As Furth understood, the Courier-Express needed a villain in whom the evil intent could be personified. Warren Buffett—“Big Brother from Omaha,” as Furth referred to him in court20—was his ace in the hole. The guts of his case were that Buffett was a numbers-crunching millionaire who had no concern for Buffalo, and who was intent on driving the Courier-Express out of business to enhance the value of Buffett’s own paper.
Buffett answered in personal terms. As a prelude to appearing in court, he filed an affidavit citing his grandfather’s and father’s associations with newspapers, his background as a paperboy, the Sun’s Pulitzer:
It is much more than just a business to me. I want to achieve business success in newspapers but will be unhappy unless it is accompanied by journalistic success.21
On November 4, 1977, as a hard rain came whipping in from Lake Erie, Buffett took the stand in the federal courthouse. The gallery was packed with Courier-Express employees and their family members, who saw the hearing as a last chance to keep their livelihoods, and saw Buffett as a viper. Furth hammered away at him. Buffett replied evenly, separating out the needles that were intended to bait him and responding with facts, facts, facts. He was like a human backboard; nothing riled him.
FURTH: Now, at the time that Blue Chip Stamp Company decided to acquire the News, you made an analysis, did you not, of the profit and loss of the News?
BUFFETT: I made a mental analysis of the position of the Buffalo News, its publishing strengths and weaknesses, its past history of earnings, its future potential, the price paid for newspapers, and other markets. There were a lot of variables that went into the calculation.
FURTH: Well, are you saying you didn’t do a written analysis, you simply massaged the figures, as the current financial term, is that—
BUFFETT: That is your term. I don’t think I massaged them at all. I tried to analyze the future potential of the Buffalo Evening News.
FURTH: You looked at the income for the previous year, didn’t you?
BUFFETT: I looked at the income for the previous five years, the history of circulation, advertising, a number of factors.22
It was an odd sort of trial: the criminal was known—all that mattered was the motive. Furth’s strategy was to destroy Buffett’s stated rationale and supply his own. Thus: Buffett did not have an economic basis for buying the Evening News; he had not made much of an effort to learn about the paper—all he had cared about was getting his hands on it, so he could kill its competitor.
Buffett patiently countered that he had bought the Evening News on the basis of his own mental analysis of the facts and figures. The rationale was in his head. This played to Furth’s strength.
FURTH: And you purchased the newspaper just on the information that [Manno] gave you, is that right?
BUFFETT: No, we purchased the newspaper based on some information he gave us, some information we dug up ourselves, and a general knowledge of the newspaper business.
FURTH: You did not come and inspect the plant, the facilities, the presses, talk to the people and do things like that?
BUFFETT: No, we did not.
FURTH: Now, sir, you had contemplated, had you not, even prior to the acquisition, coming out with the Sunday newspaper?
BUFFETT: I thought it was most unusual that a major metropolitan newspaper did not have a Sunday edition. I certainly intended to investigate the possibility.
FURTH: Did you have a study done?
BUFFETT: I don’t have studies done, basically. I look into them myself.
FURTH: You just did it all yourself?
BUFFETT: Right. The circulation figures and the linage figures are available from trade publications.23
Perhaps it is necessary to add that the typical businessman does not spend $32.5 million without commissioning a study, often several of them. They provide him with a sense of security—the blessing of supposed experts—even if it is a false security. Ultimately, someone has to evaluate the facts. The someone ought to be the CEO, though it takes a rarely self-assured one to appear before a board without a prop. Buffett’s instinct was to remove the layers between the decision and himself. Yet as one who dispensed with the normal props, he could be made to seem suspect.
FURTH: All right, sir, how many days did you spend here in Buffalo?
BUFFETT: Probably once a month on average.
FURTH: So you have been here maybe five, six times?
BUFFETT: Something like that.
FURTH: And you made your cost estimates based on the five days that you have been here since you acquired the paper?
