The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [71]
“One day I read in the Daily Nebraskan a little item that said, ‘The John E. Miller Scholarship will be awarded today.5 Applicants should go to Room 300 at the Business Administration building.’ And it provided five hundred dollars*12 to go to the accredited school of your choice.
“I went to Room 300, and I was the only guy who showed up. The three professors there kept wanting to wait. I said, ‘No, no. It was three o’clock.’ So I won the scholarship without doing anything.”
Enriched with this nugget mined from the college newspaper, Warren rose in the middle of the night to catch the train to Chicago, where his Harvard interview would take place. He was nineteen, two years younger than the average college graduate, and younger still than the average business-school student. His grades were good but not stellar. Despite being the son of a U.S. Congressman, he was using no connections to try to get into Harvard. Since Howard Buffett scratched no backs, his own back went unscratched, and his son’s as well.
Warren was relying on his knowledge of stocks to make a good impression in the interview. So far his experience had been that whenever he started talking about stocks, people could not help but listen. His relatives, his teachers, his parents’ friends, his fellow students—all wanted to hear him discourse on this subject.
But he had misunderstood Harvard’s mission, which was to turn out leaders. When he arrived in Chicago and introduced himself to the interviewer, the man saw past his confidence as a prodigy in a single subject straight through to his self-consciousness, his shaky inner core. “I looked about sixteen and emotionally was about nine. I spent ten minutes with the Harvard alumnus who was doing the interview, and he assessed my capabilities and turned me down.”
Warren never got the chance to show off his knowledge of stocks. The man from Harvard told him gently that he would have a better chance in a few years. Warren was naive; it did not quite sink in what this meant. When the letter arrived from Harvard refusing him admission, he was shocked. His first thought, he says, was, “What am I going to tell my dad?”
Awkward and stiff-necked he might be, but Howard was undemanding of his children. The Harvard dream was Warren’s, not his father’s. Howard was accustomed to failure and resolute in defeat. The real question must have been: What am I going to tell my mom?
These conversations took place, but their memory has drained away. And yet Warren would later come to consider his rejection by Harvard the pivotal episode of his life.
Almost immediately, he started investigating other graduate schools. While leafing through the Columbia catalog one day, he came across two names that were familiar to him: Benjamin Graham and David Dodd.
“These were big names to me. I’d just read Graham’s book, but I had no idea he was teaching at Columbia.”
“Graham’s book” was The Intelligent Investor, published in 1949.6 This book of “practical counsel” for all types of investors—the cautious (or “defensive”) and speculative (or “enterprising”)—blew apart the conventions of Wall Street, overturning what had heretofore been largely uninformed speculation in stocks. It explained for the first time in a way that ordinary people could understand that the stock market does not operate through black magic. Through examples of real stocks such as the Northern Pacific Railway and the American-Hawaiian Steamship Company, Graham illustrated a rational, mathematical approach to valuing stocks. Investing, he said, should be systematic.
The book had mesmerized Warren. For years, he had been going downtown to the library and checking out every book available on stocks and investing. Many of the books dealt with stock-picking systems based on models and patterns; Warren wanted a system, something that would work reliably. He had been fascinated by numerical patterns—technical analysis.