B000U5KFIC EBOK Page 5

  The teachers of Omaha, and especially Miss Kiewit, emphasized "thought" problems at which Munger always excelled. They also required the children to serve as crossing guards and do other chores. "Teachers were very well-behaved people," said Munger, "good moral exemplars in the old-fashioned sense. There was discipline. The moral teaching was good."

  Young Charlie in knickers in Omaha.

  Charlie was a star student, but he also was one of the most challenging to deal with.

  "Charlie was so lively that you could hardly miss him," said Estabrook. "He was up to something all the time. Occasionally he got in a scrape with his teachers. He was too independent minded to bow down to meet certain teachers' expectations. Our children are the same way. We think it's the way to be."

  Charlie also liked to tease and play tricks.

  "Mother used to say, 'Charlie is both smart and smartie,' " said Willa Davis Seemann. Mrs. Davis did her best to improve young Munger. When he was visiting the Davis' and misbehaved, Charlie got his legs switched right along with the Davis children.

  The classroom, said Munger, was only one part of his early education. "I met the towering intellectuals in books, not in the classroom, which is natural. I can't remember when I first read Ben Franklin. I had Thomas Jefferson over my bed at seven or eight. My family was into all that stuff, getting ahead through discipline, knowledge, and self-control."

  Charlie, Mary, and Carol received several books each year as Christmas gifts. "We had them read by Christmas night." said Carol. "We were very bookish people. Dad loved mysteries, Dickens and Shakespeare, biographies. Mother belonged to a book club which read everything that was current. I remember staying at the Davies and reading medical books. That's what the Davises had and what you read."

  Despite the family's love of reading, Charlie had trouble learning to read until his mother took it upon herself to teach him phonics. Whatever held him back quickly disappeared, and he was soon skipped ahead in school.

  "My parents used to say, 'there were no dumb Mongers,'" recalled Willa Seemann.

  Small and slight of build all through high school, Munger grew to his full stature of nearly 6 feet late. He was not particularly athletic, but spent this time with books, hobbies, friends, and people he liked.

  "He was always gregarious, friendly, social. He was interested in science, almost anything-he had a curious mind. Both parents had a big influence, but in different ways," explained Estabrook. "I think he related to Dad in the business and law sense. Mother was sociable. Of course, the Davis family was part of everybody's lives. They lived two or three blocks away. "

  The Munger and Davis families spent a lot of time together. Charlie was between the ages of the Davis boys, Eddie and Neil. Charlie's sister Mary was Willa's closest girlfriend.

  "Anytime anything went wrong at the Munger house, they called mother," said Willa. "Once Toody fell through the French doors. Back then they didn't have stretchers, so they took down a door and carried her out. Mother was a nervous eater, so she went to the kitchen and got a sausage and an apple and ate them going to the hospital."

  Like his parents, Charlie was fond of all the Davises. "Dr. Ed Davis was my father's best friend, and I did something unusual for a person as young as I was-five, eight, twelve, fourteen-I became a friend of my father's friend. I got along very well with Ed Davis. We understood one another.""

  Charlie became so interested in Ed Davis and his work that "I watched movies of his main operations and familiarized myself with surgical outcome statistics in his field."

  THE PROSPERITY ENJOYED BY SO MANY AMERICANS in the 1920s came to an abrupt end in the 1930s. By the time Charlie was six years old, the world was in a Great Depression that lasted until after he graduated from high school. The frightening era erupted on Black Friday, October 29, 1929. Between October and mid-November of that year, stocks lost more than 40 percent of their total valuation, a drop of $30 billion on paper at least. The effect was devastating to the more than 1.5 million Americans who dabbled in the stock market, often on borrowed money. One investor, presented with a margin account bill from her broker wailed, "How can I loose $100,000. I never had $100,000."'

