Secrets revealed: How Todd Combs earned Buffett’s and Munger's trust

Todd Combs: Investment Manager, Berkshire Hathaway

Warren Buffett and Charlie Munger's decision to bring Todd Combs on board as one of their first investment managers in 2010 was a remarkable turning point in Combs’s career.

In a recent podcast, Combs shared the story of how he managed to impress these legendary investors to become their deputy.

For more than a decade, Buffett and Munger have entrusted Combs, alongside Ted Weschler, with the task of overseeing Berkshire Hathaway's extensive portfolio of stocks and investments worth hundreds of billions of dollars.

Combs, who also serves as the CEO of Berkshire-owned Geico, and holds a position as a JPMorgan director, recently revealed the intriguing story of how he secured this esteemed role during an episode of the Art of Investing podcast.

Combs cold-calls Munger

In 2010, Combs was at a professional crossroads, feeling burned out from managing his hedge fund, Castle Point Capital, and contemplating his next career move.

An opportunity arose when he crossed paths with an investor who had connections with Charlie Munger. This connection led to Combs making an audacious decision to cold-call the office of Berkshire's vice-chairman in the hope of arranging a meeting.

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To his surprise, Munger extended an invitation for breakfast at a Los Angeles business club at 7am, leading to a marathon six-hour conversation. Recalling the experience, Combs candidly admitted to feeling "very, very nervous" while trying to keep up with the intellectual dynamo that is Charlie Munger. The conversation spanned diverse topics, including obscure books both had read, as well as their unique approaches to various issues.

Their discussion also ventured into current events, such as the Deepwater Horizon oil spill, during which Combs shared his perspective that BP had effectively taken a risky financial position by failing to invest a relatively small amount to safeguard against a potential catastrophe. Munger praised this insight as "brilliant," leaving a lasting impression on Combs.

What’s your future plan, Mr Combs?

Following this initial meeting, Munger continued to engage with Combs, with numerous conversations taking place. Eventually, Munger inquired about Combs' future plans. It was during one of these conversations that Combs shared his idea of acquiring an insurance company as a source of permanent capital for investments.

Munger suggested that he conversed on this concept with Warren Buffett. Interestingly, Combs was unaware that this process was part of a vetting procedure. He believed that he was flying out to meet Buffett because the renowned investor was interested in acquiring one of the businesses from Combs's portfolio. This approach, characterized by genuine, unscripted conversations, appeared to be an effective way to evaluate talent.

While the early interactions between Combs and Munger didn't focus on investing, Warren Buffett was eager to dive into discussions about stocks.

Why Mastercard instead of American Express, asks Buffett

Combs held shares in US Bancorp, Mastercard, and Visa, while Berkshire had substantial stakes in Wells Fargo and American Express. This sparked a conversation that delved into the choices each had made. Combs remembered the dialogue: "We got right into it, and it's like, 'Why Mastercard instead of American Express?' And so I laid it on him. I have my opinions when it comes to that stuff."

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Buffett's thorough questioning prompted Combs to explore scenarios in which his assessments might be incorrect and where Berkshire's choices could outperform.

Combs's rapport with Buffett differed from his connection with Munger. While the latter revolved around science, principles, and philosophy, his connection with Buffett centered on subjects such as capital allocation, risk assessment, and the dynamics of insurance.

Buffett even questioned Combs on whether Progressive, a company Combs had worked with previously, was superior to Geico. Combs candidly affirmed, acknowledging that Berkshire's car insurer excelled in marketing and branding, but Progressive's data-driven approach positioned it as a long-term winner.

Combs's genuine and authentic approach to the discussions seemed to resonate with Buffett and Munger, leading to his hiring in late 2010. This marked the beginning of a journey that would see him and Ted Weschler steadily assume more significant responsibilities. By the end of 2021, the duo had authority over $34 billion in investments, representing nearly a tenth of Berkshire's stock portfolio's total value. Todd Combs' remarkable journey to becoming a deputy at Berkshire Hathaway, hence, is a testament to the power of authenticity, candid conversation, and intellectual curiosity when impressing two of the most influential investors in the world.

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