The first aftershocks of Susie’s death occurred at the reading of her will, even though most of its provisions were not unexpected. She left nearly all of her Berkshire stock, worth almost $3 billion, to the newly renamed Susan Thompson Buffett Foundation. Another six hundred shares, worth $50 million at the time, went to each of her children’s foundations.
She had been generous to people she cared about, although her husband’s influence doubtless dampened her generosity. Her children each received $10 million. A long list of other people received smaller amounts. She had amended her will in the year before her death through a codicil executed by a new lawyer; the codicil gave John McCabe $8 million.1
The secret codicil shocked nearly everyone. Susie had never reconciled the divisions within her world and in the end chose to leave them unexplained. The life she lived for others was her legacy; her inner truth would remain forever unspoken. Thus it would be left to others to form their own interpretations.
Warren had long loved his wife as an ideal. She had been the “grounding person who was his connection to the outside world” as well as the “glue that held the family together.”2 After her death, he was never able to look at Susie’s photograph without crying. But he did not lapse into a years-long depression, or commit suicide, as Susie had suggested he might. Instead he mourned. For about two months, he seemed deeply depressed. And then, as most people do, he gradually returned to living his life.
Once the dreamlike assumption that “Susie will take care of everything” popped like a soap bubble, Warren began to show a newfound realism. As each month passed, he began to deal more acceptingly with endings and mortality and to connect with his children in a new way. Susie seemed to have willed him some of her strength, a little of her emotional fluency, and a lot of her generosity. Warren seemed to be acquiring unexpected dimensions to his inner life. He reclaimed some of the responsibility for the emotional territory that he had always left to his wife. He became more aware of his children’s feelings, of what they were doing and of what mattered to them.
Susie Jr. quickly stepped into the leadership role that her mother had played in philanthropy. She began to hire and to enlarge the foundation’s offices to plan for the much larger sums of money it would now be giving away.
Peter was taking Spirit—The Seventh Fire to the National Mall in Washington as part of the celebration for the grand opening of the National Museum of the American Indian. One day he called his father to say, Dad, we’re setting up the tent! Afterward he realized that he would have once called his mother, who would have told his father. It felt good to have a direct connection.3 Warren gathered a group of friends and flew to Washington to attend the cocktail party and opening night. With the show, Warren felt a new intimacy with his son—not just because of Peter’s success, but through the effort they were making to be part of each other’s lives.
When Spirit arrived in Philadelphia, it got the kind of recognition that Buffett understood: It was compared to “a Native American version of Philip Glass’s dance performance/opera 1,000 Airplanes on the Roof“ with “guitar rolls that would put U2’s The Edge to shame.”4 Its costly production, however, meant that even with high ticket prices, Spirit was losing money as a touring show. Peter put it on hiatus and began working on a new CD, Gold Star, while he considered Spirit’s longer-term future.
Howie’s business experience had ripened; he now served on two boards. Savvy about money, he had kept his CCE stock and had invested in Berkshire Hathaway stock. This latter gesture bonded him to his father as nothing else could. Warren observed how much his son had settled down and matured in the past ten years. Howie, a “marshmallow” emotionally who had yearned for a warm connection to his father all his life, now saw an opportunity to have a different sort of relationship with him. He and Devon bought a house in Omaha so they could be nearby.
The events following Susie’s death affected Astrid deeply. She had lost someone she considered a dear friend, then found out that Susie’s life had run on parallel tracks—one of which had always been invisible to her. Years of staying behind the scenes out of deference to Susie and to a marriage that, however unconventional, had been held up to all as some kind of ideal suddenly was revealed as based on a falsehood. She felt betrayed and used. Belatedly, Warren recognized how high a price Astrid had paid for the arrangement he and Susie had worked out, the realities of which they had both avoided facing all these years. He took the blame and went to work setting things right. Gradually, as he passed through the stages of mourning, he brought Astrid more and more into his public life.
In December, Warren sent all of his grandchildren large checks as a Christmas gift. He had always paid for their college tuition, but he had never before given them money without any strings attached.
