executive Officer of MiTek, which is a Berkshire Hathaway company. Tom, thank you so much for joining us today.
Tom Manenti: Been my pleasure, Steve, thank you very much for having me.
Steve Pomeranz: To hear this again, listen to the full show or get a summary of the vital lessons learned here today go to StevePomeranz.com. And while you’re there, sign up for our weekly update where we’ll send you the important lessons from the show straight to your inbox.