Buffett Read online

  What, then, was the source?

  Warren was the second of three children, and the only son. His mother was a petite, feisty woman from a small town in Nebraska. She had a lively temperament and, as was said of women relegated to a supporting role, “a good head for numbers.” Warren’s father, a serious but kind man, was surely the dominant influence in his life. Opening to Warren’s eyes the world of stocks and bonds, he must have planted a seed, but insofar as such things are knowable, Howard Buffett’s acumen for numbers was not on a par with his son’s. Nor was his passion for making money. What was it, then, that prompted Warren to turn from that mannered, comfortable household—to crawl along the floor of the racetrack as though it were a bed of pearl oysters? What was it that would enable him, years later, to stun his colleagues in business-time and again—by computing columns of figures in his head, and by recalling encyclopedic volumes of data as easily as he had the population of Akron? Warren’s younger sister, Roberta, said flatly, “I think it was in his genes.”

  The Buffetts were said to be gentle and sweet-natured, traits that endured. They were skilled at business and loath to spend a dollar. The earliest known Buffett (pronounced Buffett) in America, John Buffett, was a serge weaver of French Huguenot origin. He married Hannah Titus, in Huntington, on the north shore of Long Island, in 1696.1 The Buffetts remained on Long Island, as farmers, until after the Civil War. But they had a streak of ambition, which clashed with the family’s frugal ways. In 1867, Sidney Homan Buffett was employed at clearing land for Zebulon Buffett, his grandfather. On hearing of his fifty-cent-per-diem wage, Sidney became so disgusted that he put down his ax and headed west. He took a job driving a stage out of Omaha, and in 1869 opened the S. H. Buffett grocery. With Omaha still in its frontier beginnings, the Buffetts were ensconced in the city’s commercial life, a mile and a half from the wooded site of the future office of America’s richest man.

  Omaha was a cluster of frame and log buildings, set against the rugged bluffs rising from the Missouri River. Though the plains stood at its door, the town itself was hilly. The area had been wilderness until 1854, when a treaty with the Maha Indians (later the Omahas) opened the Nebraska Territory to settlement. The seminal moment in its growth was in 1859, when an Illinois railroad lawyer named Abraham Lincoln visited the area and took a parcel of land as collateral for a defaulted loan. A few years later, President Lincoln designated the city as the eastern terminal of the Union Pacific Railroad.2

  Sidney Buffett opened his store, with impeccable timing, three months after the railroads joined the continent. Omaha was already “the great jumping-off place” for engines belching across the plains.3 It soon was teeming with settlers, drifters, speculators, Civil War veterans, railroad men, ex-convicts, and prostitutes, many of whom happened upon the Buffett grocery, where Sidney sold quail, wild ducks, and prairie chickens over the counter. Zebulon was highly dubious of his prospects. Writing to his twenty-one-year-old grandson, Zebulon stressed that prudence in business was the Buffetts’ watchword.

  You can’t expect to make much, but I hope business will get better in the spring. But if you can’t make it, do leave off in time to pay your debts and save your credit, for that is better than money.4

  But the young city prospered, and Sidney prospered with it. By the 1870s, Omaha had cast-iron architecture and an opera house. By the turn of the century, it had skyscrapers, cable cars, and a swelling population of 140,000. Sidney built a bigger store and brought two sons into the business. The younger of these, Ernest—the future grandfather of Warren—had the family knack for business. He quarreled with his brother over a girl, and married her, whereupon the brothers stopped speaking. In 1915, Ernest left the downtown store and established a new one—Buffett & Son—in the city’s western reaches.

  Once again, the Buffett timing was shrewd. Omaha’s population was migrating west from the river. Sensing opportunity in the suburbs, Ernest cultivated a delivery trade and sold on credit. Soon, rich families’ cooks were phoning orders to Buffett & Son. The business grew, and Ernest hewed to the Buffetts’ tightfisted ways. He paid the stock clerks the lordly sum of $2 for an eleven-hour shift, accompanied by a lecture on the evils of the minimum wage and similar “socialistic” mandates. Tall and imposing, Ernest did not merely run the store—he tyrannized it.

