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Meanwhile, the high cost of 1987 was not quite over. A belated note from Katharine Graham to members of the Buffett Group arrived two weeks before the end of the year. Some of them went into shock. She had sent them a bill. As it turned out, they had not been her guests. Instead, they themselves had been paying for the extravaganza in Williamsburg that Kay had put on! The total was “somewhat breathtaking,” she acknowledged, adding, “I’m really sorry it’s so late and so much. I hope Xmas is still merry and I’m still your friend.”24

Buffett did have a merry Christmas, but for another reason: His present to himself was Coca-Cola. It would make up for a great deal of the unhappiness from Salomon. At a White House dinner some time earlier, he had reconnected with his old friend Don Keough, who was now president and chief operating officer of the company; Keough had convinced him to switch from his own concoction of Pepsi dosed with cherry syrup to the newly introduced Cherry Coke. Buffett tried it and liked it. His family and friends were gobsmacked when the man so famously loyal, especially to Pepsi, performed this turnaround. For years, however, KO stock had been too expensive for Buffett to consider. Now, however, the company had gotten into trouble, its bottlers locked in a fierce price war with Pepsi that had taken the price of Coke down to around $38 a share. Rumor said that it had become a takeover target of the dreaded Perelman, and the company was buying back its own stock. Although still expensive, it had the same quality of a great brand under duress as American Express had had earlier.

The way Warren looked at it, Coca-Cola was no cigar butt, yet it was pouring forth a waterfall of cash, and spending only a small portion of that to operate. Its cash flow each year had value; that was something he could quantify in his head. Since he had studied the company for years, he knew how much money it had made in the past and he could make a sensible judgment of how much Coca-Cola’s businesses were going to grow for many years in the future.25 Adding up those estimates of cash flow year after year gave him an ultimate value.

Predicting the company’s prospects many years from now wasn’t a precise science, however. Buffett applied a margin of safety to his estimates. He did this simply by taking a whack at the number, rather than using some complicated model or formula. He used no computers or spreadsheets in doing any of these calculations; if the answer didn’t hit him over the head like a caveman’s club, in his view, the investment wasn’t worth making.

After the estimate came the decision. He had to compare what Coca-Cola would ultimately be worth as a business—the bird in the bush—to the bird in the hand, which was Berkshire’s cash. Simply by investing the cash in government bonds that had no risk of losing money, Berkshire could earn a certain amount over that same period. He compared the two. By that yardstick, Coca-Cola was a beauty, and in fact, there wasn’t any other stock he knew of that stacked up better. Buffett started buying it.

When Coca-Cola products turned up at Buffett’s shareholder meeting in 1988, Berkshire shareholders began swigging Coke in imitation of him. They had no idea that, through Berkshire, they also owned the stock. The meeting took on a whole new tenor that year when a thousand people showed up at the Joslyn Art Museum auditorium. This was the year that the Frozen Corporation, no longer a quasi-partnership, officially joined big-time corporate America and listed itself on the New York Stock Exchange. The Berkshire meeting had to be delayed because so many people showed up that shareholders were having trouble finding parking spots. Buffett had an inspiration. He rented two school buses and persuaded a few hundred shareholders to follow him after the meeting, like the Pied Piper of commerce, to the Nebraska Furniture Mart. Part of the appeal was the chance to meet the indomitable Mrs. B, about whom Buffett had been writing and