The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [203]
Yet people made their decisions for all sorts of reasons. Some needed money. Others simply invested in the Sequoia Fund after listening to Bill Ruane. Many people’s brokers urged them to sell the stock of a money-gobbling textile mill. Some listened, some didn’t. Some professional investors had other options and thought they were better off without these humdrum stocks. When Warren went to the West Coast in person and offered the DRC note, Estey Graham’s sister Betty sold her stock; Estey didn’t. Rhoda Sarnat, Ben Graham’s cousin, and her husband, Bernie, decided not to sell, telling themselves, Warren’s buying, and if it’s good enough for him, it’s good enough for us.17 When he offered the note to his sister Doris, she refused it, thinking, If he’s buying, why would I sell?
A few partners quizzed Buffett more closely in person for his opinion of how the stocks would do. He said, carefully, that he thought they would do well, but it could take a long time. People like Jack Alexander and Marshall Weinberg parsed those words, considered the fact that they were good investors themselves, and sold him part of their stock.
Munger would later call Buffett an “implacable acquirer,” like John D. Rockefeller in the early days of assembling his empire, who let nobody and nothing get in his way.18 With hindsight, some people felt hard done by, enticed, or even misled. Others said to themselves, in effect, Well, that’s just Warren. I should have known.
By the end of 1970, many of the former partners had cashed out while Warren continued buying more stock. His and Susie’s ownership of Berkshire had shot from eighteen percent to almost thirty-six percent. Their ownership of DRC had nearly doubled, to thirty-nine percent. As a practical matter, Buffett now controlled both.19 He had also bought more Blue Chip, taking him from two percent to over thirteen percent ownership of its stock.
But it was clear to Susie Buffett that Warren’s gyrations to get control of Diversified and Berkshire Hathaway meant that her husband’s second “retirement” would be similar to his first. One reason was that Blue Chip was in the same sort of trouble as Berkshire Hathaway.20 The business was no longer just shrinking, it was dying, so he and Munger would have to buy something new to springboard its capital.
In late 1971, after President Nixon abandoned the gold standard, the price of oil skyrocketed and half the country’s oil companies suddenly stopped issuing trading stamps. With prices of everything leapfrogging day by day because of inflation, the classic retailing method of enticing customers into a store through a panoply of services and giveaways was thrown overboard. People wanted the lowest price, and retailers headed to a discount model.21 Any chance that housewives would plan their shopping to collect enough books of trading stamps to get an electric frying pan evaporated.
Then one day Buffett got a call from Bill Ramsey, Blue Chip’s president, saying that a local Los Angeles company, See’s Candies, was for sale. Buffett had carved out a tiny subspecialty of studying candy companies, keeping a file on Fanny Farmer22 and looking into the company that made Necco Wafers. But candy companies were expensive. So far, he had never bitten. “Call Charlie,” he said.23 Munger was in charge of Blue Chip, their West Coast business.
See’s, founded in 1921 by a Canadian candy salesman, competed by using the finest quality butter, cream, chocolate, fruits, and nuts, painstakingly prepared to “See’s Quality,” which was better than “top quality.” During World War II, rather than dilute its recipes to stretch rationed ingredients, See’s had put signs in its distinctive black-and-white stores: “Sold out. Buy war bonds for Christmas.”24 The company became a California institution.
“See’s has a name that nobody can get near in California,” Munger told him. “We can get it at a reasonable price. It’s impossible to