BUFFETT: Not based on the five days. Based on regular financial statements I read, based on phone conversations I had, based on a knowledge of the newspaper business plus a knowledge of some of the aspects of the Buffalo Evening News’s operation.
FURTH: Plus your overall knowledge of newspapers, the Washington Post, the Trenton Times, and all of the other business that you, your father and grandfather have accumulated?
BUFFETT: My grandfather didn’t have much to do with it.24
It occurred to Furth’s associate, Daniel Mason, that Buffett was wholly unlike what he had expected. Nothing in his unassuming manner or rumpled suit gave him away—Mason would not in a million years have thought that the witness was rich.25
Buffett spoke informally, and also believably. He contended that people in Buffalo would benefit from having a second Sunday paper. When the judge, Charles L. Brieant, Jr., asked him to explain why he thought the Evening News would trail the Courier-Express on Sunday, Buffett reached for a couple of those earthy metaphors that he seemed to keep in his pocket.
BUFFETT: Well, you assume that the Courier has been publishing for many, many, many years, all alone in the market—that people’s habit patterns are very strong. I shave my face on the same side every morning and put on the same shoe first and people are creatures of habit. And the product that they have been receiving every day for a great many years has an enormous advantage.26
That was how he spoke in private—say, to Kay Graham. Even on the stand, he talked about business schematically, in big, broad brushstrokes. However, it was not in Buffett’s interest to look too clever. And by the time that Furth went for the knockout, it was obvious to everyone in the courtroom that Buffett knew more about the economics of the Buffalo Evening News than any other soul alive.
FURTH: Now, sir, did you consider whether or not your coming out with this newspaper, the Sunday newspaper, might put the Courier-Express out of business?
BUFFETT: No, Sir.
FURTH: Never ever thought whether it would or not?
BUFFETT: I think the Courier-Express is going to be in business a long time.
FURTH: That was never discussed; right?
BUFFETT: No, sir.27
Now Furth had his hook in. Approaching the bench, he waved a copy of a recent Wall Street Journal article profiling Buffett. Furth read aloud a passage corroborating that, in a general sense, monopoly newspapers had been very much on Buffett’s mind:
“Warren likens owning a monopoly or market-dominant newspaper to owning an unregulated toll bridge. You have relative freedom to increase rates when and as much as you want.”28
The quote was from Sandy Gottesman, Buffett’s friend at First Manhattan. Buffett tried to dance around it, but the toll-bridge metaphor was just too good. Everyone knew where it came from.
FURTH: Now, sir, did you ever tell him that owning a monopoly newspaper is like owning an unregulated toll bridge?
BUFFETT: I probably said that owning a monopoly, a small monopoly newspaper, specifically in a town like Fremont, Nebraska, [with] no television competition, is absolutely a great business. Whether it is like a toll bridge I don’t remember, but it is a great business. It may be better than a toll bridge in Fremont.
JUDGE BRIEANT: What is significant about Fremont, Nebraska?
BUFFETT: Your honor, the newspaper in Fremont, Nebraska, exists in an advertising vacuum. You can’t make
a television buy in Fremont.
JUDGE BRIEANT: Do you own a newspaper in—
BUFFETT: No. I wish I did.
FURTH: What you are saying is that owning a monopoly or market-dominant paper in a small community is like owning an unregulated toll bridge; is that right?
BUFFETT: I won’t quarrel with that characterization. It is a very, very good business.
FURTH: Because you can raise rates as much as you want, isn’t that true?
BUFFETT: I wouldn’t put it quite that strongly, but you have the power to raise rates.
FURTH: That is the kind of business you like to own; isn’t that true?
BUFFETT: I don’t own any, but I would like to own one.
FURTH: Now, sir, you have used that word, unregulated toll bridge, with others, haven’t you? Isn’t that one of your phrases?
BUFFETT: I have said in an inflationary world that a toll bridge would be a great thing to own if it was unregulated.
FURTH: Why?
BUFFETT: Because you have laid out the capital costs. You build the bridge in old dollars and you don’t have to keep replacing it.
