1. From peak to trough in the Depression (September 3, 1929, to July 8, 1932), the Dow fell 89%. From peak to trough in the early 1970s (January 11, 1974, to December 6, 1974), the Dow fell 45%-the two worst bear markets of the century.

2. Robert Redford interview, cited by Graham in Personal History. New York: Alfred A. Knopf, 1997.

3. Katharine Graham, Personal History.

4. The television stations owned by both would have created a conflict.

5. Katharine Graham, Personal History.

6. Al Pagel, "What Makes Susie Sing?" Omaha World-Herald, April 17, 1977.

7. Interview with Gladys Kaiser.

8. From a letter that Graham wrote Buffett, reprinted in Personal History. Don Graham recalls his mother telling him that Susie cooked eggs for her, and Susie and Warren watched Kay eat them and did not eat any themselves.

9. Measured from its peak.

10. Interview with Charlie Munger.

11. "Fighting the Tape," Forbes, April 1, 1973.

12. The seat would have sold for a quarter of what Ruane, Cunniff had paid for it.

13. The record was 1970: Sequoia 12.11% vs. S&P 20.6%; 1971: Sequoia 13.64% vs. S&P 14.29%; 1972: Sequoia 3.61% vs. S&P 18.98%; 1973: Sequoia (24.8%) vs. S&P (14.72%).

14. Marshall Weinberg as well as Buffett confirmed this in interviews. Malott says he does not recall it.

15. Loomis joined Sandy Gottesman at First Manhattan; Brandt went to work at Abraham & Co.

16. "Look at All Those Beautiful, Scantily Clad Girls Out There!" Forbes, November 1, 1974.

17. "Forbes didn't use what I considered to be the most significant line," said Buffett in a letter to Pat Ellebracht on October 24, 1974, repeating this quote.

18. Interview with Rod Rathbun; Omni arbitration files of the National Indemnity Company.

19. Compounded over thirty years at 20%, this was perhaps a $2.4 billion investment return forgone. Buffett and Munger have referred to it as the greatest missed opportunity in the history of Berkshire Hathaway. The details are arcane but the essence of the story is as portrayed here.

20. "Why the SEC's Enforcer Is in Over His Head," BusinessWeek, October 11, 1976.

21. Interview with Verne McKenzie.

22. Letter from Charlie Munger to Chuck Rickershauser "re: Diversified Retailing-Berkshire Hathaway Proposed Merger," October 22, 1974.

23. Interview with Betty Casper Peters.

24. Interview with Verne McKenzie.

25. Robin Rickershauser, who has often heard this clever trope from her husband, did not realize he originated it until contacted by the author.

26. If true, investors would have been selling without required information about the buyer and his reasons.

27. Charles T. Munger testimony, In the Matter of Blue Chip Stamps, Berkshire Hathaway Incorporated, HO-784, Thursday, March 20, 1975, p. 112.

28. The increase in Santa Barbara's price if the deal collapsed would only partially hedge this risk.

29. Charles T. Munger testimony, In the Matter of Blue Chip Stamps, Berkshire Hathaway Incorporated, HO-784, Thursday, March 20, 1975, pp. 11213.

30. Interview with Judge Stanley Sporkin.

31. Ibid. This lawyer was so particularly ferocious that the author was asked not to mention his name.

32. A thick file of documents produced in response to the SEC's February 1975 subpoena illustrates several points: 1) it contained no evidence that Buffett bought on inside information or expecting a takeover; 2) Buffett had become expert on water company regulation and ratemaking, and his interest and expertise in this narrow subject was prodigious; 3) this aspect of the investigation must have been intrusive and an embarrassing form of dej v, as it included production of his correspondence with Forbes that attempted to clear his name.

33. Partly because of state restrictions on how much stock any one insurance company could hold, the diagram was more complicated than it would have been otherwise. The version shown on pages 412413 was created by Verne McKenzie and updated through 1977 (i.e., includes the Buffalo News). Berkshire was still negotiating with the SEC as late as 1978.

34. During Buffett's testimony, In the Matter of Blue Chip Stamps, Berkshire Hathaway Incorporated, HO-784, Friday, March 21, 1975, p. 125, he acknowledged that he and Munger had been buying shares of Wesco in the open market during a tender offer and Rickershauser had advised him to stop, saying that they should use only tender offers to accumulate further shares (which they did). Rickershauser interjected, "I want the record to be clear that I did not tell them it was illegal to do what was done. I told them it would be hard to convince somebody that in hindsight they may not have intended to do what they did. You can swear me in if you want to on that one. I didn't want to be right."

