Interview with Warren Buffett’s investment manager Ted Weschler: The recipe for financial success

Photo: IMDb.

He is one of the most important managers working for Warren Buffett’s Berkshire Hathaway.

Ted Weschler (55), alongside Todd Combs, is one of the two investment managers that Buffett (85) hired to help oversee Berkshire’s portfolio.

The former hedge fund manager Weschler, who joined Omaha, Nebraska-based Berkshire in 2012, sat down with BI Germany’s editor-in-chief Christin Martens for an interview.

Business Insider: By auctioning for a private lunch with Warren Buffett in two consecutive years you basically paid $5,252,722 to get a job. What is the interest rate on that investment?

Ted Weschler: People love that story. Let me get this clear though. It was on my bucket list that I always wanted to meet Warren Buffett. I happened to be in San Francisco for a board meeting of a foundation I am affiliated with. And I knew that I wanted to visit Glide, a San Francisco church and mission, whose foundation is the charity that benefits from this lunch.

And basically you make a donation for this charity. And if you make the biggest one you also get the ‘free‘ lunch. And I ended up winning that lunch. We actually did it as a dinner in Omaha. And we had a terrific time. And the following year I did not intend to do it again. But I did not want the value of the lunch to drop. So I bid 100 $ more than the year before and I ended up winning it again.

At the end of the lunch and a very interesting conversation he, out of nowhere, said: ‘Is there any way I can encourage you to come to Berkshire Hathaway?’ And that was the last thing I ever expected. I was running a 2 billion-dollar hedge-fund, just myself, my secretary and a research assistant. I lived in Charlottesville, Virginia. I had a nice set up. And then I had the opportunity to work with somebody I had a great deal of respect for. I wrestled through it, talked to my family and ultimately thought it was the right combination. Now, I still live in Charlottesville, Virginia, that is where my family is, and I commute on a regular base every week to Omaha for a couple of days a week.

BI: It takes a lot to impress the of Oracle Omaha. How did you do it?

TW: I don’t know. We hit if off and talked about so many different subjects. I am obsessed with stocks and investing — I read everything. And it was one of these things. The conversation was very fast and for whatever reason, we had a lot of in common, for example the structure we think about investing and that was it. For whatever reason he thought I would be a good fit. It has been terrific. It has been almost five years and I really enjoy the place.

BI: As you have been a very successful investor for years: Is there a recipe to it?

TW: There is one, but I am not telling you [laughing]. Investing is kind of a game of connecting the dots. The nice thing about it is the longer you are in the business, as long as you are intellectually curious, your collection of data points of dots gets bigger and bigger. That is where someone like Warren is just incredible. He has had a passion for investing for well over 70 years. He started by the age of 10 or 12. He keeps building that library of data, the ability to recognize patterns in data. Being a successful investor you need to be hungry, intellectually curious, interested, read all the time. Read a lot of newspapers. You need a certain level of randomness in order to connect things that might give you an insight into where a business is going in five years that somebody else might not see.

When it comes to wholly owned businesses among other factors it is about pricing power. You have something that is so attractive to the consumer that they pay a premium to walk into your store and do something. There is a number of attributes like that. But you can never just point to one thing. It is a mosaic of all sort of different things. If then you read the book of a business you can pretty quickly find out if that is a good business or not.

BI: You said you read a lot. What do you recommend?

TW: I am a big fan of newspapers. I read at least one or two in paper form, the other ones on my iPad. We own a lot of newspaper at Berkshire Hathaway. I am always intrigued by who is doing what in the online business. Because everybody is coming up with presenting things in a better format. I read at least five newspapers a day.

BI: And which newspapers do you read on a regular basis?

TW: I have a tradition. I always start each day with reading the local paper of the town I wake up in. Then next one would be USA Today. That gets you a general feeling for the Zeitgeist. They package the news for the

entire population. From an investing standpoint it is relevant to understand what everybody is thinking. Then I generally move up to the New York Times, then the Wall Street Journal and then I end with the Financial Times. And actually I recently just started reading the Handelsblatt global edition.

BI: And what about books? Is there a favorite one?

TW: Really no. There is a lot I read over the years. But there is not one I would say which made the difference in investing.

BI: If I had 5000 Euros. Where should I invest?

TW: In a perfect world you could buy a good business with long term prospects at that price. I am a big fan of investing in what people do from day to day. But there are only little enterprises for that amount of money. With interest rates being historically low right now I would not want to invest in bonds. Also a bond is a contract and you can’t do anything with that. The appeal businesses is that they have the ability to change and frequently do just fine because of this. To be more specific. If I was living in Europe I would probably put that 5000 Euro in a European based index fund to keep transaction costs very low and then I forget about it for a long time.

BI: And if you were situated in the States?

TW: I would do the similar thing and probably put it in something like the Vanguard index fund. The expense on that is very, very low and it is tax efficient. And personally I buy Berkshire stocks.