Buffett

by Roger Lowenstein

  At home, Warren began to chart the prices of stocks on his own. Observing their ups and downs, he was bewitched by the idea of deciphering their patterns. At eleven, he took the plunge and bought three shares of Cities Service preferred, as well as three shares for his sister Doris, at $38 a share. “I knew then he knew what he was doing,” Doris would recall. “The boy lived and breathed numbers.” But Cities Service plunged to 27. They sweated it out, and the stock recovered to 40, whereupon Warren sold, netting, after commission, his first $5 of profit in the market. Directly he sold, Cities Service climbed to 200. It was his first lesson in patience.

  Warren did better at the track. Intrigued by the mathematics of odds-making, he and Russell developed a tipping system for horse players. After a few days, they noticed that the system worked, so they penciled out their picks under the banner Stable-Boy Selections and took a pile of copies to Ak-Sar-Ben racetrack. Quoting Russell: “We found out we could sell it. We were waving them around, calling ‘Get your Stable-Boy Selections.’ But we didn’t have a license and they shut us down.”14

  Warren’s exploits were always based on numbers, which he trusted above all else. In contrast, he did not subscribe to his family’s religion. Even at a young age, he was too mathematical, and too logical, to make the leap of faith. He adopted his father’s ethical underpinnings, but not his belief in an unseen divinity. In a person who is honest in his thoughts, and especially in a boy, such untempered logic can only lead to one terrifying fear—the fear of dying. And Warren was stricken with it.15

  Every week, no matter if the snows were four feet high, Leila and Howard insisted that Warren go to Sunday school. But it didn’t sustain him. When he sat in church, calculating the life spans of the ecclesiastics, there was a purpose to it. He wanted to know whether faith would result in living a longer life.16 Not faith in an afterlife, as a believer would have had, but a concern for living longer in this one.

  He and Bob Russell would be sitting on the Russells’ front-porch glider, in the stillness of an afternoon, and as if brought on by a sudden prairie twister, Warren would say, “Russ, there is one thing I am scared of. I am afraid to die.” He brought it up maybe every year or so—often enough so that it stuck in Russell’s mind. It seemed disconnected from everything else that Russell knew of Warren, who was usually so buoyant. Sometimes Russell would put birdseed on the floor of the milk box and trap a bird inside and invariably, Warren would beg him not to harm it. Russell would pull a string, tied to the door of the milk box, and let it go. But he couldn’t release Warren from the fear of his own mortality.

  “If you do what God gave you the talent to do, you can be successful and help others and die with a smile,” Russell would say.

  “Bob, I’m just scared,” Warren would reply.

  Russell, a Roman Catholic, did not understand. He would wonder where it came from, why a guy who had so much going for him was so afraid. But there was an aspect of Warren’s life at home that Russell did not know about.

  To outside appearances, the Buffett household was the ideal: loving, prosperous, inspired by high morals, and centered on the family. And such particulars were genuine. Leila would refer to the day she met Howard as “the luckiest day of my life.”

  She treated her husband like a king—a benevolent king, but a king nonetheless. A practical woman, Leila had ideas of her own about stocks, but she didn’t mention them to Howard. Even when Leila had pounding headaches, she was careful not to bother Howard or disturb his reading. Her aim was to be a perfect wife. Warren’s friends knew her as a tiny, cheerful woman with a pretty smile—sweet and sociable and all atwitter, like the good witch of the North.

  But when the strain of trying to be perfect was too much for Leila, she would turn on Warren and his sisters with the wrath of God. Without warning, that good-humored woman would become furious beyond words, and rage at her children with an unrelenting meanness, sometimes not letting up for hours. She scolded and degraded her children. Nothing they had done measured up. She compared, criticized, and dredged up every imaginable failing.

  In Leila’s fury, she seemed as if driven by some horrible injustice. Nothing that Warren or his sisters had done would escape her notice; no transgression, however slight, was too small for one of her vicious rebukes. Even when they had committed no crime, her imagination supplied one.

