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Buffett Leans on 29-Year-Old Cool to Oversee Problems

By Noah Buhayar and Laura Colby
January 21, 2014 7:00 PM EST 47 Comments

When Warren Buffett bought half of a commercial mortgage finance company in 2009, he hired a 25-year-old fresh out of business school to keep tabs on the investment.

Since then, Berkadia Commercial Mortgage LLC has earned back most of the $217 million that his Berkshire Hathaway Inc. (BRK/A) spent on the deal. The business also helped propel Tracy Britt Cool’s career.

Now 29, Cool is one of Buffett’s most-trusted advisers, traveling the country to assist a constellation of companies too small to command her boss’s direct attention. The billionaire said his confidence in Cool is one reason he agreed to buy party-supply seller Oriental Trading. In 2012, she was named chairman of that business and three other units, including paint company Benjamin Moore. The subsidiaries have combined sales exceeding $4 billion and more than 10,000 workers.

“There are companies that I’ve never been there, and we’ve owned them a lot of years,” Buffett said in a telephone interview. “Tracy is available to work on things that I probably should work on, but either am too busy or too lazy.” He added: “She thinks like I would.”

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In the past two years, Cool dismissed three chief executive officers at units she oversees and presided over turnaround efforts that put other managers out of jobs. She also worked with Berkshire subsidiaries to coordinate purchasing and share expertise on employee health care.

‘Self Starters’

Buffett has picked other top deputies who were little known before joining Berkshire. Cool is part of a triumvirate of aides he calls the “Ts” -- the others are Todd Combs, 42, and Ted Weschler, 52, who were hired in the past four years. Both men ran hedge funds prior to joining Omaha, Nebraska-based Berkshire, where they help oversee a stock portfolio valued at more than $100 billion. The pair has also invested pension-fund assets for several subsidiaries.

“Talented people can accomplish a whole lot,” said the 83-year-old Berkshire chairman and CEO, whose headquarters staff numbers just two dozen. “I’d rather have a relatively few that are really talented and that love what they’re doing and that are self-starters.”

Growing up in Kansas, Cool helped manage the family farming business with her brother. “Every minute that I had to work on the farm, I hated it,” she told Harvard Magazine for a 2007 profile. “But it actually shaped my dedication, my work ethic, and the way I follow through on the commitments I have made.”

Fun Idea

Her high school classmates in Manhattan, Kansas, voted her most likely to become a billionaire. She won a $10,000 scholarship in 2003 from the Horatio Alger Association of Distinguished Americans, named after the 19th century author of rags-to-riches stories. In college, she coached students in a women’s group she founded on how to write businesslike e-mails and behave on conference calls.

“When I first met her I thought, ‘Oh my gosh, this girl’s scaring me, she’s so professional,’” said Teresa Hsiao, a classmate at Harvard College. “Her idea of fun may not be what we consider fun, like looking at 10-Ks,” the annual reports filed with securities regulators.

Cool, who declined to be interviewed for this article, met Buffett through Smart Woman Securities, the group she and Hsiao founded while Harvard undergraduates. SWS aims to educate members about everything from compound interest to preparing a pitch to prospective investors.

Cool and Tiffany Niver, a Harvard classmate from Nebraska, wrote to Buffett and asked if members could visit. He agreed. The pilgrimage has become an annual event for the group, which has expanded to 17 chapters.

‘Very Comfortable’

“It was amazing seeing how close she was with Warren,” said Rebecca Horne, who visited Omaha as a Fordham University student in 2011. Added Audrey Cao, a University of Virginia senior who made the trip in 2013: “Just from the dynamics of their conversation, you can see that he is very comfortable with her.”

Cool was inspired by Buffett’s value-investing principles when she built SWS, Horne said. “I don’t think that was unconscious,” she said. “She clearly had Warren in her sights.”

While at Harvard Business School, Cool wrote in an essay: “My goal is to work with a great investor, who even more importantly is a wonderful teacher and mentor.”

She found all that in Buffett. The Berkshire chairman even stood in for her late father, Richard, walking her down the aisle at her September wedding to Omaha attorney Scott Cool. When Buffett’s daughter Susan has parties for Thanksgiving or the 4th of July, she invites the couple, the CEO said.

BofA, Lehman

At Harvard, Cool joined several women’s networking organizations. In her sophomore year alone, she was chairman of the fundraising committee of Harvard Undergraduate Women in Business, an executive board member of the Women’s Leadership Conference, and a member of Kappa Alpha Theta. During summers, she held internships at Lehman Brothers Holdings Inc., Bank of America Corp. and 85 Broads, a network that promotes women as business leaders.

As Cool was finishing business school, she wrote to Buffett asking for a job. He gave her a summer position after graduating, analyzing Lehman Brothers’ bankruptcy, and then she left to work as an analyst at Fidelity Investments. When the Berkadia Commercial Mortgage deal surfaced soon after, Buffett offered her a full-time assignment that initially focused on monitoring the venture between Berkshire and Leucadia National Corp. (LUK)

Chicken Eviscerators

In her new job, she visited Horsham, Pennsylvania-based Berkadia, where she would soak up information that she’d report back to Omaha. She also made stops in places like Indiana, where Berkshire owns Forest River, a recreational vehicle maker, and CTB, which sells grain-storage equipment and chicken eviscerators.

