The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [149]
Buffett had a buoyant optimism about the long-term economic future of American business, which had enabled him to invest in the market against his father’s and Graham’s advice. Yet his investing style still reflected Graham’s doom-laden habits of looking at businesses based on what they were worth dead, not alive. Munger wanted Buffett to define the margin of safety in other than purely statistical terms. In doing so, Munger was working against a subtle tendency toward catastrophism in Buffett’s outlook that sometimes cropped up when solving theoretical problems. His father, Howard, had always prepared for the day the currency became worthless, as if that day were imminent. Warren was far more realistic. Nonetheless, he tended to extrapolate mathematical probabilities over time to the inevitable (and often correct) conclusion that if something can go wrong, it eventually will. This style of thinking was the proverbial double-edged sword: It made Buffett a gifted visionary whose thoughts oriented toward doomsday. He would come to use this sword often to slice through knotty problems, sometimes in a very public way.
A few years earlier, another friend of Buffett’s, Herb Wolf of New York Hanseatic, an over-the-counter trading house, had helped Buffett tame another personality trait that was hindering his financial quest. Wolf, an investor in the water utility American Water Works, had sought Buffett out in the early 1950s after reading an article that Warren had written on IDS Corporation in the Commercial & Financial Chronicle.33
“Herb Wolf was one of the smartest guys I ever met. He could tell the effect on American Water Works’ earnings if somebody took a bath in Hackensack, New Jersey. He was unbelievable. One day Herb said to me, ‘Warren, if you’re looking for a gold needle in a haystack of gold, it’s not better to find the gold needle.’ I had this thing that the more obscure something was, the better I liked it. I thought it was a treasure hunt. Herb got me out of that way of thinking. I loved that guy.”
By 1962, Buffett had shaken off the treasure-hunt way of thinking. But he still had Wolf’s passion for detail, and even with the addition of Bill Scott, his operations had expanded so much that he now needed another employee to assist him. He managed to keep this one off his own payroll; Buffett would forever go to extremes to control his overhead by paying for expenses in ways that could be shut off as needed, or, better yet—as in this case—could be covered in ways that made them effectively free.
Henry Brandt, Buffett’s stockbroker friend who worked at Wood, Struthers & Winthrop, was a born sleuth who had been doing part-time research for the BPL partnership. Buffett had been paying Wood, Struthers for Brandt’s time through the brokerage commissions he paid for trading stocks through it. Since he would be paying commissions to somebody anyway, Brandt effectively worked for him for free.34 If Buffett decided he did not need Brandt’s research anymore, he could use another brokerage firm to execute his trades.
Now, Brandt worked for Buffett almost one hundred percent of the time. Buffett paid Brandt by waiving his partnership fee and beginning to cut him in on outside deals without an override. The two men shared an interest in knowing the minutest details about a company. Brandt was fearless about asking questions. Unlike Buffett, he never thought twice about making himself obnoxious if this was what it took. He gladly did enormous amounts of meticulous research by gumshoeing and pestering people. Brandt, however, was incapable of stopping before he found the gold needle. Therefore, Buffett set the agenda and steered the process