"And that was our mistake," says Knapp. "We should have let the Denver post office send them back to Washington to reduce the supply."

Through expending enormous effort to become virtual post offices themselves-with most of the work done by Knapp-they gathered more than six hundred thousand Blue Eagle stamps, collectively spending roughly $25,000. For Warren that was a lot, considering his attitude about money and his net worth. They stored the piles of stamps in their basements. And then they realized what they had done. They had laboriously acquired basements full of stamps that would never be worth more than four cents apiece. "When you have so many stamps," Knapp explains, "there are not many collectors."

So the next task became disposing of the stamps. Warren expertly delegated the problem of getting rid of $25,000 worth of four-cent stamps to Tom. Then he simply put it out of his mind, except for the funny story, and instead turned back to what was actually important: raising money for the partnerships. In June 1957, another one of the original partners, Elizabeth Peterson, Chuck's mother, asked Warren to set up a fourth partnership, to be called Underwood, investing another $85,000.31 A few months later, in the summer of 1957, "I got a call from Mrs. Edwin Davis. They used to be customers of the Buffett grocery store. Her husband, Dr. Davis, was a very prominent urologist in town. They lived just a few blocks from here. She said, 'I understand you manage money. Would you come down and explain it to us?'"

Dr. Edwin Davis was nationally known. One of his patients, Arthur Wiesenberger of New York City, was one of the most famous money managers of the era. He had at some point come to Omaha to be treated for prostate problems, and Davis became his client.

Wiesenberger published Investment Companies, an annual "bible" on closed-end investment funds. These were like publicly traded mutual funds, except that they did not accept new investors. They nearly always sold at a discount to the value of their assets, which made Wiesenberger a proponent of buying them.32 In short, they were like mutual-fund cigar butts. The summer before graduate school, Warren had sat in a chair at Buffett-Falk's office, reading Wiesenberger's bible while Howard worked. "Before I went to Columbia," he says, "I used to spend hours and hours reading that book from cover to cover, religiously." He bought two of Wiesenberger's cigar butts, United States & International Securities and Selected Industries, which in 1950 had made up more than two-thirds of his assets.33 While at Graham-Newman, he also managed to meet Wiesenberger and had impressed him, "even though I wasn't very impressive in those days."

In 1957, Wiesenberger called Dr. Davis out of the blue and explained that, although it was not necessarily in his own interest to do so, he was recommending a young man to him. "I tried to hire him myself," said Wiesenberger, "but he was forming a partnership and so I couldn't."34 He urged Davis to consider investing with Buffett.

Shortly afterward, Warren scheduled a meeting with the Davis family on a Sunday afternoon. "I went down to their place and sat in their living room and talked to them for about an hour. I said, 'Here's how I manage money and the arrangement I have.' I was probably twenty-six. I looked about twenty years old at the time." Actually, he looked more like eighteen, according to Eddie Davis: "His collar was open; his coat was too big. He talked so very fast." At the time, Warren went around Omaha wearing a mangy sweater-which one person observed probably should have been given to Goodwill-an old pair of pants, and scuffed shoes. "I acted immature for my age," Buffett recalls. "The kind of things I talked about were what you would expect from a much younger person." In fact, there was still more than a trace of the hand-drumming, "Mammy"-singing boy from Penn. "You had to overlook a lot back then."

Yet not when he was talking about the partnerships. Warren was not there to sell the Davises. He laid out his ground rules. He wanted absolute control over the money and would tell his partners nothing about how it was invested. That was the sticking point. Not for him was Ben Graham's handicap of people riding on his coattails. And his solution to the problem of people being disappointed was that he wasn't going to give them the score after every hole, only once a year after playing eighteen holes. They would get an annual summary of his performance, and they could put money in or withdraw it only on December 31. The rest of the year, their money would be locked into the partnership.

"All the while, Eddie paid no attention to me. Dorothy Davis listened very intently, asking good questions. Eddie was over in the corner doing nothing. He seemed like a very old guy to me, but he was not yet seventy. When we got all the way through, Dorothy turned to Eddie and said, 'What do you think?' Eddie said, 'Let's give him a hundred thousand dollars.' In a much more polite way, I said, 'Dr. Davis, you know, I'm delighted to get this money. But you weren't really paying a lot of attention to me while I was talking. How come you're doing it?'

"And he said, 'Well, you remind me of Charlie Munger.'35 "I said, 'Well, I don't know who Charlie Munger is, but I really like him.'"

But the other reason the Davises were so willing to invest with Warren was because, to their surprise, he "knew more about Arthur Wiesenberger than they did."36 They also liked the way he laid out his terms-clear and transparent, so they knew whose side he was on. He would win or lose along with them. As Dorothy Davis put it, "He's smart, he's bright, and I can tell he's honest. I like everything about this young man." On August 5, 1957, the money from the Davises and their three children seeded the fifth partnership with $100,000. It was called Dacee.37 With Dacee, Warren's business jumped another leg upward. He could now land bigger positions in larger stocks. In his personal portfolio, he still played with things like the "penny" uranium stocks that had been in vogue a few years earlier when the government was buying uranium. These were now fantastically cheap.38 Warren bought companies like Hidden Splendor, Stanrock, Northspan. "There were some attractive issues-it was shooting fish in a barrel. They weren't huge fish, but you were shooting them in a barrel. You knew you were going to make good money. It was minor. The bigger stuff I was putting in the partnerships."

Having new partners meant more money, of course, but it also meant that the number of stock certificates and amount of paperwork managing the five partnerships plus Buffett & Buffett increased substantially. He had to hustle, but it felt good. The shortfall, as always, was money-he never seemed to have enough. The kind of companies he was researching often had market values of one to ten million dollars, so he wanted as much as $100,000 to get a significant position in their stocks. Getting more money to manage was key.

By this time Dan Monen was ready to get back into the partnership, and he and his wife, Mary Ellen, formed the nucleus of Warren's sixth partnership, Mo-Buff, on May 5, 1958. Thanks mostly to National American, the Monens, who had had only $5,000 to invest two years earlier, were now able to put in $70,000.39 At the time, Warren Buffett probably understood the potential of money management to beget more money better than anyone on Wall Street. Every dollar added to a partnership would net him a share of what he earned for his partners.40 Each of those dollars, reinvested, would generate earnings of its own.41 Those earnings, reinvested, would beget still more earnings. The better his performance, the more he would earn, and the larger his share of the partnerships would grow, enabling him to earn even more. His talent for investing could exploit that potential of managing money to the hilt. And despite Warren's apparent awkwardness, he was indisputably successful at merchandising himself. Even though he was nearly invisible in the investing world, the snowball was starting to roll.

With momentum behind him, Warren realized it was time to leave a house where there was barely room for a family with two young children-one an unusually energetic three-and-a-half-year-old-and a third on the way. The Buffetts bought their first house. It stood on Farnam Street, a Dutch Cape set back on a large corner lot overlooked by evergreens, next to one of Omaha's busiest thoroughfares. While the largest house on the block, it had an unpretentious and charming air, with dormers set into the sloping shingled roof and an eyebrow window.42 Warren paid $31,500 to Sam Reynolds, a local businessman, and promptly named it "Buffett's Folly."43 In his mind $31,500 was a million dollars after compounding for a dozen years or so, because he could invest it at such an impressive rate of return. Thus, he felt as though he were spending an outrageous million dollars on the house.

