An interesting article came out on June 28 in the German edition of the Business Insider website. The article was a brief interview of Ted Weschler. Weschler, along with Todd Combs, manages a portion of Berkshire Hathaway’s investment portfolio.
The interview was interesting for its brevity and Weschler’s simplistic answers. This simplicity hid how insightful the answers really were. An example:
BI: As you have been a very successful investor for years: Is there a recipe to it?
TW: There is one, but I am not telling you [laughing]. Investing is kind of a game of connecting the dots. The nice thing about it is the longer you are in the business, as long as you are intellectually curious, your collection of data points of dots gets bigger and bigger. That is where someone like Warren is just incredible. He has had a passion for investing for well over 70 years. He started by the age of 10 or 12. He keeps building that library of data, the ability to recognize patterns in data. Being a successful investor you need to be hungry, intellectually curious, interested, read all the time. Read a lot of newspapers. You need a certain level of randomness in order to connect things that might give you an insight into where a business is going in five years that somebody else might not see.
When it comes to wholly owned businesses among other factors it is about pricing power. You have something that is so attractive to the consumer that they pay a premium to walk into your store and do something. There is a number of attributes like that. But you can never just point to one thing. It is a mosaic of all sort of different things. If then you read the book of a business you can pretty quickly find out if that is a good business or not.
This echoes comments that Warren Buffett has made: “Finding ideas is a function of cumulative knowledge over time. Something just comes along…”
The key is to read a lot, to read broadly, and to read with an open mind.
One other thing about the Weschler interview, which you can read here: “Interview with Warren Buffett’s investment manager Ted Weschler: The recipe for financial success.” Before being recruited to Berkshire, Weschler ran a $2 billion fund with just a secretary and a research assistant. He did not need a team of analysts or a large amount of infrastructure or overhead. It was an entrepreneurial venture where he owned a small number of companies over an extended time period.