Nearly two years later, while the Post was deep into reporting the Watergate story, in Omaha, the Sun’s reporters were basking in the glow of the Boys Town exposé. Reporting on Watergate, which began in June 1972, had gradually picked up steam. The scandal unfolded over many months. Nixon was reelected by a huge majority that fall, having vehemently denied any knowledge of or involvement in the break-in. The Nixon White House, which was already actively hostile to the Post because of the Pentagon Papers episode, dismissed Watergate as “a third-rate burglary attempt.” Attorney General John Mitchell, who had managed Nixon’s election campaign, told Woodward and Bernstein that “Katie Graham’s gonna get her tit caught in a big fat wringer” if the Post continued to report the story. A Wall Street friend with administration contacts advised her “not to be alone.”
In early 1973, a Republican fund-raiser friend of Nixon’s challenged the renewal of the Post’s two Florida television licenses. The challenge threatened half of the company’s earnings, an attack on the heart of the business.1 In response, WPO stock plunged from a high of $38 to as low as $16 a share.
Most of Graham’s time and attention now went to fighting these fires.2 Her chairman, Fritz Beebe, was ill with cancer and declining rapidly.3 Still in need of an authority figure, she increasingly turned toward another of her board members, André Meyer, senior partner of the investment bank Lazard Frères.
Vindictive, ruthless, secretive, snobbish, and sadistic, Meyer “crushed other people’s personalities.” He was known as “the Picasso of Banking” and a man with “an almost erotic attachment to money,” and called the greatest investment banker of the twentieth century.4 He was also the well-connected man who had warned Graham during Watergate not to be alone, and he soon took up Graham socially as well.
Beebe died in May 1973, and a week later his lawyer, George Gillespie, who was also Graham’s personal lawyer, began settling his estate. Gillespie got wind that a big investor out in Omaha had been buying Post stock, so he called Buffett and offered a block of fifty thousand of Beebe’s shares. Buffett snapped it up.
If he could, at the right price, Buffett would have bought almost any newspaper in sight for Berkshire Hathaway. He grabbed stock in Affiliated Publications, parent of the Boston Globe, in Booth Newspapers, in Scripps Howard, and in Harte-Hanks Communications, a San Antonio–based chain. The Sun’s elevated status as a Pulitzer Prize winner enabled him to network his way through the newspaper world, talking with publishers as one of their peers. He chatted up the owners of the Wilmington News Journal, hoping to buy the paper. Alas, while newspaper stocks were cheap because investors failed to see their value, newspaper owners were not so blind. Competing with them, Buffett and Munger’s efforts to buy whole newspapers had all come to naught.
Still, by late spring 1973 Buffett had accumulated more than five percent of the Washington Post stock.5 He now sent a letter to Graham. She had never lost her terror that her company would be taken away from her, even though Beebe and Gillespie had structured the Washington Post’s stock in two classes to prevent that.6 Buffett’s letter told her that he owned 230,000 shares and meant to buy more. But instead of legalistic boilerplate, he wrote a highly flattering, personal missive that linked their common interest in journalism and stressed the Sun’s Pulitzer.
Nonetheless, Graham panicked. She reached out for advice. While she instinctively pursued women’s equality—she had given the seed money to Gloria Steinem for Ms. magazine—deep inside she still thought that only men knew anything about business. Thus, when she asked André Meyer his opinion and he became “irate” and told her that Buffett meant her no good, she took him seriously.7
“André Meyer really wanted to think he controlled everything. And it was easy when he got a woman like Kay—he would make her feel like she’d better not go to the bathroom without checking with him. He had that style. André kept referring to me as her new boss because I bought this stock.
“She was very sensitive to the idea that anyone would manipulate her, for political purposes or for the paper, which is understandable. She was used to everybody in the world trying to use her. But what you could do with Kay is you could play on her fears. If you wanted to work her over, you could make her feel so insecure. And she knew you were doing it to her, but she couldn’t resist it.”