Just before the moving van left the house on Underwood Avenue, Warren took five-year-old Little Susie back up the stairs to the wrought-iron balcony. "The glasses man is staying here," he said. "You need to say good-bye to him." Susie Jr. said good-bye, and, indeed, the glasses man remained behind.44 Big Susie's job was to oversee the move, get them settled into the house, and lasso Howie while more than eight months pregnant with her third child. As longtime friends observed, Howie was a "hell-raiser." The inexhaustible Buffett energy poured from him in such a whirlwind that he was nicknamed the Tornado, a cousin to Warren's childhood nickname, Firebolt-but with a very different connotation. As soon as Howie could walk, says Buffett, he became peripatetic. He dug up the garden with his Tonka toys, and Susie took them away, then he tore the house apart to find them. Once he did, he dug the garden up again. Susie snatched away the front-loader, and the battle repeated itself.45 A week after arriving at Farnam Street and just a day before the Mo-Buff partnership was born, the Buffetts' second son, Peter, arrived. From the start he was a quiet, easy baby. But shortly after his birth, Susie came down with a kidney infection.46 Since her rheumatic fever and ear infections as a child, she had always considered herself healthy. The kidney infection did not concern her as much as shielding Warren from dealing with it; his discomfort around illness was so great that she had trained the family to pay attention to him whenever somebody got sick, as if he, too, were ill and required care. Her real focus was on having a home of her own at last. Even illness and the demands of caring for a new baby and two small children could not suppress her urge to decorate. As it sprang to life, she redid the house in cheery contemporary style, with chrome-and-leather furniture and huge, bright modern paintings covering the white walls. The $15,000 decorating bill totaled almost half of what the house itself had cost, which "just about killed Warren," according to Bob Billig, a golfing pal.47 He didn't notice colors or respond to visual aesthetics and so was indifferent to the result, seeing only the outrageous bill.

"Do I really want to spend $300,000 for this haircut?" was his attitude. If Susie wanted to spend some trifling sum of money, he would say, "I'm not sure I want to blow $500,000 that way."48 But since Susie wanted to spend money that he wanted to withhold, and since he wanted Susie to be happy and she wanted to please him, their personalities were gradually meshing into a system of bargaining and trades.

The outrageous bill included the cost of a device that became an object of wonderment among their friends and neighbors-one of the first color television sets in Omaha.49 Susie liked having her house as the hub of the neighborhood, so before long, on Saturday mornings, all the kids from the block would pile onto the black leather sofa in the little TV room and watch cartoons.50 Willa Johnson, a large, capable black housekeeper who quietly became Susie's extra set of hands, eyes, and ears, joined the household, freeing Susie to find an outlet for her creativity. She and a friend, Thama Friedman, decided to set up a contemporary art gallery. As with everything involving money, the decision had to be cleared with Warren. Before forking over Susie's share, he "interviewed" them in his sitting room and asked, "Do you expect to make money?" Friedman answered, "No," whereupon Buffett replied, "Okay, Susie can come in as an 'investor.'"51 He liked the idea of her doing something of her own and, according to Friedman, wanted them to step back and think about the gallery in a businesslike way while being realistic that it was a hobby. Warren always thought of money in terms of the return on capital laid out, and since the gallery wasn't going to make a profit, he wanted them to limit their spending. Susie's involvement in the gallery was truly a hobby, says Friedman, who managed it day to day.

Susie was considered a flexible, easygoing, but attentive mother by her friends and relatives. Now that the Buffetts lived closer to both their parents, the children spent more time with their grandparents. The atmosphere at the Thompsons', a block and a half away, was relaxed and enjoyable; they didn't care if Howie broke a window or the kids made a mess. Dorothy Thompson got into the spirit of things, playing games, organizing Easter egg hunts, and making elaborate multilayered ice-cream cones. The children loved Doc Thompson, despite his sober self-importance and the way he pontificated. Once he sat Howie on his knee. "Don't drink alcohol," he said, over and over. "It will kill your brain cells, and you don't have any to waste."52 On Sundays, Doc Thompson sometimes came over and preached in a jelly-bean-colored suit right in Warren and Susie's living room. Otherwise, Howie and Susie Jr. went to the Buffetts', where Leila towed them off to church. Compared to the Thompsons, she and Howard seemed stiff and straitlaced. Howard remained such a Victorian throwback that when he called Doris and Warren with news about their sister Bertie, he could only choke out, "All hell's broken loose!" They finally managed to discover, from someone else, that she had lost her baby. Howard couldn't bring himself to say the word "miscarriage."

With their large new house, Warren and Susie began to play host for the families. At her first family Thanksgiving dinner, Susie prepared the turkey herself, thinking the easy way would be to cook it overnight at 100 degrees. After the turkey fell apart, she called on Mrs. Hegman, a cook inherited from Leila, to come and help. Someone other than Warren had to carve, however, since he was useless with a knife. And at family gatherings when his mother was present, as soon as he could get away with it, he disappeared upstairs to work.

Susie had covered Warren's new little office off the master bedroom with greenback-patterned wallpaper. Comfortably surrounded by money, he now set about buying cheap stocks as fast as his fingers could fly through the Moody's Manuals: businesses that sold basic items or commodities that could be easily valued, like Davenport Hosiery, Meadow River Coal & Land, Westpan Hydrocarbon, and Maracaibo Oil Exploration. For the partnership, for himself, for Susie, or for all of these whenever he had money, he put it to work as fast as he could bring it through the door.

Often he needed secrecy to execute his ideas and he used intelligent, willing people like Dan Monen to act as his proxies. Another of these proxies was Daniel Cowin, a value hunter who worked for the small brokerage firm Hettleman & Co. in New York. Warren had met Dan through their late friend from Columbia, Fred Kuhlken.53 Hettleman made investments in little stocks with capitalizations of a few million, often the kind of obscure bargains that Warren liked.

"Fred had written and described Dan as a young star on Wall Street and said we were made for each other. I immediately decided that Fred was one hundred percent right on both counts. In the next few years, Dan and I were constantly together whenever I visited New York."54 Cowin was nine years older, with deep-set eyes and a penetrating gaze. When the two of them were together, it seemed, on the surface, like a grown man hobnobbing with a college boy, but they had much in common. Cowin had grown up poor during the Depression after his father lost the family's money, and as a teenager he had supported his family. He put the money he got for a thirteenth-birthday gift into stocks.55 He gravitated toward a career in investing after his Navy service, working independently even at an investment house, keeping his ideas to himself. Unlike Buffett, however, he had a strong appreciation for cutting-edge art, was creative around the house-spraying pinecones silver for the Christmas dinner table-and collected photography and antiques. What attracted Buffett to him was that Cowin traded well and worked his own ideas.56 Cowin had also endeared himself to Warren early on, when he was at Graham-Newman, by lending him $50,000 for a week so that Warren could buy some mutual-fund shares to achieve a thousand-dollar tax saving.57 Over time, they collaborated, with Dan the balding senior partner: more experienced and with more money to invest, but sharing information and ideas.

