A conscience of capitalism prepares to step off the stage

It was closing in on 1 p.m. when Warren Buffett, seated onstage before a rapt audience of about 40,000 at the CHI Health Center in Omaha, said that he was getting a “5-minute warning.”

To most of those there for the annual meeting of Berkshire Hathaway, his company, it was simply a signal that the gathering — known as Woodstock for capitalists — was drawing to a close. No one knew that something historic was about to happen.

After 60 years of running the company he has called his painting, the 94-year-old Buffett said that he planned to step down as chief executive at year end. (Proving how much freedom he has always exercised at Berkshire, he surprised his own board and Greg Abel, his handpicked successor: “I want to spring that on the directors,” he said with a smile.)

People in the crowd, many of whom were in tears, rose from their seats in a standing ovation for a singular figure in the business world.

Buffett is often described as a symbol of American capitalism. The truth is that he has always been an outlier. He is more the conscience of capitalism, willing to speak uncomfortable truths about the system’s ills while others remained silent. (His public comments on issues like tariffs over the weekend are a prime example.)

The billionaire always comes across as a gentleman, and in an age of distrust he became someone people could trust. Fellow business moguls and government officials admired him because of his success, yes — Berkshire reported $89 billion in net profit last year, and it is one of the biggest buyers of U.S. Treasury bonds — but also because he didn’t appear to have changed despite his wealth. He lives in a modest house in Omaha, and for years drove his own car, including to the drive-through at McDonald’s.

Buffett isn’t perfect, something he often acknowledges, and he has urged his followers to stay humble as he discussed his own investing mistakes and misses. But that also got to one of his biggest accomplishments, using his annual Berkshire letters and marathon Q. and A. sessions with shareholders to educate generations about business, investing and life itself.

After the announcement, I was struck by a social media post from someone I wouldn’t have normally considered to be a Berkshire watcher, who perfectly encapsulated the importance of Buffett and his longtime business partner, the late Charlie Munger. “They were the good investors, dealers in reality, patient,” wrote Nick Denton, the founder of Gawker. “When the history of the rise and fall of America is written, one of the chapters will begin in Omaha, with their departure.”

As Buffett prepares to depart, the big question is: What will happen to his masterpiece once it passes to Abel?

It has been apparent for several years now that on a day-to-day basis, Abel is already running large swaths of Berkshire’s operations, so the shift likely won’t be dramatic. But the scrutiny of “Abel’s Berkshire” will undoubtedly increase: The company wasn’t built just as a collection of disparate businesses, but as the vision of one man.

Abel has said he will seek to maintain the culture that his boss meticulously built. But things will inevitably become different. Berkshire’s board gave Buffett an unparalleled degree of autonomy to operate as he saw fit, often learning about significant deals he had struck only after the fact.

Abel will have to work hard to earn even some of that latitude, and under him Berkshire is likely to operate with more guardrails. But there is speculation that Buffett will remain chairman for some period, which could afford Abel more freedom as he grows into the top job.

Nevertheless, Buffett’s success, and the company he built, were exceptional. What investors gathered in Omaha this weekend, and the world over, want to know is what comes next.

HERE’S WHAT’S HAPPENING

Markets brace for central banks and a busy earnings week. On Wednesday, the Fed is widely expected to again hold interest rates steady, potentially further irritating President Trump (though he seems to be backing off calls to fire Jay Powell, the Fed chair). Big companies are also set to report results, with investors focusing on further fallout from the trade war: Ford announces on Monday; Disney, Uber and Novo Nordisk on Wednesday; and Toyota, AB InBev and Shopify on Thursday.

Stocks look set to snap a nine-day winning streak. S&P 500 futures are down, with energy stocks in particular looking weak. Oil prices have fallen roughly 2 percent on Monday — West Texas Intermediate, the U.S. benchmark, is trading around $56.60, well below most domestic drillers’ break-even price — after the OPEC Plus cartel shifted course on Saturday and said it would increase production.

Shell’s shares jump on a report that it’s weighing a bid for BP. The oil giant’s advisers are evaluating a takeover of the struggling BP, Bloomberg reports, and could pounce if oil prices (and its rival’s stock) fall further. The fate of BP has become a much-discussed issue, with Wall Street analysts seeing it as a prime acquisition target as it pursues a turnaround plan under pressure from the activist investor Elliott Investment Management.

