Two days ago, the news broke and I was really surprised:
Todd Combs is leaving Berkshire Hathaway and GEICO to join JPMorgan.
A quiet, almost monastic investor stepping away from the house Buffett built— that alone is enough to make any long-term thinker pause.
According to CNBC, JPMorgan hired him to lead its new Security and Resiliency Initiative, looking for direct equity investments across defense, aerospace, healthcare, and energy.
Yes, the industries that matter when the world becomes unpredictable.
When someone like Todd moves, he isn’t chasing headlines.
He’s redirecting a process.
A worldview.
A philosophy.
And that philosophy might be one of the clearest frameworks for thinking about businesses and investing today.
Below are the timeless lessons I’ve taken from his writing — particularly from his introduction to Security Analysis — and from studying how he actually works. Because if you understand Todd’s process, you understand why he succeeds in environments where others get lost in noise.
Start With Facts, Never With Stories
The first principle of Todd’s philosophy is almost austere:
When done well, investing involves learning how to process information in order to determine when the odds are in your favor; the goal is to make educated bets based on facts and not stories.
That sentence alone explains why Buffett hired him.
Todd avoids the trap that captures so many smart analysts: beginning with a narrative and then gathering evidence that confirms it.
He works in the opposite direction.
His process always starts with primary sources:
SEC filings
Annual reports
10-Ks, 10-Qs
Trade journals
Never with:
Management narratives
Sell-side research
“Channel checks” from biased insiders
Consensus stories
Opinion last. Facts first.
Because once you adopt a story, you unconsciously begin protecting it.
Great Businesses Reveal Themselves Through Their Economics, Not Their Story
Todd breaks analysis into the first of his three major buckets:
1. Find a good business
What does “good” actually mean?
According to Todd, a great business has:
A wide moat
Low capital intensity
Pricing power
Recurring revenues
Staying power
The likelihood of long-term growth
And you can only confirm these traits by ripping the business “down to its studs.”
His sequence is always quantitative, then qualitative:
a) Start with the balance sheet
The balance sheet tells you how the business funds itself, how much risk it carries, and how fragile it truly is.
b) Cash flow statement second
Cash flow reveals how much oxygen the business produces without illusions.
c) Income statement third
Think in terms of a dollar of revenue that flows into a business and runs through the cash flow statement, then the balance sheet, and last the income statement. This is ultimately how we derive a company’s return on invested capital, which is usually a reliable shorthand for the quality of the business.
Todd doesn’t want to know how a company performed.
He wants to understand how each unit performs — a store, a subscriber, a policy, a widget.
It’s business reality, not spreadsheet reality.
Start with facts and not opinions. If you start with opinions, it’s very easy to become wedded to them even when the facts run counter to the popular narrative.
The Second Bucket: Great Management Actually Matters
Most investors underestimate management. Todd does not.
The importance of good management is almost universally underestimated, yet it is one of the most crucial determinants of a company’s intrinsic value. As Graham and Dodd said, “You cannot make a quantitative deduction to allow for an unscrupulous management; the only way to deal with such situations is to avoid them.”
He evaluates leadership as if he were buying the entire company himself.
How does Todd judge management?
Not by charisma.
Not by interviews.
Not by investor days.
He studies:
Incentives (via the proxy statement)
Capital allocation decisions
Use of leverage
Whether the CEO acts like an owner
Whether they plant seeds for the future or borrow from it
He goes deeper through scuttlebutt — talking to people who have actually worked with or for the CEO.
Are they honest?
Do they break teams?
Do they oversimplify?
Do they confront reality or avoid it?
In Todd’s eyes, CEO incentives predict outcomes better than CEO words.
While we know that a long-term perspective is crucial in running a business, there are often unfortunate incentives to become overly short-term oriented. The private owner of a great business isn’t worried about quarterly earnings, meeting market expectations, stuffing sales channels, pursuing aggressive accounting treatments, or withholding long-term investments to improve reported short-term results.
The Third Bucket: Price Still Matters (More Than Ever)
A great business with a great CEO is still a bad investment at the wrong price.
This is where Todd’s discipline shows.
He insists on three valuation ideas:
Owner earnings > EBITDA: EBITDA, especially adjusted EBITDA, is a shortcut Todd distrusts. He focuses on owner earnings — the cash left after maintaining the business.
Capital structure matters. A company dependent on leverage is fragile, even if earnings look strong.
Margin of safety. Todd reminds us: We know far less than we think.
Perfect information does not exist; there are only confidence intervals. This is, of course, at the heart of why a margin of safety matters so greatly in investing. If you start with the premise that there is only so much one can know, of course you need a margin for error. The less you know, the greater the margin needed.
What We Can Learn From Todd Today
Here are the lessons I return to most often:
Start with facts. End with opinions. Never reverse the order. The moment you start with a story, you’ve already lost.
A spreadsheet is not business reality. Cash flow, incentives, and unit economics are reality.
Management quality is not a narrative — it’s a set of behaviors. Incentives > charisma > presentations.
The right price matters more than the right narrative. Good businesses are terrible investments at the wrong prices.
Humility compounds. You cannot know everything. But you can design a process that works despite that.
Conclusion
I believe Todd Combs didn’t leave Berkshire to become a different investor.
He left to express the same principles in a world where those principles are desperately needed.
And that’s the point:
A great investor doesn’t chase outcomes.
A great investor builds decisions.
Decisions that survive uncertainty, noise, and time.
Investors must find a way to navigate through uncertainty and randomness. There are decisions beingmade every day, and sometimes made decades earlier, that are still affecting outcomes today in every business and industry.
That’s the Todd Combs philosophy.
And there has never been a better moment to study it.
I’d love your take: what’s the most important idea you’re taking from this essay?
Let me know in the comments.
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Good comment In general, today there are many externalities that make everything even more unpredictable and my humble recognition and courage for those who risk it. In noisy times, investment is not predicting, it is the decisions that resist the error. Trade seeks movement; Investment seeks permanence. They are different games, but today they share a rare virtue: the courage to act with discretion when the market shouts otherwise.
Writing flows effortlessly, nice reading, thanks for sharing, Erza!