24 THE WARREN BUFFETT WAY
It was Munger who convinced Buffett that paying three times
book value for See’s Candy was actually a good deal (see Chapter 4
for the full story). That was the beginning of a plate-tectonic shift in
Buffett’s thinking, and he happily acknowledges that it was Charlie
who pushed him in a new direction. Both would quickly add that
when you f ind a quality company that also happens to be available at a
discounted price, then you’ve struck oil—or, in Berkshire’s case, the
next best thing: Coca-Cola (see Chapter 4).
One reason Buffett and Munger f it so well is that both men possess
an uncompromising attitude toward commonsense business principles.
Like Buffett, who endured poor returns in the insurance industry and
for a time refused to write policies, Charlie, in his function as CEO of
Wesco, refused to make loans when confronted with an unruly savings
and loan industry. Both exhibit managerial qualities necessary to run
high-quality businesses. Berkshire Hathaway’s shareholders are blessed in
having managing partners who look after their interest and help them
make money in all economic environments. With Buffett ’s policy on
mandatory retirement—he does not believe in it—Berkshire’s sharehold-
ers will continue to benef it not from one mind but two long into the
future.
A BLENDING OF INFLUENCES
Shortly after Graham’s death in 1976, Buffett became the designated
steward of Graham’s value approach to investing. Indeed, Buffett’s name
became synonymous with value investing. It is easy to see why. He was
the most famous of Graham’s dedicated students, and Buffett never
missed an opportunity to acknowledge the intellectual debt he owed to
Graham. Even today, Buffett considers Graham to be the one individ-
ual, after his father, who had the most inf luence on his investment life.^17
How, then, does Buffett reconcile his intellectual indebtedness to
Graham with stock purchases like the Washington Post Company (1973)
and the Coca-Cola Company (1988)? Neither passed Graham’s strict
f inancial test for purchase, yet Buffett made signif icant investments
in both.
As early as 1965, Buffett was becoming aware that Graham’s strategy
of buying cheap stocks was not ideal.^18 Following his mentor’s approach