By the time Buffett got his semicolon, the Internet boom had boomeranged. The dotcoms were dying at the pace of one a day.1 The NASDAQ was trading at less than half the value of its peak; the old economy stocks were still swooning too. Buffett’s reputation, however, began to revive.
Berkshire dipped its soup ladle into a huge stockpot of capital for Buffett to buy private companies, bankrupt companies, under-the-radar companies—everything from Ben Bridge jewelers to Benjamin Moore paint. Even so, by the end of 2000 Berkshire still had billions of unused capital: a baled-in-the-basement, thatched-to-the-rooftop mass of money that continued to pour out from the self-perpetuating cash-spinning machine.2
Buffett’s foreboding prediction about the market in his 1999 Sun Valley speech had proven right. Now he sermonized in his letter—which had become a global media event, released on the Internet and awaited by so many thousands of people that the Berkshire Web site nearly crashed on the appointed Saturday morning—that the birth of the Internet had offered a chance for cynical financiers to “monetize the hopes” of the credulous. The resulting “wealth transfer on a massive scale” was going to benefit only the very few.
“Promoters have in recent years moved billions of dollars from the pockets of the public to their own purses (and to those of their friends and associates).…
Speculation is most dangerous when it looks easiest.”3 The audience listened, and at the 2001 shareholder meeting, the crowds started coming back.
Buffett’s return to Sun Valley in 2001 was another opportunity to table-thump—and, of course, to see old friends. On Friday afternoon, after playing bridge, Katharine Graham, who was now left in relative peace at age eighty-four, rode back to her condo in the little golf cart she used to get around in Sun Valley. Tall and still on the slender side, she had had both hips replaced, and one worked better than the other. People noticed that she seemed worn out and “fading,” but she had been saying what a marvelous time she was having this year. The company that she and her son Don had created, with much help from Buffett’s advice, was now regarded almost as iconic for its financial and journalistic success at a time when newspaper profits were slipping badly. Graham took obvious pleasure in the way the Allen conference brought together so many of the people she enjoyed. She had been assigned an assistant to escort her everywhere, but she had the grit to resist handling, so for much of the conference she was seen on the arm of either Don or Barry Diller, chairman of USA Networks and a close friend. At the moment, however, she was alone.
Susie Buffett Jr. and her mother, in their car, spotted Graham and drove into an unobtrusive parking lot so that they could watch her climb the four steps to her condominium. She was taking the anticoagulant Coumadin, which greatly increased the risk of serious hemorrhage should she fall. She clung to the handrail and looked shaky but made it inside without incident.4
Later, outside on the deck of the Wildflower condos, overlooking the golf course and mountains, where Graham often sat reading the Washington Post in the afternoons, fashion designer Diane von Furstenberg threw her annual women’s cocktail party for Kay, a Sun Valley tradition.5
Saturday dawned. The audience settled into its chairs to hear Andy Grove, head of Intel, kick off the morning with “Internet Interrupted.” Then Diane Sawyer moderated a panel, “Pulse of America: How Do You Find It?” After Diane Sawyer, Buffett was scheduled to speak. Since the market’s peak in March 2000, over $4 trillion of stock-market value had evaporated.6 The surviving Internet businesses were entering their adolescence. The audience hoped he would relent from his previous bearishness.
Yet Buffett showed them a graph indicating that the value of the market was still one-third larger than the economy. That was far higher than the level at which Buffett said he would buy stocks. It was considerably higher than the market had ever stood in modern history—higher, even, than the peak of the Great Bubble of 1929. In fact, the graph suggested that the economy would have to nearly double, or the value of the market would have to fall by nearly half, before he would get really excited about it.7 He told them that despite two years of keelhauling, even with the NASDAQ down by more than half, he would still not buy. He expected the stock market (with dividends included) to grow at no better than about seven percent a year, on average, for possibly as long as the next twenty years.8 That was only about one percent higher than he had said two years before. It was a dispiriting message.
“That shouldn’t be the way markets work,” he said, “but that is the way markets work. And in the end, that’s what you should remember.”
Many in the audience were shocked and sobered—but impressed. Buffett enjoyed congratulations for his speech at lunch under a tent on the deck behind Herbert Allen’s condo, where a group of about a hundred people, including the Grahams, had gathered. He sat with President Vicente Fox of Mexico—whom he thought of as “an old Coca-Cola guy”—and kicked around the economy.9 Then he went off to play golf.
Kay Graham rode over to the bridge room to play cards. After a while she said she was not feeling well and had decided to go back to her room. She called to alert her assistant, who was waiting for her at Herbert Allen’s condo next door to her own, then drove back to her condo alone.
