Howie had been pacing the floor for ten days, ever since Mark Whitacre, an excitable manager he knew at ADM, suddenly confessed to him that he was acting as an FBI mole. Whitacre told him that the FBI was going to arrive at Howie’s house at six o’clock on Tuesday night for an interview.
Howie was terrified, but had made up his mind to be completely forthcoming with the FBI. Three hundred agents were at that time fanning out across the country, interviewing people about price-fixing of an ADM product called lysine, which was used in chicken feed. When the agent charged with speaking to Howie showed up at his house, Howie said he didn’t trust ADM’s CEO, Dwayne Andreas.1 The previous fall Andreas had rebuked him when he raised ethical questions about providing entertainment to a Congressman. Howie didn’t know anything about price-fixing, however.
The second the FBI agents left, Howie called his father, flailing, saying, I don’t know what to do, how do I know if these allegations are true? My name is on every press release. What should I do, should I resign?
Buffett refrained from the obvious response, which was that, of his three children, only Howie could have wound up with an FBI agent in his living room after taking his first job in the corporate world. He told Howie that it was his decision whether to stay at ADM. He gave only one piece of advice: to decide within the next twenty-four hours. If you stay in longer than that, he said, you’ll become one of them. No matter what happens, it will be too late to get out.
The next day Howie went in, resigned, and told the general counsel that he would take legal action against the company if they put his name on any more press releases. Resigning from the board was a major event. For a director to resign was like sending up a smoke signal that said the company was guilty, guilty, guilty. People at ADM did not make it easy for Howie. They pushed for reprieve, they asked how he could in effect convict them without a trial. Howie held firm, however, and got out.2
Howie had just saved himself from being associated with a disaster in which three top executives, including the vice chairman Michael Andreas, would go to prison in the biggest price-fixing case in American history.3 ADM paid an enormous fine to settle with the government, and its reputation took a hit that would shadow it for years.
Now, however, the contretemps had left Howie out of a job. Big Susie, who was concerned about him and also about Susie Jr., who was getting divorced from Allen, swung into action and convinced Warren to begin a tradition of giving each of the kids a million dollars once every five years on their birthdays, starting then. Buffett not only went along but bragged on himself for beginning this tradition. He had begun to loosen up significantly when it came to money. Susie’s allowance had expanded dramatically. At her behest, Buffett bought another house in Laguna next to the first, known as the “dormitory,” to house all the children and grandchildren and visitors.4 Susie’s Pacific Heights apartment had been transformed to feature white lacquered walls and carpeting in her trademark sunny yellow. Almost every inch of space was covered with things she had purchased, collected from her travels, or been given by friends. They filled her walls, cabinets, closets, and drawers to overflowing.
The effect struck observers, depending on their perspective, as colorful, beautiful, and a wonderful reflection of Susie’s personality, or a chaotic magpie’s nest of things. Susie was always lobbying for more space; along with a second apartment she had convinced Warren to buy her on the ground floor of her building, unknown to him, she had also begun to rent storage rooms around San Francisco to house her ever-expanding collections.
Susie’s ministry to the sick and dying seemed to compound as rapidly as her collections. She had carried on her work with AIDS sufferers through the 1990s. Then her sister, Dottie, began a battle with terminal cancer. Susie stayed in Omaha to nurse her sister through her last months and days. When Dottie finally died, another person Susie had not, in the end, been able to save, it was the greatest loss she had suffered since her nephew’s terrible death by overdose.
In summer 1996, she had to help Warren deal with the death of his ninety-two-year-old mother. Even in her later years, Leila had never stopped berating the family. She could still work Doris over on the phone or during a visit for an hour or more, sending Doris into tears and ending with “I’m glad we had this little talk.” Warren had relegated most of her caretaking to Susie Jr. He spoke much more often and more fondly of Rose Blumkin than he ever did of his mother. When Astrid and Sharon Osberg took him out to visit Leila, he was a “wreck,” and the two women would talk to Warren’s mother while he sat by anxiously, not participating in the conversation. As Leila’s memory faded, her story mostly wound down to the 38½ wonderful years with Howard and one other topic that seemed to have lodged itself in her mind during Warren’s infancy: “Isn’t it a shame about the little Lindbergh baby?” she would ask. “Isn’t it a shame?”
