The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [124]
Yet not when he was talking about the partnerships. Warren was not there to sell the Davises. He laid out his ground rules. He wanted absolute control over the money and would tell his partners nothing about how it was invested. That was the sticking point. Not for him was Ben Graham’s handicap of people riding on his coattails. And his solution to the problem of people being disappointed was that he wasn’t going to give them the score after every hole, only once a year after playing eighteen holes. They would get an annual summary of his performance, and they could put money in or withdraw it only on December 31. The rest of the year, their money would be locked into the partnership.
“All the while, Eddie paid no attention to me. Dorothy Davis listened very intently, asking good questions. Eddie was over in the corner doing nothing. He seemed like a very old guy to me, but he was not yet seventy. When we got all the way through, Dorothy turned to Eddie and said, ‘What do you think?’ Eddie said, ‘Let’s give him a hundred thousand dollars.’ In a much more polite way, I said, ‘Dr. Davis, you know, I’m delighted to get this money. But you weren’t really paying a lot of attention to me while I was talking. How come you’re doing it?’
“And he said, ‘Well, you remind me of Charlie Munger.’35
“I said, ‘Well, I don’t know who Charlie Munger is, but I really like him.’”
But the other reason the Davises were so willing to invest with Warren was because, to their surprise, he “knew more about Arthur Wiesenberger than they did.”36 They also liked the way he laid out his terms—clear and transparent, so they knew whose side he was on. He would win or lose along with them. As Dorothy Davis put it, “He’s smart, he’s bright, and I can tell he’s honest. I like everything about this young man.” On August 5, 1957, the money from the Davises and their three children seeded the fifth partnership with $100,000. It was called Dacee.37
With Dacee, Warren’s business jumped another leg upward. He could now land bigger positions in larger stocks. In his personal portfolio, he still played with things like the “penny” uranium stocks that had been in vogue a few years earlier when the government was buying uranium. These were now fantastically cheap.38 Warren bought companies like Hidden Splendor, Stanrock, Northspan. “There were some attractive issues—it was shooting fish in a barrel. They weren’t huge fish, but you were shooting them in a barrel. You knew you were going to make good money. It was minor. The bigger stuff I was putting in the partnerships.”
Having new partners meant more money, of course, but it also meant that the number of stock certificates and amount of paperwork managing the five partnerships plus Buffett & Buffett increased substantially. He had to hustle, but it felt good. The shortfall, as always, was money—he never seemed to have enough. The kind of companies he was researching often had market values of one to ten million dollars, so he wanted as much as $100,000 to get a significant position in their stocks. Getting more money to manage was key.
By this time Dan Monen was ready to get back into the partnership, and he and his wife, Mary Ellen, formed the nucleus of Warren’s sixth partnership, Mo-Buff, on May 5, 1958. Thanks mostly to National American, the Monens, who had had only $5,000 to invest two years earlier, were now able to put in $70,000.39
At the time, Warren Buffett probably understood the potential of money management to beget more money better than anyone on Wall Street. Every dollar added to a partnership would net him a share of what he earned for his partners.40 Each of those dollars, reinvested, would generate earnings of its own.41 Those earnings, reinvested, would beget still more earnings. The better his performance,