The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [81]
But Graham viewed his role as serving all the company’s investors, not just himself, and instead of selling, he went down to the shareholders’ meeting in remote Oil City, Pennsylvania, where he was the only person who attended other than company employees. He made a motion about the railroad bonds, but the management refused to recognize him because he had brought no one along to second the motion. In its dealings with him, the management also made what he felt were some anti-Semitic innuendos, which hardly inclined him to give up the fight. Over the next year, he bought additional shares, teamed up with other investors, and prepared to mount a legal battle with management—a proxy fight. By the time of the next shareholders’ meeting, he had assembled enough votes to get two additional directors elected to the board, which tilted the balance in favor of distributing the bonds. The company submitted and ended up handing out the equivalent of $110 per share in cash and stock to its shareholders.
The battle became a famous incident on Wall Street, and Graham went on to build the Graham-Newman Corporation into one of the best-known, although far from the largest, investment firms in the business.
He did it even while inflicting a handicap on his own performance. His teaching style used examples taken directly from Graham-Newman’s office. Every time he mentioned a stock in the classroom, the students ran out and bought it, pushing up the price and making it more expensive for Graham-Newman to buy. This drove Jerry Newman crazy. Why make the firm’s job harder by letting other people in on what they were doing? To make money on Wall Street meant keeping your ideas to yourself. But, as Buffett said, “Ben didn’t really care how much money he had. He wanted to have enough, and he went through that period in ’29 to ’33 that was very rough. But if he had as much money as he felt he needed, anything else was totally immaterial to him.”
Over the twenty-year life of Graham-Newman Corporation, its performance had beaten the stock market’s performance by an average of 2.5 percent a year—a record exceeded by only a handful of people in the history of Wall Street. That percent might sound trifling, but compounded for two decades, it meant that an investor in Graham-Newman wound up with almost sixty-five percent more in his pocket than someone who earned the market’s average result. Much more important, Graham had achieved this superior performance while taking considerably less risk than someone who simply invested in the stock market as a whole.
And Graham did it mainly through his skill at analyzing numbers. Before him, assessments of a security’s value were largely guesswork. Graham developed the first thorough, systematic way of analyzing the value of a stock. He preferred to work by studying only publicly available information—usually a company’s financial statements—and rarely attended even public meetings with a company’s management.9 Although his associate Walter Schloss had been at the Marshall-Wells meeting, it was his own idea to go, not Graham’s.
Ben’s third wife, Estey, drove her husband up to Columbia from the Graham-Newman Corporation’s office at 55 Wall Street every Thursday afternoon after the market closed to teach his “seminar on common stock valuation.” This course was the culmination of the Columbia finance curriculum, so highly regarded that men who were already working in money