After Leila died—on Warren’s sixty-sixth birthday—the family assembled for a funeral, their grieving complicated by a cauldron of mixed emotions. She went to rest as the person she had been; any hopes of what she could have become had things been different went to the grave along with her.
“I cried a lot when my mother died. It wasn’t because I was sad and missed her. It was because of the waste. She had her good parts, but the bad parts kept me from having a relationship with her. My dad and I never talked about it. But I really regret the waste of what could have been.”
With both his parents gone, Warren was the senior member of his family, the watchkeeper at that thin boundary between life and death. It was his sisters, however, whose lives were most affected by Leila’s death. They were surprised to find themselves inheriting a sizable amount of Berkshire stock from their mother, more than they had originally owned themselves, along with the first distribution from their father’s trust set up by their brother years before.
Warren’s sisters were now rich. Two of his children also had a little money, thanks to Susie’s persuasiveness about the million-dollar birthday gifts. Buffett had never demanded an accounting of the huge amounts it took to fund Susie’s largesse, although he scratched his head and wondered what on earth she did with all the money. The tax complication of the large gifts to their children, however, required that she give Warren a history of her gift-giving. He had always been proud of her generosity, although not always pleased about those who benefited from it. He was now particularly displeased by some of her larger gifts, which flew in the face of what he had understood about the nature of their marriage. His impression that she had ended her other relationship stood corrected. Despite the parallel between his own complicated personal life and Susie’s, he was upset.
A discussion of Susie’s will ensued. They had sharply differing opinions about who among her friends should receive bequests. In the end, his decision ruled. Afterward, the Buffett bathtub memory went to work. Anything negative that had transpired between them simply vanished, and Susie was restored as his ideal, because he needed her to be.
Warren had stood firm on the question of Susie’s bequests to her friends. But she had gentled him enough on issues of money when it came to their children that he was not only comfortable giving them a million dollars every few years while he was alive, he was going to leave them a reasonable amount of money after his death.5
Howie had used his first million-dollar birthday gift to buy a nine-hundred-acre farm in Decatur, Illinois, where he still lived. This meant he had two farms, one of which he owned outright. After the ADM lawsuits settled down, Don Keough suggested that he become a professional director by going on the board of another high-profile business, Coca-Cola Enterprises (CCE).
A giant cola bottler, CCE had been smashed together out of smaller bottlers that were Coca-Cola’s customers. They bought the syrup concentrate that Coke made, mixed it with fizzy water, and sold it, acting as middlemen, so their relationship with Coke was critical. Neither could live without the other.
Don Keough, Buffett’s old Omaha friend, was now president of Coca-Cola. His boss, the CEO of Coca-Cola, the aristocratic Cuban-born Roberto Goizueta, was revered in the business world for creating the world’s best-known brand through slogans like “Coke Is It” and “I’d like to buy the world a Coke.” Buffett felt that Coca-Cola had by now become a self-sustaining enterprise—and he admired Goizueta for having gotten it to this stage.
In 1997, Gates joined Buffett and Goizueta on a panel discussion at Sun Valley that was moderated by Keough.
“I used to talk to Bill all the time, and I’d always use this expression that a ham sandwich could run Coca-Cola. And Bill wasn’t quite housebroken then. So we were sitting on this panel, up in front of the audience, and Bill said something to the effect that it’s pretty easy to run Coke.”
“I was trying to make a point about how Coke is such a wonderful business,” says Gates, “and I said something about how I’m going to step down from Microsoft before I’m sixty because it’s a tough business and a young person may need to be in there to handle turns in the road. But it came across that I thought of Microsoft as exciting and I must have said something like, ‘Unlike Coca-Cola …’
“Goizueta thought I was an uppity, arrogant kid who was painting some kind of picture that I was engaged in some masterful act on a daily basis whereas anybody could leave at noon and go golfing if they ran Coca-Cola.”6
“And Roberto hated Bill from that point forward.”
Buffett avoided technology stocks partly because these fast-moving businesses could never be run by a ham sandwich. He wanted to get Berkshire Hathaway to the point that it could be run by a ham sandwich too—though not until after he was gone.
But by 1997, Coca-Cola had started to set goals for itself that were so ambitious that it took a lot of financial engineering to achieve them.
