4. Interview with Paula Orlowski Blair. She thought it funny that her new boss wanted to turn her into a private eye.

5. Interviews with Donald Feuerstein, Bob Denham. Denham says only that they agreed a change was needed.

6. Warren Buffett testified to this in "In the Matter of Arbitration Between John H. Gutfreund against Salomon Inc., and Salomon Brothers Inc.," Sessions 13 & 14, November 29, 1993.

7. During John Gutfreund's arbitration hearing.

8. A number of sources said this to the author but were afraid to be quoted.

9. The firm became Munger, Tolles & Olson in 1986.

10. Law-firm sources and former employees give Buffett all of the credit for this idea, despite the law firm's putative role.

11. Drexel Burnham Lambert had failed after its indictment. Kidder, Peabody was sold to PaineWebber. Salomon's highly leveraged balance sheet put the firm in even greater jeopardy.

12. Interview with Ron Olson.

13. Ibid.

14. Ibid.

15. Interview with Frank Barron. Rudolph Giuliani, U.S. Attorney for the Southern District of New York, had pressed for Drexel Burnham Lambert to waive the privilege, but the firm did not.

16. Charlie Munger later acknowledged the morally fraught-at best, ambiguous-situation, saying he and Buffett had no choice but to assist in criminal investigation and prosecution of potentially innocent employees. "When the final chapter is written, the behavior evinced by Salomon will be followed in other, similar cases," he said. "People will be smart enough to realize this is the response we want-super-prompt-even if it means cashiering some people who may not deserve it." Lawrie P. Cohen, "Buffett Shows Tough Side to Salomon and Gutfreund," Wall Street Journal, November 8, 1991.

17. Warren Buffett letter to Norman Pearlstine, November 18, 1991.

18. Buffett testified to this in "In the Matter of Arbitration Between John H. Gutfreund against Salomon Inc., and Salomon Brothers Inc.," Sessions 13 and 14, November 29, 1993.

19. "I didn't fire them on the spot," said Olson in an interview. "I was a little more subtle than that."

20. Interviews with Carolyn Smith, Warren Buffett. He added Smith to his collection of people, writing to the head of the hotel about her, corresponding with her, and putting her on his Christmas list.

21. Interviews with Gladys Kaiser and Bob Denham.

22. House Committee on Energy and Commerce-Telecommunications & Finance Subcommittee, September 4, 1991, regarding securities trading violations by Salomon Brothers and implications for government securities market reform legislation.

23. Maughan had to go back to Washington a few weeks later to testify by himself. "The sea did not part," he says, "and I got thoroughly wet."

24. "Our goal is going to be that stated many decades ago by J. P. Morgan, who wished to see his bank transact 'first-class business in a first-class way.'" Warren Buffett, "SALOMON INC-A report by the Chairman on the Company's Position and Outlook."(This wording was also used in a letter to Salomon Inc., shareholders as reprinted in the Wall Street Journal, November 1, 1991.) 25. Senate Subcommittee on Securities Committee on Banking, Housing, and Urban Affairs-Hearing on the Activities of Salomon Brothers Inc., in Treasury Bond Activities, Wednesday, September 11, 1991.

26. At the time, sixty-five lenders had stopped entering into repurchase agreements with Salomon, and the firm's commercial-paper balance was falling toward zero. One major counterparty, Security Pacific, was refusing to do daylight foreign-exchange trades without posting of collateral. Buffett says this was his absolute low point. The news media never picked up this story, which, if reported, could have kicked off a panic.

27. Interview with John Macfarlane. The cost of funds motivated traders to run off uneconomic trades. Ultimately the rate went to 400 basis points over Fed Funds rate. The short-term capital-intensive trades like the "carry-trade" (interest arbitrage) ran off.

28. Interview with John Macfarlane.

29. Senate Subcommittee on Securities Committee on Banking, Housing, and Urban Affairs-Hearing on the Activities of Salomon Brothers, Inc., in Treasury Bond Activities, Wednesday, September 11, 1991.

30. By then, many other people, including Denham and Munger, had found out about the Sternlight letter, but they say everybody thought somebody else had told Buffett or that he somehow knew. Buffett and Munger were also incensed to learn that at the June audit committee meeting, with Feuerstein present, Arthur Andersen represented that no events had taken place that were required to be reported to the SEC or the New York Stock Exchange. While Wachtell, Lipton had indeed taken that position, this statement, with hindsight, was manifestly untrue.

