Warren Buffett's likely successor will be Geico's next CEO - here's how he prepared Todd Combs for the role
- Warren Buffett's deputy, Todd Combs, is set to become CEO of Geico in January.
- Combs will continue to manage $14 billion in investments for Buffett's Berkshire Hathaway.
- Buffett prepared Combs for the role by trusting him with more and more money, encouraging him to take on leadership roles, and working with him on major acquisitions.
- Tasking Combs with leading a massive company while managing a huge portfolio is a logical next step in preparing him to take charge of Berkshire as a whole.
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Warren Buffett's deputy, Todd Combs, is set to become CEO of Geico starting next year. Combs will continue to oversee $14 billion in assets as an investment manager at Buffett's Berkshire Hathaway conglomerate.
Leading the nation's second-largest auto insurer while managing a massive portfolio might seem unfeasible, but a review of Buffett's annual shareholder letters suggests he's been preparing Combs for this type of role. Combs' joint responsibilities will also be valuable practice for running the entirety of Berkshire one day.
Between 2010 and 2012, Buffett hired Combs and another hedge-fund manager, Ted Weschler, as investment managers at Berkshire and potential successors to 89-year-old Buffett and his partner, 95-year-old Charlie Munger.
"Both of these men have outstanding investment skills and a deep commitment to Berkshire," Buffett wrote in his 2011 letter. "They have the brains, judgement and character to manage our entire portfolio when Charlie and I are no longer running Berkshire."
Buffett entrusted Combs and Weschler with a couple of billion dollars to invest. Both men outperformed the S&P 500 by double-digit margins in 2012, Buffett wrote in his next letter. "They left me in the dust as well," he added in a much smaller font.
"We hit the jackpot with these two," Buffett continued. "You can rest easy when they take over."
Charged with handling over $7 billion in 2013, both men again outperformed the S&P 500 and Buffett himself in 2013. "If such humiliating comparisons continue, I'll have no choice but to cease talking about them," Buffett wrote.
"Both men have Berkshire blood in their veins," he added.
Running a business makes you a better investor, and investing makes you a better CEO, Buffett wrote in his 2014 letter. Accordingly, he asked Combs and Weschler to each serve as chairman of one of Berkshire's smaller businesses, as the roles would "make the two of them even better investors than they already are (which is to say among the best)."
The so-called Oracle of Omaha reserved special praise for Combs in his 2015 letter, as his deputy laid the groundwork for Berkshire's $32 billion takeover of Precision Castparts Corp. (PCC), a supplier of aerospace components.
"A personal thank-you: The PCC acquisition would not have happened without the input and assistance of our own Todd Combs, who brought the company to my attention a few years ago and went on to educate me about both the business and [its CEO]," Buffett wrote.
He added that hiring Combs and Weschler "was one of my best moves."
Buffett's letters reveal his efforts to strengthen Combs' investing and leadership skills. He allowed Combs to grow his portfolio from less than $2 billion in 2011 to over $14 billion today. He also encouraged him to take on a chairman role and worked with him on a multi-billion dollar acquisition.
Tasking Combs with leading Geico while managing a huge investment portfolio is a logical next step in preparing him to take charge of all of Berkshire down the line.
