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Now Schloss was dismayed to hear Brandt telling himself he was better off without Berkshire stock in a way that contravened this whole cigar-butt philosophy. Schloss worked on him for two hours, saying, You’ve got the smartest guy in the world managing your money, in effect, and Warren doesn’t charge you anything, you’re making a big mistake to sell. “I thought I convinced him,” says Schloss. But the U.S. economy by then was in so much trouble that New York City was almost bankrupt; the country was in a mood of such profound pessimism that it affected people’s judgment. “On Monday he called his broker,” says Schloss, and began selling—his wife’s shares, not his own—until half their shares were gone.5

Immediately afterward, President Ford refused a bailout of the New York City economy; the New York Daily News captured the feeling of the times in a huge headline: “Ford to City: Drop Dead.”6

The partners who had been given Berkshire stock in 1970 when it was trading around $40 seemed no better off five years later. “To anybody who held our stock,” says Munger, “it looked like not much was happening favorably for a long, long time. And that was not the way our partners, by and large, had previously experienced things. The paper record looked terrible, yet the future, what you might call the intrinsic record, the real business momentum, was gaining all the while.”

Buffett’s own net worth, based on where the stock was trading, had likewise been sliced to the level of when he closed the partnership. Yet despite this apparent destruction of wealth—which would have frightened almost anyone else—his pulse never seemed to flutter. He just had the companies he controlled keep buying, and buying, and buying. In 1974, before the SEC investigation began, Berkshire owned twenty-six percent of Blue Chip. Although he put the brakes on at Berkshire during the 1975 Omni aviation affair, through Diversified, he bought Berkshire stock. By 1976, he was buying both Berkshire and Blue Chip through Diversified. When all was said and done, Berkshire would own more than forty-one percent of Blue Chip—so much that he and Susie owned, personally and through Berkshire Hathaway, thirty-seven percent of the stock all by themselves.

And as long as Berkshire was cheap in 1976, he thought of another way to capitalize on the situation, getting his mother, “who cared nothing about money,” to sell her 5,272 shares of Berkshire to Doris and Bertie. For $5,440 plus a $100,000 note, they each got 2,636 shares of Berkshire—paying the equivalent of $2 a share in cash.7 Buffett, who viewed debt as almost sinful, thought Berkshire was so cheap at $40 a share that he was willing to have his sisters borrow an extraordinary ninety-five percent of the purchase price to buy it. At the rate he obviously thought he could compound the stock’s value, buying on these terms would make his sisters rich.8 And it would also avoid an enormous estate tax bill.

“It’s what my mother wanted to do, but it was the perfect time. That was probably the greatest move of all time. It will never happen again. That was a once-in-a-lifetime situation.”

Valuable properties were being sold everywhere for a pittance. Around the same time, Tom Murphy came to Warren with the chance to buy a television station. Buffett realized it would be a terrific deal but that he couldn’t buy it because it would conflict with the Washington Post Company, which also owned television stations. Since he sat on the Post board, it would put the Post over the limit the FCC allowed.9 “What am I involved with that I don’t own?” he asked himself. He actually had to think about it to find something. Then he remembered that he didn’t own Grinnell College. The first station they looked at had already sold, but at Buffett’s recommendation, Grinnell bought a Dayton, Ohio, station for $13 million, putting down only $2 million. Sandy Gottesman arranged debt financing for the rest. The broker who sold it to Grinnell called it the best deal he had seen in the past