Buffett made two exceptions to the checks. He did not include Nicole and Erica Buffett, Peter’s adopted daughters. Big Susie had loved Erica and Nicole. They had shown up at her funeral dressed in long flowing outfits and wailed like a pair of brunette banshees. Susie had left each of her “adored grandchildren,” including Nicole and Erica, $100,000 “as a hug” in her will. But ten days after Susie’s funeral, Warren had told Peter, “By the way, I don’t consider the girls my grandchildren. I don’t want them to expect anything from me in my will.” Peter found this inexplicable. “Are you sure you want to do this?” he asked. His father was undeterred. That Susie had given the girls—who had been adopted after their mother’s divorce from Peter—money and specified that they had the same status as her other grandchildren in her will seemed to have roused Warren’s feelings of possessiveness about money.
Two years later, Nicole participated in Jamie Johnson and Nick Kurzon’s documentary The One Percent, a story about the children of the rich. In the documentary, Nicole unwisely positioned herself as a spokesman for the unspoiled Buffett way of life. The documentary resulted in follow-up media appearances, including an invitation to appear on an Oprah episode about social class in America. Buffett’s reaction was harsh; he sent word to Nicole that he didn’t consider her his granddaughter, and if asked, would say so. Nicole told Oprah she was “at peace with” not having inherited wealth—apparently a reference to the small amounts that Susie had left her grandchildren—but added, “I do feel that it would be nice to be involved with creating things for others with that money and to be involved in it. I feel completely excluded from it.” The “poor little me” aspect of her interview was her second mistake.
Afterward, she sent Buffett a letter asking why he had disavowed her. In a letter marked by a carefully controlled tone,5 he wrote back and offered her good wishes, told her she had reason to be proud of her accomplishments, and gave her some worthwhile advice. Positioning herself with people as a member of the Buffett family was a mistake, he wrote. “If you do so, it will become your primary identity with them. People will react to you based on that ‘fact’ rather than to who you are or what you have accomplished.” But he also wrote, “I have not legally or emotionally adopted you as a grandchild, nor have the rest of my family adopted you as a niece or cousin.… It is simply a fact that just as [your mother] is in no respect my daughter-in-law, her children are not my grandchildren.”
Nicole had wounded him in his most tender spot—his identity and that of his family. In doing so, she ran afoul of what was referred to semi-jokingly in family circles as the “Buffett Name Police,” which restricted use of the Buffett name for self-promotional purposes to Warren and, occasionally, his children. The Buffett Name Police enforced its rules by banishment from the family, a punishment that was usually carried out by Susie Jr. and acquiesced to by the rest.
Buffett’s unusual decision to banish Nicole personally rather than using a surrogate backfired badly on him. Nicole may have been wrong, but she seemed sincere. Instead of reining her in, the rejection letter sent her off on another round of interviews that made Buffett look like Ebenezer Scrooge; one result was a Page Six story in the New York Post (Buffett to Kin: You’re Fired!”6) portraying him as taking vengeance on her for participating in the documentary. Even four years after Susie’s death, their relationship was still not mended. Nicole took the further step of doing an interview with Marie Claire7 in which she provided photographs and letters signed “Grandpa” to prove that Buffett had indeed at one time considered himself her grandfather. To the man who had worked so hard for a lifetime never to alienate anyone, it was a painful irony. It seemed unlikely—though not impossible—that the two would ever reconcile.
Buffett had always had an easier time giving away money to mankind than to his family. He was what is called a “telescope philanthropist.” Bill Gates, the most influential philanthropist on earth, was becoming his role model. Their relationship had grown even closer. In late 2004, Buffett overcame some earlier reservations that Gates’s powerful personality might dominate the Berkshire board, and invited him to join it. Sharon and Bill had been talking for some time about the challenges that the Buffett Foundation faced. To give away several billion dollars a year after Warren was gone, it would have to change dramatically. No foundation in history had ever succeeded in such a transformation, because no foundation had ever tried. With one exception—the Gates Foundation—no other philanthropic organization had ever worked with such large sums.
Buffett had also been thinking about the problem. In the fall, he had videotaped a question-and-answer session with his foundation trustees, making sure they understood his wishes. Like Walter Annenberg, he wanted to reduce the chance of being double-crossed after he was dead.
Early in 2005, Osberg “trumped up some pretense” and made a trip to Omaha to speak to Buffett. Given his admiration for Gates, she said, shouldn’t he consider leaving his money to the Gates Foundation after he died? Though Buffett reacted noncommittally,8 he had in fact been considering leaving at least some of the money to the Gateses since well before Susie died.