Buffett and Cowin used to call each other weekly when the Pink Sheets that listed small stocks came out, and compare notes. "Did you get that one?" "Yes! I bought that, that's mine!"-both feeling like winners when they had picked the same ones. "It was like picking a horse," says Dan's wife, Joyce.58 They thought about taking over the National Casket Company, code-naming it the Container Company. "Dan was a digger," Buffett says, "which I guess makes sense."

Once, Buffett says, they had even tried to buy a Maryland "town" that the Federal Housing Authority was auctioning off for peanuts: it consisted of the post office, the town hall, and a large number of rental properties that were charging below-market rents. The town had been built during the Depression. Buffett recalls that the ad for the town made them salivate with Snidely Whiplash dreams of quickly raising the rents to a market rate. But even for "peanuts," the town was expensive and they couldn't get together enough cash.59 Warren could never get enough cash. He was always trying to raise money. The Graham connection was about to pay off again. Bernie Sarnat-a pioneer in plastic and reconstructive surgery-went to have a chat one day with Ben Graham, his wife's first cousin. Ben had moved across the street from the Sarnats when he and Estey retired to California. Sarnat says he asked Graham what he should do with his money now, "what little money he had in his partnership. Well," recalls Sarnat, "he said, 'Oh, buy AT&T,' and he handed me shares in three closed-end funds and some stock. And then he very casually mentioned, 'One of my former students is doing some investing. Warren Buffett.' And that was it. So casually that I didn't even pick it up."

Hardly anybody knew Warren Buffett. He might as well have been a patch of moss hidden under a rock in Omaha. Sarnat's wife, Rhoda, a social worker, took a walk every day with her cousin-in-law Estey. "One day not long after," she recalls, "Estey said to me, 'Listen, Rhoda, people are always approaching us to invest in their partnerships, because if they can tell people that Ben Graham invests in them, they have it made. We say no to everybody. But that Warren Buffett-he has potential. We're investing with him, and you'd better do it too.'

"My only question was," says Rhoda, "'Estey, I know you think he's bright, but I'm more interested in whether he's honest.' Estey said, 'Absolutely. Totally. I trust him a hundred percent.'" The Sarnats and Estey Graham put $10,000 and $15,000, respectively, into Mo-Buff. By then, the Monens' investment had grown to $100,000.

Some of the students in Warren's investing classes had also joined the partnerships, as had Wally Keenan, his former Dale Carnegie instructor. In fact, by 1959, he was getting somewhat of a name around town, in part through his teaching. No longer hidden, his qualities-good and bad-had begun to be recognized in Omaha. The side of him that had taken the counterposition in the teenage radio show American School of the Air came across in Omaha as brash, a know-it-all. "I used to love to take the opposite side of any argument," he says, "no matter what. I could turn in a second." People thought it was nervy of him to ask for money to invest without telling them what he would be buying. "There were people in Omaha who thought what I was doing was some sort of Ponzi scheme," he recalls. It had repercussions. When Warren had reapplied for full membership in the Omaha Country Club, he was blackballed. To be blackballed from the country club was a serious matter; someone disliked him enough to show it in a tangible and embarrassing way. It was one thing to identify with outsiders, but he also wanted to belong. Besides, Warren liked to play golf, and the club had a good course. Through connections, he worked at it until he got off the blacklist.

But his talents shone through to many more people now, and brought him partners of increasing prominence. In February 1959, Casper Offutt and his son, Cap Jr., members of one of Omaha's most prominent families, approached him about a partnership of their own. When Warren explained that they would not know what he was buying, Cap Sr. said, "Well, I'm not going to put any money in if I don't know what it is, if you've got complete control and I don't have any voice in it."60 But Cap Jr., together with his brother John and William Glenn, a businessman for whom Chuck Peterson managed real estate properties, invested anyway. They put $50,000 into Glenoff, the seventh partnership.

And all the while that Warren was investing during these early years of the partnerships, he never deviated from the principles of Ben Graham. Everything he bought was extraordinarily cheap, cigar butts all, soggy stogies containing one free puff. But that was before he met Charlie Munger.

23.

The Omaha Club Omaha * 1959 Like a steel bank vault door, the arched portals of the Omaha Club swung closed behind the bankers and insurance men and railroad executives of the city as George, the black doorman, welcomed them inside. Come from playing squash in the basement or from their offices downtown, the men loitered by the tiled fireplace in the front hall, chatting until the women entered through a separate side door in the building's Italian Renaissance facade to join them. The assembled parties ascended the curving mahogany staircase to the second floor, passing on the way the life-size painting of a Scotsman catching a trout in a stream. The Omaha Club was where the town came to dance, to raise money, to get married, and to celebrate anniversaries. But above all, it was where the town came to do business, for at its tables you were left to talk in peace.

One summer Friday in 1959, Buffett strode through the club's entrance to have lunch with two of his partners, Neal Davis and his brother-in-law Lee Seeman, who had arranged for him to meet Davis's best friend since childhood. It was Neal's father, Dr. Eddie Davis, who had said to Warren, "You remind me of Charlie Munger" when the Davises had joined the partnership. Now Munger was in town to settle his father's estate.1 Munger knew only a few facts about the crew-cut Buffett kid, six years his junior. But, consistent with his expectations of life in general, his expectations of this meeting were not high.2 He had developed the habit of expecting little so as never to be disappointed. And rarely did Charles T. Munger meet anyone to whom he enjoyed listening as much as himself.

The Mungers had started in poverty, but by the latter part of the nineteenth century, T. C. Munger, Charlie's grandfather, a federal judge, had brought the family to prominence, welcome in every drawing room in Omaha-rather than only at the back door, delivering groceries, like the Buffetts. Judge Munger, an iron disciplinarian, had forced the whole family to read Robinson Crusoe to absorb the book's portrayal of the conquest of nature through discipline. He was known for giving longer jury instructions than any judge in the middle west.3 He liked to lecture his relatives on the virtue of saving and the vices of gambling and saloons. Charlie's straitlaced aunt Ufie, who listened, had "kept hard at two separate careers until past eighty, dominated her church, saved her money, and, duty-ridden, attended as a matter of course her beloved husband's autopsy."4 Judge Munger's son Al followed his father into the law, becoming a respectable but not rich attorney who counted among his clients the Omaha World-Herald and other important local institutions. Lighthearted, unlike his father, he was often seen enjoying a pipe, hunting, or catching a fish. His son later said of him that Al Munger "achieved exactly what he wished to achieve, no more or less...with less fuss than either his father or his son, each of whom spent considerable time foreseeing troubles that never happened."5 Al's wife, the beautiful, witty Florence "Toody" Russell, came from another clan raised on duty and moral rectitude, an enterprising family of New England intellectuals known for what Charlie referred to as "plenty of plain living and high thinking." When she announced she was marrying Al Munger, her elderly grandmother observed his thick spectacles and five-foot, five-and-a-half-inch frame and was flabbergasted. "Whoever would have thought she had the sense?" she supposedly exclaimed.

Al and Toody Munger had three children: Charles, Carol, and Mary. A photograph of Charlie as an infant shows him already wearing the petulant expression so typical of him later in life. At Dundee Elementary School, his most prominent features were a pair of huge elfin ears and, when he chose to reveal it, a broad smile. He was recognized as intelligent, "lively," and "too independent-minded to bow down to meet certain teachers' expectations," according to his sister Carol Estabrook.6 "Smart, and a smarty," is how the Mungers' neighbor Dorothy Davis recalls Charlie from his earliest childhood.7 Mrs. Davis tried to control Charlie's influence on her son, Neal, but nothing tamed Charlie's mouth, not even the sight of her with a switch in her hand, coming after the boys to lash their bare calves.