  Ernest’s son Howard—Warren’s father—had no interest in becoming a third-generation grocer. Howard was independent-minded, like Ernest, but warmer and without the bluster. He worked briefly on an oil pipeline in Wyoming, but his true interests were in the life of the mind. At the University of Nebraska in Lincoln, Howard was editor of the Daily Nebraskan, and aspired to a career in journalism. Though not particularly handsome, he had dark hair and an arresting gaze. As fraternity president, he had his pick of society belles. But in his senior year, Howard met a hardscrabble country girl who was anything but society.

  Leila Stahl had grown up in West Point, Nebraska, a bleak, rural town of 2,200 people. Her father, John Ammon Stahl, owned a weekly paper, the Cuming County Democrat. Most of the people in town were Germanic, and the English-speaking Stahls were outsiders. Leila’s mother felt particularly isolated and spent much of the time bedridden and depressed. Leila and her brother and two sisters had to fend for themselves, and Leila had to help her father at the County Democrat. From the fifth grade on, she would sit on a high stool and set type by hand, and later by Linotype. Sometimes when a train stopped in West Point she would rush on board and interview passengers to fill the news columns. On Thursdays, this slight schoolgirl stood beside the fly of the giant press, firmly gripping the sheets of newsprint and taking care to pull each one at just the right moment. In time, Leila developed pounding headaches, synchronized with the press run of the County Democrat.

  After Leila graduated from high school, at sixteen, she had to work three more years to afford tuition at Lincoln. She appeared in Howard Buffett’s office, looking for a job at the Daily Nebraskan, having survived her childhood with a tart tongue and a wry sense of humor. She was pretty, just over five feet, with soft features and wavy light brown hair. As she would put it, she “majored in marrying”5—not an unreasonable course of study for a woman facing the prospect of returning to West Point.

  Howard hired her, and immediately asked her for a date. The attraction was immediate on both sides. When his graduation neared, Howard asked for her hand. John Stahl, an educated man, had hoped that his daughter would finish college, but gave his blessing. The wedding was in West Point, the day after Christmas, 1925, in ten-below-zero weather. According to a memoir that Leila wrote for her grandchildren, Howard later told her, “When I married you it was the best bargain I ever made.” There was no thought of a honeymoon. Directly the wedding ended, they boarded a bus for Omaha.

  Howard had been offered a newspaper job, the stuff of his dreams, but a friend of his father’s had a $25-a-week spot for him in an insurance company. Howard’s capitulation was a commentary on the times. As Leila noted, “He deferred to his father, who had paid for college.”6

  The couple moved into a two-bedroom white clapboard bungalow with a coal furnace, on Barker Avenue. For Leila, it was a hard beginning. Raised by an invalid mother, she was unprepared as a home-maker. As Howard used the car, Leila walked to the streetcar when she took temporary secretarial or printing jobs—sometimes, in those first years, making more in a week than he did. Then she would walk back to a load of housework. In 1927, Leila had an eye operation, after which her headaches began to recur. The next year, when Doris, her first child, was born, Leila ran a fever of 105, alarming everyone. Two years later the couple had a son, Warren Edward. It was a humid summer’s day—August 30, 1930—a cloudburst breaking the eighty-nine-degree heat.

  From the start, Warren was cautious beyond his years. When he learned to walk, it was with his knees bent, as if ensuring that he wouldn’t have far to fall. When his mother took Doris and Warren to church-circle meetings, Doris would explore and get lost, but Wa
rren would sit dutifully by her. “Never much trouble as a little child,” Leila would write.

  In a picture taken when Warren was two, he appears as a chunky, blondish boy in white laced boots and white socks, one hand grasping a cube-shaped block, with a slight smile and a deep gaze. His hair, reddish blond at first, turned to auburn, but his temperament didn’t change. He didn’t wander where he was unfamiliar, nor did he cause trouble or get into fights. Roberta, younger than Warren by three years, would protect him from neighborhood bullies. Once, Howard brought home some boxing gloves and invited a boy over to box with Warren. “They were never used afterwards,” Leila noted. So gentle was Warren’s nature that he inspired in his sisters, as he would in others, a protective instinct. He didn’t seem equipped to fight.

