The Oracle and Omaha: How Warren Buffett and His Hometown Shaped Each Other

THE

oRACLE & OMAHA How Warren Buffett and his hometown shaped each other

Steve Jordon

THE

oRACLE &OMAHA

How Warren Buffett and his hometown shaped each other

Steve Jordon

THE

oRACLE &OMAHA

BY Steve Jordon

EDITOR Dan Sullivan DESIGNER Christine Zueck-Watkins PHOTO imaging Jolene McHugh EXECUTIVE EDITOR Mike Reilly PRESIDENT AND PUBLISHER Terry Kroeger

on the cover: Warren Buffett in Omaha’s Gene Leahy Mall.

on preceding page:

In front of the Burlington Building, which was built in 1879 as headquarters for the Burlington and Missouri River Railroad.

at right:

At the Omaha Convention and Visitors Bureau. photos by matt miller All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior consent of the publisher, Omaha World-Herald Co. Copyright 2013 Omaha World-Herald Co. 1314 Douglas St. Omaha, NE 68102-1811 First Edition ISBN: 978-0-615-79394-8 Printed by Walsworth Publishing Co. Marceline, MO

THE

oRACLE & OMAHA

How Warren Buffett and his hometown shaped each other

1 27 39 47 57 65 79 89 99 113 121 137 161 175 187 199 212

Ties That Would Bind ■ 1930 This Is The Place ■ 1956 Class Is In Session ■ 1961 Cultivating A Conscience ■ 1963 A Financial Star Is Born ■ 1966 Making An Impact ■ 1972 A Stake In The City ■ 1983 A Drawing Card ■ 1985 The Brand Of Integrity ■ 1991 Crowd-Pleasing Lessons ■ 1998 Financing Hope ■ 2004 Making Millionaires ■ 2005 The Reflected Glow ■ 2008 Invested In Omaha ■ 2011 Comforts Of Home ■ 2013 Preserving A Masterpiece Acknowledgments

W

arren Buffett faced a choice. His mentor, Benjamin Graham, was retiring.

Buffett could become a full partner at age 26 in a New York City investment firm at the center of the financial world in 1956, the dawn of the greatest buildup of wealth in the history of free enterprise.

Then there was Omaha, half a continent away in distance and a world apart in business culture. Yet for Buffett,

his hometown held endless promise, not only for his young family but also as a blank canvas for his ideas about how to accumulate money. Omaha’s public schools had helped channel Buffett’s intelligence, and family and friends helped him set standards he would follow. He saw clear advantages in being removed from the clamor of Wall Street.

He returned to Omaha.

Over the decades, Buffett turned that blank canvas into what he termed a “business masterpiece,” the product of a lifetime of hard work and dedication to rational investing principles. He began with seven partners, then turned Berkshire Hathaway Inc. into his tool for growth.

With the help of fellow Omaha native Charlie Munger, his vice chairman and confidante, Buffett built one of history’s great fortunes for himself and dozens of others.

Just as Buffett was shaped by the teachers, the friends, the neighborhoods, the ethics — the overall identity — of Omaha, so Buffett has helped shape the city. Sometimes his impact is direct, such as visitors’ eager arrivals in Omaha to see Buffett at his annual shareholders meeting, or the college students introduced to Omaha through their Q&A sessions with Buffett. Sometimes it’s indirect, such as Omaha’s campaign for business integrity or the Omaha buildings funded by donations from multi-millionaire investors in Berkshire Hathaway.

This is the story of The Oracle & Omaha, how the city and its most famous resident share a history and a future.

IV INTRODUCTION

“I’m very happy when I’m home. That’s why I’ve never moved.”

Warren Buffett’s love of numbers and fascination with money emerge during his early years in Omaha.

He forms deep personal bonds that will help tie him forever to his hometown.

•

A

s an 8-year-old growing up in Omaha’s Country Club neighborhood, Warren Buffett would hide pennies, nickels and even the occasional dime in his room, tucking them into books, alongside the walls and under the bed. He would then invite sisters Doris and Bertie in for a treasure hunt. The best thing was that the two girls could keep what they found. “Who doesn’t like to go on a hunt?” Doris said. “He was like the Easter Bunny.” Warren didn’t hoard money, but he loved the fun of finding it — and keeping it in the family.

As boys, Warren and Dan Monen stocked shelves and delivered groceries at Grandpa Buffett’s grocery in the Dundee neighborhood.

They dug up dandelions in Grandpa’s yard on 57th Avenue.

Some Saturday mornings, Warren and Bob Falk would race up and down the stairs at the Omaha National Bank Building, timing each other with Warren’s stopwatch while their fathers worked as stockbrokers on the fourth floor. For the youngsters, the visits were a special treat, exposing them to the world of finance and the routine of their fathers’ brokerage, Buffett-Falk & Co. The sisters grew up, moved away and had families. The boys became men and had families, too, but stayed in Omaha.

Warren liked to count, be it bottle caps or coins.

Christmas 1937: The Buffett siblings, on the facing page, show off their presents outside their home in Omaha’s Country Club neighborhood. Warren has a new nickel-plated coin changer, which he used for his Coca-Cola and chewing gum sales. Older sister Doris holds a new Shirley Temple doll, which replaced the one held by younger sister Bertie, who had “trimmed” its hair.

ties that would bind 3

Warren Buffett returns from New York and reconnects with Omahans who will help him start his financial masterpiece. As his partnerships take root, he revels in the distance from Wall Street’s noise.

P

•

ick up an Omaha World-Herald in 1956, and you’d find lots of things happening.

For an evening out, folks might start at La Casa Pizzaria on Leavenworth Street. They could choose between “The King and I” at the Airport Drive-in Theater or “Bus Stop” with Marilyn Monroe at the Omaha Theater. Or they could take in a burlesque show at the Town Theater or go to the Colony Club to hear the Ink Spots.

Going shopping? Harold’s Supermarket offered nice-sized watermelons for 39 cents and a dozen eggs for 29 cents.

A case of locally brewed Storz, Metz or Falstaff beer ran $2.75, a riding lawn mower was $165.50 at Osoff ’s Hardware.

The Virginia Dare store listed two pairs of shoes for $5. Houses for rent included “suburban living” near 90th and Center Streets.

In the news, President Dwight D. Eisenhower was expected to announce soon whether he’d run for re-election.

