The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [123]
“We might as well control the issue,” Warren said. They spent $8,000 and bought the pads.
“And that was our mistake,” says Knapp. “We should have let the Denver post office send them back to Washington to reduce the supply.”
Through expending enormous effort to become virtual post offices themselves—with most of the work done by Knapp—they gathered more than six hundred thousand Blue Eagle stamps, collectively spending roughly $25,000. For Warren that was a lot, considering his attitude about money and his net worth. They stored the piles of stamps in their basements. And then they realized what they had done. They had laboriously acquired basements full of stamps that would never be worth more than four cents apiece. “When you have so many stamps,” Knapp explains, “there are not many collectors.”
So the next task became disposing of the stamps. Warren expertly delegated the problem of getting rid of $25,000 worth of four-cent stamps to Tom. Then he simply put it out of his mind, except for the funny story, and instead turned back to what was actually important: raising money for the partnerships. In June 1957, another one of the original partners, Elizabeth Peterson, Chuck’s mother, asked Warren to set up a fourth partnership, to be called Underwood, investing another $85,000.31
A few months later, in the summer of 1957, “I got a call from Mrs. Edwin Davis. They used to be customers of the Buffett grocery store. Her husband, Dr. Davis, was a very prominent urologist in town. They lived just a few blocks from here. She said, ‘I understand you manage money. Would you come down and explain it to us?’”
Dr. Edwin Davis was nationally known. One of his patients, Arthur Wiesenberger of New York City, was one of the most famous money managers of the era. He had at some point come to Omaha to be treated for prostate problems, and Davis became his client.
Wiesenberger published Investment Companies, an annual “bible” on closed-end investment funds. These were like publicly traded mutual funds, except that they did not accept new investors. They nearly always sold at a discount to the value of their assets, which made Wiesenberger a proponent of buying them.32 In short, they were like mutual-fund cigar butts. The summer before graduate school, Warren had sat in a chair at Buffett-Falk’s office, reading Wiesenberger’s bible while Howard worked. “Before I went to Columbia,” he says, “I used to spend hours and hours reading that book from cover to cover, religiously.” He bought two of Wiesenberger’s cigar butts, United States & International Securities and Selected Industries, which in 1950 had made up more than two-thirds of his assets.33 While at Graham-Newman, he also managed to meet Wiesenberger and had impressed him, “even though I wasn’t very impressive in those days.”
In 1957, Wiesenberger called Dr. Davis out of the blue and explained that, although it was not necessarily in his own interest to do so, he was recommending a young man to him. “I tried to hire him myself,” said Wiesenberger, “but he was forming a partnership and so I couldn’t.”34 He urged Davis to consider investing with Buffett.
Shortly afterward, Warren scheduled a meeting with the Davis family on a Sunday afternoon. “I went down to their place and sat in their living room and talked to them for about an hour. I said, ‘Here’s how I manage money and the arrangement I have.’ I was probably twenty-six. I looked about twenty years old at the time.” Actually, he looked more like eighteen, according to Eddie Davis: “His collar was open; his coat was too big. He talked so very fast.” At the time, Warren went around Omaha wearing a mangy sweater—which one person observed probably should have been given to Goodwill—an old pair of pants, and