"I said, 'Now, Senator, I'm Larry Spivak, and you're sitting there at that table, and you've got that glass of water in front of you, and I say, "Do you believe somebody can make that glass of water move across the desk through the powers of their mind standing some feet away?"' And he said, 'Yes, I believe that can be done.'

"There were these people around the room-some of them who had their whole careers invested in the guy, like his chief of staff-and they saw themselves in the White House. And they started denying what they were hearing. They were waving their hands and saying it didn't mean what it meant. As I kept going, they were just dying. They were bursting in and saying, 'That isn't what he's saying,' and, 'Don't worry about this; it can be taken care of,' and that Abraham Lincoln had believed some of the same things. Obviously they knew some of this already. The whole thing was going down the tubes. I have never seen anything like it. It was just fascinating because of the years of preparation and these guys who had been dreaming of working for a U.S. President.

"Finally, at one point, Joe said, 'Senator, tell Warren if he asks another question like that, you're going to make him disappear.'

"So, I said, 'Senator, lookit. There are all kinds of phonies in American politics. You know, they profess to believe in God, and they say they go to church every Sunday and everything. They don't believe a damn word of it, you know. But it works. You, on the other hand, believe something very sincerely, and you've got your reasons for it, you know, but I will promise you that there's ten percent of the normal Democratic vote or some significant percentage of the votes that you can't have, just because of something you honestly believe, whereas the other guy is getting the vote because of something he doesn't believe. That's just a reality.' Meanwhile, all these guys are saying 'Don't pay any attention. What does he know?' But Hughes said that he would go away and when he came back, he would do something that would end his candidacy."6 And so it came to pass that ten days later Hughes gave an interview to the Des Moines Register in which he said that he had recently spent an hour talking to his dead brother through a medium.7 Thus ended the presidential ambitions of Senator Harold Hughes.8 The episode with Harold Hughes would prove to be the peak, the nadir, and-thanks in part to Richard Nixon's eventual reelection-for many years the end of Buffett as would-be kingmaker. But throughout it, Buffett paid careful attention to the overwhelming influence of media in politics; he wanted some of that. A childhood throwing newspapers, his friendship with Fortune reporter Carol Loomis, the purchase of the Sun, a search for other newspapers to buy, and his investment in the Washington Monthly-Buffett's interest in publishing had grown and compounded. He had seen the overwhelming power of television to capture attention throughout the tumultuous 1960s, from the JFK assassination to the Vietnam War to the civil-rights movement. Now, as the profitability of television became apparent, he wanted a piece of that business too.

Then Bill Ruane set him up at a dinner in New York with an acquaintance, Tom Murphy, who ran Capital Cities Communications, a company that owned broadcasting stations.

Murphy, the son of a Brooklyn judge, had grown up in the spicy chowder of New York politics before joining the Harvard Business School class of '49. Jowly, balding, easygoing, Murphy had started by managing a bankrupt TV station in Albany so frugally that he painted only the sides of the building that faced the road. Then he started to buy broadcasters, cable companies, and publishers, creating a media empire. Before long he moved to New York and recruited another HBS classmate, Dan Burke, brother of Johnson & Johnson CEO Jim Burke.

After their dinner, Murphy strategized with Ruane about how to get Buffett on his board of directors. Ruane said the way to Buffett's heart was to visit him in Omaha. Murphy promptly made the pilgrimage. Buffett plied him with a steak dinner, then drove him home to meet Susie. She must have known by now what to expect: Her husband had met another new object of infatuation. Buffett liked to show new people his totems: the office, Susie, and sometimes the train set. After the tour he and Murphy played a couple of games of racquetball in the Buffetts' basement court, Murphy running around in his oxford dress shoes. Buffett saw where he was headed before Murphy could pop the question. "You know, Tom," he said, "I couldn't become a director because I'd have to have a major position in your company, and your stock is too high."9 Even though the rest of the market was stumbling downhill, investors were excited about television stocks. Cable television was new, and local franchises were consolidating into newly visible public companies, whipping up investors' excitement about the medium. "Lookit," he said, "you can have me for nothing, you don't need me on the board."10 So Murphy started calling Buffett every time he made a deal. Buffett, just over forty, was flattered and made unlimited time for Murphy, then in his mid-to late forties, even though he thought, "This guy is old." But "he understands the whole world," and "I was in awe of Murph," Buffett says. "I thought he was the ultimate businessman." One evening, Murphy phoned him at home and offered him first shot at a Fort Worth TV station that was for sale.11 Buffett was interested but, for reasons he doesn't recall, turned Murphy down-which he later called one of his greater business mistakes.12 What Buffett really wanted was to be a publisher. In fact, he thought he had a hot scoop, but when he gave the editors at the Washington Monthly the idea, they pooh-poohed it. "I'm just sure in my heart," says Charles Peters, the Monthly's publisher, "that the editors were offended at the idea of having an investor call them up and tell them to do a story." They told Peters it was "no real story for the Monthly" and Peters did not push back. Then Buffett turned to the Omaha Sun, which might not have a national platform but was better than no newspaper at all. As matters turned out, says Peters, "I could have shot everybody on my staff."

What Buffett had heard was that Boys Town, one of Omaha's sacred cows, had turned into a hog. A refuge for homeless boys, Boys Town was founded in an old mansion near downtown in 1917 by Father Edward Flanagan, an Irish priest who wanted to save orphans and rejected children from wasted lives as drifters, criminals, or addicts. "Father Flanagan was famous around town for getting five bucks at a time," says Buffett, "and as soon as he got it, he spent it on a kid. Then he got ninety dollars and he put twenty-five kids in a house."13 In its early years, Boys Town had always struggled financially, but it grew nonetheless. By 1934 it occupied a 160-acre campus ten miles west of Omaha complete with a school, dormitories, a chapel, a dining hall, and athletic facilities. With help from Howard Buffett, Boys Town set up its own post office in 1934 to assist in fund-raising.14 It became an incorporated village in 1936. Then a 1938 Oscar-winning film starring Spencer Tracy and Mickey Rooney brought it national fame.