On Wall Street, the Dow Jones industrials hovered below 485. Locally, the city was debating whether to annex land in “west Omaha,” namely, beyond 72nd Street.

Something else happened in 1956 that would change the course and the character of Omaha. The event didn’t escape the attention of the local daily, even though its importance wasn’t apparent at the time. A three-sentence item on Page 28 of the February 28 paper, in a column called “Of Social Nature,” told the story:

“

Planning to return to Omaha to live are Mr. and Mrs. Warren Buffett and their children, Susie and Howard, of White Plains, N.Y. Mrs. Buffett’s mother, Mrs. W.H. Thompson, will leave Omaha March 22 for White Plains. She and her daughter and grandchildren will return to Omaha about March 29 and Mr. Buffett will join them later.

’’

The World-Herald showed the Buffetts, on the facing page, at their home at 5202 Underwood Avenue in 1956.

The family was “back in Omaha and ready for a picnic,” the newspaper reported. Susie was 2½, and Howard was 17 months.

this is the place 29

Warren Buffett appreciated what he learned from great teachers.

His own mission to educate extends beyond the classroom.

•

M

ike Beilis’ job at Omaha University was to fill the municipal college’s new Eppley Conference Center with non-credit teachers and students. One day in 1961, he and some of the professors were kicking around ideas, and someone suggested an investing course. William “Doc” Thompson, dean of arts and sciences, snorted, “I have a son-in-law who knows all about that.” Beilis called the son-in-law, Warren Buffett, who came to the university to make plans for a course.

“He was very enthusiastic,” Beilis said. “He went directly to the point and spoke very fast. He was strictly business, in a very friendly way. The guy was very interested, in a hurry to accomplish whatever his mission was in his mind.”

That mission, Buffett believes, is to educate as many people as possible about the right way to invest and the right way to conduct business. As Benjamin Graham’s ideas energized him, Buffett aims to energize others.

Buffett drives home a point at the blackboard.

The Adult Education Conference Center, on the facing page, widened Omaha University’s appeal beyond traditional college students.

class is in session 41

While Omaha proves ideal for Warren Buffett’s business, the city’s social shortcomings awaken wife Susie’s love of the underdog. Her passion to help spurs her family to follow.

O

•

n a sweltering June afternoon in 1963, a group of airmen from Offutt Air Force Base near Omaha headed to the city’s popular Peony Park for a swim in the amusement park’s sandy-beach pool. Attendants allowed white airmen in but turned away two blacks. World-Herald headlines and stories chronicled what happened next: Civil Rights Charge Filed Against Peony: City Prosecutor Charles A. Fryzek filed a complaint against Peony Park Inc. Friday afternoon charging that it had violated state civil rights statutes by refusing to admit a Negro to the swimming pool. — June 15, 1963.

Peony Park Locks Its Gates as Racial Pressure Increases: The management of Peony Park locked its gates Tuesday afternoon. ... (The park owner) emphasized that prejudice or bias does not lie behind Peony’s sealed gates, only simple economics, (and) questioned whether the park’s present clientele would continue to patronize the spot should Negroes be admitted. — July 17, 1963.

Park for All, Peony’s Hope: Peony Park owners announced Thursday that they will seek to develop a plan by which the park will open all its facilities to all persons. — July 25, 1963.

Peony Pool Easing Bar on Negroes: More Negroes ventured into Peony Park’s swimming pool Sunday. The youths, most of them of the Youth Council of the NAACP, went through the turnstiles singly or in groups of two or three. — July 29, 1963.

On the day Peony Park was integrated, Susie Buffett and a black friend, Charline Gibson, wife of baseball star and Omaha native Bob Gibson, got together to take their kids to the pool. That day’s swim showed Susie’s hands-on style and her passion for equality, a passion eventually shared by her husband and her children.

Peony Park was integrated in July 1963. On the facing page, in the front, from left, are F.J. Pepper of the Urban League, Herb Rhodes, Betty Jo Moreland and Dale Anders. “I feel Omaha is my city, and I have faith in it,” said Rhodes, an Omaha University student.

cultivating a conscience 49

The World-Herald is first to describe the Warren Buffett phenomenon to a wide audience.

His fame grows year by year, soon reaching coast to coast.

W

•

arren Buffett quietly operated his hugely profitable investment partnerships for nearly a decade.

Some of his partners May 29, 1966 had whispered about his knack for making big gains, but most of their friends nodded politely and kept their wallets in their pockets. But then a World-Herald reporter caught wind of what the young investor was doing and wrote the first Buffett profile story in 1966.

Many Omahans knew the Buffett name from Warren’s staunchly conservative father, along with his grandfather and uncle, the upstanding grocers. A handful of people had taken his investment classes at Omaha University, and word had gotten around in the established stockbroker community about Buffett’s unusual practices. But The World-Herald story blew Buffett’s cover, and before long Warren became THE Buffett in Omaha.

Warren Buffett, on the facing page, with partnership staff members Bill Scott, left, and John Harding in one of the photos that accompanied The World-Herald’s first Buffett profile on May 29, 1966.

a financial star is born 59

As a rule, Warren Buffett prefers to leave local civic matters to others, spending his time on his own work.

But there are exceptions.

W

•

arren Buffett charted an unconventional path in Omaha business circles as he grew in prominence, staying mostly outside the normal institutions used by other business leaders to influence civic affairs. He didn’t get involved with the local chamber of commerce, or university and civic March 30, 1972 boards, or the nonprofit Knights of Ak-Sar-Ben, long a nexus of power among Omaha’s leading citizens.

His joining with Susie in combating racism showed his willingness to challenge the Omaha establishment, as did his key role in reforming a leading Omaha institution, the nationally renowned orphanage called Boys Town. Buffett might have become a journalist had he not loved being an investment manager, and he fed both passions in 1969 with the purchase of the Omaha Sun Newspapers, a weekly publication that usually focused on good news from Omaha neighborhoods.

In 1972, Buffett orchestrated a story that marked a radical departure from the Sun’s regular coverage: an investigative report revealing that Boys Town pleaded poverty while raising tens of millions of dollars a year in donations that weren’t spent on its troubled children. The Sun story, published on March 30, 1972, won the first Pulitzer Prize ever awarded to a weekly newspaper and was an example of Buffett’s unconventional approach to civic involvement.

Boys Town directors announced changes to the institution in May 1972, including the possibility of beginning services for girls.