Warren had borne the indignities of childhood with only brief rebellion before learning to hide his misery and adopt artful strategies to cope. Too proud to submit, Charlie suffered through the woes of youth by employing his talent for wounding sarcasm. Matched as a dance partner every single Friday at Addie Fogg's dance class with Mary McArthur, the only girl shorter than he, Charlie made no secret of his irritation at the routine that emphasized his status as the second-shortest child in the class.8 At Central High School, he gained the nickname "Brains" and a reputation for hyperactiveness-and for being aloof.9 From a family that treasured learning, he grew up intellectually ambitious and enrolled in the University of Michigan at seventeen, majoring in mathematics. He enlisted in the Army a year after Pearl Harbor, halfway through his sophomore year. While in the service he attended the University of New Mexico and California Institute of Technology for credits in meteorology, though he never actually graduated. After more coursework he worked in Nome, Alaska, as an Army meteorologist. Later, Munger would make a point of saying that he never saw active duty and would emphasize his luck in having been stationed out of harm's way. The main risk that he took was financial: He augmented his army pay by playing poker. He found he was good at it. It turned out to be his version of the racetrack. He said he learned to fold fast when odds were bad and bet heavily when they were good, lessons he would use to advantage later in life.

With the help of well-oiled family connections, he brazened his way into Harvard Law School after the war without ever having finished his undergraduate degree.10 By then he was married to Nancy Huggins, an impulsive match entered into when he was twenty-one and she nineteen. He had sprouted into a medium-height, well-dressed young man whose close-cut dark hair and alert eyes gave him a polished look. But his most prominent feature-apart from his ears, now only slightly winged from his skull-was a hallmark skeptical expression. He wore it often while racing through Harvard-without learning anything, he says.11 Then, he later told his friends, he looked at a map and asked himself, "What city is growing and full of opportunity, so that I could make a lot of money, but not so big and well developed that it would be hard to rise into the ranks of the city's prominent men?" He chose Los Angeles.12 Pasadena-the gracious old Spanish-flavored Los Angeles suburb where he had attended Caltech-had impressed him. It was there that he had met his wife, the daughter of a locally prominent family. Nancy was "willful, indulged," says her daughter Molly, not exactly ideal traits given her new husband's temperament.13 Within a few years their marriage was in trouble. Nonetheless, after Harvard they hightailed it back to her hometown, with their son, Teddy, and settled in Pasadena, where Charlie became a successful lawyer.

By 1953, after three children and eight years of incompatibility, fighting, and misery, Munger found himself divorcing at a time when divorce was a disgrace. Despite their problems, he and Nancy worked out a civilized arrangement regarding their son and two daughters. Munger moved into a room at the University Club, bought a dented yellow Pontiac with a bad paint job "to discourage gold diggers," and became a devoted Saturday father.14 Then, within a year of the separation, Teddy, now eight years old, was diagnosed with leukemia. Munger and his ex-wife scoured the medical community but quickly discovered the disease was incurable. They sat in the leukemia ward with the other parents and grandparents in different stages of watching their children waste away.15 Teddy was in and out of the hospital often. Charlie would visit, hold him in his arms, then walk the streets of Pasadena, crying for his son. He found the combination of his failed marriage and his son's terminal illness almost unbearable. The loneliness of living as a divorced single father in the 1950s also chafed at him. He felt a failure without an intact family, and wanted to live surrounded by children.

When things went wrong, Munger would set out toward new goals rather than let himself dwell on the negative.16 That could come across as pragmatic, or even callous, but he viewed it as keeping the horizon in sight. "You should never, when facing some unbelievable tragedy, let one tragedy increase into two or three through your failure of will," he would later say.17 So even as he cared for his dying son, Munger decided to marry again. His method of analyzing the odds of a successful match made him pessimistic, however.

"Charlie was despairing over whether he would ever meet anyone else. 'How can I find somebody? Out of twenty million people in California, half are women. Of these ten million, only two million are of an appropriate age. From that group, a million and a half would be married, leaving five hundred thousand. Three hundred thousand of them are too dumb, fifty thousand are too smart, and of the remaining hundred fifty thousand, the number I would want to marry would fit on a basketball court. I've got to find one of those. And then I've got to be on her basketball court.'"

Munger's mental habit of setting low expectations was well established. He equated this with the route to happiness, since he felt that high expectations led to fault-finding. Low expectations made it harder to be disappointed. Paradoxically, however, they could also confound success.

Out of desperation, Munger started reviewing divorce and death notices to find newly single women. That got his friends' attention. Thinking this pathetic, they began to intervene. One of his law partners came up with another Nancy, a divorcee with two young boys. Nancy Barry Borthwick, a petite brunette, played tennis avidly, skied, and golfed. She was also a Phi Beta Kappa economics graduate of Stanford.

On their first date he warned her, "I'm didactic." The thought of a man infected by the urge to preach failed to put Nancy off, which augured well for their relationship. They started taking their children on outings. At first Teddy went along with them, but he soon became too ill. Later, thirty-one-year-old Charlie spent much of his son's final weeks sitting by Teddy's bedside. By the time Teddy died in 1955 at age nine, Charlie had lost between ten and fifteen pounds. "I can't imagine any experience in life worse than losing a child inch by inch," he said later.18 Charlie married Nancy Borthwick in January 1956. She quickly became his ballast. He desperately needed someone to arrange his life. Nancy had moxie, pricking Charlie's balloon without hesitation when it inflated with too much hot air. She was an excellent manager, observant, calm, reasonable, and practical. Nancy curbed his caprices when Charlie took off on occasional bolts of impulsiveness. In time, they added three sons and a daughter to his two girls and her two boys. She set about raising eight children while keeping house and taking care of Charlie.19 He became known to his children as a "book with legs," constantly studying science and the achievements of great men. Meanwhile, he continued seeking his fortune at the law firm of Musick, Peeler & Garrett, but realized that the law would not make him rich. He began to develop some profitable sidelines. "Charlie, as a very young lawyer, was probably getting $20 an hour. He thought to himself, 'Who's my most valuable client?' And he decided it was himself. So he decided to sell himself an hour each day. He did it early in the morning, working on these construction projects and real estate deals. Everybody should do this, be the client, and then work for other people, too, and sell yourself an hour a day."

"I had a considerable passion to get rich," Munger said. "Not because I wanted Ferraris-I wanted the independence. I desperately wanted it. I thought it was undignified to have to send invoices to other people. I don't know where I got that notion from, but I had it."20 He saw himself as the gentleman squire. Money wasn't a competition to him. He wanted to join the right clubs but he didn't care whether the other members were richer than him. Beneath the surface arrogance, his deep respect for authentic achievement gave him a genuine humility that would be crucial in forming a relationship with the man he was about to meet.