When Ted Miller, a professional fund-raiser, saw the movie, he recognized how to transform Boys Town's fund-raising appeals into a huge national campaign. Every year at Christmas time, Boys Town, which now called itself "The City of Little Men," sent out millions of letters that began, "There will be no joyous Christmas season this year for many homeless and forgotten boys...." and bore the picture the movie made famous of a street urchin carrying a tot with the legend "He ain't heavy, Father...He's m'brother."

People sent in as little as a dollar, but even small amounts coming from a tiny percentage of the tens of millions of letters that had been sent out added up to a lot of money.15 Boys Town, then awash in contributions, expanded to a 1,300-acre campus with a stadium, a souvenir shop, a farm where the boys worked as hired hands, and vocational training facilities. Father Flanagan died in 1948, but the money kept rolling in under his successor, Monsignor Nicholas Wegner. It was now a virtual shrine that was the state's biggest tourist attraction.

"I used to hear these stories about how the U.S. National Bank put on extra people for weeks and weeks before Christmas just to handle the Boys Town money that was coming in. Meanwhile, of course, I saw the boy count coming down."

In its early years, Flanagan had searched court records and taken in a certain number of hard-core delinquents, even a few murderers. But by 1971, the home screened out the emotionally disturbed, mentally retarded, and serious juvenile offenders; it tried to limit its occupants to "homeless" boys who had no other significant problems.16 Built to house a thousand, Boys Town now employed some six hundred people to care for its six hundred and sixty-five boys.17 However, its gigantic institutional approach of housing boys in a same-sex facility, isolated from the surrounding community, with a custodial, even prisonlike atmosphere, had begun to seem out of date.18 The boys moved to the signal of bells: They prayed at the first bell in the giant "chow hall," sat down to the second, ate at the third, put down their forks at the fourth whether they were finished or not, stood and prayed at the fifth, and dashed out of the chow hall at the sixth. Their mail was censored and they were allowed only one visitor a month, chosen by the staff, not themselves. They worked at menial jobs and had little recreation and no contact with girls. Boys Town emphasized low-grade vocational training: picking beans and making birdhouses.

So one evening in July 1971, at a meeting at the Buffetts' house, Warren and Sun editor Paul Williams discussed the Boys Town rumors and decided to commission a story on how the institution raised and spent its money. The Sun had already made a couple of runs at this story and was told by Boys Town, "We don't discuss our finances."19 Now Williams took three city reporters, Wes Iverson, Doug Smith, and Mick Rood, and set them to work on the confidential "Project B," planning an elaborate investigative reporting project. 20 Having noticed that the Boys Town marketing material said it got no money from any church or from the state or federal government, reporter Mick Rood pawed through records at the Nebraska state capitol in Lincoln and found out that this was false.21 That made them suspicious of Boys Town's other claims.

Through other basic reporting, they got the institution's property-tax records, educational records, and articles of incorporation. They found out that Boys Town had a history of strained relations with the state welfare department; Monsignor Wegner, who currently ran Boys Town, had refused to participate in program reviews by outside agencies despite the advice of his own staff.22 Williams used a Congressional source to get a report on the Boys Town post office and learned that it sent between thirty-four and fifty million pieces of fund-raising mail a year. This was a staggering number; fund-raisers for other organizations told them that, based on such numbers, Boys Town must be taking in at least $10 million a year. Using his financial knowledge, Buffett figured out that its operating costs could be no more than half of that.23 Boys Town was accumulating money faster than it could possibly spend it. It had undergone a major expansion in 1948. Assuming it had piled up $5 million a year ever since, Buffett thought it must have at least $100 million in excess funds. But so far, there was no proof.

Buffett had joined the board of the local Urban League, and from that connection knew Dr. Claude Organ, a local surgeon, the only black man on the Boys Town board. Buffett thought the doctor was a decent guy.

"We had breakfast over at the Blackstone Hotel right across the street. And I talked and talked and I tried to get him to tell me. He wouldn't give me details, but he also told me I wasn't wrong. He did even better than that. He let me know there was a story there, although I couldn't get any numbers from him."

Dr. Organ began quietly steering the reporting team, helping them stay on track without disclosing confidential information.24 The reporters had started talking to people around town but were not getting anywhere; most of the Boys Town employees were too afraid to talk. Buffett, playing newshound, roamed Omaha in his beat-up old tennis shoes, moth-eaten sweater, and pants covered with streaks of chalk.25 "It was a high," he says. "Whatever was the male equivalent of Brenda Starr, Girl Reporter, well, that was me." By now Warren had also adopted Susie's friend Stan Lipsey, who remained the Sun's publisher, as one of his new people, going jogging with him and playing racquetball in the Buffetts' basement.

Then Warren had a brainstorm. He knew that Congress had passed a law that, among other things, required nonprofit organizations to file a tax return with the IRS.

"I was sitting there in the family room doing the Form 990 for the Buffett Foundation, and it just hit me-if I had to file a return, maybe they did too."26 The reporters tracked down the Form 990 to the IRS in Philadelphia and waited impatiently for twenty days for the IRS to dig it out of its files.27 Two days later, the package arrived in Omaha. Paul Williams had hired Randy Brown, a new assistant managing editor, in part to help coordinate the Boys Town story, bringing the team to four reporters. "My first day at work, this 990 plopped down on my desk," says Brown.28 Buffett, who had just bought See's and was still mailing out boxes of candy to friends all over North America, nonetheless was so enthralled by Boys Town that he threw himself into helping Brown figure it out. Sure enough, Boys Town had a net worth of $209 million, which was rising at the rate of about $18 million a year, four times faster than the amount it spent to fund its operations. Buffett was elated. All his life, he had been waiting for a nun to commit a crime so he could expose the culprit by whipping out her fingerprints. Now he had used a tax return to nab a monsignor red-handed.

