Oddly, when Buffett graduated, in 1951, both Graham and his father advised him not to go into stocks. Each had the post-Depression mentality of fearing a second visitation. Graham pointed out that the Dow had traded below 200 at some point in every year, save for the present one. Why not postpone going to Wall Street until after the next crash, his heroes counseled, and meanwhile get a safe job with someone like Procter & Gamble?43
It was awful advice—violating Graham’s tenet of not trying to forecast markets. The Dow, in fact, never went under 200 again. “I had about ten thousand bucks,” Buffett noted later. “If I’d taken their advice I’d probably still have about ten thousand bucks.”44
Anyway, there was no way that Buffett was going to wait. Having racked up the only A+ that Graham had awarded in twenty-two years at Columbia,45 Buffett made what seemed an irresistible offer: to work for Graham-Newman for free.
But Graham turned him down. These were the days when Jews were locked out of Wall Street’s gentile firms, and Graham preferred to hold his spots for Jews.46 † (Morgan Stanley would not hire its first Jew until 1963.)47 It is not clear whether Buffett discovered Graham’s reason then or a bit later, but when he did, it was a shocker. “It was sensitivity training for him,” one of his friends would comment.48
It did not occur to Buffett to look anyplace else on Wall Street—that is, to work for someone he didn’t know. Once again, he headed home. The Omaha National Bank offered him work, but Buffett turned it down, preferring the familiar confines of Buffett-Falk & Co., his father’s brokerage. A friend of Howard’s asked: “Will you be known as Buffett & Son?”
“No,” Warren cracked. “Buffett & Father.”49
In Omaha, Buffett began to court Susan Thompson, the daughter of a prominent Omaha minister and psychology professor. Her folks were friends of the Buffetts, and her father had managed one of Howard’s campaigns. Also, Susie had roomed with Warren’s sister Roberta at Northwestern University.
Susie had an enormous sparkling smile, round cheeks, and dark hair that fell to a curve at the neck—somewhat resembling Betty Boop’s. Bubbly and outgoing, on first impression she struck many as light-headed and even vacuous.
The truth was to the contrary. As a girl, Susie had been sickly. She had suffered from earaches, had frequently had her ears lanced, and had spent long stretches at home with rheumatic fever. William and Dorothy Thompson had tried to make up for it by showering their daughter with attention, tenderness, and physical demonstrativeness.
She grew up, she would say, with an awareness of being unconditionally loved.50 And having overcome illness, she was conscious of a sensation of freedom. She felt not merely healthy, but released from pain. She would say, “To be free of pain is a great state of being. I learned that at a very young age.”51
By the time she reached adulthood, Susie seemed to have been put together from all the emotional material that Warren did not have. She took an unusual interest in reaching out to other people—a deep interest. Instinctively empathetic, she had a soothing way of drawing people out, especially at a level of feelings. Faith Stewart-Gordon, a sorority sister and later proprietress of New York’s Russian Tea Room, said:
Susie had this otherworldly side. We took the same philosophy course. After, she sent me this book on Zen Buddhism. She was always trying to get past the mundane and get to the big issues. She’d look into my eyes and say, “How are you?” When Susie said that, she meant: “How are you doing in life? How is your soul?”
In particular, Susie had a fascination with death. But it was the mirror image of Warren’s obsession. Somewhere in her illnesses, Susie had lost the fear of dying, and now she was eager to be with people on their deathbeds and to ease their fears of passing on. Whereas Warren thought about dying logically and wanted to keep the whole terrifying subject as far away as possible, Susie related to death in spiritual terms and was eager to wrap her hands around it.
