The following morning, Buffett pulled on a cardigan and arranged his wayward hair into a neat gray comb-over. Greenfield crammed all five of them into her little car for the ninety-minute drive to the Gates compound. “While we’re driving down there, I said, ‘What the hell are we going to spend all day doing with these people? How long do we have to stay to be polite?’”
Gates had similar feelings. “I had a constant dialogue with my mom,” he says, “which was, Why don’t you come to the family dinner? No, Mom, I’m too busy, I’m working. So she told me Katharine Graham was coming, and Warren Buffett.” He was interested in meeting Graham, now a seventy-four-year-old legend who had softened into an older but still patrician—and imperious—figure, like a witty version of Queen Elizabeth, but, “I told my mom, ‘I don’t know about a guy who just invests money and picks stocks. I don’t have many good questions for him; that’s not my thing, Mom.’ But she insisted.” Gates flew in on a helicopter so he could make a quick getaway. When a tiny car pulled into the driveway, he was surprised to see a group of famous people—Greenfield and her guests—pop out like a gang of circus clowns.6
Graham was taken over to meet Gates, who looked like a recent college graduate, in a red sweatshirt over a golf shirt, his collar turned up in a little saucer around his neck. While Gates was arranging for Graham to take a seaplane ride, Buffett was introduced to Bill Gates Sr. and his wife, Mary.7 Then Bill III, known as Trey, was brought round to meet Buffett.
Observers kept a weather eye on this introduction. Gates was well-known for unleashing his impatience on things that didn’t interest him. Buffett no longer walked off to read a book when he was bored but had a way of disentangling himself very quickly from conversations he wanted to exit.
Buffett skipped the small talk; he immediately asked Gates whether IBM was going to do well in the future and whether it was a competitor of Microsoft. Computer companies seemed to come and go, and why was that? Gates started explaining. He told Buffett to buy two stocks, Intel and Microsoft. Then he asked Buffett about the economics of newspapers, and Buffett told him that they had gotten worse, because of other media. Within minutes the two were deeply immersed in conversation.
“We talked and talked and talked and talked and paid no attention to anybody else. I started asking him a whole bunch of questions about his business, not expecting to understand any of it. He’s a great teacher, and we couldn’t stop talking.”
The day started to go by. The croquet games began. But still Gates and Buffett talked on, even as many of Seattle’s best-known people circulated around them: Speaker of the House Tom Foley; chairman and CEO of Burlington Northern Jerry Grinstein; former EPA administrator Bill Ruckelshaus; Arthur Langlie, son of a former three-term governor, his wife, Jane, and their son Art; and Joe Greengard, a close friend of Greenfield’s, plus a local doctor, judge, newspaper owner, and art collector.8 Gates and Buffett took a walk on the pebbly beach. They were starting to attract attention. “We were sort of ignoring all these important people, and Bill’s father finally said, gently, that he’d prefer that we join in with the rest of the people a little more.
“Bill started trying to convince me to get a computer. I said, I don’t know what it’s going to do for me. I don’t care how my stock portfolio is doing every five minutes. And I can do my income taxes in my head. Gates said he would pick out the best-looking gal at Microsoft and send her to teach me how to use the computer. He would make it totally painless and pleasant. I told him, ‘You’ve made me an offer I almost can’t refuse, but I will refuse it.’”
As the sun descended toward the water during the cocktail hour, Buffett and Gates kept talking. At sunset the helicopter had to leave. Gates did not go with it.9
“Then at dinner, Bill Gates Sr. posed the question to the table: What factor did people feel was the most important in getting to where they’d gotten in life? And I said, ‘Focus.’ And Bill said the same thing.”