That man who sat across from him in a private room of the Omaha Club and started to talk was dressed like a youngish salesman come to sell insurance to the gentleman squire. The worldly Munger by now was well ensconced in Los Angeles business and society, and looked the part. As soon as the Davises and Seemans had made the introductions, however, the two fell into a tte--tte. Charlie allowed that he had actually "slaved" a short stint at the Buffett grocery store, where "you were just goddamn busy from the first hour of morning until night."21 Ernest had let the sons of favored customers like Toody Munger loaf, however, at least compared to the rest of the beleaguered clerks.22 After the pleasantries, the conversation picked up speed and the rest of the party listened, rapt, as Warren began to talk about investing and Ben Graham. Charlie grasped the concepts right away. "He had spent plenty of time thinking about investing and business by then," Buffett says.

He told Charlie the story of National American insurance. Munger had gone to Central High with Howard and Hayden Ahmanson. He was amazed that someone like Buffett, who was not from California, could know so much about the Ahmansons and their savings and loan. Before long, the two men were talking simultaneously, yet they seemed to understand each other perfectly.23 After a while, Charlie asked, "Warren, what do you do specifically?"

Well, I've got these partnerships, Buffett explained, and I do this, and this, and that. In 1957, he said, his partnerships had earned over ten percent in a year when the market had declined over eight percent. The next year the partnerships' investments had risen more than forty percent in value.24 Buffett's fees so far from managing the partnerships, reinvested, came to $83,085. These fees had mushroomed his initial contribution of only $700-$100 contributed to each of the seven partnerships25-into a stake worth 9.5 percent of the combined value of all the partnerships. Moreover, his performance was well on its way to beating the Dow again in 1959, which would make him richer still and raise his stake again. Meanwhile, his investors were thrilled; new partners kept joining. Charlie listened. Eventually he asked, "Do you think that I could do something like that out in California?" Warren paused for a moment and looked at him. This was an unconventional question coming from a successful Los Angeles lawyer. "Yeah," he said, "I'm quite sure you could do it."26 As the luncheon wound its way to an end, the Seemans and the Davises decided it was time to go. When they got on the elevator, their last sight was of Buffett and Munger, still sitting at the table, engrossed.27 A few nights later, the two men took their wives to Johnny's Cafe, a red-velvet steak joint, where Munger became so self-intoxicated at one of his own jokes that he slipped out of the booth and began rolling on the floor with laughter. When the Mungers returned to Los Angeles, the conversation continued in installments, the two men talking on the phone for an hour or two with increasing frequency. Buffett, once obsessed with Ping-Pong, had found something far more interesting.

"Why are you paying so much attention to him?" Nancy asked her husband.

"You don't understand," said Charlie. "That is no ordinary human being."28

24.

The Locomotive New York City and Omaha * 19581962 Warren and Susie seemed like ordinary people. They kept a low profile. Their house was large but not ostentatious. It had a log cabin in the backyard for the kids. The back door was never locked; neighborhood children wandered in and out. Inside the house, the Buffetts clickety-clacked on their different tracks at gathering speed. As Susie added stop after stop to her local schedule, Warren headed out on a nonstop trip to Dollar Mountain.

Until 1958, his straightforward route was to buy a stock and wait for the cigar butt to light. Then he usually sold the stock, sometimes with regret, to buy another he wanted more, his ambitions limited by his partnerships' capital.

Now, however, he was managing more than $1 million in seven partnerships plus Buffett & Buffett and his personal money,1 which let him operate on a different scale. His network of business pals like Stanback, Knapp, Brandt, Cowin, Schloss, and Ruane had grown by the addition of Munger; the two of them ran up outrageous-by their standards-phone bills every month. Munger had introduced him to his friend Roy Tolles, a lanky former Marine fighter pilot who wore a constant placid smile and kept the thoughts inside his quick mind to himself-except for the occasional barbed zingers he had a way of throwing out, which made people "want to keep a few Band-Aids around," as one friend put it. Buffett, like Munger, could parry and riposte with the best, and added Tolles to his collection. This knack for signing up volunteers to his cause had created a large, if loosely organized, support structure. Warren more or less automatically Tom-Sawyered these supporters, hived off into several cells, into helping his interests, which had grown so fast that he could no longer carry out every detail of them by himself.

The days when Warren simply sat in his study at home, picking stocks out of Security Analysis or the Moody's Manuals, were gone. Increasingly, he began to work on large-scale, lucrative projects that required time and planning to execute-even more so than buying up the shares of National American insurance. These projects would sometimes evolve into complicated, even dramatic episodes that would absorb his attention for months, or occasionally years, at a stretch. Sometimes several of these investing projects operated simultaneously. Already preoccupied to the point that he was barely present to his family much of the time, this expansion of scale would exacerbate that tendency, while binding him more tightly to his friends.

The first of these complicated episodes involved a company called Sanborn Map. It published minutely detailed maps of power lines, water mains, driveways, building engineering, roof composition, and emergency stairwells for all the cities of the United States, maps that were mainly bought by insurance companies.2 The business was no winner, its customer base slowly shrinking as insurers merged. But its stock was cheap at $45 per share, since Sanborn's investment portfolio alone was worth $65 per share. To get hold of that investment portfolio, however, Warren needed not just money from his partnerships but also help from other people.

Beginning in November 1958, he put more than one-third of the partnerships' assets into Sanborn. He bought the stock for himself and for Susie. He had his aunt Alice, his father, his mother, his sisters, all buy it. He passed the Sanborn idea along to Cowin, to Stanback, to Knapp, and to Schloss. Some people got in on it as a favor from him. He took an override-a percentage of the profits-from others as a way of leveraging his capital. To get more shares under his control, he added Don Danly, his pinball-and-pilferage pal from high school; his father's best friend, Vic Spittler; Dottie's husband, Homer Rogers; and Howard Browne, the head of Tweedy, Browne and Reilly, the brokerage firm where Tom Knapp worked. He also put Catherine Elberfeld and Anne Gottschaldt, the aunt and mother of his friend Fred Kuhlken, into the stock. Since he had still not brought Gottschaldt and Elberfeld into a partnership, this strongly suggested that he thought Sanborn was a sure thing. Eventually he controlled enough of Sanborn's shares to be elected to the board.

In March 1959, Warren took one of his regular trips to New York, staying out on Long Island at Anne Gottschaldt's little white colonial house. By now she and her sister had adopted him as a sort of surrogate son, as if to replace the long-dead Fred. Warren kept spare sets of underwear and pajamas at her house, and Gottschaldt made him hamburgers for breakfast. On these journeys, he always set out with a list of between ten and thirty things he wanted to accomplish. He would go to the Standard & Poor's library to look up some information. He would visit some companies, visit some brokers, and always spend time with Brandt, Cowin, Schloss, Knapp, and Ruane, his New York City network.

This particular trip was lengthy, about ten days. He had sit-downs with prospects for the partnership and another important appointment: his first meeting as a board member at Sanborn Map.

Sanborn's board consisted almost entirely of insurance-company representatives-its biggest customers-so it operated more like a club than a business, except that the board meeting wasn't followed by a round of golf. None of the board members owned more than token amounts of stock.3 At the meeting, Warren proposed that the company distribute the investments to the shareholders. But since the Depression and World War II, American businesses treated money as a scarce commodity to be hoarded and husbanded. This way of thinking had become automatic, its underlying premise unexamined, even though the economic justification for it had long disappeared. The board responded to the idea of separating the investment portfolio from the map business as preposterous. Then, toward the end of the meeting, the board broke out the humidor and passed around cigars. While they smoked, Warren sat fuming. "That's my money paying for those cigars," he thought. On the way back to the airport, he took pictures of his children out of his wallet and looked at them to bring his blood pressure down.