Once he started seeing Susie, in the summer of 1951, Warren immediately fell in love with her. But Susie was anything but in love with him. She was bored by his brainteasers and would slip out the back door when Warren came calling. He told her that he would be rich, which did not mean a thing to her. Besides, as Susie recalled, she was “madly in love with somebody else.” So Warren settled for courting Susie’s father. According to Susie, Warren
went over to my parents’ home every night and played the ukulele. My father [had] played the mandolin since he was 20, so he was really excited about having someone to play with. So Warren did that every night, while I went out with this other person.52
The “other person” was Milton Brown, a Union Pacific mail handler’s son who had dated her in high school and also at Northwestern. Susie’s parents objected to her dating a Jew and wouldn’t invite Brown into the house.53 The cash-strapped Brown wasn’t welcome at Susie’s sorority, either. To Susie, who was trying to break out of her sheltered, Waspish upbringing, this magnified Brown’s appeal. But eventually, she gave in to her father, broke off with Brown, and hastily left Northwestern. 54
Warren, meanwhile, was canny enough to see what was going on. He told “Doc” Thompson that he was the perfect compromise: “Jewish enough to suit Susie, and Christian enough to suit you.”55 By Jewish enough for Susie, Warren surely meant that Susie would find plenty in him to empathize with, too. Susie’s sister, Dorothy, recalled:
My dad liked him right away. He’d come over after the family had dinner. She’d be doing the dishes and he’d be sitting on a stool and playing a ukulele or a little guitar and singing. Warren had a very nice voice.
The black-haired minister, who was used to getting his way, kept telling Susie that she ought to go out with Warren. And Susie looked up to her father and respected his judgment.
Eventually, she and Warren began to date. She liked his sense of humor, and their Pat-and-Dick courtship blossomed into romance. “They were so infatuated with each other,” said Warren’s Aunt Katie. “Kissing, sitting on each other’s laps. It was awful.”
Warren, as he had predicted, was indeed “Jewish enough” for Susie. He had his buried childhood traumas, such as his tormenting mother and his forced removal to Washington, just waiting for Susie to go to work on. And Susie had a depth of understanding that was unlike anyone’s in his experience. In retrospect, Warren said he had been lonely until he met her.56
Hidden behind an illusion veil and a gown of Chantilly lace, Susie married Warren at Dundee Presbyterian on the third Saturday in April 1952. Driving to California for a honeymoon, they stopped at the Wigwam Café, outside of Omaha, for their first meal. According to one account—perhaps apocryphal—of the trip, on the first Sunday, Warren noticed a lone Cadillac parked outside a company headquarters. He stopped the car, ducked inside, and picked the brain of the company president while his nineteen-year-old bride waited in the car, reflecting on the verities of being married to Warren Buffett.
The Buffetts started out in a $65-a-month three-room apartment.57 Given Warren’s promises of riches, Susie may have been a bit taken aback. The place was so run-down that mice crawled into their shoes at night. Warren was so tight about money that when the couple had a daughter—also named Susie—they made a bed for her in a dresser drawer.
At Buffett-Falk, Buffett was not the sort of stock salesman one meets very often. The first stock he sold was a tough sale, little-known security—GEICO. Buf Buffett, now over his own self-doubt, put $10,000—most of his savings—into it and pushed it on dubious customers all over Omaha. (His Aunt Alice got him started by buying one hundred shares.) He would cash out for a 50 percent profit the following year.58
What was most unusual about the young salesman was his appetite for research. Searching for ideas, he read the heavy purple-bound Moody’s manuals page for page with the zest of a small boy reading comics. And he found small gems—unwanted and very cheap cigar butts such as Kansas City Life, Genesee Valley Gas, and Western Insurance Securities, all trading at three times earnings or les
s. It seemed too good to be true; if the stocks were so cheap, Buffett figured, somebody ought to be buying them. But slowly, it dawned on him. The somebody was him. Nobody was going to tell you that Western Insurance was a steal; you had to get there on your own.59
But Buffett was in the wrong job. All that research was wasted on a salesman, who stood to make the same small commission regardless if the idea was any good or not.
And customers thought he was green. Many times, a fellow would listen to Buffett’s pitch, then check it out with his own, more seasoned broker and buy it from him. Daniel Monen, a friend of Buffett’s in Omaha, said, “It drove Warren wild.”
