As was her habit with powerful men, Graham reached out to him for help. Buffett needed little encouragement.
“The first time she was going to speak to the New York Society of Security Analysts, I went over there to her apartment in New York on a Sunday morning to help her write her speech. She was a basket case. She was terrified that all these men were going to be there and she was going to have to stand up in front of them. Public speaking was something that was very hard for her always. The funny thing is, she had a great sense of humor, she was smart, but she tended to freeze in front of a crowd. Particularly if she thought they were going to question her about numbers.”
As Robert Redford had said in an interview after first meeting her to discuss the Watergate movie All the President’s Men, Graham had a “tight-jawed, blue-blooded” quality that demanded that her privacy not be invaded. Why, therefore, Redford asked himself, “did she keep making speeches and accepting awards?”2—particularly since it terrified her to do it.
Buffett sat down in the living room of Graham’s large apartment situated on an upper floor of the modern UN Plaza, overlooking New York City’s East River. Surrounded by Asian art and antiques from Agnes Meyer’s collection, they started to work.
“She kept imagining these questions they were going to ask, like how much are you paying for your newsprint per ton? She thought it was a quiz. And I said it doesn’t make any difference. You’re paying what other people are paying for newsprint, so what? But that was a big thing. She was just convinced. I kept trying to get her away from trying to remember facts. Just have a theme.” Graham wanted to say that good journalism makes good profits. Buffett snorted to himself over this notion and refocused her. “You know, good journalism is not inconsistent with good profits, or something like that. The hell with all the other stuff. I just tried to convince her that she was a hell of a lot smarter than all those dumb males that were out there. That’s what really sort of bonded us initially.”
In an ironic turnabout, Buffett became Kay Graham’s personal Dale Carnegie instructor. He, of all people, could sympathize with someone who tended to freeze in front of a crowd. Moreover, thanks to Susie’s gentle tutelage over the years, he had learned a subtler way of dealing with people. He knew how to anticipate their reactions and to phrase things in a nonthreatening way. His letters, which had always been self-conscious, were now more deftly worded and empathetic. He had learned to listen and show interest in other people and to converse on topics other than stocks. It helped that he was genuinely fascinated by Graham.
After they finished preparing and rehearsing, Graham said she was going to a party at the Agnellis’ that night. “You might find the sightseeing entertaining,” she said. “Why don’t you come with me?” Buffett always stressed how uncomfortable and out-of-place he felt at glamorous events and how uninterested he was in attending them. So he told Graham that, yes, he would go. That evening he left his room at the Plaza to pick up Graham and ride to the Upper East Side.
“We were this very improbable couple—her mid-fifties, me early forties, and we got to this apartment, which was more than an apartment, it was like a triplex, it was huge. And everybody was bowing and scraping to Kay. There was every character from the party scene in the film La Dolce Vita. I was the required walk-on, the potted plant. You wanted it to go in slow motion so you could see everything. Gianni Agnelli, the head of Fiat, and his wife, Marella, weren’t there. It was almost like a costume party, except it wasn’t.”
Buffett returned to Omaha afterward having seen a new side of Graham. As he continued getting to know her on a personal level, he saw her as a bundle of paradoxes. “Fearful but willful. Patrician but democratic. Wounded by the people she cared most about.” He was surprised how much she still talked about her former husband a decade after his suicide.
“When you first met her, she would often get off on the subject of Phil very quickly, almost like Charlie getting off on a subject. And she described him in terms that were sort of hard to believe, considering how badly he treated her. But after I got to know her better, she told me everything about him and the relationship. She had found it impossible to conceive of herself as being in the same league as him. She felt she was a fraud, almost, even pretending to be in the same room with him. They used to hang out a lot with the Kennedys, and she just felt that she shouldn’t be there. Anything he said was funny, anything he did was right. When he used to chop up the children right in front of her, she wouldn’t stop him—I mean, the whole thing.”