Frustrated, Warren decided that he would take the company away from Sanborn's undeserving board on behalf of the other shareholders. They deserved it more. Therefore, Buffett's group-Fred Stanback, Walter Schloss, Alice Buffett, Dan Cowin, Henry Brandt, Catherine Elberfeld, Anne Gottschaldt, and some of the others-kept buying. Warren also used new money coming into the partnerships. He had Howard put a number of his brokerage clients into Sanborn. Warren was probably doing his father a financial favor, even as he tightened his grip on the company.

Before long, people friendly to Warren, including the famous money manager Phil Carret, who had bought Greif Bros. and Cleveland's Worst Mill after hearing of these stocks through Warren, had corralled about 24,000 shares. Once they had effective control, Warren decided it was time to act. The stock market was high, and he wanted Sanborn to unload its investments at an opportune time. Booz Allen Hamilton, the company's strategic consultants, had already submitted a plan to do this,4 but the sticking point was taxes. If Sanborn sold the investments, it would have to pay a tax bill of about $2 million. Warren offered a solution similar to the Rockwood & Co. tax trick of swapping the investments, tax-free, for stock.

Another board meeting took place at which nothing happened except for more of the investors' money going up in cigar smoke. For a second time Buffett rode back to the airport looking at pictures of his kids to calm himself down. Three days later, he threatened to call a special meeting and take control of the company unless the directors took action by October 31.5 His patience had run out.

Now the board had no choice. It agreed to split the two businesses. Even so, the issue remained of how to deal with the tax. One of the insurance men said, "Let's just swallow the tax."

"And I said, 'Wait a minute. Let's-"Let's" is a contraction. It means "let us." Who is this us? If everyone around the table wants to do it per capita, that's fine, but if you want to do it in a ratio of shares owned, and you get ten shares' worth of tax and I get twenty-four thousand shares' worth, forget it.' He was talking about swallowing two million dollars' worth of tax just because he didn't want to go to the trouble of doing the share buyback.6 I remember the cigars getting passed around. I was paying for thirty percent of every one of those cigars. I was the only guy not smoking cigars. They should have paid for a third of my bubble gum."

In the end, however, the board capitulated. Thus, through force of energy, organization, and will, early in 1960 Warren won the fight. Sanborn made a Rockwood-type offer to shareholders, exchanging a portion of the investment portfolio for stock.7 The Sanborn deal set a new high-water mark: Buffett could use his brains and his partnerships' money to alter the course of even a stubborn and unwilling company.

During this episode, as Buffett traveled back and forth to New York and worked on the Sanborn project, figuring out where to get the stock he needed for control, how to make the board fall in line, and how not to swallow the tax, all the while looking for other investment ideas, his mind whirled with the thousands of numbers that clicked and spun inside his head. At home, he would disappear upstairs to do his reading and thinking.

Susie understood his work as a sort of holy mission. Still, she tried to get him out of his study and into the family's world: scheduled outings, vacations, dinners in restaurants. She had a saying: "Anyone can be a father, but you have to be a daddy too."8 Yet she was talking to someone who'd never had the kind of daddy to which she was referring. "Let's go to Bronco's," she would say, and stuff a gang of neighborhood kids into the car for a burger run. At the table, Warren would laugh when something funny happened and would appear engaged, but he rarely spoke. His mind could have been anywhere.9 On vacation once in California, he took a bunch of kids to Disneyland one night and sat on a bench reading while the kids ran wild and had a grand time.10 Peter was now almost two, Howie five, and Little Sooz-who occupied her own pink checked-gingham kingdom with a canopy bed up a separate flight of stairs-six and a half. Howie tested his parents with destruction to see how much it took to get a reaction from them. He picked on Peter, who was slow to start talking, prodding him as if he were a science experiment to see how he would respond.11 Little Susie policed them both to keep things under control. She started figuring out ways to get back at Howie, once telling him to stick holes with a fork around the bottom of a milk carton. While Howie was enjoying the sight of milk spurting all over the kitchen table, she ran upstairs, crying, "Mommmmmm, Howie's being bad again!"12 Warren simply turned to Susie to cope with their son's explosive energy. And Howie remembers that his mother almost "never got angry, and was always supportive."13 Susie juggled all this while playing the part of the standard-issue upper-middle-class wife circa 1960: appearing every day in her trademark look, a tailored dress or pantsuit, often in sunshine yellow, and a lacquered bouffant wig; taking perfect care of her husband and family; becoming a community leader; and gracefully entertaining her husband's business associates as if this required no more effort than tossing a Swanson TV Dinner into the oven. Warren let her hire help, and soon a series of au pairs took up residence in an airy, light-filled room with its own bath on the second floor. Letha Clark, the new housekeeper, assumed some of the burden. Susie often started her day around noon by hosting a charity luncheon. After school, she shuttled Little Susie to Blue Birds. She would always describe herself as a simple person, but she steadily added layers of complexity to her life. She was setting up a group called the Volunteer Bureau14 to do office work and teach swimming at the University of Omaha. "You, too, can be a Paul Revere" was its motto, invoking an image of one individual saving an entire nation through his (or her) daring and self-sacrificing deeds.

Susie-like Paul Revere-was impatient to mount and ride;15 she dashed back and forth between family obligations and the growing number of people who wanted her attention. Many of these were disadvantaged or traumatized in some way.

Her closest friend, Bella Eisenberg, was an Auschwitz survivor who had made her way to America and Omaha after the camp was liberated. She thought of Susie as someone you could call at four o'clock in the morning when the demons got hold of you.16 Another, Eunice Denenberg, was only a child when she found her father after he hanged himself. Rarest of all among well-off white families, the Buffetts had black friends, including the most intimidating pitcher in baseball, Bob Gibson, and his wife, Charlene. Being a star athlete meant little in 1960 if you were black. "Those were the days when white people wouldn't be seen with black people in Omaha," says Buffett's childhood friend Byron Swanson.17 Susie reached out to everyone; in fact, the more troubled the person, the more willingly she helped. She took a deep interest in the personal lives of people she barely knew. Warren recalls an incident when he left her on line at a concession stand during a football game. By the time he returned from the men's room a few minutes later, the woman standing on line next to Susie was saying to her, "Now, I've never told anybody this before in my life..." as Susie listened, appearing fascinated. Almost everyone she met glowed under this kind of attention and felt touched by the encounter. But even with her closest friends, Susie nearly always took care not to share her own problems.

She played the same role of ministering angel with her own family, above all with her sister. Dottie, who was musical like Susie, had founded the Opera Guild, and remained the beauty of the family, but seemed vacant and, as one person put it, "valiantly unhappy." She maintained a pleasant surface but told Susie that she never cried because if she ever started, she would never stop. Homer, her husband, appeared frustrated that he could not penetrate his wife's cocoon. Still, the Rogerses kept up their vigorous social schedule, and at night, amid the drinks and merriment, their two young sons roamed underfoot. At times, Homer punished them harshly or Dottie teased Billy cruelly-so Susie mothered her nephews along with her own children.

