Chapter 14
1. The class size is approximate because Woodrow Wilson had, in effect, two classes graduating in parallel (February and June graduates); students like Warren could shift from February to the previous June by taking a few extra credits. The school described Buffett’s top 50 ranking as falling in the top “one-seventh” of his class.
2. Barbara “Bobby” Weigand, who remembers only the hearse. Doris Buffett recalled the family debate about the hearse.
3. Interviews with Bob Feitler, Ann Beck MacFarlane, Waldo Beck. David Brown became brother-in-law of Waldo Beck, Ann Beck’s brother.
4. Interviews with Bob Feitler, Warren Buffett. Note that, because he was using the car for commercial purposes, Buffett would probably have been able to get extra gas coupons at a time when gas was tightly rationed.
5. The term “policy” probably came from the Gaelic pá lae sámh (pronounced paah lay seeh), which means “easy payday,” a nineteenth-century Irish-American gambling term.
6. The bill generated fierce anti-Taft labor reprisals in the Midwest.
7. Interview with Doris Buffett.
8. Estimate based on data supplied by Nancy R. Miller, Public Services Archivist, The University Archives and Record Center, University of Pennsylvania.
9. Jolson, a vaudeville singer, was the most popular stage entertainer of the early twentieth century. He made famous such songs as “You Made Me Love You,” “Rock-a-Bye Your Baby with a Dixie Melody,” “Swanee,” “April Showers,” “Toot, Toot, Tootsie, Goodbye,” and “California, Here I Come.” He performed “My Mammy” in blackface in the 1927 movie The Jazz Singer, the first feature film to enjoy widespread commercial success. Jolson was voted “Most Popular Male Vocalist” in a 1948 Variety poll on the back of a film about his life, The Al Jolson Story, which repopularized him to a younger generation. Performing in blackface would be considered racist today but was ubiquitous and unremarkable at the time.
10. “My Mammy,” words by Sam Lewis and Joe Young; music by Walter Donaldson, copyright 1920.
11. Rich Cohen, “Pledge Allegiance.” From Killed: Great Journalism Too Hot to Print, ed. David Wallace. New York: Nation Books, 2004.
12. Interview with Clyde Reighard.
13. Coffee with Congress.
14. Interview with Chuck Peterson.
15. Interview with Clyde Reighard.
16. Interviews with Chuck Peterson, Sharon and Gertrude Martin.
17. Interview with Anthony Vecchione, as quoted in Roger Lowenstein, Buffett: The Making of an American Capitalist. New York: Doubleday, 1996.
18. Peterson recalls that he stuck it out all year—or, well, almost.
19. Interview with Doris Buffett.
20. Kenesaw Mountain Landis, Segregation in Washington: A Report, November 1948. Chicago: National Committee on Segregation in the Nation’s Capital, 1948.
21. Interview with Bob Dwyer.
22. Don Danly, as quoted in Lowenstein, Buffett. Danly is deceased.
23. Interview with Norma Thurston-Perna.
24. Interview with Barbara Worley Potter.
25. Interview with Clyde Reighard.
26. Beja, as quoted in Lowenstein, Buffett. Beja is deceased.
27. Interview with Don Sparks.
28. Shoe-shining was a big thing at Penn; a typical pledge haze was to shine the actives’ shoes.
29. In an interview, Reighard recalled the outlines of the story. Buffett became a close friend of the victim Beja’s roommate, Jerry Oransky (renamed Orans), who is deceased.
30. Interview with Barbara Worley Potter.
31. Interview with Ann Beck MacFarlane, who thinks the date was engineered by her parents and Leila Buffett.
32. Susan Thompson Buffett described her husband circa 1950 this way.
33. Interview with Clyde Reighard.
34. Interview with Bob Feitler.
35. Interview with Clyde Reighard.
36. Interview with Anthony Vecchione, as quoted in Lowenstein, Buffett.
37. Interview with Martin Wiegand.
38. “Buffett Lashes Marshall Plan,” Omaha World-Herald, January 28, 1948. Buffett campaign literature also describes foreign aid as money down the rat hole.
39. June 5, 1948, dedication of Memorial Park.
40. Last will and testament of Frank D. Buffett, filed February 19, 1949.
41. Approved application to the county court of Douglas County, Nebraska, April 14, 1958. The bonds were allowed to mature, since the will said proceeds of any property “sold” could only be invested in U.S. bonds. Given the opportunity cost and interest rates, Howard’s move was wise.