“She would fall in and out of love with people,” says fellow Post board member Arjay Miller. “She could be bullied. She would meet somebody and be sort of dazzled with them for a little while and think they knew all the answers. She thought men knew all about business and women didn’t know anything. At the bottom, that was the real problem. Her mother told her that and her husband told her that, over and over and over and over again.”8
Graham barely remembered Buffett from their earlier encounter.9 She and her colleagues bought copies of Supermoney and devoured the chapter on him, wondering what the man from Nebraska had in store for them. Those unfriendly to Buffett made sure she also saw a recent unsigned article in Forbes about a stock purchase of Buffett’s, which cast a shadow on the sunny portrait that Supermoney had painted of him.
This Forbes piece described a San Jose Water Works shareholder who wanted to unload his stock. A company director sent him to Buffett. The article insinuated that Buffett must have known that a deal was brewing for the city to take over the water works at a higher price. He had connections, so he must have known something—right?
But there was nothing illegal about a director referring a seller of stock to a buyer.10 Indeed, no deal ever took place. Yet to anyone checking him out, this would be the most prominent, public, recent mention of his name apart from Supermoney.11 Buffett felt like a cat’s scratching post. If this cascaded into a series of expanding stories, it could wreck his newly gilded reputation. Buffett was not the type to storm and shout, but to brood and plan. He wanted retribution and vindication. Too clever to confront the magazine and denounce its nameless reporter, however, he used the opportunity to bring himself to the attention of magazine publisher Malcolm Forbes, writing him an artfully worded letter in which he mentioned the Sun’s Pulitzer.12 He also wrote to the Forbes editor, directly stating the facts to support his innocence.
Sure enough, Forbes ran a correction. Buffett knew, however, that corrections were rarely read and had no impact as compared to the initial story. So he also sent one of his proxies, the loyal Bill Ruane, to position Buffett with the Forbes editors as an expert who could write an article about investing.13 This attempt failed, at least initially. He now had a new cause—outrage at bias in news reporting—which wound itself around his sense of justice and his interest in journalism in general. That a reporter could lie by inference and omission without any accountability drove him wild. He knew that even well-intentioned news publications flew into a state of high dudgeon and defended their reporters’ dubious behavior on the premises of newsroom morale and press independence—a stance known as the “defensive crouch.”14
Eventually, he would end up helping to fund the National News Council, a nonprofit organization that arbitrated complaints of journalistic malpractice. The council’s position was that lack of media competition gave publishers “power without responsibility.” The council offered redress to victims who had been “traduced, misquoted, libeled, held up to unjustified ridicule, or whose legitimate views have been ignored in a one-sided report.” Unfortunately, those very monopolies and the few publishers who dominated the media had no interest in publishing the News Council’s rulings, which exposed their biases and the carelessness of their reporters. The News Council eventually folded after its findings were spiked, time and time again, by the free and independent press that was supposed to publish them.15
The National News Council was a worthy crusade, indeed perhaps ahead of its time, like many of the causes on which Buffett spent his energy. But by 1973, Susie Buffett had seen him expend a tidal wave of energy on each new obsession, sometimes changing entire coastlines in his wake. From his childhood hobby of collecting license-plate numbers to reforming the jiggery-pokery of journalism, three roles invariably interested him. The first was the relentless collector, expanding his empire of money, people, and influence. The second was the preacher, sprinkling idealism from the lectern. The third was the cop, foiling the bad guys. The perfect business would allow him to do all of these at once: preach, play cop, and ring the cash register. The perfect business was a newspaper. That was why the Sun had been a sliver of something that he wanted more of, much, much more.
