The Snowball

by Alice Schroeder

  “We were in the track, yelling, ‘Get your Stable-Boy Selections!’ But the Blue Sheet was the number-one tip sheet, and the racetrack was getting a commission on it. The Blue Sheet sold for a little more. At twenty-five cents, we were a cut-rate product. They shut down the Stable-Boy Selections fast because they were getting a cut on everything sold in the place except for us.”

  When the Buffetts moved to Washington, D.C., the only plus for Warren was the chance to upgrade his handicapping skills.

  “The one thing I knew about Congress was that Congressmen had access to the Library of Congress—and the Library of Congress had everything that had ever been written. So when we got to Washington, I said, ‘Pop, there’s just one thing I want. I want you to ask the Library of Congress for every book they have on horse handicapping.’ And my dad said, ‘Well, don’t you think they’re going to think it’s a little strange if the first thing a new Congressman asks for is all the books on horse handicapping?’ I said, ‘Pop, who was out there at the county fairs stumping for your election? Who was down there at the packinghouses ready to get to the cops if something happened?’ I said, ‘And you’re coming up for reelection in two more years. You’re going to need me. So this is payoff time.’ And he got me hundreds of books on horse handicapping.2

  “Then what I would do is read all these books. I sent away to a place in Chicago on North Clark Street where you could get old racing forms, months of them, for very little. They were old, so who wanted them? I would go through them, using my handicapping techniques to handicap one day and see the next day how it worked out. I ran tests of my handicapping ability day after day, all these different systems I had in my mind.

  “There are two kinds of handicappers. There are speed handicappers and class handicappers. Speed handicappers figure out the horse with the best times in the past. The fastest horse will win. Class handicappers feel that the horse that’s run against ten-thousand-dollar horses and done well and now is running against the five-thousand-dollar horses will beat them. Because, they say, the horse runs just fast enough to win.

  “In horse racing it pays to understand both types of handicapping. But back then I was basically a speed guy. I was a quantitative guy to start with.”

  As he tested, thought, and observed, Warren discovered the Rules of the Racetrack:

  1. Nobody ever goes home after the first race.

  2. You don’t have to make it back the way you lost it.

  The racetrack counts on people to keep betting until they lose. Couldn’t a good handicapper turn these rules around and win?

  “The market is a racetrack too. But I was not developing elaborate theories in those days. I was just a little kid.”

  Betting in Washington was ubiquitous.

  “I would go down to my dad’s office fairly often, and there was actually a bookie in what was then called the Old House Office Building. You could go to the elevator shaft and yell ‘Sammy!’ or something like that and this kid would come up and take bets.

  “Now, I used to do a little bookmaking too, for guys who wanted to bet on the Preakness or something like that. That’s the end of the game I liked, the fifteen percent take with no risk. My dad, you know, was struggling somewhat to keep this under control. He was amused by it to some extent, but he could also see how it could veer off in the wrong direction.”

  During summer vacations, Warren returned to Omaha and went stooping at the Ak-Sar-Ben track, this time with his friend Stu Erickson.3 Back in Washington, he found a new friend to go to the racetrack with, someone who could advance his handicapping skills. Bob Dwyer, his high school golf coach, a potbellied, enterprising young man, made far more than his teacher’s stipend by selling life insurance and ice chests and other things during the summer when school was out.4 The other members of the golf team viewed Dwyer as tough and crusty, but he took a shine to Warren, who had a way about him and played enthusiastically despite his glasses always fogging up.

  One day Warren asked Dwyer to take him to the races. His coach said he needed permission. “The next morning,” Dwyer says, “bright and early, he came prancing in with a note from his mother, saying it was all right to go to the races.” So Dwyer wrote Warren some phony excuse to get out of class5 and then they took the Chesapeake & Ohio from Silver Spring, Maryland, over to the racetrack in Charleston, West Virginia. Going to the races with a teacher polished Warren’s sophistication about handicapping. Dwyer taught Warren advanced skills in reading the most important tip sheet, the Daily Racing Form.