31. Employees asked how much Buffett and Munger understood about the workings of Salomon before August 1991, while serving on the board, uniformly said "not much," or words to that effect, and that information was skillfully meted out to the board so that much of the firm's messiness never surfaced.

32. Lawrie P. Cohen, "Buffett Shows Tough Side to Salomon."

33. Interview with Gladys Kaiser.

34. Buffett cannot remember who did this-although it was neither Astrid, who retires early, nor someone from the office. He thinks it must have been some other local friend or neighbor.

35. Although securities underwriters sell service, price, and expertise, ultimately they are financial guarantors. Salomon's financial-strength ratings had been downgraded. With a criminal indictment and its primary dealership threatened, that the firm managed to retain any banking clients remains one of Wall Street's great survival stories. It did so by giving up lead positions and switching to co-lead, in effect taking on a supporting-cast-member role. Nevertheless, its market share fell from 8% to 2%.

36. Interview with Eric Rosenfeld.

37. Interview with Paula Orlowski Blair. Morse Shoe filed for bankruptcy in July 1991 just weeks after Berkshire agreed to buy H. H. Brown Shoes. Berkshire acquired Lowell Shoe, a subsidiary of Morse Shoe, at the end of 1992, and also bought Dexter Shoe in 1993.

38. Smith Barney, Shearson Lehman, and UBS Securities. The ensuing witch-hunt atmosphere also caused Morgan Stanley to put out a statement denying it was the subject of a government investigation.

39. The Treasury Department/Fed study also revealed that, over a period beginning in early 1986, Salomon had bought more than half the bonds issued in 30 out of 230 auctions (Louis Uchitelle, Stephen Labaton, "When the Regulators Stood Still," New York Times, September 22, 1991).

40. Warren Buffett testimony, "In the Matter of Arbitration Between John H. Gutfreund against Salomon Inc., and Salomon Brothers Inc." Session 13 & 14, November 29, 1993.

41. Contracts differ by employee, by company, and by state, and the indemnification provisions use broad wording that is subject to interpretation, but in general, corporate officers accept the legal risk that goes with their position on the condition that their employers pay legal fees unless they are convicted of fraud or other criminal wrongdoing or have engaged in willful misconduct. Salomon's action was highly unusual at the time and remains unusual. In 2005, KPMG's refusal to pay its partners' legal fees became the subject of lawsuits. In July 2007, a U.S. federal judge dismissed a case against thirteen KPMG employees for promoting aggressive tax shelters, because he determined that the government had strong-armed KPMG into denying them legal payments.

42. Transcript of Federal Open Market Committee meeting, October 1, 1991.

43. Interview with Gary Naftalis.

44. Interview with Otto Obermaier.

45. Ibid.

46. Interview with Gary Naftalis.

47. Interview with Otto Obermaier.

48. Letter to Salomon Inc., shareholders as reprinted in the Wall Street Journal, November 1, 1991.

49. Interview with Paula Orlowski Blair.

50. Ibid.

51. Salomon advertisement in the Wall Street Journal, November 1, 1991. All of Salomon's growth in earnings for several years had been given back to employees. Salomon performed in the bottom third of stocks in its market-cap class. The third-quarter-income statement would have been drenched with red ink had not the lower bonus pool reversed it. The previous "share the wealth" approach subsidized money-losers so that everyone was richly paid. Buffett's biggest change was to link bonuses to individual and division performance. For the five years ending December 31, 1991, Salomon Inc.'s stock ranked 437th in performance among S&P's top 500 stocks. (1991 Salomon Inc., 10K) 52. Interview with Deryck Maughan.

53. Interview with Jim Robinson.

54. For decades, as a partnership, it had-literally-been run for the employees. It was the inherent separation of capital and labor at a publicly owned investment bank that was the problem.

55. Otto Obermaier. He later wrote "Do the Right Thing: But if a Company Doesn't It Can Limit the Damage," Barron's, December 14, 1992.

56. The same was not true of the May two-year note squeeze, in which several small firms were bankrupted. Had it ever been proven that Mozer colluded with the hedge funds to corner the market or submitted false bids in that auction, Salomon's and the individuals' penalties doubtless would have been more severe; the whole story might have ended differently.

57. Interviews with Frank Barron and Bill McLucas. McLucas confirms the gist but can't recall the exact words.

58. Interview with Otto Obermaier.

59. Mozer served his four months after pleading guilty to lying to the Federal Reserve Bank of New York. The SEC and prosecutors took no action against Feuerstein.