But he and Munger had struck out at trying to buy major city newspapers. Now here was Katharine Graham, unsteady on her feet when it came to business and seeking a lifesaver ring from anyone she could find. Yet despite her position at the helm of the Washington Post, which made her one of the most powerful people in the Western Hemisphere, Graham was afraid of Buffett. She asked George Gillespie whether he was crooked. She could not afford to make a mistake. For several years the Nixon administration had been waging an all-out war to discredit the Post. A set of newly discovered tapes implicated the President. Graham labored every day over the Watergate story. In a sense, she had staked the Post’s franchise on it.
She relied heavily on the opinion of the devoutly religious, utterly respectable Gillespie. He had served the Graham family ever since, as a twenty-eight-year-old trust lawyer, he had drafted Eugene Meyer’s final will, witnessing the signature of the fading old man. “He’s going to take over the Washington Post,” she said about Buffett. “Forget it,” Gillespie said. “It’s not possible. It doesn’t make any difference how much B stock he owns. He has no rights. All he could do would be to elect himself to the board if he owned the majority of the B stock.”
Gillespie had called a San Jose Water Works director and was convinced that Buffett had had no inside information. He made it clear that he disagreed with the powerful André Meyer, going out on a limb, given Meyer’s position and connections. He told her to talk to Buffett, that he would be good for her to know.16
Graham wrote Buffett, quaking as she dictated the letter, suggesting that they get together in California, where she would be late that summer on business. He agreed eagerly, and when she arrived at an office borrowed from the Los Angeles Times, she looked exactly as she had two years before: impeccably tailored shirt-dress, her pageboy hairdo lacquered into place, lips pursed in a small smile. When she saw Buffett, Graham said, his “very appearance surprised” her.
“The great blessing and curse in my mother’s life,” says her son Don, “was she had very high standards when it came to taste. She was used to traveling in highfalutin circles. She thought there was one right way to dress and eat and one circle of people to be paid attention. Warren violated all her standards when it came to these things, yet he didn’t care.”17 Wearing a suit that looked tailored for some other man, the hair no longer crew-cut and beginning to float up slightly at the ends, “he resembled no Wall Street figure or business tycoon I’d ever met,” she later wrote. “Rather, he came across as corn-fed and Midwestern, but with that extraordinary combination of qualities that has appealed to me throughout my life—brains and humor. I liked him from the start.”18
But at the time, that certainly didn’t show.
“When I first met with Kay, she was wary and scared. She was terrified by me, and she was intrigued by me. And one thing about Kay was that you could tell. She was not a poker-face type.”
Buffett told her he thought Wall Street did not see the value of the Post. Graham relaxed her guard slightly. In her patrician accent, she invited him to meet with her in Washington a few weeks later.
Warren and Susie arrived November 4, the evening before the meeting, drove up in a taxi to the Madison Hotel, directly across the street from the Post headquarters, and, as they were checking in, found that the newspaper was in the middle of a printers’ union work stoppage. Federal marshals were evicting the mutinous printers amid rumors of pressmen carrying guns. Commotion, glaring lights, and television cameras carried on until dawn. Given what was happening in the political sphere, it would be hard to find a worse time to shut down a newspaper, which of course was exactly what the union intended. Vice President Spiro Agnew had suddenly pleaded “no contest” less than a month ago to a tax-evasion charge, then resigned. The Watergate scandal had reached an explosive crisis. Nixon had fired Special Prosecutor Archibald Cox in what became known as the “Saturday Night Massacre.”19 The President’s interference in the supposedly independent judiciary branch of government shifted public opinion suddenly and decisively against him. Pressure was mounting rapidly on Congress to impeach.
The morning after the Buffetts’ arrival, Graham, exhausted from working with most of her managers until six a.m. to get the paper out, was embarrassed at the introduction her new shareholder had received to her paper and nervous about how the day’s meeting would proceed. But she had arranged lunch for Buffett with Ben Bradlee, Meg Greenfield, Howard Simons, and herself.
