So Warren Buffett has finally named his successor–or at least, told us who’s leading the running. His name is Todd Combs, a 39-year old hedge fund manager from Darien, Connecticut who got the (sort-of) job the old-fashioned way: he applied for it. Very little is known about him beyond some broad biographical details, and the recent performance of his fund.
There’s been more than a little professed surprise, but this doesn’t surprise me at all–Warren Buffett is, after all, the guy with a fetish for the unrecognised, undervalued asset. It seems only natural that he’s plucked someone from relative obscurity–and whatever else you say about this guy, he certainly does seem to have a passion for value investing.
I doubt, however, that that will be enough to reproduce–or extend–Buffett’s success. The lure of value investing is that all you need is common sense, hard work, and the courage to resist your own greed, but in fact, Buffett’s intelligence is really singular. Reading his thoughts on the bubble in 1999, you’re struck not merely by his courage in naming the bubble, but his ability to crystallize such an incisive critique of the prevailing zeitgeist. Moreover, the kinds of stock values that made Buffett rich are thin on the ground these days–the proliferation of screening tools, and other sorts of company information, means that few people are able to make money simply by identifying “hidden gems”. Buffett has survived through a combination of unique vision, good management, and the magical effect of the Buffett name on the investments he does choose to make. It’s going to be hard to impart that to a successor.
Indeed, given his previous thoughts on the matter, I kind of wonder why he’s doing this now. Several years ago, I attended the Berkshire Hathaway annual meeting in Omaha, and Buffett had this to say about his succession:
“If we had a good way to inject someone into some role that would make them a better CEO of Berkshire, we’d do it, but the candidates we have right now are running businesses, making decisions, getting experience. To bring them in to the Berkshire offices while I’m sitting there reading would be a waste of talent.”
One theory is that it was to reassure his investors that he has a plan–but if so, it backfired; shares fell about 1% on the news.
Does Buffett think he can train this guy? Does he think the end is near? Or is there some more complicated logic I’m not seeing?