42. Leila Buffett’s day books. “It’s Cold—But Remember that Bitter Winter of ’48–’49?” Omaha World-Herald, January 6, 1959.
43. Commercial & Financial Chronicle, May 6, 1948.
44. Interview with Doris Buffett.
45. Interview with Lou Battistone.
46. Interview with Sharon Martin.
47. Interviews with Waldo Beck and Ann Beck MacFarlane, to whom Brown repeated the story.
Chapter 15
1. They would sell 220 dozen balls for a total of $1,200.
2. Warren Buffett letter to Howard Buffett, February 16, 1950.
3. He asked Howard to advance him $1,426 that the broker required him to keep on deposit, signing off, “Yours, for lower auto profits, Warren.” Warren Buffett letter to Howard Buffett, February 16, 1950.
4. Warren Buffett letter to Jerry Orans, May 1, 1950, cited in Roger Lowenstein, Buffett: The Making of an American Capitalist. New York: Doubleday, 1996.
5. “Bizad Students Win Scholarships,” Daily Nebraskan, May 19, 1950.
6. Benjamin Graham, The Intelligent Investor: A Book of Practical Counsel. New York: Harper & Brothers, 1949.
7. Garfield A. Drew, New Methods for Profit in the Stock Market. Boston: The Metcalf Press, 1941.
8. Robert D. Edwards and John McGee, Technical Analysis of Stock Market Trends. Springfield, Mass.: Stock Trend Service, 1948.
9. Wood, as cited in Lowenstein, Buffett. Wood is deceased. He told Lowenstein he was not sure when this conversation took place—before Buffett was rejected by Harvard or as late as after when he had started at Columbia, but it was apparently before he met Graham himself.
10. According to Buffett, Howard Buffett was acquainted with one of the board members.
11. Columbia University in the City of New York, announcement of the Graduate School of Business for the winter and spring sessions 1950–1951, Columbia University Press.
Chapter 16
1. In his memoir, Man of the House (New York: Random House, 1987), the late Congressman Tip O’Neill recalled that his pastor, Monsignor Blunt, said it was a sin for Catholics to go to the Protestant-managed YMCA. O’Neill and a Jewish friend stayed at the Sloane House anyway. The regular rate in the 1930s was sixty-five cents a night, but, O’Neill said, “If you signed up for the Episcopal service, it was only thirty-five cents, with breakfast included. We were nobody’s fool, so we signed up for the thirty-five-cent deal and figured to duck out after breakfast and before the service. But apparently we weren’t the first to think of this brilliant plan, because they locked the doors during breakfast, which meant that we were stuck.” By the 1950s, there was no longer a “pray or pay” deal at the Sloane House. “If there had been,” Buffett says, “I would have experienced a revelation and embraced whatever denomination offered the greatest discount.”
2. Buffett is not certain if the smoking deal applied to all three of the Buffett kids or only his sisters, but they all got the $2,000 on graduation on roughly the same terms.
3. Most of the money was invested in U.S International Securities and Parkersburg Rig & Reel, which he replaced with Tri-Continental Corporation on January 1, 1951. Howard contributed most of the money and Warren contributed the ideas and work, or “sweat equity,” to an informal partnership.
4. Benjamin Graham and David L. Dodd, Security Analysis, Principles and T
echnique. New York: McGraw-Hill, 1934.
5. Barbara Dodd Anderson letter to Warren Buffett, April 19, 1989.
6. David Dodd letter to Warren Buffett, April 2, 1986.
7. The Union Pacific Railroad in the nineteenth century was the most scandal-plagued and bankruptcy-riddled of the nation’s railroads.
8. William W. Townsend, Bond Salesmanship. New York: Henry Holt, 1924. Buffett read this book three or four times.
9. Interview with Jack Alexander.
10. And, according to Buffett, one woman, Maggie Shanks.
11. Interview with Fred Stanback.
12. Anyone of a certain age from the Mid-Atlantic region would still recognize the slogan, “Snap back with Stanback,” and “neuralgia” as an old-fashioned term for a bad headache.
13. The SEC’s Regulation FD now bars selective disclosure of material nonpublic information and requires that it be disseminated simultaneously by companies to the market on a timely basis.