They moved desks, file cabinets, and three phones into Williams's basement recreation room. In the end, "we tracked everything," says Lipsey, "except, I think, two accounts in Switzerland. We couldn't break through those." The Sun's reporters were stunned to find that Boys Town had an endowment three times the size of the University of Notre Dame. Conservatively stated, it was worth more than $200,000 per boy. Mick Rood took to calling it the "City of Little Men with a Large Portfolio."29 The money machine was bringing in $25 million a year and could easily cover its costs out of investment income without raising another nickel.30 As the story came together, the reporting team held a meeting in a room at the Blackstone Hotel, across the street from Buffett's office. Coincidentally, the Boys Town board was meeting at the same time in a room down the hallway. The reporters tiptoed in and out, hoping they weren't seen.31 The intrigue heightened as they worked on the obvious questions: What was Boys Town going to do with all that money? Why did it need to keep raising more? The last phase of the investigation meant to find that out.

As administrator of Boys Town, seventy-four-year-old Reverend Monsignor Nicholas H. Wegner was in charge of fund-raising. The monsignor knew by then that the Sun was asking questions; Boys Town had already started putting together a hasty program of reforms. But the reporters were confident that as yet he had no idea they had obtained Boys Town's tax return. Their fear was losing the story to the Omaha World-Herald, which might swoop down with its greater resources once it realized that a juicy bit of news was waiting to be served up to the readership. An even greater risk was that Boys Town might work cooperatively and exclusively with the World-Herald to launch a preemptive strike with a friendlier story.32 The reporters plotted how to get to Wegner and to Archbishop Sheehan, his superior in the archdiocese. Rood, a thirtyish badass with shoulder-length wavy hair and a handlebar mustache, went to see Wegner. His first reaction was pity for Wegner, whose bald, wrinkled skull craned from his cassock like the head of an ancient tortoise. The monsignor was obviously frail, the survivor of fifteen surgeries, some of them major. As the interview proceeded, however, he rambled on incautiously and also denied receiving state funds. Asked to justify the exhaustive fund-raising, he said, "We're so deep in debt all the time." Knowing that nothing of the sort was true, Rood went straight back to Williams's basement with the tape of the interview. After it was transcribed, Williams put it in a safe-deposit box.

While Rood was interviewing Wegner, Williams was trying to nail the archbishop. They had tried to schedule his interview simultaneously with Wegner's but were unable to get both on the same day. Sheehan-possibly cued in at that point-confirmed statements Wegner had made but declined to add anything more. With confirmation in hand, however, the team, accompanied by photographers, showed up at the fund-raising office, which was a separate operation located in an Omaha building marked "Wells Fargo" rather than in Boys Town. They walked in the door uninvited and snapped photos of long rows of women typing solicitation letters and thank-you notes to donors. They also managed to talk to some of the fund-raisers, who said, "Please don't mention the fund-raising operation in your article. It's easy for the public to get the wrong idea. People will think we're rich," and "We want people to think the boys send out the letters."33 Meanwhile, the other reporters descended on the board of directors. It was made up mostly of people with little incentive to tip over the sacred cow. They included the banker who ran the Boys Town investment portfolio, the son of the architect who built the place and who ran the firm that stood in line to do any current building work, the retailer who supplied all the boys' clothing, and the lawyer who handled Boys Town's legal affairs. Apart from the financial interests many of them had in it, all the directors enjoyed the prestige of sitting on the board of Nebraska's most respected institution while doing very little work on its behalf. Wegner considered them a nuisance and had told Rood, "They've never been of much help," and "They don't know anything about social welfare...they don't know anything about education."34 According to Williams, whatever they may have actually known, the board's reactions to the reporters' questions ranged from "dismay to innocence or downright ignorance."35 Another Boys Town official would later put it this way with hindsight: "The board has not been all that good in serving Father Wegner.... The board could have advised him about slowing down on the fund-raising."36 And that was indeed the irony. It was Boys Town's background of Depression-era poverty that had probably led Wegner to accumulate money as if the "wolf was at the door," as Randy Brown put it.37 This same background had very likely lulled the board into overseeing Wegner's activities without questioning whether they made sense. But Warren Buffett, a product of the very same environment, who had the very same impulses, was going to bust them for it. The crime, in his eyes, was not just accumulating the money. It was piling it up mindlessly without a plan to use it. Boys Town didn't even have a budget.38 The sin to Buffett was an abdication of fiduciary responsibility, the failure to manage money responsibly on others' behalf.

The reporters worked feverishly on the story all weekend, Buffett and Lipsey reading copy as it progressed. "We were this little nothing weekly paper," says Buffett, but they intended to meet the journalistic standard of a top national daily. Finally they all trooped over to Paul Williams's living room, spread everything out on the floor, and tried to figure out headlines and captions. The story's banner lead asked: "Boys Town: America's Wealthiest City?" An eight-page special section with sidebars, it led off with a kicker in the form of a Bible verse, Luke 16:2-"Give an account of thy stewardship."

On the Wednesday afternoon before publication, Williams sent the story to the Associated Press, UPI, the Omaha World-Herald, and television stations. The next day, March 30, 1972, would be recalled by Buffett as one of the greatest of his life. The story not only fulfilled his wish to run a business as a church, but the section opened with a Bible-quoting headline about a favorite concept, stewardship-the lens through which he now viewed duty, moral obligation, and the responsibility that went along with a position of trust. By the end of that week, the wire services had broken the Boys Town story across the country and exposed a national scandal.39 On Saturday, the Boys Town board held an emergency meeting and decided to cancel all fund-raising, including the spring mailing for which envelopes had already been partly stuffed.40 In a new era of investigative reporting, the drama was of such magnitude that it gave an immediate push to reforms in the way nonprofits were governed all over the United States. The story was picked up by Time, Newsweek, Editor & Publisher, and the LA Times, among others.41 An informal survey of twenty-six boys' homes showed that immediately after the expose, more than a third of them said that their fund-raising efforts were affected.42 But Monsignor Francis Schmitt, an understudy of Wegner's who had begun assuming some of his duties, quickly circulated a letter to Boys Town supporters calling the Sun "a kind of Shopper's Guide." It said, "There can only have been yellow journalism, prejudice, jealousy, and, for all I know, bigotry involved in the story," suggesting that the motive was anti-Catholic bias. In fact, the reporters had bent over backward to avoid such a bias. Moreover, Schmitt said, the story was full of "snide innuendos" that cut into his vitals all "because of a cheap editor of a cheap paper, whose owner is himself a millionaire many times over."43 Wegner also remained unrepentant. "Boys Town," he said, "will still be here when that yellow rag, what's it called"-the Sun-"is forgotten."44 To people who wrote asking about the Boys Town story, Wegner was sending out a form letter saying the Sun story was spreading "sensational views of local issues," and that while at the present time, Boys Town was not seeking donations, as "our properties and facilities have multiplied in value...SO HAVE OUR COSTS."45 The letter was printed on the usual stationery, with "your contribution is an allowable income tax deduction" and "we employ no solicitors or fund-raising organization-we pay no commissions" at the bottom.