From left on the facing page are Monsignor Nicholas Wegner, Archbishop Daniel Sheehan and architect Leo A. Daly.

MAKING AN IMPACT 67

Warren Buffett was building a financial empire with just a secretary and a few others in his hometown office.

Then he started buying Omaha businesses, increasing his imprint on the city.

R

•

ose Blumkin faced a problem unlike any other in her long career in retailing. It wasn’t 1917, when a Siberian border guard blocked her as she tried to enter China on her way to join her husband in the United States. It wasn’t 1937, when she started a furniture business during the Great Depression, even though she couldn’t read or write. It wasn’t the 1950s, when furniture manufacturers refused to let her cut prices so she could offer bargains to customers.

It was 1983, after “Mrs. B,” as she was known in Omaha, had built her Nebraska Furniture Mart into a powerhouse retailer with more than 400 employees, the largest single store of its kind in the country. Nearing 90 years old, she worried about the future of the family-owned business, with her children as co-owners and her grandchildren helping run the store. Estate planning, even though it might not have been Mrs. B’s forte, was looming, and she was determined to do something about it.

She ended up with two offers, one from a local fellow she had met briefly, Warren Buffett, and the other from Ostermann’s, a well-respected German furniture company. “It was close,” said her son, Louie, who acted as a partner in the Mart. “She asked, Buffett said of “Mrs. B”: “If she ran a popcorn and I said, ‘Sell it to Warren.’ But it was her choice, not mine.” stand, I'd want to be in business with her.”

Buffett and Rose Blumkin, on the facing page, reached their 1983 deal for the Nebraska Furniture Mart without an audit or an inventory. Blumkin gave him a price, and he accepted it.

a stake in the city 81

Warren Buffett gives Omaha a chance to link its name to an event synonymous with smart money: Berkshire Hathaway’s shareholders meeting.

“O

•

ne million, two million, three million.” Warren Buffett tested his microphone in May 1985, as about 250 Berkshire Hathaway shareholders jammed into a meeting room at the Red Lion Inn in downtown Omaha. The line got a laugh, and it would continue to over the years as it eventually inflated to, “One billion, two billion, three billion.”

The World-Herald’s Robert Dorr was the first to report the details of the 1985 meeting. With Vice Chairman Charlie Munger at his side and between “I think we may be able to do better sips of Pepsi (Berkshire hadn’t bought Coca-Cola stock yet), Buffett told than American industry as a whole.” shareholders that he couldn’t succeed as well in the future as he had in the past. Even so, he said, “I think we may be able to do better than American — Buffett, on his investment outlook in 1985 industry as a whole.” The refrain would become familiar to Buffett investors.

Two months later, Warren and Susie Buffett became Nebraska’s first billionaires, thanks to the rising value of their Berkshire Hathaway stock.

Together, they had nearly six times the wealth of Peter Kiewit, who once had been the state’s richest citizen.

Buffett’s fame was growing nationally as well, nearly as rapidly as his wealth. Earlier in 1985, when he helped finance Capital Cities Communications’ purchase of television network ABC, more than 100 out-of-town reporters called his Omaha office seeking interviews. Yet, Dorr said, none of them bothered to come to Omaha for that year’s annual shareholders meeting. It was the shareholders who wanted to see and hear Warren Buffett in person by coming to Omaha, and he responded by opening up for questions and giving candid answers. The Berkshire shareholders meetings stamped the city with financial savvy: Today, it is the site of the “Woodstock for Capitalists,” a place where airlines and hotels jack up their prices once a year, thanks to the economic principle of supply and demand.

The meetings attract legions of folks who would never visit Omaha otherwise, creating an opportunity for the city to stretch its arms wide and welcome a world interested in finance, business and, specifically, money.

Buffett, on the facing page, took the stage at the Orpheum Theater for the shareholders meeting in 1990.

a drawing card 91

Warren Buffett’s Omaha upbringing is brought to the fore when his business ethics are displayed on a national stage. He later faces one of his most serious tests in his hometown.

W

•

arren Buffett’s views on ethics and honesty went on national display on a steamy late-summer day in Washington in 1991. Dirty deals had been carried out under the once-respected banner of Salomon Brothers Inc., and Berkshire Hathaway Inc. was Salomon’s biggest shareholder. When Salomon executives’ misdeeds became public, the board of directors appointed Buffett as CEO to save the company.

In an era when corporate crooks seemed to be on the rise, members of Congress had questions, and they invited Buffett to supply answers. It was a crucial moment for the Omaha investor, who had criticized Wall Street’s financial misbehavior for years and had been thrust into the job of rooting out and preventing the exact sort of misconduct he abhorred.

Peter Hoagland, a three-term congressman from Omaha, took a seat at the witness table in Buffett arrives at the Salomon Brothers offices in 1991. a hearing room at the Rayburn House Office Building to introduce Buffett as the first witness.

“I think that much of Warren’s success can be traced to growing up in Omaha, a beginning that instilled in him the old-fashioned values of integrity, discipline and character,” Hoagland told the lawmakers.

Buffett testified for nearly an hour before a U.S. House subcommittee examining Salomon Brothers’ trading activities.

the brand of integrity 101

Omaha becomes Warren Buffett’s classroom for students from around the world, and the city becomes part of the lesson.

F

•

inance professor Al Auxier first brought his University of Tennessee students to Omaha to meet Warren Buffett in 1998. “I believe that your ethical and belief system will have rubbed off on them, just as your father’s and Ben Graham’s rubbed off on you,” Auxier wrote to Buffett. “Giving of yourself to young people is a precious gift.” The Tennesseeans later started a tradition: giving Buffett investment tips. They left him a copy of the autobiography of Jim Clayton, founder of a factory-built home company.

Within months, Buffett had bought Clayton Homes for $1.7 billion.

Buffett rewarded Auxier with $75,000 worth of Berkshire stock and each of the 40 students with $2,550 worth of stock — a lesson that Buffett offers his wallet, briefly, to Kristin went beyond the usual classroom lecture. Since Auxier’s first visit, Molina of Northern Arizona University. nearly 10,000 university students have made the trek to Omaha, with Buffett hosting groups from more than 40 universities each year. Local business schools at Creighton University and the University of Nebraska’s Omaha and Lincoln campuses meet with him each year, and about 200 other schools have taken turns. Buffett requires at least one-third of the students to be women and frequently notes the number of foreign-born students. They tour Berkshire’s Nebraska Furniture Mart and Borsheims jewelry store, talking with executives, and sometimes meet with other Omaha business leaders.