  Warren’s first years were difficult ones for the family. Howard was working as a securities salesman with Union Street Bank. The curmudgeonly Ernest thought it a dubious profession. He summed it up in a letter to Warren’s Uncle Clarence:

  I know all there is to know about stocks, and in a few words that means that any man who has been able to save a few dollars up to the time he is fifty years old is a darn fool to play the stock market, and I don’t mean maybe.7

  Howard scribbled in the margin, “A real booster for my business!” But within a year, Ernest looked prophetic. On August 13, 1931—two weeks shy of Warren’s first birthday—his father returned from work with the news that his bank had closed. It was the defining, faith-shattering scene of the Great Depression. His job was gone, his savings were lost.8 Ernest gave his son a little time to pay the grocery bills—a bitter pill, for Howard had inherited the Buffett disdain for borrowing. “Save your credit, for that is better than money.” His prospects were so bleak that he considered moving the family back to West Point.

  But in short order, Howard announced that Buffett, Sklenicka & Co. had opened its doors in the Union State Bank building on Farnam Street—the same street where Warren would later live and work. Howard and a partner, George Sklenicka, peddled “Investment Securities, Municipal, Corporation and Public Utilities, Stocks and Bonds.” Howard now drew on his courage and will, for the market crash had tarnished the public’s trust. Omaha, at first, had thought itself immune to the Depression, but by 1932, wheat prices had plunged and farmers were eating in soup kitchens. Staunchly Republican Omaha voted Roosevelt in a landslide; the next year, eleven thousand registered for relief. Born in those meanest of times, Buffett Sklenicka appears at first to have been a business only in name—a place where Howard could hang his hat and work on commission. His first sales were long in coming, and the commissions were small. Ernest, who was president of the Omaha Rotary, informed his fellow Rotarians that as his well-intentioned son didn’t know much about stocks, they would be advised not to give him their business.9 Leila managed to put dinner on the table, but she often skipped herself to give Howard a full portion. The family was so strapped that Leila stopped going to her church circle for want of twenty-nine cents to buy a pound of coffee.

  And the Buffetts were wracked by those extremes of nature that in the Midwest seemed as if fused with the Depression itself. “The Great Depression began,” Leila wrote, with “a terrible, 112-degree heat.” Dust storms blew in from Oklahoma, and Omahans vainly sealed their homes against the locusts. On the day of Warren’s fourth birthday party, a “high searing wind” blew the paper plates and napkins off the table and buried the porch in red dust. Warren and Doris would bear the suffocating heat outside, waiting for the ice man to hop from his horse-drawn cart and hand them ice slivers to suck on. Worse than the heat was the bitter winter cold. Bundled up, Warren and his sister would walk eight long blocks to the Columbian School, in weather so frigid that salesmen kept their motors running as they paid their calls, for fear that they wouldn’t be able to restart their engines.

  By the time that Warren began school, his father’s fortunes were rapidly improving. When Warren was six, the Buffetts moved to a more spacious Tudor brick home with a sloping, shingled roof, on suburban North 53rd Street. The bad times in the Buffett home were not discussed; they were banished.

  But they seem to have deeply affected Warren. He emerged from those first hard years with an absolute drive to become very, very rich. He thought about it before he was five years old. And from that time on, he scarcely stopped thinking of it.

  When Warren was six, the Buffetts took a rare vacation to Lake Okoboji, in northern Iowa, where they rented a cabin. Warren managed to buy a six-pack of Cokes for twenty-five cents; then he waddled around the lake selling the sodas at five cents each, for a nickel profit. Back in Omaha, he bought soda pop from his grandfather’s grocery and sold it door-to-door on summer nights while other children played in the street.

  From then on, such endeavors were unceasing. And Warren’s moneymaking had a purpose. He wasn’t thinking about getting pocket money for then, but about advancing toward his great aspiration.

