In Matthews’ opinion, the most disconcerting news from the weekend was that the external managers Buffett has hired to manage Berkshire’s money are doing a lousy job. Specifically, Matthews says, they all lost more than 37% on the year — worse than the stock-market average.

The only reason to hire a money manager is to try to beat the market, because otherwise you should just buy an index fund. The fact that Berkshire’s external managers lost money isn’t surprising — everyone got hammered last year. The amount they lost, however, is.

The reason Berkshire has hired external managers, says Matthews — founder of Ram Partners — is to conduct a sort of open audition for managers, who might take over this job after Warren Buffett retires. So far, all the managers Berkshire has hired appear to have flunked the test.

Berkshire devotees maintain that the company will be fine when Warren leaves. Given the performance of its external managers thus far, however, there wouldn’t seem to be much evidence of this.

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