A couple of months after the Sun's coverage appeared, the Omaha Press Club put on its annual show. A team of singers got up and entertained the Who's Who of Omaha (and more than a few from out of town). Their song satirized Monsignor Wegner and Boys Town: We started up a home for boys, 'Bout fifty years ago; We asked for contributions And the dough began to flow.

We asked for all the charity The traffic would allow; Our homeless waifs were finally Quite liberally endowed.

But then we had a tragedy, Our bankroll was exposed, And thanks to Warren Buffett All those pocketbooks were closed.

(chorus) Who threw the monkey wrench In Father Wegner's poor box?

Now we're as popular As if we had the smallpox.

It's a dirty trick, you know, Why did Warren Buffett throw The monkey wrench in Father Wegner's poor box?

Some folks came out from Hollywood, To make a movie show; Mickey Rooney showed the people Where their cash should go.

Spencer Tracy played his part With Roman piety; We made enough off popcorn sales To buy AT&T.

We passed the tin cup all around To land on Easy Street; Then Warren Buffett came along And read our balance sheet.

We built palatial cottages, To give our boys some class; Instead of fish on Friday We had pheasant under glass.

We talk a lot of poor mouth But we're never in the red; It figures out to something Like 200 grand a head.

Buffett blew the whistle On a spiteful, jealous whim; He must have figured we were getting Just as rich as him!46 Buffett had never had so much fun reading a tax return, and wanted to keep the momentum going to make sure that, contrary to the monsignor's prediction, the Sun would not be forgotten. The thought of a Pulitzer, the grandest prize in journalism, "started my adrenaline flowing," he said.47 He got Paul Williams working on the paper's submission for the prize. Williams prepared a detailed outline for Buffett, who had some strategic thoughts of his own, drawn from a long history with the newspaper business. "In a country where economics inevitably lead to one-daily towns," Buffett wrote, the Sun's submission should stress "the necessity for another printing press." Another paper, even a weekly suburban, adds "value in terms of worrying Goliaths"-whereas the dominant paper may fear to do so, because it "may look silly."48 Mick Rood wrote a follow-up piece about Boys Town-a good story that was also meant to keep worrying the Goliath-that drew on some racially bigoted comments Father Wegner had made in his interview, as well as certain disclosures he had made about the boys growing marijuana at Boys Town down by the lake. Paul Williams spiked it, saying the Sun had to take the high road, in part not to jeopardize future stories and in part to avoid looking anti-Catholic. Also, at this time the Pulitzer was pending. "Too bad," wrote Rood in a note to himself.49 The Sun team knew it had strong competition for the Pulitzer. It would be up against the series of articles penned by Washington Post investigative journalists Carl Bernstein and Bob Woodward, who had followed what appeared to be a minor burglary inside the Watergate offices of the Democratic National Committee during the 1972 Nixon-McGovern election campaign, and uncovered what turned out to be an enormous political spying and sabotage operation. But the Sun would fare very well in the prizes awarded for 1972 journalism.

In March 1973, Sigma Delta Chi, the national journalism society, gave the Sun its highest award for public service; the Washington Post won for investigative reporting. During the cocktail hour before the awards ceremony, as Stan and Jeannie Lipsey milled among the guests, waiting to catch a glimpse of Woodward and Bernstein, Jeannie nudged her publisher husband in the ribs and said, "I'll make you a bet. I'll bet you a hundred dollars that you'll win the Pulitzer." A few weeks later came the phone call. The Sun had won a Pulitzer for local investigative specialized reporting, sending the newsroom into a jubilation of cheers and applause.50 This time it had swapped awards with the Washington Post, which won the Pulitzer for public service. Susie Buffett threw a party to celebrate, fixing an oversize pretzel that spelled out "Sun Pulitzer" to the paneling in the family room. In part they were also celebrating some tangible results. Boys Town had started throwing money at projects and quickly announced a center for the study and treatment of children's hearing and speech defects. It was something, and it would do some good. Boys Town from now on would have a budget and would disclose its financial status publicly.

Instead of the annual Christmas fund-raising letter that year, there was only a Christmas card expressing thanks, as well as a letter from Archbishop Sheehan, announcing with "deep regret" that Monsignor Wegner would retire "due to his failing health." While he was genuinely frail and ill, some cynic at the Sun circled this before filing it and added, "due to something he read."51 The following Easter, 1974, Jet Jack Ringwalt sent Warren a copy of the letter he had received from Father (no longer Monsignor) Wegner. Instead of whining that there would be no joyous Christmas for the homeless, abandoned boys, the letter talked at length of the costly new projects that Boys Town had just built and was going to build and the experts who had been hired "to assist us in planning for our future."52 While down from previous highs, the contributions that rolled in after the letter was sent came to $3.6 million, never mind the scandal.

Thus, the story ended as such things usually do: a mixed triumph with a certain amount of ass-covering and reforms that came about because of public embarrassment rather than an institutional change of heart. While Boys Town eventually turned over its board of trustees and management, it did not happen easily or overnight, and the conflicts of interest on the board also did not disappear, at least not immediately.

And even the Sun's glory proved short-lived. It was failing financially, and its muckraking editor, Paul Williams, retired not long after the Pulitzer. One by one the investigative reporters dispersed to other papers and the wire services. Unless Buffett was willing to run it as a money-losing hobby, the economics of the Sun couldn't support a future like its past. And the Washington Monthly had already proven that-even for great journalism-Buffett would not do that. In a sense, the Sun was one of his cigar butts, from which he had been able to enjoy one huge personal puff.