FURTH: And you used the term unregulated so that you can raise prices; is that right?
BUFFETT: That is true.
FURTH: And the toll bridge, you assumed, had the monopoly over the river; is that what you are saying?29
Though Furth couldn’t have known it, Buffett had fancied toll-booths ever since, as a boy, he had gazed at the traffic cruising past his friend Bob Russell’s house. And Blue Chip actually did own 24 percent of the stock of Detroit International Bridge Co., the owner of the Ambassador Bridge between Detroit and Windsor, across Lake Erie from Buffalo.30 It was a real toll bridge—the only one owned by stockholders in the United States—and Buffett controlled a quarter of it. Furth had missed it. Still, he had drawn blood.
Blue Chip’s lawyers thought Buffett had made an outstanding, and credible, witness. But had he been too credible? Had he revealed too much of his keenness for dominant businesses? The vivid toll-bridge metaphor hung over the court.
On November 9—four days before the inaugural Sunday—Judge Brieant ordered an injunction against the Evening News, pending a trial. Though technically he did not grant all of what the morning paper sought, his lengthy opinion—delivered with what seemed remarkable speed—was devastating.
Judge Brieant ruled that the Courier-Express would likely be able to prove at a trial that its rival was adopting unfair tactics, that it was doing so with the intent to monopolize, and that if not stopped the Courier-Express would fail:
There are only two newspapers now. If the plan works as I find it is intended to work, there will be but one left.31
Buffett appears in the judge’s rather awestruck opinion as an impressive but archetypal financier—supremely shrewd but darkly enhanced. Page for page, Buffett can barely take a breath without its reeking of motive. Judge Brieant, unaware that Buffett made a habit of buying businesses on the numbers, views even his failure to visit the newspaper plant or to talk to the employees as “evidence of specific intent to monopolize.” Even the judge’s subtitle, Mr. Buffett Comes to Buffalo, has a loaded ring. The judge elegantly acknowledges, “Intent exists only in the unfathomable human mind.” But he has no problem discerning intent from Buffett’s footprints:
Mr. Buffett made no secret of his economic motivations and his acute awareness of the value which would be attached to ownership of the Evening News were it to become a monopoly. But for the awareness of this likelihood, it seems the acquisition of the Evening News for this price, all in cash, and in this manner, makes no economic sensed.32
The injunction permitted the Sunday paper to go ahead, but severely restricted its ability to promote, market, and circulate the edition to readers and advertisers. While these half measures hurt, Judge Brieant’s strongly worded opinion did the real damage, costing the Evening News dearly in public support, and at a crucial time. The verdict was splashed all over the Courier-Express, along with an approving photograph of the judge and a flurry of favorable stories and testimonials. The president of the local AFL-CIO Council, representing 122,000 Buffalonians, was quoted on the front page as saying: “Don’t buy that Sunday newspaper.” Just to make sure that no one forgot whom it was fighting, the Courier-Express slapped a new nameplate on the front page: “Buffalo Family Owned and Operated.”
On the eve of the new edition, Buffett showed up at the Evening News for a bash in the newsroom, accompanied by a blue-jeaned Susie. He pressed a button, and the presses rolled. But sales had been measurably slowed by the bad publicity. Readers and advertisers, fearing the loss of jobs if the Courier-Express went under, were rallying to the weaker paper. Most painfully, employees at the Evening News could not respond to the bad press, as they were legally enjoined from making defamatory remarks about the Courier-Express. By December 18—the fifth Sunday of publication—the Evening News had only 147 inches of ads, as compared to 579 for the Courier-Express, despite having 40 percent more news space.33 In short, Buffett’s newspaper had suffered a crushing setback. To put it in perspective, Berkshire Hathaway’s share price, which had rebounded in 1977, was trading at 132 a share, so Buffett’s net worth was in the neighborhood of $70 million. About a fifth of his personal fortune was sunk into the Evening News.
