1. Carol Loomis, “Hard Times Come to the Hedge Funds,” Fortune, January 1970, the first of a series of Loomis articles that showcase Buffett’s opinions.
2. Book value. Tangible book value was $43. Warren Buffett letter to partners, October 9, 1969.
3. Ibid.
4. The more inquisitive partners may have discovered that Berkshire Hathaway owned Sun Newspapers by reading its 1968 annual report.
5. Letter to partners, October 9, 1969. Buffett explained that he expected stocks to yield about 6½% after tax for the next ten years, roughly the same as a “purely passive investment in tax-free bonds.” Even the best managers, he said, were unlikely to do better than 9½% after tax. Compare this to the 17% return he had projected to partners in the early years of the partnership and the 30% average he had actually achieved.
6. Letter to partners, December 5, 1969.
7. According to Buffett, a couple of them never were able to find anyone they trusted to manage their money, and one ended up working as a fortune-teller in San Diego.
8. Letter to partners, December 26, 1969.
9. This statement is intriguing since Buffett had just named Dow Jones as the stock he would like to own on a desert island. However, the Sun was not a good investment.
10. Emphasis added by author. By then, a small cult of Buffett-stalkers monitored his holdings, and curiosity about Buffett’s intentions was rife among many partners. The importance of a clear statement of his intentions—after more than a decade of obsessive secrecy—should have been unmistakable (at least with hindsight).
11. Buffett indulged in a bit of score-settling with the underwriters in his letter to partners of December 26, 1969, saying that the deal was pitched “with a heavy weight” placed on a comparison to Sperry & Hutchinson, the nearest competitor, but shortly “before the stock was to be offered, with the Dow Jones Industrials much lower but S&H virtually unchanged, they indicated a price far below their former range.” (Blue Chip at the time had declined significantly.) “We reluctantly agreed and felt we had a deal but, on the next business day, they stated that our agreed price was not feasible.”
12. It was a little unclear what the filling stations’ actual beef was. They had given out Blue Chip stamps and made money doing it. If there were five stamp companies in California, they might have given out stamps that cost more, and it isn’t clear that they would have made more money—they might have made less.
13. DRC’s 1971 annual report discloses $841,042 of notes issued “in exchange for common stock of an affiliated company” due on varying dates, or within twelve months of the death of Warren E. Buffett. DRC continued to issue these notes until 1978, for a total of $1.527 million. During the first year the notes were also payable at the payee’s demand. Apparently the notes were reissued with this term eliminated in 1972 (according to the 1972 DRC financial statements).
14. 1970 Annual Statement for Reinsurance Corporation of Nebraska, Berkshire Hathaway, Diversified, and Blue Chip, Forms 10-K and annual reports to shareholders.
15. Interview with Verne McKenzie.
16. Interview with Rhoda and Bernie Sarnat.
17. Interview with Charlie Munger.
18. Through chunks of stock large enough to almost certainly block an unfriendly takeover.
19. Blue Chip sales peaked in 1970 at $132 million.
20. A&P’s discounting program, Where Economy Originates, prompted other supermarket chains to adopt discounting in 1972. “The Green Stamp Sings the Blues,” Forbes, September 1, 1973.
21. From the files of Berkshire Hathaway.
22. Interview with Bill Ramsey. The sale occurred because Laurence A. See, son of Mary See and a founder of the firm, had died, and Charles See, his brother and executor of his estate, mentioned to an attorney acquaintance while on vacation in Hawaii that he might want to sell. The attorney told Bob Flaherty, who worked for Scudder, Stevens, and Clark, and Flaherty talked to Ramsey, who was also a client of the firm.
23. Interview with Ed Anderson.
24. Buffett and Munger paid 11.4x trailing twelve months earnings for See’s (i.e., a price equal to over eleven years’ worth of the company’s earnings—at the past twelve months’ earnings rate). This was a remarkably high price/earnings ratio for Buffett, who rarely paid more than ten times earnings. Paying more than book value was also unprecedented. Susie told at least one friend that he “bought it for her,” because of her chocolate obsession, which sounds like something he might have said as an endearment.
25. Since 1960.
26. This account is an amalgamation of interviews with Munger and remarks at the Berkshire Hathaway 2003 annual meeting. Warren Buffett and Charlie Munger, “What Makes the Investment Game Great Is You Don’t Have to Be Right on Everything,” Outstanding Investor Digest, Vol. XVIII, Nos. 3 and 4, Year End 2003 Edition.
27. Interviews with Ed Anderson and Chris Browne. Buffett’s reasoning in situations like this and Berkshire was that he needed the stock to get control. However, his allies could have kept their stock and voted with him. Indeed, in his younger days when he had less capital, Buffett had arranged such voting blocks.
28. Warren Buffett letter to Chuck Huggins, December 28, 1971.
29. During the early 1970s, the price of sugar increased sixfold. Although most news stories focused on the price of meat, sugar and cocoa were the commodities that experienced the most wrenching price increases.
30. Narrative is based on correspondence among Warren Buffett, Stanley Krum, and Chuck Huggins, 1972. In a letter dated later in 1972, Buffett the teetotaler also says, “Maybe grapes from one little eighty-acre vineyard in France are really the best in the whole world, but I have always had a suspicion that about 99% of it is in the telling and about 1% is in the drinking.”
31. This is the lament of a number of the managers.
32. Warren Buffett letter to Chuck Huggins, September 25, 1972.
33. Interviews with Tom Newman, Raquel Newman.
34. Buffett also would have gone on the board of his favorite company, GEICO, had the SEC not concluded that it would be a conflict because Berkshire Hathaway already owned an insurance company, National Indemnity.
35. Interview with Peter Buffett.
36. Each of the advisory-board members invested about $7,000. Control of the bank was retained within the African-American community. Some blacks did not want white investors. “They just thought we were trying to put something over on them, I guess,” Buffett says.
37. Interview with John Harding.
38. Interview with Larry Myers. According to Myers, Buffett continued this level of involvement for seventeen years. An advisory board is different from a regular board position and normally requires less time commitment.
39. Roger Lowenstein, Buffett: The Making of an American Capitalist. New York: Doubleday, 1996.
40. Interview with Hallie Smith.
41. Interview with Rhoda and Bernie Sarnat. Buffett recalls the story as well.
42. At an anniversary party for the Thompsons a few weeks earlier, the Buffetts’ cook served what came to be known throughout Omaha as the “poisoned chicken.” Except for a rabbi and his wife, who ate tuna, everyone present came down with salmonella. By then, Buffett was so well-known that the episode made the Omaha World-Herald. Interview with Rabbi Meyer Kripke.
43. As Buffett tells this story he lost the game, but according to Roxanne and Jon Brandt, he was determined not to lose to a six-year-old—and won.
44. According to a friend, Susie began to verbalize this attitude around the late 1960s. She later said these words, as quoted, to Charlie Rose in an interview.
45. Interview with Milton Brown. Several sources confirm that Susie was frequently in contact with Brown during this period.
46. Interviews with Racquel Newman, Tom Newman.
47. His mortgage was $109,000 in 1973.