The $4-Billion Regular Guy : Junk Bonds, No. Greenmail, Never. Warren Buffett Invests Money the Old-Fashioned Way.

<i> Linda Grant, a contributing editor to this magazine, is a former staff writer for Fortune magazine and The Times</i>

AS HE STRIDES INTO THE ROOM, THE PUDGY, UNREMARKABLE man in dark suit and tie, with thinning gray hair, unruly eyebrows and a kindly Mr. Chips face, peers out through horned-rimmed glasses at a small but engrossed gathering of professors. They have assembled at the Notre Dame College of Business Administration to sit at the feet of the master, the man regarded by cognoscenti as the premier businessman and investor of the past quarter century, multibillionaire Warren E. Buffett. * Buffett, 60, who delivers Will Rogers-style homilieswith a comic’s flair, immediately puts them at ease. His goal is to explain how he has come to be the second-richest man in America by building a company that owns, among other things, a dozen insurance companies, See’s Candies Inc., the Kirby vacuum cleaner company, World Book Inc. and the Buffalo (N.Y.) News, as well as major holdings in firms such as the Coca-Cola Co., Capital Cities/ABC Inc., the Washington Post Co., the Gillette Co., GEICO Corp. and Wells Fargo & Co. * “At my granddaughter Emily’s fourth birthday party last year, a fellow called Beemer the Clown entertained us with magic tricks that were quite impressive,” he tells the teachers. “Beemer had a big black box into which he would drop handkerchiefs. Emily would wave a magic wand over the box, and if Beemer dropped in a red one, she would make it come out blue. If it was straight, she would make it come out knotted. After about the fourth time, each more wondrous than the last, she beamed out at us and said, ‘Gee, I’m really good at this!’ ” * With a guffaw, Emily’s grandfather drives home his point: This is what Buffett does for a living, and, like Emily, he does it very well. He directs a bunch of “beemers,” who run the myriad unrelated businesses that Buffett has collected under the umbrella of his conglomerate, Berkshire Hathaway Inc. With the cash flow and earnings that these beemers wring out of their operations, he invests in still more businesses that churn out ever more bountiful profits for investment. * The results will be forever enshrined in business lore: Berkshire’s per-share book value has grown at a rate of 23.2% compounded annually for the past 26 years. Upon Berkshire shareholders, Buffett’s magical touch has bestowed the equivalent of three or four winning lottery tickets. An investor who gave Warren Buffett $10,000 to manage in 1956 has seen that investment explode to the dizzying, nearly unbelievable amount of more than $30 million. A single share of Berkshire Hathaway stock today costs more than any other stock listed on any U.S. exchange: about $8,000. * Because Buffett owns 42% of Berkshire, his net worth is estimated to be $4.6 billion, second only to that of John Kluge, founder of Metromedia, whose fortune is estimated at $5.6 billion. Like the federal budget, Buffett’s lucre is almost too enormous to comprehend. * Once you’ve met Warren Buffett, or talked with old friends of his who tell you he has not changed one iota in 40 years, that figure seems downright ludicrous. For this is no Donald Trump, with his name splashed atop gaudy gambling casinos, nor Ivan Boesky, proclaiming that greed is good, nor even Michael Milken, pulling in $550 million in earnings for one year. * This unassuming billionaire does not reside in a Fifth Avenue penthouse. He calls Omaha, Neb., home and has established Berkshire’s headquarters there. The pleasant house he lives in was purchased in 1958 for $31,500. (He owns a second home in Laguna Beach.) Buffett tools around town in a 1983 Cadillac, and he buys his undistinguished suits off the rack. Says his friend and vice chairman of Berkshire, Los Angeles businessman Charles T. Munger: “Buffett’s tailoring has caused a certain amount of amusement in the business world.”

Buffett’s culinary tastes prompt equal mirth, for he wouldn’t be caught dead sipping a Kir Royale. He orders Cherry Coke for his aperitif and consumes steaks and thick, juicy hamburgers with no regard for the current cholesterol phobia. Heavily salting his T-bone one recent evening at Gorat’s Steak House, his favorite Omaha hangout, Buffett says: “You know how our life span depends on how long our parents live? Well, I watch my mother’s exercise and diet very carefully. She has 40,000 miles on her bike.” Chuckling, he dives into sides of hash browns and spaghetti.