“Roberto did a lot of things operationally that were terrific, and I loved the guy. But Roberto got tangled up in promising numbers that eventually couldn’t be delivered. He talked about high-teens growth, eighteen percent. Big companies are not going to increase their earnings in the high teens over long periods of time. For a while you can do it, but it just isn’t in the cards to keep it up forever.…
“The prices they paid for bottling companies were just nuts. I asked the chief financial officer all these questions. But Roberto started the board meetings at ten o’clock and finished at noon; the atmosphere was such that it didn’t lend itself to questioning. You just had a feeling when it got to be noon that it would not be at all polite to keep raising subjects or talking about things that would cause the meeting to last until one o’clock. He was just not a guy you questioned. Some people have that bearing about them, and when the bearing is backed up by a very good record, the combination of the two is pretty overpowering.” Buffett was more than simply nonconfrontational; he was of an age and from an era that viewed serving on boards as a quasisocial activity in which deference and politeness held sway. In 1998, that was the boardroom culture throughout America. This culture reflected the reality that the structure of corporate boards gave directors very little leeway with management.
“As a director, you can’t remotely tell management what to do. All this stuff you read in the press about the board setting strategy is baloney. As a board member, you can do practically nothing. If a CEO thinks a director is smart and on his side, he’ll listen to some degree, but ninety-eight percent of the time, he’ll do what he wants to anyway. Listen, that’s the way I run Berkshire. I think Roberto liked me, but he was not looking for a lot of ideas from me.”
But Buffett never knew of anything seriously enough awry at Coca-Cola to make him consider the drastic step of resigning from the board.
By the mid-1990s, Goizueta and his finance chief, Doug Ivester, were dosing Coke with even larger amounts of bottler profits to maintain the illusion of the company’s rapid earnings flow. Then in 1997, Goizueta died unexpectedly, only a few months after announcing he had lung cancer. The board and the company and investors were shocked. The board had deferred to Goizueta so absolutely that nobody ever seemed to have thought of any alternative to his handpicked successor, the burly, table-pounding Ivester.7
Buffett liked Ivester and wanted him to succeed. Of course, under Goizueta he had enriched Buffett enormously. He had an underdog grit that Buffett liked. Moreover, Buffett laid responsibility for the accounting gimmickry at Goizueta’s door, not Ivester’s.
Juicing the earnings had certainly worked. Coca-Cola was trading at $70 per share. BRK itself, priced at $48,000 in June 1997, flew to $67,000 over the next nine months. The higher the market went, the tougher it got for Buffett to invest, and yet the higher BRK rose. It made no sense for BRK to follow the stocks that it owned—its past successes—instead of its future prospects. At the shareholder meeting, Buffett told investors, “Our idea of tough times is periods like now.”8
Without calling the Air-a-holic hotline, Buffett now bought a company for Berkshire called NetJets.9 This company sold time-shares in jets; its planes all had tail numbers that started with QS, or Quebec Sierra. Susie had gotten Warren to buy her a quarter share in a “fractional” jet from NetJets in 1995, worth two hundred hours a year of flight time, which she referred to as The Richly Deserved.10 She joked that QS stood for Queen Susie. Buffett took to NetJets so much that he had appeared in an ad and endorsed it even before he bought it. He sold the Indefensible and became one of NetJets’s customers. Still, on the surface, buying NetJets was an atypical decision for a man who would, one year later, tell the moguls at Sun Valley that somebody should “have shot Orville down.”
The reasoning behind the purchase seemed sound, though. NetJets was dominant in its market. Buffett figured that it was not unlike the newspaper business, where there were no red ribbons. Eventually, the competitors would fall away.11 Buffett was also intrigued with its CEO, Richard Santulli, an entrepreneurial mathematician from Goldman Sachs. Now he used his mathematical skills to schedule plane flights on six hours’ notice for a database full of celebrity clients. Buffett met a whole new set of famous people, including Arnold Schwarzenegger and Tiger Woods.
