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Buffett wanted him to do it, because Berkshire Hathaway was a lousy business that he had partially liquidated, and this was his chance to swap those funds for a great business. Since he knew that Ringwalt would be having second thoughts while away in Florida, he moved fast to seal the deal before Ringwalt could change his mind. Both men wanted a contract no more than one page long.20 Buffett had final papers drawn up quickly and the funds deposited in the U.S. National Bank.21

When Ringwalt returned from Florida a week later, Buffett freight-trained him with a deal ready to close. But Ringwalt showed up to the closing meeting ten minutes late. Buffett and Heider would later explain this by saying that Ringwalt was driving around the block looking for a parking meter with time left on it.22 Ringwalt always said he was just late. But maybe he’d realized he wasn’t actually better off without it, and was dragging his feet, sorry at having bowwowed himself into thinking he was better off without National Indemnity.

Buffett, of course, knew full well that the partnership was better off with it; National Indemnity was the chance to give his fortunes a gigantic push. A short time later, he wrote a paper on the subject under the dull title “Thoughts Regarding Capital Requirements for Insurance Companies.”

The word “capital”—money—was an important hint at what Buffett was thinking when he acquired National Indemnity, for capital was his partnership’s lifeblood. He was pulling capital from Berkshire and it needed to be put to work. National Indemnity took a lot of risk and needed gobs of capital to do so. “By most standards,” he wrote, “National Indemnity is pushing its capital quite hard. It is the availability of additional resources in Berkshire Hathaway that enables us to follow the policy of aggressively using our capital which, on a long-range basis, should result in the greatest profitability within National Indemnity…. Berkshire Hathaway could put additional capital into National Indemnity, should underwriting turn sour.”23

Buffett had figured out a whole new type of business. If National Indemnity made money, he could send those profits out to buy other businesses and stocks, instead of leaving them to hibernate in National Indemnity’s vault. But if the lion ate the lion tamer, National Indemnity might need money to pay the lion tamer’s weeping family. Then the money could come back home to National Insurance from the other businesses.

Grafting the insurance business onto Berkshire Hathaway, the mess of a textile mill, made its capital homeostatic. It could respond internally to the environment at Buffett’s command, rather than hibernating like a lizard when it got cold or running out when the sun shone to find a rock on which to sun itself.

The key was to price the risks right. Thus he needed Jack Ringwalt, who had talked himself into selling his own business, to stick around. Buffett paid Ringwalt handsomely and cultivated him as a friend; and as with Ben Rosner and Associated Cotton Shops, he had bought an excellent business run by an able manager.

The two men often played tennis in California. Ringwalt, whose taste in clothes resembled Buffett’s, would show up in a grimy old sweatshirt that his daughter had made for him. His racy nickname, Jet Jack, stretched in huge letters over his bay window of a gut. Once when he and Buffett were having lunch at a Jolly Roger restaurant, a little kid came up to him. “Can I have your autograph, Jet Jack?” he asked. Ringwalt swelled with pride. The kid thought he was a celebrity: an astronaut or a movie star. He may not have looked the part except to a little kid, but in his heart, he still felt like Jet Jack.

And rightly so, because the swashbuckle came from inside, not from the way he looked. Ringwalt may have sold his company, but he had gotten back a bit of his own—for what he did with some of the money he got from selling National Indemnity was to buy stock in Berkshire Hathaway.24

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