It is unclear how many people at the table understood “focus” as Buffett lived that word. This kind of innate focus couldn’t be emulated. It meant the intensity that is the price of excellence. It meant the discipline and passionate perfectionism that made Thomas Edison the quintessential American inventor, Walt Disney the king of family entertainment, and James Brown the Godfather of Soul. It meant the depth of commitment and mental independence that led Jeannette Rankin to stand alone as the only representative in Congress to vote against U.S. entry into both World Wars in the face of widespread ridicule. It meant single-minded obsession with an ideal. “Focus” meant the kind of person who could earn billions by allocating capital, yet be baffled by a sign that said “No TP.”
Sometime during the weekend, a guest who was less focused had figured out that “No TP” stood for touchy plumbing that couldn’t handle toilet paper. At last, the mysteries of the indoor facilities had been revealed and Buffett was liberated from the gas station. However, some traitorous member of the party—Graham, Greenfield, or one of the Evanses—had found the story so hilarious that even Buffett’s introduction to the Gates family had included a recounting of the story of “No TP.”
A day later, Buffett escaped the island and returned to the normal plumbing of Omaha. He could see that Gates was brilliant and that he understood business very well. But since the days when he told Katie Buffett not to invest in Control Data and passed on the chance to invest in the start-up of Intel, Buffett had never trusted technology companies as investments. Technology companies came and went, their products often made obsolete. Now, his interest piqued, he bought a hundred shares of Microsoft, which, to him, was like eating a single Cheerio. He couldn’t bring himself to buy any Intel, even though he sometimes bought a hundred shares just to keep track of a company. Grinnell College had made a lot of money from its Intel stock but had already sold it.10 Buffett himself would never buy stock like Intel that depended so much on future growth and that he didn’t fully understand. But he did invite Gates to the next Buffett Group meeting. Soon thereafter he had gotten the phone call from Don Feuerstein and Tom Strauss and for the next two months had thought of nothing but the miseries of Salomon.
In October, released from the conference rooms of 7 World Trade Center and the browbeatings of Congressmen and regulators for a few days, he went to Vancouver, British Columbia, for the latest meeting of the Buffett Group. FMC Chairman Bob Malott and his wife, Ibby, who were the planners, appreciated Native American culture and had arranged a “potlatch dinner” and Native American dance one evening. The person who introduced the dancers explained that the ceremony had been condensed from its usual length of three days. For the next several hours, the Buffett Group twitched and yawned on hard wooden benches with no refreshments and no escape. Roxanne Brandt leaned over to Buffett at one point: “Which is worse, this or Salomon?” she whispered. “This is worse,” Buffett replied.11
Bill Gates avoided the evening of the dancers; he was coming to the meeting for only the one particular session that interested him. The Buffett Group was going to review the ten most valuable companies in 1950, 1960, 1970, 1980, 1990—and how the list had changed. What gave a business a durable competitive advantage? What gave companies an edge, and why didn’t they keep it?—because most didn’t.
Arriving late because his new seaplane had been delayed by fog, Bill and his girlfriend, Melinda French, slipped into the room unobtrusively from the rear. Melinda had thought that they were going to leave fairly early. However, after about the fourth slide, she realized that maybe they were going to stay.12 Tom Murphy and Dan Burke, who both served on IBM’s board, started talking about why IBM, the leader in hardware, hadn’t gone on to become the leader in software. Buffett said, “I think we’ve got somebody here who can add a little something to this discussion.” Everybody turned around and saw Bill Gates.13 The conversation continued. If you were Sears in 1960, why couldn’t you keep getting the smartest employees and selling at the best prices? What was it you couldn’t see that prevented you
from remaining the leader? Most of the proposed answers, regardless of the company, revolved around arrogance, complacency, and what Buffett called the “Institutional Imperative”—the tendency for companies to engage in activity for its own sake and to copy their peers instead of trying to stay ahead of them. Some companies didn’t bring in young people with fresh ideas. Sometimes managements weren’t attuned to tectonic shifts in their industry. Nobody suggested these problems were easy to cure. After a while Buffett asked everyone to pick their favorite stock.
What about Kodak? asked Bill Ruane. He looked back at Gates to see what he would say.