Investors cheered Buffett’s purchase of NetJets but were shocked when he almost simultaneously announced that Berkshire was buying General Re, a huge insurance wholesaler, or “reinsurer,” which bought excess risk from other insurers. At $22 billion, this deal was almost thirty times larger than NetJets. It dwarfed by multiples his largest deal ever, GEICO.12
When he met with the Gen Re management team, Buffett told them, “I’m strictly hands-off. You guys run your own business. I won’t interfere.” Then he suddenly started spouting numbers from GEICO. “Last week their numbers were …” Holy cow! thought Tad Montross, General Re’s chief underwriter. This is hands-off? He knows more about GEICO than we know about General Re.13
Buffett did not know much about the inner workings of General Re. He had made the decision to buy based on studying the company’s results, and he liked its reputation. Still … given the pattern of Buffett’s purchases of insurers—in almost every case they plunged straight into the ditch shortly after he bought them—and given the size of this deal, the distant rumble of the tow truck’s engine warming up could be heard, barely audible, over the next hill.
But it was the high price paid for General Re that attracted most of the attention, and the fact that Buffett had paid in stock, not cash—in effect, swapping twenty percent of Berkshire Hathaway for General Re in a deal announced on the day that Berkshire hit its then-all-time high of $80,900 per share. People wondered if Buffett’s willingness to give away his stock when it was trading at such an unheard-of price meant that he, too, thought BRK was overvalued.14 Buffett had spent his career tightening his stranglehold on Berkshire. Giving stock to General Re’s shareholders diluted his own personal voting interest in Berkshire from forty-three percent to less than thirty-eight percent.
The price of BRK swung up and down based partly on the prices of the stocks that Berkshire owned. So, if Buffett was subtly signaling through his purchase of General Re that BRK was overvalued, did that mean that its underlying stocks—like Coca-Cola—were overpriced? If so, this could have implications for the entire market. It might mean the whole market was overpriced.
Buffett’s stake in KO had multiplied fourteenfold over a decade, to $13 billion, and he had gone so far as to declare the company an “inevitable” to his shareholders, as if it were a stock he would never sell.15 He reasoned that Coca-Cola would send more swallows down more throats in each passing decade “for an investing lifetime.” Berkshire now owned more than eight percent of the company. Coca-Cola stock was trading as high as forty times its estimated 2000 earnings—a multiple that said investors believed the stock would keep rising by at least twenty percent a year. But to do that, it would have to increase earnings twenty-five percent a year for five years—impossible. It would have to almost triple sales—again impossible.16 Buffett knew it. Nevertheless, he did not sell his Coca-Cola stock.
Buffett carefully sidestepped these questions about the market and Coca-Cola when he used Berkshire stock to buy General Re, saying, “It is not a market call whatsoever.”17 BRK, he said, was “fairly valued” before the merger, and the combined companies would create “synergy.” When Charlie Munger was asked, he stated that Buffett had consulted him about this deal very late in the game. In effect, he disowned the deal.18 Not unexpectedly, investors began to reprice BRK as if either Berkshire and its holdings in stocks like Coca-Cola were overpriced or the deal’s synergies would prove illusory.19 Or both.
Buffett’s explanation later that summer at Sun Valley was that “we wanted to buy Gen Re, but coming with Gen Re was $22 billion of investments.” Many were stocks; Buffett promptly sold them. Adding $22 billion of bonds “changed the bond/stock ratio at Berkshire, which I was not unhappy with. It did have the effect of a portfolio allocation change.”
So Buffett—who sat on the Coca-Cola board with Herbert Allen—was “not unhappy with” swamping BRK’s stocks, including Coca-Cola, in an ocean of General Re’s bonds. He accompanied his “not unhappy with” remark with the warnings that interest rates must stay well below average and the economy stay unusually hot for the market to meet investors’ expectations. This was the same Sun Valley speech where Buffett had explained that investing is laying out money today to get money back tomorrow, like Aesop’s bird in the hand versus the birds in the bush; that interest rates are the price of waiting for the birds in the bush; that for periods sometimes as long as seventeen years the market had gone exactly nowhere; and that at other times—such as the present—the value of stocks grows much faster than the economy. And, of course, he had closed this speech by comparing investors to a bunch of oil prospectors who were going to hell.
Thus, if Buffett was reshuffling his portfolio and focusing on bonds, perhaps it meant that he thought that it was now easier to make a living in bonds than stocks, and it was going to get easier still.20
The following October, he made another move that was strikingly conservative by the standards of the market. He bought MidAmerican Energy Holding Company, an Iowa-based utility company with some international operations and a presence in alternative energy. He bought just over seventy-five percent of MidAmerican for about $2 billion plus $7 billion of assumed debt, with the other twenty-five percent owned by his friend Walter Scott; MidAmerican’s CEO, Scott’s protégé David Sokol; and Sokol’s number two, Greg Abel.
