Beebe died on May 1, 1973, and a week later his lawyer, George Gillespie, who was also Graham’s personal lawyer and one of her advisers, began settling his estate. Gillespie got wind that a big investor out in Omaha had been buying Post stock, so from his summer house in Maine, he called Buffett and offered a block of fifty thousand of Beebe’s shares that needed to be sold. Buffett snapped it up.
If he could, at the right price, Buffett would have bought almost any newspaper in sight for Berkshire Hathaway. When the bankers from Affiliated Publications, publisher of the Boston Globe, were struggling to place its deal, Buffett broke his unwritten rule against buying public offerings and took four percent of Affiliated at a discount price. Berkshire wound up its largest shareholder. He grabbed stock in Booth Newspapers, Scripps Howard, and Harte-Hanks Communications, a San Antonio–based chain. The Sun’s elevated status as a Pulitzer Prize winner enabled him to network his way through the newspaper world, talking with publishers as one of their peers. He chatted up the owners of the Wilmington News Journal, hoping to buy the paper. Alas, while newspaper stocks were cheap because investors failed to see their value, newspaper owners were not so blind. Competing with them, Buffett and Munger’s efforts to buy whole newspapers had all come to naught.
Still, by late spring 1973 Buffett had accumulated more than five percent of the Washington Post stock.6 He now sent a letter to Graham. She had never lost her terror that somehow her company would be taken away from her, even though Beebe and Gillespie had structured the Washington Post’s stock in two classes so that an unfriendly buyer could never do that.7 Buffett’s letter told her that he owned 230,000 shares and meant to buy more. But instead of legalistic boilerplate, he wrote a highly flattering, personal missive that linked their common interest in journalism and stressed the Sun’s Pulitzer. The letter began:
This purchase represents a sizable commitment to us—and an explicitly quantified compliment to the Post as a business enterprise and to you as its chief executive. Writing a check separates conviction from conversation. I recognize that the Post is Graham-controlled and Graham-managed. And that suits me fine.8
Nonetheless, Graham panicked. She reached out for advice.
“At times,” Jim Hoagland, one of her reporters, wrote, Graham was “capable of being taken in by mountebanks of the moment,” and “particularly if they were adroit at a certain kind of kidding flattery.”9 She was a “pretty dreadful snob” and “too easily impressed by people with big titles,” according to another reporter.10 Moreover, while she instinctively pursued women’s equality—she had given the seed money to Gloria Steinem for Ms. magazine, she was known to chide men for referring to professionals as if all members of the class were men, and she once hurled a paperweight at a Post executive who refused to allow girls to deliver papers—deep inside she still thought that only men knew anything about business. Thus, when André Meyer was “irate” and told her that Buffett meant her no good, she took him seriously.11 And it also carried weight when another of Graham’s acquaintances, Bob Abboud, a fellow trustee at the University of Chicago, warned her away.
“André Meyer really wanted to think he controlled everything. And it was easy when he got a woman like Kay—he would make her feel like she’d better not go to the bathroom without checking with him. He had that style. André kept referring to me as her new boss because I bought this stock. You had all these guys who could see their power being diluted if I got in the inner circle.
“She was very sensitive to the idea that anyone would manipulate her, for political purposes or for the paper, which is understandable. She was used to everybody in the world trying to use her. But what you could do with Kay is you could play on her fears. If you wanted to work her over, you could make her feel so insecure. And she knew you were doing it to her, but she couldn’t resist it.”
“She would second-guess herself,” says fellow Post board member Arjay Miller. “She would fall in and out of love with people. She could be bullied. She would get overwhelmed by certain people in business. She would meet somebody and be sort of dazzled with them for a little while and think they knew all the answers. She thought men knew all about business and women didn’t know anything. At the bottom, that was the real problem. Her mother told her that and her husband told her that, over and over and over and over again.”12
Graham tried to find out what she could about Buffett. She barely remembered him from their brief encounter two years earlier.13 She and her colleagues bought copies of Supermoney and devoured the chapter on him, wondering what the man from Nebraska had in store for them. Those unfriendly to Buffett made sure she also saw an unsigned article in the September 1 issue of Forbes about Buffett’s purchase of stock in San Jose Water Works, which cast a shadow on the sunny portrait that Supermoney had painted of the mystery man.