“Kodak is toast,” said Gates.14
Nobody else in the Buffett Group knew that the Internet and digital technology would make film cameras toast. In 1991, even Kodak didn’t know that it was toast.15
“Bill probably thinks all the television networks are going to get killed,” said Larry Tisch, whose company, Loews Corp., owned a stake in the CBS network.
“No, it’s not that simple,” said Gates. “The way networks create and expose shows is different than camera film, and nothing is going to come in and fundamentally change that. You’ll see some falloff as people move toward variety, but the networks own the content and they can repurpose it. The networks face an interesting challenge as we move the transport of TV onto the Internet. But it’s not like photography, where you get rid of film so knowing how to make film becomes absolutely irrelevant.”16
Now everybody wanted to talk to Gates, who could explain the new digital world and what it meant to them. “The next thing we knew, we were going on the boat that afternoon,” says Gates. “And Kay was making sure that I didn’t just talk to Warren.” That was fortunate, because Buffett—who liked to glue himself to certain people—would have liked to become Bill Gates’s Siamese twin. They headed out on Walter and Suzanne Scott’s enormous boat, the Ice Bear. Graham introduced Gates to Tisch and Murphy and Keough and the rest.17 In half a day, he and Melinda had become de facto members of the Buffett Group. A bunch of people dropped in and out of a come-and-go discussion of many things, during which Gates grumbled to Murphy about the high cost of his television advertising. A month later the Wall Street Journal story had appeared, portraying Buffett as a hypocrite rather than the complex personality he was, and making all of them regret—not the conversation about ad prices, but having responded after the meeting to questions from a reporter who didn’t have a working tape recorder in his hand.
By 1993, thanks partly to the salvation of Salomon, Berkshire stock had nearly doubled. By the time Warren was starting to Buffett his way through the arbitration with John Gutfreund, it burst through $18,000 a share. Buffett was now worth $8.5 billion, and Susie’s stock was worth $700 million. The original partners now had $6 million for every $1,000 they’d invested in 1957. Buffett was now the richest man in the United States.
Over the holidays, he and Carol Loomis turned to the annual ritual of writing and editing his chairman’s letter, this time with the awareness of a much larger national—even international—audience. In May 1994, the same month that Gutfreund’s arbitrators awarded him zero, Buffett held his annual shareholder meeting; more than 2,700 people arrived at the Orpheum Theater. Buffett told See’s, the shoe companies, and World Book encyclopedia, which the company also owned, to set up booths in the lobby. See’s sold eight hundred pounds of candy, and more than five hundred pairs of shoes walked out the door.18 World Book sold well, too, although Buffett did not know that it, like Kodak, would soon be toasted by the Internet. Delighted with his shareholders’ purchases, Buffett drove over to Borsheim’s and made an appearance, then showed up at the Furniture Mart. “He goes out to where we have the mattresses displayed,” said Louie Blumkin, “and he’s selling, man.”19 Buffett started to think harder about the idea of hawking products at the shareholder meetings. He vowed to move the meeting to the Holiday Inn, which had more space for sales booths. And next year, he decided, he would also sell Ginsu knives.20
His rising fame swept most of the family along with it. Now that Buffett was worth more than $8 billion, his charitable foundation would be one of the five largest in the world, and his and Susie’s decision to leave almost all of their money to it meant that it would be Berkshire’s largest shareholder after he died. Reflecting that, he had recently added Susie, who was president of the Buffett Foundation but knew nothing about business, to the Berkshire Hathaway board. The foundation had been giving away about $3.5 million a year, which had doubled by 1994—still small by the standards of families of similar wealth. Its future riches, however, were well-known. The Buffett Foundation and its president were suddenly in the public eye.