  “I’d get the Daily Racing Form ahead of time and figure out the probability of each horse winning the race. Then I would compare those percentages to the odds. But I wouldn’t look at the odds first, to avoid prejudicing myself. Sometimes you would find a horse where the odds were way, way off from the actual probability. You figure the horse has a ten percent chance of winning but it’s going off at fifteen to one.*9

  “The less sophisticated the track, the better. You have people betting on the jockey’s colors, and you have them betting on their birthdays, you have them betting on the horses’ names. And the trick, of course, is to be in a group where practically no one is analytical and you have a lot of data. So I would study the forms like crazy when I was a kid.”

  One grade behind Warren at Woodrow Wilson but slightly older, Bill Gray went to a few horse races with him. “He was very sharp with numbers. Very talkative.6 Very outgoing. We would discuss baseball, batting averages, sports.7

  “He knew which horses he was going to pick the minute he got off the train. He would go down to the track and say, well, this horse is too much weight, or this horse, where he’s come in the last few races has not been good enough, or his times are not good enough. He knew how to judge the horses.” Warren made six-to ten-dollar bets, sometimes on the nose.*10 He only bet big if the odds looked good, but he had a way of risking some of his hard-earned paper-route money on the right horse. “He might change his mind as the different races came forward,” says Gray. “But for a sixteen-year-old, that’s not so common, you know?”

  Then one time, Warren went to Charleston by himself. And he lost in the first race. But he didn’t go home. He kept on betting and he kept on losing, until he had lost more than $175 and his pockets were stripped nearly bare.

  “I came back. I went to the Hot Shoppe, and I treated myself to the biggest thing they offered—a giant fudge sundae or something—and there went all the rest of my money. While I ate, I figured out how many newspapers I had to deliver to make up what I had lost. I was going to have to work more than a week to make back the money. And I’d done it for dumb reasons.

  “You’re not supposed to bet every race. I’d committed the worst sin, which is that you get behind and you think you’ve got to break even that day. The first rule is that nobody goes home after the first race, and the second rule is that you don’t have to make it back the way you lost it. That is so fundamental, you know.”

  Did he realize that he’d made an emotional decision?

  “Oh, yeah. Oh, I was sick. It was the last time I ever did anything like that.”

  14

  The Elephant

  Philadelphia • 1947–1949

  Warren graduated sixteenth out of 350 in his high school class, putting “future stockbroker” under his picture in the yearbook.1 The first thing he and Danly did with their freedom was to go in together and buy a used hearse. Warren parked the hearse in front of the house and used it to take a girl out on a date.2 When Howard came home later, he asked, “Who put that hearse out here?” Then Leila said one of their neighbors was gravely ill, and she was not having a hearse in front of the house. That was the end of the hearse.

  While he and Don were selling the hearse, Warren gave up his paper routes and got a summer job as a relief circulation manager for the Times-Herald, moving up in the world. Whenever he had to substitute for his paper carriers, he rose at four a.m., and delivered the papers from a little Ford coupe he borrowed from David B
rown, a young man from Fredericksburg who had a crush on Doris and who had gone into the Navy.3 Standing on the running board of the car with the door open, he coasted at about fifteen miles an hour, one hand reaching inside the car to hold on to the wheel, the other hand grabbing the papers and pitching them onto the subscribers’ lawns. He rationalized that at such an early hour of the morning, nothing too terrible was likely to result from driving the car that way.4

  Afterward he stopped by the Toddle House at four forty-five a.m. to treat himself to a double order of hash browns with paprika for breakfast. Then he went on to his second job, distributing papers at Georgetown University Hospital.

  “I had to give the priests and nuns about a half a dozen papers free, which always irritated me no end. I thought they weren’t supposed to be interested in secular things. But this was part of the deal. And then I went room by room, ward by ward.