But the main attraction is an informal question-and-answer session with Buffett that can last as long as three hours, followed by lunch — Buffett’s treat — and more discussion with the students.

At the 2011 meeting of Berkshire shareholders, John Norwood of West Des Moines, Iowa, asked how Buffett would like to be remembered in 100 years. “A teacher,” Buffett said. “I really enjoy having students come in.”

University of Nebraska-Lincoln students, on the facing page, listen to Buffett and Bill Gates in 2005.

crowd-pleasing lessons 115

Susie Buffett’s generous spirit lives on and blossoms into a worldwide charitable effort worth billions of dollars. Members of the Buffett family make sure that Omaha will benefit as well.

•

T

hrough their married life and his business career, Warren and Susie Buffett had figured that because he was a male and two years older, he probably would die first. Susie, with her big heart and decades of experience in helping people and righting social wrongs, would then wisely use his financial legacy to tackle world-scale suffering from disease, mistreatment of women and minorities, overpopulation and other problems.

Susie Buffett’s sudden death from a stroke in 2004 ended that plan.

With a fortune in hand, growing by the year, Buffett sought a practical solution.

Because his skill is making money, not spending it, and running Berkshire Hathaway is a full-time job, he needed someone else to oversee how his wealth is spent. He chose to pledge 99 percent of his fortune to the Bill & Melinda Gates Foundation and four Buffett family foundations. It was payout time for his decades Warren and Susie in 2001. of profitable investing.

Buffett began making annual donations to the foundations, urging his children to take on difficult challenges using hundreds of millions of dollars they would oversee at their foundations.

The connection with Susie was clear.

“I am proud of what you are doing, and your mother would be proud as well,” he wrote to his children.

In 2012, when he doubled his pledged support, he wrote, “Your mother would be as proud of you as I am.

I see her influence in what you are accomplishing.”

On the facing page, Buffett provides instruction on the ukulele to Alexis Jones at a Girls Inc. event in 2009.

FINANCING HOPE 123

Warren Buffett’s early investors had trusted him, even though some found his ideas risky.

The investors are now able to give millions to fulfill their dreams of improving Omaha and supporting causes they love.

•

T

he wealth Warren Buffett created extends beyond the foundations controlled by family members and the Gates Foundation. Early Berkshire investors have accumulated hundreds of millions of dollars as well, and many of them still live in Omaha.

“There is so much money in this community and good things that have happened, because of the fact that my dad happened to make all this money for people,” daughter Susie said. “And, you know, we have this wonderful group of shareholders who got very, very lucky and happen to be very generous.”

Bill and Ruth Scott helped fund buildings at the University of Nebraska Medical Center.

Dick and Mary Holland, on the facing page, at the opening of the Holland Center in 2005.

making millionaires 139

Warren Buffett became Omaha’s most recognized citizen, and the city benefited from the association.

W

•

arren Buffett’s fortune continued to grow, even as he gave it away. In one year, he gained $10 billion even while donating 5 percent of his total wealth to foundations, and by 2008 his $62 billion put him atop the world’s wealth list compiled by Forbes magazine.

In a wide range of contexts, “Warren Buffett” has become a brand name, synonymous with the best among peers.

People called themselves, or others, the Warren Buffett of the wine world, the Warren Buffett of groceries, the Warren Buffett of cartoons, the Warren Buffett of biotechnology venture capitalists, the Warren Buffett of the European Union’s debt crisis, the Warren Buffett of Kentucky, the Warren Buffett of websites, the Warren Buffett of restaurants, the Warren Buffett of collegiate athletics, the Warren Buffett of Hollywood, the Warren Buffett of collectibles, the Warren Buffett of the Mystical School of Abundance and Prosperity, the Warren Buffett of President Barack Obama presented Warren Buffett with the Presidential papal collections, the Warren Buffett Medal of Freedom in 2011 for “devoting the vast majority of his wealth to those of sweat equity and the Warren Buffett around the world who are suffering or sick or in need of help.” Time magazine of chocolate cream puffs. named Buffett one of the world’s 100 most influential people in 2007, while Above all, of course, he’s the Warren Foreign Policy magazine named him among the 100 most influential global thinkers in 2012.

Buffett of Omaha.

Berkshire meetings at the CenturyLink Center, on the facing page, draw more than 30,000 to Omaha each year.

the reflected glow 163

Warren Buffett’s appetite for Omaha companies continues, and Berkshire Hathaway becomes one of the city’s biggest employers.

A

•

sk the average Buffett-watcher about Berkshire Hathaway’s employment numbers in Omaha, and you might get a chuckle. The company’s headquarters staff has “ballooned” to 24 people, after opening in Kiewit Plaza 50 years ago with three, a rate of one job added every other year. But over the past 40 years, Berkshire has bought up a string of Omaha companies that generally met his standards: a consistent history of profits, good management in place, simple businesses that were available for sale at the right price.

Now you’ll find Omaha employees in Berkshire-owned companies who sell necklaces, calculate insurance premiums, fill ice cream cones, pitch condominiums, deal in dining-room sets, trade natural gas, tend electrical generators, mail rubber chickens, hook up rail cars and run printing presses.

It’s a wide-ranging set of Omaha employees who fall under the “Berkshire Hathaway Company” banner these days. Counting affiliated real estate agents and seasonal employees, Berkshire’s 7,000-plus Omaha-area work force is one of the area’s largest.

While Buffett didn’t set out to become a major Omaha employer, he signs paychecks — indirectly — for two out of every 100 Omaha-area workers. The annual payroll of Berkshire companies in Omaha topped an estimated $330 million in 2012, creating an Kiewit Plaza, the home of Berkshire Hathaway. economic impact close to $600 million a year.

Buffett addressed World-Herald employees, facing page, at the announcement of the newspaper’s purchase in 2011.

invested in omaha 177

Warren Buffett is a man of routine in his hometown.

He found what he liked, and he stuck with it.

•

S

usie Buffett describes her father’s life in Omaha as boringly predictable, but Warren’s own take is that he tap-dances to work, eager for the latest business developments and enjoying the staff he has assembled at Kiewit Plaza.

The routine starts at home with lighthearted banter between Warren and wife Astrid, who is expert at making things easier.