Investors were mystified. Why would Buffett want to buy a regulated electric company? Admittedly, the business was growing moderately, was well-managed, and had attractive embedded returns that were relatively certain and would be so for as long as could reasonably be imagined.
Buffett saw this as a second cornerstone for Berkshire alongside the insurance business. He said he was working with excellent managers who could potentially put a lot of money to work in utilities and energy at predictable rates of return, which compensated for the limited growth. However, Buffett was already being ridiculed for his refusal to buy technology stocks. Now he had bought the light company. How dull!
But this was not how he thought. When it came to investing, the kind of electricity he sought was not the thrill of trading, but rather, kilowatts.
Buying MidAmerican and General Re significantly diluted the impact of Coca-Cola on Berkshire’s shareholders, but Berkshire still owned 200 million shares of Coke. Buffett never stopped thinking about Coca-Cola, where matters continued to go awry. By late 1999, the value of his KO stock was down to $9.5 billion, dragging down the price of BRK with it. Thanks in large part to Coca-Cola, one share of BRK stock could no longer buy a top-of-the-line luxury sports car. Buffett kept turning over and over in his mind an incident back in June. Reports had trickled in that Coke products were poisoning children in Belgium and France. It was not hard to figure out what to do. The late Goizueta would have let “Mr. Coca-Cola,” Don Keough, handle it: Fly over right away, visit the kids, shower the parents with free soft drinks. Instead, Ivester—who was actually in France at the time—returned to the U.S. without comment, leaving the local bottlers to deal with the mess.
As the episode blew up into a public-relations disaster, Ivester showed up in Europe weeks later and apologized in finely crafted legalese that never actually said, “We’re sorry.” The headlines died, and the Coke machines were plugged back in all over the continent. But the incident cost more than a hundred million dollars and impossible-to-measure damage to Coke’s reputation. Buffett stewed.
Herbert Allen was stewing as well. Closer to the day-to-day management of the company, he questioned whether Coca-Cola was running off the rails. Despite the declining sales, at least 3,500 new employees had marched into Coca-Cola Plaza in Atlanta in the last two years. Allen looked at the burgeoning payroll and saw “a cancerous growth on the company.”21 Quarter after quarter, Ivester promised to improve growth rates; quarter after quarter, Coca-Cola fell short. One day in Ivester’s office, Allen asked him, What are you going to do? And Ivester said he didn’t know; had no solution.22
Through Keough, Buffett also heard that Ivester had been dictating terms to the bottlers in an unheard-of way.23 Keough had become a sort of “father confessor to the disaffected” among the bottlers.24 They were in open revolt. Meanwhile, Ivester had snatched away Keough’s official role, a dumb move since Ivester needed Keough on his side. He might be King Arthur, but Keough was Coca-Cola’s Merlin and must be paid due respect.
Still, Buffett was pretty sure that these problems were not so obvious to the whole board. As he ticked off marks against Ivester, Buffett spent the whole fall in a wrung-out state of anxiety. By Thanksgiving, he had almost reached a breaking point.25
Then Fortune magazine, which had labeled Ivester “the 21st-century CEO” not two years earlier, published a highly critical piece blaming him for the company’s problems.26 That was a bad sign. Fortune rarely smiled on CEOs whom Fortune smacked around this way, especially if the CEO had previously been featured in a flattering profile on the cover of the magazine. Being knocked off one’s pedestal in public signaled that the powerful people whom Fortune’s reporters used as sources were displeased, and on the brink of tossing away the teddy bear they had once embraced.
Right after Thanksgiving, Herbert Allen put in a call to Buffett. “I think we have a problem with Ivester,” he said. “We picked the wrong guy,” Buffett agreed.27 They began to lay their plans. They both estimated that it would take more than a year for the board to come around to their point of view that Ivester had to go—and that, says Allen, “would have been devastating to the company. So I think we decided, just as two individuals, to tell him the truth about how we felt.”
Allen called Ivester and said he and Buffett wanted a meeting. They agreed to get together in Chicago, where Ivester would be stopping following a meeting with McDonald’s.