  “After they had the baby, the women in the obstetrics ward would see me come in and say, ‘Oh, Warren! I’m going to give you something more valuable than a cash tip. I’m going to tell you when my baby was born and how much it weighed. Eight thirty-one a.m., six pounds and eleven ounces.’” The babies’ birth times and weights were meant for betting on the “policy racket,” the numbers game in Washington.5

  Warren ground his teeth whenever he got useless information instead of a cash tip. As a handicapper, he would never have played the policy racket. The odds were terrible. “The policy racket paid off six hundred to one, and the guy that was your runner got ten percent of it. So you have a five hundred forty-to-one payoff on what was a thousand-to-one shot, basically. People made penny bets and dime bets. If you put a penny up, you might win $5.40 net. And everybody in town played. Some of my newspaper delivery customers used to ask me, ‘Do you run policy numbers?’ I never did. My dad would not have approved if I’d become a policy runner.”

  He was already a good enough oddsmaker to work in Vegas, but he probably would not have bet on the next thing his father did. Howard Buffett voted for a bill that actually passed, joining 330 other Congressmen who made the Taft-Hartley Act law over President Truman’s veto. One of the most controversial pieces of legislation ever enacted in the United States, the 1947 Taft-Hartley Act severely restricted the tactics used by labor unions. It made it illegal for them to support one another through secondary strikes and authorized U.S. Presidents to declare a national emergency and force striking workers back to work. It was referred to as a “slave labor” bill.6 Omaha was, of course, a union town, but it would never have occurred to Howard to vote according to his constituents’ preferences; he always voted his principles.

  So when the Buffetts went home to Omaha for a visit during the summer, and Warren went to a hometown baseball game with his father, he saw just how unpopular Howard had become among the blue-collar voters. “They introduced the dignitaries in between the doubleheader. And he stood up and everybody in the place started booing. He just stood there and didn’t say anything. He could handle things like that. But you just can’t imagine the effect that has on a kid.”

  Even the mildest forms of confrontation terrified him. But soon he would be standing on his own, out from under his father’s wing. At almost seventeen, Warren was barely a kid. One year older and a few years earlier he might have been fighting in the war.

  Instead of the military, in the fall he was starting college. The Buffetts had long taken for granted that Warren would attend the University of Pennsylvania’s Wharton business school.7 Wharton was the nation’s most important undergraduate business college and Penn the brainchild of Benjamin Franklin, creator of aphorisms like “he that goes a’borrowing goes a’sorrowing,” “time is money,” and “a penny saved is a penny earned.” In theory, Penn and Warren, who had the energy of two people and hustled like a stevedore while other kids played, were a perfect fit.

  However, Warren would have just as soon skipped the whole thing. “What was the point?” he asked himself. “I knew what I wanted to do. I was making enough money to live on. College was only going to slow me down.” But he would never have defied his father on something so important, so he acquiesced.

  Knowing their son’s immaturity, the Buffetts arranged a roommate for him who was the son of some friends from Omaha. Five years older, Chuck Peterson had just returned from eighteen months’ service in the war. He was a handsome young man-about-town, dating a different girl every night, and drinking. Naively, the Petersons supposed that Warren might settle Chuck down, while the Buffetts reckoned that an older boy might help Warren adjust to college.

  In the fall of 1947, the entire family piled into the car and drove Warren to Philadelphia, where they deposited him and his raccoon coat in a little dormitory suite with a shared bathroom. Chuck had already moved in, but was out on a date somewhere.

  As the Buffetts drove away to return to Washington, they left their son at a campus filled with people much like Chuck. An army of World War II veterans marched across College Green and filled the Quad, the centers of Penn university life. Their worldliness widened by years the gap Warren had felt between himself and his classmates ever since moving to Washington. On an organized, busy, social campus, his baggy T-shirts and worn tennis shoes stood out among the purposeful men dressed in sports coats and polished oxfords. Penn was a football powerhouse; its fall social life revolved around football dates, followed by fraternity parties. Warren loved sports, but the social requirements were beyond him. He was used to spending much of his time honing ideas, counting his money, organizing his collections, and playing music in the privacy of his room. At Penn, his solitude battered by the sixteen hundred flirting, necking, jitterbugging, keg-tapping, football-tossing members of the Class of 1951,8 he was a butterfly in a beehive.

