The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [155]
This new emphasis on a qualitative approach paid off in the stupendous results Buffett was able to announce to his partners at the end of 1965. When Buffett made his annual report to them, he compared the huge gain to an earlier prediction that he could beat the Dow by ten percent a year—and referred to the dazzling performance by saying, “Naturally no writer likes to be publicly humiliated by such a mistake. It is unlikely to be repeated.”7 Despite the irony, he had begun a tradition of hedging against his partners’ high expectations. As his record of outstanding results lengthened, his letters also began to display a preoccupation with measuring success and failure. He used terms like “guilt,” “embarrass,” “disappoint,” or “blame” with unusual frequency, including to describe his so-called mistakes—for he remained obsessed with never letting anyone down.8 As readers began to recognize this pattern, some assumed he was manipulating them, while others accused him of false modesty. Hardly anybody knew how deep his sense of insecurity ran.
In the year following Howard’s death, Warren began to think of memorializing him in some way—for example, through endowing a university chair. But he could never seem to find the perfect vehicle. He and Susie did set up the Buffett Foundation, which made small grants to educational causes. But this wasn’t what he had in mind for his father. And he had no intention of becoming a philanthropist; it was Susie who liked to dispense money and she who ran the foundation. Instead, Warren worked with no slacking of intensity. After his incredible home run on American Express, he hired John Harding from the Omaha National Bank trust department in April 1965, to handle administration. And yet, when Harding took the job, Buffett warned him: “I don’t know if I’ll necessarily be doing this forever, and if I quit, you’ll be out of a job.”9
But there was no sign of his quitting. Harding had hoped to learn investing, but that ambition was soon destroyed. “Any idea that I wanted to handle investments on my own disappeared when I saw how good Warren was,” he says. Instead, Harding simply put most of his money into the partnership.
Besides shoveling millions of dollars’ worth of American Express stock into BPL, Warren now chased bigger deals that required travel and coordination, both giant cigar butts and “qualitative” class handicapping deals that were a far cry from flipping through the Moody’s Manual in his bathrobe at home. His next target, another cigar butt, lay far from Omaha.
Each of the Grahamites in Buffett’s network was always looking for ideas, and Dan Cowin had brought Buffett a textile maker in New Bedford, Massachusetts, that was selling at a discount to the value of its assets. 10 His idea was to buy it and liquidate it, to sell it off piecemeal, and to shut it down. Its name was Berkshire Hathaway. By the time the hair had grown back on Warren’s head from the shock of his father’s loss, he was in full pursuit of this new idea.
Buffett began by circling over the company and observing it. He started leisurely accumulating stock in Berkshire Hathaway. This time, for better or worse, he had chosen a business run by a personality the size of Massachusetts.
Seabury Stanton, president of Berkshire Hathaway, had reluctantly closed more than a dozen mills, one by one, over the past decade. The remnants sprawled along the rivers of the gently moldering towns of coastal New England like empty red-brick temples of a long-lost faith.
He was the second Stanton to oversee the company, and was filled with a sense of destiny. Standing on New Bedford’s rocky shores, he cast himself as King Canute, telling the tides of devastation to retreat. But unlike Canute, he actually