In another sense, the temporary boost of fame he had gotten from the Sun was a sidebar compared to something else. Buffett had recently exploded in investors' minds for a different reason. Under the pen name Adam Smith, a writer named George Goodman had published Supermoney, a fire-and-brimstone critique of the 1960s stock-market bubble, which sold more than a million copies.53 It demonized the fund managers who had ascended to the stratosphere almost overnight and then crashed, in a parabola as dramatic as if their engines had suddenly run out of rocket fuel. They were featured as devil-horned, pitchfork-bearing tempters of the ordinary Joe Investor. But when it came to Ben Graham and his protege Buffett, Goodman knew he had met a couple of very different characters, and he devoted an entire chapter to the two of them, in which he captured them brilliantly.

Goodman respected the Latin-and French-spouting Graham and had been highly entertained by him, but when Graham was quoted in Supermoney, he sounded painfully affected, speaking in a style that bordered on self-satire. Buffett, however, appeared as a blue-ribbon, All-American, Pepsi-quaffing, investing fundamentalist, one who plied his trade in glorious solitude, far from the Lucifers of Wall Street. Presented alongside Graham this way, Buffett came across like a two-inch-thick T-bone next to a dab of goose liver pte on a plate. Everyone went for the steak.

One hundred percent of the book's reviewers mentioned Buffett. John Brooks, dean of the Wall Street writers, described him as a "Puritan in Babylon" among the "greedy, sideburned young portfolio wizards."54 Overnight, he was a star.

Even in Omaha, Supermoney created a minor sensation. Buffett had been crowned as the king of investors in a best-selling book. After fifteen years, the jury had come in. He was now "the Warren Buffett."

36.

Two Drowned Rats Omaha and Washington, D.C. * 1971 Buffett had craved a niche in the publishing big leagues for quite some time. Since newspapers, which were mostly family-owned businesses, had recently gone through a spasm of selling themselves and now looked cheap, he and Charlie Munger had worked ceaselessly to buy one. They had tried, unsuccessfully, to buy the Cincinnati Enquirer from Scripps Howard,1 and Buffett had tried to buy another Scripps company, the New Mexico State Tribune Company, which published the Albuquerque Tribune,2 for Blue Chip, but that bid failed too.

In 1971, Charles Peters, publisher of the Washington Monthly, had gotten a call from Buffett, asking him to introduce Buffett and Munger to Washington Post publisher Katharine Graham. Buffett said that he and Munger had bought some stock in the New Yorker and wanted to buy the whole magazine. They had talked to Peter Fleischmann, chairman of the New Yorker and a large shareholder, who was willing to sell, but they wanted a partner in the purchase and thought the Washington Post might be the right choice.

Peters wasn't surprised to get the call. Aha, he thought, Buffett must be interested in the Post stock now that the Graham family is taking the company public. Perhaps all the recent public offerings of newspapers were why he continued to own the Washington Monthly. If the Monthly turned out to be an entry point for making a killing on the Post, then the failed investment could be justified financially.

On the brink of the Post's initial public offering in 1971,3 Peters set up the meeting to explore a partnership to buy the New Yorker. Buffett had never bought public offerings, which he felt were overhyped and overpromoted; they were the opposite of the unloved cigar butts or great-company-at-the-right-price choices like American Express or See's Candies that he and Munger sought. So Buffett had no plans to buy Post stock, but he and Munger flew to Washington and went to meet Kay Graham at the Washington Post headquarters, a monolithic eight-story 1950s white building with the paper's name in its distinctive Gothic-style typeface above the door.

Though publisher of the Post, Kay Graham had come late in life to running a newspaper. When she took it over eight years earlier, at age forty-six, she was a widow with four children and had never worked in a business. Now she found herself preparing for the challenge of running a public company under the unremitting scrutiny of investors and the press.

"Charlie and I met her very, very briefly, for twenty minutes. I had no idea what she was like. The idea that she'd be frightened of her own business-I didn't know any of that. It was raining like hell, so we came in looking like a couple of drowned rats, and you know how we dress anyway."

As they sat in her office, "She couldn't have been nicer to us. Then she suggested we go see Fritz Beebe, the chairman of the board, who was really the guy kind of running the place up in New York, which we did. But we weren't going anyplace with it."

At the time, Graham had no interest in the New Yorker purchase that had prompted the visit-and there was nothing in the meeting to suggest that she and Buffett would one day be great friends. He made no impression on her whatsoever. For his part, he did not find her particularly attractive-even though she was a handsome woman-for she lacked the soft femininity and caretaking qualities of his ideal, Daisy Mae. Moreover, their backgrounds were worlds apart.

Katharine Graham, born just before the twenties started to roar, was the daughter of a rich father, investor and Post publisher Eugene Meyer, and a self-absorbed mother, Agnes-"Big Ag," as the family called her behind her back because of her imposing stature and, as the years passed, increasing girth. Agnes, who had married her Jewish husband at least in part for his money, was passionate about Chinese art, music, literature, and other cultural interests, but indifferent to her husband and their five children. The family shuttled among their pinkish-gray granite mansion in Mount Kisco, overlooking Westchester County's Byram Lake; their full-floor apartment on Fifth Avenue in New York City; and a large, dark, red-brick Victorian house in Washington, D.C.

Katharine spent her early years under the rule of Agnes at the Mount Kisco estate, which the family referred to as the "farm" because it contained a large orchard, garden, dairy, and an old farmhouse where the farmhands lived in bachelor quarters. Every vegetable and piece of fruit on the dining table came from the surrounding fields and orchards. Kay ate meat from the farm's own pigs and chickens and drank milk from its Jersey cows. Lavish bouquets of flowers appeared on the tables of each of the family's houses every day, even in Washington, sped there from the Mount Kisco gardens. The Westchester mansion's walls were covered with magnificent Chinese paintings; it boasted every status symbol of the era: an indoor swimming pool, a bowling alley, tennis courts, a massive pipe organ.

Kay chose her riding horses from a stable of steeds handsome enough to draw Cinderella's carriage and was taken on incredible vacations, once visiting Albert Einstein himself in Germany. When Agnes took the children camping to teach them independence, they roughed it accompanied by five ranch hands, eleven saddle horses, and seventeen packhorses.

