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We Are All Wet Cement — And Other Lessons from Berkshire Hathaway's Todd Combs
"Every single person … massively underestimates how much their life is going to change going forward."
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I’m feeling positively spoiled these days — what with the typically media-shy Todd Combs giving two lengthy interviews this year alone. In fact, it kinda feels like we’ve learned more about Combs’s evolution as an investor and his approach to business in the last few months than over the entire previous twelve years (since he joined Berkshire Hathaway) combined.
(And, extending the timeframe out a little further, you could certainly toss in his remarks at last fall’s Graham & Dodd Annual Breakfast here, too.)
Since these opportunities to learn more about the Berkshire investment manager don’t come around very often, I try to peer deeply into these interviews in an attempt to wrest out every last lesson that I can find. And his recent sit-down with the Art of Investing podcast is certainly no exception.
When you listen to an interview with someone who tapes up hundreds of pages of financial securitization documents on the walls of his office and stays there into the early hours of the morning scrutinizing them line by line — as Combs did at the outset of the Global Financial Crisis — you might imagine a dry discussion full of numbers and other inscrutable metrics.
In true Berkshire tradition, Combs’s comments apply equally well to anyone seeking a more rational mindset — no matter what profession or level of education — as they do to serious players of the money game.
All those years around Warren Buffett and Charlie Munger seem to be rubbing off.
So, without further ado, here are the five most important lessons from Todd Combs’s interview with the Art of Investing podcast.
Anyone — young or old, novice or expert — can take these to heart on the journey to success in any walk of life…
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(1) Tell the truth — even if it’s unpopular
Perhaps the biggest takeaway from this interview is how Todd Combs’s willingness to tell the truth (even the unpopular truth) continually won him favor from some of the biggest names in business and investing.
I already wrote about how, in his very first meeting with Warren Buffett, Combs delivered a frank appraisal of one of his future boss’s most cherished subsidiaries:
GEICO’s better at marketing and branding, but Progressive is a data company and data is going to win in the long run.
Combs did not toe the party line about GEICO — and impressed Buffett with his candid analysis and willingness to share an unpopular opinion.
Likewise, when meeting with Stephen Friedman (who served on the boards of Goldman Sachs and Fannie Mae) a few years before the GFC, he pulled no punches when discussing the future of Fannie.
“Fannie Mae is a complete accounting fraud,” [I told Friedman]. “There’s going to be people who go to jail over this.”
He’s like, “You know I’m on [Fannie’s] board?”
And I was like, “No, I didn’t know that — [but] I would get the hell off that board like tomorrow.”
Combs met again with Friedman the next day to walk him through all of Fannie’s many shortcomings — including its dangerous involvement with arcane derivatives. After listening to Combs’s presentation, Friedman excused himself, left the room, and resigned from Fannie Mae’s board with immediate effect.
When Friedman returned to the room, he offered to seed a new fund to be run by Combs (who, at the time, was relatively unknown). That was the start of Castle Point Capital Management, which Combs ably steered through the GFC — and which started him on the path that ended at Berkshire Hathaway.
(2) Turn negatives into positives
Early in his career, Todd Combs spent several years at Progressive Insurance — before pivoting into money management at Columbia Business School.
And, thanks to some excellent advice from a few mentors, Combs managed to turn his insurance background — and relative lack of Wall Street experience — into an asset.
Progressive didn’t do calls — which everybody did back then — or guidance or anything else. So a couple of these general managers, who wrote my recommendations [and] that I became quite close with, said: “How do you turn a negative into a positive?”
[They said that] because Progressive doesn’t do these calls, you should talk to these people on Wall Street about Progressive because they’re dying for this information.
Weston Hicks was the #1 II insurance analyst at the time, covering all of these insurance companies, [and] they put me in touch with him.
Hicks went on to put Combs in touch with Blue Ridge Capital (run by John Griffin, one of the Tiger Cubs) and he quickly made a name for himself among the Blue Ridge crew as a sharp analyzer of financial firms and a fount of knowledge on insurance.
Combs now had his foot in the door on Wall Street — not to mention burgeoning relationships with big names like Weston Hicks and Blue Ridge — all because of a simple sleight of hand. In one deft motion, he turned a perceived negative (spending his formative years in insurance) into a positive asset that propelled his career forward.
