Berkshire Hathaway 2017 Annual Meeting Audience Question # 35

Why Todd Combs and Ted Weschler haven’t been given more capital to manage

Warren Buffett:

Andrew ?

Andrew Ross Sorkin:

Warren. Since Todd and Ted joined Berkshire, the market cap of the company has doubled, and cash on hand is now nearly a hundred billion dollars.

It doesn’t look like Todd and Ted have been allocated new capital on the same relative basis.

Why?

Warren Buffett:

Well, actually, I would say they have been.

I think we started out with two billion. That could be wrong, but my memory was two billion with Todd when he came with us. And so, there have been substantial additions.

And, of course, their own capital has grown just because… say, in a sense, they retain their own earnings.

So yeah, they are managing a proportion of Berkshire’s capital… also measured by marketable securities… I think they’re managing a proportion that’s pretty similar, maybe even a little higher than when each one of them entered. And Ted entered a year or two after Todd.

You know, they… I think they would agree that it’s tougher to run 10 billion than it is to run one or two billion. I mean, your expectable returns go down as you get into larger sums.

But the decision to bring them on has been terrific. I mean, they have… they’ve done a good job of managing marketable securities. They made more money than I would’ve made with that same, what is now 20 billion, but originally was two billion.

And they’ve been a terrific help in a variety of ways beyond just money management. So that decision, I’ll… you know… that’s been a very, very good decision.

And they are… they’re smart. They have money minds. They are good, specifically, at investment management. But they’re absolutely first-class human beings. And they really fit at Berkshire. So, that was…

Charlie gets credit for Todd. He met Charlie first. And I’ll claim credit for Ted. And I think we both feel very good about the decisions.

Charlie?

Charlie Munger:

Well, I think the shareholders are very lucky to have them because they both think like shareholders.

Warren Buffett:

Totally.

Charlie Munger:

After all, it came up that way. And that is not the normal way headquarters employees think. It’s a pretense that everybody takes on, but the reality is different.

And these people really, deeply think like shareholders. And they’re young, and smart, and constructive. So we’re all very lucky to have them around.

Warren Buffett:

Yeah. Their mindset is a hundred percent, “What can I do for Berkshire,” not, “What can Berkshire do for me?” And, believe me, you can spot that over time with people.

And on top of that, you know, they’re very talented.

But, you know, it’s hard to find people young, ambitious, very smart, that don’t put themselves first. And I would… every experience we’ve had, they did not put themselves first. They put Berkshire first.

And believe me, I can spot it when people are extreme in one direction or another. Maybe I’m not so good around the middle, but you’ve got…

You couldn’t have two better people in those positions.

But… and you say, “Well, why don’t you give them another 30 billion each or something?” I don’t think that would improve their lives or their performance.

They may be handling more as they go along, but the truth is, I’ve got more assigned to me than I can handle at the present time, as proven by the fact that we’ve got this 90 billion-plus around.

I think there are reasonable prospects for using it. But if you told me I had to put it to work today, I would not like the prospect.

Charlie, anything?

Charlie Munger:

Well, I certainly agree with that. It’s a lot harder now than it was at times in the past.

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