35. Said to a colleague.

36. The SEC apparently considered Buffett, Munger, and Guerin's interests and the companies a controlled group for purposes of tender offers. The combination of Warren (11%), Susie (2%), Munger and his partners (10%), Berkshire Hathaway (26%), and Diversified (16%) controlled 65% of Blue Chip's stock. Warren and Susie owned 36% of Berkshire and 44% of DRC. Munger owned 10% of DRC. DRC owned 15% of BRK and 16% of BC. BC owned 64% of Wesco.

37. The "harm principle" was articulated by scholars such as John Locke, Wilhelm von Humboldt, and John Stuart Mill, who argued that the sole purpose of law was to prevent harm, and the individual's liberty should not be encroached otherwise. The harm principle is the basis for certain portions of the U.S. Constitution.

38. Chuck Rickershauser Jr. letter to Stanley Sporkin, November 19, 1975.

39. Chuck Rickershauser Jr. letter to Stanley Sporkin, December 1, 1975.

40. Warren E. Buffett testimony, In the Matter of Blue Chip Stamps, Berkshire Hathaway Incorporated, HO-784, Friday, March 21, 1975, p. 157.

41. Charles T. Munger testimony, In the Matter of Blue Chip Stamps, Berkshire Hathaway Incorporated, HO-784, Thursday, March 20, 1975, p. 197.

42. Interview with Judge Stanley Sporkin. Sporkin served as general counsel to the CIA after leaving the SEC in 1981. He became Judge of the U.S. District Court for the District of Columbia in 1985 and served till his retirement in 2000.

43. Ibid. For more on Sporkin see Jack Willoughby, "Strictly Accountable," Barron's, April 7, 2003; Peter Brimelow, "Judge Stanley Sporkin? The Former SEC Activist Is Unfit for the Federal Branch," Barron's, November 4, 1985; Robert M. Bleiberg, "Sporkin's Swan Song?" Barron's, February 2, 1981; "Why the SEC's Enforcer Is in Over His Head," BusinessWeek, October 11, 1976.

44. "I bet on a good horse," says Sporkin, "and the horse came in."

45. After the deregulation of the S&L industry, Santa Barbara lost $80.9 million during fifteen straight quarters in the early 1980s. In June of 1984, Ivan Boesky was close to buying it and infusing it with a desperately needed $34 million, but that fell through. In 1990 it was seized by federal regulators, placed in conservatorship, and operated by the Resolution Trust Corp. until Bank of America bought it in 1991 for $41 million.

46. The company also paid a $115,000 fine. "Consent to Judgment for Permanent Injunction and Other Relief," "Final Judgment for Permanent Injunction and for Other Relief and Mandatory Order and Consent with Respect Thereto," and "Complaint for a Permanent Injunction and Other Relief," In the Matter of Securities and Exchange Commission vs. Blue Chip Stamps, June 9, 1976.

47. The SEC Advisory Committee on Corporate Disclosure, July 30, 1976.

Chapter 40.

1. Doug Smith, "Solid Buffett Voice Melts Debut Jitters," Omaha World-Herald, May 9, 1975.

2. Interview with Charlie Munger.

3. Charles Munger letter to Katharine Graham, December 9, 1974. Munger wrote "dilly" when he apparently meant "silly." For clarity, "silly" has been used in the text.

4. Interview with Fred Stanback.

5. Interviews with Roxanne Brandt, Walter Schloss. Brandt later jokingly admitted this was grounds for divorce.

6. New York Daily News, October 30, 1975.

7. As of December 2007, these shares would be worth $747 million.

8. That Buffett, who had never borrowed a significant amount of money in his life, thought it made sense for his sisters to buy Berkshire stock using borrowed money, with only 5% down, speaks volumes about how cheap he thought the stock was and how good its prospects were at the time.

9. Berkshire owned so much Washington Post stock and Buffett's position on the board was such that, if it bought a TV station, its ownership would be attributed to the Washington Post, pushing it over the limit of five stations that it could own.

10. Howard E. Stark letter to Warren Buffett, June 18, 1975. Also see Lee Smith, "A Small College Scores Big in the Investment Game," Fortune, December 18, 1978.

