Warren Buffett’s Top Jockeys: For The Kentucky Derby And Berkshire Hathaway

The first Saturday of May marks two significant events: the Kentucky Derby and the annual meeting for Berkshire Hathaway. Despite their apparent differences, these events share striking similarities. Both attract massive, passionate crowds and are steeped in tradition. Moreover, they offer participants the potential to turn a profit, whether through winning bets or from successful investments.

The age-old question for investors and horse racing enthusiasts alike is: do you pick the horse or the jockey? As Warren Buffett famously quipped, when a CEO with a reputation for brilliance tackles a business with poor economics, the reputation of the business remains intact. The same applies to jockeys and horses.

Legendary jockey Willie Shoemaker riding a show pony would never have won a race. Similarly, one of Buffett’s all-time favorite CEOs, Tom Murphy, who ran Capital Cities/ABC (which later merged with Disney), would likely have struggled in a declining industry like buggy whips. However, when you combine a great CEO with a good business or a great jockey with a high-quality horse, magic happens – winning races for horse racing fans and great returns for shareholders.

This year’s Kentucky Derby features legendary jockey John Velazquez riding the odds-on favorite, Fierceness. Velazquez has won the Kentucky Derby three times before: in 2011 with Animal Kingdom, in 2017 with Always Dreaming, and in 2020 with Authentic. A win this year would tie him with Willie Shoemaker for the third-most wins, behind only Eddie Arcaro and Bill Hartack, who each have five victories.

The role of a skilled jockey on a high-performing horse is analogous to that of a great CEO leading a successful company. Just as a talented jockey can guide a horse to victory, a competent CEO can steer a company towards success. Both must make critical decisions under pressure, adapt to changing circumstances, and optimize their assets to achieve the best possible outcome.

Buffett has a stable of great CEOs who run businesses that Berkshire Hathaway owns completely or has minority positions in. Some are well-known, like James Quincey, who leads Coca-Cola
Coca-Cola
, or Todd Combs, CEO of GEICO. Others, like Pat Egan, who runs See’s Candies, may be less famous but are equally talented.

Horse racing involves substantial strategy and competition, with jockeys making split-second decisions and trainers meticulously preparing horses for each race. The ability to quickly recover from mistakes is also crucial. Buffett now readily admits that buying a faltering textile operation named Berkshire Hathaway was a poor decision. However, his longtime partner, Charlie Munger (who passed away in December at age 99), advised him on how to fix the mistake. The key, Munger said, was to “give up buying fair businesses at wonderful prices” and instead add “wonderful businesses purchased at fair prices” to Berkshire’s portfolio.

This year’s Kentucky Derby features two first-time jockeys: Keith Asmussen, riding Just Steel, and Ryusei Sakai, riding Forever Young. Asmussen, the 25-year-old son of Hall of Fame trainer Steve Asmussen, will participate in his first Derby after less than two years of full-time riding. Sakai, a rising star in Japan, may bring good karma to the race, given Berkshire’s success in Japan in recent years.

While Warren Buffett won’t be at Churchill Downs on Saturday, he will have his two favorite “jockeys” on stage with him at the Berkshire Hathaway’s annual meeting in Omaha: Greg Abel, who runs Berkshire’s non-insurance operations and is in line to succeed Buffett as CEO, and Ajit Jain, who heads the insurance business.

The author, a long time Berkshire Hathaway shareholder, favors the Japanese horse Forever Young to win Saturday’s Kentucky Derby. He will attend the Berkshire annual meeting in Omaha with an eye toward Louisville.