Help Wanted: Warren Buffett’s Hiring

  • Share
  • Read Later

The other day I attended a luncheon for Barnes & Noble’s Discover Great New Writers nominees, which is just a way for me to mention I, ahem, was one in 2006 for my first book–though not, tragically, a finalist. At the lunch I met a lovely fellow who runs a Nebraska furniture business owned by Berkshire Hathaway (his partner was a fellow nominee; check out his work here). This fellow delighted me with stories of how the second richest man in the world personally attends ribbon-cutting ceremonies of local furniture stores, and I thought, wouldn’t he be a great guy to work for?

What a coinkydink: it turns out Warren Buffett is hunting for a #2.

In his rambling, folksy annual letter to shareholders, Buffett includes a help-wanted ad of sorts. He’s looking for a chief investment officer to take over after he croaks (I’m not being rude–he puts it just as bluntly); the man slated for the job being just six years younger, Buffett’s looking for some fresh blood. Even if you’re not packing your bags for Nebraska, the job description itself is a lesson in what one of the greatest businessmen alive looks for a top investment manager. You can download the whole letter here, or read the section I refer to below (bolds mine):

I have told you that Berkshire has three outstanding candidates to replace me as CEO and that the Board knows exactly who should take over if I should die tonight. Each of the three is much younger than I. The directors believe it’s important that my successor have the prospect of a long tenure.

Frankly, we are not as well-prepared on the investment side of our business. There’s a history here: At one time, [vice chairman] Charlie [Munger] was my potential replacement for investing, and more recently Lou Simpson has filled that slot. Lou is a top-notch investor with an outstanding long-term record of managing GEICO’s equity portfolio. But he is only six years younger than I. If I were to die soon, he would fill in magnificently for a short period. For the long-term, though, we need a different answer.

At our October board meeting, we discussed that subject fully. And we emerged with a plan, which I will carry out with the help of Charlie and Lou.

Under this plan, I intend to hire a younger man or woman with the potential to manage a very large portfolio, who we hope will succeed me as Berkshire’s chief investment officer when the need for someone to do that arises. As part of the selection process, we may in fact take on several candidates.

Picking the right person(s) will not be an easy task. It’s not hard, of course, to find smart people, among them individuals who have impressive investment records. But there is far more to successful longterm investing than brains and performance that has recently been good.

Over time, markets will do extraordinary, even bizarre, things. A single, big mistake could wipe out a long string of successes. We therefore need someone genetically programmed to recognize and avoid serious risks, including those never before encountered. Certain perils that lurk in investment strategies cannot be spotted by use of the models commonly employed today by financial institutions.

Temperament is also important. Independent thinking, emotional stability, and a keen understanding of both human and institutional behavior is vital to long-term investment success. I’ve seen a lot of very smart people who have lacked these virtues.

Finally, we have a special problem to consider: our ability to keep the person we hire. Being able to list Berkshire on a resume would materially enhance the marketability of an investment manager. We will need, therefore, to be sure we can retain our choice, even though he or she could leave and make much more money elsewhere.

There are surely people who fit what we need, but they may be hard to identify. In 1979, Jack Byrne and I felt we had found such a person in Lou Simpson. We then made an arrangement with him whereby he would be paid well for sustained overperformance. Under this deal, he has earned large amounts. Lou, however, could have left us long ago to manage far greater sums on more advantageous terms. If money alone had been the object, that’s exactly what he would have done. But Lou never considered such a move. We need to find a younger person or two made of the same stuff.

The #1 job isn’t open just yet. As Buffett sums up:

The good news: At 76, I feel terrific and, according to all measurable indicators, am in excellent health. It’s amazing what Cherry Coke and hamburgers will do for a fellow.

Awww. Doesn’t he sound great? I think I’m going to send in my résumé. Maybe my stint writing for Money magazine makes me a candidate. That, and my love for Cherry Coke. Will he care that I only drink diet?