The assistant had started to check out the window for her every couple of minutes. She looked and saw that Kay’s golf cart had already arrived, but it was empty. She sprinted outside and saw Kay lying at the top of the steps on the porch in front of her door. Running over, she bent and spoke to Graham, who didn’t respond. She started screaming for Herbert Allen to come out.10 By the time the emergency medical technicians arrived a few minutes later, Don Graham had rushed back from the golf course. He was going to need someone to help him make decisions, and asked Buffett whether he wanted to come along. But Buffett could not do it.11 Griffith Harsh, a prominent neurosurgeon who was married to eBay CEO Meg Whitman, went with Don to look at the CAT scan at St. Luke’s hospital in Ketchum, about ten minutes away.12
Susie Jr. drove off to meet Don and Herbert Allen at the hospital. She knew very well that no one could expect her father to deal with any kind of medical crisis. Big Susie had had a cardiac catheterization in 1997, and Warren got on a plane to go to San Francisco to be with her. When Kathleen Cole called to say that Susie was going to be okay, he turned the plane around in midair and went back to Omaha. Since then, Susie had been in the emergency room repeatedly with excruciating abdominal adhesions and intestinal blockages. In 1999 she had her gallbladder removed. Throughout all of her medical problems over the years, Warren had never once been able to endure the emotional distress of going to the hospital to be with his wife.13
After seeing the CAT scan, Dr. Harsh had Kay helicoptered to St. Alphonsus Regional Medical Center in Boise; Don and Susie flew after her in a private plane.
While all of this was transpiring, Warren retreated to his condo. Big Susie had left earlier that day for a wedding in Greece and knew nothing of what was going on. Peter and Jennifer, Howie and Devon were still at Sun Valley; Peter and Howie came by briefly, but even at such a time it was unnatural for Warren to tune the unfamiliar instrument of his emotions to make an openhearted connection with his sons. Bill and Melinda Gates, Ron and Jane Olson, and Susie Jr.’s boyfriend sat with him while he waited for news, and distracted him by talking of anything but Kay. Susie Jr. had called from Boise to say that she was going into surgery, but that was all.14
Kay was taken into the operating room, then brought out. Around two o’clock in the morning, since there had been no further word from Boise, Buffett decided to go to bed. Everybody left.
Ninety minutes or so later, after a second CAT scan, the doctors moved Kay to intensive care. “We’re really not sure what’s going to happen,” they told Susie Jr. She called her father, woke him up, and told him to get the family on the plane.
A couple of hours later, when the NetJets plane taxied into Boise, Warren called Susie Jr. and said he didn’t feel he could come to the hospital. She told him that he had to come; Don was distraught and needed him to be there. Even if Kay was not conscious and couldn’t see him, she would be able to sense his presence. Reluctantly, he acquiesced.
When he got to the hospital, his daughter met him downstairs in the lobby. She knew he was so frightened that he would have to be coaxed. “You have to come upstairs,” she insisted. “You have to come.” She led him to intensive care, where Don Graham, red-faced from weeping, was sitting alone with his mother. Kay, drained of color and unconscious, lay connected to monitoring devices that blinked little lights and made tiny noises. Warren and Don clung to each other, sobbing. Lally Weymouth, Kay’s oldest child and only daughter, arrived. Eventually, Susie Jr. took her father downstairs. There was nothing more they could do. As the rest of Kay’s children gathered in Boise, the Buffetts boarded a plane for a sad ride back to Omaha.15
Two days later, the call came that Kay had died. Warren had already told Lally that he wasn’t going to be able to speak at Kay’s service. He would be an usher along with Bill Gates. Astrid took care of him at home, and work consumed him at the office. When he wasn’t working, Sharon played bridge with him or he played helicopter, anything to distract himself from the horror of Kay’s death.
And yet, the day after Graham died, Buffett arrived, as scheduled, to speak to an audience of college students at the Terry College of Business at the University of Georgia. He climbed onto the stage wearing his stiff gray suit and looking only a little more awkward than usual, his breathy voice grating slightly. “Testing, one million, two million, three million,” he said at the microphone. This line could always be counted on to get a laugh, and it did. He then launched into a couple of Nebraska football jokes but, out of character, rushed the punch line and got only chuckles from the audience.
Then he seemed to catch his rhythm. “People ask me where they should go to work, and I always tell them to go to work for whom they admire the most,” he said. He urged them not to waste their time and their life. “It’s crazy to take little in-between jobs just because they look good on your résumé. That’s like saving sex for your old age. Do what you love and work for whom you admire the most, and you’ve given yourself the best chance in life you can.”
They asked him what mistakes he had made. Number one was Berkshire Hathaway, he said—spending twenty years trying to revive a failing textile mill. Second, US Air. Buffett spoke of his failure to call the Air-aholic hotline beforehand. Third, he said, had been buying the Sinclair gas station as a young man. That mistake, he reckoned, had cost him about $6 billion compared to what he could have earned on the money invested.
