1. From peak to trough in the Depression (September 3, 1929, to July 8, 1932), the Dow fell 89%. From peak to trough in the early 1970s (January 11, 1974, to December 6, 1974), the Dow fell 45%—the two worst bear markets of the century.
2. Robert Redford interview, cited by Graham in Personal History. New York: Alfred A. Knopf, 1997.
3. Katharine Graham, Personal History.
4. The television stations owned by both would have created a conflict.
5. Katharine Graham, Personal History.
6. Interview with Gladys Kaiser.
7. From a letter that Graham wrote Buffett, reprinted in Personal History. Don Graham recalls his mother telling him that Susie cooked eggs for her, and Susie and Warren watched Kay eat them and did not eat any themselves.
8. Measured from its peak.
9. Interview with Charlie Munger.
10. The record was 1970: Sequoia 12.11% vs. S&P 20.6%; 1971: Sequoia 13.64% vs. S&P 14.29%; 1972: Sequoia 3.61% vs. S&P 18.98%; 1973: Sequoia (24.8%) vs. S&P (14.72%).
11. Marshall Weinberg as well as Buffett confirmed this in interviews. Malott says he does not recall it.
12. Loomis joined Sandy Gottesman at First Manhattan; Brandt went to work at Abraham & Co.
13. “Look at All Those Beautiful, Scantily Clad Girls Out There!” Forbes, November 1, 1974.
14. “Forbes didn’t use what I considered to be the most significant line,” said Buffett in a letter to Pat Ellebracht on October 24, 1974, repeating this quote.
15. Interview with Rod Rathbun; Omni arbitration files of the National Indemnity Company.
16. Compounded over thirty years at 20%, this was perhaps a $2.4 billion investment return forgone. Buffett and Munger have referred to it as the greatest missed opportunity in the history of Berkshire Hathaway. The details are arcane but the essence of the story is as portrayed here.
17. “Why the SEC’s Enforcer Is in Over His Head,” BusinessWeek, October 11, 1976.
18. Interview with Verne McKenzie.
19. Interview with Betty Casper Peters.
20. Interview with Verne McKenzie.
21. Robin Rickershauser, who has often heard this clever trope from her husband, did not realize he originated it until contacted by the author.
22. If true, investors would have been selling without required information about the buyer and his reasons.
23. Charles T. Munger testimony, In the Matter of Blue Chip Stamps, Berkshire Hathaway Incorporated, HO-784, Thursday, March 20, 1975, p. 112.
24. The increase in Santa Barbara’s price if the deal collapsed would only partially hedge this risk.
25. Charles T. Munger testimony, In the Matter of Blue Chip Stamps, Berkshire Hathaway Incorporated, HO-784, Thursday, March 20, 1975, pp. 112–13.
26. Interview with Judge Stanley Sporkin.
27. Ibid. This lawyer was so particularly ferocious that the author was asked not to mention his name.
28. A thick file of documents produced in response to the SEC’s February 1975 subpoena illustrates several points: 1) it contained no evidence that Buffett bought on inside information or expecting a takeover; 2) Buffett had become expert on water company regulation and ratemaking, and his interest and expertise in this narrow subject was prodigious; 3) this aspect of the investigation must have been intrusive and an embarrassing form of déjà vù, as it included production of his correspondence with Forbes that attempted to clear his name.
29. Partly because of state restrictions on how much stock any one insurance company could hold, the diagram was more complicated than it would have been otherwise. The version shown on this page–this page was created by Verne McKenzie and updated through 1977 (i.e., includes the Buffalo News). Berkshire was still negotiating with the SEC as late as 1978.
30. During Buffett’s testimony, In the Matter of Blue Chip Stamps, Berkshire Hathaway Incorporated, HO-784, Friday, March 21, 1975, p. 125, he acknowledged that he and Munger had been buying shares of Wesco in the open market during a tender offer and Rickershauser had advised him to stop, saying that they should use only tender offers to accumulate further shares (which they did). Rickershauser interjected, “I want the record to be clear that I did not tell them it was illegal to do what was done. I told them it would be hard to convince somebody that in hindsight they may not have intended to do what they did. You can swear me in if you want to on that one. I didn’t want to be right.”
31. Said to a colleague.
32. The SEC apparently considered Buffett, Munger, and Guerin’s interests and the companies a controlled group for purposes of tender offers. The combination of Warren (11%), Susie (2%), Munger and his partners (10%), Berkshire Hathaway (26%), and Diversified (16%) controlled 65% of Blue Chip’s stock. Warren and Susie owned 36% of Berkshire and 44% of DRC. Munger owned 10% of DRC. DRC owned 15% of BRK and 16% of BC. BC owned 64% of Wesco.
33. The “harm principle” was articulated by scholars such as John Locke, Wilhelm von Humboldt, and John Stuart Mill, who argued that the sole purpose of law was to prevent harm, and the individual’s liberty should not be encroached otherwise. The harm principle is the basis for certain portions of the U.S. Constitution.
34. Chuck Rickershauser Jr. letter to Stanley Sporkin, November 19, 1975.
35. Chuck Rickershauser Jr. letter to Stanley Sporkin, December 1, 1975.
36. Warren E. Buffett testimony, In the Matter of Blue Chip Stamps, Berkshire Hathaway Incorporated, HO-784, Friday, March 21, 1975, p. 157.
37. Charles T. Munger testimony, In the Matter of Blue Chip Stamps, Berkshire Hathaway Incorporated, HO-784, Thursday, March 20, 1975, p. 197.
38. Interview with Judge Stanley Sporkin. Sporkin served as general counsel to the CIA after leaving the SEC in 1981. He became Judge of the U.S. District Court for the District of Columbia in 1985 and served till his retirement in 2000.
39. Ibid. For more on Sporkin see Jack Willoughby, “Strictly Accountable,” Barron’s, April 7, 2003; Peter Brimelow, “Judge Stanley Sporkin? The Former SEC Activist Is Unfit for the Federal Branch,” Barron’s, November 4, 1985; Robert M. Bleiberg, “Sporkin’s Swan Song?” Barron’s, February 2, 1981; “Why the SEC’s Enforcer Is in Over His Head,” BusinessWeek, October 11, 1976.
40. “I bet on a good horse,” says Sporkin, “and the horse came in.”
41. The company also paid a $115,000 fine. “Consent to Judgment for Permanent Injunction and Other Relief,” “Final Judgment for Permanent Injunction and for Other Relief and Mandatory Order and Consent with Respect Thereto,” and “Complaint for a Permanent Injunction and Other Relief,” In the Matter of Securities and Exchange Commission vs. Blue Chip Stamps, June 9, 1976.
42. The SEC Advisory Committee on Corporate Disclosure, July 30, 1976.