The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [196]
Buffett brought Ruane to Omaha and promoted the Sequoia Fund to the partners. He endorsed Ruane in typically mathematical terms. Unremarkably, even though he had known Ruane for years, he still felt it necessary to leave a small escape hatch, fearing blame in case things didn’t work out, and wrote: “There is no way to eliminate the possibility of error when judging humans…[but] I consider Bill to be an exceptionally high-probability decision on character and a high-probability one on investment performance.”22
Yet while Buffett made arrangements to close the partnership, the first signs appeared that the market’s sparks were going to cool. By July 1969, when U.S. troops began withdrawing from Vietnam, the Dow had dropped nineteen percent. Even though the triumphant moon landing that summer gave the country a lift, Wall Street did not feel it. Exotic stocks like National Student Marketing and Minnie Pearl’s Chicken System, Inc.—which had garnered a huge following in a market where half the money managers and brokers had been working in the business for no more than seven years—were starting to collapse.23
Blue Chip Stamps, the trading-stamp stock painstakingly accumulated by Buffett, Munger, and Guerin, now became a striking exception to the general trend. The three of them had been betting on whether the company could settle its antitrust lawsuit with Sperry & Hutchinson. When a settlement was reached, this stock—which the Buffett partners didn’t know they owned—showered nearly $7 million in profit on them in return for a $2 million investment less than a year ago.24 Now Blue Chip decided to have a public offering, and Buffett elected to sell the partnership’s shares as part of that deal.25 It seemed that the partners were going to have a splendid final year in 1969.
That October, Buffett called another meeting of the Grahamites, including those who had gathered in San Diego the year before, sans Ben Graham himself. This time the wives were also invited, and although they did not join the meetings in which the men talked about stocks, their presence made the atmosphere more festive, like a vacation. Buffett delegated the planning to Marshall Weinberg, who lived in New York City and liked to travel. But Weinberg, who also liked to shave a dime and had no more experience of the jet-set life than Buffett, asked around and then made the unfortunate choice of the Colony Club, a Palm Beach, Florida, resort, where they were treated like rubes and snooted at even by the bellboys.
Ruane reported at the first night’s dinner that the bellhop had handed him back his five-dollar tip with a sneer, saying, “You need it more than I do.” Bill Scott had given his bellhop a handful of the dimes he always carried in his pocket to make phone calls for Buffett. The bellhop threw the change all over the floor in the hallway on his way out.
For the next five days, as the group enjoyed bad food, small rooms, high winds, and lashing rains, the men sat classroom style, with Buffett most often in his usual place at the front. They batted thoughts back and forth in an encoded shorthand derived from many years of conversation and a closely shared set of concepts and values.26 “Charlie told some horror stories,” Buffett wrote later, and “I drew the same gloomy conclusions, [while Walter Schloss] said that two mislocated steel companies with obsolete plants were still below book value so all was not lost.”27
Buffett posed the Desert Island Challenge. If you were stranded on a desert island for ten years, he asked, in what stock would you invest? The trick was to find a company with the strongest franchise, one least subject to the corroding forces of competition and time: Munger’s idea of the great business. As Henry Brandt took copious notes on the various answers, Buffett delivered his own choice: Dow Jones, owner of the Wall Street Journal. His interest in newspapers