The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [114]
Intrigued, Anderson had been riding Graham’s coattails. After buying a single share of Graham-Newman, he used its quarterly statements to figure out what Graham was doing, then bought those stocks. Graham never discouraged this; he liked other people to learn from and emulate him.
Anderson had come in because he was thinking about buying another share of Graham-Newman, but he had noticed an oddity and he wanted to ask about it. Graham had loaded up on shares of American Telephone & Telegraph. It was the least Graham-like stock imaginable—owned, studied, and followed by all, valued fairly, with as little potential as it had risk. Was something going on? he asked Warren.
Warren thought for a second. It was impressive that this man with no business background—a chemist—had the perception to see that AT&T was out of pattern. Too many people thought that “business” was some sort of priesthood practiced only by those with special training. He said to Anderson, “This might not be the best time to buy another share.”27 They chatted a bit longer and then parted in a friendly way, intending to keep up the acquaintance. Warren was very glad that his friend Schloss had gone out on his own. From watching the firm’s trading patterns and keeping his ears open, he had already figured out that Graham was going to shut down his partnership.
Ben Graham’s career was coming to an end. He was sixty-two years old, and the market had surpassed the peak of 1929.28 Its priciness made him nervous. He had beaten the market by 2.5 percent for more than twenty years.29 He wanted to retire and move out to California to enjoy life. Jerry Newman was also retiring, but Jerry’s son, Mickey, would stay on. In the spring of 1956 Graham gave notice to his partners. But first he offered Warren the opportunity to become a general partner in the firm. That he would choose someone of Warren’s age and experience shows how valuable he had made himself in such a short time. Nevertheless: “If I had stayed I would have been sort of the Ben Graham of it, and Mickey would have been the Jerry Newman of it—but Mickey would have been the senior partner by miles. It would have been called Newman-Buffett.”
Even though Warren was flattered, he had gone to Graham-Newman to work for Ben. It wasn’t worth it to him to stay, not even to be thought of as Graham’s intellectual heir. Moreover, all the while that he was carrying out the bus bell-ringer and the cocoa-bean caper he was thinking, “I don’t like living in New York. I’m on the train back and forth all the time.” Above all, he was not cut out to work with a partner—least of all as someone’s junior partner. He turned the offer down.
22
Hidden Splendor
Omaha • 1956–1958
I had about $174,000, and I was going to retire. I rented a house at 5202 Underwood in Omaha for $175 a month. We’d live on $12,000 a year. My capital would grow.”
In retrospect, it would strike people as odd that at the age of twenty-six, Warren used the term “retire.” Maybe it was a way to downplay expectations. Or maybe it referred to his notion of capital as money that worked as a sort of servant to make you rich. The overseer of capital was not an employee.
Mathematically speaking, Warren could theoretically “retire” on his own money and still reach his goal of being a millionaire by age thirty-five.*18 Since entering Columbia with $9,800, he had grown his money by more than sixty-one percent a year. But he was in a hurry, and it would require a very aggressive compounding rate to meet his goal.1 Therefore he had decided to start a partnership like Graham-Newman’s sister hedge fund, Newman & Graham.2 It was possible that he did not think of this as having a “job.” In fact it was a near-perfect way of not having a job. He would have no boss, could invest from his house, and could put friends and relatives into the same stocks that he would have bought for himself. If he took