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From Graham’s class, Warren took away three main principles that required nothing more than the stern discipline of mental independence:

• A stock is the right to own a little piece of a business. A stock is worth a certain fraction of what you would be willing to pay for the whole business.

• Use a margin of safety. Investing is built on estimates and uncertainty. A wide margin of safety ensures that the effects of good decisions are not wiped out by errors. The way to advance, above all, is by not retreating.

• Mr. Market is your servant, not your master. Graham postulated a moody character called Mr. Market, who offers to buy and sell stocks every day, often at prices that don’t make sense. Mr. Market’s moods should not influence your view of price. However, from time to time he does offer the chance to buy low and sell high.

Of these points, the margin of safety was most important. A stock might be the right to own a piece of a business, and the intrinsic value of the stock was something you could estimate, but with a margin of safety, you could sleep at night. Graham built in his margin of safety in various ways. As well as buying things for considerably less than he thought they were worth, he never forgot the danger of using debt. And although the 1950s had become one of the most prosperous eras in American history, his early experiences had scarred him and given him the habit of assuming the worst. He looked at business through the lens of his 1932 Forbes articles—as worth more dead than alive—thinking of a stock’s value mostly in terms of what the company would be worth if dead—that is, shut down and liquidated. Implicitly, Graham was always looking over his shoulder at the 1930s, when so many businesses went into bankruptcy. He kept his firm small in part because he was so risk-averse. And he rarely bought more than a tiny position in any company’s stock, no matter how sound the business.17 This meant the firm owned a large array of stocks that required much tending. While plenty of stocks did sell at prices below the businesses’ liquidation value, which made Warren an enthusiastic follower of Graham, he disagreed with his teacher about the need to buy so many stocks. He had cast his lot with one stock: “Ben would always tell me GEICO was too high. By his standards, it wasn’t the right kind of stock to buy. Still, by the end of 1951, I had three-quarters of my net worth or close to it invested in GEICO.” And yet Warren “worshipped” his teacher, even though he had strayed so far from one of Graham’s ideas.

As the spring semester wore on, Warren’s classmates gradually accepted the routine of the classroom duet. Warren “was a very focused person. He could focus like a spotlight, twenty-four hours a day almost, seven days a week almost. I don’t know when he slept,” says Jack Alexander.18 He could quote Graham’s examples and come up with examples of his own. He haunted the Columbia library, reading old newspapers for hours on end.

“I would get these papers from 1929. I couldn’t get enough of it. I read everything—not just the business and stock-market stories. History is interesting, and there is something about history in a newspaper, just seeing a place, the stories, even the ads, everything. It takes you into a different world, told by somebody who was an eyewitness, and you are really living in that time.”

Warren collected information, weeding out biases imposed by other people’s way of thinking. He spent hours reading the Moody’s and Standard & Poor’s manuals, looking for stocks. But it was the weekly Graham seminar that he looked forward to more than anything else he did. He even convinced his disciple Fred Stanback to come in and audit a class or two.

While the chemistry between Warren and his teacher was obvious to everyone else in the class, one student in particular had taken note of him. Bill Ruane, a stockbroker at Kidder, Peabody, had found his way to Graham through his alma mater, Harvard Business School, after reading two important and memorable