Could we one day look back and say that Warren Buffett’s greatest genius was finding amazingly talented people to replace him?
Berkshire Hathaway investors (BRK-A, BRK-B) certainly hope so.
Buffett, 86, wasn’t shy about acknowledging his own mortality and that at some point others would run his business money machine. And while Buffett has not yet named a successor, he has hired two wealth managers, Todd Combs (2010) and Ted Weschler (2011), to take over Berkshire’s key investment businesses.
I recently sat down with Buffett, Combs, and Weschler in Omaha for a rare three-way interview. What it turns out is that Combs and Weschler are actually very similar to Buffett and his partner Charlie Munger.
This is of course not a coincidence. Buffett and Munger looked for clones as close as they could find – at least in terms of their fixed assets. Both Combs and Weschler are low-key, super-intelligent, and spend most of their time doing the same thing Buffett and Munger do with their noses in documents.
How Todd and Ted got Warren’s attention
“They’re the only two guys who have read as much as we have,” says Buffett with a laugh.
Actually, Buffett isn’t really kidding.
Warren Buffett and his deputies, Ted Weschler and Todd Combs
People may be curious to see how Todd Combs (pronounced “combs his hair”) and Ted Weschler (pronounced “weshler”) got the jobs that most would consider the most sensitive in the investment business.
Let’s start with Combs and let’s share about how he got the job:
“I met Warren through Charlie. I called Charlie by chance. I’ve always wanted to meet him. And we got along, ”says Combs. “We had breakfast for three or four hours. And luckily he called me a few weeks later and we continued to discuss. And that went back and forth for a few months. “
Combs added, “And at one point I was with him at breakfast or lunch and he said, ‘You know, you really should meet Warren.’ And then, in true Charlie and Berkshire fashion, he tried to convince me why this was necessary and how much I would enjoy it and so on. So I called Warren. And flew to Omaha and we met. So that’s what happened. “
The story goes on
Just peasy isn’t it?
As for Weschler, he had to raise $ 5,252,722 to get the job. Serious! Here’s the story: In 2010, an anonymous bidder paid $ 2,626,311 at a charity auction to have lunch with Buffett. And then the following year, one bidder won lunch by increasing the bid by $ 100 to $ 2,626,411.
It turned out that the winner in both years was Weschler, who was then running his highly successful Peninsula hedge fund in Charlottesville, Virginia. Buffett was so impressed by Weschler that he offered him a job.
So how are Buffett’s two money managers? Well, both Combs, 46, and Weschler, 56, appear calm, thoughtful, and friendly. And both are in top shape. Combs plays tennis and Weschler runs almost every day. Buffett suggested the two of them whip me at the upcoming Berkshire 5k in Omaha on May 7th, the day after the annual meeting – and I bet he’s right.
And of course, Berkshire shareholders should love the fact that they’re both decades younger than Buffett and Munger. That is, if they are successful they will do their job for many, many years.
Plenty of time to read at work
I was very curious about what it’s like to work for Buffett. I asked Weschler first.
“It is great. In many ways, not much changes from my earlier world in which I ran a fund, ”says Weschler. “I’ve always been kind of a one-man band, analytically. I spend most of my day reading. I’m trying to make about half of this reading random. Things like newspapers and trade magazines. “
(See below for Todd and Ted’s reading list.) *
Weschler added that it was remarkable “to be able” [work] in a setting like Berkshire and being able to study through osmosis and compare notes to Warren. We meet for lunch every Monday, the three of us and Tracy [Britt Cool, another top exec at Berkshire]when she’s in town, she’ll join us. “
Weschler says the group talk about Berkshire culture and the events that happened during Buffett’s career.
“It’s something very special. I was first introduced to Warren (not physically) in 1979 by a friend of mine who said, ‘There’s this guy in Omaha who when he writes you should really read what he writes because there is some clarity about it. ‘ “he said.” And I started reading [Buffett’s shareholder letters etc.] and I’ve read pretty much everything Warren put there over the years I think. Having that as a background and then getting into the organization and being able to interact regularly is great. It is fun.”
Of course, I had to ask Buffett how he picked these two out of the hordes who wanted the job.
“Well, they’re chosen for both their skills and character,” says Buffett. “For a very long time, just me and Charlie Munger made investments. And then, maybe seven or eight years ago, Charlie and I talked about how desirable it would be to hire someone, or maybe more than one person, to manage both money now, but also in preparation for the day Charlie and I won’t be there anymore
“And I remember when I flew to Korea once, I think I took around 600 people’s letters with me. And it wasn’t just about looking at past records or anything like that. I mean, there are all kinds of past records that really don’t mean much. But it’s how they put something like that together, and then it’s the kind of person they are.
“There is a huge responsibility when someone joins the Berkshire family and an integral part of it is to invest a lot of money. And I wanted someone who would be there forever. And I first found Todd six or seven years ago and Ted five or so years ago. And now we’re done. And they handle $ 10 billion each. When we started it was maybe $ 2 billion or so. Now I’ve added capital. It’s one of the best decisions Charlie and I have ever made to get these two on board. “
I ask Combs how his day is.
“I come in around 7 or 8 and read until around 7 or 8 in the evening,” he says with a laugh. “And I go home and visit my family, and then I read in bed for an hour or two at night. And you know, there might only be three or four calls a week. So there are very, very few interruptions. I have a great assistant who knows everything I read and she kind of provides everything and there is a back and forth between us where I mark it and give it back to her. And we have a system of filing and so on. But it’s literally just about 12 hours a day reading everything I just mentioned. “
“Charlie describes himself as a book with legs,” says Buffett after hearing this.
So how is this going to work? I asked Buffett if he had a formal plan to turn things over to Combs and Buffett.
“We don’t have a formal plan,” says Buffett. “But it is clear where we are going. There is a lot of money to be invested in at Berkshire. Our greatest hope is that we can find operational companies to invest in. But we will always have a lot of marketable securities. And we will probably always have a decent amount of cash. “
“But ideally we would have less money than now. Because I’d rather own a business than own government bonds. [In terms of Combs and Weschler taking over] it will be evolutionary, “adds Buffett. “But they will be very, very, very helpful to the next CEO. Not only in dealing with marketable securities, but only in evaluating the acquisition. You understand companies. “
Berkshire shareholders hope it does. No doubt they will find out.
*Ted Weschler’s reading list:
“Handelsblatt has a very good English version. I started reading this a few years ago. The Financial Times gives you a slightly different look at the world of the United States, The New York Times, and Wall Street Journal. I always read the local paper in the city where I wake up every day. I still read USA Today every day. It just makes another job of telling you where things resonate with the non-financial crowd. And I like to see where USA Today article placements are against the New York Times. “
*And Todd’s list:
“Well, it covers the scale too. I would definitely say newspapers. I track about 250 publicly traded companies every quarter. And so I go through their quarterly reports for each quarter of each of these companies. So a lot of SEC filings. Lots of transcripts. I can read a transcript much faster than I can listen to the conference call. And you eliminate some of the friction there too.
“So a lot of SEC filings. Lots of trade magazines. There are a couple of dozen of these that I subscribe to. And then I have a wonderful analyst who helps me with channel checks where we talk to customers, suppliers, former employees, etc. We’re really trying to get an idea of what it would be like – any security we look at, we’re really trying to get a feel for what it would be like to own the entire company. “
Andy Serwer is the Editor-in-Chief of Yahoo Finance.
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