Financial History 134 (Summer 2020) | Page 15

Newman each received salary and incentive compensation of $80,214. The net assets in the fund had grown to $6,162,000. In 1953, net assets peaked at $7,267,000. The fund was liquidated in 1957 after Graham’s retirement to California. In addition to their joint holdings in the Graham-Newman Corporation, both Graham and Dodd were partners in Newman and Graham, a private hedge fund, which carried on the arbitrage strategies of the Benjamin Graham Joint Account. They were also partners in a controlling investment in Government Employees Insurance Company (GEICO). Graham was chairman of the board and Dodd was an investor and member of the board of directors of GEICO and related companies. He was vice chairman of the profit-sharing plan of all the companies from 1960–63. Graham-Newman’s investment of $712,000 in GEICO in 1948 eventually resulted in a position worth $400 million by 1972. Relationship with Warren Buffett (1950–1988) By 1950, Dodd had ascended the academic ladder to become a full professor and Associate Dean for Admissions. According to Columbia Business School: A Century of Ideas, in August of that year he was contacted by a young graduate of the University of Nebraska named Warren Buffett who was investigating graduate schools to attend. The normal application deadline for the fall term had passed, but Dodd agreed to admit him, perhaps because of Buffett’s familiarity with Security Analysis and The Intelligent Investor, which had been published the year before. According to Columbia Business School: A Century of Ideas: Although only at the school for one year, Buffett took a well-attended investment course, Finance 111–112 Investment Management and Security Analysis, from Dodd in the fall of 1950 and a much smaller seminar class with Graham in the spring of 1951. Dodd taught his class using the 1940 edition of Security Analysis. Graham taught mostly by presenting then-current investment cases. In these classes, a young Buffett “learned the details of reading a financial statement from Dodd, and Graham taught him how to use a company’s published financial statements to estimate the fair value for David Dodd’s guest cabin on Chebeague Island, Maine, which he used as a summer retreat for writing. its securities.” Indeed, Graham and Dodd “gave Buffett the tools to begin mastering the art of investing.” Graham famously awarded him the only A+ grade in his 21 years of teaching and hired him as an analyst at Graham-Newman. According to his grandson, David Anderson, Dodd was disappointed that Buffett decided to leave after one year. He was looking forward to mentoring him again for another year. When Buffett founded the Buffett Partnership in 1956, Dodd invested as an expression of support, without any particular expectation of a huge return. Dodd followed up by investing in Berkshire Hathaway after the Buffett Partnership was liquidated at the top of the market in 1969. He bought the Berkshire Hathaway shares in the name of his daughter, Barbara Dodd Anderson. Later Years at Columbia (1951–61) One of Dodd’s students in the spring semester of 1957 was Judy Stein, one of only six women at Columbia Business School at that time. She was an economics major from Mount Holyoke College, and only a few years younger than Dodd’s daughter Barbara. Stein remembers Dodd’s style of teaching as being a combination of lecture and discussion. He was low-key and conversational, but also required that students speak up in class. He used the third edition (1951) of Security Analysis as his textbook. Dodd was very supportive of Stein in her career and wrote letters of recommendation for her to both George Weiss, a senior partner of Bache & Co., and Henry Loeb, a senior partner of Loeb Rhoades & Co., a research-oriented stock brokerage firm. Loeb hired her as an analyst, making her one of only four women security analysts on Wall Street during the 1950s. Retirement Years (1961–1988) Dodd continued to teach security analysis at Columbia until 1961, when he retired. He passed the mantle to Roger F. Murray, who educated the next generation Courtesy of David Anderson www.MoAF.org | Summer 2020 | FINANCIAL HISTORY 13