14. At $2,600 a year, Schloss as an investor was making less than the average secretary in 1951, who took home $3,060, according to a survey of the National Secretaries Association.
15. Interview with Fred Stanback.
16. Interview with Walter Schloss. Some material is from The Memoirs of Walter J. Schloss. New York: September Press, 2003.
17. Benjamin Graham, The Memoirs of the Dean of Wall Street. New York: McGraw-Hill, 1996.
18. Stryker & Brown was the “market maker,” or principal dealer, in Marshall-Wells stock.
19. Marshall-Wells was the second Graham and Dodd stock he had bought, after Parkersburg Rig & Reel. Stanback confirms the lunch with Green, but can’t recall the date.
20. Not, as has been written, from Who’s Who in America. However, he may have learned it from reading Moody’s, hearing it from David Dodd or Walter Schloss, or from a newspaper or magazine source.
21. Due to a legal technicality, this divestiture of GEICO stock was required in a consent order with the SEC in 1948. Graham-Newman violated Section 12(d)(2) of the Investment Company Act of 1940, although “in the bona fide, though mistaken, belief that the acquisition might lawfully be consummated.” A registered investment company (Graham-Newman was “a diversified management investment company of the open-end type”) cannot acquire more than 10% of the total outstanding voting stock of an insurance company if it does not already have 25% ownership.
22. GEICO oral history interview of Lorimer Davidson by Walter Smith, June 19, 1998, and also see William K. Klingaman, GEICO, The First Forty Years. Washington, D.C.: GEICO Corporation, 1994, for a condensed version of this story.
23. Making $100,000 in 1929 was equivalent to making $1,212,530 in 2007.
24. By 1951, GEICO was deemphasizing mailings in favor of platoons of friendly telephone operators who answered the phone at regional offices and were trained to quickly screen bad risks.
25. A type of auto insurer called “nonstandard” specializes in these customers, surcharging them, say, 80%. USAA and GEICO at the time were “ultra-preferred” companies, specializing in the best risks.
26. The main problem with tontines was that people were gambling with their life insurance policies instead of using them as protection. Originally a “survivor bet,” expulsion from a tontine pool was later based on failure to pay premiums for any reason. “It is a tempting game; but how cruel!” Papers Relating to Tontine Insurance, The Connecticut Mutual Life Insurance Company, Hartford, Conn.: 1887.
27. Office Memorandum, Government Employees Insurance Corporation, Buffett-Falk & Co., October 9, 1951.
Chapter 17
1. Benjamin Graham, The Memoirs of the Dean of Wall Street. New York: McGraw-Hill, 1996. Anecdotal material from this source has been verified with Warren Buffett.
2. In 1915, members of the Grossbaum family, like many American Jews, began to anglicize their name to Graham in response to the anti-Semitism that flourished during and after World War I. Ben’s family made the change in April 1917. Source: November 15, 2007, speech by Jim Grant to the Center for Jewish History on “My Hero, Benjamin Grossbaum.”
3. Graham was born in 1894, the year of one of the biggest financial panics in American history, which was followed by the depression of 1896–97, the panic of 1901, the panic of 1903–04 (“Rich Man’s Panic”), the panic of 1907, the war depression of 1913–14, and the postwar depression of 1920–22.
4. Benjamin Graham, Memoirs.
5. Ibid.
6. Ibid.
7. Traditionally, people came to Wall Street in one of two ways. Either they entered the family business by following a relative into the job, or, having no such connection, they “came up through the hawsehole,” to use a nautical expression common on Wall Street at the time, starting young as a runner or board boy and working their way up, like Sidney Weinberg, Ben Graham, and Walter Schloss. Attending business school with the conscious intention of working on Wall Street was essentially unheard of until the early 1950s because most areas of finance, and especially the art of security analysis, had not developed as academic disciplines.
8. Details of Graham’s early career are from Janet Lowe’s Benjamin Graham on Value Investing: Lessons from the Dean of Wall Street. Chicago: Dearborn Financial Publishing, 1994.
9. Graham believed that one could be swayed by personality and salesmanship by going to meetings with a company’s management, so this was partly a way of remaining dispassionate. But Graham was also not particularly interested in human beings.