Though Buffett’s name and international reputation cause him no end of local celebrity, he shuns involvement in Omaha’s social life. In fact, Buffett rejects small-town conventionality. He once successfully sponsored a Jewish friend for membership at a private club to make a point about discrimination. He switched his political registration from Republican to Democrat in the mid-1960s, when, he says, “it became apparent the Democrats were more likely to do something about the (civil rights) problem.” He calls himself an agnostic. He resides separately from his wife of 38 years, Susan, and has lived with Astrid Menks, a former maitre d’ at the top French restaurant in Omaha, for several years. Nonetheless, daughter Susan Buffett Greenberg, 37, says her parents have a “great relationship.”


Indeed, his wife, who lives in San Francisco, is the second-largest Berkshire shareholder, with 3% of the stock, worth $330 million. Buffett has nominated her to become a company director at the annual meeting April 29 and has informed stockholders that she will gain control of the company if she survives him.

Buffett’s one indulgence, Berkshire’s $6.7-million private jet, allows him to travel at a moment’s notice. He reports to shareholders about it in tiny print (“Occasionally a man must rise above principle,” he says) to spoof himself, and calls it the Indefensible. The plane whisks him off to points east and west, where he maintains close ties to a loyal roster of big shots.

The Buffett circle includes Laurence A. Tisch, chairman of CBS Inc.; Katharine Graham, chairman of the Washington Post; Thomas S. Murphy, chairman, and Daniel Burke, president, of Cap Cities/ABC; Donald R. Keough, president of Coca-Cola; Carol Loomis, a respected Fortune magazine editor; and George Gillespie III, a partner in the Cravath, Swaine & Moore law firm. When Buffett is in New York, Graham makes her Manhattan apartment available to him, with instructions for the staff to stock his favorite snacks: Planters’ peanuts and Haagen-Dazs strawberry ice cream. Loomis, her husband, John, Gillespie and Buffett are a bridge foursome. For their “nights on the town,” they order in deli sandwiches.

Though such details of Buffett’s personal style may seem irrelevant, in truth they reveal the essence of the man. Some skeptics on both coasts are so confounded by his unpretentious manner that they view it as a sort of reverse affectation. They are wrong. He is the real thing: a man who marches to his own drum at his own cadence. Explains Munger, who grew up in Omaha but has lived and worked in Los Angeles for 43 years: “Omaha culture is about the self-reliant pioneer. Buffett believes successful investment is intrinsically independent in nature. The winners tend to isolate themselves from what the majority are thinking and doing.”

BUFFETT REPEATEDLY DRIVES HOME THE POINT that the wealth Berkshire has created for shareholders flows from basic principles that emphasize independent thinking and evaluation. Twenty-six years ago, he wrote: “It is close to impossible for outstanding investment management to come from a group of any size.”

Last fall, that loner’s perspective reappeared when Buffett snapped up 9.8% of Wells Fargo stock at an average per-share cost of about $58. Real estate values were crumbling then. Commercial banks were writing off hundreds of billions of dollars in bad loans, and their shares were in a free fall. Investors who make their money by selling short--that is, in anticipation that prices will drop--jumped in to amass big Wells Fargo positions against Buffett.

About that time, conventional Wall Street wisdom suggested that Buffett might be vulnerable. Shares of Berkshire, punished by recession, had lost considerable value. During 1990, they dropped 23% from $8,725 to $6,300. Results from some Berkshire investments--notably USAir Group--were dismal. Compounding the doubt was a Barron’s article that concluded that Berkshire shares were overpriced. Wall Street buzzed with speculation. Was Buffett’s brand of so-called value investing washed up? Were his loyal shareholders disenchanted? Had he finally seriously stumbled?