Like Buffett, Cool has a low-key manner that belies an ability to zero in on the minutiae of business. One former employee of a Berkshire unit said Cool preferred to listen rather than steer conversation in meetings. The person was one of half a dozen ex-employees who requested anonymity to speak about Cool so as to not damage relationships.

Cool became chairman in 2012 of two units deemed in need of changes: Benjamin Moore and Larson-Juhl, which sells custom picture frames. She got the same title at insulation maker Johns Manville after the unit’s new CEO, Mary Rhinehart, asked if Cool could be a “sounding board,” Buffett said.

‘Take This’

With Oriental Trading, “I might not have bought it” if it meant adding another CEO to supervise, he said. “To not add one more to my list, I just said, ‘Tracy, take this on.’”

In 2012, she delivered messages for Buffett, firing Steve McKenzie, who helped sell Larson-Juhl to Berkshire about a decade earlier and was working to stem profit declines. She also ousted Benjamin Moore’s Denis Abrams, a 17-year veteran of the paint company who had disagreed with Buffett on strategy.

The changes shocked staff, according to former employees. The new CEOs and the cuts that followed were even more startling at companies that previously had a more collegial atmosphere, these people said.

At Larson-Juhl, Cool brought in her former business school classmate, Drew Van Pelt. He soon fired three senior executives and demoted others to help turn around the business, a former employee said.

“It was an organization that had had an extended period of decline,” Van Pelt said in a phone interview. In the past two years the company has invested in new products, improved quality and won a local award for being a top workplace in the Atlanta area, a sign of “a pretty strong culture and a pretty healthy environment,” he said.

‘Direct Experience’

Cool enlisted restaurant executive Bob Merritt, the husband of her friend Jill DiLosa, to run Benjamin Moore. Merritt fired longtime managers, a former employee said.

Buffett, the world’s fourth-richest person, said he knew of Cool’s connections to both CEOs and that he made the final decision about whom to name. “I prefer if you have some direct experience with somebody before you hire them,” he said. “I had some experience with Tracy before I hired her.”

That approach didn’t pan out with Merritt. Cool visited late last year to tell staff that Berkshire was looking for the unit’s third CEO in less than two years, according to a person who attended. Cool declined to answer questions from staff about why the CEO left, the person said. Attempts to reach Merritt were unsuccessful.

Cool’s Test

“If someone needs to be canned, sometimes you have to do it with dispatch and with not a lot of emotion,” said David Rolfe, chief investment officer of Berkshire shareholder Wedgewood Partners Inc., which manages about $7 billion. “These things will test her, and I think that’s part of the gig.”

Merritt was replaced in October by Michael Searles, who previously ran Wilsons The Leather Experts Inc. while Weschler was on the retailer’s board and his hedge fund was one of its largest investors.

The paint company plans to return to 2012 staffing levels this year after the workforce declined by about 120 people in 2013 through job cuts and attrition, said Kimberlee Bradshaw, a Benjamin Moore spokeswoman.

Cool’s ascendancy shines light on how sprawling Berkshire has become after decades of takeovers that have swelled revenue to more than $160 billion a year. In addition to household names such as car insurer Geico and railroad Burlington Northern Santa Fe, Berkshire has dozens of smaller units that can occasionally create headaches.

Problem Children

“If you have 60 or 70 children, you’re going to have one or two that are going to be problems from time to time,” said Buffett, who focuses on acquisitions, large stock bets, insurance and the railroad. “Part of her job is to make sure that, where there is some area where the companies can benefit from some interaction, they actually do benefit. I’ve never done anything along those lines.”

Given Buffett’s preference for experienced executives, Cool’s role is surprising, said James Armstrong, president of Henry H. Armstrong Associates, which holds Berkshire shares.

“Berkshire usually brings on people who have a lot of time in the saddle,” he said.

Buffett, who has written that it’s “difficult to teach a new dog old tricks,” may be envisioning a bigger role for Cool as he prepares the company for his eventual departure. He picked her for the board of HJ Heinz Co. in June after Berkshire and 3G Capital bought the ketchup maker for about $29 billion.

‘Particular Value’

Cool organized a get-together around the time of Berkshire’s annual meeting last year to allow managers to network and discuss common challenges. A similar gathering is scheduled for this year, with Buffett included. The groundwork and relationships that she’s building through her travel and events like those will serve the next Berkshire CEO well, said Buffett, who hasn’t publicly identified his replacement.

“Tracy can be of particular value, I think, to my successor,” he said. “She’ll have so much operational familiarity with the really dozens of companies, probably more than anybody else.”

To contact the reporters on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net; Laura Colby in New York at lcolby@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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