  As far as Warren and his sisters knew, Leila’s moods were wholly unpredictable, and therefore all the more terrifying. And when one came over her there was no escape. She was a strong woman, strong as the girl who had run the Linotype at age eleven. If they tried to break free she would snap at them, “I’m not finished.”17 And then, suddenly, the tempest would be over. Then the sweet little woman would return.

  Once, in more recent years, one of Warren’s sons, who was home from college, called Leila to say hello. She suddenly lit into him with all her fury. She called him a terrible person for not calling more often, and detailed his supposedly innumerable failings of character, and went on for two entire hours. When Warren’s son put down the phone, he was in tears. Warren said softly, “Now you know how I felt every day of my life.”

  Sometime after Leila left West Point, her family suffered repeated tragedies. One of her sisters committed suicide; another sister and Leila’s mother were institutionalized. Whatever the streak of madness or emotional imbalance that the Stahl women suffered, Leila at least survived.

  But Warren and his sisters had to deal with the shrapnel from her fury on their own. There was certainly no discussion of it in the Buffett home. One morning, when Warren was young, Howard came downstairs and warned him, “Mom is on the warpath again.”18 But more often, after Howard had left the house, Warren and the girls would listen for the telltale tone of her voice and warn one another. Their parents didn’t argue; the conflict was between Leila and her kids. And it was a conflict that Warren and his sisters had no chance of winning.

  Warren coped with this hopeless battle by not fighting back. “He didn’t get mad. He kept it to himself,” his sister Roberta said. Jerry Moore, who lived across the street, observed that Warren didn’t fight with anyone. He shied away from the usual neighborhood scrapes—from any sort of conflict.

  He didn’t mention his mother’s “moods” to his friends, and there was nothing in his upbeat manner that would have betrayed them. But some of the boys noticed that Warren spent more time with them at their homes than he did at his own. Mrs. Russell used to say, “I put him out with the cat and brought him in with the milk.” Byron Swanson, a classmate, would come home—in that halcyon time when Americans left their homes unlocked—and find Warren, innocently and rather charmingly, sitting in his kitchen, drinking a Pepsi and eating potato chips. Walter Loomis said his mother had to chase Warren out when Loomis’s father came home so the family could have dinner. (In retrospect, he added dryly, “Too bad we kicked him out.”)

  Later, Warren’s son Peter would wonder if his father’s success was driven in part by the urge to get out of the house. The question is unanswerable, but he had the urge from somewhere. Warren would sit on the fire escape at Rosehill elementary school and flatly tell his chums that he would be rich before he was thirty-five.19 He never came across as being a braggart, or swell-headed. (In Russell’s homely phrase, “his cap always fit.”) He just had this conviction about himself.

  He would bury himself in a favorite book, One Thousand Ways to Make $1,000, an exhortation to future Rockefellers with stories such as “Building a Business on Homemade Fudge” and “Mrs. MacDougall Turned $38 into a Million.” How vividly did Warren imagine himself as the man in the illustration—dwarfed by a mountain of coins that brought more ecstasy than any mountain of candy! Surely, he was the reader of the editor’s dreams—so well did he seize on the book’s advice to “begin, begin” whatever schemes one might, but, by all means, not to wait.

  On 53rd Street, Warren was known as a bookworm, and was certified in the neighborhood lore as having a “photographic memor
y.” He was tall for his age, and liked to play sports, but was rather ungainly. He talked up his financial exploits, however, with a contagious passion. And when Warren talked, his friends perked up their ears. He didn’t persuade the other boys to join him so much as he attracted them—a fireball, as his father said, drawing moths. Warren recruited Stuart Erickson, Russell, and Byron Swanson to go to Ak-Sar-Ben to scavenge for tickets. He enlisted half the neighborhood to gather golf balls. Soon he had bushel baskets of golf balls in his bedroom, organized by brand and price. Bill Pritchard, a neighbor, recalled, “He’d hand out a dozen golf balls. We’d sell ’em, and he’d take his cut.” Warren and Erickson even set up a golf-ball stand at Elmwood Park, until, as Erickson recalled, business was so good that “somebody snitched on us and the pro threw us out.”