That he and Graham—who showed the aftereffects of an upbringing by a cruel, neglectful mother and years of abuse by a sadistic husband with untreated bipolar disorder—would be mutually attracted seems almost a foregone conclusion given Buffett’s own childhood experiences. He knew how to behave around her in a way that wasn’t threatening. By the spring of 1974, she began to switch her allegiance from her other advisers to him. In turn, he seized the chance to tutor the CEO of the Washington Post Company about business as if he had been waiting to play Pygmalion all his life: his very own Eliza Doolittle. More patient than Henry Higgins, he coached her gently and sent helpful, interesting articles to Kay and to her son Don.
As Buffett’s influence grew stronger, Graham noticed that the words “Warren says” brought shudders from some of her board members.3 But Buffett himself was hoping to be invited onto that board. When Tom Murphy had approached him to join the Cap Cities board, Buffett told him no, he was holding out for the Post.4 Murphy dutifully spilled this news to Graham, who “felt dense” for not having figured it out herself.5
Susie thought that instead of taking on more business responsibilities, her husband should sell some of their stock and use it for a higher cause. Riding with him in a taxi in Washington, D.C., she pointed out philanthropist Stewart Mott, who was running the Stewart R. Mott Charitable Trust, which gave money to peace, arms control, and population and family-planning causes. The Buffetts were now richer than Mott, who had started with $25 million. “Why don’t you quit?” Susie said. “Stewart Mott is doing all these other things now and he doesn’t have to work every day.” But Warren was incapable of quitting; he fell back on his philosophy that $50 million today would be worth $500 million someday. Nonetheless, he was not entirely disengaged from his family nor insensitive to his wife. He had picked up some vibrations from Susie, a sense that she wanted more from her life. With Peter moving along in high school, Warren told her, “Susie, you’re like someone who has lost his job after twenty-three years. Now what are you going to do?”
Photo Insert Two
Image 24
In 1945, Warren and Lou Battistone “lusted after” Abbye “Pudgy” Stockton, the pioneer in women’s weight-lifting.
Image 25
Warren sang and played the ukulele every morning before work at an employee “pep rally” in the basement of JC Penney’s, where he sold menswear and men’s furnishings in 1949.
Image 26
Warren pretends to pick the pocket of his fraternity brother Lenny Farina in 1948.
Image 27
In 1951, Warren dated Vanita Mae Brown, who was “Princess Nebraska” in the 1949 National Cherry Blossom Festival, as well as Miss Nebraska 1949.
Image 28
Susan Thompson and Warren Buffett beaming at their wedding, April 19, 1952.
Image 29
Susie Thompson as a preschooler.
Image 30
Warren posing as a prisoner on his honeymoon, April 1952.
Image 31
An undated photograph of Graham-Newman partners Jerome Newman and Benjamin Graham.
Image 32
Warren teaching one of his early investing classes, probably Sound Investing in Stocks, at the University of Omaha, 1950s.
Image 33
Susie Buffett in New York City, holding daughter Susie Jr. during a visit with Ben and Estey Graham. Estey is holding the Buffetts’ new baby, Howard Graham Buffett.
Image 34
&n
bsp; Susie with, clockwise, Peter, Howie, and Susie Jr., in the mid-1960s.
Image 35
Charlie Munger as a baby in his father Al Munger’s arms, already wearing his trademark skeptical expression.
Image 36
Buffett and his partner Charlie Munger in the 1980s. Buffett calls them “Siamese twins, practically.”
Image 37
First meeting of the ”Graham Group” at the Hotel del Coronado in San Diego, 1968. Left to right: Buffett, Robert Boorstin (a friend of Graham’s), Ben Graham, David “Sandy” Gottesman, Tom Knapp, Charlie Munger, Jack Alexander, Henry Brandt, Walter Schloss, Marshall Weinberg, Buddy Fox (in profile), and Bill Ruane. Roy Tolles took the photograph and Fred Stanback could not attend.
Image 38
The Buffetts in the mid-1970s. Left to right, Howie (holding Hamilton), Susie, Peter (behind Susie), Warren, Susie Jr.
Image 39
Susie Buffett glows in sequins before one of her singing performances at Omaha’s French Café, shortly before she moved to San Francisco.
Image 40
The Buffetts celebrate the Pulitzer Prize awarded to the Sun Newspapers after the Boys Town exposé.
