The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [229]
“I didn’t have the nerve to stand up and offer a toast, which you’re supposed to do. I blew it totally. I was so uncomfortable. I even thought I might throw up, actually. I could not stand up there in front of half the cabinet and talk. I wasn’t up to it.” All he wanted to do was escape. Afterward, as he and Susie made their goodbyes, they had the feeling that the hicks from Nebraska would be the talk of Georgetown long after they left.
“This Senator was still trying to score with Susie as we were leaving and was so concentrating on explaining how she should come down to the Senate and see his offices as we were leaving that he opened the door to a closet and walked in. That was my introduction to Washington.”
Yet while it was true that the formal, glittering society that surrounded the powerful Mrs. Graham may have unnerved Buffett and made him ill at ease, he had never been one to hide his enthusiasms. And so it must have soon become obvious to Susie Buffett that her husband wanted more of this world.
38
Spaghetti Western
Omaha • 1973–1974
By the time he dined with Katharine Graham in 1973, Buffett was no longer just an investor who was buying newspaper stocks. He was becoming a business mogul on a small scale. Berkshire Hathaway and Diversified were his bailiwick. Charlie Munger was the czar of Blue Chip Stamps.
The interlocking ownership of these three companies had tightened the business relationship between Buffett and Munger, and resembled the embryo of an empire built by another investor whom Buffett in particular admired, Gurdon W. Wattles.1 His company, American Manufacturing, was like a Russian doll; open it and inside was another company and another and another: Mergenthaler Linotype, Crane Co., Electric Auto-Lite. These stocks were all publicly traded, because though Wattles controlled them, he did not own one hundred percent of any of them. From early in his investing career, Buffett admired the Wattles model. He considered how best to profit from the same stocks Wattles was buying. He talked about Wattles all the time to his friends. “The only way to go is coattail-riding,” he would say.2
“Wattles had this little closed-end investment company called Century Investors, which had to report to the SEC. He did this chain thing where he would be buying stock in a company at a discount, which would be buying stock in another company at a discount, which would be buying stock in another company at a discount. The big company at the end of the thing was Mergenthaler Linotype, which was two-thirds owned by American Manufacturing. In those days, you didn’t have to file with the SEC to publicly reveal that you were buying, so nobody knew and he just would keep buying until he got control. He bought control of Electric Auto-Lite, partly through Mergenthaler, and he was doing the same thing with Crane Co., not the stationery but the plumbing supply. Somewhere in the chain was Webster Tobacco. They were all cheap statistically. Everything sold at a discount, and you could just keep buying all of them and make more money every time you made a purchase. Usually I would buy some of all of them. I owned Mergenthaler, I owned Electric Auto-Lite, I owned American Manufacturing.3 What would cause the value to come out, that was always the question. But you just had a feeling you were with a smart guy and eventually it would.”
Early on, he went to see Wattles at his office at White, Weld & Co. in Boston.4
“I was a little apprehensive and said something like, ‘Mr. Wattles, I hope I can ask you some questions.