But the children had to make an appointment to see their own mother. They gobbled down their meals because Agnes, served first at the long dining-room table, began eating as the footmen moved around serving everyone else-and had the others' plates snatched away the instant that she herself had finished. By her own admission, she did not love her children. She left them to be raised by nannies, governesses, and riding instructors; she sent them off to summer camps, boarding schools, and dancing class. Their only playmates were one another and the servants' children. Agnes drank heavily, pursued flirtatious and obsessive (although apparently platonic) relationships with a number of famous men, and treated all other women as inferior, her own daughters among them. She compared Kay unfavorably to America's sweetheart, Shirley Temple, the singing, dancing, smiling child star with golden blond ringlets.4 "If I said I loved The Three Musketeers," Graham recalled, "she responded by saying I couldn't really appreciate it unless I had read it in French as she had."5 Kay was trained like a hybrid orchid, beautifully pampered, savagely critiqued for her show potential, and otherwise largely ignored. Still, by the time she reached the Madeira School in Washington, D.C., she had somehow managed to learn the skills of popularity and was elected head of her class-most surprising at that time and in that place because she was half Jewish.

In Protestant Mount Kisco, the family had been socially shunned. Since at Agnes's insistence the children were raised as Protestants-albeit nonobservant ones, for the most part-and were not even aware that their father was Jewish, Graham did not understand the reason for their isolation. Indeed, she would later be stunned at Vassar when a friend apologized because someone had made a bigoted remark about Jews in front of her. She reflected with hindsight that this clash in her bloodlines "leaves you either a good survival capacity or a total mess."6 Or, perhaps, both.

From her mother, Kay learned to be ungenerous about small things, fearful of being cheated, unable to give things away, and certain that people were trying to take advantage of her. By her own description, she also grew up inclined to be bossy.7 Yet others saw in her qualities of naivete, candor, generosity, and open-heartedness that she herself seemed unable to acknowledge.

She felt closer to her awkward, distant, yet supportive father. To Eugene Meyer, she attributed her zeal for tiny economies-compulsively turning out lights, never wasting anything. Her father's talent for such economies, along with great infusions of time, money, and energy, had been crucial in keeping the ailing Washington Post alive while Kay was growing up, when the paper ranked fifth in a field of five in the capital area, far behind the dominant paper, the Washington Evening Star.8 But when Meyer began thinking of retiring in 1942, Kay's brother, Bill, a doctor, had no interest in running an unprofitable newspaper, so the duty fell to Kay and her new husband, Philip Graham. Kay was besotted with Phil, and so convinced of her own lowliness that she accepted as a matter of course her father's decision to sell Phil nearly two-thirds of the Post's voting stock, giving him absolute control. Meyer did it because, he said, no man should have to work for his wife. Kay got the remainder.9 Despite Meyer's zeal in keeping the paper alive, when Phil Graham took it over, matters were out of hand. Certain people in the newsroom and the circulation department spent most of the day playing the horses and drinking. When Meyer was out of town, the first thing the office boy did every morning was bring one man a half pint of booze and the Daily Racing Form.10 Phil Graham got the place shipshape, gave it an identity by fostering vigorous political coverage, and stamped its editorial page with a strong liberal voice. He bought Newsweek magazine and several television stations, and proved to be a brilliant publisher. But over time, drinking binges, a violent temper, unstable moods, and a cruel sense of humor showed themselves, with particularly devastating effects on his wife. When Katharine gained weight, he called her "Porky" and bought her a porcelain pig. She thought so little of herself that she found the joke funny and put the pig on the porch for display.

"I was very shy," she said. "I was afraid to be left alone with anybody because I'd bore them. I didn't speak when we went out; I let him speak.... He was really brilliant and funny. Marvelous combination."11 Her husband played on her fears. When they were out with friends, Phil would look at her in a certain way when she was talking. She sensed that he was telling her that she was going on too long and boring people. She was convinced that she occupied some lesser sphere and could never meet the expected-but impossible-standard of living up to Shirley Temple. No wonder that, over time, she ceased speaking in public and let Phil take center stage.12 She grew so insecure that she vomited before parties. And by some accounts, the way Phil treated her in private was even worse.13 Her four children grew up seeing their father tear their mother apart. He would drink and build up to a violent rage; then she froze and shut down.

She never confronted Phil, even when he embarked on a series of affairs with other women that supposedly included swapping mistresses with Jack Kennedy.14 Instead, she defended him, swept away by the force of his personality, wit, and brains. The more cruelly he behaved, the more she seemed to want to please him.15 "I thought that Phil literally created me," she said. "My interests were better. I was surer of myself."16 He thought she was lucky to have him, and she did too. When he finally left her for Newsweek staffer Robin Webb, she was stunned by the response of one of her friends, who said, "Good!" It had never occurred to her that she might be better off without Phil. But then he began trying to take the paper away from her, since he controlled two-thirds of the stock. Kay was terrified that she would lose her family's newspaper.

In 1963, in the midst of her battle to keep the paper, Phil Graham suffered a spectacular public breakdown, was diagnosed with manic depression, and committed himself to a mental institution. Six weeks later, he talked his way out of the hospital for a weekend leave. He came home to Glen Welby, the Grahams' sprawling rural Virginia farm retreat. On Saturday, after eating lunch with Kay, he shot himself in a downstairs bathroom while she was upstairs taking a nap. He was forty-eight.

His suicide left Kay with the paper, no longer threatened with its loss. She dreaded being in charge, but even though some suggested that she sell, she was absolutely determined to keep it; she saw her stewardship as a holding action until the next generation was ready to take over. "I didn't know anything about management," she said. "I didn't know anything about complicated editorial issues. I didn't know how to use a secretary. I didn't know big things and small things and, worse still, I couldn't tell them apart."17 While Graham could project a determined confidence at times, at work she began to rely on other people as she constantly rethought and questioned her own decisions. "I just kept trying to learn the issues from the men who were running things," she wrote. "And of course, they were all men." She never trusted them or anyone else-but, of course, no one close to her had ever treated her in a trustworthy way. She would tentatively extend her confidence to someone, then second-guess herself and pull back. Alternately enthused, then disenchanted with her executives, she gained a fearsome reputation in the office. And all the while, she never stopped seeking advice.