Today the answer to those questions appears to be a resounding “no.” A rejuvenated market has boosted Wells Fargo shares back to respectable levels and forced short sellers to cover their positions at enormous losses. As of mid-March, Wells Fargo stock had ascended to about $79 a share, delivering Buffett a paper profit of more than $100 million. Berkshire, riding the euphoric wave that added 500 points to the Dow throughout most of the first quarter, regained nearly all its lost value. Buffett ignored the Barron’s piece.

Throughout the episode Buffett maintained his customary silence. He refuses to comment on Wall Street speculation, except to reiterate his time-tested investing philosophy. He pays no attention to market swings or economic cycles. If he sees an excellent business for sale at an attractive price, he buys it. To that end, recessions and stock market doldrums can be a plus, because bargains often emerge.

As for Wall Street speculations, he harbors nothing but disdain for the herd mentality that characterizes the investment community. During the Notre Dame appearance, he displayed a list of 37 defunct investment-banking firms. “Every one of these has disappeared,” he said. “This happened while the volume of the New York Stock Exchange multiplied fifteenfold. All these companies had people with high IQs working for them, (people) who worked ungodly hard and had intense desires for success and money. They all thought they would be leaders on Wall Street.”

Gathering steam, he pressed his point: “You think about that. How could they get a result like that? These were bright people; they had their own money in their businesses. I’ll tell you how they did it: mindless imitation of their peers. I don’t get great ideas talking to people. I never talk to brokers or analysts. You have to think about things yourself. “ The irony really gets to him. “These people all gave advice to companies about how they should run their businesses. You know, Wall Street is the only place people ride to in a Rolls-Royce to get advice from people who take the subway.”

During the greedy 1980s, Buffett leveled broadsides at the investment-banking community for peddling dubious financial products such as junk bonds to gullible investors. He also expressed disgust at the burgeoning savings and loan mess. Berkshire is a partial owner of a small S&L;, Mutual Savings and Loan Assn., in Pasadena. In 1989, outraged by the way the United States League of Savings Institutions lobbied against even minimal legislative reform, Buffett and Munger resigned Mutual Savings’ membership in the league with an indignant letter: “It is not unfair to liken the situation now facing Congress to cancer, and to liken the league to a significant carcinogenic agent.”

Another evergreen Buffett target is that group of academicians who preach the “efficient-market” theory. It’s a notion that suggests that since every stock price incorporates all known information about a company, there is nothing to be gained by analyzing companies to ferret out superior buys. At Notre Dame, Buffett chided the faculty. “It has been helpful to me to have the tens of thousands turned out of business schools taught that it didn’t do any good to think.” One professor called out, “Anybody for changing the syllabus?”

This is vintage Buffett, and it signals his intensity and intellectual annoyance with other people’s limitations. Although such feelings are usually masked by politeness, for Buffett is a gracious person, his impatience flickers unmistakably when he is sorely tried.

As someone who prizes his solitude and independence, Buffett does not relish the role of celebrity that has been thrust upon him. He is only selectively available to the press. He initially declined to cooperate in the preparation of this article but eventually capitulated. He then went to unusual lengths to be helpful (and to educate me--at one point, he assigned two chapters of textbook reading).

In many ways, Buffett’s vision resembles an artist’s commitment to his art more than a chief executive’s involvement with his company. Indeed, Buffett calls Berkshire his “canvas.” Observes Ross A. Webber, professor of management at the Wharton School of the University of Pennsylvania: “For entrepreneurial people like Buffett, the metaphor is art. They create their ideas and, like artists, tend to be aggressively independent--not because they don’t like other people but because they just so crave that sense of connection between artistic vision and result.”

GROWING UP IN OMAHA--WHERE HIS FATHER WAS a stockbroker with Harris, Upham--Buffett at an early age displayed a whiz-bang memory and precocious command of math and statistics. “I was fascinated with anything to do with numbers and money,” he recalls.

By the age of 11, Buffett had bought his first shares of stock and was in the process of memorizing a book titled “One Thousand Ways to Make $1,000.” The next year he published a racing tip sheet called Stableboy Selections. When he was 13, he began to pay taxes on an income of $1,000, money earned from two paper routes.