Image 41
Susie Buffett Jr. at her November 1983 wedding to Allen Greenberg, who later became executive director of the Buffett Foundation.
Image 42
Buffett and Washington Post publisher Kay Graham began a close, lifelong friendship in 1973.
Image 43
Astrid Menks in 1974, age 28. Four years later Susie Buffett encouraged her to take care of Warren, and she ended up moving in with him.
Image 44
Russian immigrant Rose Blumkin overcame hardship to build the largest furniture store in North America. She worked until age 103, a benchmark Warren often cites for himself.
Image 45
Buffett at home in his kitchen, wearing a favorite threadbare sweater.
Image 46
Buffett playing bridge with George Burns in 1991, at Burns’s 95 birthday at the Hillcrest Country Club in Los Angeles. Not shown: Charlie Munger and a sign reading: “No smoking by anyone under 95.”
Image 47
Throwing out the first pitch before the Omaha Royals’ home opener, April 11, 2003.
The answer, she said, was sing. Her nephew Billy Rogers had made her some instrumental guitar tracks so that she could tape herself and listen to her performances. Rogers had been playing jazz guitar at Mr. Toad’s, Spaghetti Works, and other clubs in Omaha, and along with him, Susie was now a familiar face in the local music scene. But when she first started practicing, “I was scared, really scared,” she said. “I was bad.” The last time she had performed in public was ten years before at a charity benefit at Central High. So she got coaching and worked on contemporary love songs and ballads. Susie first debuted as a chanteuse that July, before a friendly audience at a private party at Emerald Bay. “People seemed to like it pretty well,” she said.6 And it thrilled her husband to see his friends applauding his wife’s talent.
While the Buffetts were in Emerald Bay that summer, Warren invited Graham for a visit in connection with a trip she was making to speak to an analysts’ meeting in Los Angeles. Sensing that Graham was going to talk to him about joining the Post board, Buffett had been dancing around his office at Kiewit Plaza for days ahead of time, happy and excited as a kid on Christmas Eve.7
The Buffetts’ house at Emerald Bay, down a steep driveway set well back from the beach, still had the feeling of a modest rental house; it lacked most of the personal touches that spoke of a family. Warren had no sense of what kind of impression the place might make on Graham, who owned several enormous, impeccably decorated and maintained mansions, including the farm at Glen Welby and a vast, shingle-style waterfront estate on Martha’s Vineyard.
Apparently, however, he must have impressed upon his wife that they would have to make an unusual effort for Graham. The first morning after Kay arrived, Susie rose at an unheard-of hour and feigned domesticity: She cooked a full breakfast for the three of them, which both of the Buffetts pretended to eat. Her husband spent the rest of the day wrapped up in Graham, talking to her about newspapers, journalism, politics, and bringing up every opportunity for her to invite him on the board.
At some point, he put down his newspapers, donned a bathing suit purchased specially for the occasion, picked up a brand-new beach umbrella bought in Graham’s honor, and left the house with Graham to walk the hundred or so yards down a steep path to the shore to join the family. Previously, his attitude toward the ocean had been: “I think having the ocean nearby is an attractive feature, and fun to listen to at night, and all that kind of stuff. But actually getting in it—I feel I’ll save that for my old age.” But now, after sitting on the sand for a bit, looking at the water, he waded gamely into the Pacific. By all reports, Susie and the Buffett kids “went into convulsions of laughter” at the odd sight.
What Susie thought about this extraordinary gesture is not known. But Warren’s explanation of it is on record: “Only for Kay,” he says. “Only for Kay.”
On Sunday morning, they dropped their company manners and Susie sleepwalked through cooking bacon and eggs for Graham, eating nothing herself, while Warren sat nearby spooning chocolate Ovaltine from a jar.8 After breakfast, he and Graham resumed their tête-à-tête. At some point, Graham told him that she wanted him to join her board but was waiting for the right time. She knew that some of her board members, such as André Meyer, would not welcome Buffett. But he asked, “When is the right time?” thus forcing her to make up her mind. And so in short order it was done; they agreed that Buffett would join the board of the Washington Post Company. He was elated.