"As decisions would come along in the course of a day where she was very uncertain how to proceed," says her son Don, "she was literally reinventing the wheel. She would be called upon to be a top manager of a company when she'd never been a bottom manager of a company. She hadn't watched people who were CEOs, except the way you watch your husband or your dad.

"And so she had the great habit, when she faced what she thought of as a difficult decision-it usually was a difficult decision-she would call directors, she would call friends whom she thought might have a relevant experience. It was partly getting advice to help her handle the problem. And it was partly trying out the friends as advisers to see who seemed to make sense and whom she'd call the next time."18 Early on, Graham began to lean on Fritz Beebe, a lawyer and the chairman of the Washington Post Company, finding him a strong source of support as she struggled with her new job.19 By then, the Post was the smallest of three remaining Washington newspapers, with $85 million in yearly revenues and $4 million in profits.

Gradually she grew into her role. She and her managing editor, Ben Bradlee, had a vision of a national paper that would set a standard to rival the New York Times. Bradlee, born the WASPiest of Boston WASPs, a Harvard graduate whose Brahman of a first wife was the daughter of a U.S. Senator, had worked closely with intelligence agencies before turning to journalism. He was funny, brilliant, had an unexpected saltiness that belied his background, brought out the best in Graham-and encouraged reporters to thrive in an informal atmosphere of ambition and competition. Before long, the Post had developed a reputation for solid journalism. Three years after taking over the paper, Graham made Bradlee executive editor.

In 1970 Kay was freed from the tyranny of her mother, Agnes, who died in bed while Kay was visiting Mount Kisco on Labor Day weekend. Kay went up to her mother's bedroom to check on her after the maid told her that Agnes had not rung for her breakfast, and found her in bed, "weirdly inert and already cold," Graham wrote in her memoir. She did not cry; while superficial books and movies could turn her into "a weeper" and she sometimes cried when angry or hurt-as she explained in her book-she never cried when anyone died.20 And while the death of Agnes Meyer relieved Graham of a burden, it did not cure her insecurities.

In March 1971, amid continuing protests of the Vietnam War, the New York Times was leaked a copy of the Pentagon Papers-a top-secret and ruthlessly honest history of the decision-making that led the country into and through Vietnam that had been commissioned by former Defense Secretary Robert McNamara.21 Comprising forty-seven volumes totaling seven thousand pages, the Pentagon Papers showed conclusively that the government had perpetrated a vast deception on the American public. The Times published its account of the scheme on Sunday, June 13.

On June 15, about two weeks after Buffett and Munger had gone down to Washington to meet Graham in her office, a federal district court enjoined the Times from publishing most of the Pentagon Papers. It was the first time in history that a U.S. judge had restrained publication by a newspaper, raising a major constitutional question.

The Post, mortified at having been scooped, was determined to get its hands on the Pentagon Papers. Through informed guesswork and contacts, an editor tracked down their source, Daniel Ellsberg, an expert on the Vietnam War. The editor flew to Boston with an empty suitcase and brought the Pentagon Papers back to Washington.

By then Graham had mastered some of the basics of being a publisher, though she remained deferential and ill at ease. Further, "we were in the middle of going public [but] we hadn't sold the stock," she recalled. "It was a terribly sensitive time for the company, and we could have been very badly hurt if we'd been to court or criminally enjoined.... The business people were all saying either don't do it or wait a day, and the lawyers were saying don't do it. And the editors were on the other phone saying you've got to do it."

"I would have had to quit if we hadn't published it," says Ben Bradlee. "A lot of people would have quit."

"Everybody knew we had those papers," Graham wrote later. "It was terribly important to maintain the momentum after the Times had been stopped, because the issue was the government's ability to prior-restrain newspapers. And I felt what Ben said, that the editors would really be demoralized, that the news floor would be demoralized, that a great deal depended on our doing it."

Notified on the terrace of her Georgetown mansion that beautiful June afternoon that she had a call, Graham went into her library and sat down on a small sofa to pick up the phone. Post chairman Fritz Beebe was on the line. He told her, "I'm afraid you are going to have to decide." Graham asked Beebe what he would do, and he said that he guessed he wouldn't.

"Why can't we wait a day?" said Graham. "The Times discussed this for three months." Now Bradlee and other editors joined the call. The grapevine, they said, knows we've got the papers, journalists inside and out are watching us. We've got to go, and we've got to go tonight.

Meanwhile, in the library, Paul Ignatius, president of the Post, was standing at Graham's side, saying, "each time more insistently-'Wait a day, wait a day.' I had about a minute to decide."

So she parsed Fritz Beebe's words and his lukewarm tone when he said that he guessed he wouldn't and concluded that he would back her if she chose a different course.

"I said, 'Go ahead, go ahead, go ahead. Let's go. Let's publish.' And I hung up."22 In that moment the woman who reached for the advice of others on every decision realized that only she could choose; when forced to reach inside to form her own opinion, she found that she did know what to do.

Before the afternoon was out, the government filed suit against the Post. The following day, June 21, Judge Gerhard Gesell ruled in the newspaper's favor, refusing to grant an order restraining it from publishing the Pentagon Papers. Less than two weeks later, the Supreme Court upheld him, saying the government had not met "the heavy burden" required to justify, on the grounds of national security, restraining publication.

With the Pentagon Papers, the Post transcended its status as a decently run business that produced good local journalism and began its transformation into a great paper of national importance.

"Her skill," wrote reporter Bob Woodward, "was to raise the bar, gently but relentlessly."23

37.

Newshound Washington, D.C. * 1973 Nearly two years later, the Post was deep into reporting the Watergate story, while in Omaha, the Sun's reporters were basking in the glow of the Boys Town expose. Reporting on Watergate, which began in June 1972 when the break-in occurred, had gradually picked up steam as Woodward and Bernstein linked a check made out to one of the burglars to the Nixon re-election campaign. The scandal unfolded over many months as a secret FBI informant, Mark Felt-code-named "Deep Throat" and known to no one but Bob Woodward until thirty-three years later-funneled information to them about CREEP, the Campaign to Re-elect the President, and about various CIA and FBI officials involved in funding and aiding the burglars. But other papers largely ignored the scandal, as did the public. Nixon was re-elected by a huge majority that fall, having vehemently denied any knowledge of or involvement in the break-in. The Nixon White House, which was already actively hostile to the Post because of the Pentagon Papers episode, dismissed Watergate as "a third-rate burglary attempt" and kept up a barrage of threats and harassment against the paper. Attorney General John Mitchell, who had managed Nixon's election campaign, told Woodward and Bernstein that "Katie Graham's gonna get her tit caught in a big fat wringer" if the Post continued to report the story. A Wall Street friend with administration contacts advised her "not to be alone."