For a long time Buffett had felt that society was best served if he carried on compounding the money, rather than giving it away. But delaying the gift until his death also amounted to the White Queen’s “jam tomorrow”—a postponement in his struggle with endings, with loss, with death, with letting go. Over the years he had gradually evolved from a boy who stole his sister’s bicycle and got other people to buy his barbells, from a father who said no to every request for money from his children, to a man who gave them a million dollars every five years on their birthday. Although he still had issues with money, in a profound shift, he was working his way through the problem of whether to serve some of tomorrow’s jam today.
That did not mean, however, that the encroachments of time would become easier for him. A year after Susie died, Buffett found himself shocked once again by the impending arrival of another birthday. Could he actually be three-quarters of a century old? He spoke of it with disbelief.
His seventy-fifth birthday party took place at the Marin County home of Sharon Osberg and her husband, David Smith, with Astrid, Bill Gates, and his sister Bertie in attendance. His birthday cake was a white-chocolate replica of a $100 bill. On Saturday morning, Smith had arranged for Buffett to take on Ariel Hsing, a nine-year-old Chinese-American Ping-Pong champion. With the video camera rolling, the little girl crushed him. After a fierce bridge tournament the following morning, an artist whom Osberg and Smith had hired came over to amuse Buffett and Gates by trying to teach them the art of landscape painting. Buffett gamely swiped away with a brush at acrylics, but painting, unlike Ping-Pong, was not rhythmic and repetitious, and he produced a canvas adorned with trees that resembled brown lollipops. Meanwhile, the previous day’s Ping-Pong game was fermenting an idea. Why not add the video of him getting trounced by Ariel Hsing to the ever-expanding movie at the shareholders meeting?
Before 2003, Buffett’s need for attention had been satisfied by a few interviews a year and the shareholder meeting. He had always been careful and strategic in his cooperation with the media (if not always forthcoming about just how cooperative he had been). But starting around the time of Susie’s illness, for whatever reason, he had begun to need the mirror of media attention, television cameras especially, almost like a drug. The intervals he could tolerate without publicity were growing shorter. He cooperated with documentaries, spent hours talking to Charlie Rose, and became such a regular on CNBC that it started to prompt puzzled queries from his friends.
The Buffett who so craved attention contrasted markedly with the Buffett who focused with unaltered intensity on Berkshire Hathaway. To see him flip from one mode into the other in half a second was head-spinning. He remained as focused on investing as he had been as a younger man. That did not mean it was easy for him.
Since the Federal Reserve’s dramatic interest rate cuts in the wake of 9/11, the market had steadily recouped its losses until it was nearing bubble-era levels. Buffett wrote in his 2004 letter to shareholders: “My hope was to make several multibillion dollar acquisitions that would add new and significant streams of earnings to the many we already have. But I struck out. Additionally, I found very few attractive securities to buy. Berkshire therefore ended the year with $43 billion of cash equivalents, not a happy position.”
Buffett used this report to reiterate that he was still down on the dollar, and thought it would decline. Because the dollar had strengthened since his first article, now his view was being widely criticized in the financial press. He had reduced his currency bets in favor of buying foreign stocks, but nothing changed his view. And once again, he decried excessive executive compensation. On derivatives, a topic he now covered every year, Buffett wrote:
“Long ago Mark Twain said: ‘A man who tries to carry a cat home by its tail will learn a lesson that can be learned in no other way.’ … I dwell on our experiences in derivatives each year for two reasons. One is personal and unpleasant.” Here, he wrote about the costly unwinding at General Re.
“The second reason I regularly describe our problems in this area lies in the hope that our experiences may prove instructive for managers, auditors, and regulators. In a sense, we are a canary in this business coal mine and should sing a song of warning as we expire.…
“It could be a different story for others in the future. Imagine, if you will, one or more firms (troubles often spread) with positions that are many multiples of ours attempting to liquidate in chaotic markets and under extreme, and well-publicized pressures. The time to have considered—and improved—the reliability of New Orleans’s levees was before [Hurricane] Katrina.”9
The general belief, however, continued to be that derivatives spread and reduced risk. In a market shoved upward by cheap debt and derivatives nearly day by day, low interest rates and the “securitization” of mortgages into derivatives were pumping a housing boom that would peak in 2006. By one estimate, total global leverage (debt) had quadrupled in less than a decade.10 Buffett fretted occasionally that he might never again see the kind of home-run climate for investing that had blessed him in the 1970s. But he never stopped searching, he never stopped delving for ideas.