In 1943, to the family’s dismay, his father, Howard, was elected to represent his Nebraska district in Congress. That led to the only dark period in Buffett’s life that he can recall. He was miserable in Washington, tried to run away and got terrible grades, even in math. He shaped up only after his father threatened to take away his two Washington Post paper routes.

At his father’s urging, he enrolled in Wharton in Philadelphia at age 16. He didn’t like it and, two years later, transferred back home to the University of Nebraska, where he graduated in 1950. While a college senior, Buffett read a newly published book, “The Intelligent Investor” by Benjamin Graham. The experience apparently spawned something of an epiphany.

Here’s how Buffett explains Graham’s theory: “The common intellectual theme is that Graham investors search for discrepancies between the value of a business and the price of small pieces of that business in the market.” (The small pieces are shares of stock.) “These investors are, mentally, always buying the business, not buying the stock.”

Therein lies the crux of the Buffett strategy. To Buffett, “investors” are people who evaluate businesses after careful study and purchase shares only if they are convinced the market has priced those enterprises irrationally. To him, those who trade stocks based on hunches about whether share prices will rise or fall, and when they will do so, are “speculators.”

When he applied to Harvard’s graduate business school, he says, he was “a scrawny 19-year-old who looked 16 and had the poise of a 12-year-old.” Harvard wasn’t interested. Soon thereafter he learned that Graham was teaching at Columbia’s business school, so he applied there, and this time around, he was accepted.

After completing Graham’s course, Buffett offered to work for free at Graham’s Manhattan investment firm. “He turned me down as overvalued,” Buffett jokes. After much pestering, Graham finally caved in and hired Buffett, who toiled as a “peasant” for two years, searching investment manuals for shares that met Graham’s definition of “bargain stocks"--generally those that could be bought for one-third less than the companies’ net working capital.

During that period, Buffett, by then married and a father, commuted by train from his home in Westchester County. “It didn’t seem like much of a life,” he says. And he wised up to the lemming-like behavior of Wall Street. “People kept coming up to me all the time, whispering into my ear about some wonderful business. I was getting excited all the time. I was a wonderful customer for the brokerages. Trouble was, everyone else was, too.”

Convinced it was time to strike out on his own, back to Omaha he went. Buffett was 25, but he had used the Graham techniques to invest his own money for years and was already worth $150,000. He bid adieu to the last boss he would ever have. From that time forward, Warren Buffett answered only to Warren Buffett.

WORKING OUT OF A TINY ROOM, BUFFETT WENT about assembling $105,100 from family and friends. In 1956, with that seed money, and only $100 out of his own pocket, he started Buffett Partnership Ltd., a limited partnership in which he, as manager, received 25% of profits earned after investors received a 6% return on capital.

The fund prospered impressively, but not because Buffett went after stocks such as Xerox or IBM at a rock-bottom price. Instead, he scoured the landscape for undervalued, unloved and unheard-of companies. At about this time, Charles Munger, seven years Buffett’s senior, was introduced to the young man whose reputation was growing. “He wore his hair in a crew cut and worked out of his sun porch,” Munger recalls. “What impressed me was the power of his mental apparatus. I wasn’t just slightly impressed; I was very impressed.”

One spectacular move occurred in 1964 when Buffett bet 40% of the partnership’s money on American Express stock. The shares had been hammered by a scandal in a small subsidiary. Buffett snapped up $13 million worth and sold them two years later for a $20-million profit. In 1965, the Graham formula led him to purchase a small Massachusetts textile manufacturer, Berkshire Hathaway, which had a long history of financial troubles, for $11 million.

By 1969, the market was so speculative, and stock prices were so irrationally high, that Buffett believed he could no longer participate. He decided to fold the partnership. The record he had compiled was 14-karat: Over 13 years the original investment had compounded at the average annual rate of 29.5% to about $100 million. He returned investors a proportional interest of Berkshire stock, and he became the company’s chairman.

