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Daily Archives: October 26, 2010

Oliver Hart is in town…

Oliver Hart is currently at CBS giving a series of talk on firm theory.  Professor Hart, now teaching at Harvard, is widely considered to be  a future Nobel prize winner in the field of theory of firm, after the seminal contributions of Ronald Coase and Oliver Williamson.

For a list of his talks, click here.

Buffet found his successor

WSJ reports Warren Buffet just named his successor:

Berkshire named Todd Combs, manager of a small hedge fund from Connecticut, to oversee a portion of Berkshire's roughly $100 billion investment portfolio. The surprise appointment will be a challenge for Mr. Combs, 39 years old, whose fund recently had only about $400 million in assets and primarily invested in the shares of financial-services companies.

The succession plan at Berkshire is among the most high-profile in modern American corporate history. Mr. Buffett, who turned 80 in August, has said he will likely split his job in two—into separate CEO and investing functions—and adds that he has no current plans to step down. Mr. Combs is "not going to take over the whole investment function as long as I'm around," Mr. Buffett said in an interview. "I have this dual position as CEO and CIO and I will remain in that."

Mr. Combs will join a company that has fewer than two dozen employees in its corporate office, but owns over 70 businesses that collectively had more than 257,000 employees at the end of 2009. 

The surprise announcement came after two candidates—including Chinese-American hedge fund manager Li Lu, and another individual Mr. Buffett was interested in—took themselves out of the running for the job, Mr. Buffett said. The emergence of Mr. Li as a contender was the subject of a July page-one article in The Wall Street Journal.

The reaction of these two candidates underlines some of the challenges for Berkshire in filling the shoes of one of the most famous investors in history. Talented investment managers can receive pay totaling billions of dollars over a career. Filling Mr. Buffett's shoes won't likely lead to that kind of eye-popping pay, says Mr. Buffett, who earns $100,000 in salary as CEO of Berkshire, though he's been enriched through his holding of Berkshire shares.

"You'll make a lot of money in this job but you won't make billions," Mr. Buffett says.

Mr. Buffett says Mr. Li "decided he would prefer to be where he was. In effect he didn't want the job. I think he made a lot of money doing what he is doing and he has a very good position in life." Mr. Li has developed a close relationship with Charles Munger, Berkshire's 86-year old vice chairman, and manages a large portion of Mr. Munger's family's money that isn't in Berkshire.

Mr. Li said, "I've decided to stay where I am." He declined to elaborate further.

Mr. Comb's fund, Greenwich, Conn.-based Castle Point Capital, was launched in 2005 with seed money from private-equity firm Stone Point Capital. Mr. Combs' fund focuses on stock investing—both buying and selling "short," or betting on price declines. Castle Point has earned cumulative returns of about 34% since the fund launched, according to an investor who read a letter sent by Mr. Combs to clients explaining he was closing his firm to join Berkshire. Over the same period, the S&P 500 index fell 5.1%.