This Forbes piece struck a very different tone than the glowing article the magazine had published two years before. It described a San Jose Water Works shareholder who wanted to unload his stock. He went to a company director who sent him to Buffett. The article insinuated that Buffett must have known that a deal was brewing for the city to take over the water works at a higher price than he was paying for the stock—simply because a director had referred a seller to him. He had connections, so he must have known something—right? The article ended: “…the American Stock Exchange and the San Francisco office of the Securities Exchange Commission are making inquiries and asking questions.”14
But there was nothing illegal about a director referring a seller of stock to a buyer.15 Indeed, no deal ever took place. Yet to anyone checking him out, this would be the most prominent, public, recent mention of his name apart from Supermoney.16 Buffett felt like a cat’s scratching post. If this cascaded into a series of expanding stories, it could wreck his newly gilded reputation even though the story had no substance to it. He was not the type to storm and shout, however, but to brood and plan. Thus, while angry, he was too clever to confront the magazine and denounce its nameless reporter. He wanted retribution and vindication, so he used the opportunity to bring himself to the attention of magazine publisher Malcolm Forbes, writing him an artfully worded letter in which he talked of the pitfalls of journalism, complimented him on the magazine’s good “batting average” in investigative reporting over the years—to which the article on San Jose Water Works was some kind of unfortunate exception—and mentioned the Sun’s Pulitzer.17 On the same date he wrote a crisper letter, sans the flattery, to the editor, stating the facts to support his innocence.
Sure enough, Forbes ran a correction. Buffett knew, however, that corrections were rarely read and had no impact as compared to the initial story. So he also sent one of his proxies, the loyal Bill Ruane, to talk to the editors, not to complain but to position Buffett as an expert who could write an article about investing.18 The attempt failed, at least initially.
Buffett now had a new cause—outrage at bias in news reporting—which wound itself around his sense of justice and his interest in journalism in general. That a reporter could lie by inference or omission without any accountability drove him wild. He knew that even well-intentioned news publications flew into a state of high dudgeon and defended their reporters’ dubious behavior on the premises of newsroom morale and press independence. This stance, he would later learn, was referred to at the Washington Post as the “defensive crouch.”19
Eventually, he would end up helping to fund the National News Council, a nonprofit organization that arbitrated complaints of journalistic malpractice. The council’s position was that media had become dominated by monopolies and concentrated in a few hands; this lack of competition meant that the First Amendment’s right of freedom of the press gave publishers “power without responsiblity.” The council offered redress to victims who had been “traduced, misquoted, libeled, held up to unjustified ridicule, or whose legitimate views have been ignored in a one-sided report.” Unfortunately, those very monopolies and the few publishers who dominate
d the media had no interest in publishing the News Council’s rulings, which exposed their biases and the carelessness and incompetence of their reporters. The News Council eventually folded after its findings were spiked, time and time again, by the free and independent press that was supposed to publish them.20
The National News Council was a worthy crusade, indeed perhaps ahead of its time, like many of the causes on which Buffett spent his energy. But by 1973, Susie Buffett had seen him expend a tidal wave of energy on each new crusade or obsession, sometimes changing entire coastlines in his wake. While many people shift their interests over time, the shy, insecure man she had married seized on one obsession after another. From his childhood hobby of collecting license-plate numbers to reforming the jiggery-pokery of journalism, three roles invariably interested him. The first was the relentless collector, expanding his empire of money, people, and influence. The second was the preacher, sprinkling idealism from the lectern. The third was the cop, foiling the bad guys.
The perfect business would allow him to do all of these at once: preach, play cop, and collect money to ring the cash register. The perfect business, therefore, was a newspaper. That was why the Sun had been a sliver of something that he wanted more of, much, much more.