Prediction markets versus the vaticanisti

Betting on papal elections may be older than the Sistine Chapel. This week’s conclave involves a new twist: It’s the first time that major online prediction markets have turned their focus on the Vatican’s ancient selection process.

And the wagers are flowing in. The Italian cardinal Pietro Parolin has emerged as the odds-on favorite to succeed Pope Francis, according to the prediction markets Polymarket and Kalshi. Even a report last week that the 70-year-old had medical issues, which the Vatican denied, did little to dent that lead.

But while prediction markets claimed vindication in correctly predicting President Trump’s victory in November, picking the next heir to Saint Peter’s throne is likely to be a tougher challenge, experts both inside the Vatican — known as the “vaticanisti” — and outside tell Bernhard Warner and Michael de la Merced.

The wisdom of crowds can likely go only so far. High-tech betting sites “will never be able to break through the complexity, the unpredictability of the decisions made inside,” Franca Giansoldati, a Vatican specialist who writes for Il Messaggero, one of Italy’s biggest daily newspapers, said.

Rajiv Sethi, an economist at Barnard College who has studied prediction markets, noted that when it came to the presidential election, bettors were able to process a wide variety of information sources, including public polls and televised debates. The papal conclave — famously conducted behind closed doors and composed of an expected 133 cardinal electors sworn to secrecy — offers far fewer clues for gamblers.

Consider that a spike in the Polymarket contract betting that a new pope would be picked in 2025 took place after Francis’ death was announced, according to Sethi. Were there inside trading, someone could have made a lot of money. “We can rule out information leakage from cardinals,” Sethi said.

Conclave politics have been highly unpredictable. In 2013, the odds-on favorite was Cardinal Angelo Scola; then-Cardinal Jose Maria Bergoglio, who became Francis, was on few short lists. There are also unexpected developments, most recently when Cardinal Angelo Becciu, who was forced to resign his positions after a financial scandal, briefly sought to crash the upcoming conclave.

Again this time, the cardinals are divided, and many are meeting for the first time — factors that could complicate how long it takes before white smoke emerges from the Sistine Chapel.

Then there are other potential wild cards, including President Trump’s policies (which Francis frequently criticized), Giansoldati noted. Could cardinals even be influenced by a Trump social media post depicting himself in papal vestments? Analysts have seen a kind of Trump effect energizing national elections around the world already this year.

All that is unlikely to deter online bettors. Kalshi’s main contract on who the next pope will be currently has about $5 million in wager volume. “So far, the papal election market is tracking to be as big as the Super Bowl,” which saw $27 million in volume, Jack Such, a spokesman for the prediction market, told DealBook.

“Today, it might be that, you know, Donald Trump thinks he can take over the election system through one of his executive orders. Tomorrow maybe it’s the banking system. After that, maybe it’s contracts. Maybe he decrees, ‘I’m gonna decide which contracts are binding and which contracts aren’t binding.’ So, the legal system is fundamental to how our society operates, how capitalism operates, and everyone should have a stake in that.”

— Marc Elias, a prominent lawyer for the Democratic Party whom President Trump has targeted by name in his campaign against big law firms, on “60 Minutes.” Trump drew further concern when, during an interview on “Meet the Press” that aired on Sunday, he repeatedly said “I don’t know” when asked if he needed to uphold the Constitution and guarantee the right of due process.

The trade war goes to Hollywood

Shares in Netflix were down more than 4 percent in premarket trading this morning as investors weigh President Trump’s latest tariff target: films made overseas.

Never mind that Hollywood has a huge trade surplus with the rest of the world, and that it’s difficult to define how much of a major film is actually produced outside the United States. The proposal, which involves a 100 percent levy on such films, could scramble the economics for major studios and streaming services.

Elsewhere in tariff news:

• Trump said on Air Force Once that he has no plans to speak with Xi Jinping, China’s top leader, this week as the trade talks between the two stall. But he reiterated that he is willing to lower the levies that have hit commerce between the two countries.

• Many of the corporate promises to invest big in America, which the White House has said amount to “trillions of dollars in new investment,” are wildly overblown, according to an analysis by The Washington Post.

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