The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [189]
He seemed especially—and comfortably—antiquated when it came to all the new technology companies that were forming. At Grinnell College, he showed up for a meeting to find his fellow trustee Bob Noyce itching to leave Fairchild Semiconductor. Noyce, Gordon Moore (its research director), and its assistant director of research and development, Andy Grove, had decided to start a nameless new company in Mountain View, California, based on a vague plan to extend the technology of circuits to “higher levels of integration.”23 Joe Rosenfield and the college endowment fund each said they would put in $100,000, joining dozens who were helping to raise $2.5 million for the new company—which was soon to be named Intel, for Integrated Electronics.
Buffett had a long-standing bias against technology investments, which he felt had no margin of safety. Years ago, in 1957, Katie Buffett, wife of his uncle Fred Buffett, had arrived at Warren’s back door one day with a question. Should she and Fred invest in her brother Bill’s new company? Bill Norris was leaving Remington Rand’s*26 UNIVAC computer division to start a company called Control Data Corporation to compete with IBM.
Warren was horrified. “Bill thought that Remington Rand was falling behind IBM. I thought he was out of his mind. When he left Remington Rand he had six kids and no money to speak of. I don’t think Bill left to get rich. I think he left because he just felt frustrated. Everything had to go to New York to get approved and come back. And Aunt Katie and Uncle Fred wanted to put a few bucks in Control Data there right at the start. Bill didn’t have any money. Nobody had any money, in a sense.” Well, except Warren and Susie. “I could have financed half the thing if I’d wanted. I was very negative on it. I told them, ‘It doesn’t sound like much to me. Who needs another computer company?’”24
But since Bill was Katie’s brother, for once she and Fred had ignored Warren’s advice and invested $400 anyway, buying the stock at sixteen cents a share.25
That Control Data had geysered investors with money hadn’t changed Buffett’s opinion about technology. Many of the other technology companies that had started at the same time had failed. As much out of regard for Rosenfield as for any other reason, however, Buffett signed off on a technology investment for Grinnell.26 “We were betting on the jockey, not the horse,” as he saw it.27 But, more important, Rosenfield provided the margin of safety by guaranteeing the college’s investment. And as much as Buffett admired Noyce, he did not buy Intel for the partnership, thus passing on one of the greatest investing opportunities of his life. While he had lowered his investing standards in difficult environments—and would do so again—one compromise he would never make was to give up his margin of safety. This particular quality—to pass up possible riches if he couldn’t limit his risk—was what made him Warren Buffett.
Now the whole market was starting to look like Intel to him, however. His 1968 year-end letter assessed it soberingly, saying that investing ideas were at an all-time low.28 “Nostalgia just isn’t what it used to be,” he concluded.
As he later explained: “It was a multi-trillion-dollar market, and yet I couldn’t find a way to invest $105 million intelligently. I knew I didn’t want to manage other people’s money anymore in an environment where I didn’t think I could do well, and yet where I’d feel obliged to do well.”
That attitude was remarkably different from 1962, when the market was similarly soaring. Both times he bemoaned it. But then he had raised money with an energy that belied his inability to put it to work.
The partners were dumbfounded by the contrast between his dour words and the wing-walk way he seemed to be earning money for them. Some began