Buffett did learn a trick for getting in the door. He told Bob Dwyer, his old golf coach, “Just let ’em feel that you can save ’em something on taxes and nobody will keep you out.”‡
But he didn’t like persuading people to invest, particularly as he realized that his own interest—getting a commission—was not the same as theirs. It had an adversarial—almost a confrontational—aspect that made him highly uncomfortable.60 Don Danly said, “I know that he abhorred it.”
On the side, Buffett bought a Texaco station—sort of a twenty-something version of Wilson Coin Op—and invested in real estate. But neither worked out.61 Meanwhile, he dreamed up studies to do for Ben Graham and suggested a couple of stocks to him—anything to keep his chances of working for Graham alive.62
Buffett’s biggest step at Buffett-Falk was not an investment at all; it was taking a Dale Carnegie course on public speaking. Buffett was terrified of it, but he desperately wanted to master his fear.
The interesting question is, why? Why would a twenty-one-year-old stockbroker have wanted to learn that skill? If Buffett’s only ambition was to be an investor, he would not have envisioned that he would need to speak in public. Much less would he have foreseen the day that he would deliver a narrative off-the-cuff so compelling, so concise, and so precisely to the point that his audience would swear it was scripted. But to what did Buffett aspire—aside from being a stockpicker—that prompted him to try?
After the Carnegie course, Buffett polished his skills by teaching a night class—“Investment Principles”—at the University of Omaha. The students were in their thirties and forties, and many of them were doctors. When the skinny, open-collared twenty-one-year-old teacher walked in, the doctors snickered.63
Buffett immediately began to talk about Graham. “After he talked for five minutes you were sold,” said Leland Olson, an obstetrician. “And he wasn’t selling. He was laid back.”
Buffett, who taught several terms, based the lectures on The Intelligent Investor. But now and then he would spice the class with a homey story or word of wisdom, phrasing it simply and pacing it to perfection.
I will tell you the secret of getting rich on Wall Street. [Pause.] Close the doors. You try to be greedy when others are fearful and you try to be very fearful when others are greedy.§
When Buffett lectured, he would stand behind the desk and awkwardly bend his right arm, so that his elbow was at his hip and his hand was at his cheek, as if he were holding the phone. Then he’d take his left arm and hold the right elbow, as if to make sure it didn’t fall off. And he would stare above his pupils’ heads, as if he were afraid to make eye contact.
Yet he spoke with such an obvious fervor that the students were spellbound. Elizabeth Zahn, a Spanish teacher who enrolled with her husband, an IBM salesman, in 1953, was so struck by Buffett’s manner that she made detailed descriptions of his every gesture. In particular, Zahn was puzzled by a seeming contradiction. Buffett was very “low-gear,” but at the same time, he was intensely committed to what he was saying. His informal manner was set off by a focused quality that was other than casual. “Even in low gear, I was mesmerized by him,” Zahn recalled.
When he got deep into a thought, he would pace the room, shyly keeping his head down, and just as Zahn was afraid he’d bump into the wall he’d reverse course and do it again the other way. And nothing could distract him. Buffett would go from one point to the next, railroad-track straight, as if he had a blueprint of the lecture pasted to his brain.
Unlike Graham, Buffett would not give stock tips. The students would try to get one, indirectly. They would ask about a company with seeming casualness, but Buffett would just laugh them off. Zahn even read aloud a plaintive ballad:
Biz-whiz counselor
This is our cry
Why oh why won’t you tell us what YOU buy?
Buffett laughed—but no dice. The young salesman actually advised the class not to take tips from brokers. He said they weren’t to be trusted.64 The entire subject of sharing information touched a nerve, as though he considered it fraught with the potential for abuse on either side. He regarded the majority of tips as a waste, which is why brokers passed them along. But good ideas—his ideas—he treated as intensely private. He regarded them as his creation—as a tiny bit sacred.
Howard Buffett, who had retired from the House in 1952, thought his son was an honest broker, and admired him for it.65 According to Herbert Davis, a colleague, “Howard was proud of Warren long before he had a record to be proud of. He talked about him all the time, and with great affection.” And Warren was extremely loyal to his father.