A letter Buffett wrote to investors explaining his decision became the forerunner of a tradition. Today his letter to shareholders in the Berkshire annual report is distributed as cult reading by connoisseurs. Wealthy American families are known to buy one share of Berkshire for young scions, so they’ll receive the Buffett perspective each year. His point of view is amplified by quotes from unlikely sources:

“Currently liking neither stocks nor bonds, I find myself the polar opposite of Mae West as she declared, ‘I only like two kinds of men--foreign and domestic.’ ”

“Billy Rose described the problem of overdiversification: ‘If you have a harem of 40 women, you never get to know any of them very well.’ ”

In 1962, Buffett persuaded Munger, who had founded the L.A. firm Munger Tolles & Olson, to give up law and join him as Berkshire’s vice chairman. Munger agreed, if he could continue to live in Los Angeles, where he is also chairman of the Daily Journal Corp., publisher of the Los Angeles Daily Journal, for lawyers. Munger owns 2% of Berkshire stock.

According to Buffett, over the years Munger convinced him that Graham’s rigid principles required at least one major refinement. Munger maintains that a great franchise is the single most important determinant of a successful business. He argues that moderately priced businesses with such a franchise--and by that he means a recognizable name, a commanding position in an industry and the ability to charge higher prices--are incomparably superior to rock-bottom bargains with a weak market position.

Buffett’s experience with Berkshire’s textile business confirmed the validity of Munger’s theory. The company lost money, and after 20 years of struggling, Buffett reluctantly closed its doors. He confessed to shareholders in the 1989 annual report that buying the textile business had been an error. In a section titled “Mistakes of the First 25 Years (A Condensed Version),” he admits he did so because it was cheap, and the experience taught him that “time is the friend of the wonderful business, the enemy of the mediocre.”

A second lesson has been much quoted: “When management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”

He ticks off other newly gained lessons: He has learned to look for what he calls one-foot hurdles rather than seven-footers, because “we’ve done better by avoiding dragons than by slaying them.” He has learned to go into business only with people he likes and trusts. He has also discovered an unforeseen force he labels “the institutional imperative.” This affliction causes companies to behave irrationally. For example, “Any business craving of the leader, however foolish, will be quickly supported by . . . studies prepared by his troops.” Or “The behavior of peer companies will be mindlessly imitated.” Buffett says he tries to manage Berkshire in ways that minimize the imperative, mainly by eliminating bureaucracy.

Despite--or perhaps because of--Buffett’s mea culpa , his shareholders revere him. Every spring, more than a thousand of them trek to the Orpheum Theatre in Omaha and, at Berkshire’s annual meeting, question Buffett and Munger for hours about the company they have cobbled together, a sprawling holding company (1990 sales: $2.7 billion) that has at its center a large property-and-casualty insurance operation.

Berkshire’s insurance business is run by Michael A. Goldberg, a transplanted New Yorker who oversees 12 subsidiaries headed by National Indemnity Co. of Omaha. He is the only operating executive who shares Berkshire’s modest 14th-floor quarters with Buffett at Omaha’s Kiewit Plaza. Goldberg , an intense, wiry man, describes it this way: “Warren Buffett is a person who, the closer he gets, the more extraordinary he gets. If you tell people about him, the way he is, they just think you were bamboozled.”

Goldberg says that nothing much happens at headquarters. “If Buffett has two or three visitors a week, that’s a lot,” he says. There is no computer or Quotron in Buffett’s simple office--only three telephone lines to brokers. On the day I visited, Buffett lunched at his desk, a McDonald’s Quarter Pounder, fries and--what else?--a Cherry Coke. Goldberg’s companies write insurance for big disasters, events called “super-cats,” such as hurricanes and earthquakes. Because Buffett refuses to price policies at a loss the way many in the industry periodically do, some years his companies write very few policies. At other times, when competitors are cutting back due to losses, Berkshire is the only insurer issuing super-cat policies at sizable premiums. The result: Berkshire’s insurance operations boast hefty balance sheets. What Buffett likes about the insurance business is the dollar “float” generated by premiums. Over the years a solid chunk of such capital went to purchase eight businesses that make up Berkshire’s manufacturing, publishing and retailing arm. This group includes the Nebraska Furniture Mart, the nation’s largest furniture retailer under one roof; Borsheim’s, a huge Omaha jewelry retailer, second in size only to Tiffany’s New York store; See’s Candies Inc. of San Francisco; The Buffalo News; Fechheimer Bros., a Cincinnati manufacturer and distributor of uniforms; the Cleveland-based Scott Fetzer Manufacturing Group, and two of Scott Fetzer’s biggest operations, Kirby and World Book.

