Jason Zweig for the Intelligent Investor writes: The chairman and chief executive of Berkshire Hathaway, who has run the conglomerate since 1965, announced this week that he has prostate cancer. The disease was detected early, and the 81-year-old Mr. Buffett is otherwise in excellent health. His prognosis is good. But the news brought renewed attention to the question of who ultimately will succeed him. A skilled bridge player, Mr. Buffett is keeping his cards close to his vest. He has said the members of Berkshire's board have chosen a successor whom they know and admire, as well as two backups.
Publicly naming his successor wouldn't just make it hard for Berkshire to change its mind later if circumstances warrant; it would demoralize the two backup choices and make them more prone to poaching by competitors.
In hopes of unearthing some of those surprising names, I asked two independent teams of financial researchers—Paul Tetlock and Tim Scully at Columbia Business School and Richard Peterson at Los Angeles-based investment firm MarketPsych—to analyze what Mr. Buffett has written about Berkshire's divisional executives in his annual letters. Both groups of researchers specialize in "textual analysis," or the use of mathematical formulas to measure the frequency and positive or negative tone of language. In previous studies—for example, of the wording in companies' financial filings—these methods have been shown to improve forecasts of profitability.
Since 1977, Mr. Buffett has written nearly 400,000 words in his annual letters to shareholders. Messrs. Tetlock and Scully found that Mr. Buffett has mentioned Ajit Jain, head of Berkshire's reinsurance group, far more often than any other current division boss—102 times, versus 60 for the next most-cited, Tony Nicely of Geico….. They found that Mr. Buffett referred slightly more positively to Mr. Jain than he did to any other Berkshire manager. However, Tad Montross, CEO of General Re, scored a close second….