  When Warren was seven, he was hospitalized with a mysterious fever. Doctors removed his appendix, but he remained so ill that the doctors feared he would die. Even when his father fetched his favorite noodle soup, Warren refused to eat. But left alone, he took a pencil and filled a page with numbers. These, he told his nurse, represented his future capital. “I don’t have much money now,” Warren said cheerfully, “but someday I will and I’ll have my picture in the paper.”10 Purportedly in his death throes, Warren sought succor not in soup but in dreams of money.

  Howard Buffett was determined that Warren would never repeat his own experience of hardship. Also, he resolved that as a parent, he would never follow the example of Ernest and demean his son. He unfailingly expressed confidence in Warren and supported him in whatever he did. And though Warren had his mother’s high spirits, his universe revolved around his father.

  Six feet tall, Howard towered over the family, physically and in other respects. He worked hard at supporting the family, owning not only his brokerage but also the South Omaha Feed Co., a small business by Omaha’s stockyards. But he was not excited by money; his passions were religion and politics. He was a self-consciously moral man and had the courage of his beliefs, which were conservative in the extreme. (“To the right of God,” a local banker said.)

  Convinced that Roosevelt was destroying the dollar, Howard gave gold coins to his children and bought pretty things for the house—a crystal chandelier, sterling silver flatware, and oriental throw rugs—all with a view that tangibles were better than dollars. He even stocked up on canned foods and purchased a farm, intended to be the family’s refuge from the hellfire of inflation.

  Howard also stressed a principle that was more enduring than any of his political opinions, namely, the habit of independent thought. With his children at his side, Howard would recite a favorite maxim from Emerson:

  The great man is he who in the midst of the crowd keeps with perfect sweetness the independence of solitude.

  Howard drilled the children in religious values, but also in secular ones. He taught an adult Sunday school class, but he also served on the public school board. Scarcely a week went by without his reminding Warren and his sisters of their duty—not just to God, but to community. He was fond of telling them, “You are not required to carry the whole burden—nor are you permitted to put down your share.”

  As was not, perhaps, so uncommon for a man of that era, he not only mouthed such aphorisms but did his best to live by them. He did not ever drink or smoke. When a favored customer’s securities turned out poorly, Howard felt bad enough to repurchase them for his own account.

  “You are a good citizen,” he would respond when told of some social malady. “What are you going to do about it?”

  He sat, always, in a red leather chair in the living room, with a Victrola at his ear blaring out Stephen Foster and cherished hymns and marches. A creature of habit, the dimpled stockbroker would take the family to Sunday dinner at the bustling terra-cotta Union Station, and then to Evans Ice Cream on Center
Street. Though he dressed soberly in dark suits, he smiled easily. Herbert Davis, at one time Howard’s associate, said, “He was exactly what you’d want in a father.”

  His children lived in fear of disappointing him. Doris refused to even sit with friends who were drinking beer, lest her father see them and associate her with such sinfulness. “He had all these high principles,” Roberta recalled. “You felt you had to be a good person.”

  Warren idealized him the most of all. He was close to his dad, and loose and easy with him. In church, once, Warren told his rather off-key father, “Pops, either you can sing or I can sing, but we both can’t sing at the same time.” Howard affectionately called him “Fireball.”

  When Warren was ten, Howard took him to New York—as he did, in turn, each of his children—on the overnight train. Leila watched Warren go off with his “best friend” in hand and his big stamp album under his arm. Their itinerary included a baseball game, a stamp display, and “some place with Lionel toy trains.”11 On Wall Street, Warren went to the stock exchange.

  Warren was already as fascinated by stocks as other boys were by model aircraft. He frequently visited Howard’s now prosperous brokerage, which had moved to the marble-columned Omaha National Bank Building, at 17th and Farnam. Up in his father’s office, Warren would gaze at the stock and bond certificates, stowed behind gold-painted bars and endowed, in Warren’s eyes, with a mysterious allure.12 Often, he would race down the steps to the Harris Upham brokerage, which was in the same building and was frequented by financial men in Omaha as a source of stock quotations. Jesse Livermore, the infamous East Coast speculator, would stop by when he was in town, scribble an order on a piece of paper, and silently depart. And the Harris Upham brokers indulged the young, big-eared Warren by allowing him to chalk the prices of stocks on the blackboard.13