Graham considered editorial-page editor Meg Greenfield her closest friend, yet referred to her as “a lone fortress … no one ever really got to know Meg.” Howard Simons, the Post’s managing editor, was known for his sharp-witted way of twitting Graham. “Howard Simons used to say that you don’t have to be dead to write obituaries.… He was wicked. He used to tease Kay so much.20
“We were eating lunch, talking about acquisitions and media properties. I could see that even though she had all the A stock, she was afraid of me.… So I said something about how the amortization of intangibles made it harder for the media companies, because they paid so much for goodwill.”* Buffett was trying to reassure Graham that it was hard to take over media companies because the accounting made it burdensome to would-be acquirers. “And Kay was showing off. She said, ‘Yes, the amortization of intangibles caused us a problem’ or something like that. Howard looked her right in the eye, and he said, ‘Kay, what is the amortization of intangibles?’
“And at that moment, I mean, I loved it. She was just frozen. She was paralyzed. Howard was enjoying it. So I jumped in and explained what amortization of intangibles was to Howard. And when I got through with this description, Kay said, ‘Exactly!’ ”
Buffett loved outthinking Simons, short-circuiting the game, and coming—indirectly and subtly—to Graham’s defense. Graham’s tight little smile began to ease. “From that point forward, we were the best of friends. I was Sir Lancelot. That was one of the greatest moments of my life. Turning defeat into triumph for her.”21
After lunch, Buffett met with Graham for about an hour, then he reassured her in writing. “I said, ‘I’m telling you that even though these teeth look like Little Red Riding Hood’s wolf fangs to you, they really are baby teeth. But we’ll just take them out.’ ”
That afternoon, Buffett—who had spent $10,627,605 to buy twelve percent of the company—signed an agreement with Graham not to buy any more of the Post stock without her permission. “I knew that was the only way that she would ever be comfortable.”
In the evening, the Buffetts were due at Graham’s for one of her famous dinners, this one for forty guests honoring Warren and Susie. Despite Graham’s personal insecurity, she was considered Washington’s greatest hostess, above all because she knew how to help people relax and enjoy themselves.
“She traveled widely in the world, so found occasions to give dinners,” says Don Graham. “If she had gone to Malaysia, when the prime minister came to town she’d give a dinner for him. The ambassador would look up what they did last time, and there was always a meal at Mrs. Graham’s house. Someone would publish a book, someone would have a birthday, and she’d give a dinner because she loved to give a dinner.”22 Graham used the dinners as a way of making new friends and as a way of getting people to know one another. She wanted to get to know Buffett, her new investor.
This evening, despite her exhaustion and the temptation to cancel, “She had a little party for me. That was her way of reciprocating. And when she had a party, she could get anybody she wanted. Anybody—the President of the United States, anybody.
“So all of a sudden I’m at the Madison Hotel with Susie, and about five o’clock somebody slips something under the door and it describes the party, which I had been invited to weeks before. At the bottom it says ‘black tie.’ Well, I didn’t have that, needless to say.… So I called her secretary, panicked.
“Her secretary is a very nice gal. She says, well, let’s put on our thinking cap.” Graham’s assistant, Liz Hylton, called a local store and found something suitable.23
The Buffetts left the Madison Hotel and were driven past mansion after mansion on Embassy Row. The taxi turned onto Q Street, past the historic Oak Hill Cemetery where Phil Graham was buried. Around the corner, they passed a row of historic nineteenth-century town houses with tiny manicured gardens. It was early November; the leaves glowed with traces of russet, amber, and gold. The taxi’s passage into Georgetown was like crossing a border into a Colonial-era town. Tucked into the corner of the cemetery and sprawling down its tree-swagged hill stood Dumbarton Oaks, the ten-acre Federal estate where the conference at which the United Nations had been planned took place.24
The taxi swiveled left between a pair of stone gateposts. The sight ahead was breathtaking. As the taxi crunched its way up the white-pebbled drive, the Buffetts saw in the distance a three-story cream-colored Georgian mansion with a green mansard roof. The broad lawns that surrounded it lapped all the way to the top of Georgetown’s Rock of Dumbarton, so that the house looked down on the cemetery. To the right, down the hill past a deep colonnade of trees, were the nearby neighborhoods leading to the old Buffett house in Spring Valley, and just beyond them, Tenleytown, where Warren had delivered papers at The Westchester and stolen golf balls from Sears.