She also helped the senior Buffetts, who were saddled with both Howard's health issues and his ideology. Just as the rest of America had caught up to his level of paranoia about Communism, Howard leapfrogged ahead. By the late Eisenhower years, Americans felt their country, grown soft and fat in its prosperity, was losing the arms race and were haunted by the frightening image of Premier Nikita Khrushchev banging his shoe on a table at the United Nations and thundering "We will bury you." All 180 million Americans ducked-and-covered in air-raid drills, the youngest crouched under their elementary-school desks. More than one billion people were now living under Communism in almost twenty countries around the globe. The rapid advance of Communism over such a broad swath of the world stunned much of the nation. Howard joined a newly formed group, the John Birch Society, which combined paranoia about Communism with what he described as concern for the "moral and spiritual problem of America, which would be with us even if Communism were stopped tomorrow."18 He covered his office walls with maps showing the menacing red advance of Communism. He and Doris helped bring the Christian Anti-Communist Crusade to Omaha19 and threw themselves behind a movement of ideological conservatives that was coalescing around Arizona Senator Barry Goldwater. Howard was respected as a philosophical purist among the libertarian-leaning wing of the Republican Party, but anyone associated with the Birchers attracted both alarm and ridicule. After he went to the local press to defend his Birch membership, people increasingly wrote him off as an eccentric. That Omaha snickered at his revered father was painful to Warren.

But his anxiety on Howard's behalf had even more to do with eighteen months of mysterious symptoms that doctors could not seem to diagnose despite a trip to the Mayo Clinic in Rochester, Minnesota.20 Finally, in May of 1958, Howard had been told he had colon cancer that required immediate surgery.21 Warren had been upset by the diagnosis, but angered by what he considered its inexcusable tardiness. Since then, Susie had shielded him from the details of his father's illness.22 She gave him head rubs and kept up the household schedule. She also devoted herself to propping up Leila during Howard's surgery and long recuperation. She did all of this cheerfully; not only that, she seemed to thrive as the calm, soothing presence on whom everyone could depend in this crisis. She helped her older children understand the illness and saw that all of them, including little Peter, visited their grandfather regularly. Howie watched college football in the afternoons with Howard, who would sit in his recliner and switch sides repeatedly during games, cheering for whichever team was losing. When Howie asked him why, he said, "They're the underdogs now." 23 Throughout his father's ordeal, Warren used business as a distraction. He kept his head buried in American Banker or the Oil & Gas Journal except for brief interludes when he wandered into the kitchen for some popcorn or a Pepsi from the wooden crates that only he was allowed to touch.

Yet somehow, despite Howard's distress and illness, the quiet, withdrawn man who was the Warren Buffett his family saw became a presence in public no matter what was going on at home. He displayed an authority, an almost electric charge of energy, that radiated to an audience. "He just used to ooze that stuff wherever he went," says Chuck Peterson.24 The man who had so impressed Charlie Munger talked constantly and convincingly about investing and the partnerships; he raised money as fast as he could talk-but not as fast as he could invest.

Munger listened to Buffett's investing and money-raising exploits on their almost-daily phone calls, wondering at the natural salesmanship that enabled Buffett to promote himself so well. His trips to New York became more frequent now that Henry Brandt prospected for him. Cash poured into the partnerships' coffers, 1960 a watershed year. Warren's aunt Katie and uncle Fred put nearly $8,000 into Buffett Associates early in the year. Another $51,000 came into Underwood, partly through Chuck Peterson's connections. Then, "Chuck said to me, 'I'd like you and Susie to come to dinner and meet the Angles.' Well, I didn't know them. He said they're both doctors, and real smart people."

Carol and Bill Angle lived across the street from Peterson. Bill Angle, a cardiologist, was a whimsical man who would stay up all night in the winter, spraying water around his front yard and making impeccably glazed snowmen, frosty replicas of his chubby self, standing next to frozen "ponds." His wife specialized in pediatric research.

"We picked them up and there were six of us in the car. We headed over to the Omaha Country Club. Carol Angle was a very good-looking woman, and smart. All during dinner, she couldn't take her eyes off me. I mean, she was just fascinated. I was going crazy, talking about everything in the world and trying desperately to impress her. And she was just taking in every word."

After the presentation, which Peterson recalls as typically persuasive, "we left the country club and drove back. All the way in the car she still couldn't take her eyes off me. We dropped the Angles off. And I said to Chuck, 'I made quite an impression tonight.' He said, 'No, dummy. She's deaf. She's reading your lips.' Since I couldn't stop talking, she couldn't stop looking at me."25 But he certainly had made an impression, for afterward the Angles hosted a dinner at the Hilltop House for a dozen doctors they knew, at which Bill Angle suggested that they form a partnership and each chip in $10,000. One doctor asked, "What happens if we lose all our money?" "Bill Angle gave him this disgusted look. And he said, 'Well, then we form another partnership.'"

The Emdee partnership, Buffett's eighth, was launched on August 15, 1960, with $110,000. The twelfth doctor, the one who worried about losing all his money, did not join.

There were other skeptics. Not everyone in Omaha liked what they heard about Warren Buffett. His secretiveness put people off. Some thought the young hotshot wouldn't amount to anything, and believed the authority he radiated was unearned arrogance. Some resisted the idea of a nobody succeeding without kowtowing his way to the top. One member of a prominent Omaha family was lunching with half a dozen people at the Blackstone Hotel when Buffett's name came up. "He'll be broke in a year," the man said. "Just give him a year and he's gone."26 A partner at Kirkpatrick Pettis, which Howard's firm had merged with in 1957, said time after time, "The jury's still out on him."27 That fall, the already frothy stock market took off on a tear. The economy had been slogging along in a mild recession, and the country's mood was dark because the Soviets seemed to be winning the arms and space races. But when John F. Kennedy won the presidency in a squeaker of an election, the pending change in administrations to a man from a vigorous young generation uplifted the nation. In one of his early speeches, Kennedy set out a goal: sending a man to the moon and back. The market shot up, and once again comparisons were made to 1929. Warren had never ridden out a speculative market, yet he remained unruffled. It was as if he had been waiting for this moment. Instead of pulling back, as Graham might have done, he did something remarkable. He went into overdrive raising money for the partnerships.

He put Bertie and her husband, his uncle George from Albuquerque, and his cousin Bill into Buffett Associates, the original partnership. Wayne Eves, his friend John Cleary's partner, got on board too. And he finally put Fred Kulhken's mother and aunt, Anne Gottschaldt and Catherine Elberfeld, into the partnership. Their presence suggested that he felt the timing was not just highly propitious but also safe.

Three more people went into Underwood. Waiting for a cab in the rain after attending one of Ben Graham's lectures in New York, Warren met Frank Matthews Jr., son of the former Secretary of the Navy before whom Vanita Mae Brown had once claimed to be married to Warren-Matthews became a partner.28 Warren set up Ann Investments, his ninth partnership, for a member of another prominent Omaha family, Elizabeth Storz. He put Mattie Topp, who owned the fanciest dress shop in town, along with her two daughters and sons-in-law and $250,000, into the tenth, Buffett-TD.

Legally, he could take on only a hundred partners without having to register with the SEC as an investment adviser. As the partnerships burgeoned, he started encouraging people to team up informally and come in as a single partner. Eventually he would put people into pools, combining their money himself.29 He later described the tactic as questionable-but it worked. His compulsion to get more money, to make more money, drove him on. Warren was on fire, shuttling back and forth to New York at a frantic pace. He began to suffer from stress-related back pain. It often worsened when he was on an airplane, and he tried all sorts of things to alleviate it-everything but staying home.