That afternoon, Buffett left his family at Emerald Bay and drove Graham to the Los Angeles airport. “On the way, all of a sudden, she looked at me like a three-year-old kid. Her voice changed, and her eyes, and she said, basically pleading, ‘Just be gentle with me, please don’t ever assault me.’ I learned later that Phil and some people at the paper, to get their own ends or for sheer enjoyment, would push her buttons just to watch her fall apart. It was cruel on the part of Phil; it was manipulative on the part of the rest. It was very easy to do; the button still worked.”
At summer’s end, on September 11, 1974, Buffett officially joined the board, which catapulted him from a star investment manager from Omaha to official adviser at one of the most important media companies in the world. Even at that first meeting he could see that Graham had a habit of pleading with the board for help. Buffett thought, This won’t do. You can’t put yourself in that position as a CEO. But he didn’t yet know her well enough to say anything. Instead, he educated himself about the Post board, which was full of many prominent and influential people, and began to tiptoe his way through the powerful, jockeying men who were used to dominating Graham. He was a quiet board member, however, and used his skills behind the scenes.
Buffett at the time was preoccupied with far more than just Kay Graham and the Washington Post. The market, which investors had expected to rally in 1974, instead was in the full throes of collapse. Pension-fund managers had cut back their stock purchases by more than eighty percent. Berkshire’s own portfolio looked as though someone had given it a severe hedge trimming, shearing off nearly one-third in the second Great Crash, the kind that comes along only a few times in a century.
Munger had kept his partnership open after Buffett had shuttered his. Now its value was plunging. His performance had always been more volatile—in both directions—than the market’s. For the past couple of years he had managed decent though unspectacular returns. But by 1974 Munger found himself in trouble, his partners losing nearly half of their money.9 Like Ben Graham half a century earlier, he felt obliged to make their money back.
“If you’re put together properly, you have a fiduciary gene like Warren and me,” he says, “and if you’ve told people, ‘I think I can get you extraordinary results,’ then you really hate
the idea of not delivering for them.”
As for himself, “Certainly the quoted value of my capital went down. I didn’t like it, but just think about how many years could go by—what difference does it make at the end whether I have X dollars, or X minus Y? The only thing that bothered me was that I knew how hard it was on the partners. That was what killed me—the fiduciary aspect of my position.”10
Munger still had about twenty-eight limited partners, including some family trusts. To earn back losses of half his capital, he would have to more than double the remaining stake. The value of Blue Chip Stamps would have a significant bearing on whether he could accomplish that.
Bill Ruane’s Sequoia Fund was also in trouble. It had started with $50 million from Buffett’s former partners and invested its money well by taking large positions in undervalued stocks like Tom Murphy’s Capital Cities Communications. This was not the kind of stock that money managers who had piled into glamour television and electronics stocks a few years earlier were buying now. They had galloped all at the same time straight the other way, into the arms of the “Nifty Fifty,” a small group of the largest, best-known companies.11
“In this business,” Ruane said, “you have the innovators, the imitators, and the swarming incompetents.” The imitators and the swarming incompetents were now at the wheel, and the stocks that Ruane and his partner Rick Cunniff had bought in 1970 had been cut in half. Compounding their problems, they had bought a seat on the New York Stock Exchange just before prices for seats fell over a cliff.12 The timing of Sequoia’s opening was obviously inauspicious—Ruane had agreed to start up just as Buffett was shutting down due to lack of opportunities. Sequoia had underperformed the market every year—cumulatively by a dramatic amount.13 The Sequoia Fund’s worst year yet was 1973; it had lost twenty-five percent, compared to the market’s loss of fifteen percent. It was on its way to another terrible year in 1974. Ruane’s largest backer, Bob Malott, was incensed. He was already known as a “ballbuster” around the halls of Ruane, Cunniff for his habit of calling to complain about minor discrepancies in his family’s accounts. Now, he berated Ruane for buying a seat on the exchange and for his poor performance with such persistence that Ruane feared he would pull his capital out of the firm.14 Buffett, however, remained serene in the knowledge that Mr. Market’s opinion of a stock’s price at any time had no bearing on its intrinsic value. He knew which stocks Ruane and his partners had bought and was confident that they had made good decisions.
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