The Snowball
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17. Warren and Susie personally owned 46% of Berkshire (both directly and indirectly, through their ownership of Blue Chip and Diversified, which owned Berkshire stock), and 35% of Blue Chip (both directly and indirectly).
18. Murray Light, From Butler to Buffett: The Story Behind the Buffalo News (Amherst, NY: Prometheus Books, 2004), who notes that only in the face of an inquiry from the Human Rights Commission in the early 1970s did Butler begin publishing wedding photos of African-Americans.
19. Interview with Stan Lipsey.
20. The Evening News put out a Saturday edition, but its weak ad lineage demonstrated the power of the Sunday edition of the Courier-Express.
21. If the trend had continued without the Evening News starting a Sunday paper, the logical outcome would have been either a joint operating agreement or outright acquisition of the Courier-Express to combine the papers—both expensive alternatives.
22. Buffalo Courier-Express, Inc., v. Buffalo Evening News, Inc., Complaint for Damages and Injunctive Relief for Violation of the Federal Antitrust Laws (October 28, 1977).
23. Former Courier-Express reporter Michael A. Hiltzik posted on June 20, 2000, on Jim Romenesko’s “Media News Extra,” a recollection of the staff writing puff pieces on every local state judge in order to flatter whichever one was chosen. It was a “misguided strategy,” he said, as the trial took place in federal court under Brieant. One of the profiles supposedly was titled “Judge Loses Firmness When He Doffs His Robe.”
24. Interview with Ron Olson.
25. Jonathan R. Laing, “The Collector: Investor Who Piled Up $100 Million in the ’60s Piles Up Firms Today,” Wall Street Journal, March 31, 1977.
26. Testimony of Buffett, Buffalo Courier-Express, Inc., v. Buffalo Evening News, Inc., November 4, 1977.
27. In Roger Lowenstein’s Buffett: The Making of an American Capitalist, Bob Russell cited Warren as a boy wanting to charge money to people driving by the Russells’ house. Buffett does not remember the incident, but if it occurred, most likely he was influenced by the city’s efforts to convert the Douglas Street toll bridge—the only passageway over the Missouri River—to a free bridge, one of the most widely reported local news stories during his early youth.
28. The bridge was sold to Marty Maroun in 1979 for $30 million, 30% less than the inflation-adjusted cost of building it thirty years earlier. Maroun parlayed the bridge into an enormous fortune.
29. Findings and Conclusions, Motion for Preliminary Injunction, Buffalo Courier-Express, Inc., v. Buffalo Evening News, Inc., November 9, 1977.
30. Dick Hirsch, “Read All About It,” “Bflo Tales” in Business First, Winter 1978.
31. In its first full year under Buffett. Murray Light, From Butler to Buffett.
32. Interview with Stan Lipsey.
33. Ibid.
34. Buffalo-Courier Express, Inc., v. Buffalo Evening News, Inc., United States Court of Appeals, Second Circuit, 601 F.2d 48, April 16, 1979.
35. Warren Buffett, “You Pay a Very High Price in the Stock Market for a Cheery Consensus,” Forbes, August 6, 1979.
36. Interview with Wally Walker. Jobs did not respond to repeated requests for comment.
37. Warren Buffett, “You Pay a Very High Price in the Stock Market….”
38. Interview with Stan Lipsey.
39. Blue Chip Stamps 1980 annual report to shareholders.
40. Janet Lowe, Damn Right!: Behind the Scenes with Berkshire Hathaway’s Charlie Munger, New York: John, Wiley & Sons, 2000.
41. Ibid.
42. Warren Buffett memo to employees, December 2, 1980.
43. At first, management and the unions tried to publish without the drivers (Buffalo Evening News, December 2, 1980). The striking union walked out over a pay difference of $41 a week.
44. It was selling 195,000 papers on Sundays, about ⅔ of its rivals. From Lowenstein, Buffett, Audit Bureau of Circulations figures as of March 1982.
45. The Blue Chip Stamps 1980 annual report to shareholders notes the litigation became “less active and costly” that year.
46. Interview with Ron Olson.
Chapter 43
1. From $89 million at the end of 1978 to $197 million in August 1980.
2. Interview with Charlotte Danly Jackson.
3. Interview with Verne McKenzie.
4. Affiliated Publications—bought for $3.5 million, jumped to $17 million after nine years. The Washington Post—bought for $10.6 million, now worth $103 million. GEICO—bought for $47.1 million, now worth almost seven times that, $310 million. Berkshire’s total common stock portfolio was worth double its cost.
