Dear Mr. Buffett_ What an Investor Learns 1,269 Miles From Wall Street - Janet M. Tavakoli [5]
July 2005 was another busy month: I had focused so much on the securities fraud case that I had a backlog of business, so I took a much-needed week-long vacation to decompress. At the end of July, I reviewed my pending correspondence file, and it contained only one item: the letter.
After rereading the letter on August 1, I wrote a letter in reply and offered three dates, with August 25, five days before Warren Buffett’s 75th birthday, being the earliest of the three:
It is my turn to apologize for being so late getting back to you. . . . . Business isn’t taking me in that direction anytime soon, but I would be happy to fly in for the day—just because I would enjoy doing it . . .
On August 3, I received an e-mail from Warren Buffett through his assistant stating that August 25 would work:
If you can make it for lunch, I would be glad to take you to a place with no décor but good food.
Everyone in the global financial community knew Warren Buffett by reputation, and his name continually popped up in the financial press, but I operated in specialty niches of the industry, and he was just part of the background noise of my world. I hadn’t read any of the books about him, and I hadn’t read the many articles about Warren Buffett, the man. But I had read many of Berkshire Hathaway’s annual reports including Mr. Buffett’s shareholder letters, which I enjoyed very much.
Warren Buffett was already a billionaire at age 60.That in itself was an achievement beyond the reach of all but a miniscule percentage of humans, but his future success dwarfed that accomplishment. Due to the benefits of continued compounded growth off of a greater base of wealth, the bulk of Buffett’s wealth accumulated after the age when most men retire to spend their money.
Throughout my career, I worked with people who eventually met or did business with Warren Buffett. It was as if we attended the same university and he were a popular senior and I a freshman. I was well respected in my field, and was a self-made woman; but Warren Buffett was a financial legend superlatively good at making money for himself and for his shareholders.
In 1987,Warren Buffett and Charlie Munger rode to the rescue of John Gutfreund, the CEO of Salomon Brothers. Their “white knight” investment of $700 million of Salomon Inc.’s convertible preferred stock enabled Gutfreund to fend off Ronald Perelman’s hostile takeover. Perelman, a famous, colorful cigar-loving corporate raider with a reputation for ruthlessness, had already swallowed up Revlon, Sunbeam, Panasonic and other companies in the 1980s. In contrast, Buffett and Munger were not well known, and their lifestyles didn’t provide salacious material for the media frenzy that surrounded corporate raiders.
Initially, Salomon’s preferred stock was an ideal Berkshire Hathaway investment. Buffett never supplied management; he looked for good honest managers, and he thought he had found one in Gutfreund. Things changed in 1991. Paul Mozer, a trader on the Arbitrage Desk, pleaded guilty to felony charges after a government bond trading scandal. John Meriwether, the head of Salomon’s Arbitrage trading desk, told Gutfreund that Mozer had confessed to him. Their failure to immediately come forward compounded the scandal, and neither of them survived the fallout. Buffett was compelled to protect Berkshire Hathaway’s investment. In the summer of 1991, he became Salomon’s reluctant CEO for 10 months. Mr. Buffett’s leadership and reputation for integrity salvaged Salomon’s business, which rapidly recovered. The convertible bonds outperformed the fixed income securities that Berkshire Hathaway had sold in their place, but by 1995, the option to convert to common shares of Salomon stock was worthless. In 1997, Buffett off loaded the investment on Sandy Weil, and Salomon eventually became a part of Citigroup.
I had joined Salomon Brothers’ summer 1985 training class lampooned by my classmate Michael Lewis in his book, Liar’s Poker. Unlike