Happy 80th Birthday, Warren Buffett... Will You Answer the One Question on Everyone's Mind?

By Hans Wagner

Warren Buffet turns 80 years old on August 30th. Charlie Munger, Berkshire Hathaway's Vice Chairman, is 86.

Now no one is suggesting it's time for either Buffett or Munger to retire. Far from it. Investors seem to want the duo to work and live forever. But since we're pretty sure that won't happen, everyone naturally wonders who will take the helm when/if Buffett decides to step down. 

I suspect Mr. Buffett will go to work on August 30th as he always does, but he might take the occasion to think further about who will replace him. Many believe the Berkshire Hathaway (NYSE: BRK-A) succession plan calls for Buffett's job to be split into two roles: one person in charge of company operations, the other in charge of investing activities.

According to the Wall Street Journal, the two most likely candidates are David Sokol and Li Lu. Sokol is the chairman of Berkshire's MidAmerican Energy Holdings. As one of Buffett's favorite managers, Sokol has strong management experience and a proven ability to control costs.

Like Buffett, he delivered newspapers as a boy, worked in a small grocery store as a teenager, and now lives in Omaha. Sokol is known to drive a hard bargain as he seeks to deliver long-term growth and value, making him a good candidate to oversee the numerous companies owned by Berkshire.

So assuming Sokol could continue generating profits via the firm's vast holdings, the next question is, "Where to invest those profits?"

This is where Li Lu comes in. Li is a formidable character with a fascinating story. Born in China, Li's childhood coincided with Mao's terrifying Cultural Revolution and as a young adult he organized and led student protests during the famous 1989 demonstrations in Tiananmen Square. After the government crackdown, he left China to attend Columbia University. Li eventually started his own fund in New York, investing on behalf of an exclusive client list, and generating an annualized return of +26.4% since 1998 (vs. 2.25% for the S&P 500). 

Li invests in what he knows and understands, a hallmark of the style popularized by Buffett and Munger. But while Buffett has largely avoided high-tech industries, saying he doesn't sufficiently understand them, Li likes the high-tech space, especially in Asia. 

Li famously introduced Munger to BYD Co., a Chinese battery and auto manufacturer, and Li enlisted Sokol's help to convince Buffett to invest in the firm. The team of Li and Sokol eventually won Buffett over. Berkshire went on to see its stake in BYD grow six-fold, generating profits of $1.2 billion for the firm. Now those are the type of results expected of Buffett and Munger's successors. 

For more about Warren Buffett's famous investing strategies, check out How Buffett Made a +362,000% Gain and Understanding the Four Pillars of Warren Buffett.