  The bees reacted much as expected to the butterfly that had flown into their midst. Chuck retained his military tidiness and the habit of constantly polishing his shoes. When he met his new roommate, Warren’s disgraceful wardrobe shocked him. He soon discovered that the way Warren dressed symptomized something else. Just as Leila waited hand and foot on Howard and did all the work around the house, Warren had never been taught the most basic ways of taking care of himself.

  Chuck stayed out late socializing as usual his first evening after they met. The next morning, he woke late to find the bathroom in a mess and his new roommate gone to early classes. When he saw Warren that evening, he said, “Clean up after yourself, will you?” “Okay, Chas-o,” Warren said. “I came in this morning and you left a razor lying at the bottom of the sink,” Chuck went on. “You left soap all over the sink, the towels were on the floor, and it’s sloppier than hell. I like things neat.” Warren appeared to agree. “Okay, Chas-o, okay, Chas-o,” he said.

  The next morning, when Chuck got up, he stepped through sodden towels on the bathroom floor to find tiny damp hairs covering the sink, and a brand-new, soaking-wet electric razor lying in the basin, tethered to the outlet in the wall by its cord. “Warren, lookit,” said Chuck that evening. “Unplug the damn thing. Somebody’s going to get electrocuted. I’m not going to pick it up out of the sink every morning. You’re driving me nuts with your sloppiness.” “Okay, okay, fine, Chas-o,” said Warren.

  The next day was exactly as before, the razor lying in the sink. Chuck realized that his words were bouncing off Warren’s head. He lost his temper and decided to take action. He unplugged the razor, filled the sink with water, and threw the razor in.

  The following morning, Warren had bought a new razor, plugged it in, and left the bathroom in the same state as before.

  Chas-o gave up. He was living in a pigsty with a hyperactive teenager who hopped around in constant motion, drumming his hands, beating them on every nearby surface. Warren was obsessed with Al Jolson and played Jolson records day and night.9 He sang, over and over, imitating Jolson: “Mammy, my little Mammy, I’d walk a million miles for one of your smiles, my Mammy!”10

  Chuck needed to study, and he could not hear himself think
inside the suite. Warren, on the other hand, had plenty of time to sing. He hadn’t bought a lot of textbooks, but he had read the ones he bought at the beginning of the semester, before classes started, the way someone else might flip through a Life magazine. Then he threw them aside and never opened them again. This left him all night long to sing “Mammy” if he felt like it. Chuck thought he was going mad. Warren knew he was immature, but he couldn’t help it.

  “I probably wouldn’t have fit in very well anyplace at that time. I was still out of sync with the world. But I was also younger than anybody else, and, on top of that, I was young for my age in many ways. I really didn’t fit in socially.”

  Chuck’s social life, on the other hand, was in full swing; he had pledged Alpha Tau Omega. Warren had little interest in Greek life but pledged his father’s fraternity, Alpha Sigma Phi. It was not a jock house nor particularly brutal, but the rituals of pledging turned him red-faced. The secret motto of Alpha Sig was zeal, humility, courage.11 Warren had plenty of the first two, but courage was his Achilles’ heel. When the pledges were sent to Wanamaker’s to buy extra-large women’s panties and brassieres, he circled the underwear department for a looooong time before facing the snickering coed salesgirls.12

  That fall, Leila and Doris struggled to describe Warren’s crew-cut, slightly bucktoothed appearance truthfully on a radio show in Washington called Coffee with Congress.

  Host:

  Incidentally, is Warren good-looking?

  Leila:

  He was good-looking as a small child. He’s just boyish—I wouldn’t call him good-looking, but he’s not poor-looking either.

  Host:

  He’s handsome-looking.

  Leila:

  No, not handsome, just friendly.