5. Buffett and Munger took out a loan of $40 million from Bank of America National Trust and Savings Association for Blue Chip to protect against a rush of redemptions, according to Munger’s testimony in the Blue Chip case.
6. In 1976, the U.S. District Court in Los Angeles had said that Blue Chip no longer had to dispose of one third of its business, recognizing that it was impractical after management contacted more than eighty potential buyers and had no serious bids. Sales shrank from $124 million to $9.2 million. The woes of the Buffalo News, which Blue Chip owned, made valuing Blue Chip problematic until 1983, given Buffett’s proportional interests in the different companies versus other shareholders, principally Munger.
7. Berkshire Hathaway 1983 annual report.
8. In 1984, during a period of relatively high inflation, the union agreed to a wage freeze.
9. The Bank Holding Company Act of 1956 placed restrictions on bank holding companies (those owning more than 25% of two or more banks, i.e., the J. P. Morgans) owning nonbanking interests, in order to avoid monopolistic control in the banking industry. It was amended in 1966 and again in 1970 to further restrict the nonbanking activities of one-bank holding companies (such as Berkshire). In 1982, it was amended to further forbid banks from engaging in insurance underwriting or agency activities. In 1999, the Gramm-Leach-Bliley Act repealed parts of these acts.
10. Interview with Verne McKenzie. According to him and Buffett, Associated was never able to recover from the disintegration of urban centers after the 1960s and adapt to the new culture required to sell discount dresses in shopping malls.
11. Interview with Charlie Munger.
12. Interview with Howie Buffett.
13. Interviews with Dan Grossman, Peter Buffett.
14. Interview with Peter Buffett.
15. Interviews with Marvin Laird, Joel Paley.
16. Interview with Howie Buffett.
17. Ibid. As Susie Jr. says, “When Howie dies, it will be no ordinary death. It will probably be by falling out of a helicopter into a polar bear’s mouth.”
18. For a four-hundred-acre farm.
19. Interviews with Howie Buffett, Peter Buffett.
20. Peter Kiewit Sons’ Inc. was founded by the original Peter Kiewit, a bricklayer of Dutch descent, in 1884. Dave Mack, “Colossus of Roads,” Omaha magazine, July 1977; Harold B. Meyers, “The Biggest Invisible Builder in the World,” Fortune, April 1966.
21. When Kiewit died, Buffett got the chance to take an apartment in Kiewit Plaza. He would have loved to do it, but Astrid didn’t want to leave her garden. So they stayed on Farnam Street.
22. “Peter Kiewit: ‘Time Is Common Denominator,’” Omaha World-Herald, undated, approximately November 2, 1979; Robert Dorr, “Kiewit Legacy Remains Significant,” Omaha World-Herald, November 1, 1999; Harold B. Meyers, “The Biggest Invisible Builder in the World” interview with Walter Scott Jr., Peter Kiewit’s successor, who also had an apartment at Kiewit Plaza.
23. Interview with Walter Scott Jr.
24. Peter Kiewit died on November 3, 1979. Warren Buffett, “Kiewit Legacy as Unusual as His Life,” Omaha World-Herald, January 20, 1980.
25. Buffett read Flexner’s autobiography three or four times and gave copies to his friends.
26. $38,453 for the year ended June 1980, of which $33,000 went toward colleges, the rest toward local
organizations. Five years earlier, in June 1975, the foundation had assets of $400,000, with gifts of $28,498 to similar organizations.
27. Rick Guerin letter to Joe Rosenfield, October 1, 1985.
28. Warren Buffett letter to Shirley Anderson, Bill Ruane, and Katherine (Katie) Buffett, trustees of the Buffett Foundation, May 14, 1969.
29. Richard I. Kirkland Jr., “Should You Leave It All to the Children?” Fortune, September 29, 1986.
30. Larry Tisch as quoted by Roger Lowenstein, Buffett.: The Making of an American Capitalist. New York Doubleday, 1996. Tisch is deceased.
31. Kirkland, “Should You Leave It All to the Children?”
32. Warren Buffett letter to Jerry Orans, cited in Lowenstein, Buffett.
Chapter 44
1. The Dream that Mrs. B Built, May 21, 1980, Channel 7 KETV. Mrs. Blumkin’s quotes have been rearranged and slightly edited for length.
2. Ibid.
3. “The Life and Times of Rose Blumkin, an American Original,” Omaha World-Herald, December 12, 1993.
4. Ibid.
5. Minsk, near Moscow, is relatively close to the Eastern European border of Russia, which would have been a difficult passage during the war. Her route created a longer trip than traveling between San Francisco and New York by train three times, then winding back to Omaha.