When Susie had moved to San Francisco and made the decision to stay married to Warren while going her own way, she envisioned being able to keep the two halves of her life separate, quiet, and in balance. Never a thinker, she was caught by surprise when her husband became an icon of the business world, carrying her along with him. On the one hand, she wanted her privacy and freedom. On the other hand, she wanted to please Warren, enjoyed running the foundation, and also gravitated toward the elephant-bumping aspects of public life. Yet her role as president of the Buffett Foundation and now as a member of the Berkshire board made her a public figure. Susie was trapped. To fend off attention, she downplayed her role and explained that she was not important, just an accessory to Warren’s fame. Thus, nobody should be interested in her, nobody needed to write about her or her life. To maintain her privacy, she had to juggle deftly, keeping a low profile in San Francisco and declining opportunities that went with her husband’s rising stature. Susie expressed resentment of Warren from time to time to various people, as if it were his fault that her life was now so fraught.
Her routine with Warren now included the celebrity Sun Valley scene every July, the biannual Buffett Group meetings, which were held in different places every other year, family Christmas and New Year’s in Laguna Beach, and two weeks every May in New York with the whole family. In between these trips, Susie counseled a long list of “clients,” traveled to see her grandchildren and hosted them in Emerald Bay, and accompanied son-in-law Allen Greenberg on Buffett Foundation business, which took them to places as far away as Vietnam. She also entertained, went to parties, concerts, museums, spas, got pedicures, shopped, continued the never-ending renovation of the Laguna house, maintained her other relationship, wrote hundreds of cards and sent hundreds of gifts, and traveled frequently with friends. And she willingly dropped everything to be at the bedside of anyone who was dying or ill.
But her pace had been slowed by painful bouts of adhesions in 1987 and more adhesions and a hysterectomy in 1993. Kathleen Cole found herself shuttling her friend and boss to the emergency room distressingly often. She tried to coax Susie into exercising and to wean her off her steady diet of Tootsie Rolls, cookies, and milk by stocking the kitchen with low-fat SnackWells. But the Pilates equipment gathered dust downstairs, in a second apartment that Susie had convinced Warren to buy for her, and some friends noted that Susie routinely overextended herself with commitments to care for others.21 The family seemed strangely unperturbed each time Cole called Nebraska to say that Susie had been hospitalized, as if they had adopted her serene attitude.22 “Thank God I have my health,” she often remarked, and continued to view herself as the well person who ministered to the ill, rather than the other way around.
By now she was running a hospice in her apartment. Her first patient was an artist friend who was dying of AIDS, whom she invited to move in and spend his final weeks there. Cole found herself administering IV drips to a terminal patient while Susie’s other employees strolled in and out of the room, questioning her about foundation matters or the renovations and redecoration of the Laguna Beach house, still metamorphosing after a decade.23 After that, whenever one of Susie’s gay friends who was dying of AIDS neared the end, she invited him to come live with her. She and Cole took some of her dying friends on dream trips, one to Japan
, another to Dharamsala, where she had arranged for him to have a personal audience with the Dalai Lama—what must have been an almost unimaginable spiritual experience for a man who was weeks from death. At one friend’s request, she threw a La Cage aux Folles–like masquerade party instead of a memorial service after he died. She kept her friends’ ashes on her mantel to make sure that someone would remember them. Peter took to calling his mother the Dalai Mama.
Howie, who had always absorbed so much of his mother’s energy, now stepped out from under her wing at the same time that his father’s growing fame began to have an impact on his life. During 1989, he had become chairman of the Nebraska Ethanol Authority & Development Board. Through this role, he became friendly with Marty Andreas, an executive at Archer Daniels Midland, a large Illinois-based agricultural company that was heavily involved in ethanol. Marty Andreas was nephew of ADM’s CEO, Dwayne Andreas, who served on the Salomon board with Warren. Two years later, thirty-six-year-old Howie was asked to become the youngest member of the ADM board.
Dwayne Andreas had been charged, but acquitted, of making illegal political campaign contributions during Watergate; he also made huge and sometimes controversial donations to politicians of both parties while Congress was repeatedly passing the tax subsidies for ethanol that benefited ADM. Buffett’s view that rich people and powerful business interests were far too able to buy access and influence with politicians conflicted sharply with the way that ADM did business in politics.
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