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Nobody steered Warren Buffett. He fired her on the spot.

But he did need help. Just before moving into Kiewit Plaza he had also hired Bill Scott, a trust officer from the U.S. National Bank who had read an article in the Commercial & Financial Chronicle that Warren had written about an obscure insurance company. Scott signed up for Buffett’s investing course, and then, he says, “I set out to suck up to him until I got a job.” Buffett started going over to the Scotts’ house on Sunday mornings after he dropped his kids off at church to talk about stocks, and eventually offered him a job.36

Scott began to help Buffett as he herded money into the partnership as fast as the two of them could open the mail. Buffett had his mother join for the first time, along with Scott, Don Danly, and Marge Loring, the widow of Warren’s bridge partner Russ Loring, and even Fred Stanback, who had a family business and heretofore had worked with Warren only on specific ideas.37 And for the first time, Warren put his own money—all of it, almost $450,000—into the partnership.38 With that, his and Susie’s share of the partnership rose to more than a million dollars after his six years of work; together they owned fourteen percent of BPL.

The timing was stupendous. In mid-March 1962, the market finally broke. It continued its slide until the end of June. Stocks were suddenly cheaper than they had been in many years. Buffett was now sitting on a single partnership with a huge pile of cash to invest. Its portfolio was relatively unscathed in the downturn—“Compared to more conventional (often termed conservative, which is not synonymous) methods of common stock investing, it would appear that our method involved considerably less risk,” he wrote in a letter to his partners.39 He went racing through the stock tables. He often paraphrased Graham, saying: “Be fearful when others are greedy, and greedy when others are fearful.” This was the time to be greedy.40

25

The Windmill War

Omaha and Beatrice, Nebraska • 1960–1963

In the late 1950s and the early 1960s, while Buffett wrestled with Sanborn, consolidated the partnerships, and moved into the office with his father, he embarked on another project, again some distance from Omaha. The second major orchestration of his supporting group, this was the first in which he actually took control of a company. And it would consume far more of his time and energy than had Sanborn Map.

Dempster Mill Manufacturing, a family-run company in the worst sense of the word, made windmills and water irrigation systems in Beatrice,*21 Nebraska. This episode of Buffett’s career had started like putting a quarter in yet another slot machine to get a dollar back—or so it seemed. The stock sold for $18 a share and the company had a steadily growing book value of $72 a share. (“Book value” is the stated value of a company’s assets less what it owes—like a house less the mortgage, or cash in the bank less a credit card balance.) In the case of Dempster, the assets were windmills, irrigation equipment, and its own manufacturing plant.

In 1958, Warren had driven out to Beatrice, a windswept prairie town that depended on Dempster as its sole important employer. He was armed with a list of nineteen questions, such as: “How many dealers does the company have?” and “During the Depression, how bad did the bad debt experience ever get?”1 After the visit he decided that the company was “well-heeled financially but not making dough.”2 Its president, Clyde Dempster, was running it into the ground.3

Since Dempster was just another cigar butt, Warren applied his cigar-butt technique, which was to keep buying a stock as long as it continued to sell below book value. If the price rose for any reason, he could sell out at a profit. If it didn’t, and he ended up buying until he owned so much stock that he controlled the company, he could sell off—that is, liquidate—its assets at a profit.4

As with Sanborn, Buffett couldn’t afford as much of Dempster as he wanted. He called Walter Schloss and