The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [202]
Still, the Howard in Warren demanded that he present their options with scrupulous honesty. The way he answered the next question told the departing partners exactly what to expect.
Should I hold my stock? they asked.
Buffett gave as clear and direct advice as he would ever give in public about a stock.
“All I can say is that I’m going to do so,” he said, “and I plan to buy more.”10
The departing partners were also going to have a third stock to deal with. In this same letter of December 26, Buffett told them that the Blue Chip stock sale had fallen through.11 The stock had plunged in a short time from a high of $25 to $13 a share because Safeway Stores had dropped Blue Chip stamps, its customer base was eroding, and no buyer was in sight for the one-third of the business that the Justice Department had mandated it sell. Two new lawsuits had been filed against it in the U.S. District Court in Los Angeles, one by Douglas Oil Company and the other by a group of filling stations, who said Blue Chip had broken the antitrust laws—that it was a monopoly—and asked for treble damages and attorneys’ fees.12
Yet even as Blue Chip’s problems multiplied and the price fell, Buffett had been buying the stock instead of selling. He had bought it for Diversified Retailing and for National Indemnity. He had bought it for Cornhusker Casualty and National Fire & Marine, two little insurance companies that Berkshire had acquired. He had also bought it for himself and for Susie.
Now the partners knew that Buffett wouldn’t sell, and indeed planned to hoover up more of all these stocks. They would get whichever they wanted—stock or cash. If they took the money, he would get the stock. If they kept their stock, they would still be his partners, in a sense.
In his anxiety over whether people accepted and liked him, Buffett valued loyalty more than almost anything. He looked for loyalty in all of his relationships. The dissolution of the partnership had elements of a loyalty test, as his behavior afterward would make clear.
When the partnership unwound, Buffett had more money to buy even more stock, for even while holding on to his shares—he personally owned eighteen percent of Berkshire Hathaway, twenty percent of Diversified, and two percent of Blue Chip Stamps13—he and Susie had hauled home roughly $16 million in cash by the end of 1969. During the ensuing year, the shares of Berkshire and Diversified quickly began to change hands, as though a giant were shuffling a deck of cards. As he had promised—but on a scale that might have staggered his partners, had they known—Buffett used the cash he got from the partnership to buy still more Berkshire and Diversified for his own account. He used Berkshire’s cash to buy its own stock, and for DRC, offered to buy the company’s stock from some people in exchange for a DRC note that paid interest at nine percent.14 He bought from people ranging from his former brother-in-law Truman Wood to his first investor, Homer Dodge, and his son Norton.15 Those who rejected these offers had to be willing to ride along and let Buffett reinvest the earnings without ever paying out a dime—a show of trust that was important to him.16
Forever after, he would feel a loyalty to those who kept the stock—a loyalty of such depth and strength that the standard-model modern CEO would find it completely incomprehensible. Berkshire, he would later reflect, is still “like a partnership. You basically have the closest thing to a private business with shareholders who identify with you and who like to come to Omaha.” He thought of partners as people who had come together out of a complex set of shared values and interests, not out of short-term economic convenience. He often said that he tried to treat his partners