Both papers plunged into an all-out, old-fashioned newspaper war, which in Buffett’s opinion only one of them was likely to survive.34 The Courier-Express, sensing that the injunction had bought it time, modernized in a hurry. Typesetting was automated, equipment upgraded. Douglas Turner, the executive editor, said, “They gave me things I’d been asking for for years: split pages, outlook sections, bigger comics, a bigger magazine. I built up the payroll by 25 percent.”
The news staffs combed the city like rival fifth columns. Robert McCarthy, a reporter for the Evening News, said, “You didn’t dare show your face if the Courier beat you on a story. You stayed all night to beat them.” One of the few things that Buffett could control was the size of the news hole, and he went at it full blast. “We made a point of having more news than the other paper,” Buffett recalled. “If they had eight pages of sports, we were going to have more. All the traditional ratios—I told ’em to hell with it.”35
In the newsroom, people had a sense that this owner would be different. As one veteran put it, “Warren seemed to take a real interest.” He occasionally sent a note commending a story, and he showed up at a staff picnic wearing, of all things, a T-shirt. The reporters, a cynical bunch, loved his skepticism. Rather than pontificate on the redeeming value of capitalism, he tipped the paper to a story on a topic that concerned him much more—namely, how greedy and perhaps unethical he considered his fellow tycoons to be.
The story concerned a secret encampment in Santa Rosa, California, known as Bohemian Grove. Each summer, conservaüve business types such as Merv Griffin, Gerald Ford, and Ray Kroc flew out in corporate jets to meet in the redwoods and bewail the fate of Western civilization. According to Lee Coppola, the Evening News’s crack investigative reporter, “The angle Buffett wanted was to examine whether or not the businessmen were taking a tax deduction for the jets. It was during the gas crisis. He thought it was wrong.” Coppola, who wrote a page-one blowout, turned down a job offer partly because of his high hopes for how the paper would be run under Buffett.
But in the financially crucial battle for Sunday supremacy, the paper continued to hurt. In 1978, the Courier-Express trounced the Evening News by 100,000 papers every Sunday. As Buffalo fell into a recession, the sight of laid-off factory workers enhanced people’s fears that the Courier-Express would fold. “The community had bought their line,” the editor Murray Light recalled. “I’d call Warren on Wednesday or Thursday to tell him how many ads we had for Sunday. And there were only a handful.”
Buffett would frequently call Light—his eyes and ears in Buffalo—at Light’s home, and pick his brain over how to jump-start the Sunday paper. An hour was a short co
nversation. “He had enormous interest in every facet of the Sunday product,” Light said. Buffett came to town and met the big advertisers and retailers. He approved promotional series, contests—“We did everything,” Buffett recalled.
We had these special circulation teams. All week they would tell me, “We got 828 starts this week, 750 starts this week.” Then, on Friday night, I would get the draw for Sunday and we’d be down to 412 or something.36
Buffett’s instinct in such a jam was to turn to a Man Friday, a Harry Bottle or a Ken Chace. The guy he wanted was in Omaha—Stan Lipsey, his buddy and the publisher of the Omaha Sun. Lipsey, though, had no desire to go to Buffalo.
“What about just going up there once a month doing whatever you think needs done?” Buffett asked.
Lipsey thought to himself, “What kind of a job description is that?” Buffett, reading his mind, added, “The place will just run better if you’re there.”
Lipsey went to Buffalo. He spent a week there each month, in theory as an assistant to the publisher, who was a holdover from the previous owner.
But the Evening News remained badly hampered by the injunction. Judge Brieant required the paper to show a signed customer order authorizing each and every Sunday delivery. And every word that was uttered by an Evening News salesman, executive, or other employee was picked over by opposition lawyers in the hope of finding a violation of the court order. One time, the Evening News was found in contempt—a serious matter. Mason, a lawyer for the other side, said, “Things didn’t go well for the News. We had the ability to police their activities. We had discovery, we had access to their records.” Essentially, the paper was operating at the mercy of a federal judge.
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