Unaudited financial statements can be scary things.
But that didn’t stop Warren Buffett from buying one tiny furniture company in 1983.
Buffett shared the sweet success story in his new annual letter to Berkshire Hathaway shareholders:
I can’t resist, however, giving you an update on Nebraska Furniture Mart’s expansion into Texas. I’m not covering this event because of its economic importance to Berkshire — it takes more than a new store to move the needle on Berkshire’s $US225 billion equity base. But I’ve now worked 30 years with the marvellous Blumkin family, and I’m excited about the remarkable store — truly Texas-sized — it is building at The Colony, in the northern part of the Dallas metropolitan area.
When the store is completed next year, NFM will have — under one roof, and on a 433-acre site — 1.8 million square feet of retail and supporting warehouse space. View the project’s progress at www.nfm.com/texas. NFM already owns the two highest-volume home furnishings stores in the country (in Omaha and Kansas City, Kansas), each doing about $US450 million annually. I predict the Texas store will blow these records away. If you live anywhere near Dallas, come check us out.
I think back to August 30, 1983 — my birthday — when I went to see Mrs. B (Rose Blumkin), carrying a 11⁄4-page purchase proposal for NFM that I had drafted. (It’s reproduced on pages 114 – 115.) Mrs. B accepted my offer without changing a word, and we completed the deal without the involvement of investment bankers or lawyers (an experience that can only be described as heavenly). Though the company’s financial statements were unaudited, I had no worries. Mrs. B simply told me what was what, and her word was good enough for me.
Mrs. B was 89 at the time and worked until 103 — definitely my kind of woman. Take a look at NFM’s financial statements from 1946 on pages 116 – 117. Everything NFM now owns comes from (a) that $US72,264 of net worth and $US50 — no zeros omitted — of cash the company then possessed, and (b) the incredible talents of Mrs. B, her son, Louie, and his sons Ron and Irv.
The punch line to this story is that Mrs. B never spent a day in school. Moreover, she emigrated from Russia to America knowing not a word of English. But she loved her adopted country: At Mrs. B’s request, the family always sang God Bless America at its gatherings.
Aspiring business managers should look hard at the plain, but rare, attributes that produced Mrs. B’s incredible success. Students from 40 universities visit me every year, and I have them start the day with a visit to NFM. If they absorb Mrs. B’s lessons, they need none from me.
You can’t beat good management and the instinct to identify them.
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