Buffett

by Roger Lowenstein

  Perfect strangers besieged him with “deals.” A Pakistani émigré pitched him a newsstand; a woman in Jackson, Mississippi, offered an antebellum mansion.5 (“With my idea and your money, we’ll do OK,” Buffett quipped.)6 Unnervingly, a man from Lincoln, Nebraska, requested a $100 million “loan” to buy a “ranch.” When Buffett declined, the man showed up at Kiewit Plaza with a pistol-toting gunman. FBI agents, tipped off by the companion, arrested the man as Buffett sat calmly at his desk.7

  Though in the public spotlight, Buffett was standing guard over a still uncommonly private life. So unlike the modern CEO, he did not block out his time in advance, preferring to keep it unencumbered. When Bill Graham (a son of Kay) asked when he might stop by, Buffett replied, “Come any time. I don’t have a schedule.” Richard Simmons, president of the Washington Post Co., was amazed by the quiet in Buffett’s emerald-green inner sanctum, which was sparely outfitted with miniature sculptures of bulls and bears, an antique Edison stock ticker under a glass dome, a citation for the Sun’s Pulitzer, family pictures (and one of Ben Graham), and a plaid couch from which a cloud of dust issued at the merest pretext.8 He did not have an electronic calculator, a stock terminal, or a computer. “I am a computer,” he noted to an interviewer.9 When Buffett was in his office, Simmons said, “Nothing seems to happen, except Bill Scott [Buffett’s trader] pokes his head in to say, ‘Ten million dollars at 125 ⅛; yes or no?’ The phone doesn’t ring much. Buffett has so much more time than the average CEO.” His day was a veritable stream of unstructured hours and cherry colas. He would sit at the redwood horseshoe desk and read for hours, joined to the world by a telephone (which he answered himself) and three private lines: to Salomon Brothers, Smith Barney, and Goldman Sachs.10

  No matter who told it, the story of first seeing Buffett had a ring of innocence reclaimed. Seth Klarman, a young investment manager, met the billionaire for breakfast at the Ritz-Carlton in Boston. Klarman found him “as advertised”—waiting by the maître d’ stand, with no one fussing over him or aware of who he was. “He ate link sausage and eggs—the last person in America who ate sausage.” Norman Lear, the Hollywood producer, saw the slightly pudgy billionaire at the Omaha airport, holding his car keys, and mistook him for a chauffeur—a plain-faced fellow in tortoiseshell glasses with thinning, unkempt hair. Only the untamable eyebrows suggested an independence of spirit.

  The writer Adam Smith found “a certain nostalgia in this triumph of Middle America.”11 Buffett was a billionaire who drove his own car, did his own taxes, and still lived in a home he had bought in 1958 for $31,500. He seemed to answer to a deeply rooted, distinctly American mythology, in which decency and common sense triumphed over cosmopolitan guile, and in which an idealized past held firm against a rootless and too hurriedly changing present. It seemed fitting that Berkshire’s shareholders included not only famous money managers such as Mario Gabelli but also Eppie Lederer, a.k.a. Ann Landers, the columnist from Sioux City, Iowa, who had met and befriended Buffett and who dispensed homespun advice to millions of ordinary Americans. Buffett was the advice columnist of Wall Street.

  By the mid-eighties, Buffett was (paradoxically) becoming celebrated for his common touch. He was the subject of adoring profiles with such folksy titles as “Aw, Shucks, It’s Warren Buffett” and “The Corn-fed Capitalist.”12 Such articles accented his self-deprecating wit and modest lifestyle. A newspaper profile written by a friend of Carol Loomis maintained, “Buffett does not relish the role of celebrity that has been thrust upon him.”13? But that was no longer true. When asked if his boss had changed, Verne McKenzie, who had been Berkshire’s treasurer since the sixties, singled out Buffett’s delight onstage. “I never would have predicted that he would have enjoyed the limelight and publicity,” McKenzie said.

