The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [70]
In the fall, he had moved into a furnished house on Pepper Avenue in Lincoln, which he shared with Truman Wood, and started full time at the University of Nebraska. He liked the teachers better than at Penn and he enrolled with a heavy course load, studying accounting with Ray Dein, the best professor he had had thus far.
That year Warren revived his golf ball business, this time with a college friend from Penn, Jerry Orans, as a partner. He would drive down to the Omaha train station and pick up the golf balls from his old supplier, Half-Witek.1 Orans acted as his East Coast distributor, but in fact Warren had always wanted partners for the sake of partnership alone; in every business venture, he looked to friends to partner with him. (Needless to say, in Warren’s partnerships, he was always the senior partner.) He was also investing and got the idea of shorting stock in the automaker Kaiser-Frazer. This company produced its first cars in 1947, but saw its share of the auto market fall from nearly one out of every twenty cars to fewer than one out of every hundred in less than a year. “Dear Pop,” he wrote his father on Nebraska Cornhusker stationery. “If there isn’t a trend line apparent in those percentages, I’m no statistician.” Kaiser-Frazer had lost $8 million during the first six months, “so even with phony bookkeeping the loss will probably run more.”2 He and Howard shorted the stock together.
Back at school, he went down to the broker Cruttenden-Podesta’s office and asked a stockbroker, Bob Soener, where the stock was trading. Soener looked at the chalkboard and said, “Five bucks.” Warren explained that he had shorted the stock, borrowing shares to sell. If the price dropped, as he expected, he could buy the stock back, return the shares, and keep the difference. Since Warren thought Kaiser-Frazer was going bust, if he had sold the shares at five bucks, he could buy them back for pennies and make nearly five dollars on each share.
I’ll show this young whippersnapper, thought Soener. “You’re not old enough to short a stock legally,” he said. “Oh yes,” Warren said, “I did it in my older sister Doris’s name.” He explained why the stock was going to zero and laid out the evidence.3 “And he cut my feet right out from under me,” says Soener. “I had no retort whatsoever.”
Warren waited for the Kaiser-Frazer idea to work. And waited. He started hanging around Cruttenden-Podesta while he waited. He was convinced the idea would work. It was so obvious that Kaiser-Frazer would eventually go broke. Meanwhile, he and Soener became friends.
In the spring of 1950, Warren was close to finishing college. After three years of study, he only needed to take a few classes at summer school to graduate. And then he made a decision that completely reversed his path to date. After high school he had felt fully qualified to achieve his goal of becoming a millionaire by age thirty-five with no further education. But now that he was close to graduating, at the point when most people are done studying and ready to go to work, Warren prepared to put work aside. He had fixed his ambitions on attending the Harvard Business School. Throughout his entire educational history he had shown little interest in formal schooling—as opposed to learning—and considered himself largely self-taught. Harvard, however, offered him two important things: prestige and a network of future connections. He had just seen his father thrown out of Congress and his career as a stockbroker crushed, in part because he had tended to isolate himself by sacrificing relationships for the sake of rigid ideals. So perhaps it was not surprising that Warren chose Harvard.
He was so certain that Harvard would choose