11. Katharine Graham, Personal History. New York: Alfred A. Knopf, 1997.

12. The new printing-press technology that owners had installed made management hostage to the skilled employees who knew how to run the complex equipment.

13. Katharine Graham, Personal History.

14. Ibid.

15. Interview with George Gillespie.

16. According to Personal History, this contract would have given the pressmen the highest wages in the nation and security from layoffs. Negotiations broke down in part because the Post refused to hire back the workers who had damaged the presses.

17. According to Personal History, fifteen former Post pressmen pleaded guilty to various misdemeanor charges. Six who had damaged presses and committed more serious crimes were jailed.

18. They sold their interest in Source Capital to its managers.

19. With the press strikes and Watergate affair behind her, Katharine Graham began to focus on growth at the Washington Post in the mid-1970s. Up until then, the company didn't have sufficient profits and there was "little more than a hit-or-miss strategy" for growth (Personal History). Sales and earnings started to take off in 1976, around the time that they started buying back company stock. Earnings per share were $1.36 in 1976 vs. $0.36 in 1970. Return on equity was 20% compared to 13%. Profit margin grew to 6.5% from 3.2%. And it kept improving from there (Value Line report, March 23, 1979).

20. Charles Munger letter to Katharine Graham, November 13, 1974.

21. Interview with Don Graham.

22. C. David Heymann, The Georgetown Ladies' Social Club. New York: Atria Books, 2003.

23. Interview with Don Graham.

24. Interview with Susie Buffett Jr., who credits her parents for not interfering.

25. Interview with Susie Buffett Jr.

26. Interview with Dick and Mary Holland.

27. Interview with Susie Buffett Jr.

28. Ibid.

29. Interview with Howie Buffett.

30. In an interview Peter Buffett described his routine at this time.

31. According to friends of Susie's who say she blamed Graham for the relationship.

32. Al Pagel, "What Makes Susie Sing?" Omaha World-Herald, April 17, 1977.

33. Ibid.

34. This is Jack Byrne's recollection of Davidson's remonstration in an interview. Jack being a colorful guy, it is possible that his recollection is a bit more colorful than what Davidson actually said.

35. Interview with Tony Nicely.

36. Warren Buffett memo to Carol Loomis, July 6, 1988.

37. By 1974, the whole insurance industry was producing what rating agency A. M. Best called "unbearable" losses of $2.5 billion from a vicious price war and inflation of everything from car repairs to lawsuits. (A.M. Best Company Comment on the State of and Prospects for the Property/Liability Insurance Industry, June 1975.) The states were also passing "no-fault" insurance legislation, which meant that insurers had to pay for an accident regardless of who caused it. The federal government also slapped price controls on the industry during the Middle East war. Meanwhile, the devastating stock market of 197374 had wiped so much value from GEICO's stock portfolio that for every share of stock, investments that had once been worth $3.90 were now worth a dime a share (Leonard Curry, "Policy Renewed: How GEICO Came Back from the Dead," Regardie's, October/November 1982).

38. GEICO had $500 million in premiums and would have needed capital of $125 million to meet regulatory and rating agency standards for leverage.

39. Interview with Sam Butler.

40. Interview with Jack Byrne. "The bastards at Travelers had passed me over for president for Ed Budd," recalls Byrne (who likes to tell this story and tells it often). "A million dollars invested with me is now worth a billion, and a million dollars invested with Ed Budd is now worth $750,000. And I used to be pissed, but obviously I'm more mature about it now. Well, I'm still pissed." This story is also recounted in William K. Klingaman, GEICO, The First Forty Years. Washington, D.C.: GEICO Corporation, 1994.

41. Interview with Jack Byrne.

42. "GEICO's Plans to Stay in the Black," BusinessWeek, June 20, 1977. It is Byrne's impression that Wallach did not like him.

43. GEICO had too little capital under regulatory standards to ensure its ability to pay claims on all its policies. By transferring some of its business to competitors, the company would relieve the strain on capital.

44. Interview with Rhoda and Bernie Sarnat.

45. Interview with Lou Simpson.

46. "Leo Goodwin Jr. Is Dead at 63; Headed GEICO Insurance Concern," New York Times, January 18, 1978; "Leo Goodwin, Financier, Son of Founder of GEICO," Washington Post, January 18, 1978.

47. Interview with Don Graham.

48. Leonard Curry, "Policy Renewed."

49. Warren Buffett memo to Carol Loomis, July 6, 1988.