In 2000, Combs started his MBA at Columbia Business School. It was a chance to learn securities analysis in the same halls where Buffett had long ago learned the craft from Benjamin Graham, the father of value investing.
His first encounter with Buffett came during a talk that year. The Berkshire CEO told students that one thing they could do to get ahead was to read 500 pages a week, Combs recalled in a 2014 interview with CNBC. The billionaire’s point, he said, was that an investor could compound knowledge and get better over time.
Richard Hanley, a hedge fund manager in New York, was an adjunct professor in the MBA program back then. Combs, he says, had a deep drive to get ahead and the mental flexibility to come up with smart ideas. One assignment Hanley gave his students was to devise a trade that would have the best performance over the next several months. Unlike his peers, Combs decided to short the stock he picked. Hanley forgets the company Combs bet against, but his idea beat everyone else’s. “Todd was very intense, very focused,” Hanley says.
Buffett’s advice about reading stuck with Combs as he started his investment career, first as a financial-services analyst at Copper Arch Capital and later at Castle Point Capital Management, the hedge fund in Greenwich, Conn., he started in 2005. Combs’s approach was a race against the clock to consume information, says one person familiar with his strategy during that period. At Castle Point he’d get to the office early and leave late. If he wasn’t in a meeting with his analysts or taking a break to exercise, he was reading, three people say.
He was fascinated by psychology and the sorts of biases that drive decision-making. Books such as Talent Is Overrated and The Checklist Manifesto have become staples in the hedge fund world, where money managers are constantly looking for an edge. But Combs was interested in those ideas well before they became trendy, one person says. Every month or so, he’d pick a book and get together with his analysts to discuss it.
In early 2007, Buffett said in his annual letter to Berkshire shareholders that he was looking to hire at least one younger money manager who would be able to succeed him as the company’s chief investment officer. Résumés poured in, and Combs threw his own into the mix. But it didn’t stand out.
Castle Point’s mandate was to invest in financial-services stocks. His company had done well but not exceptionally so. It was also relatively small, overseeing about $400 million. Combs’s big accomplishment was navigating the 2008 financial crisis relatively unscathed. His fund ended down 5.7 percent that year, while the S&P 500 plunged 37 percent, according to a letter to investors.
In 2010, Combs asked Buffett’s longtime business partner, Berkshire Vice Chairman Charles Munger, for a meeting. Soon after, the two met for lunch at the California Club in Los Angeles and ended up having a conversation that stretched for hours, according to an article at the time in the Wall Street Journal. Afterward, Munger suggested to Buffett that he meet the young money manager. Beyond his apparent smarts, Combs had the sort of personality that was a “100 percent fit” for Berkshire’s culture, Buffett told the newspaper. Mark Nelson, chairman of investment manager Caledonia in Sydney, who had encouraged Combs to reach out to Munger, says he was surprised by how quickly Berkshire acted. Combs enjoys digging into complex financial companies and tearing apart the accounting, Nelson says. “They probably saw a kindred spirit.”
Combs joined Berkshire early in 2011 and eventually moved his family to Omaha from Connecticut. Ted Weschler, the other investment manager Buffett hired to pick stocks at Berkshire, chose to stay in Charlottesville, Va. People familiar with the two men’s arrangements say Combs’s decision to relocate means Buffett leans on him more. In public, however, the billionaire has tried to treat both equally, saying that Combs and Weschler have been great additions to the company and have “Berkshire blood in their veins.”
Sitting next to Buffett has had other benefits for Combs, who now manages about $12 billion for Berkshire. Dimon was introduced to Combs by the Omaha billionaire, which led to the young investment manager joining the JPMorgan board.