6. “The Life and Times of Rose Blumkin, an American Original.”
7. This and most of the other details of Mrs. B’s journey are from a Blumkin family history.
8. The Dream that Mrs. B Built.
9. Around 1915, roughly 6,000 Russian Jews lived in Omaha and South Omaha, part of a general migration beginning in the 1880s to escape the pogroms (anti-Jewish riots) that began after the assassination of Czar Alexander II. Most started out as peddlers and small-shop owners, serving the large immigrant working class drawn by the railroads and stockyards. Until 1930, Omaha had the largest percentage of foreign-born residents of any U.S. city. Lawrence H. Larsen and Barbara J. Cottrell, The Gate City. Lincoln: University of Nebraska Press, 1997.
10. Interview with Louis Blumkin. His father was comparing the pawnshop to the many banks that failed during this period.
11. The Dream that Mrs. B Built.
12. Ibid.
13. Louis Blumkin, who says she sold for $120 coats that cost her $100 and retailed for $200 elsewhere in town.
14. The Dream that Mrs. B Built.
15. “The Life and Times of Rose Blumkin, an American Original.”
16. Interview with Louis Blumkin.
17. Ibid. They were carving out a piece of their allotments for her.
18. “The Life and Times of Rose Blumkin, an American Original.”
19. Interview with Louis Blumkin.
20. James A. Fussell, “Nebraska Furniture Legend,” Omaha World-Herald, August 11, 1988.
21. Interview with Louis Blumkin.
22. “The Life and Times of Rose Blumkin, an American Original.”
23. Joyce Wadler, “Furnishing a Life,” Washington Post, May 24, 1984.
24. “The Life and Times of Rose Blumkin, an American Original.”
25. The Dream that Mrs. B Built.
26. “The Life and Times of Rose Blumkin, an American Original.”
27. Joyce Wadler, “Blumkin: Sofa, So Good: The First Lady of Furniture, Flourishing at 90,” Washington Post, May 24, 1984.
28. Buffett, in a letter to Jack Byrne in 1983, noted that Levitz stores averaged about 75% the size of NFM and did 10% the volume of NFM.
29. Buffett noted in the 1984 annual report that NFM operated with exceptional efficiency. Its operating expenses were 16.5% of sales, compared to 35.6% at Levitz, its largest competitor.
30. Warren Buffett letter to Jack Byrne, December 12, 1983.
31. Frank E. James, “Furniture Czarina,” Wall Street Journal, May 23, 1984.
32. Speech given at Stanford Law School on March 23, 1990. “Berkshire Hathaway’s Warren E. Buffett, Lessons From the Master,” Outstanding Investor Digest, Vol. V, No. 3., April 18, 1990.
33. Chris Olson, “Mrs. B Uses Home to Eat and Sleep; ‘That’s About It,’” Omaha World-Herald, October, 28, 1984.
34. Joyce Wadler, “Furnishing a Life.”
35. “Mrs. B Means Business,” USA Today, April 1, 1986.
36. Bella Eisenberg letter to Warren Buffett, June 8, 1984.
37. “I can hear my mother [saying it] now,” said Louis Blumkin in an interview.
38. The Dream that Mrs. B Built.
39. In the documentary The Dream that Mrs. B Built, Blumkin refers to this incident and said Buffett didn’t want to give her the price she wanted and she told him he was too cheap.
40. Interview with Louis Blumkin.
41. Possibly it might have had something to do with her early years of sleeping on straw on a bare wood floor.
42. Joyce Wadler, “Blumkin: Sofa, So Good: The First Lady of Furniture, Flourishing at 90.”
43. James A. Fussell, “Nebraska Furniture Legend.”
44. Berkshire Hathaway 1983 chairman’s letter. Initially, Berkshire bought 90% of the business, leaving 10% with the family, and optioning 10% back to certain key young family managers.
45. Contract for sale of Nebraska Furniture Mart, August 30, 1983.
46. Robert Dorr, “Furniture Mart Handshake Deal,” Omaha World-Herald, September 15, 1983.
47. Buffett’s sentimental fondness for Mrs. B is notable in light of her similarity to his mother in the sense of her outbursts of abuse toward her family and employees. Only rarely did he take the risk of associating with anyone who could blow up on him.
48. Warren Buffett letter to Rose Blumkin, September 30, 1983.
49. From a retired Berkshire employee (not Verne McKenzie, the star of this anecdote).
50. Interview with Verne McKenzie.
51. Several Buffett Group members swear to the exact number.
52. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Book IV, 1776.
