The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [240]
What Susie thought about this extraordinary gesture is not known. But Warren’s explanation of it is on record: “Only for Kay,” he says. “Only for Kay.”
On Sunday morning, they dropped their company manners and Susie sleepwalked through cooking bacon and eggs for Graham, eating nothing herself, while Warren sat nearby spooning chocolate Ovaltine from a jar.8 After breakfast, he and Graham resumed their tête-à-tête. At some point, Graham told him that she wanted him to join her board but was waiting for the right time. She knew that some of her board members, such as André Meyer, would not welcome Buffett. But he asked, “When is the right time?” thus forcing her to make up her mind. And so in short order it was done; they agreed that Buffett would join the board of the Washington Post Company. He was elated.
That afternoon, Buffett left his family at Emerald Bay and drove Graham to the Los Angeles airport. “On the way, all of a sudden, she looked at me like a three-year-old kid. Her voice changed, and her eyes, and she said, basically pleading, ‘Just be gentle with me, please don’t ever assault me.’ I learned later that Phil and some people at the paper, to get their own ends or for sheer enjoyment, would push her buttons just to watch her fall apart. It was cruel on the part of Phil; it was manipulative on the part of the rest. It was very easy to do; the button still worked.”
At summer’s end, on September 11, 1974, Buffett officially joined the board, which catapulted him from a star investment manager from Omaha to official adviser at one of the most important media companies in the world. Even at that first meeting he could see that Graham had a habit of pleading with the board for help. Buffett thought, This won’t do. You can’t put yourself in that position as a CEO. But he didn’t yet know her well enough to say anything. Instead, he educated himself about the Post board, which was full of many prominent and influential people, and began to tiptoe his way through the powerful, jockeying men who were used to dominating Graham. He was a quiet board member, however, and used his skills behind the scenes.
Buffett at the time was preoccupied with far more than just Kay Graham and the Washington Post. The market, which investors had expected to rally in 1974, instead was in the full throes of collapse. Pension-fund managers had cut back their stock purchases by more than eighty percent. Berkshire’s own portfolio looked as though someone had given it a severe hedge trimming, shearing off nearly one-third in the second Great Crash, the kind that comes along only a few times in a century.
Munger had kept his partnership open after Buffett had shuttered his. Now its value was plunging. His performance had always been more volatile—in both directions—than the market’s. For the past couple of years he had managed decent though unspectacular returns. But by 1974 Munger found himself in trouble, his partners losing nearly half of their money.9 Like Ben Graham half a century earlier, he felt obliged to make their money back.
“If you’re put together properly, you have a fiduciary gene like Warren and me,” he says, “and if you’ve told people, ‘I think I can get you extraordinary results,’ then you really hate the idea of not delivering for them.”
As for himself, “Certainly the quoted value of my capital went down. I didn’t like it, but just think about how many years could go by—what difference does it make at the end whether I have X dollars, or X minus Y? The only thing that bothered me was that I knew how hard it was on the partners. That was what killed me—the fiduciary aspect of my position.”10
Munger still had about twenty-eight limited partners, including some family trusts. To earn back losses of half his capital, he would have to more than double the remaining stake. The value of Blue Chip Stamps would have a significant