  A Saturday Evening Post profile of the Omaha of those years saw a barren city—in the telling quip, west of civilization, which stopped in Des Moines, and east of the scenery, which began with the Rocky Mountains.20 It was distinguished only for its “conformity”; extreme only in its weather. Its contribution to culture was the Swanson dinner. Overlaid on this myth of Omaha as a cultural wasteland was a more romantic view of Omaha as an unspoiled refuge from the sinful East—as “simple” and vaguely pastoral. While this had an element of truth, it was greatly exaggerated. It would partly account for a later tendency to describe Buffett as oracular, rather than as talented and savvy, as a New Yorker would have been described—as the “Oracle of Omaha” or, repeatedly, the “Wizard of Omaha.” (The Wizard of Oz did hail from Omaha.)

  But Omaha was not a barren place to Warren. The Buffetts and their neighbors were educated and urban and part of the cultural mainstream. Fred Astaire learned to dance at the Chambers Academy on Farnam Street; Henry Fonda, a local boy, appeared on Omaha stages. Warren’s Omaha was a small city—220,000 people—but by no means a small town. Carl Sandburg, who shoveled coal there, called it “Omaha, the roughneck, [which] feeds armies, eats and swears from a dirty face.”21

  The summer that Warren was eleven, Howard, who wanted his children to experience the supposed purity of farm life, took out an ad for a rural home. For a few weeks, Warren and Doris were boarded by a farmer named Elmer Benne. Warren savored Mrs. Benne’s pies, but he didn’t care for cows or stalks of corn. A silo was just as remote to him as the modern Art Deco skyscrapers of Omaha were to a farm boy. Warren was a city kid.

  On 53rd Street, he knew the people in every house. And there was a sameness to the homes, with their twin gables, brown brick, and center doorways. He recognized the truck from Roberts Dairy, and the music of the trolley and the not-too-distant freight trains, and the aroma of coffee from the roasting plant downtown, and even, when a wind blew from the south on warm summer evenings, the thick, intolerable smell of the meatpacking plants. Whether on foot, on his three-speed, or by streetcar, he could fan out over the city, to the golf courses, to his father’s office, to his grandfather’s store. Whatever Warren’s problems with his mother or his torment in church, his city was his great, sustaining constant.

  But the violent shock that upset all America in December 1941 also threatened Warren’s life in Omaha. The Sunday of Pearl Harbor, the Buffetts were paying a visit to Grandpa Stahl, in West Point. On the drive home, they listened to martial music. For the next few months, as America got used to war, Warren’s life went on as before.

  But in 1942, the Republicans in Nebraska’s second congressional district were unable to find a candidate who would run against the party of a popular wartime president. In desperation, the GOP turned to an outspoken New Deal hater: Howard Buffett.

  Howard, an isolationist, was given little chance of winning. On the stump, his venom was directed not at Hitler or Mussolini but at Franklin Roosevelt.

  I am fully aware of the odds against a Republican candidate today. He fights against the most powerful Tammany political machine the world has ever known. This ruthless gang, under cover of war, is making plans to fasten the chains of political servitude around America’s neck.22

  Inveighing against inflation and big government, Howard was forty years ahead of his time. But in Omaha, he was personally popular. He had little money—his expenses would amount to only $2,361—but he campaigned tenaciously.

  On election day, Howard typed out a concession speech and retired at nine o’clock. The next day, he discovered he had won. He would call it “one of the happiest surprises” of his life.

  Warren realized his fate with a jolt: for the first time in his twelve-plus years, he was leaving Omaha. In a family photograph taken just after the election, Warren looked decidedly uneasy, his handsome face set in a vague stare, his tightly pursed lips managing only the slightest suggestion of a smile.

  As space in wartime Washington was scarce, Howard rented a home in the charming but remote Virginia town of Fredericksburg. The house stood on a hill, overlooking the Rappahannock River. It was a rambling white Colonial place with a front porch and roses. To Roberta, it looked “like something out of the movies.” Warren hated it.