A breakfast of Häagen-Dazs strawberry ice cream and cinnamon toast — whatever he wants, really — might be in order, along with the morning newspapers: the Wall Street Journal, the Financial Times, the New York Buffett at the groundbreaking for a ballpark in Sarpy County.

Times, USA Today and The World-Herald.

The house itself, which he bought in 1958, has changed to suit their tastes: A garage was converted into a sunroom, and a racquetball court, now seldom used, was added. In recent years, Astrid has improved the landscaping. (Her gardening interest is reflected in the Garden of the Senses at Omaha's Henry Doorly Zoo, where a gazebo is named “Astrid’s Place.”) The driveway was extended, and a guard shack sprouted. It’s a big house for its two permanent residents, but comfortable.

On facing page, Buffett calculates his next play during a regional bridge tournament in 2011.

comforts of home 189

Berkshire Hathaway is rooted as deeply in Omaha as its chairman.

With some new faces in place, parts of the future already are clearly visible.

•

B

erkshire Hathaway is based on Warren Buffett’s prescriptions for using capital wisely, letting company executives work without interference, rewarding good perform-ance in the right way, enforcing sound ethical principles and having the patience to let the true value of an investment be recognized in due time. It’s not a stretch to say he perfected these ideas, at least in part, because of his life in Omaha.

The hometown connection is central to Buffett’s blueprint for preserving the culture of his financial masterpiece.

He envisions that one day in the future, Berkshire Hathaway’s directors will name a new chief executive and, separately, elect son Howard as chairman.

No matter who is chairman or CEO, Howard Buffett said, Berkshire's headquarters will remain in Omaha.

“That’s just like a line in the sand.”

Howard Buffett has been designated to succeed his father as chairman of Berkshire Hathaway.

On the facing page, Susie and Peter Buffett joined their dad at the Berkshire Hathaway shareholders meeting in 2011.

preserving a masterpiece 201

Acknowledgments A book about Warren Buffett and Omaha was in the thinking stages before The World-Herald became a part of Berkshire Hathaway in 2011.

On January 13, 1972, my byline and Warren Buffett’s name appeared, by coincidence, on the same page in The World-Herald. I had written a story, and he was quoted in a separate article nearby, both on aspects of race relations in Nebraska. I first wrote about Buffett in 1985, when he said in his letter to Berkshire shareholders, “A hyperactive stock market is the pickpocket of enterprise.” Since then I’ve written more than 1,000 articles about Buffett, including, so far, nearly 250 weekly “Warren Watch” columns starting in 2008.

We’ve run into each other in Omaha over the years, on the job and off. When he sang for the Omaha Press Club’s satirical shows, I played in the orchestra (drums, not ukulele). When he helped open the Nebraska Furniture Mart’s Kansas City store, I covered the event. When Susie Buffett died, I wrote her hometown paper’s obituary. When Warren remarried, I wrote that, too, and even thought to ask what Astrid wore (a blue silk top and white pants, and she carried white roses).

Our most uncomfortable time was in 1992, when author Michael Lewis wrote an article for the New Republic that was deeply critical of Buffett’s character.

The World-Herald reprinted it, over the objections of Buffett and his family, who said the article was full of inaccuracies and gave a false impression.

I wrote accompanying articles giving their side, but it still bothered them that Warren was negatively portrayed in his hometown paper. In 2009, Lewis wrote that he “lived to regret” the criticism and that his article downplayed Buffett’s virtues. I wrote about those Lewis comments, too.

My most difficult contact was in 1987. Susie Buffett had found her nephew, William Rogers, dead of a drug overdose. I worked on the story and got a photo of him from Susie. As a teenager, Rogers had played guitar in a local rock ’n’ roll band with me and some friends before his outstanding music career in California.

Throughout my contact with Warren Buffett — from the 1985 supper we had when he was honored as the Omaha Press Club’s “Face on the Barroom Floor” to the interview for this book (“Let’s get to work,” he said) — he has been consistently fair and open, as reported by many other journalists. World-Herald archives yielded excellent Buffett and Berkshire stories by Bob Dorr, Bud Pagel, Jim Rasmussen, Mike Kelly and the late Dave Beeder, among others, as well as photos and advertisements.

212 acknowledgments

About The Author For this book, Buffett and his children, Howard, Susie and Peter, and sisters Doris and Bertie talked about their lives, past and present.

Susie gets extra credit for sifting through digitized family photos to find important images, and Devon Buffett also provided valuable material.

Buffett’s longtime partner Charlie Munger held forth, still with a soft spot for his hometown despite, or because of, his long residence in California. Early shareholders were generous with their time and records, including Dick Holland, Stan Truhlsen, John and Janice Cleary, Carl Mammel, Chuck Peterson, Bill Scott and George Payne.

Good-natured Bob Falk and Bob Spittler spoke about their fathers deciding not to invest with Buffett. Omaha stockbroker Jim Kineen, good friend Willie Young and adult education guru Mike Beilis provided early documents and tips. Omaha business leaders Mike Harper, David Brown, Beverly Kracher and Walter Scott added perspective, right on the money as usual. And without the help of Buffett’s administrative assistant, Debbie Bosanek, who knows when you might be reading this.

I’ve worn out my copies of the Buffett biographies by Alice Schroeder, Roger Lowenstein and Andy Kilpatrick, who kept my timelines straight and true. I learned to appreciate the value of a good index. Doris Buffett’s genealogy book traced an intriguing family history.

I’m grateful that Executive Editor Mike Reilly and Money editor Deborah Shanahan lightened my daily newspaper load for seven months for this project. Dan Sullivan’s shepherd-style editing and Christine Zueck-Watkins’ elegant layout were vital ingredients. Finally, the family of a newspaperman adjusts so well to absence and distractedness that the joyful task of writing a book didn’t faze Helen, Leland, Ingrid, Jin, Brandon and Mabel. As far as I could tell.

Steve Jordon joined The World-Herald in 1967 as an intern and became a full-time reporter after graduating from the University of Nebraska. He reported on law enforcement, the courts and education early in his career and has covered business for the past 35 years, including 10 years as business editor.

A native of West Virginia, Jordon came to Omaha with an Air Force family and graduated from Bellevue High School.