One day in 2004 he obtained from his broker a thick book, the size of several telephone directories stapled together. Its pages contained listings of Korean stocks. He had been scouring the global economy, looking for a country, a market, that was overlooked and undervalued. He had found it in Korea. Night after night, he leafed through the tome, studying column after column of numbers, page by page by page. But the numbers and their nomenclature puzzled him. He realized that he needed to learn a whole new language of business that described a different culture of commerce. So he got another book and figured out everything important there was to know about Korean accounting. That would reduce the odds of getting hornswoggled by the numbers.
Once he’d mastered the listings, he began sifting and sorting. It felt something like the old days back at Graham-Newman, when he sat next to the ticker machine clad in his cherished gray cotton jacket. He could pick out from hundreds of pages which numbers were important and how they fell into a coherent pattern. Working from a list of several thousand Korean stocks, he quickly pared it down to a workable number; after making some notes on a yellow legal pad he kept going, just as he had when he’d paged through the Moody’s Manual—until finally he arrived at a much shorter list.
This winnowed-down list was so short that it could be contained on a single piece of legal-size paper. Sitting down with a visitor, he held out the list, which consisted of at most a couple of dozen companies. A few were large—among the largest in the world—but most were very small.
“Lookit,” he said, “this is how I do it. They are quoted in won. If you go to the Internet and look them up on the Korean stock exchange, they have numbers instead of ticker symbols, and they all end in zero unless it’s a preferred stock, in which case you click in five. If they have a second class of preferred, you don’t click in six, you click in seven. Every night you can go on the Internet at a certain time and look up some issues and it’ll show you the five brokerage firms that would have been the largest buyers and the five that would have been the largest sellers that day. You have to set up a special account with a bank in Korea. That’s not easy to do. I’m learning it as I go along.
“It’s like finding a new girl to me.
“These are good companies, and yet they’re cheap. The stocks have gotten cheaper than five years ago, and yet the businesses are more valuable. Half of the companies have names that sound like a porno movie. They make basic products, like steel and cement and flour and electricity, which people will still be buying in ten years. They have a big market share in Korea, which isn’t going to change, and some of these companies are exporting to China and Japan too. Yet for some reason, they haven’t been noticed. Look, this flour company has more than its market value in cash, and it sells at three times earnings. I couldn’t buy very much, but I got a few shares. Here’s another one, a dairy. I could end up with nothing but a bunch of Korean securities in my personal portfolio.
“Now, I’m no expert on foreign currencies. But I’m comfortable owning these securities denominated in the won right now.
“The main risk, and part of why the stocks are cheap, is North Korea. And North Korea is a real threat. If North Korea invaded South Korea, the whole world could go to hell. China, Japan, all of Asia would be drawn into a war. The consequences are almost unimaginable. North Korea is very close to having nuclear weapons. I regard it as one of the world’s most dangerous countries. But I would make the bet that the rest of the world, including China and Japan, are simply not going to let the situation get to the point that North Korea makes a nuclear attack on South Korea anytime soon.
“When you invest, you have to take some risk. The future is always uncertain. I think a group of these stocks will do very well for several years. Some of them may not do well, but as a group, they should do very well. I could end up owning them for several years.”
He had found a new game, a new puzzle to figure out. He wanted more of them and kept looking for opportunities with the same eagerness he’d once shown stooping for winning tickets at the racetrack.
In December 2005, in a talk at the Harvard Business School, he was asked about his hopes for the Buffett Foundation’s impact on society, since it would someday become the best-funded philanthropy in the world. Buffett responded that his guess was that he was not doing society as great a favor by compounding any more. So he was thinking more these days about giving the money away.
Nobody said anything. Nobody seemed to realize that Buffett had just signaled a total shift in direction.
Later, in the same speech, he talked about the Gates Foundation. He admired Bill and Melinda Gates more than any other philanthropists, he said. Theirs was the most rational and best executed of any foundation policy he had ever seen. And he liked that they didn’t want publicity for their philanthropy, did not want their name on any buildings.