Entrepreneurs built these businesses and in most cases continue to run them. Berkshire’s entrepreneurs are Buffett’s beemers, his magicians. He holds them in the highest regard and lavishes praise on them in each year’s annual report. In return, they perform for him, earning lofty returns on equity of some 50%. Says 66-year-old Ike Friedman, president of Borsheim’s, “I’ve turned over all my shares to my children, but now I’m working harder than ever, because there’s nobody like Warren Buffett as a human being.”

Friedman’s cousin, Louie Blumkin, 70, president of the Nebraska Furniture Mart, says that life with Buffett has “no downside. He lets us make our own decisions. Everyone runs his own show.”

It’s tough to wring any complaints out of this collection of admirers. A lone naysayer is Rose Blumkin, Louie’s 97-year-old mother who founded Nebraska Furniture Mart, sold it to Buffett and ran its carpet department for decades. Two years ago Mrs. B, as she is known, got angry when her three grandsons overrode her objections and redecorated her department. She stomped out in a huff and opened a new store--Mrs. B’s Warehouse, across the street. From her motorized golf cart that whizzes her around the showroom, she says: “Warren Buffett is not my friend. I made him $15 million every year, and when I disagreed with my grandkids, he didn’t stand up for me.” Asked how business is, she replies, “I didn’t open this store for money; I opened it for revenge.”

SINCE NOT SO MANY GOOD businesses are for sale--and because he has so much cash to deploy--Buffett settles for buying huge stakes in large companies, his permanent common-stock holdings. No matter how much they appreciate, Buffett swears the holdings are not for sale. The following chart conveys some idea of his prescience:

Buffett also invests in large quantities of marketable securities that are held by Berkshire’s insurance companies. For these, he surveys the market for the highest after-tax returns. Several years ago he rode to the rescue of four embattled managements as a white knight, driving off unwanted suitors.

His rewards were handsome: He bought blocks of newly issued convertible preferred shares in each of the four companies, with slightly above-market yields, plus the right to convert them into common shares in the future. So far, only the Gillette preferred has been called, and it looks like a zinger: Berkshire would make about $280 million in profit if the common were sold. (Buffett says he’ll hang on to the shares for the time being.) The jury is still out on Berkshire’s interests in the investment bank Salomon Inc., the Washington-based airline USAir Group and the big paper company Champion International. Their preferred shares need not be converted for another six to seven years.

Given Buffett’s contempt for Wall Street, the Salomon Bros. investment appears puzzling. Asked about it, he squirms and says “(Salomon chief executive) John Gutfreund is an outstanding, honorable man of integrity” who has advised clients not to take actions that would have brought big fees Salomon’s way.

Berkshire is a passive investor (it does not exercise control) in most of the companies it buys into. Therefore, it chooses to include in its stated earnings only dividends received, not a commensurate share of profits. This means that Berkshire’s profits are understated.

Buffett advises shareholders to think in terms of what he calls look-through earnings. In the 1990 annual report he defines these as the $371 million in operating earnings reported by Berkshire, plus $220 million, which is Berkshire’s share of the 1990 operating earnings retained by the companies in which Berkshire invests, minus relevant taxes. The total for 1990 “look-through earnings,” therefore, comes to about $590 million, up from the previous year’s figure of close to $500 million.

Apparently, shareholders accept the explanation, because the stock continues to sell at what Buffett regards as a “full price” over what he terms “intrinsic value.” Asked the proper price, Buffett replies, “It’s not a scientific number. Charlie (Munger) and I might differ by up to 10%. We tell everybody all the factors they should consider. They have to figure it out.”

