The Wall Street Journal, 11/08/1991. © Dow Jones & Co., Inc. Reprinted with Permission
What do Citicorp's John Reed, CBS's Laurence Tisch and American Express's James D. Robinson III have in common with heiress Ann Getty, philanthropist Walter Annenberg and Ron Reagan Jr.?
They are all part of Warren Buffett's growing network, a formidable collection of corporate heads, financiers, money managers and celebrities. The relationships in many cases have been built over decades, deftly combining friendship with business. Members of the far-flung group, who often look to the Omaha investor as something of a mentor, exchange investment ideas, insights into corporate affairs and profitable connections that have been one key to Mr. Buffett's success.
The innermost circle, which began as a group of 13 in 1968 and now numbers almost 60, gets together once every two years for a retreat led by Mr. Buffett. Guests at the most recent retreat, a four-day gathering in late September at the Laurel Point Inn in Victoria, British Columbia, included Washington Post Co. Chairwoman Katharine Graham and her son, Donald E. Graham, the company's president; Capital Cities/ABC Inc. Chairman Thomas S. Murphy; former Johnson & Johnson Chairman James Burke; Coca-Cola Co. President Donald R. Keough; Microsoft Corp. Chairman William Gates; and Mr. Tisch of CBS.
The conclaves, held at locations like The Williamsburg Inn in Virginia and aboard the Queen Elizabeth II, fall somewhere between group therapy and a huge board meeting of "Buffett Inc." Along with corporate goings-on and economic trends, topics have ranged from the best-managed company in America (Cap Cities got mentioned one year) to the worst mistake attendees ever made in business (Mr. Tisch mentioned the price he paid to air certain sports events; Mr. Murphy talked about union problems at a paper in Pennsylvania that his company bought.)
With corporate competitors and independent investors getting together, the sessions could raise antitrust or other tricky issues. But "no one wants to talk about things that could be a possible problem," says Mr. Tisch. "They won't do that. These people are too smart."
Still, Mr. Gates, a first-time retreat guest this year, tells of a cruise around Victoria's inner harbor where he says Mr. Tisch, Mr. Buffett and Mr. Murphy talked at length about "issues of price and valuation in media." Among other things, Mr. Gates says, "they were talking about where ad rates are going, and where they should be."
Legal experts consider such conversations "a gray area of antitrust," says Garth Saloner, an antitrust specialist at Stanford University's Graduate School of Business. "To prosecute that kind of thing, you need to show they agreed, whether explicitly or implicitly, to some course of action. That's hard to prove."
"If the inference is that we were talking in a gray area of antitrust, that's just not true," said Mr. Murphy in a telephone interview. (Later, Mr. Gates called back and said the conversation on the boat was really about ad production costs, not ad rates, and that he didn't mean to imply that any collusion on prices took place.)
Not everyone in Mr. Buffett's network rates an invitation to the retreats. Former Salomon Chairman John Gutfreund never did. Though American Express Chairman James Robinson has visited Mr. Buffett several times in Omaha, he's "just not our kind of guy and would never be invited to the retreat," says New York stockbroker Marshall Weinberg, one of the original group of 13.
John J. Byrne, a recently named American Express director who heads Fund American Cos., passes muster. Four months after he arrived on the American Express board, Mr. Byrne helped broker a $300 million Buffett investment in the company, according to Mr. Robinson.
Mr. Buffett is in close touch with all levels of his network. Capital Cities's Mr. Murphy says he has consulted Mr. Buffett "on every major decision I've made" since the two met 20 years ago.
The same holds true for Mrs. Graham. She was advised by Mr. Buffett to buy 53 cable-television systems from Capital Cities in 1985 for $350 million -- a purchase that helped Cap Cities (a Buffett investment) finance its merger with ABC.
Ms. Getty, an heir to the Getty oil fortune, flew to Omaha to get advice about how to handle disputes over her inheritance in the mid-1980s, Mr. Munger says. And about that time Nancy Reagan, another Buffett friend, sent her son, Ron, to Mr. Buffett for career counseling.
Even some of the savviest investors seek Mr. Buffett's counsel. In 1988, when Walter Annenberg was wondering whether to accept a $3 billion bid from Rupert Murdoch for Triangle Publications Inc., a trip to Omaha helped clear things up.
Mr. Buffett told him to "Run to the bank, Walter, run to the bank."
Mr. Annenberg sold.