By early 2006, his thoughts had begun to crystallize. While he was pleased with the job his kids were doing with their own foundations, the sense of safety and security that Big Susie had given him was not duplicable. This emotional force operated beyond a conscious level. His decision to leave her in charge of the money had never been based on a rational or calculated assessment of her qualifications as a philanthropist. With the accretion of a decades-long relationship, he had simply built up layers of personal trust and comfort in his wife’s judgment and wisdom. Now that she was gone, everything was different. He mentioned his change of heart to Tom Murphy at Murphy’s daughter’s wedding. Out of the blue, he told Sharon Osberg. He was going to give the money away early. But he had only an idea, not a plan.
Charlie Munger had already been encouraging the idea. “It wouldn’t surprise me if they had Gates running it eventually,” he said shortly after Susie died. “It wouldn’t surprise me at all. Warren doesn’t like conventional pomposity. Gates is unconventional in the way he thinks, and he’s fifty instead of seventy-four.”11
The plan, which was complicated, took months to work out in detail. The following spring, he started telling the people who were directly affected. “Brace yourself,” he said when he sat down with Carol Loomis, one of the Buffett Foundation trustees. “The news was indeed stunning,” she wrote.12
“I got lots of questions,” he said about the conversations in which he made this startling announcement, “and some people had qualms about the plan initially because it was such an abrupt change from what they had been anticipating.”13 His sisters, on the other hand, were instantly enthusiastic when they found out. “This is the best idea you’ve had,” wrote Bertie afterward, “since you pretended to have asthma to get sent home from Fredericksburg.”14 Doris—who knew from her own Sunshine Lady Foundation how much work it was to give money away intelligently—thought it was a brilliant decision.15
On June 26, 2006, Buffett announced that he would give away eighty-five percent of his Berkshire Hathaway stock—worth $37 billion at the time—to a group of foundations over a number of years. No gift of this size had ever been made in the history of philanthropy. Five out of every six shares would go to the Bill and Melinda Gates Foundation, already the largest charity in the world, in a historic marriage of two fortunes for the betterment of the world.16 He was requiring that the money be spent as it was given, so that the foundations could not perpetuate themselves. To cushion the shock of losing the money that would someday have made their family foundation the largest in the world, Buffett divided the remaining shares, worth about $6 billion, among his children’s individual foundations, each of which would receive shares worth $1 billion, and the Susan Thompson Buffett Foundation, which would receive shares worth $3 billion. None of the children had ever expected their personal foundations to reach such an enormous size, especially not while he was alive. At the date of the gift, the shares handed over in the first year’s installment were worth $1.5 billion to the Gates Foundation, $50 million to each of his children’s foundations, and $150 million to the Susan Thompson Buffett Foundation. Depending on Berkshire’s stock price, those values could vary.17
The man who was, at the time, the second richest person on earth was giving away his money without leaving a trace of himself behind. He had spent all his life rolling up the snowball as if it were an extension of himself; yet he would establish no Warren Buffett Foundation, no Buffett hospital wing, no college or university endowment or building with his name on it. To donate the money without naming something after himself, without controlling personally how it would be spent—to put the money in the coffers of another foundation that he had selected for its competence and efficiency, rather than creating a whole new empire—upended every convention of giving. No major donor had ever done such a thing before. “It was a historic moment in the field of philanthropy globally,” said Doug Bauer of Rockefeller Philanthropy Advisors. “It’s set a bar, a touchstone, for others.”18
That Warren Buffett had done this was both surprising and predictable. An unconventional thinker and problem-solver, he was making a gesture against philanthropic waste and grandiosity. The Gates Foundation got its money, but had to spend each installment—and fast. The decision was unusual, highly personal, a form of teaching by example, and—naturally—enormously attention-getting. Meanwhile, in another sense, this was a classic Buffett no-lose deal. He had stunned the world by giving away almost all of his money by earmarking it, yet got to keep most of it until he actually transferred the shares. Nonetheless, in one stroke he had transformed a lifetime of grasping at money by committing to letting go—and had started to disburse it by the billions. The boy who would not let his family touch the chifforobe where he kept his hoarded coins had finally become a man who could entrust his tens of billions to someone else’s hands.
In the announcement speech, Buffett said, “Just over fifty years ago last month, I sat down with seven people who gave me one hundred and five thousand dollars to manage in a little partnership. And those people made the judgment that I could do a better job in amassing wealth for them than they could do themselves.
