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37. Interview with George Brumley.

38. Louis Jean-Baptiste Alphonse Bachelier, Theory of Speculation, 1900. Bachelier applied the scientific theory of “Brownian motion” to the market, probably the first of many attempts to bring the rigor and prestige of hard science to the soft science of economics.

39. Charles Ellis, Investment Policy: How to Win the Loser’s Game. Illinois: Dow-Jones-Irwin, 1985, which is based on his article “Winning the Loser’s Game” in the July/August 1975 issue of the Financial Analysts Journal.

40. The modern-day equivalents of Tweedy Browne’s Jamaica Water warrants still exist, for example.

41. Burton Malkiel, A Random Walk Down Wall Street. New York: W. W. Norton, 1973.

42. Aside from the Superinvestors article, Buffett did not write about EMH directly until the Berkshire 1987 shareholders letter, but he had led up to it with related subjects such as excessive trading turnover since 1979.

43. Transcript of Graham and Dodd 50th Anniversary Seminar. Jensen at the time was professor and director of the Managerial Economics Research Center of the University of Rochester Graduate School of Management. Within a year, he would be at Harvard, where he remains as professor of business administration emeritus.

44. Stanley Perlmeter and the Washington Post pension fund. Although, as this book illustrates, Buffett shared ideas with some of these investors in the early days—for example, when he was short on capital—more often the use of similar rules led them to similar veins of ore.

45. One subtle underpinning of EMH was a free-market, quasilibertarian philosophy that aligned with the spirit of deregulation and Reaganomics, under which investors could fend for themselves as free agents in an unfettered self-regulating market. Thus one side effect of EMH was to subtly build support for other types of market deregulation and for government and Federal Reserve actions that arguably contributed to later asset bubbles.

46. Beta can be a godsend in helping manage an unmanageably large portfolio. Criticism of beta could also, therefore, be directed at the investors who put money into unmanageably large funds that are diversified this way, and then expect them to outperform the market every year, if not every quarter.

47. Hedge funds in this form, pioneered by A. W. Jones, preceded popularization of the random-walk academic theory.

48. In a worst-case scenario, both sides of an arbitrage go the wrong way—the short rises, the long falls. This is the “earthquake risk” of the arbitrageur.

49. Buffett, speaking at the 1994 Berkshire annual shareholder meeting. Munger made the “twaddle and bullshit” comment at the 2001 shareholder meeting.

50. The model with junk bonds was based on average credit history, not the behavior of the stock or bond market. The two models are not only related, but have the same basic flaw, which is that “earthquake events” are never factored in correctly—because if they were, the model would reveal a prohibitively high cost of capital.

51. With the introduction of equity index futures in 1982, Buffett started trading these instruments as a hedge. Nevertheless, he wrote Congressman John Dingell, chairman of the House Energy and Commerce Committee, warning about their risk, and likewise wrote to Don Graham, “So much for the many claims as to hedge and investment type utilization; in actual practice, virtually all contracts involve short-term highly leveraged gambling—with the brokers taking a bite out of every dollar of public participation.” Letter from Warren Buffett to Mr. and Mrs. Don Graham, January 18, 1983.

52. Berkshire Hathaway annual letter, 1985. The deal was $320 million in cash and the rest in assumed debt and other costs. “Scott Fetzer Holders Clear Sale of Company,” Wall Street Journal, December 30, 1985. In Berkshire’s 2000 annual report, Buffett points out that BRK netted $1.03 billion from its net purchase price of $230 million.

53. Interview with Jamie Dimon.

54. Berkshire had $4.44 billion of assets on its