Value Investing

Job Description for Buffett’s Successor

When I was reading what Seth Klarman looks for when hiring analysts (for my previous post), it mentioned Warren Buffett’s job description for his successor on the investment side. That was revealed in Berkshire Hathaway’s annual letter in March 2007.

Here’s some key characteristics for the person:

  • Smart people with impressive records
    • But there is far more to successful long-term investing than brains and performance that has recently been good.
  • Genetically programmed to recognize and avoid serious risks, including those never before encountered.
    • Over time, markets will do extraordinary, even bizarre things. A single, big mistake could wipe out a long string of successes.
  • Temperament, independent thinking, emotional stability, and a keen understanding of both human and institutional behavior.
    • Buffett has seen a lot of very smart people who lacked these virtues.
  • Not driven only by the money
    • Berkshire needs to be able to retain the person, even though he or she could leave and make much more money elsewhere.

After shortlisting applicants, Buffett will ask for at least 10 years worth of personal investment records. In terms of compensation, he plans to pay the manager a percentage (e.g. 10%) of his outperformance over the S&P 500 over a five-year rolling average.

So far, Todd Combs (previously ran $400m at Castle Point Advisors) and Ted Weschler (previously from Peninsula Capital) had got themselves hired.



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