That made for an even exchange.īuffett is a long-time investor in the insurance business. B a check for $55 million and she gave us her word. B and her family was demonstrated when we purchased 90% of the business: NFM had never had an audit and we did not request one we did not take an inventory nor verify the receivables we did not check property titles. B boils it down to “sell cheap and tell the truth”.) All members of the family: (1) apply themselves with an enthusiasm and energy that would make Ben Franklin and Horatio Alger look like dropouts (2) define with extraordinary realism their area of special competence and act decisively on all matters within it (3) ignore even the most enticing propositions failing outside of that area of special competence and, (4) unfailingly behave in a high-grade manner with everyone they deal with. I have been asked by a number of people just what secrets the Blumkins bring to their business. Buffett was a huge fan of NFM’s chairman, the 91-year-old Rose Blumkin, who he affectionately referred to as “Mrs. The next year, in 1984, Berkshire highlighted its purchase of Nebraska Furniture Mart. This bias caused me to make many important business mistakes of omission, although relatively few of commission. My own thinking has changed drastically from 35 years ago when I was taught to favor tangible assets and to shun businesses whose value depended largely upon economic Goodwill. But students of investment and management should understand the nuances of the subject.
BEST FINANCIAL NEWSLETTERS PER BUFFETT FULL
…You can live a full and rewarding life without ever thinking about Goodwill and its amortization.
We own several businesses that possess economic Goodwill (which is properly includable in intrinsic business value) far larger than the accounting Goodwill that is carried on our balance sheet and reflected in book value… In his 1983 letter, Buffett wrote about the importance of “economic goodwill” in the companies he invested in: But, while our operating earnings per share were up 37% from the year before, our beginning capital was up 24%, making the gain in earnings per share considerably less impressive than it might appear at first glance. In 1977 our operating earnings on beginning equity capital amounted to 19%, slightly better than last year and above both our own long-term average and that of American industry in aggregate. Right away, Buffett tackles the notion that earnings performance is a good way to measure managerial performance:Įxcept for special cases (for example, companies with unusual debt-equity ratios or those with important assets carried at unrealistic balance sheet values), we believe a more appropriate measure of managerial economic performance to be return on equity capital. Buffett’s 1977 letter is the earliest one available in the Berkshire Hathaway online archive.
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