WHAT DOES ALL THIS MONEY mean to Buffett? “I enjoy the process far more than the proceeds, though I have learned to live with those also,” he says. His son, Peter, 32, sees it somewhat differently. “My dad says the money is not important, but it is. Not because he wants to spend it but because it declares him a winner.” Peter, a composer who lives in Milwaukee, scored the fire-dance scene in Kevin Costner’s film, “Dances With Wolves.”

“My dad casts a big shadow,” Peter says. “I remember sitting at the dinner table with him, and there was nothing you could tell him that he didn’t already know. But I always got the impression he would support me in whatever I chose (to do).”

Buffett startled people a few years ago when he announced that his money belongs to society, not his children, and that he intends to return it to society when he dies, via his foundation. The Buffett Foundation, which currently has about $14 million in assets, has two principal aims: to curb population growth and to seek solutions to the problem of nuclear-weapons proliferation. Buffett says, however, that he does not intend to cut off his children without a dime. “They will get substantially less than one-half of 1%.”

Understandably, his progeny do not jump up and down with glee at this. “It’s probably the right thing,” says daughter Susan, whose husband, Allen Greenberg, runs the foundation. What frustrates her is that everyone assumes that she is rich, and she is constantly solicited for charitable contributions. “They don’t understand,” she says, “that when I write my dad a check for $20, he cashes it. If I had $2,000 now, I’d pay off my credit card bill.”

Buffett’s older son, Howard, 36, farms 406 acres near Omaha and is following in his grandfather’s political footsteps as an elected county commissioner. He rents the land he tills from his father, and the price is adjusted 2% up or down depending on how much Howard weighs, since Buffett thinks his son needs to diet. Says Howard: “Dad always likes to get the best deal.”

Susan Buffett Greenberg adds that her main wish for her dad is for a long life, and in this year’s annual report, Buffett discusses that issue for the first time. He informs shareholders that if his wife outlives him, she will inherit all his stock and effectively control the company. “She knows, and agrees,” he writes, “that neither Berkshire nor its subsidiary businesses and important investments should be sold simply because some very high bid is received for one or all.” He goes on to say, “Neither my estate plan nor that of my wife is designed to preserve the family fortune; instead, both are aimed at preserving the character of Berkshire and returning the fortune to society.”

Finally, he reports, “Were I to die tomorrow . . . Berkshire’s earnings would increase by $1 million annually, since Charlie (Munger) would immediately sell our corporate jet, the Indefensible--ignoring my wish that it be buried with me.”

Despite Buffett’s plans, it’s hard to imagine Berkshire maintaining its momentum without Buffett’s propulsion. “You don’t institutionalize an idiosyncratic leader like Buffett,” says Wharton Prof. Webber. “You can create a level of professional managers to run it like a mutual fund after he departs, but whatever unifying vision Buffett saw will evaporate.”

Unlike some wealthy industrialists, Buffett has implemented no grandiose scheme to build a fabulous art collection or to imaginatively resolve every last problem that plagues mankind. Because he shrinks from high-risk enterprises, his legacy will not be that of an innovator or creator of a new industry or technology. Besides the tens of thousands of jobs generated by his wealth, his contribution will have been his writings on his business and investing philosophies, which constitute a lucid exposition on the fine art of business--and his example of success achieved with integrity during an era of sleazy financial gimmicks.

In the meantime, Buffett’s zest for life and business remains unabated. He has no desire to move into government, or to graduate to academe, or to take on a quasi-public role such as chairman of a stock exchange, as has been rumored in recent months. “I’ll keep doing this as long as I live,” he says. “I love what I do. There is nothing in my life I would change or don’t like. I feel like tap-dancing all the time.”

Berkshire Hathaway Holdings

COMPANY ORIGINAL MARKET COST OF VALUE SHARES (As of March 18, 1991) Cap Cities/ABC $518 million $1.4 billion Coca-Cola $1 billion $2.5 billion GEICO $45.7 million $1.2 billion Washington Post $9.7 million $404 million Wells Fargo $289 million $384 million