He has lived in Omaha’s Benson area since 1968. He is former president of the Omaha Press Club and a trustee of its scholarship foundation, taught reporting and news writing at Creighton University and advised the University of Nebraska at Omaha student newspapers and Junior Achievement’s J.A. Journal. His work has been recognized by the University of Nebraska at Omaha, the Associated Press, the Society of American Business Editors & Writers and the American Society of Newspaper Editors, among others.

His family includes Helen, his wife of 45 years; son and daughter-in-law Staff Sergeant Leland and Jin Jordon of Washington, D.C.; and daughter and son-in-law Ingrid and Brandon Jordon-Thaden and granddaughter Mabel Thaden of Albany, Calif.

acknowledgements 213

Credits Editor Dan Sullivan

Index

Director of Photography Jeff Bundy

Buffett family: 2, 3, 5, 9, 15, 16, 20, 26, 30, 41, 44, 68, 123, 134, back cover Bundy, Jeff: 133, 177, 180, 186 Burnett, James R.: 80, 87, 91, 92, 94, 102, 120, 125, 138, 140, 151, 182, 183, 197, 212, back cover Conces, Colin: 182 Cruse, Kiley: 126, 177, 182 Davis, Mark: 196 Douglas County Historical Society: 14 Durham Museum: 13 Evans, Mel: 75 Gratz, Rebecca: 117, 118, 123, 149, 157, 182, 188, back cover Inns, Laura: 114, 116, back cover Janda, Richard: 56, 62, 71, 78, 143, 195 Johnson, Phil: 96, 150, 164 Jordon, Helen 173 Jordon, Steve: 84 Joseph G. Johnston Photography: 154 Machian, Chris: 7, 129, 145, 147 Marcus, Howard K.: 128 Melingagio, Yano: 59, back cover Miller, Matt: front cover, i, ii, v, 105, 112, 135, 166, 169, 189, 191, 192, 193, 200, 205, 207, 211, 218 Omaha Press Club: 93 Paskach, Robert: 32, 38, 51, 77, 153 Peter Kiewit Sons’: 13 Schukar, Alyssa: 179, 182, 190, 208 Sievers, Kent: 98, 115, 119, 131, 150, 162, 168, 169, 170, 173, 181, 201, back cover Smith, Rudy: 215 Taylor, Robert: 86 Thompson, Christine: 108, 144 University of Nebraska: 141, 152 Walsh, Jannet 94

PHOTOGRAPHERS Anderson, Richard: 83 Associated Press: 100, 101, 103, 163, 172 Beiermann, Jeff: 97, 127, 139, 167 Blumkin family: 12, 85

Reprint Information Omaha World-Herald photos are available from the OWHstore.

Call 402-444-1014 to place an order or go to OWHstore.com.

Designer Christine Zueck-Watkins Photo IMAGING Jolene McHugh contributing Editors Jim Anderson Bob Glissmann Rich Mills Pam Richter Pam Thomas from world-herald archives David C. Beeder Henry J. Cordes Robert Dorr Melinda Keenan Michael Kelly Alfred “Bud” Pagel Jim Rasmussen Researchers Jeanne Hauser Joe Janowski Sheritha Jones INTELLECTUAL PROPERTY MANAGER Michelle Gullett Print and Production Coordinators Pat “Murphy” Benoit Wayne Harty Director of Marketing Rich Warren

214 credits & index

Adams, Sherman 73 Ak-Sar-Ben, Knights of 67, 71, 85 Ak-Sar-Ben, racetrack 10, 11 Ali, Muhammad 192 Allen, Mrs. Paul 56 Anders, Dale 48 Andersen, Harold 74, 180 Anderson, Mrs. Andrew 105 Angle, Bill 45, 150, 206 Angle, Carol 206 Applied Underwriters 182, 184 Archer Daniels Midland 110 Auxier, Al 115 Bail, Milo 46 Banks, Ernie 164, 192 Barboza, David 164 Bay, Mogens 179 Beilis, Mike 41, 43, 46 Benjamin Moore 206 Berkshire Hathaway 21, 62, 63, 88, 91-98, 102, 103, 107-111, 115, 124, 125, 127, 141, 144, 145, 152, 154, 157, 159, 160-171, 177, 180-182, 184, 191, 193, 200, 201, 206, 208 Betz, Frank 97 BH Media Group 186 Billig, Bob 44, 45, 146 Blackstone Hotel 21 Blumkin, Isadore 85 Blumkin, Louie 81 Blumkin, Rose 12, 80-83, 85-88, 97 Bonner, Mrs. Arnett 56 Bono 125, 165 Booker, Frank 95 Borsheims 86, 87, 97, 115, 165, 169, 182, 195 Bosanek, Debbie 193 Bottle, Harry 62 Boys Club 75 Boys Town 67-70, 74 Britt, Tracy 206 Brokaw, Tom 172 Bronco’s restaurant 195

Brown, David 208 Buffalo News 64, 69, 94, 178 Buffett, Alice 16-18, 34, 35, 53, 127, 128, 142 Buffett, Astrid Menks 128, 189, 198 Buffett, Barbara 5 Buffett, Bill 5 Buffett, Bob 5 Buffett, Clarence 5, 16 Buffett, Devon 132, 197, 198 Buffett, Doris 3, 5, 8, 10, 17, 19, 20, 26, 34, 35, 64, 72, 126, 134, 135, 142, 198 Buffett, Ernest 3, 5, 15, 16, 17, 105, 197 Buffett, Fanny Homan 5 Buffett, Fred 5, 15, 16, 26, 62, 63 Buffett, George (Warren’s cousin) 5 Buffett, George (Warren’s uncle) 5, 16, 34 Buffett, Howard (Warren’s father) 4, 5, 7, 10, 16, 18, 19, 22-25, 30, 34, 60, 73, 105, 153, 154, 157, 191 Buffett, Howard (Warren’s son) 28-30, 34, 54-56, 72, 77, 78, 110, 128, 130-132, 190, 197, 198, 201-203, 209, 210 Buffett, Howard Warren (Warren’s grandson) 132 Buffett, Jennifer 128, 132, 133 Buffett, Jimmy 173, 195 Buffett, Katie 16 Buffett, Leila Stahl 4, 10, 19, 94 Buffett, Peter 38, 72, 128, 132, 133, 136, 197, 198, 200, 202 Buffett, Roberta “Bertie” 3, 5, 9, 10, 19, 20, 22, 24, 34, 64, 72, 134, 135, 171, 198 Buffett, Sidney 5, 15 Buffett, Susie Thompson 24, 25, 26, 28, 29, 30, 38, 49-56 , 63, 67, 68, 72, 91, 123, 127, 128, 143, 149, 158 Buffett, Susie (Warren’s daughter) 28, 29, 30, 34, 50, 52, 53, 55, 72, 124, 125, 128-130, 136, 139, 189, 197, 200, 202