  Cinematic though it may have been, Fredericksburg was isolated, Southern, and unfamiliar. Any change would have been unwelcome to Warren, and this one turned his world upside down. Not only had he been yanked away from friends and neighborhood, but he was separated during the week from his father, who was residing at the Dodge Hotel, in Washington, fifty miles north. The freshman congressman told his family that he would serve only one term, but that didn’t comfort his son. Away from Omaha and from all that he knew, Warren was “miserably homesick.”23

  Though he was desperate to leave, it was not in his nature to confront his folks. He merely told them that he was suffering from a mysterious “allergy” and that he couldn’t sleep at night. Of course, his Zen-like stoicism was perfectly calculated to unnerve them. He would recall, “I told my parents I couldn’t breathe. I told them not to worry about it, to get a good night’s sleep themselves, and I’d just stand up all night.”24 Naturally, they were worried sick about him.† Meanwhile, Warren wrote to Grandpa Ernest and told him that he was unhappy. In short order, Ernest wrote back and suggested that Warren move in with him and his Aunt Alice and finish the eighth grade in Omaha. After a few weeks in Fredericksburg, his parents agreed.

  Warren went back on the train, sharing an overnight compartment with Hugh Butler, a Nebraska senator. At daybreak, Senator Butler, noticing that the youngster had passed the night soundly, commented, “I thought you couldn’t sleep.” Warren replied airily, “Oh, I got rid of that in Pennsylvania.”25

  In Omaha, Warren’s spirits revived. Aunt Alice, a free-spirited home economics teacher, was a kind guardian, and she took an interest in Warren. Like other teachers, she was attracted to his brightness and curiosity.

  Grandpa Ernest, an instinctive teacher, also took a shine to him. Ernest was working on a book, and each night he dictated a few pages to Warren.26 The recherché title was “How to Run a Grocery Store, and a Few Things I Have Learned About Fishing.” The thrust of it is evident from a letter in which Ernest confidently declared that supermarkets were a passing fad:

  Kroger, Montgomery & Ward, and Safeway, I think have seen their high points. The chain stores are going to have a hard time from now on.27

  Fortunately, “How to Run a Grocery Store” was never published.

  But Warren went to work at Buffett & Son, where he observed his grandfather’s maxims firsthand. Ernest took it upon himself to deduct two pennies a day from Warren’s meager salary—a gesture which, along with his lectures on the work ethic, was intended to impress upon Warren the intolerable costs of government programs such as Social Security. For a twelve-year-old boy, the work itself was hard: lifting crates, hauling soda pop. Warren didn’t care for it. He didn’t like the smell of groceries. When fruit spoiled, he had to clean the bins.28

  But he liked the store. Buffett & Son was a cozy nook of a grocery, with squeaky wooden floors, rotating fans, and rows of wooden shelves that reached to
the ceiling. When someone wanted a can from the upper shelf, Warren or another clerk would move a sliding ladder to the proper spot and ascend to the summit.

  It was the first successful business that Warren had seen. His Uncle Fred, who stood behind the counter, had a cheerful word for every shopper. With its pungent, fresh-baked breads, ripe cheeses, and unwrapped cookies and nuts, Buffett & Son had something—an adherence, perhaps, to Grandpa’s penny-pinching virtues—that pulled people back.29

  Charlie Munger, Warren’s future business partner, worked there on Saturdays (though he did not meet Warren until years later). Munger saw in the store the inculcation of a culture, something out of a Norman Rockwell painting. Nobody ever loafed. “You were just goddam busy from the first hour of morning to night.” When Bill Buffett, Warren’s cousin, would trudge in a few minutes late, he would be greeted by his portly, white-haired grandfather, pocket watch in hand, bellowing from a second-floor balcony, “Billy, what time is it?”

  While living at Ernest’s, Warren often went to the home of Carl Falk, his father’s then business partner, for lunch. He would curl up with an investment book from Falk’s study—much more his cup of tea than groceries—while Mrs. Falk made lunch. One time, while Warren was slurping Mary Falk’s chicken noodle soup, he declared that he would be a millionaire by age thirty—and enigmatically added, “and if not, I’m going to jump off the tallest building in Omaha.”