Their responses were 180 degrees apart. By merging Salomon with a more diversified partner, Buffett had diluted the Salomon shareholders’ interests in arbitrage and in the rest of Salomon’s business. Now they would own pieces of a much larger Travelers. Long-Term’s partners had made the exact opposite decision: to a great extent, they had bought out their partners, thus redoubling their bets on arbitrage. The irony was that Buffett had converted a chronic loser into $9 billion while Long-Term’s partners had converted a consistent winner into a giant—and still unrealized—bet on the future.