  After Black Friday, the market rallied a few times, but finally floundered. Matters were made worse when a series of natural disasters deluged the United States-floods, droughts, plagues, and dust storms. More than 40 million Americans descended into dire poverty.10

  Though Munger was unaware of it, something else happened in Omaha in 1929 that would influence his life. Warren Buffett tells the story this way:

  I'm quite fond of 1929, since that's when it all began for me. My dad was a stock salesman at the time, and after the Crash came, in the fall, he was afraid to call anyone-all those people who'd been burned. So he just stayed home in the afternoons. And there wasn't television then. Soooo ... I was conceived on or about November 30, 1929, and I've forever had a kind of warm feeling about the Crash."

  Warren was born nine months later on August 30, 1930.

  Tinges were so bad that every day hobos knocked on the back doors in Omaha's better neighborhoods, offering to sweep the driveway or do some other chore for a sandwich. "It was amazing how poor people were in the 1930s," said Munger. "One summer it took family pull to get me a summertime job at 40 cents per hour. And all through the depression you could get all you could eat at Henshaw's Cafeteria, including meat and dessert, for 25 cents."

  But, said Munger, he learned some of his most important life lessons during that time: "I had the example in early life of family members who behaved well under stress. It must have been very hard for Grandfather Munger to cure family financial distress that wouldn't have happened if the suffering family members had been more like the judge. But he came through anyway."

  Both sets of grandparents did what they could to help their children through the lean years.

  "When the 1930s came Grandfather Russell, was down to very modest circumstances, his wholesale dry goods business having foundered," Charlie said. "uncle Ed was in real estate, and was stone cold broke and owed money. Grampa Russell cut his house in half and moved in his daughter and Ed-even as their oldest child died slowly of meningitis leaving medical and hospital bills that took years to pay."

  On the Munger side of the family, one of Charlie's uncles owned a small bank in Stromsburg, Nebraska. Farmers defaulted on loans, and the hank wasn't sound enough to reopen after Roosevelt's bank holiday in 1933. "Uncle Tom needed about $35,000 worth of good assets to replace $35,000 of crap. Grampa Munger had $35,000 in good mortgages and put them into his son-in-law's bank in exchange for the crap. It was a big risk. It represented about half of his assets and there were no pensions for judge's widows at that time. At the end of the bank holiday, Uncle Tom's bank re-opened, and, eventually, over many years, much of the judge's investment was recovered as bad assets became merely mediocre assets."

  . One of Munger's aunts had married a musician over the judge's objection. Judge Munger gave him money to go to pharmacy school, then lent him money to buy a well-located, but bankrupt pharmacy that prospered. Both the Mungers and the Russells stuck together and pulled through. Despite the problems the rest of the family had, Al Munger was relatively secure.

  "My father was never again so rich in real income as he was in 1936. It was his peak of lawyering. We didn't live in a big house and have a chauffeur, but we were very comfortable-by the standards of the day."

  Al Munger's prosperity in the mid-1930s was partly clue to a law case Al handled on behalf of a tiny soap company. Al argued that one of the New Deal's tax laws was unconstitutional, and the case somehow got accepted for review by the U.S. Supreme Court. On the outcome swung a huge sum of money for Colgate Palmolive Peet and a small sum for Al's client. Colgate paid Al generously for allowing Colgate's famous New York lawyer to argue the case, which the New York lawyer then lost. "I could have lost it just as well for less," said Al.

  Despite his family's relative prosperity in the 1930s, Charl
ie took jobs when he could: "I first encountered the Buffetts when I worked at the family grocery store. The hours were long, the pay low, opinions cast in iron, and foolishness zero."''

  Buffett & Son was started in 1869 by Warren's great-grandfather, Sidney Buffett. When Charlie worked there, it was owned by Warren's grandfather Ernest. The Buffett sense of humor apparently is hereditary. Ernest's brother was named Frank.

  Originally located on 13th Street, the store later moved to the western edge of Omaha, 5015 Underwood Avenue, six or seven blocks from Munger's home.

  "It was a credit and delivery store," explained Buffett. "It had a mezzanine where my grandfather would sit. Basically he was the boss. He'd give orders. Uncle Fred, Ernest's son, did all the work."

