Becoming Warren Buffett Page #5

stock in a terrible business.

Berkshire Hathaway

was closing mills

and as they closed mills,

it would free up some capital,

and then they would

repurchase shares,

so I bought

some stock with the idea

that there would be another

tender offer at some point,

and we would sell the stock

at a modest profit.

And at one point,

the management asked me at what

price we would tender our stock,

and I said, "$11.50."

And the tender offer

came out a few months later,

and it was

at $11 and 3/8ths,

which was an eighth

of a point cheaper.

And that made me very mad,

so I just started

buying more stock.

I just felt that I'd been

double-crossed by the management.

And in May of 1965,

I bought enough so we

controlled the company,

and we changed

the management.

It was a pretty silly way

to behave,

as Warren has recounted

in retrospect.

One of the reasons

Warren is successful

is he's brutal

in appraising his own past.

He wants to identify misthinkings

and avoid them in the future,

but it was an accident that

he chose Berkshire Hathaway.

If the chairman hadn't tried

to cheat him out of an eighth,

there wouldn't have been any

Buffett- Berkshire Hathaway history.

Warren:
If you're emotional about investment,

you're not going to do well.

You may have all these

feelings about the stock.

The stock has

no feelings about you.

Looking back, it's interesting,

that tender offer...

I didn't realize it, but it... it happened

about five days after my dad had died

and whether that had affected me or not,

I don't know.

Kunhardt:
Do you remember your last

conversation with your father?

Yeah, but I don't want

to talk about it.

Munger:

I think it just sobered him and hurt him,

but...

Warren soldiers on.

Both Warren and I

could look at our fathers

and see what they did right

and what they did wrong.

Warren's father was a real

old-fashioned right-wing ideologue.

And his father was

so intense about it,

that Warren just decided

that it was mistake...

it cabbaged up your head

to be that much an ideologue,

so he loved his father,

but he didn't want to become

that much of a true believer in...

in anything.

My politics became more overt

after my dad died.

Civil rights

changed my views.

You know, in 1776

Thomas Jefferson wrote,

"All men are created equal,"

and then when they wrote the Constitution,

they all of a sudden

decided that, no,

it was just 3/5ths of a person

if you were black.

I mean, that struck me

as kind of crazy.

Susie:
I was talking to him one

day about some racial issue,

and he said to me,

"Wait till women discover

they're the slaves

of the world."

Now how many men

were cognizant of that,

and even women then?

Warren:

The initial example is really my mother.

She came from a generation

where the main function

of the wife

was to help

her husband in the job.

And my sisters are

fully as smart as I am.

They got better personalities

than I had,

but they got the message

a million different ways

that their future

was limited,

and I got the message

that the sky is the limit

and it wasn't due to a lack of

love or anything of the sort.

It just...

it was the culture.

On the other hand,

you can look

at the flip side of that

and say it's quite encouraging,

because if you look at what

this country accomplished

only using half of its talent,

just think of the potential

for the future.

I'm enormously bullish

on America over the future

and part of the reason

is that we,

by some rather

stupid decisions,

essentially put half our

talent on the sidelines.

Loomis:
Warren is probably the most

rational person I've ever met.

Charlie Munger

would be a close rival.

And Charlie became a man

that Warren

depended on heavily

and I think his first

experiences

in the discarded-

cigar-butt era

convinced him that it was not

exactly where he wanted to be.

Munger:

He made so much money for so long

doing what he'd been taught

by Ben Graham,

which he'd buy

these very cheap stocks.

If they were cheap enough,

he didn't care it was

a lousy company

and a lousy management.

He knew he was going to make money anyway,

just because of the cheapness.

Warren:

Charlie Munger has had a big impact on me

in moving me toward looking for

wonderful companies at fair prices

rather than fair companies

at wonderful prices.

That was enormously important, because it

enabled Berkshire to scale up in a way

that would have been

impossible to do otherwise.

Yep?

Man:
What are the key indicators

you'd look for within companies

before making an investment?

Well, I look for something that

does give them a moat around it.

We have a company called See's

Candies out on the west coast.

See's Candies

Boxed Chocolates.

If you give a box of See's

chocolates to your girlfriend

on the first date

and she kisses you?

We own you.

You know? I mean we...

we can raise

the price tomorrow.

I mean,

you'll buy the same box.

You're not gonna

fool around with success,

so the key there

is the response.

You do not want to get home

on Valentine's Day

and say to your wife

or your sweetheart...

preferably they're

the same person...

you don't say, "Here, honey,

I took the low bid."

It doesn't work.

Price is...

to a degree, is immaterial.

If you've got

an economic castle,

people are gonna come and wanna

take that castle away from you.

You better have

a strong moat.

You better have a knight in the

castle that knows what he's doing.

You're not buying an asset,

you're buying a name,

you're buying a brand,

you're buying

a real franchise here,

and Charlie was more responsible

for that than anybody.

Warren:

We were mental partners

right from the moment we met.

Woman:
I wanna know,

going back 50 years,

what it was like

when you first met Warren.

Well, I thought

he was a prodigy...

and I got a lot

of criticism.

My wife said,

"Why are you paying such enormous respect

"to that young man

with a crew cut

who won't eat vegetables?"

Warren:

He's ungodly smart.

He's got a much broader

intellect than I do,

and he's magnificent

at being able

to condense important ideas

into just a very few words.

If you're not interested

in the economic scene right now,

you're mentally dead.

Charlie has no tact.

Woman:
All right,

let's talk a little bit about bankers.

Charlie, on Friday,

compared them to heroin addicts.

Yeah, well,

that's colorful Charlie,

but I would not

have chosen that.

Loomis:

I once wrote of him

that when

they handed out humility,

he didn't get

his fair share.

The ideal way to run a

headquarters is to have one man,

preferably over 80,

sitting in an office

by himself.

Anything else

is pure frippery.

Warren:

He's always honest in what he tells me,

so I... I listen to him.

Munger:

We never had an argument.

We just...

We just kinda

roll with it easily.

Suppose Warren doesn't wanna do

something that I would've done,

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