No. of Recommendations: 22
It's really good to see this serious, on-topic, discussion. Thanks all.
Below are some notes I've taken from the replies - not a summary, just reminders. So, with apologies,:
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Ultimatespinach: Who will do the stock picking? Is this an “on topic” topic worth of discussion?
Oscar255414: Yes. Plenty of reasons to keep watching this board.
WEBspired: No problem if Abel wishes to increase their money managed
Ppant: Berkshire is too big these days to be impacted meaningfully by conventional stock-picking managers. Where something will make a meaningful impact, a la Apple, it is best approached as an enterprise capital allocation decision to take a substantial business position rather than a conventional portfolio management one.
There is no reason why Abel as CEO can(not) view the stock portfolio as a set of stakes in businesses administered by a person or group of managers ( delegated to Tedd, Tod or anyone else). The CEO can then allocate capital, set hurdle rates and assess performance based on returns produced from this business segment over a period that makes sense ( 5 years at least).
Blackswanny: Todd and Tedd will continue to run their own portfolios I think in a small way...however hopefully efforts will be concentrated on Apple type investments between the three of them that move he needle.
BRKnut: We all got to read the tea leaves our own way!
Ted and Todd are being provided opportunities for understanding businesses within the fold. Besides the cliché “you are a better investor if you are a better business manager”, there’s something fundamental about Warren Buffett’s own evolution.
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My takeaway is that this is a significant topic to discuss. And that Ted and Todd can be part of a combined team effort to find significant investment opportunities for BRK. Greg will head the team.
Below are some thoughts on the subject.
o If there is to be a significant ongoing stock picking activity, Greg will not have time to do the investigations in depth. Buffett, Ted, Todd, and others emphasize the amount of reading needed. As Ted put it, you need a "variant" insight into an opportunity to outwit the market. You need to understand the basis for what the market is thinking to know when you might have an edge. That takes a lot of reading. Greg is going to be very busy helping the existing businesses become more efficient in a slow growth GDP. Others are going to have to define the opportunities for consideration.
Buffett, long ago, made the correct decision for himself that he would be of more value concentrating on asset allocation than managing the businesses. And that's what he strongly prefers to do anyway. In one sense, Buffett runs his life to do things he enjoys doing and to delegate or avoid things he doesn't enjoy doing. He doesn't like confrontation, and that's sometimes part of business management. He did keep track of how the various businesses performed by frequent reports and his photographic memory to recall the past. But he rarely intervened. Buffett is a prodigy.
That isn't Greg. He knows operations and has the ability to understand businesses - current or potential. So he will "invert" the CEO role that Buffett has played. As Buffett needed managers he could trust, Greg will need advisors he can trust. He will make final major decisions on asset allocation. Fast if needed. An obvious role for T&T.
o Investment opportunities large enough to impact BRK today are limited. We will need to be very well prepared to act when market downturns provide opportunities.
o What hasn't been brought up is "what's in it for T&T?"
If the original compensation package still holds, they agreed to a $1 million annual salary plus some percent of what investment results they achieved vs the S&P 500 over a five year period IIRC. That's peanuts - particularly if they've followed the "don't lose money" philosophy of Buffett in a market driven by the magnificent seven. As someone has pointed out, they also don't enjoy leverage from float as Buffett does. In addition, they've been diverted to other chores by Buffett.
I sincerely hope their compensation has been modified. But, that's not why they took the jobs. The ability to work closely with Buffett is the incentive. There were other pluses - availability of capital, freedom from dealing with anxious clients, time spent to manage a fund, etc. They could concentrate on what they enjoyed. But Buffett is the draw. Ted spends more on weekly commuting to Omaha than his income from BRK.
Both Ted and Todd are already independently wealthy so compensation isn't an issue now. What about after Buffett passes on? As others have suggested, they need to have a broader role defined and compensated. And, if they're concentrated on infrequent, large, WRO BRK investments, will that be enough to hold their interest?
I don't expect them to immediately bail out when Buffett is no longer CEO. They have too much respect for Buffett and Berkshire to jump ship on Greg. But, for how long?
Todd strikes me as a Berkshire lifer. I think Ted has broader interests in life, especially as time passes. Just my reading of them - no data.
So, I also vote "Yes". This is a worthwhile discussion "on-topic" topic.
