The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [93]
Long used to this kind of talk, from both his own father and Susie’s, Warren waited patiently for the crucial word “yes.” Three hours later, Doc Thompson wound his way to a conclusion and gave his consent.43
By Thanksgiving, Susie and Warren were planning their April wedding.
19
Stage Fright
Omaha • Summer 1951–Spring 1952
Warren understood Doc Thompson’s concern about how he would support a family, even though he had no such doubts himself. Since he couldn’t work for Graham-Newman, he had decided to become a stockbroker, and to do it in Omaha, far from the canyons of Wall Street. If you wanted to make money in the stock market, went the common wisdom, the place to do it was New York, so his decision was an unusual one. But he felt free from the conventions of Wall Street; he wanted to work with his father; Susie was in Omaha; and he was never happy far from home.
At almost twenty-one, Warren was supremely confident in his own investing abilities. By the end of 1951, he had already boosted his capital from $9,804 to $19,738. He had earned seventy-five percent in a single year.1 As a matter of course, however, he consulted his father and Ben Graham. To his surprise, both said, “Maybe you should wait a few years.” Graham—as always—thought the market was too high. Howard, pessimistic, favored mining stocks and gold stocks and other investments designed to protect against inflation. He didn’t think any other kind of business would be a good investment, and he worried about his son’s future.
That didn’t make sense to Warren. Since 1929, the value of businesses had grown substantially.
“It was absolutely the reverse effect of what you saw in other times, when the market was staggeringly overvalued. I had looked at companies. I just couldn’t see why you wouldn’t want to own them. It was on a micro level, not an assessment of the growth of the economy or anything like that, and I was working with micro money. But it just seemed to me that it was crazy not to own them. On the other hand, here’s Ben, with his two hundred IQ and all experienced, telling me to wait. And my dad, who, if he told me to walk out a window, I would have done it.” Still, to make this decision to defy the advice of his two great authorities—his father and Ben Graham—was an enormous step for him. It required him to consider the possibility that his judgment might be superior to theirs, and that the two men whom he most deeply respected were not thinking rationally. Yet he was certain he was right. He might have walked out a window if his father told him to—but not if it meant leaving a Moody’s Manual full of cheap stocks behind.
In fact, the opportunities he saw were so plentiful that they justified borrowing money for the first time. He was willing to take on debt equal to a quarter of his net worth. “I was already running short of money to invest. If I was enthused about a stock I would have to sell something else to buy it. I had an aversion to borrowing money, but I got a loan for five thousand dollars or so from the Omaha National Bank. I was under twenty-one and my dad had to cosign the loan. Mr. Davis, the banker, conducted it as a rite of passage. He said something like, ‘You’re going into manhood now,’ and referred to this five thousand dollars, saying, ‘It’s a solemn obligation, and we know you’ve got the kind of character to pay it back.’ This went on for half an hour while I was sitting there next to this big desk.”
Howard probably felt both proud and a little silly cosigning a loan for his son, who had been a full-fledged businessman for at least a dozen years. Since Warren had made up his mind, Howard was also willing to take him on at his own firm, Buffett-Falk—though only after suggesting that he interview at a prominent local firm, Kirkpatrick Pettis Co., to see what the best of Omaha stockbroking had to offer.
“I went to see Stewart Kirkpatrick and said during the interview that I wanted intelligent customers.