  The store had squeaky wooden floors, rotating fans, and floor-toceiling wooden shelves. When a customer wanted a can from a higher shelf, a young clerk moved a sliding ladder to the right place and retrieved the item. Grocery boys unpacked and shelved cases of food, cleaned out the produce bins, carried grocery bags to the homes of Omaha matrons, and swept floors. Charlie -slaved" in the store on Saturdays. You were just goddam busy from the first hour of morning until night," he explained.13

  If Warren's older cousin, Bill Buffett, arrived late, he was greeted by the portly, white-haired Grampa Ernest, standing above on the mezzanine with watch in hand, "Billy, what time is it?"

  Ernest Buffett was a strict employer and he held strong political views. "He paid $2 for 12 hours of uninterrupted work. Social Security had just been enacted, and he used to require each boy to bring two pennies to the store to pay his contribution to the system," said Charlie.''

  At the end of the day, Charlie handed Ernest his two pennies and in return received two dollar bills, plus a lecture on the evils of socialism.

  For Munger, "The Buffett family store provided a very desirable introduction to business. It required hard, accurate work over long hours, which caused many of the young workers, including me (and later Ernest's grandson Warren), to look for an easier career and to be cheerful upon finding disadvantages therein."

  Warren's Uncle Fred Buffett, who once was voted the most popular man in Omaha, took over running the store in 1946 when Ernest died. As late as the 1960s, Buffett's grocery still accepted phone-in orders and made home deliveries. When Fred finally closed the business in 1969, it had been operating for 100 years, run by three generations of Buffetts. The building remains in the Dundee area surrounded by a cluster of antique shops.

  BY THE TIME CHARLIE MUNGER was nine years old, Franklin Roosevelt had been elected president, the New Deal had been introduced, and Prohibition had been repealed. When Charlie was 14, Orson Welles terrified the United States with his overly realistic radio broadcast "War of the Worlds." Munger was 15 when Hitler's Nazi army invaded Poland. The whole world was experiencing dramatic change that would carry Charlie away from his home in Nebraska.

  C H A P T E R F O U R

  SURVIVING

  THE WARS

  He's a poker player, likes to keep things to .himself. Even when we were children, he'd say, "We'll see. We'll see," more than any other comment. If you ask him a question he doesn't want to answer, he just pretendshe doesn't .hear.

  Molly Munger

  WO OF TIIE MI]NGER GRANDCHILDREN, Charles Lowell and Nathaniel (ages ranging from seven-ish to ten-ish), and a mob of kids from neighboring cabins clamor up and down the stairs of the main Star Island house to a third-floor loft, where they have set up a fort and have formed a secret club.

  On this sunny, languorous August day at the Munger compound on Cass Lake, they play a game that children have played for centuries, making up elaborate rules, planning raids on imagined enemies, and seizing territory. Their chatter has a recurring theme. One youngster bursts out, "I've got an idea!" No sooner does the gang discuss and agree on the plan, than young Nathaniel Munger pipes up, "I've got a better idea." Back to the drawing board. Nathaniel always has a better idea.

  To improve the fortification and deter intruders, the children pile a chair and suitcases at the top of three flights of stairs. All is well until Nathaniel decides to make a reconnaissance trip to the first floor. Suddenly, with an alarming clatter, the chair, the suitcases, and Nathaniel all tumble down.

  Charlie Munger Senior glances up from his book and listens to the bawling Nathaniel and the thunder of feet as the other children run to gawk and as adults rush to survey the damage. Miraculously, Nathaniel has no broken bones, not even a bruise that anyone can locate. Once he is the center of attention, Nathaniel's crying stops. The family reports to Grandad that no damage was done. Charlie continues to read. "I didn't think so," he mutters. By the end of the day, Nathaniel is boasting to his pals that he fell all the way down the stairs and didn't even get hurt.

  THE 1940s BROL'(;HT TI 110`1011, AND CHANGE both to America and the Munger household. Some of that change was to be expected because Al and Toody's children were growing up. As rumblings of war were heard from across the oceans, first Charlie, then Mary, and finally Carol left for college. In the middle of those natural transitions, a dreaded inevitability occurred-the United States was dragged into World War II.