In early 1973, a Republican fund-raiser who was a friend of Richard Nixon challenged the renewal of the Post's two Florida television licenses. The challenge, which was probably politically motivated, threatened half of the company's earnings, an attack on the heart of the business.1 In response, WPO stock plunged from a high of $38 to as low as $16 a share.

Yet even with a Pulitzer in hand, the Watergate burglars convicted and sent to prison, and a growing body of evidence linking top Nixon administration officials to the break-in, Graham kept second-guessing herself about whether the paper was being set up or misled.2 Most of her time and attention now went to fighting these fires. Her chairman, Fritz Beebe, was ill with cancer and declining rapidly,3 and still in need of an authority figure to rely upon, she increasingly turned toward another of her board members, Andre Meyer, senior partner of the investment bank Lazard Freres.

Vindictive, ruthless, secretive, snobbish, and sadistic, Meyer "crushed other people's personalities." He was known as "the Picasso of Banking" and a man with "an almost erotic attachment to money," and called the greatest investment banker of the twentieth century, "a genius of the art of acquisitiveness," according to his colleagues.4 He was also the well-connected man who had warned Graham during Watergate not to be alone. He "had an ability to relate to people at times of distress in a way that created loyalty and exposed him to grand opportunities in the future," said a former Lazard executive.5 He soon took up Graham socially as well and was seen with her at restaurants, parties, and the theater.

Beebe died on May 1, 1973, and a week later his lawyer, George Gillespie, who was also Graham's personal lawyer and one of her advisers, began settling his estate. Gillespie got wind that a big investor out in Omaha had been buying Post stock, so from his summer house in Maine, he called Buffett and offered a block of fifty thousand of Beebe's shares that needed to be sold. Buffett snapped it up.

If he could, at the right price, Buffett would have bought almost any newspaper in sight for Berkshire Hathaway. When the bankers from Affiliated Publications, publisher of the Boston Globe, were struggling to place its deal, Buffett broke his unwritten rule against buying public offerings and took four percent of Affiliated at a discount price. Berkshire wound up its largest shareholder. He grabbed stock in Booth Newspapers, Scripps Howard, and Harte-Hanks Communications, a San Antoniobased chain. The Sun's elevated status as a Pulitzer Prize winner enabled him to network his way through the newspaper world, talking with publishers as one of their peers. He chatted up the owners of the Wilmington News Journal, hoping to buy the paper. Alas, while newspaper stocks were cheap because investors failed to see their value, newspaper owners were not so blind. Competing with them, Buffett and Munger's efforts to buy whole newspapers had all come to naught.

Still, by late spring 1973 Buffett had accumulated more than five percent of the Washington Post stock.6 He now sent a letter to Graham. She had never lost her terror that somehow her company would be taken away from her, even though Beebe and Gillespie had structured the Washington Post's stock in two classes so that an unfriendly buyer could never do that.7 Buffett's letter told her that he owned 230,000 shares and meant to buy more. But instead of legalistic boilerplate, he wrote a highly flattering, personal missive that linked their common interest in journalism and stressed the Sun's Pulitzer. The letter began: This purchase represents a sizable commitment to us-and an explicitly quantified compliment to the Post as a business enterprise and to you as its chief executive. Writing a check separates conviction from conversation. I recognize that the Post is Graham-controlled and Graham-managed. And that suits me fine.8 Nonetheless, Graham panicked. She reached out for advice.

"At times," Jim Hoagland, one of her reporters, wrote, Graham was "capable of being taken in by mountebanks of the moment," and "particularly if they were adroit at a certain kind of kidding flattery."9 She was a "pretty dreadful snob" and "too easily impressed by people with big titles," according to another reporter.10 Moreover, while she instinctively pursued women's equality-she had given the seed money to Gloria Steinem for Ms. magazine, she was known to chide men for referring to professionals as if all members of the class were men, and she once hurled a paperweight at a Post executive who refused to allow girls to deliver papers-deep inside she still thought that only men knew anything about business. Thus, when Andre Meyer was "irate" and told her that Buffett meant her no good, she took him seriously.11 And it also carried weight when another of Graham's acquaintances, Bob Abboud, a fellow trustee at the University of Chicago, warned her away.

"Andre Meyer really wanted to think he controlled everything. And it was easy when he got a woman like Kay-he would make her feel like she'd better not go to the bathroom without checking with him. He had that style. Andre kept referring to me as her new boss because I bought this stock. You had all these guys who could see their power being diluted if I got in the inner circle.

"She was very sensitive to the idea that anyone would manipulate her, for political purposes or for the paper, which is understandable. She was used to everybody in the world trying to use her. But what you could do with Kay is you could play on her fears. If you wanted to work her over, you could make her feel so insecure. And she knew you were doing it to her, but she couldn't resist it."

"She would second-guess herself," says fellow Post board member Arjay Miller. "She would fall in and out of love with people. She could be bullied. She would get overwhelmed by certain people in business. She would meet somebody and be sort of dazzled with them for a little while and think they knew all the answers. She thought men knew all about business and women didn't know anything. At the bottom, that was the real problem. Her mother told her that and her husband told her that, over and over and over and over again."12 Graham tried to find out what she could about Buffett. She barely remembered him from their brief encounter two years earlier.13 She and her colleagues bought copies of Supermoney and devoured the chapter on him, wondering what the man from Nebraska had in store for them. Those unfriendly to Buffett made sure she also saw an unsigned article in the September 1 issue of Forbes about Buffett's purchase of stock in San Jose Water Works, which cast a shadow on the sunny portrait that Supermoney had painted of the mystery man.