But his mistakes of omission—things he could have done and didn’t do—had plagued him most, he said. He mentioned only one—failing to buy FNMA stock, the Federal National Mortgage Association. That, he said, had cost about $5 billion as of that date. There were others: passing on the television station that Tom Murphy had tried to sell him; not investing in Wal-Mart. The reason that he had made mostly mistakes of omission instead of commission, he explained, was his cautious approach to life.
Buffett had talked many times before about mistakes. But when he spoke, as he often did, of his mistakes of omission, he never ventured beyond business mistakes. The errors of omission in his personal life—inattention, neglect, missed chances—were always there, the side effects of intensity; but they were shadow presences visible only to those who knew him well. He spoke of them only in private, if at all.
To the students, he explained his “Twenty Punches” approach to investing. “You’d get very rich,” he said, “if you thought of yourself as having a card with only twenty punches in a lifetime, and every financial decision used up one punch. You’d resist the temptation to dabble. You’d make more good decisions and you’d make more big decisions.”
He ran his life on Twenty Punches, too, with as little flitting as he could arrange. Same house, same wife for fifty years, same Astrid on Farnam Street; no desire to buy and sell real estate, art, cars, tokens of wealth; no jumping from city to city or career to career. Some of that was easy for a man so certain of himself; some of it came with being a creature of habit; some of it was a natural tendency to let things compound; and some of it was the wisdom of inertia. When he gave somebody a punch on his card, they became a part of him and that decision was permanent. Any crack in the facade of permanence was extraordinarily difficult for him to face.
A few days later, police arrived early in the morning to close nearby streets for the crowd they expected at the Washington National Cathedral, its gargoyle-bedecked flying buttresses silhouetted against a bright blue sky.16 Television crews began to set up for an elaborately orchestrated event that had all the trappings of a funeral for a head of state. By late morning, buses bearing Washington Post employees pulled up one by one. A blue-and-white-striped bus carrying members of the Senate arrived, and people began streaming in from cars and limousines. Gradually the front pews filled with dignitaries like Bill and Hillary Clinton and Lynne and Dick Cheney. Famous faces were everywhere.17 Hundreds, then thousands, of people filed in through the enormous bronze doors to the sound of the National Symphony Orchestra, gradually assembling into what looked like the largest crowd the cathedral had ever held.18
As the service began, Buffett and Bill Gates slipped into a pew next to Melinda. The music started. Historian Arthur Schlesinger spoke; Henry Kissinger spoke; Ben Bradlee spoke; Graham’s children spoke. Near the end, former Senator John Danforth gave the homily. Graham, he thought, never said much about religion, but she lived the way a believer is supposed to live. “She dismissed out of hand the notion that she was the most powerful woman in the world,” he said. “In Washington, especially, a lot of people strut, and Kay did not strut.… We do not attain the victory of life by selfishness. Victory is for those who give themselves to causes beyond themselves. It is very biblical and very true that everyone who exalts themselves will be humbled and he who humbles himself will be exalted. That is a text for all of us. It was lived by Katharine Graham.”
Melinda Gates reached up and wiped away tears while Buffett sat next to her husband with a grief-stricken face. The two cathedral choirs, dressed in black and white robes, sang Mozart. Carefully, the pallbearers lifted the casket to their shoulders and bore it down the aisle while the congregation sang “America the Beautiful.” The family followed the procession out of the cathedral to the Oak Hill Cemetery across the street from Graham’s house, where she would be interred next to her late husband.
Early that afternoon, more than four hundred people swept up the circular driveway to Graham’s house and walked around to the rear garden, where her children and grandchildren stood about, chatting with guests. At a buffet inside the tent, people ate finger sandwiches and sliced ham and tenderloin. They wandered around past the swimming pool, and found their way into the house to gather the collection of memories that it held. They stood in the living room where President Reagan had gotten down on his hands and knees to pick up ice cubes he’d spilled on the floor, and gazed for one last time at the books and knickknacks in the library where Mrs. Graham had pondered whether to print the Pentagon Papers. They paused by Napoleon’s china on the walls next to the round dining tables in the golden room where American Presidents from Kennedy to Clinton had dined. From Jacqueline Onassis to Princess Diana, if Katharine Graham invited them, they all came.19 The house itself was a kind of history.
Warren walked through Kay’s house for one last time to remember, but he did not linger. He left early and would never return.20
As the afternoon wore on, the rest of Katharine Graham’s friends and admirers told her good-bye. They withdrew down the long hallway gallery past the rooms where she had entertained them so often and slipped past the garden outside. Then slowly, sometimes reluctantly, they left the last Kay Party, and began their final trip down the pebbled drive.