On a cool, cloudy Wednesday, the first day of December 1999, Buffett and Allen flew into Chicago. Ivester’s well-known obstreperousness kindled Buffett’s dread of confrontation. He lashed down his anxiety, turtling into his shell. Later, it was reported that he appeared cold. The three men got down to business without preamble.28 Impersonally, Buffett and Allen told Ivester that they appreciated his efforts on behalf of Coca-Cola, but he no longer had their confidence.
Still, Ivester was not actually fired. Buffett and Allen lacked the authority to fire Ivester. “He might have won a board vote, and he knew that,” Buffett says.
Ivester took the news stoically. He rushed back to Atlanta to call an emergency telephone board meeting for four days later, leaving the mystified board to wait in suspense.
On Sunday, Ivester told the board members that he had concluded that he was not the right person to run the company. He would step down immediately. This was exactly as Buffett and Allen had hoped. But he also said there would be no transition; he was leaving as of that day. As the board listened in stunned silence, he described it as a voluntary decision, and that was true—in the sense that it is voluntary to avoid the firing squad by walking the plank.29
Board members began asking what had happened. Was he sick? Was something terribly wrong at Coca-Cola? Why didn’t they have any warning? Must the transition be so sudden? Ivester never wavered from his script.30
A while back the board had insisted, against some resistance, that Ivester put a name in an envelope that said who should succeed him if he were hit by a truck. The envelope was now opened to reveal the name of Doug Daft, head of Coca-Cola’s Middle and Far Eastern divisions. Daft was halfway out the door to retirement, but—just as it had done after Goizueta died—the board, among them Buffett and Allen, instantly made him Ivester’s successor, with apparently no serious discussion of any alternative.
The recriminations began as the market took a hatchet to the stock.31 Investors had figured out that Ivester was walking the plank. In private conversations with a few board members, he let out the truth. The board now realized with varying degrees of outrage how much their role had been usurped.
With the media howling, it became clear that the company needed to be more forthcoming. Fortune wrote an exclusive piece revealing details of the secret Chicago meeting.32 Ivester had negotiated a staggering $115 million consolation package, which angered both his detractors and his supporters; it gave the impression that he was either paid off or wronged. And observers now realized that an inner circle ruled the Coke board.
But by year-end, Buffett’s reputation was suffering in an even more overt way, because the biggest, most profitable feat of stock selection that he had ever made, Coca-Cola, was down by one-third after Ivester’s departure. That Buffett had felt forced to intervene in a particularly graceless way, which had backfired in public on both the company and himself, left the impression not that he had ridden to the rescue—as with Salomon—but that what he and Herbert Allen had done was the meddling of a couple of old men.
That impression compounded the worries raised when the biggest acquisition he had ever made, General Re, coughed up a nasty surprise within days after Berkshire closed the purchase. Ron Ferguson, the CEO, had called to say that the company had been duped out of $275 million in an enormous, elaborately designed fraud called Unicover. Investors had been surprised, to say the least, when the first report Buffett gave them about General Re was an apology for this foolish thing, as well as an expression of confidence in Ferguson and the prediction that affairs would be righted. Since there had been concerns from the beginning about whether Buffett had bought General Re only to dilute his large positions in stocks like Coca-Cola, decades of blissful confidence in his judgment about buying businesses suddenly began to waver.
Even some of his most devoted believers were questioning his wisdom, as the stock market’s repudiation of Buffett’s Sun Valley manifesto grew even louder in the last few months of 1999. That December, he continued to look not just wrong about technology stocks but dead wrong and, at last, stubbornly blind to the obvious. The Dow closed the year up twenty-five percent, the NASDAQ an incredible eighty-six percent. The market valued Berkshire, with its burgeoning coffers of cash, at only $56,100 per share now, for a total market capitalization of $85 billion. That compared poorly to a little online media company called Yahoo!, which had quadrupled in the last year. Yahoo!, which captured the spirit of the times in its name, was now valued at $115 billion.