Buffett, Warren: boyhood in Omaha 3-18, 20, 21; in Washington, D.C. 19-22; National Guard duty 25, 30; in New York 30, 31; at Wharton business school 22, 142, 143; at Columbia University 23, 42, 116; working for father 23-25; wedding 26; moving back to Omaha 29, 31-38; early partnerships 35-38, 43-45, 58-63, 138160; letters to investors 37, 45, 61, 64, 106, 159; teaching at Omaha University 41-43, 46; views on equality 50, 52, 53; changing political parties 51; philanthropy begins 56; early news coverage 58-64; Pulitzer Prize with Sun Newspapers 67-70; views on civic involvement 71-78; on Grinnell College board 71; on WorldHerald board 74, 75; Nebraska Furniture Mart purchase 81-83; National Indemnity purchase 83, 84; Borsheims purchase 86, 87; Central States Indemnity purchase 88; induction into Omaha Business Hall of Fame 88; growth of shareholders meetings 91- 98; 1991 testimony in Congress 100-104; creation of B shares 107-109; David Sokol resignation 111, 112; hosting groups of students 115-120; donations to foundations 123-128; investment philosophy 155, 156; worldwide fame 163-174; Omaha subsidiaries 176-186; Omaha routine 189-198; plan for Berkshire Hathaway's future 201-211 Buffett & Co. 7 Buffett-Falk & Co. 3, 24, 25, 37, 42 Buffett grocery 4, 14-16, 26, 63, 197 Buffett, Sklenicka Co. 7 Burlington Northern Santa Fe 109, 167, 170, 182, 184 Butler, Hugh 73

CBSHome Real Estate 182, 184 Central High School 51, 55, 130 Central States Indemnity 88, 182, 184 CenturyLink Center 169 Chace, Ken 106 Cherry, Irving “Gus” 78 Christenson, Walter 74 Civic Auditorium 167 Clayton Homes 115 Clayton, Jim 115 Cleary, Janice 153, 154 Cleary, John 36, 44, 45, 60, 153, 154 Colombia Insurance 84 Columbian School 7 Combs, Todd 194, 195, 204, 205 Community Bank of Nebraska 53 ConAgra 76, 77, 158 Country Club neighborhood 3, 7, 18, 34 Creighton University 115, 144 Crump, Ethyl 5

Capital Cities Communications 91, 178 Casey, William 178

Falk, Bob 3, 7, 21, 30, 157, 158 Falk, Carl 7, 157, 158 Falk, Gladys 21

Dairy Queen 169, 182, 184, 185 Daly, Leo A. 32, 33, 66, 74, 112 Darner, Clyde 23 Data Documents 153, 154 Davidson, Lorimer 46 Davis, Edwin 150 Day, Laurence 164 Dempster Mill Manufacturing 62, 158 Dingell, John 102, 104 Docekal, Stan 196 Dodge, Homer 35 Dorr, Robert 60-63, 91, 172, 178 Dundee Presbyterian Church 9, 26 Dunn, Gene 195 Dynegy 180 Eisenhower, Dwight D. 29, 73 Enron 75, 76, 180 Ernie’s Drug Store 8

Fisher, Todd 165 Flatley, Michael 169 Flexner, Abraham 56 Friedman, Ike 86, 87 Fryzek, Charles A. 49 Gates, Bill 87, 116, 123, 128, 136, 139, 190 Gates, Melinda French 87, 123, 128 Geico 46 Gerdes, Lou 63 Gibson, Bob 49 Gibson, Charline 49, 51 Glover, Danny 140 Goodman, George Jerome Waldo (“Adam Smith”) 64 Gorat, Louis N. “Pal” 31, 98 Gorat, Shirley 98 Gorat’s Steak House 31, 98, 117, 118, 195 Graham, Benjamin iv, 23-25, 30, 35, 36, 41, 43, 46, 52, 62, 105, 115, 144, 154 Graham, Katharine 178 Graham, Estey 30 Greenberg, Allen 128, 197 Greenwald, Bruce 116 Hancock, John 179 Harding, John 58, 62 Harper, Mike 76, 158 Hawkins Construction 75 Hegarty, Jim 112 Heider, Charles 60 Helzberg Diamonds 182, 184 Henry, John 107 Henry Doorly Zoo 78, 189 Highland Country Club 52 Hirschey, Mark 118 Hoagland, Peter 101, 102 Hobson, Melody 130 Holland, Dick 44, 45, 52, 60, 138, 141, 148, 149, 160 Holland, Mary 138, 141, 148, 149 Homan, George 5 Homestate Insurance 182

Horn, Gunnar 157 Howe, G. Woodson 75 Hruska, Roman 73 Huggins, Charles 94 Ixtabalan, Eric 129 Jackson, Jesse 56 Jacobson, A.F. 33, 74 Jacques, Susan 87, 195 Jain, Ajit 184 James, LeBron 192 Johns Manville 107, 206 Jones, Alexis 123 Joslyn Art Museum 12, 97 Kaiser, Gladys 60 Keenan, Wally 44, 45 Kelly, Michael 174 Kenner, Nicholas 94 Keough, Donald 157 Kiewit, Peter 12, 13, 38, 74, 91, 112, 124, 126, 158, 178, 179 Kiewit Plaza 21, 38, 60, 61, 77, 92, 144, 155, 177, 179, 190, 191, 196, 204 Kilpatrick’s department store 5 Kineen, James 107, 156 King, Billy Jean 165 King, Martin Luther Jr. 71 Kirkpatrick, Stewart 24 Kizer, William 88 Kooser, Ted 140 Kracher, Beverly 206 Kroeger, Terry 178-180, 186 Larson-Juhl 206 Lay, Ken 75, 76 LeMay, Gen. Curtis 42 Lewis, Al 107 Limprecht, Hollis 72 Lipsey, Stan 68, 69, 94 Lisovicz, Susan 119, 120 Livingston, Jerry 173 Loomis, Carol 64, 173 Lowenstein, Roger 186