But he and Munger had struck out at trying to buy major city newspapers. Now here was Katharine Graham, unsteady on her feet when it came to business, manipulated by those around her, flailing, seeking a lifesaver ring from anyone she could find. Yet despite her insecurities and vulnerabilities, because of her position at the helm of the Washington Post, she had become one of the most powerful women in the Western Hemisphere. And Buffett had always had a strong attraction to powerful people.
Graham was afraid of him. She asked George Gillespie whether he was crooked. She could not afford to make a mistake. For several years the Nixon administration had been waging an all-out war to discredit the Post. The Senate Watergate Committee was holding hearings. Woodward and Bernstein had unearthed Nixon’s “enemies list.” A set of newly discovered tapes implicated the President, who had refused to hand over information he claimed was privileged, information that could answer the question of what happened and who was involved. Graham labored every day over the Watergate story. In a sense, she had staked the Post’s franchise on it.
She relied heavily on the opinion of the devoutly religious, utterly respectable Gillespie. He had served the Graham family ever since, as a twenty-eight-year-old trust lawyer at Cravath, Swaine & Moore, he had drafted Eugene Meyer’s final will, witnessing the signature of the fading old man. “He’s going to take over the Washington Post,” she said about Buffett. “Kay, he can’t take over the Post,” Gillespie said. “Forget it. It’s not possible. It doesn’t make any difference how much B stock he owns. He has no rights. All he could do would be to elect himself to the board if he owned the majority of the B stock.”
Gillespie had called a San Jose Water Works director and was convinced that Buffett had had no inside information. He made it clear that he disagreed with the powerful André Meyer, going out on a limb, given Meyer’s position and connections. He told her to talk to Buffett, that he would be good for her to know.21
Graham wrote Buffett, quaking as she dictated the letter, suggesting that they get together in California, where she would be traveling late that summer on business. He agreed eagerly, and when she arrived at an office provided by the Los Angeles Times, the Post’s West Coast news-service partner, she looked exactly as she had two years before: impeccably tailored shirtdress, her pageboy hairdo lacquered into place, lips pursed in a small smile. When she saw Buffett, Graham said, his “very appearance surprised” her.
“The great blessing and curse in my mother’s life,” says her son Don, “was she had very high standards when it came to taste. She was used to traveling in high-falutin circles. She thought there was one right way to dress and eat and one circle of people to be paid attention. Warren violated all her standards when it came to these things, yet he didn’t care.”22 Wearing a suit that looked tailored for some other man, the hair no longer crew-cut and beginning to float up slightly at the ends, “he resembled no Wall Street figure or business tycoon I’d ever met,” she later wrote. “Rather, he came across as cornfed and Midwestern, but with that extraordinary combination of qualities that has appealed to me throughout my life—brains and humor. I liked him from the start.”23
But at the time, that certainly didn’t show. Instead, she came across as frightened, unsure of both him and herself.
“When I first met with Kay, she was wary and scared. She was terrified by me, and she was intrigued by me. And one thing about Kay was that you could tell. She was not a poker-face type.”
Buffett could see that Graham knew nothing about business and finance and that she thought her board and managers outclassed her in running the business despite what was by now a decade of experience. He told her he thought Wall Street did not see the value of the Post. Graham relaxed her guard slightly. In her patrician accent, she invited him to meet with her in Washington a few weeks later.
