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By Root 3355 0

problem endemic to the industry.15 Buffett by now had a clear-cut pattern: He rationalized to avoid the confrontation of firing losing managers. He gave criticism to his managers indirectly, often by withholding, sometimes resources, but especially by withholding praise. As the number of things he owned expanded, he used that technique ever more frequently. Trying to parse his shareholder letters for news about the insurance companies, one had to be Sherlock Holmes attending to the curious incident of the dog in the night-time—the dog that didn’t bark.16 Having lavished individual insurance managers with praise in the 1970s, Buffett gradually ceased to cite by name any of the insurers or their managers, except the superbly performing GEICO and National Indemnity.

Buffett did not stop writing about the insurance industry, however. In fact, in the 1984 letter he wrote about it more than ever. But he lumped all of Berkshire’s insurance companies together and took the blame for their poor performance himself, without naming a single company or a single manager who had been responsible for the hemorrhage of losses. He went on like this for an excruciating seven pages, citing the “walking dead” competition and the losses coming back to haunt him like bill collections for the man who was “buried in a rented suit.” Although it was appropriate for him, as CEO, to feel accountable, he seemed almost to be trying to forestall criticism through self-flagellation.

And he was writing these things even as he knew that, underlying the terrible numbers, substantial improvements were already taking place. By the next year, the insurers began coming together into the powerful engine that Buffett had envisioned. They started to produce the cash flows that would be the raw material to fuel the rest of his career.

By 1985 the unique business model that Buffett had designed began rising to its potential. No other business resembled it, and this structure would enable the dramatic compounding effect that propelled the shareholders’ wealth.

Then there came the moment when Goldberg found the capstone to the structure. Afterward, the numbers would gush blacker than an oil well.

One day, says Buffett, “I was down here on a Saturday, and Mike Goldberg walked in with Ajit.”

Ajit Jain, born in 1951, had an engineering degree from the prestigious Indian Institute of Technology in Kharagpur and had worked for IBM in India for three years before getting his business degree from Harvard. Ajit was skeptical and hard-nosed like Buffett and Munger. Nobody would ever put one over on Ajit. Buffett saw himself in Ajit, who quickly rose in his esteem to share Mrs. B’s pinnacle. “He had no background in insurance. I just liked the guy. I would love to glue myself to Ajit. You can argue that Ajit was when we discovered the electric light. It was huge. It was huge compared to anything we’d ever done at Berkshire.”

Buffett claimed that he “added nothing” to the quality of Ajit’s decisions. But he was far from a passive participant in those phone conversations, and if there was any job at Berkshire Hathaway he would have liked to do himself, it was Jain’s. He loved the handicapping aspect of the deals, the tough negotiating in which temperament mattered and huge sums of money were won or lost based on pure intellect and will. This supremely rational business in which psychology gave the right person an edge drew together all of Buffett’s skills. Buffetting by proxy through Ajit was as close to the old “under-the-counter” market way of trading as he could get these days, and he loved doing it.

With Buffett glued to Ajit, and the chaos sorted out, Goldberg’s job was finished. He soon moved over to start a credit and real estate business for Berkshire.

Ajit did not seem to need much sleep; when he got up around five or six a.m., he apparently asked himself, “Who’s awake? Who can I call?” His colleagues learned to be prepared for lengthy predawn talks about reinsurance deals on Saturdays and Sundays. He and Buffett followed a routine of nightly ten o’clock phone