The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [472]
“If you go from the first floor to the hundredth floor of a building and then go back to the ninety-eighth, you’ll feel worse than if you’ve just gone from the first to the second, you know. But you’ve got to fight that feeling, because you’re still on the ninety-eighth floor.”
He considered himself on the hundredth floor most of the time. However, during the spring, 2004 was definitely shaping up to be a ninety-eighth-floor kind of year. He waited with impatience as Susie suffered through her radiation until the moment later in the spring when her doctors would perform an MRI to determine whether the treatment had knocked out the cancer cells. Business was also problematic on various fronts: Buffett felt that he had “struck out” when it came to bringing home the gingersnaps: new acquisitions and new stocks to buy. Berkshire had around $40 billion in cash or the equivalent, which was “not a happy position.”3
Most of the companies within Berkshire Hathaway were doing well—even the beleaguered General Re had finally but truly reversed course and posted an underwriting profit in 2003. But GEICO had just emerged from a bitter price war and was locked in a battle for customers with its archrival, Progressive. GEICO had run a commercial in 1999 featuring a popular new character, the GEICO gecko. But GEICO’s Internet presence was lagging behind Progressive’s Web page, which let customers comparison-shop. Buffett had been thinking about the Internet and auto insurance for a decade now; he went to meetings at the company’s headquarters near Washington and repeated one statement over and over: “He who wins the Internet, wins the war.” He waited impatiently for the Internet business to reach its potential. Berkshire had appointed a new board member, Charlotte Guyman, a former Microsoft executive. The board now had its first woman, who also lowered the average age. Buffett said, however, that he did not seek board members for their demographics. He wanted “owner-oriented, business-savvy, interested, and truly independent” board members.4 Now Buffett sent Sharon Osberg and Guyman to Washington to help GEICO speed up its Web site improvement. “I have total confidence in GEICO,” he said, all the while invoking his new Internet mantra, He who wins the Internet, wins the war.
Buffett paid more attention to GEICO than almost any other business he owned, simply because he loved it. He was also a great fan of both Tony Nicely and his co-CEO Lou Simpson, whose investing track record he now trumpeted to shareholders in his annual newsletter for the first time. For the past twenty-five years, Simpson had averaged 20.3 percent, beating the market by an average of 6.8 percent a year. The stocks he bought were different from Buffett’s, but the method was the same, and his record was almost as good as Buffett’s own. Now it was obvious why Buffett granted him so much autonomy and paid him so well. Simpson qualified as another of the Superinvestors of Graham-and-Doddsville. Admittedly, however, as competition increased, the Superinvestors’ job was getting harder all the time.
Still, the challenge of finding new investments wasn’t nearly as severe as bird-dogging the ones that Berkshire already had. Coca-Cola was again evolving into a nightmarish preoccupation. Since the death of Goizueta, quarter by quarter, month by month, its business had grown steadily worse. New evidence of accounting manipulation appeared like barnacles on Coca-Cola’s earnings; the stock had sunk below $50, from a high in the $80s. In percentage terms it was hovering somewhere around the sixtieth floor.
Doug Daft had earned a reputation for volatile moods and byzantine politicking; a number of