  Actually, he always had—but before, his stage had not been as public. Buffett had always been a talker, an entertainer, a self-chronicler. He was a marvelous interview, relaxed, self-effacing, mocking himself as, say, a poor dresser. He was always telling vignettes from his career; he seemed to have a compulsion to tell and retell, to mythologize his past, whether with friends or giving a talk. He sugarcoated his past, just a bit, not seriously distorting it but occasionally embossing it around the edges, as if to perfect his past. Don Danly, Buffett’s high school chum, remembered that he, Danly, had bought the first pinball machine on his own; as Buffett told the story later, they did it together.14 Bob Russell, from grade school, recalled their racing sheet, Stable-Boy Selections, as a one-time affair, etched in pencil. Buffett described it in more grand terms, as a “published” tip sheet.15

  The thrust of Buffett’s autobiographical shadings was less to exaggerate his success than to strip it, somewhat, of the element of ambition and calculation. For instance, Buffett cast his enrollment at Columbia in terms of his enchantment with Ben Graham—not as a cool decision to settle for second best after Harvard rejected him.16 Similarly, he liked to recall that he had resigned from Graham-Newman and returned to Omaha with “no master plan,”17 and had organized Buffett Partnership only at the behest of relatives. This gives too little credit to Buffett’s own initiative; by the time the Omaha World-Herald reported that Buffett had returned from New York, the partnership had been up and running for three weeks.18 Then, too, he liked to portray the idea of being Tom Murphy’s “gorilla” as coming from Murphy, when Buffett’s footprints were all over it.19 He seemed to want to depict his success as partly the result of serendipity, rather than his intense, lifelong drive to get rich.

  Actually, what friends liked about Buffett was his absolute lack of casualness—his never being halfhearted. Norman Lear said, “He simply delights in his life. There is not a false bone in his body.” What gave rise to such impressions was Buffett’s genuine, even juvenile, enthusiasm. He was informal but not “casual,” unaffected but not in the least blasé.

  Buffett tended to turn even ordinary pleasures into fetishes. A profile in New York magazine happened to note that he was “a chronic guzzler of Pepsi-Cola, preferably laced with cherry syrup.”20 Don Keough, Buffett’s former neighbor in Omaha who had once refused to invest with the young Buffett, chanced to read the article—and was incensed. Keough by now was president of Coca-Cola Co. He wrote to Buffett, offering samples of the “nectar of the gods,”21 and after further correspondence, Buffett agreed to sample the new “Cherry Coke,” then in the testing phase. “He sort of became a Cherry Coke fiend,” Keough said. Indeed, Buffett began to drink about five bottles of the stuff a day (Pepsi was gone; it vanished) and would scribble an occasional note to Keough exclaiming his rather boyish delight. He stocked the office with potato chips and what a visitor described as “thousands” of bottles of Cherry Coke.22 When Keough ran into Buffett—at a 1986 White House reception—he thought his old neighbor unchanged: “a personable guy who loved life.”

  Buffett reached his psychic peak at the annual meetings of Berkshire Hathaway. In the early years in Omaha, only a handful of shareholders had attended these meetings, which had been held in the cafeteria of its National Indemnity subsidiary. As a trickle of holders began to come from out of town, Buffett switched the meetings to the basement of a hotel, the Red Lion. Then the trickle became a tide. In 1986, Buffett rented the mausoleum-shaped pink-marble Joslyn Art Museum. Shareholders, clutching copies of his reports, descended on Omaha like birds of spring—Buffett groupies, money men, Graham disciples, New York bankers, retirees now rich and young investors aspiring to be rich. They came in suits and shirtsleeves; they came from the East, the South, the West Coast. While most annual meetings attract virtually no one (for the reason that most are a waste of time), attendance at Berkshire’s was 450. After the meeting, Buffett shooed them to the Furniture Mart, where Mrs. B unloaded a couple of oriental rugs for $10,000.23

  The meeting itself was a sort of Bartles & Jaymes gathering. Tables were set up with coffee urns and tubs filled with cans of Cherry Coke, the company’s “official drink.” Ninety-five percent of the
shareholders had been in the stock for at least five years24—a level of devotion unique on Wall Street—and most had the vast bulk of their savings in this one stock. The investors, then, were unusually beholden to it, and to its high priest. They were a sect, a cult of which Buffett was the object. They noted his every gesture and casually offered remark as though it were suitable for framing. They felt a vicarious brilliance, as if they deserved a bit of the credit—if not for being geniuses, then for having found one. The cult had its own dogma (“Graham-and-Dodd” investing), and its members had the felt superiority of true believers.