In 1954, a Nebraska U.S. Senate seat opened up due to the death of Senator Hugh Butler, and Howard—who very much wanted to succeed him—was a front-runner for the nomination. But moderates in the Republican Party quietly tried to stop him. The matter came down to the party’s state central committee, which met with an air of intrigue at the Cornhusker Hotel, a GOP watering hole in Lincoln.
According to Warren’s sister Doris, Warren secretly went to the Cornhusker to support their dad and overheard the painful news that Howard had been beaten by Roman Hruska, a moderate.‖ Doris said, “He went down there to help our father. He overheard them in the coffee shop. He came back and said, ‘Daddy’s throat was slit from ear to ear.’ ”66
As far as others recalled, Warren didn’t mention it. His father had been crushed, and Warren had been crushed with him. But like his father, Warren kept it buried. And then, just as Howard’s dream was squashed, Warren’s was realized. Ben Graham called and said the religious barrier had been dropped67—and offered Buffett a job. Without bothering to ask his salary (it turned out to be $12,000 a year), Buffett was on the next plane.68
The Wall Street that greeted Buffett had been in a time warp. The old men who ran it lived in fear of another Depression. The younger men had never arrived. Of the most recent graduates of the Harvard Business School, merely 2.9 percent had gone to Wall Street. The new generation considered it unglamorous. Outside its gargoyled stone fortresses, black limousines waited for men with weary memories. Inside, it was masculine, aging, and unchanged by technology. At Merrill Lynch, Pierce, Fenner & Beane, customers’ orders were borne on tiny slips of paper, which were dropped onto conveyor belts to “ride jauntily on to [their] appointment with destiny.”69
The country, it is true, was prospering, and the Dow Industrials had topped 380. But caution was the watchword. The last time that stocks had been so high had been 1929. It was hardly necessary to remind people such as Graham what had happened then. He was so wary of what he termed the “new speculation” that he kept handy a set of Moody’s manuals from 1914—as if anything more recent were suspect.70
Graham-Newman was located in the Chanin Building, on 42nd Street. It had a stock ticker sitting beneath a glass bubble, making a perpetual clicking. Buffett, one of a half-dozen employees, shared a small room with Walter Schloss, and later with Tom Knapp. He wore a gray cloth jacket, like the others, and spent his time as they did, perusing the Standard & Poor’s Stock Guide for companies. According to Knapp, Buffett
felt very confident right from the start. I think his father offered to give him, or lend him, some money. He said no. He wanted to make a record starting from zero. And he wanted to make a very clean type of income. A couple of times I remem
ber saying, “Gee, Warren, this thing isn’t reported” [to the government]. And he said, “I’m putting it in.”
Graham-Newman, a mutual fund, bought stocks according to a few select techniques. Graham’s favorite was to hunt for stocks that traded at one-third less than their net working capital—in other words, stocks that were insanely cheap.a When Buffett or another associate found such a stock, he would take it to Graham. (The associates did their best to avoid Jerry Newman, Graham’s partner, who was as nasty as Graham was sweet.) And Graham would decide on the spot whether to buy it. It wasn’t a matter of persuading Graham. A stock either met his criteria or it didn’t. He did it by the numbers.
Buffett’s trouble was that he could find more stocks than he could sell. He went through the S&P guide—for him, a grown-up version of One Thousand Ways to Make $1,000—like a buzz saw. He seemed to be bursting to replicate Graham’s entire oeuvre.
One time, a broker in Philadelphia offered him an obscure insurance stock known as Home Protective, at 15 a share. There was no published material on it, and hence no way of valuing it. But Buffett went to the state insurance office, in Harrisburg, and dug up some numbers. What he saw convinced him that Home Protective was a steal. However, Jerry Newman rejected it. So Buffett and Knapp bought it for their own accounts. A bit later, Home Protective went winging up to 70.71
Buffett also found a block of Union Street Railway of New Bedford, Massachusetts, which was trading at 45 and had $120 a share in cash alone.72 Buffett couldn’t believe his luck—but Graham wasn’t convinced. Once again, Buffett bought it for himself.73
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