“Fifty years after that, I sat down and thought about who could do a better job dispensing the wealth than myself. It’s really quite logical. People don’t often have that second sit-down. They are always saying, Who should handle my money? and they quite willingly turn their money over to people with a certain expertise. But they don’t seem to think about doing that very often in the philanthropic world. They pick their old business cronies or whomever to administer wealth after they’re gone, at a time when they won’t even be able to observe what’s happening.
“So I got very lucky, because philanthropy is harder than business. You are tackling important problems that people with intellect and money have tackled in the past and had a tough time solving. So the search for talent in philanthropy should be even more important than the search for talent in investments, where the game is not as tough.”
Buffett then spoke of the Ovarian Lottery. “I have been very lucky. I was born in the United States in 1930 and won the lottery the day I was born.…
“All along, I’ve felt the money was just claim checks that should go back to society. I am not an enthusiast for dynastic wealth, particularly when the alternative is six billion people who’ve got much poorer hands in life than we have, getting a chance to benefit from the money. And my wife agreed with me.
“It was clear that Bill Gates had an outstanding mind with the right goals, focusing intensely with passion and heart on improving the lot of mankind around the world without any regard to gender, religion, color, or geography. He was just doing the most good for the most people. So when the time came to make a decision on where the money would go, it was a simple decision.”
The Gates Foundation followed a basic creed that Buffett shared: “Guided by the belief that every life has equal value,” it worked to “reduce inequities and improve lives around the world” in the areas of global health and education. The Gateses saw themselves as “convenors,” who brought together the best minds as advisers to work on permanent solutions to enormous problems.19
However much Buffett had changed and grown since Susie’s death, he was still very much the same in certain ways. Allen Greenberg, who ran the Buffett Foundation, found out that he would be running not the $45 billion foundation for which he had been preparing, but a $6 billion foundation, by proxy through Allen’s new boss and ex-wife, Susie Jr. Warren had been unable to bring himself to confront Greenberg to tell him that all his plans must be downsized. Susie Jr. had to convince Allen that this was in no way a grade on his performance. After his initial explosion over the fact that he hadn’t heard the news from the source, he conceded that he would still be administering one of the world’s ten largest charitable coffers, and peace ultimately reigned.
All involved had ample reason to behave well. Even though Buffett was giving away a vast sum, the money would be paid out over some years. And the stock he had not yet earmarked as a gift was estimated as worth more than $6 billion at the time. He still had plenty to give away.
The effects of Buffett’s announcement were immediate and sizable. Jackie Chan, the Hong Kong actor, announced that he would give away half his wealth. Li Ka-shing, Asia’s richest man, pledged a third of his $19 billion to his own charitable foundation. Carlos Slim, the Mexican communications monopolist, ridiculed Buffett and Gates for their philanthropy but, some months later, did a turnabout and announced that he, too, would begin giving money away. And the Gateses set up a new division within their foundation simply to handle people who wanted to make donations to them—such as a seven-year-old girl who sent the Gates Foundation her life savings of $35.
The newly enriched Gates Foundation was having a tectonic impact on the philanthropic world. Its “all-asset approach,” which greatly resembled Buffett’s ideas about concentration—and, indeed, his investing style—focused resources toward a short, carefully selected list of serious problems. That differed markedly from many other major foundations and community funds, at which a headquarters staff of philanthropoids circled around a series of supplicants, playing “eeny, meeny, miney, moe” as they doled out fragmentary sums. By the end of 2006, certain organizations such as the Rockefeller Foundation had begun modifying their policies to align them more closely with the Gates approach.20
Three thousand letters from needy people poured into Buffett’s office after the Gates announcement, with more coming every day. They had cataclysmic problems through no fault of their own. They were the losers in the Ovarian Lottery. Warren forwarded the letters to his sister Doris. Over the past ten years her Sunshine Lady Foundation, funded with the proceeds from Howard Buffett’s trust, had helped thousands of victims of domestic violence, the severely disadvantaged, and families in crisis. He enclosed $5 million with the letters to help fund Doris’s work.21
Buffett kept handing out more of his billions. He was already giving $5 million a year to Ted Turner’s Nuclear Threat Initiative (NTI), which he considered the most important of the U.S. organizations focused on dealing with the world’s nuclear threat, and he was willing to give more. Former Senator Sam Nunn, who ran NTI, had proposed a nuclear-fuel reserve to which countries could turn rather than developing their own nuclear enrichment programs, thereby reducing the likelihood of nuclear proliferation. Buffett felt that this idea had considerable merit, and he pledged $50 million as a matching gift if other funds could be raised. He would make huge amounts of money available to any antinuclear causes that seemed to him able to come up with realistic solutions to the problem.