  There was James Lake, a metallurgical engineer from Tucson who had read Graham and Dodd, and Ronald Melton, who ran an insurance firm in Pocatello, Idaho, and Michael O’Brien, a photographer from Austin who had met Buffett on assignment, read his letters, and bought the stock. Then there was Thad McNulty, a Jacksonville money manager who so revered the man from Omaha that he brought his wife—to celebrate their wedding anniversary.

  It was a faith healing, too, for Tim C. Medley, a Jackson, Mississippi, financial planner. His wife drawled in astonishment, “You’re going to spend $1,000 to go all the way to Nebraska to hear a man talk?” Medley only owned one share. “Maybe I’m a little crazy about this,” he admitted, “but if you practice a faith, you go to the church. Buffett energizes me.”

  Medley caught his first sight of Buffett in an archway of the Joslyn. Buffett was greeting investors in a blue blazer and gray slacks. His hair was tousled and his belt was worn thin from notch marks. He could have been a high school basketball coach: a “plain man” of whom Medley was in awe.

  As Buffett and Munger went to the podium, the crowd settled into a reverential silence. A quart of Cherry Coke stood on the dais like a sacrament. Buffett raced through the formal business of the meeting and opened the floor to questions. He deadpanned that anyone who had to leave early should do so while Munger—not Buffett—was talking. Then the two of them embarked on a rambling, uncut version of the annual reports, taking questions on Berkshire and on business in general for hours.

  Munger played the dour sidekick. He sprinkled his remarks with references to “the civilization,” which he seemed to feel was in peril. He said at one meeting: “The intelligence in this room is remarkable.” But he did not go in for the meetings’ carnival aspect. Adulation struck him as unseemly.25

  Buffett ate it up. He cracked joke after joke, and as he panned the crowd his eyebrows seem to waltz about his forehead. He loved seeing the same faces—people he had known for years, people he had made rich beyond all dreams, people such as the humble Doc Angle, who was now worth $15 million.26 Buffett told a friend that he felt as if he were painting a vast, open picture that everyone he knew could admire.27 This messianic attachment to Berkshire explains why he was unwilling to sell even a single share, and also, perhaps, why he turned the meetings into a ritual. He talked about inflation, Mrs. B, and management. He took questions on investing, Cap Cities, and Ben Graham. Now and then, he would respond with a story that was concise and to the point, yet so easy on the ear that one imagined the speaker to be sitting back in his rocker on a lazy summer’s afternoon.

  One time, when Buffett was speaking off-the-cuff to a group at Cap Cities, he was asked what techniques he recommended to managers. He launched into a tale about a stranger in a small town. The fellow wanted to get acquainted with folks, so he went over to the village square and saw an old-timer with “kind of a mean-looking German shepherd.” Buffett continued:

  He looked at the dog a little tentatively and he said, “Does your dog bite?” The old-timer said, “Nope.” So the stranger reached down to pet him and the dog lunged at him and practically took off his arm, and the stranger as he was repairing his shredded coat turned to the old-timer and said, “I thought you said your dog doesn’t bite.” The guy says, “Ain’t my dog.”28

  The moral for managers: It’s important to ask the right question.

  Buffett was forever dropping these little “pearls,” even in small, private settings. One Saturday, Steven Gluckstern, a touted but reluctant prospect for Buffett’s insurance company, flew in for an interview. It was a bitter-cold Omaha morning. Gluckstern, who had read Buffett’s press notices, was nervous about what he would be like in person. Buffett greeted him in a flannel shirt and khaki pants, and immediately put him at ease. He didn’t really interview him. He talked to him, in conceptual terms, about risk-taking. “Hey, Steve,” he said, “you know, when you go into a poker game, you look around, there is always one patsy. If you look around and you can’t tell who the patsy is, that’s ’cause it’s you.”29

  This was Buffett’s way of warning him not to broker risks he didn’t understand. Gluckstern felt his host was like the author of those annual letters—dropping one-liners which, in context, seemed highly meaningful. He accepted on the spot.

  One thinks of the young Warren who had stood in the corner at fraternity parties, taking the other fellows’ questions, or who had sat in the Brandts’ Manhattan living room with cronies at his feet. “Jesus and the apostles,” Roxanne Brandt had called them. Then he had been entirely private. Though now he was also a public person, he was surrounded by apostles still.

