The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [176]
It wasn’t enough. As the numbers came in, Buffett realized that the Apparel Fabrics and Box Loom divisions were losing so much money that the only way to salvage them was to modernize the equipment. But throwing good money after bad had been Seabury Stanton’s mistake. Buffett refused to invest in the business; it would be like trying to irrigate the desert with a garden hose. Still, closing the plants down would throw hundreds of people out of work. He sat behind his desk and swiveled his chair and thought about it, then thought about it some more.
The irony was that the partnership was swimming in a sea of money.14 And on Wall Street, brokers in pinstripes were getting high on cash. A new breed of men, who had come of age after World War II without the lessons of the Crash and the Great Depression seared into their brains, had risen on the Street. As they pushed stocks to never-before-seen values, Buffett began selling down his American Express position, which by now was worth $15 million more than the $13 million that it had cost, accounting for two-thirds of the partnership’s gain. But he didn’t want to plow that money back into Berkshire Hathaway.
Rather, his most important task that year was to find something new to which he could hitch the broken-down nag of Berkshire before its “substantial drag” on his performance became intolerable. In Omaha, he had long had his eye on a company, National Indemnity, headquartered just a few blocks away from his Kiewit Plaza office. Buffett first met its founder, Jack Ringwalt, in the early 1950s, in the boardroom at the broker Cruttenden and Company. Ringwalt was one of the smartest, most enterprising men in town. Then Warren’s aunt Alice had tried to steer Ringwalt into the Buffett Partnership.15 Ringwalt later claimed that Buffett had demanded a minimum investment of $50,000 (though Buffett was taking far less than that from nearly everyone at the time). “If you think I am going to let a punk kid like you handle $50,000 of my money, you are even nuttier than I think you are,” Ringwalt supposedly replied, and declined to invest. Ringwalt considered himself an investing expert, however, and Buffett’s penchant for secrecy put many people off.16
Buffett kept an eye on National Indemnity nonetheless. A nonstop learning machine, he wanted to know everything there was to know about the insurance business. He checked out armloads of books from the library and came to understand Ringwalt’s strategy, which was to insure the most difficult customers. Ringwalt, Buffett saw, was the mix-up player of insurance—the cautious risk-taker and the penny-pinching, aggressive underwriter who went around the office every night and turned off all the lights.17 For a fancy price, he insured the unusual: circus performers, lion tamers, the body parts of burlesque stars.18 “There’s no such thing as a bad risk,” Ringwalt liked to say, “only bad rates.” His first break had come when a bank asked him to guarantee that a bootlegger—presumed murdered—would not return to Omaha, because the presumptive widow wanted to withdraw his account without waiting the legally required seven years. Ringwalt figured the alleged murderer’s lawyer might have a pretty good idea whether the missing bootlegger’s blood no longer pulsed. He had helped the accused murderer beat the rap, but the dead man’s widow (and the bank) suspected that was mainly just good lawyering,