The Buffetts were ushered through Graham’s front door to join the other guests, who were having cocktails in the living room. Asian art from her mother’s collection hung everywhere on eggshell-white walls swagged with blue velvet curtains, along with a Renoir painting and Albrecht Dürer engravings. Graham began to introduce the Buffetts to her other guests. “She told them nice things about me,” Buffett says. “Kay was doing everything in the world to make me comfortable. [Yet] I was so uncomfortable.”
He had never attended a gathering of such formality or grandeur. When the cocktail hour ended, crossing the hallway to the huge dining room where Graham held her famous parties, its paneled walls lit by the glow of tapered candles in bronze sconces, did nothing to make Buffett feel more at home. Crystal candlesticks and armorial porcelain gleamed on the round walnut dining tables, although the guests whom Graham had invited outshone the splendor of the surroundings. The room at any given time could be filled with a selection of U.S. Presidents, foreign leaders, diplomats, administration officials, Congressional members, senior lawyers in town, and people chosen from her group of prominent friends.
Buffett found himself seated next to Edmund Muskie’s wife, Jane, an obvious dinner partner, since the Buffetts had entertained her husband in Omaha. On his other side was Barbara Bush, whose husband was the U.S. Ambassador to the United Nations but would soon become the Chief of the U.S. Liaison Office in Peking, with the important role of steering the United States through the delicate process of renewing its diplomatic ties with China. Graham pressed a button to signal the kitchen, and waiters began to move around the antique Georgian tables and serve. Warren tried not to gape at the protocol. “Susie’s over there sitting next to some senator. And he’s trying to make out with her, he’s got his hand on her leg and all these things. But me, I’m dying, because I don’t know what to talk to these people about. Barbara Bush could not have been nicer. She could see how ill at ease I was.”
The waiters began to follow an American version of service à la russe, serving the first course followed by a fish course, then the main course, all borne on trays from which the diners served themselves. On and on the courses went as wine was poured to the sound of Washington chatter. The waiters added and removed unfamiliar sterling implements like fish knives. As they offered him food that he would never eat and wines that he would never drink, he found the meal increasingly more complex and intimidating. Graham’s other guests were relaxed and comfortable, but by the time dessert was served, Buffett was thoroughly cowed. Then came coffee he did not drink. His discomfort increased to terror when, as at the end of every evening, Graham stood up and read an articulate, witty, polished, personal, and original toast to her guest of honor that she had obviously put considerable thought into writing, however lacking in confidence her delivery. The guest of honor was supposed to stand and toast his hostess in kind.
“I didn’t have the nerve to stand up and offer a toast, which you’re supposed to do. I blew it totally. I was so uncomfortable. I even thought I might throw up, actually. I could not stand up there in front of half the cabinet and talk. I wasn’t up to it.” Afterward, as he and Susie made their good-byes, they had the feeling that the hicks from Nebraska would be the talk of Georgetown long after they left.
“This Senator was still trying to score with Susie and was so concentrating on explaining how she should come down to the Senate and see his offices as we were leaving that he opened the door to a closet and walked in. That was my introduction to Washington.”
Yet while it was true that the formal, glittering society that surrounded the powerful Mrs. Graham may have unnerved Buffett and made him ill at ease, he had never been one to hide his enthusiasms. And so it must have soon become obvious to Susie Buffett that her husband wanted more of this world.
*If a company’s book value is $1 million and a buyer pays $3 million, the remaining $2 million is for intangible assets—some specifically identifiable, like trademarks and patents, the rest unidentifiable customer “goodwill” Accounting rules used to require sellers to gradually charge off, or amortize, these costs over time.