  In Buffett’s case, this usual distinction between private and public was blurred. His friends were also his apostles. They called on him regularly for advice and counsel. Stan Lipsey turned to Buffett for advice on how to disentangle himself from a girlfriend. Richard Rainwater, the Texas financier, went to him for periodic “reality checks.” In 1986, Buffett urged Rainwater, then at a crossroads, to stay away from anything even remotely unseemly; a few extra dollars weren’t worth it, he warned. Rainwater found it memorable when, a short while later, some of Wall Street’s leading lights were dragged away in handcuffs. Jack Byrne spoke of Buffett as though he were some sort of national treasure. “Some people who know Warren don’t share him,” Byrne complained. “I deserve some credit for sharing him.”

  Every odd year, Buffett’s inner circle—the so-called Graham group—convened at a resort. In the beginning, it had just been Buffett and a bunch of investment pals—very stag and very cheap. At the second meeting, in Palm Beach, Florida, a bellhop was so ticked off by one of their chintzy tips that he heaved it against a door.30 Another time, the ultrarich Sandy Gottesman hooked up with the group at the airport, expecting to fly first-class. But no one else was; Gottesman stammered something about his secretary having made a mistake and switched to coach.31

  More recently, the seminars had gotten tonier and less inbred. They met in places like Scottsdale, Arizona, Sun Valley, Idaho, and on board the Queen Elizabeth 2. Also, Buffett invited spouses and friends—such as Carol Loomis and Tom Murphy—who were not narrowly financial. One time, the group went rafting on the Colorado River, whereupon the patrician Key Graham was moved to remark, “I have never had my ass this wet in my life.”32

  Buffett considered these retreats with friends to be especially enjoyable times, and rather private ones. He was extremely fond of his friends, as they were of him. Yet the gatherings had a reverential aspect not wholly dissimilar from the annual meetings. These few dozen friends, though highly successful on their own, willingly regrouped under Buffett’s mantle—almost in celebration of him. The guest list was Buffett’s: only he decided who could come. One longtime member said, “There is a palpable desire of people to be seated at the same table with him. You get the feeling—will he sit at my table?” Peter Buffett, a young musician, sensed that his father’s friends yearned to be in his company. Relaxing in his studio beneath a picture of John Lennon and Yoko Ono, Peter likened them to a group of talented but lesser musicians with his Beatles idol. Ed Anderson, a charter member, regarded Buffett as “a sort of miracle man.” While Buffett’s demeanor at these get-togethers was unassuming, there was a sense in which these private friends—some of them, at least—were a more familiar form of the “audience” that Buffett had with public shareholders.

  Most of Buf
fett’s older friends also were his shareholders. This set him at the curious remove of being responsible for many of his friends’ and family members’ wealth. They talked about Buffett, and about the stock, obsessively. Indeed, at every step of the way, they agonized over it. Marshall Weinberg, Buffett’s stockbroker friend, urged a client to wait for a better price when Berkshire was at $77, and repeated this counsel at $105.33 Henry Brandt, another longtime Buffett pal, was forever polling fellow disciples about the outlook for Berkshire. At $1,700, he panicked and sold his wife’s stock.

  Conceptually, selling was at odds with the reason for owning Berkshire—which was to let Buffett manage the money, rather than to make such calls oneself. But the stock’s rise was so out of the realm of ordinary experience that people lost their nerve. Keith Wellin, the president of Reynolds Securities, had bought some Berkshire at $40, and a little more at $43. When it went to $50, he decided to wait for the price to fall. He waited … and waited. He finally bought some more at $3,000 a share.

  Weinberg, a friend for decades, obsessively analyzed the possible financial consequences to himself of Buffett’s dying. How much would the stock go down—$1,000 a share? $2,000? And Weinberg was hardly alone. It was as if Buffett’s health were merely a financial concern. Witness the exchange at an annual meeting:

  QUESTIONER: I’m thinking of making a purchase of Berkshire but I’m concerned about something happening to you, Mr. Buffett. I cannot afford an event risk.

  BUFFETT: Neither can I.34

  The blurring of Buffett’s roles extended to his family. In writing his annual letters he envisioned that he was writing to Roberta, his adored younger sister. But when he was with Roberta, he kept her at a respectful distance. Roberta, who lived in California, was conscious of not wanting to intrude on her brother, and she took care to be succinct when she asked him a question.