53. Interview with Stan Lipsey.
54. “A Tribute to Mrs. B,” Omaha World-Herald, May 20, 1984; John Brademas, President, New York University, letter to Rose Blumkin, April 12, 1984.
55. Interview with Louis Blumkin.
56. Joyce Wadler, “Blumkin: Sofa, So Good: The First Lady of Furniture, Flourishing at 90.”
57. Interview with Louis Blumkin.
58. Warren Buffett letter to Larry Tisch, May 29, 1984.
59. Beth Botts, Elizabeth Edwardsen, Bob Jensen, Stephen Kofe, and Richard T. Stout, “The CornFed Capitalist,” Regardie’s, February 1986.
60. Robert Dorr, “Son Says No One Wanted Mrs. B to Leave,” Omaha World-Herald, May 13, 1989.
61. Andrew Kilpatrick, Of Permanent Value: The Story of Warren Buffett/More in ’04 (California edition). Alabama: AKPE, 2004.
62. Robert Dorr, “Son Says No One Wanted Mrs. B to Leave.”
63. Sonja Schwarer, “From Wheelchair, Mrs. B Plans Leasing Expansion,” Omaha Metro Update, February 11, 1990; James Cox, “Furniture Queen Battles Grandsons for Throne,” USA Today, November 27, 1989.
64. Robert Dorr, “Garage Sale Is Big Success for Mrs. B,” Omaha World-Herald, July 17, 1989.
65. Andrew Kilpatrick, Of Permanent Value.
66. Bob Brown, Joe Pfifferling, “Mrs. B Rides Again: An ABC 20/20 Television News Story,” 1990.
67. “A Businessman Speaks His Piece on Mrs. Blumkin,” Furniture Today, June 4, 1984, Berkshire Hathaway 1984 annual report. Buffett used a line like this with great frequency as a tag to label a person or situation so that other parts of the bathtub could drain.
68. Linda Grant, “The $4-Billion Regular Guy: Junk Bonds, No. Greenmail, Never. Warren Buffett Invests Money the Old-Fashioned Way,” Los Angeles Times, April 7, 1991.
69. Interview with Louis Blumkin.
70. Harold W. Andersen, “Mrs. B Deserves Our Admiration,” Omaha World-Herald, September 20, 1987; Robert Dorr, “This Time, Mrs. B Gets
Sweet Deal,” Omaha World-Herald, September 18, 1987.
Chapter 45
1. Interview with Peter Buffett.
2. Interview with Doris Buffett.
3. Witnessed by a source close to the family who described it in an interview.
4. AIDS had first been discovered among homosexual men in the summer of 1981, but it was reported as pneumonia and as a rare, fatal form of cancer. President Reagan made his first mention of AIDS in September 1985 after his friend, the actor Rock Hudson, announced that he had been diagnosed with the disease.
5. Interagency Coalition on AIDS and Development. Also see And the Band Played On (New York: St. Martin’s Press, 1987) by journalist Randy Shilts, who covered AIDS full-time in the early ’80s for the San Francisco Chronicle.
6. Interview with Marvin Laird and Joel Paley.
7. This story was pieced together from conversations with a number of sources.
8. Alan Levin, “Berkshire Hathaway to Close,” New Bedford Standard-Times, August 12, 1985.
9. A four-year-old loom that had cost $5,000 went for $26 as scrap. Some of the equipment went to a textile museum.
10. Buffett used the term “disaster” in the 1978 chairman’s letter, discussing NICO workers’ comp businesses’ bad performance, which he laid largely at the door of industry problems.
11. Interviews with Verne McKenzie, Dan Grossman. The man was an agent who allegedly embezzled from Berkshire.
12. Interview with Tom Murphy.
13. Interview with Verne McKenzie.
14. Interview with Dan Grossman.
15. Several reinsurance managers presided during a short-lived interregnum: Brunhilda Hufnagle, Steven Gluckstern, and Michael Palm. For various reasons, none of them stuck.
16. Sir Arthur Conan Doyle, The Memoirs of Sherlock Holmes: The Adventure of Silver Blaze. London: George Newnes, 1894. (The story in Mark Haddon’s prize-winning novel The Curious Incident of the Dog in the Night-time [New York: Doubleday, 2003] kicks off with a dead poodle speared with a garden fork.)
17. Rob Urban, “Jain, Buffett Pupil, Boosts Berkshire Cash as Succession Looms,” Bloomberg News, July 11, 2006. While the author has been acquainted with Jain for years, he declined repeated requests to be interviewed.