Astrid was now Warren’s official companion at events outside Omaha. She remained virtually unchanged—the same plainspoken, unpretentious person.
Two years after Susie’s death, on his seventy-sixth birthday, Warren married Astrid in an unfussy civil ceremony at Susie Jr.’s house with no guests other than family. Astrid wore a simple turquoise blouse and white pants, and Warren wore a business suit. Tears welled from her eyes as he placed a huge diamond solitaire ring on her finger. Afterward, they went to the Bonefish Grill next to Borsheim’s for dinner. Then they flew out to San Francisco for a wedding party and a traditional wedding cake at Sharon Osberg and David Smith’s. The Gateses joined them for the celebration.
Warren Buffett, the not-simple man of simple tastes, now had the simple life of the man that he had always believed himself to be. He had one wife, drove one car, occupied one house that hadn’t been redecorated in years, ran one business, and spent more and more time with his family.22
Buffett always said that trees don’t grow to the sky. But new saplings form.
The question of who would succeed him had long vexed his shareholders. He sometimes quipped that Berkshire could be run by someone working five hours a week, or by Charlie’s bust of Ben Franklin, or by a cardboard cutout. He’d also joked about controlling it after his death: “Well, my backup plan is that I’ve figured out how to manage the company by séance.” No one was fooled by his banter. On other occasions he was just as likely to tell his listeners: “My psyche is all wrapped up in Berkshire.” And those who worked for and invested in Berkshire were all wrapped up in Buffett. He was not replaceable. Thanks in part to his television appearances, his image in the public mind was that of America’s greatest investor, its wisest thinker on business matters.
Even so, Buffett’s adoring club of shareholders had for some time now contained certain rebellious members, some of whom may in fact have joined only to needle him. After the speech about abortion at the fractious 2004 shareholder meeting, Buffett moved the business section of the 2005 meeting to late in the afternoon, both in order to discourage activists and in the hope that if they did appear, the audience would already be on its way to the Furniture Mart or the local bars by the time he had to answer any unpleasant questions.
That year, and the following, no activists appeared to make motions in person. But in 2007, a billboard appeared overlooking a major freeway in Omaha that said, “Will your conscience let you off on a technicality?” The question referred to a proposed resolution to force Berkshire to sell its PetroChina investment; PetroChina’s parent company, Chinese National Petroleum Company (CNPC), was implicated in funding Chinese sponsorship of genocide in Darfur. While not required to put the resolution on the ballot, Buffett did so. The super-voting provisions of Berkshire’s A shares meant that the resolution could never pass. Thus, it seemed safe to allow a vigorous airing of the Darfur issue at the shareholder meeting, a gesture that would garner praise for transparency.
At the meeting, Buffett stated his position: Since PetroChina was ultimately owned by the Chinese government, it was not responsible for directing how its profits were used. This position met with mixed views; many thought it did amount to a technicality. While Buffett was lauded for his openness, for the most part the resolution generated only bad publicity. Descriptions of Buffett-as-financier-of-genocide competed in the press with the more friendly aspects of the shareholder meeting. Though Buffett downplayed the PetroChina controversy, this was not the finale he was looking for at his “Woodstock for Capitalists”; he cared deeply what his shareholders thought of him and the company. In the end, the question of what to do about the PetroChina shares was mooted when, for reasons that he said were unrelated to Darfur, Buffett sold the PetroChina investment before the 2008 shareholder meeting. The stock had cost Berkshire just under $500 million; the company netted a $3.5 billion profit.
In 2008 and 2009, environmentalists and Native Americans would protest at the meeting, claiming that two of MidAmerican Energy subsidiary PacifiCorp’s dams on the Klamath River were killing salmon and causing human health hazards. But by then Buffett had learned his lesson, and understood that it was better to pay as little attention as possible to the activists. For all practical purposes, he ignored the Klamath Dam controversy, and it received far less notice among Berkshire shareholders and the media.
Buffett’s long-used technique of criticizing by withholding attention worked as well on activists as it did on everyone else. He directed the media’s attention toward anyone and anything he wanted them to focus on, and distracted them—for the most part successfully—from subjects he would rather be ignored.