By now his name was passed along like a secret. Invest with Warren Buffett to get rich. But the routine had changed. By 1960 it took at least $8,000 to get in the door. And he no longer asked people to invest with him. They had to bring it up. It had to be their idea. People not only would have no inkling what he was doing, they had to put themselves in this position.*20 It converted them into enthusiasts for Buffett, and reduced the odds of their complaining about anything he did. Instead of asking a favor, he was granting one; people felt indebted to him for taking their money. Making people ask put him psychologically in charge. He would come to use this technique often, in many contexts, for the rest of his life. Along with getting him what he wanted, it seemed to soothe his persisting fears of being responsible for other people's fates.

Though his insecurity was rampant as ever, his success and Susie's care and tutoring had given him a bit of polish and flair. He was starting to appear powerful, not vulnerable. Plenty of people were happy to ask him to invest for them. Buffett formed the eleventh and last of his partnerships, Buffett-Holland, on May 16, 1961, for Dick and Mary Holland, friends he had met through his lawyer and partner Dan Monen. When Dick Holland decided to invest in the partnership, members of his family pressured him not to do it. Buffett's abilities were apparent to him, Holland says, even though in Omaha people were still "laughing up their sleeves" at Warren's ambitions.30 Yet in 1959 the partnerships had outperformed the market by six percent. In 1960 they leaped to nearly $1.9 million in assets by beating the market by twenty-nine percent. Even more impressive than any single year's profits was the compounding power of repeated growth. A thousand dollars invested in Buffett Fund, the second partnership, was now worth $2,407 four years later. Invested in the Dow Jones Industrial Average, it would have been worth just $1,426.31 More important, he accomplished this higher return while taking less risk than the market as a whole.

And Buffett's fees, reinvested, had by the end of 1960 earned him $243,494. More than thirteen percent of the partnerships' assets now belonged to him alone. Yet even as his share of the partnerships increased, he had made the partners so much money that they were no longer simply happy; many regarded him with awe.

Bill Angle, his partner in Emdee, was foremost among them. He Tom-Sawyered himself into becoming Warren's "partner" in building a gigantic model train set with an HO gauge track on the third floor of the Buffetts' house, which had been a ballroom in a former life and was now the family attic. Warreny, the boy who had lingered at the Brandeis store every Christmas, longing for the huge, magical model train that he couldn't have, awoke inside the grown man. He "supervised" as Angle did all the work to create Warren's childhood fantasy.

Warren also tried to Tom-Sawyer Chuck Peterson into investing in it. "Warren, you must be out of your mind," Peterson said. "Why would I want to go fifty-fifty with you on a train that you possess?" But Warren didn't get this, so carried away was he by enthusiasm for the train and its accoutrements. "You can come over and use it," he said. 32 The train filled much of the former ballroom's space. It stood on pilings, with passageways underneath so that the diorama could be viewed from inside. Three locomotives carrying long chains of cars raced along an enormous spiraling track. They rocketed past villages and dove through forests, disappeared into tunnels, climbed mountains and dipped through valleys, stopping and starting at signals, and derailing just often enough to add a thrill when Buffett switched on the engines.33 Shining with the reflected glow of a delayed childhood, burnished with the patina of Omaha's railroading history, the train was Warren's totem. His children were forbidden to go near it. By now, his relentless obsession with money and obliviousness to his family were a running joke among his friends. "Warren, those are your children-you recognize them, don't you?" people said.34 When he was not traveling, he could be found wandering through the house, nose buried in an annual report. The family swirled around him and his holy pursuit-the disengaged, silent presence, feet up in his stringy bathrobe, eyes fixed on the Wall Street Journal at the breakfast table.

The bookkeeping and banking and safety-depositing and post-officing required for his complicated empire, which had grown to almost four million dollars, eleven partnerships, and well over a hundred investors, now became almost overwhelming. Amazingly, Warren was still handling all the money and doing all the clerical work himself: filing the tax returns, typing the letters, depositing the dividend and capital checks, stopping for a meal at the Spare Time Cafe along the way, stuffing the stock certificates in the safety deposit box.

On January 1, 1962, Buffett dissolved all of the partnerships into a single entity, Buffett Partnership, Ltd.-or BPL. The partnerships had produced a stellar forty-six percent return in 1961, compared with the Dow's twenty-two percent. After the partners invested more money that January 1, the new Buffett Partnership, Ltd., started the year with net assets of $7.2 million. In just six years, his partnerships had grown bigger than Graham-Newman. Yet when Peat, Marwick, Mitchell audited it, the auditor, Verne McKenzie, pored over the BPL files not in a conference room on Wall Street but in the alcove off Warren's bedroom upstairs, where the two of them worked side by side.

Even Buffett realized by now that his growing collection of files, phone bills, and stock trades had reached the limits of what he could handle working in a home office. He disliked taking on overhead, but he could afford it.

Including his outside investments-which totaled well over half a million dollars by now-Warren had become a millionaire at age thirty.35 So he rented office space in Kiewit Plaza, a new white granite building a straight shot down Farnam Street about twenty blocks from his house and less than two miles from downtown. He and his father now shared space, a longtime goal of Warren's, as well as a secretary. But Howard was clearly very ill. He soldiered gamely into the office with a stiff gait, making the effort. Warren's face would shadow when he learned some new piece of ominous news about his father's health, but mostly he tried to avoid knowing the details.

The new secretary tried to tell Warren what to do. "She thought she was a little motherly," he says, "in the sense of trying to steer me."

Nobody steered Warren Buffett. He fired her on the spot.

But he did need help. Just before moving into Kiewit Plaza he had also hired Bill Scott, a trust officer from the U.S. National Bank who had read an article in the Commercial & Financial Chronicle that Warren had written about an obscure insurance company. Scott signed up for Buffett's investing course, and then, he says, "I set out to suck up to him until I got a job." Buffett started going over to the Scotts' house on Sunday mornings after he dropped his kids off at church to talk about stocks, and eventually offered him a job.36 Scott began to help Buffett as he herded money into the partnership as fast as the two of them could open the mail. Buffett had his mother join for the first time, along with Scott, Don Danly, and Marge Loring, the widow of Warren's bridge partner Russ Loring, and even Fred Stanback, who had a family business and heretofore had worked with Warren only on specific ideas.37 And for the first time, Warren put his own money-all of it, almost $450,000-into the partnership.38 With that, his and Susie's share of the partnership rose to more than a million dollars after his six years of work; together they owned fourteen percent of BPL.

The timing was stupendous. In mid-March 1962, the market finally broke. It continued its slide until the end of June. Stocks were suddenly cheaper than they had been in many years. Buffett was now sitting on a single partnership with a huge pile of cash to invest. Its portfolio was relatively unscathed in the downturn-"Compared to more conventional (often termed conservative, which is not synonymous) methods of common stock investing, it would appear that our method involved considerably less risk," he wrote in a letter to his partners.39 He went racing through the stock tables. He often paraphrased Graham, saying: "Be fearful when others are greedy, and greedy when others are fearful." This was the time to be greedy.40