1956 return to Omaha '100 percent the right decision' for Warren Buffett - Omaha.com
Published Sunday, December 1, 2013 at 1:30 am / Updated at 6:48 pm
1956 return to Omaha '100 percent the right decision' for Warren Buffett
This is an excerpt from Steve Jordon's “The Oracle & Omaha,” a look at how Warren Buffett and his hometown share a history and a future. The book costs $29.95 and is available at bookstores. It also can be ordered at OWHstore.com or by calling 402-444-1014.

Sunday: Buffett's return to Omaha from New York.

Dec. 8: Omaha discovers it is home to a budding financial genius.

Dec. 15: Why Buffett stays on the sidelines in civic matters.

In 1954, Warren Buffett's drive to become rich took him to New York one more time. He went to work for Benjamin Graham, the guru of investing. At last Buffett was managing money in a way that made profits for himself and his clients at the same time, ending the salesman-client conflict of interest that he disliked. Yet Omaha remained on Buffett's mind. “Even when I moved back to work for Graham for 21 months, I had a subscription to The World-Herald.”

For Warren Buffett, the 1956 return to Omaha marked the end of moves that easily could have left his hometown far behind.

Buffett had thought hard about staying in New York.

“I liked the work I was doing, so it was nothing against that,” he said. “I made a lot of friends. I wasn't unhappy there.”

Omaha was, simply, home.

He preferred “by some margin” local restaurants such as Piccolo Pete's and Gorat's — where steaks were served up by Rosehill School classmate Louis N. “Pal” Gorat — to swanky bistros of Manhattan, like the 21 Club.

In New York, Buffett said, “I didn't have much of a life outside the work I was doing, and I did not like the life I was going to live there as well as I would like the life I would live here. Incidentally, it was 100 percent the right decision. My life has been happier being in Omaha, I think, than if I'd been anyplace else.” ...

Along with Omaha's personal attraction for Buffett, New York had its business-related drawbacks, in Buffett's view.

“People know better, but when they hear a rumor — particularly when they hear it from a high place — they just can't resist the temptation to go along,” he said.

“It happens in Wall Street periodically, and then you get what are, in effect, manias. You look back on it, and you can't really understand how it could have happened. A group of lemmings looks like a pack of individualists compared to what happens on Wall Street when it gets a concept in its teeth.

“It's one of the advantages of being out in Omaha, frankly. I worked in New York for a couple of years, and people kept whispering to me on street corners. And I kept listening to them, which was even worse. So I got back to Omaha, where there's less chance you'll go way off the track.”

Or as he explained one other time, “I don't want to hear what a lot of other people think. I just want a lot of facts. ... I don't care what other people think at all. I mean, in the end, I'm not handing my money over to anybody else, or my shareholders' money.”

Omaha fit Buffett's needs and was part of what he later considered winning the “ovarian lottery” — being born an American male, expected to use his capabilities, raised by supportive parents, living in a city with good teachers and under a capitalist economic system that valued his skill in allocating capital. American capitalism had figured out how to “unleash human potential,” he would say. He learned to spot businesses that promised long-term growth that would turn his nest egg into a fortune. ...

Starting in junior high, Buffett had bounced among Omaha, Lincoln, Washington, D.C., and New York. Now he was permanently, happily rooted in Omaha.

At first he thought he would simply support his family from the investments with his nest egg, which had grown substantially during his years in New York.

“I had no plan, zero, none,” he said. “If my Aunt Alice and a few people like my sister and my father-in-law didn't ask, 'What should we do with our money?' I wouldn't have formed a partnership.

“I had no notion that another partnership would come along or any more partners. It was just to take care of the seven people who really said to me that they wanted me to manage their money.” He didn't want to act as a broker and sell securities, so a partnership, while “totally accidental,” was the logical step.

Four relatives and three friends put in their money: father-in-law Doc Thompson, $25,000; sister Doris and her husband, Truman Wood, $10,000; aunt Alice Buffett, $35,000; former college roommate Chuck Peterson of Omaha, $5,000; Peterson's mother, Elizabeth, $25,000; and childhood friend Dan Monen, $5,000. Buffett said he “put my money where my mouth was” and added $100, counting his investment expertise as his main contribution to the partnership. The total was $105,100.

Although Buffett hadn't asked to manage their money, from the standpoint of his family-and-friends partners, hiring him was somewhat akin to a father helping a son get a start in vacuum-cleaner sales by buying the first one.

They trusted Buffett to do well, and some had been his clients in his brokerage days with his father at the Omaha National Bank Building, before he went to New York to work for Benjamin Graham.

One by one, the partnership groups gave Buffett more capital to invest, and soon he was handling millions. If he had stayed in New York City, he said, “It wouldn't have been the same. I don't know who would have joined in with me.”

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