Random aside: In an odd coincidence, Weston Hicks ended up becoming the longtime CEO of Alleghany Corporation — which Berkshire Hathaway acquired last year. Hicks retired from that post at the end of 2021, turning the reins over to Joe Brandon, another man with serious Berkshire bonafides.
(3) Stay curious
Warren Buffett may have zeroed in on a career in money management from a very young age — famously spending his youth reading financial books and investing in his first stock at the age of eleven — but the same cannot be said of Todd Combs.
While earning his undergraduate degree from Florida State University, he dabbled in many different disciplines — from psychology to architecture to astronomy — before ultimately turning towards the business end of things.
“I wasn’t — to be clear — good at any of this,” Combs laughed. “I was just nineteen or twenty, trying to figure my way out.”
It might not have been intentional, but this college-aged “indecision” gave Combs a multidisciplinary toolkit and mindset that has made him a better investor and leader. And, with his wide range of knowledge and interests, it’s not hard to see how he hit it off with Charlie Munger during their first meeting.
(Combs doesn’t specifically mention it in this interview, but I’m guessing that his and Munger’s shared interest in architecture created a bonding moment or two.)
Society and capitalism, quite frankly, has pushed people to specialize earlier and earlier. Specialists start out faster. There’s this immediate gratification that you get … You come out of the gate really quick, but you also plateau much earlier.
Generalists start off much slower — as you’d expect — but there’s delayed gratification.
Todd Combs is proof of that. Some of his contemporaries may have raced ahead right out of college, but his slow-and-steady accumulation of knowledge and interests will continue to pay dividends for the rest of his life.
And it was all made possible through the careful cultivation and indulgence of his own innate sense of curiosity.
It’s not raw IQ points or anything else. It’s just [that] if you’re really, really curious, you’re going to have a lot of different interests.
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(4) We are all “wet cement”
People tend to think that whatever they are right now is what they always will be. That life is static and a big change — whether in direction or purpose — is no longer possible. Well, Todd Combs would say such an attitude is utter hogwash.
Every single person … massively underestimates how much their life is going to change going forward.
You constantly think, “Oh, I recognize that there’s been a lot of change [in my life] — and I realize that I’m different than I was — but now I’m set. People don’t realize that [they are] constantly wet cement. They think that the cement is dried — and it doesn’t. That’s a freeing concept.
And this is true whether you’re twenty, forty, seventy, or ninety-plus like Warren Buffett and Charlie Munger.
It’s never too late to make a change in life.
It’s still early days for everyone.
(5) You are never ready
Near the end of the interview, one of the hosts asked Todd Combs if he felt ready to run his own fund when Stephen Friedman offered him the chance.
No, I wasn’t ready at all. I have never really been ready for anything in my life.
That’s probably one takeaway everybody should write down. When people see things in you that you don’t see in yourself, that’s amazing. And that was true with Steve [Friedman]. That was certainly true with Charlie. And that was true — multiple times — with Warren for Berkshire.
I started as an investor with [Lou Simpson’s] portfolio at $2-2.5 billion, then [Warren] comes down one day — like six months into the job — and he says, “Why don’t we double it?”
I [resisted] and he’s like, “No, you’re fine.” And I wasn’t ready for that. I wasn’t ready for Haven. I wasn’t ready to look into 200 [potential] acquisitions a year. I assure you, I wasn’t ready to run a 40,000 person company (GEICO).
We often fall prey to the temptation to hold off on doing important things until the circumstances are ideal. Or until we do more research. Or refine our process further. Or save a little more money. In other words, we wait until we feel ready.
Well, the harsh truth is that we (probably) will never feel ready. Especially for the most important moments and leaps in life.
Waiting around until everything is perfect — which will never happen — is a surefire way to end up with regrets. You’ll probably be waiting forever.
In Combs’s case, his mentors have continually pushed him to step outside of his comfort zone and to keep growing as an investor and business leader.
But here’s the key point: Despite admitted misgivings about his own readiness, Combs did not shrink from these challenges. Each time, he said yes — and pushed his career to new heights.