1. At times he had said he wanted to be a millionaire by age thirty.
2. Interview with Ed Anderson.
3. “Newman and Graham predated A. W. Jones, which everybody thinks is the first hedge fund,” Buffett says. A. W. Jones is best known as the first promoter of the concept of hedging the risk in stocks with short sales. However, its fee structure, partnership arrangement, and flexible investing approach—that is, the classic hedge fund as the term is technically defined—were pioneered much earlier, by Graham if not others as well.
4. The first partnership agreement provided: “Each limited partner shall be paid interest at the rate of 4% per annum on the balance of his capital account as of December 31 of the immediately preceding year as shown by the Federal Income Tax Return filed by the partnership applicable to said year’s business, said interest payments to be charged as expenses of the partnership business. In lieu of a separate computation of interest for the period ending December 31, 1956, each limited partner shall be paid 2% of his original capital contribution, said payments to be charged as expense of the partnership business for said period. In addition each of the limited partners shall share in the overall net profits of the partnership, that is, the net profits of the partnership from the date of its formation to any given point of time in the proportions set opposite their respective names.” The total interest of the partners added up to 21/42 or 50% of the total interest in the earnings (Certificate of Limited Partnership, Buffett Associates, Ltd., May 1, 1956). The agreement to share in the losses was an amendment to the partnership agreement on April 1, 1958.
5. According to Joyce Cowin, both Buffett and her own husband, Dan Cowin, who had been introduced to Buffett by Fred Kuhlken, ran money separately for Gottschaldt and Elberfeld.
6. Interview with Chuck Peterson.
7. Some of these remarks were made at a 2003 speech to Georgia Tech students, the rest in interviews with the author.
8. Hartman L. Butler Jr., “An Hour with Mr. Graham,” March 6, 1976, interview included in Irving Kahn and Robert Milne, Benjamin Graham: The Father of Financial Analysis. Occasional Paper No. 5, The Financial Analysts Research Foundation, 1977.
9. Interview with Tom Knapp.
10. “Tourist Killed Abroad, Portugal-Spain Highway Crash Fatal to Long Island Man,” New York Times, June 23, 1956. Kuhlken had been on a yearlong trip. The other passenger, Paul Kelting, was listed in critical condition.
11. Sloan Wilson, The Man in the Gray Flannel Suit. New York: Simon & Schuster, 1955.
12. Interview with Susie Buffett Jr.
13. Interview with Charlie Munger.
14. Or thereabouts.
15. Interview with Ed Anderson.
16. According to Tom Knapp, one thing Dodge and Buffett had in common was their tightfistedness. Even when he later became one of Buffett’s richest partners, Homer Dodge would angle for a free canoe from a canoe maker. He knew every route into New York City from both La Guardia and JFK airports, and took convoluted trips by bus and subway and on foot rather than hire a cab.
17. The Dodges chose a slightly different deal. Buffett’s share of the profits would be only 25%, but the amount he could lose was limited to his capital, initially only $100. Certificate of Limited Partnership, Buffett Fund, Ltd., September 1, 1956.
18. Cleary split profits over 4%, while Buffett was exposed to the extent of any arrears. Certificate of Limited Partnership, B-C Ltd., October 1, 1956. In 1961, B-C Ltd. was folded into Underwood Partnership, Ltd.
19. Buffett Partnership files, “Miscellaneous Expense” and “Postage and Insurance Expense,” 1956 and 1957.
20. Warren Buffett’s first letter to partners, December 27, 1956.
21. During the war, people bought Liberty Bonds, which paid low interest rates, as a patriotic duty. When rates subsequently rose, the bonds traded “below par”—face value. Stock promoters offered shares to Liberty Bond owners in exchange for the par value of the bonds. Thus bondholders thought they were getting $100 worth of stock for a bond selling in the market for, say, $85, when in fact the stock was worth little if anything. Salesmen also promised some buyers board seats, according to Hayden Ahmanson, who told Buffett this.
22. From 1928 to 1954, the manual was published in five volumes annually as Moody’s Manual of Investments, one volume each for government securities; banks, insurance companies, investment trusts, real estate, finance and credit companies; industrial securities; railroad securities; and public-utility securities. In 1955, Moody’s began publishing Moody’s Bank and Finance Manual separately.
