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The second unusual provision was that the debentures paid eight percent but, depending on the earnings of the company, could pay up to an additional one percent.

And Buffett added a third provision. Because he felt that the bonds would be sold mainly to people who knew him or his reputation, he wanted the bonds to be redeemable if he sold enough stock in DRC that he was no longer the largest shareholder.34

“And nobody had ever stuck anything like this in a covenant. I said, ‘You know, they’re entitled to have this in there. They may not want to redeem them, but they’re entitled if they want to. They lent money to me, basically.’” When his own banker, Nelson Wilder, protested that such clauses were unprecedented and unnecessary, Buffett overruled him.35

Now that interest rates had risen, and banks were newly reluctant to lend, the debentures suddenly became a valuable form of cheap financing, a powerful consolation prize. Nevertheless, since Buffett thought of a dollar today as the fifty or hundred dollars that it could become someday, it was as if he had lost many millions on Hochschild-Kohn because of the forgone opportunity to use the money more effectively. He drew a conclusion that he would later state as:

Time is the friend of the wonderful business, the enemy of the mediocre. You might think this principle is obvious, but I had to learn it the hard way…. After ending our corporate marriage to Hochschild-Kohn, I had memories like those of the husband in the country song ‘My Wife Ran Away with My Best Friend and I Still Miss Him a Lot.’…It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price. Charlie understood this early; I was a slow learner. But now, when buying companies or common stocks, we look for first-class businesses accompanied by first-class managements. That leads right into a related lesson: Good jockeys will do well on good horses but not on broken-down nags.36

Even as Buffett and Munger were working on the sale of Hochschild-Kohn in the fall of 1969, Forbes hit the newsstand with a story about Buffett titled “How Omaha Beats Wall Street.” The article opened in such an arresting manner that other writers covering Buffett would copy it for decades afterward.37

“$10,000 invested in his Buffett Partnership in 1957,” Forbes said, “is now worth $260,000.” The partnership, which now had assets of $100 million, had grown at an annual compounded rate of thirty-one percent. Over that twelve-year period, “it hasn’t had one year in which it lost money…. Buffett has accomplished this through following consistently fundamental investing principles.” The anonymous columnist for Forbes then wrote one of the more insightful statements ever made about Buffett:

“Buffett is not a simple person, but he has simple tastes.”

This not-simple Buffett with simple tastes had insisted on total secrecy in his stock dealings when he ran his partnership, and was never once profiled in an interview. Now, however, when secrecy was no longer important, he had cooperated with a high-profile article about himself.

The article did not print, or even whisper, his net worth. The reporter did not know that since Buffett closed the partnership to new partners in 1966, his fees, reinvested, had quadrupled his net worth to $26.5 million in just three years—nor that, with no money coming in from new partners to dilute him, his share of the partnership’s assets had risen from nineteen percent to twenty-six percent. The story cited his “rambling old Omaha house” 38 and the lack of computers and vast staff in his unimpressive office. True, the man with simple tastes still chugged four or five bottles of Pepsi a day, asked for it instead of wine at dinner parties, and ate only the dinner rolls if anything more complicated than a steak or hamburger was served. A helpless captive of whoever happened to be doing the laundry at home, he still sometimes turned up in public looking little better than a hobo and