As 1999 spun to a close, there was no doubt who was important and influential at the turn of the millennium, and even less doubt who was not. Buffett’s personal ranking had dropped on the annual taking-stock lists, which multiplied a thousandfold that year with the millennial summings-up and retrospectives. He was now only the fourth-richest man in the world. Technophiles reveled in pointing out the great investor’s feet of clay, saying that “if Buffett headed a mutual fund, he’d be looking at a second career.”33 Barron’s, a Wall Street weekly, put him on its cover with the accompanying headline “Warren, What’s Wrong?” and the comment that Berkshire stock had “stumbled” badly.34 He might as well have had a bull’s-eye painted on his brow.
In public, Buffett repeated—in almost unvarying terms—the ideas that had made him famous: the margin of safety, the circle of competence, Mr. Market’s vagaries. He still maintained that a stock is a piece of a business, not a bunch of numbers on a screen. All through the market’s dizzy rise, he refrained from arguing or disputing any of the madness, except for making his now-famous speech at Sun Valley. People thought, from the way he disciplined every syllable that exited his mouth, that he was above the criticism. “Nothing bothers me like that,” he said, when asked if it bothered him when people called him a has-been. “You can’t do well in investing unless you think independently. And the truth is, you are neither right nor wrong because people agree with you. You’re right because your facts and reasoning are right. In the end, that’s what counts.”35
But these were separate issues. While he had no problem thinking independently, he was indeed miserable over being called a has-been. Asked around then if being in the public eye for decades helped keep the criticism in perspective, Buffett paused for a long while. “No. It never gets easier,” he said soberly. “It always hurts just as much as the first time.” But he could not do a thing about it.
Buffett had spent his whole career competing in a contest that was impossible to win. Sooner or later he would have a bad year or the momentum would slow down. He knew that; over and over he had warned investors that trees don’t grow to the sky. But that had never stopped him from climbing as fast as he could. And while he had loved the climb, somewhat to his surprise, there was no blue ribbon waiting at the top.
His life was fascinating, his business accomplishments important, the principles through which he had succeeded worthy of study. Everyone who knew him personally liked the man. His kaleidoscope personality perpetually revealed new facets, yet remained faithful at its core to his Inner Scorecard. The one thing that he would always be the best at was being himself.
As he did every year, Buffett spent the holidays with Susie and the family at their vacation home in Emerald Bay.36 His work life may have been particularly challenging then, but Christmas of 1999 was a good one for his family. Warren was satisfied with the way his kids were maturing. Howie had settled down into life as a middle-aged farmer and businessman. Big Susie had gotten him interested in photography. Now he lived on an airplane half the time, photographing dangerous wild animals, his love of living on the edge channeled into getting bitten by a cheetah and chased by a polar bear.
A full-time mother of two children and unpaid part-time assistant to her father, Susie Jr. had followed in her mother’s footsteps to become a force in Omaha philanthropy. Her ex-husband Allen ran the Buffett Foundation, and the two lived a few blocks apart and shared parenting.37
After his divorce, Peter had married Jennifer Heil and was still living in Milwaukee and writing music. In the early 1990s, he had gotten the opportunity to move to Hollywood and work in the entertainment industry. But “I realized if I moved to L.A.,” he says, “I’d be one of thousands of me’s out there trying to get work. My father was always into the movie The Glenn Miller Story. Glenn Miller searched and searched to find his sound; my father used to always talk about ‘finding your sound.’ ” Peter stayed in Milwaukee; he felt that his father understood that this was analogous to his own choice to come back to Omaha to do things his way rather than staying in New York. Soon after Peter decided not to go to L.A., he was hired to compose and produce the soundtrack for a PBS documentary, the eight-part 500 Nations.38
Howie had been working on Big Susie, saying, “Give us a chance, the money is there, give us the chance to do something with it.”39 That Christmas, Susie Jr., Howie, and Peter were shocked to receive five hundred shares of Berkshire stock in foundations that each could manage and give to any causes they chose. The kids were elated.40
The family settled in for New Year’s Eve. You could follow the progress of the millennium’s arrival on television, starting in the Kiribati Islands. From Sydney to Beijing to London, millions of people celebrated on streets and beaches as a chain of fireworks shot around the globe. As the hours ticked by, nothing disastrous happened anywhere, even at General Re and Coca-Cola. There was a mathematical neatness to the progression of time zones, locations, hours, that Buffett liked. After the stressful fall he had just spent, the change of millennium was not exciting to him—it was relaxing, and he needed that.