What Buffett wanted most of all was for investors, shareholders, the media, and, above all, students of business to pay attention to him and to Berkshire Hathaway—his Sistine Chapel, his didactic enterprise, the life’s work that spelled out how he thought a business should be managed.
But what would happen to all the capital that Berkshire had accumulated? The question of either a dividend or a huge share repurchase would arise instantly when he was gone. His successor as CEO would have to change some things—for while parts of the Berkshire model should be preserved, other parts should not.
Buffett had addressed the issue of his advancing age partly by adding new directors to the Berkshire board. Before adding Tom Murphy and Don Keough in 2002, he had used his chairman’s letter to invite shareholders to nominate themselves for the director position. The letters came pouring in, and Buffett—of course—collected them the way he collected everything. The director nomination stunt revealed the highly personal—bordering on whimsical—style of corporate governance at Berkshire. In response to an SEC request, Berkshire agreed to adopt a formal process for shareholders to nominate directors. After the later additions of Bill Gates and Charlotte Guyman, in 2007 director Malcolm Chace, the last holdover from the old textile mill days, retired. With that, Buffett added Yahoo! chief financial officer Susan Decker to the board, tilting the demographic to a younger average age.
But, along the way, Buffett found that he liked the idea of advertising for people to nominate themselves for jobs. He had always preferred that people ask him for favors. In his 2006 letter to shareholders, prodded by Bill Gates, he had pointed out that Lou Simpson’s “top-notch” investing record was at risk (omitting any mention of his own) if anything happened to both Simpson and himself, and advertised for a successor to Simpson. Send in your résumé, Buffett said.
What he did not mention was why Gates was prodding him. Berkshire’s big money was always made in times of fear and panic. When others fled a stock and—especially—the whole stock market, Buffett saw that as a cue to buy. In the 1960s he bought American Express; in the 1970s he bought GEICO and the Washington Post, and any number of other stocks that positioned Berkshire for its long gallop into the 1990s; in the early 1980s, when investors thought equities were dead, he bought stocks greedily. Later, he bought Coca-Cola when its price war with Pepsi seemed to have eroded the franchise; he scooped up undervalued stocks after the market crash of 1987. He had tried to buy Long-Term Capital Management during the panic its failure created. That he had not succeeded he considered one of the great missed opportunities of his life; Buffett kept the framed offer letter on his office wall.
Buffett reveled in the hard times that terrified most investors. Since the long boom of the 1980s began, he had been waiting for others to become fearful again so that he could become greedy. “It may not happen in my lifetime,” he said once. His nagging worry was that after holding Berkshire’s powder dry for two decades, he might never get to spend it in a final burst of glory. Who knew how much longer the boom would last? The one thing he did know was that it wouldn’t be forever.
Forced to choose someone besides himself who might be in charge of Berkshire’s coffers at the time of the next panic—as well as during the speculative investment bubble that would lead up to it—he and Munger were looking for a person who could “anticipate things that have never happened.” Seven hundred proposals arrived from all over the world. One person explained, “I am said to be selfish and also ruthless”; many people wrote saying they had no requisite experience, but wanted to be Buffett’s apprentice, understudy, or protégé. He collected all these letters in huge boxes in the boardroom before eventually filing them away. In the end he chose four candidates who were already successful and managing money; they waited in the wings to assume the role of being compared to Warren Buffett—ten seconds of omnipotence, fifteen minutes of fame, followed by a marathon endurance test.
Buffett once said that he would be happy if Berkshire was still serving his shareholders thirty years after his death. That was his design. The elegant machine that he had created was built to last more than a generation beyond him. Yet to maintain it would be a remarkable accomplishment; he was the soul of that machine, and without him there would be a vacuum at the center, no matter what. For Buffett was the best there would ever be at the thing that only he could do perfectly, which was to be himself.
No group of shareholders in history had ever missed their CEO as much as Berkshire’s shareholders would miss Buffett when he was finally gone. None had ever thought of their CEO as a teacher and a friend the way Buffett’s shareholders had thought of him. The man who had made billions had touched thousands of people and had a relationship that felt personal to countless others whom he’d never even met or seen. But oddly enough, no matter how many fan letters Buffett got or how many autographs he signed, he never fully grasped how loved and admired he was. He still got as excited about every letter and request for an autograph as though it were the first.