23. Buffett says Hayden Ahmanson gave him this version of events.
24. Buffett: “He was my partner in National American insurance. Dan didn’t have a lot of money, so he was using his money that he had originally planned to put in the partnership, and borrowed some money too.”
25. Under the Williams Act, passed in 1968, you could not do this today, nor could Howard Ahmanson buy back the stock piecemeal. The act requires buyers to make a “tender offer” that puts all sellers on a level playing field under the same price and terms.
26. According to Fred Stanback, when Buffett had “bought all he could pay for,” he also let Stanback start buying.
27. A year later, Buffett sold the National American stock for around $125 (to the best of his memory) to J. M. Kaplan, a New York businessman who had reorganized and headed Welch’s Grape Juice in the 1940s and ’50s and was later known for his philanthropy. Kaplan eventually sold the stock back to Howard Ahmanson.
28. See, for example, Bill Brown, “The Collecting Mania,” University of Chicago Magazine, Vol. 94, No. 1., October 2001.
29. Arthur Wiesenberger, Investment Companies. New York: Arthur W. Wiesenberger & Co., released annually from 1941.
30. Quote is from Lee Seeman. Buffett confirms the substance of the statement. The intriguing question is who or what prompted Wiesenberger to refer Buffett to Davis.
31. Lee Seeman’s recollection in an interview is that Dorothy Davis made the comparison.
32. Buffett, recalling a conversation with Eddie Davis.
33. Dacee resembled the Buffett Fund. Buffett was credited 25% of any profits over a 4% hurdle rate. Certificate of Limited Partnership, Dacee Ltd., August 9, 1957.
34. Congressional records note a Washington, D.C., furniture store was giving away shares of uranium stock with any purchase for a Washington’s Birthday sale. (Stock Market Study, Hearings before the Committee on Banking and Currency of the United States Senate, March 1955.)
35. Above a 4% to 6% “bogey.” He benchmarked himself against the rate of long-term government bonds, telling his partners that if he could not do better than that, he should not get paid. The wide range of profit-sharing reflected the varying level of risk Warren was taking. In the partnerships that paid him the most, he also had unlimited liability to pay back losses.
36. Buffett was charging 25% of the partnership’s appreciation in excess of 6%.
37. Meg Mueller, in an interview, recalls its size relative to other houses on the street at the time.
38. Reynolds was a city councilman. “Sam Reynolds Home Sold to Warren Buffett,” Omaha World-Herald, February 9, 1958. “Buffett’s Folly” was referred to in a letter to Jerry Orans, March 12, 1958, cited in Roger Lowenstein, Buffett: The Making of an American Capitalist. New York: Doubleday, 1996.
39. Interview with Susie Buffett Jr.
40. Interview with Howie Buffett.
41. Pyelonephritis, sometimes associated with pregnancy.
42. As quoted in Lowenstein, Buffett. Billig is now deceased.
43. Interview with Charlie Munger.
44. Interview with Howie Buffett.
45. Kuhlken had introduced Cowin to Buffett in 1951 on one of Buffett’s trips back to New York after his graduation from Columbia.
46. From Joyce Cowin’s eulogy for Cowin.
47. Marshall Weinberg, Tom Knapp, Ed Anderson, Sandy Gottesman, Buffett, and others contributed to this portrait of Cowin.
48. “He lent me unsecured. A dollar of short-term loss offset two dollars of long-term gain for tax purposes, and you could buy a mutual fund that was going to pay a long-term capital-gains dividend and redeem it immediately thereafter to offset a long-term gain going into the end of the year. I bought a combination of long-term gain and short-term loss, which, though equal in amount, had different effects on your tax return. It was all legit then; you can’t do it anymore. It probably saved me a thousand dollars. Boy, it was huge,” says Buffett.
49. Interview with Joyce Cowin.
50. This was an experimental town built to house 1,800 families in low-cost units. Numerous government properties were auctioned off after World War II. “House Passes Bill to Speed Greenbelt Sale,” Washington Post, April 14, 1949; “U.S. Sells Ohio Town It Built in Depression,” New York Times, December 7, 1949; “Greenbelt, Md., Sale Extended for 30 Days,” Washington Post, May 31, 1952.