The Interview

Lincoln and Chicago • 1949–Summer 1950

The first thing Warren did on returning to Nebraska in that summer of 1949 was get a job managing country circulation for the Lincoln Journal. He and his friend Truman Wood, who was Doris’s boyfriend, went halves on a car. Warren felt comfortable in Lincoln, going to university classes in the morning, then driving around managing his route in the afternoon. Supervising rural paperboys was a serious job, for he was now the boss. Fifty young boys in six rural counties reported to “Mr. Buffett.” The challenges of management suddenly became clear when he hired a minister’s daughter in the town of Beatrice, thinking she would be a responsible paper carrier. The three paperboys in Beatrice promptly quit: He’d turned it into a sissy job.

Warren spent part of his time that summer in Omaha, selling men’s furnishings at JC Penney’s. His spirits had begun to revive. He bought a ukulele to compete with the uke-playing boyfriend of a girl he was pursuing, but wound up holding only the ukulele instead of the girl.

Penney’s, however, was a good place to work. The employees put on an unofficial pep rally in the basement every morning where Warren, clad in a cheap suit, played his new ukulele—off the clock—while everyone sang, before heading off to his seventy-five-cents-an-hour job in men’s furnishings. Penney’s called him back over the Christmas holidays, improbably putting him to work selling menswear and Towncraft shirts. Looking at racks filled with products about as comprehensible to him as a French restaurant menu, he asked his manager what to tell the customers about the clothes. “Just tell them it’s a sort of worsted,” Mr. Lanford said. “Nobody knows what a worsted is.” Warren never did learn what a worsted was, but at JC Penney’s he sold nothing but.^*

In the fall, he 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, and using his old supplier, Half-Witek.¹ Orans acted as his East Coast distributor. (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 saw its share of the auto market fall by ninety-five percent 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

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 and his father 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, he could buy the shares 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 laid out the evidence for shorting Kaiser-Frazer.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. Meanwhile, he and Soener became friends.

In the spring of 1950, after three years of study, Warren needed only a few summer school classes to graduate. And then he made a decision that 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, 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 accept him that he was already urging his friend “Big Jerry” Orans to “Join me at Harvard.”⁴ Furthermore, he wasn’t even going to have to pay for all of his tuition.

“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^* 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 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?

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.

“I read all of them over and over. The book that probably had the most influence on me was Garfield Drew, who wrote an important book about odd-lot stock trading.⁷ I read that about three times. I read Edwards and McGee, which is the bible of technical analysis.⁸ I would go down to the library and just clean them out.” But when he found The Intelligent Investor, he read and reread it. “It was almost like he found a god,” said Truman Wood, his housemate.⁹ After careful study, he had gone ahead and made a “value” investment on his own. Through a connection of his father’s, he had heard of a company called Parkersburg Rig & Reel, which he researched according to Graham’s rules. He bought two hundred shares.¹⁰

According to the catalog Warren had now picked up, the man who had become his favorite author, Ben Graham, was lecturing in finance at Columbia University. And David Dodd was there too. Dodd was associate dean of the Graduate School of Business, and head of the department of finance. In 1934 Graham and Dodd had coauthored the seminal text on investing, Security Analysis. The Intelligent Investor was the layman’s version of Security Analysis. Enrolling at Columbia would mean he could study with Graham and Dodd. And as Columbia’s catalog pointed out: “No other city in the world offers as many opportunities to become acquainted at firsthand with the actual conduct of business. Here a student may come into personal contact with the outstanding leaders of American business.… Business establishments of the city cheerfully welcome groups of students as visitors.”¹¹ Even Harvard could not offer this.

Warren now determined that he would go to Columbia. But it was almost too late.

“I wrote in August, about a month before school started, way past when you were supposed to do it. Who knows what I wrote? I probably wrote that I just found this catalog at the University of Omaha, and it said that you and Ben Graham taught, whereas I thought you guys were on Mount Olympus someplace just smiling down on the rest of us. And if I can get in, I’d love to come. I’m sure it was not a very conventional application. It was probably fairly personal.”

But in a written application, Warren could shape the impression he made more successfully than in a personal interview. The application wound up on the desk of David Dodd, who as associate dean was in charge of admissions. By 1950, after teaching at Columbia for twenty-seven years, Dodd had effectively become the junior partner of the famous Benjamin Graham.

A thin, frail, balding man who cared for a disabled wife at home, Dodd was the son of a Presbyterian minister and eight years older than Warren’s father. While Dodd may have been touched in some way by the personal nature of the application, it was also true that at Columbia, he and Graham were more interested in their students’ aptitude for business and investing than their emotional maturity. Graham and Dodd were not trying to create leaders. They taught a specialized craft.

Whatever the reason, after the deadline, and without an interview, Warren was accepted by Columbia.