The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [106]
Warren was a bloodhound for anything free or cheap. With his prodigious ability to absorb numbers and to analyze them, he quickly became the fair-haired boy of Graham-Newman. It came so naturally to him; Ben Graham’s cigar butts resembled his old hobby of stooping at the racetrack for cast-off winning tickets.
He paid close attention to what was going on in the back where the partners—Ben, Jerry, and Mickey—worked. Ben Graham was on the board of Philadelphia and Reading Coal & Iron Company, and Graham-Newman controlled the company. Warren had discovered this stock on his own, and by the end of 1954 he had put $35,000 into it. His boss would have been appalled, but Warren was confident—and eavesdropped with fascination.22 Philadelphia and Reading—which sold anthracite coal and owned the supposedly valuable culm banks—actually wasn’t worth much as a business. Over time, it was going nowhere. But it was throwing off extra cash, which it could use to transform itself into a better business by buying another company.
“I was just a peon sitting in the outer office. A guy named Jack Goldfarb came in to the office to see Graham-Newman. He negotiated with them and they bought the Union Underwear Company from him for Philadelphia and Reading Coal and Iron, creating what became Philadelphia and Reading Corporation.23 That was the beginning of the company’s transformation into something more diversified. I was not in the inner circle, but I was terribly interested, knowing something was going on.”
What Warren was learning about by keeping his ears open was the art of capital allocation—placing money where it would earn the highest return. In this case, Graham-Newman was using money from one business to buy a more profitable business. Over time, it could mean the difference between bankruptcy and success.
Transactions like this made Warren feel that he was sitting on the windowsill looking in at high finance as it was taking place. Yet, as he soon found, Graham did not behave like anyone else on Wall Street. He was always mentally reciting poetry or quoting Virgil and was apt to lose packages on the subway. Like Warren, he was indifferent to how he looked. When someone observed, “That’s an interesting pair of shoes,” Graham looked down at the brown oxford on one foot and the black one on the other and said, without blinking, “Yes, as a matter of fact, I’ve got another pair just like them at home.”24 Unlike Warren, however, he cared nothing about money for its own sake, nor was he interested in trading as a competitive game. To him, stock-picking was an intellectual exercise.
“One time, we were waiting for an elevator. We were going to eat in the cafeteria down at the bottom of the Chanin Building at Forty-second and Lex. And Ben said to me, ‘Remember one thing, Warren: Money isn’t making that much difference in how you and I live. We’re both going down to the cafeteria for lunch and working every day and having a good time. So don’t worry too much about money, because it won’t make much difference in how you live.’”
Warren was in awe of Ben Graham, but nonetheless he was preoccupied with money. He wanted to amass a lot of it, and saw it as a competitive game. If asked to give up some of his money, Warren responded like a dog fiercely guarding its bone, or even as though he had been attacked. His struggle to let go of the smallest amounts of money was so apparent that it was as if the money possessed him, rather than the other way around.
Susie had learned this only too well. Even within their apartment building, Warren had quickly earned a reputation for tightfistedness and eccentricity. It was only after he was embarrassed by the state of his shirts at work—for Susie never ironed more than the collar, front placket, and cuffs—that he allowed her to send the shirts to a laundry.25 He made a deal with