Warren and Susie arrived November 4, the evening before the meeting, drove up in a taxi to the Madison Hotel, directly across the street from the Post headquarters, and, as they were checking in, found that the newspaper was in the middle of a printers’ union work stoppage. Federal marshals were evicting the mutinous printers amid rumors of pressmen carrying guns. Commotion, glaring lights, and television cameras carried on until dawn. Given what was happening in the political sphere, it would be hard to find a worse time to shut down a newspaper, which of course was exactly what the union intended. Vice President Spiro Agnew had been under criminal investigation but suddenly pleaded “no contest” less than a month ago to a tax-evasion charge, then resigned. The Watergate scandal had reached an explosive crisis. Two weeks after Agnew’s resignation, U.S. Attorney General Elliot Richardson and Deputy Attorney General William Ruckelshaus resigned in protest rather than execute President Nixon’s order to fire special prosecutor Archibald Cox—who had been appointed to investigate the unfolding scandal—and abolish his office. Nixon did so anyway, in what became known as the “Saturday Night Massacre.”24 The President’s interference in the supposedly independent judiciary branch of government marked a turning point in the Watergate affair by shifting public opinion decisively over the course of the past two weeks against him. Pressure was mounting rapidly on Congress to impeach.
The morning after the Buffetts’ arrival, Graham, exhausted from working with most of her managers until six a.m. to get the paper out, was embarrassed at the introduction her new shareholder had received to her paper and nervous about how the day’s meeting would proceed. But she had arranged lunch for Buffett with Ben Bradlee, Meg Greenfield, Howard Simons, and herself.
Graham considered Meg Greenfield her closest friend, yet referred to her as “a lone fortress…no one ever really got to know Meg.” Editorial-page editor of the Post, Greenfield was a short, chunky woman with cropped dark hair and a plain no-nonsense face. She exemplified humor, honesty, toughness, good manners, and modesty.25
Howard Simons, the Post’s managing editor, was known for his sharp-witted way of twitting Graham. “Howard Simons used to say that you don’t have to be dead to write obituaries. He was a great guy, but he was wicked. He used to tease Kay so much.26
“We were eating lunch, talking about acquisitions and media properties. I could see that even though she had all the A stock, she was afraid of me. I mean, they had spent their whole life dreaming up and putting defenses around the stock. So I said something about how the amortization of intangibles made it harder for the media companies, because they paid so much for goodwill, which caused problems if they were conscious of valuation.”*27 Buffett was trying to reassure Graham that it was hard to take over media companies because the accounting made it burdensome to would-be acquirers. “And Kay was showing off. She said, ‘Yes, the amortization of intangibles caused us a problem’ or somethin
g like that. Howard looked her right in the eye, and he said, ‘Kay, what is the amortization of intangibles?’
“And at that moment, I mean, I loved it. She was just frozen. She was paralyzed. Howard was enjoying it. So I jumped in and explained what amortization of intangibles was to Howard. And when I got through with this description, Kay said, ‘Exactly!’”
Buffett loved outthinking Simons, short-circuiting the game, and coming—indirectly and subtly—to Graham’s defense. Graham’s tight little smile began to ease. “From that point forward, we were the best of friends. I was Sir Lancelot. That was one of the greatest moments of my life. Turning defeat into triumph for her.”27
After lunch, Buffett met with Graham for about an hour, then he reassured her in writing. “I said, ‘Kay, George Gillespie’s arranged for the A shares to give you control. But,’ I said, ‘I also know that it is so important to you in this world that you’re going to worry about it no matter what you’ve got. It’s your whole life.’ And so I said, ‘I’m telling you that even though these teeth look like Little Red Riding Hood’s wolf fangs to you, they really are baby teeth. But we’ll just take them out. Just have the orders come up this afternoon, and we’ll white out*28 some things, and I’ll never buy another share of stock unless you’re okay with it.’ I knew that was the only way that she would ever be comfortable.” That afternoon, Buffett—who had spent $10,627,605 to buy twelve percent of the company—signed an agreement with Graham not to buy any more of the Post stock without her permission.
In the evening, the Buffetts were due at Graham’s for one of her famous dinners, this one for forty guests honoring Warren and Susie. Despite Graham’s personal insecurity, she was considered Washington’s greatest hostess, above all because she knew how to help people relax and enjoy themselves. This evening, despite her exhaustion and the temptation to cancel, “She had a little party for me. That was her way of reciprocating. And when she had a party, she could get anybody she wanted. Anybody—the President of the United States, anybody.”
The Snowball Page 49