CREDITS & INDEX 215

Lubrizol 111 Lucci, Susan 165 Lueder, Robert 34 Luthans, Fred 174

Newman, Nick 53 Newton, Judy 105 Northern Natural Gas 76, 180, 182 Norwood, John 115

Mackiel, John 129 Madoff, Bernie 142 Mahr, Nicole 129 Mammel, Carl 44, 45, 141, 142, 146-148, 160 Mammel, Joyce 141 Marcus, Stanley 87 Markoe, Rev. John P. 54 Marsalis, Branford 140 Mauer, Harold 145 McDonald, John G. “Jack” 116 McGruder, Spencer 53 Medley, Tim 98 Melingagio, Yano 62 Mellema, Warren 173 Merriam, John F. 74 Meyer, Lloyd 112 MidAmerican Energy Holdings 180, 182, 184 Miller, Jane 126 Minnifield, Myron 54, 55, 130 Molina, Kristin 115 Monen, Dan 3, 34, 35, 45, 144 Moreland, Betty Jo 48 Morgan, John 135 Morrison, Rev. Michael 86 Munger, Charlie iv, 9, 10, 16, 17, 36, 73, 91, 92, 105, 108, 109, 167, 192, 194, 197 Murphy, Tom 178 Mutual of Omaha’s Wild Kingdom 4, 93

Obama, Barack 163, 171, 190 Obama, Michelle 193 Olson, Dorothy 141 Olson, Leland 141 Omaha Boys Club 75 Omaha Business Ethics Alliance 112, 206 Omaha Club 17, 52, 53 Omaha Lounge Suit Society 95 Omaha National Bank 3, 7, 23, 24, 35, 69 Omaha Press Club 70, 86, 93, 127, 195, 196 Omaha Royals 78, 192 Omaha Steaks 4, 93 Omaha Sun Newspapers 67-70, 84 Omaha University 40-43, 46, 59, 61, 144, 157 Omaha World-Herald purchase 176-180, 182, 186 O’Neal, Shaquille 192 Oriental Trading 181, 182, 206 Orpheum Theater 90 Orr, Kay 76 Osborne, Tom 192 Othmer, Donald 141, 152, 153 Othmer, Mildred Topp 141, 152, 153

Nader, Ralph 165 Nasr’s restaurant 53 National Indemnity 83, 84, 92, 182 Nebraska Furniture Mart 12, 81-86, 97, 115, 165, 169, 178, 182, 183 Nelson, C. Clifton 53 Nelson, John 112 Newman, Jerome 30

216 credits & index

Pagel, Al “Bud” 72 Panel of American Women 51, 52 Payne, Alexander 146 Payne, George 45, 146 Peony Park 48, 49, 86 Pepper, F.J. 48 Petersen, Milton Jr. 22 Peterson, Peter G. 146 Peterson, Chuck 22, 33, 35, 142, 143 Peterson, Elizabeth 35, 142, 143 Piccolo Pete’s Restaurant 31, 119, 195, 196 Pitzer, Annette 174

Raikes, Jeff 128 Rasmussen, Jessie 130 Rawls, Arnold 140 Reynolds, Debbie 165 Reynolds, Louise 34 Reynolds, Sam 34 Rhodes, Herb 48 Ricketts, Joe 127, 158 Ringwalt, Jack 83 Rodriguez, Alex 193 Rose, Charlie 169 Rosehill School 8, 9, 18, 20, 31, 46 Rosenblatt, Johnny 33 Rosenfield, Joseph 71 Rosenthall, William 25 Ruane, Bill 152, 159, 160 Salomon Brothers 101-104, 106 Schmidt, Phyllis 54 Schroeder, Alice 172, 193 Schroedl, Evelyn 167 Scott, Bill 43, 58, 62, 139, 141, 144, 145 Scott, Carolyn Falk 38 Scott, Ruth 139, 141, 144, 145 Scott, Walter 21, 38, 74, 77, 78, 97, 126, 127, 158, 178, 179 Seemann, Lee 141, 150 Seemann, Willa 141, 150 Sheehan, Archbishop Daniel 66 Sherwood Foundation 129 Skutt, V.J. 74 Snorf, Charles 34, 36 Snorf, Lowell 36 Snorf, Susan 34 Soener, Robert 42, 44, 45 Sokol, David 111, 112 Sorensen, A.V. 33, 50 Spittler, Robert 18, 157 Spittler, Victor 18, 45, 153, 157 Stavrou, Christopher C. 95 Stewart, Jon 173 Stinson, Ken 126

Taylor, Sam 181 Thompson, Dorothy (Warren’s mother-in-law) 29 Thompson, Dorothy (Warren’s sister-in-law) 53 Thompson, William “Doc” 24, 25, 35, 41, 46, 142 Thornton, Erin 125 Trudeau, Garry 193 Truhlsen, Dorothy 141 Truhlsen, Stanley 45, 141, 151, 152 Union Pacific Railroad 76, 78 Union State Bank 4 Union Station 9, 12, 13 University of Nebraska at Omaha 84, 115, 135, 146 University of Nebraska-Lincoln 22, 72, 115, 116, 125, 129, 153, 169, 174 University of Nebraska Medical Center 139, 141, 145, 151, 152 Urban League 52, 56 Valmont Industries 179 Varley, Doug 125 Walsh, Mike 78 Washington Post 64, 178 Watanabe, Harry 181 Wegner, Monsignor Nicholas 66, 69, 70 Weschler, Ted 194, 195, 204, 206, 207 West, Gary 158 West, Mary 158 Whitaker, Mark 110 Williams, Paul 68, 69 Wood, Robin Buffett 34 Wood, Truman 34, 35, 142 Wood, Brig. Gen. Warren 25 Woods, Tiger 192 Yale, Don 87 Young, George 84 Ziegenbein, Lyn Wallin 112

“I spent my lifetime working on it. I believe Berkshire’s as permanent as you can come up with.”

THE

ORACLE & OMAHA

Warren Buffett, “The Oracle of Omaha,” often speaks fondly of his hometown.

The city provided him a comfortable home base, away from Wall Street’s distractions. In return, Omaha benefited from the worldwide attention that came his way and from the generosity of his early investors. It turned out to be a profitable relationship for both The Oracle & Omaha.

“An essential book for anyone interested in Buffett.”

– Alice Schroeder, Buffett biographer © 2013 all rights reserved.

omaha world-herald co.

omaha.com

$29.95