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By Root 3122 0

was the usual practice. When they arrived, he carried them—smooth cream-colored diplomas in investing, engraved with finely etched drawings of railroads and bald eagles, sea beasts and toga-clad women—down to the Omaha National Bank in his own hands and placed them in a safety deposit box. Whenever he sold a stock, he went to the bank, riffled through the collection of certificates, and mailed off the correct ones from the post office on 38th Street. The bank would call to let him know when a dividend check came in to be deposited, and he would go there, examine the check, and endorse it personally.

He tied up the family’s single telephone line with his daily calls to the handful of brokers he used. His expenses were as close to zero as he could get. He listed them by hand on a lined sheet of yellow paper: 31¢ for postage, $15.32 for a Moody’s Manual, $4.00 for the Oil & Gas Journal, $3.08 for telephone calls.21 Except for more meticulous accounting and a great deal more thought, he ran the business much as though he were just anybody trading stocks through a broker for a personal account.

At the end of 1956, Warren wrote a letter to the partners outlining the partnership’s results at year-end. He reported that it had earned a total income of slightly more than $4,500, beating the market by about four percent.22 By then, Dan Monen, his lawyer, had withdrawn from the first partnership, with Doc Thompson buying out his share. Monen had joined Warren on a personal side project that he had been pursuing for some time: buying the stock of an Omaha-based insurer, National American Fire Insurance. This company’s worthless stock had been sold to farmers all over Nebraska in 1919 by unscrupulous promoters in exchange for the Liberty Bonds issued during World War I.23 Since then, its certificates had lain crumbling in drawers, while their owners gradually lost hope of ever seeing their money again.

Warren had discovered National American while working at Buffett-Falk, flipping through the Moody’s Manual.24 The company was headquartered only a block away from his father’s office. William Ahmanson, a prominent Omaha insurance agent, had originally been sucked into it unawares, set up as a local front man for what had started out as a fraud. But the Ahmanson family had gradually turned it into a legitimate company. Now, Howard Ahmanson, William’s son, was feeding top-drawer insurance business into National American through Home Savings of America, a company he had founded in California, which was becoming one of the largest and most successful savings-and-loan companies in the United States.25

The defrauded farmers had no idea that their moldering paper was now worth something. Howard had been quietly buying the stock back from them on the cheap for years through his younger brother Hayden, who ran National American. By now the Ahmansons owned seventy percent of the company.

Warren admired Howard Ahmanson. “Nobody else was quite as audacious at managing capital as Howard Ahmanson. He was very shrewd in a lot of ways. Formerly, a lot of people came in to Home Savings and paid their mortgages in person. Howard put the mortgage at the farthest branch away from where you lived so that you paid by mail and didn’t spend half an hour of one of his guys’ time telling them about your kids. Everybody else had been to see It’s a Wonderful Life and felt that you should do this Jimmy Stewart stuff, but Howard didn’t want to see his customers. His operating costs were way under anybody else’s.”

National American was earning $29 per share, and Howard’s brother Hayden was buying its stock for around $30 per share. Thus, as with the rarest and most attractive of the cheap stocks that Warren stalked, the Ahmansons could pay virtually the entire cost of buying a share of stock out of one year’s profits from that single share. National American was the cheapest stock Warren had ever seen—except for Western Insurance. And it was a nice little company, too, not a soggy cigar butt.

“I tried to buy the stock for a long time. But none of it was getting