  Charlie was 17 when he left, in 1941, to enroll in the University of Michigan where he majored in mathematics-and never after, except for visits, returned fo Omaha. Mary Munger chose Scripps College in Pasadena, but Carol followed in her father's footsteps and went east to Radcliffe, nominally the women's college at Harvard at the time.

  At Ann Arbor the students, including Charlie and his roommate, Nebraskan John Angle, listened to Bing Crosby records, watched young Bette Davis at the movies, and explored new academic vistas. Charlie was introduced to physics. "To me, it was a total eye-opener," he said. Although Munger only took an introductory level class, it was the physicists approach to problem solving that made a lifelong impression on him.

  "The tradition of always looking for the answer in the most fundamental way available-that is a great tradition, and it saves a lot of time in this world. And, of course, the problems are hard enough that you have to learn to have what some people call assiduity. Well, I've always liked that word-because to me it means that you sit down on your ass until you've solved your problem."

  Munger says that if he were running the world, anyone who qualified to do so would be required to take physics, simply because it teaches a person how to think.

  "I am in no sense a working scientist or a working amateur scientist," Munger concedes, "hut I have a very deep appreciation of science and I find the methods used are useful outside of science."

  But he was not to have a long period of tranquil studies at the University of Michigan. Instead, the prospect of war was troubling the minds of most Americans. The political temperature was rising in Europe, then, early in Charlie's first year of college, on December 7, 1941, there came the surprise attack on the U.S. Naval fleet at Pearl Harbor. The imperative of World War II forced many young men out of college and into military service, and Charlie was no exception. He stayed at the University of Michigan through the end of 1942, then, a few days after his nineteenth birthday, joined up.

  When Charlie enlisted, the war was well underway in Europe, Africa, and the Pacific. Because he had been a member of the Reserve Officer Training Corps (ROTC) in high school and college-a total of six yearsMunger was bored with marching. He decided against going into the infantry and to his everlasting good fortune joined the Army Air Corps.

  Charlie's mother was frantic about the safety of her only son, although Carol Estabrook said Toody Munger tried to hide her fear. Surely Al Munger suffered similar anxieties, but to compensate, he threw himself into the war effort at home. Consequently, World War II became an exciting time for Charlie's father. He cultivated a huge victory garden, recruiting a nephew to work in it with him. Then he found a partner, a priest who was a professor at a local Jesuit college and who had some land in the country. Together they raised pigs so that they could have bacon and other pork
cuts, which were scarce because so much meat was being shipped overseas to feed the troops. About the time their pigs matured, though, rationing ended and pork products again became available at reasonable prices.

  "It was very expensive bacon," chuckled Charlie. "I think my father did it mostly because he liked raising pigs."

  When he first joined the military, Munger was an ordinary soldier, and his training gave him time to think about his future. "As a private in the Army in Utah in a tent, in the mud and snow-very unpleasant conditions-I remember talking to someone. I said I wanted a lot of children, a house with lots of books, enough money to have freedom."

  After Munger took the Army General Classification Test, he found out that a score of 120 qualified a soldier to be commissioned as an officer. Charlie did much better than that, scoring 149. He soon was promoted to Second Lieutenant.'

  He was first dispatched to the University of New Mexico in Albuquerque, and then to a distinguished private college of science and engineering, the California Institute of Technology in Pasadena, California, to train as a meteorologist. In plainer language, he would be a weather forecaster. Charlie took one look around Pasadena and knew he liked his new surroundings.

  Pasadena was a graceful old town, full of Spanish colonial-style mansions and shaded by billowing purple jacarandas and fragrant eucalyptus and pepper trees. It had been settled a hundred years earlier by Midwesterners who built impressive churches and cultural institutions like the ones they enjoyed back home. Smog wasn't yet the problem it would become, and on most days, the San Gabriel Mountains seemed so close that you could reach out and touch them. To the west stretched the energetic, exotic metropolis of Los Angeles.

  "Southern California was quite different. It looked like a bigger, more interesting place than Omaha, a city that I love," he said.