10. Interview with Rhoda and Bernie Sarnat.
11. As cited by Lowe.
12. Benjamin Graham, Memoirs.
13. Ibid.
14. Interview with Jack Alexander.
15. In Security Analysis, Principles, and Technique (New York: McGraw-Hill, 1934), Benjamin Graham and Dodd stressed that there is no single definition of “intrinsic value,” which depends on earnings, dividends, assets, capital structure, terms of the security, and “other” factors. Since estimates are always subjective, the main consideration, they wrote—always—is the margin of safety.
16. The apt analogy to Plato’s cave was originally made by Patrick Byrne.
17. Often this was because the kind of undervalued stocks he liked were illiquid and could not be purchased in large positions. But Buffett felt that Graham could have followed a bolder strategy.
18. Interview with Jack Alexander.
19. Interview with Bill Ruane.
20. Interviews with Jack Alexander, Bill Ruane.
21. Schloss, in his memoir, wrote with warm affection of his wife, Louise, who “battled depression throughout her entire adult life.” They remained married for fifty-three years, until she died in 2000.
22. Interview with Walter Schloss.
Chapter 18
1. Mary Monen, sister of Dan Monen, who would later become his lawyer.
2. Susie’s parents were friends of Howard and Leila Buffett, but their children attended different schools, so they did not socialize.
3. Interview with Roberta Buffett Bialek. Susie was born June 15, 1932. Bertie was born November 15, 1933.
4. Earl Wilson was the saloon writer for the New York Post. In describing Newsday scribe Jimmy Breslin, Media Life Magazine defined a saloon writer as the purveyor of “a certain style of journalism that’s peculiar to New York, and a bit peculiar in itself, where the writer journeys about the places where ordinary people can be found and writes of their visions of the human condition.”
5. A well-known women-only residence still in operation today (at 419 W. 34th Street in New York City).
6. Vanita, in a Valentine letter to Warren, February 1991, poses the possibility that she “never liked cheese sandwiches and that I just ate them to please.” (In this letter, as at some other times, she spells her middle name “May” instead of “Mae” as in her youth.)
7. This description came from various letters from Vanita, reminiscing about her dates with Warren—January 1, 1991, February 19, 1991, January
1, 1994, many undated; Buffett agrees.
8. Susan Thompson Buffett, as told to Warren Buffett in 2004. He does not remember this but adds that, of course, he wouldn’t.
9. Buffett says that, despite her antics, he was never intimidated by Vanita. “I wouldn’t have had the guts to stick Pudgy in a wastebasket,” he says. “I mean, she’d have beaten the hell out of me.” For her part, Vanita later claimed to Fred Stanback that the incident never happened—although she did have some incentive to downplay the histrionic side of her personality to Fred.
10. As Charlie Munger puts it, Buffett narrowly missed a disastrous marriage when he “escaped the clutches of Vanita.”
11. “A Star Is Born?” Associated Press, Town & Country magazine, September 24, 1977.
12. Information on William Thompson comes from a variety of sources, including interviews with Warren, Roberta, and Doris Buffett and other family members, and “Presbyterian Minister Reviews Thompson Book,” Omaha World-Herald, January 5, 1967; “Old ‘Prof’ Still Feels Optimistic About Younger Generation,” Omaha World-Herald, March 28, 1970; “W. H. Thompson, Educator, Is Dead,” Omaha World-Herald, April 7, 1981; “O.U. Alumni Honor Dean,” Omaha World-Herald, May 15, 1960.
13. As supervisor of the school system’s IQ testing, Doc Thompson had access to and, according to Buffett, knew Warren’s IQ. Indeed, the IQ test results for the three little Buffetts may have intrigued him, given their remarkably high—and remarkably similar—scores.
14. In an interview, Marge Backhus Turtscher, who attended these services, wondered what on earth motivated Thompson to make the long trip each Sunday to preach at this tiny church. Thompson also once published a book, The Fool Has Said God Is Dead. Boston: Christopher Publishing House, 1966.
15. Susan Thompson Buffett told this story to various family members.
16. In many patients, rheumatic fever causes mild to serious heart complications (in Howard Buffett’s case, at least moderate complications), but based on her subsequent health history, Susan Thompson appears to have been among the 20–60% who escape significant carditis, or long-term damage to the heart.
17. Warren, Doris Buffett, Roberta Buffett Bialek, Susie Buffett Jr., and other Buffetts talk of this striking film.
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