60. Gutfreund was also barred from heading a firm without SEC approval.

61. Interview with Paula Orlowski Blair.

62. In fact, Jerry Corrigan did not lift the full ban on Salomon until August 1992.

63. CNBC Inside Opinion, Ron Insana interview with Gutfreund, April 20, 1995.

64. Interview with John Gutfreund.

65. Interview with Charlie Munger.

66. The arbitrators were John J. Curran, Harry Aronsohn, and Matthew J. Tolan.

67. Interview with Frank Barron.

68. Those who have spent any significant amount of time with Munger will instantly recognize the sensation of talking to him when his head is turned off, while something occasionally pierces his band of indifference. "It's hard to pierce Charlie's band of indifference," says Buffett. "I can tell you that."

69. Charles T. Munger testimony, "In the Matter of Arbitration Between John H. Gutfreund against Salomon, Inc., and Salomon Brothers, Inc.," Sessions 33 & 34, December 22, 1993.

70. Interview with Sam Butler, Frank Baron.

71. Interview with Frank Barron.

Chapter 50.

1. Michael Lewis, "The Temptation of St. Warren," New Republic, February 17, 1992.

2. Ron Suskind, "Legend Revisited: Warren Buffett's Aura as Folksy Sage Masks Tough, Polished Man," Wall Street Journal, November 8, 1991.

3. Patricia Matson letter to Peter Kann, Norman Pearlstine, Paul Steiger, James Stewart, and Lawrence Ingrassia of the Journal, November 18, 1991, and attached chronology of events, in which Tom Murphy recalls explaining to Suskind before publication that he was misquoting and misportraying the conversation; Bill Gates letter to Warren Buffett, November 13, 1991, which says, "The quote is wrong. I never suggested anything of the kind to the reporter." Gates said he called the Journal before publication to ensure the incorrect quote would not be published and was "shocked" to see the quote in the article. Memo from Patty Matson, official spokesperson of CapCities/ABC, to "Those possibly interested," November 19, 1991, cc: Buffett, Murphy, Gates, Tisch, which says Steiger of the Journal called and acknowledged a "puzzlement" in which someone might have been "gilding the lily."

4. Bill Gates letter to Warren Buffett, November 13, 1991.

5. Interviews with Warren Buffett, Bill Gates. The latter may have heard a version from someone else, which got exaggerated in the retelling. On the other hand, Buffett had to use the facilities somehow.

6. Interview with Bill Gates.

7. For four generations the Gateses named their sons William Henry Gates. Bill Jr.'s father, William Henry III, changed his name to Bill Jr. and his son, the new Bill III-who was actually Bill IV-became known as Trey. Bill Jr. then stepped up to become Bill Sr. as the oldest living William Henry Gates, and his son is now known variously as Trey, Bill III, Bill, and The Bill Gates.

8. Interview with Arthur K. Langlie.

9. Interview with Bill Gates.

10. Noyce died June 3, 1990.

11. Interview with Roxanne Brandt.

12. Interview with Bill Gates.

13. Interview with Bill Ruane.

14. Interview with Don Graham.

15. Gates was right; Kodak was toast. From January 1990 to December 2007, Kodak stock rose a measly 20%, barely more than 1% a year. The S&P over the same period rose 315%. Berkshire Hathaway rose 1,627%. Microsoft rose 6,853%.

16. Interview with Bill Gates.

17. Ibid.

18. Statistics courtesy of Berkshire Hathaway.

19. Interview with Louis Blumkin.

20. A Scott Fetzer product.

21. Based on various comments from Kelly Broz, Roberta Buffett Bialek, Peter Buffett, Doris Buffett, Susan Clampitt, Jeannie Lipsey, Stan Lipsey, Ron Parks, Marilyn Weisberg, and Racquel Newman.

22. Interviews with Kathleen Cole, Susie Buffett Jr.

23. Interview with Kathleen Cole.

24. Interviews with Susie Buffett Jr., Howie Buffett. This took place at McMillan Junior High.

25. Which works out to $21,000 per year.

26. Interview with Howie Buffett.

27. Interview with Susie Buffett Jr.

28. Kurt Eichenwald, The Informant. New York: Broadway Books, 2000.

29. Interview with Susie Buffett Jr.

30. Interview with Bill Gates.