The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [304]
Grossman found himself a company president at age twenty-six, in a business where fraud prevention is more important than sales. He faced customers with decades of experience cheating insurers. His calls for help only splattered against Buffett’s Teflon pleasantries, adding to the already considerable mess. Grossman was one of many who learned that it was his job to figure it out. Bright and hardworking, he felt “totally unqualified” to run an insurer at his age and level of experience, and explained that he was in over his head. Buffett said he had confidence in him and was sure that he could rise to the occasion. Instead, the stress overwhelmed him, and his marriage fell apart. Finally, he told Buffett he simply couldn’t handle it, moved to the San Francisco Bay Area, and began to manage investments on his own.14
Buffett, who hated to let anyone go, urged him to remain in the Buffett Group. Grossman was well liked, and various members of the group called to try to dissuade him from leaving. But he felt he was not strong enough to maintain his autonomy within the entanglements that bound people to the Buffetts—Susie with her crowd of dependent worshippers, Warren with his network of supportive protectors. Knowing what he was giving up, he cut everyone off. “He divorced the Buffetts,” said one former friend, who understood why but thought it was too bad.
Now headquarters had one fewer person to support the growing insurance empire. Verne McKenzie was so overworked figuring out how to slide the Furniture Mart into Berkshire’s numbers without showing Mrs. B’s financial underwear that he rarely saw Buffett. During Grossman’s peripatetics, Buffett had installed Mike Goldberg, a former McKinsey consultant who had once worked with Rickershauser at the Pacific Coast Stock Exchange, in Grossman’s onetime office. A wiry Brooklynite of sardonic intensity and the subtlest humor, Goldberg turned out to have the so-called insurance gene, which is made up of one part knack for handicapping mixed with two parts dark skepticism about human nature. Thus he was able to teach himself the business—just as well, since it had been out of character for Buffett to spend time on one protégé, let alone two.
With Goldberg’s arrival, the polite, restrained Midwestern way of doing things at headquarters changed abruptly. Managers that Goldberg decided were only ninety percent of grade were swiftly sent packing. As the packing cases flew out the doors of the failing Homestate Companies, Goldberg gained a fearsome reputation. He brought in new people for workers’ compensation and reinsurance. Some survived, some wearied of the high-amp atmosphere and left, and others didn’t make the cut.
Goldberg’s method was to call his managers and talk to them at length every day, quizzing them mercilessly to understand their attitudes and to reinforce how they should think about the business. The value of Goldberg’s hands-on approach in an atmosphere of chaos was hard to overstate. One former manager referred to it as working in a “Socratic wind tunnel.” People learned a lot from Goldberg if they could withstand the stress. He was the type, an ex-employee said, who “yelled when hailing a cab.”
Throughout the early 1980s, Goldberg worked against the tide to right the ship. Unlike the disappointing Hochschild-Kohn or the pathetic Berkshire Hathaway—businesses that Buffett simply should not have bought—for the first time, perfectly decent businesses were unaccountably floundering on Buffett’s watch. He had confidence that Goldberg would do what was necessary. However, the pleasant but unskeptical George Young, who ran the reinsurance division, had been taken by unscrupulous brokers, a