Buffett wants risk-averse portfolio managers · Transcript · BuffettMungerGPT

WarrenYou have identified four investment professionals who will at some point in time be running the portfolio for Berkshire Hathaway. What was the criteria that you used to select the four people? We obviously look for people that have had pretty good records, but that criteria alone is nowhere near sufficient to come up. with the candidates we want. I mean, we care enormously about human qualities, and we think we can make that judgment in some cases, and in some cases we can't. I mean, and it's no negative vote on people we skipped over. We just decided we didn't know whether they would be the right kind of person. We made an affirmative judgment on four as to both their ability and their integrity, and I would like to – there was one other item in here, I believe. I believe, which I think achieved a little added relevance in the last year. I said, we therefore need someone genetically programmed to recognize and avoid serious risks, and then I put in italics, including those never before experienced. And then I said, certain perils that lurk in investment strategies cannot be spotted by one of the models, by use of the models commonly employed today by financial institutions. Well, I think that proved to be somewhat prophetic of what happened last year. All of these places had models. I mean, the major banks, the major investment banks, and they went neat weekly at a risk committee probably and go over their models and all of the statistics would be printed in nice columns and everything, and they didn't have the faintest idea what risk they were involved. You really need, in the investment world, someone very solid, someone you trust, someone you trust, reasonable analytical skills, but you also need someone that actually can contemplate problems that haven't popped up yet, which are starting to become possibilities in terms of new financial instruments or new behaviors in markets and that sort of thing. And that's a rare quality. I mean, that inability to envision something. that doesn't show up in your past model, you know, can be fatal.