Warren Buffett. Robert G. HagstromЧитать онлайн книгу.
25 percent of the Buffett Partnership's assets to an economically sinking ship with no exit strategy. “I became the dog who caught the car,” he said.19
The journey from managing one of the greatest investment partnerships in history to then parlaying his net worth into owning a dying manufacturing business had all the makings of a Greek tragedy. What was Warren thinking?
It's clear what he was not thinking. He had no grand plan to engineer a complete turnaround. And even though he had Ben Graham whispering in his ear, he never intended to sell the company to a greater fool. Who would have wanted to buy a 75‐year‐old, low‐margin, capital‐intensive, labor‐dependent, nineteenth‐century New England maker of fabric liners for men's suits? No, Warren was guided by a stronger principle, a principle that in fact lies at the heart of his investing philosophy—long‐term compounding.
From an early age, Warren was taught the benefits of compound interest. More important, he experienced the benefits of a compounding machine firsthand when he took the earnings from his various jobs and plowed them back into his little business enterprise. If one paper route was a good job for making money, then having two paper routes meant more money. If owning one pinball machine added to his savings, then owning three was even better. Even as a kid, Warren was not geared to spend the money he had earned.
In many ways, Warren's childhood enterprises were like a conglomerate, allowing him to transfer money unimpaired from one business to another or, better yet, plowing more money back into the best business. And 20 years later, a conglomerate is what he had with Berkshire Hathaway, although few recognized it.
Most thought that Warren had rolled the dice on a beaten‐down textile business, but what they missed is that in one bold step he now owned a corporate entity called Berkshire Hathaway that in turn owned a textile company. Warren figured all he had to do was to wring out whatever cash was left from Berkshire Hathaway manufacturing and reallocate it to a better business. Fortunately, the textile group of manufacturers under the Berkshire name did generate enough capital to allow Warren to buy other businesses, which, as we will see, is a much brighter story. It wasn't long before the metamorphosis of Berkshire Hathaway was complete, from a single‐line textile manufacturer to a conglomerate that owned a portfolio of diversified business interests.
In the 2014 Berkshire Hathaway Annual Report, Warren gave shareholders a short tutorial on the advantages of owning a conglomerate. “If the conglomerate form is used judiciously, it is an ideal structure for maximizing long‐term capital.” A conglomerate is perfectly positioned to allocate capital rationally and at a minimal cost, he explained. Furthermore, a conglomerate that owns different businesses is in an ideal position: “Without incurring taxes or much in the way of other costs [it can] move huge sums from businesses that have limited opportunities for incremental investment to other sectors with greater promise.”20
You have probably noticed that with his decisions about Berkshire Hathaway, Warren had pulled away from the teachings of Ben Graham. Maximizing long‐term capital gain was not a Ben Graham strategy. His approach to buying stocks was to keenly focus on cheap, hard‐asset‐based stocks with limited downside price risk. Once the stock price reset back to fair value, Graham would quickly sell the stock and move on to the next investment. The idea of compounding an existing stock position over several years was not part of Graham's calculation. In fact, the word compound appears nowhere in Security Analysis or The Intelligent Investor.
In contrast, even in the earliest years of the partnership Warren was writing about the “Joys of Compounding.” In the 1963 Buffett Partnership letter to his partners, Warren relayed the story of Queen Isabella underwriting the voyage of Christopher Columbus for $30,000. He pointed out that if that investment compounded at 4 percent, it would have been worth $2 trillion five hundred years later. Year after year, Warren would school his partners on the wonders of compounded interest. A $100,000 investment compounded at 4 percent rate becomes $224,000 in 30 years, he explained, but can become $8,484,940 when compounded at 16 percent. His advice: live a long life and compound money at a high rate.
However, we should not forget that the partnership years, and Graham's influence thereon, are critical to the story of Warren Buffett. He grew the Buffett partnership assets by perfectly executing Ben Graham's core methodology. Its success helped to build Warren's net worth, and the yearly performance bonus added to his financial security. That allowed him to provide a solid foundation for his family. But once their financial future was secured, the question became, what next?
One option was to continue the partnership—keep on buying and selling stocks each year, paying commissions and taxes along the way, always having to navigate the rocky shores of overpriced markets. The other was to change vessels and chart a new course.
To date, Berkshire Hathaway is the sixth largest company in the world. The original A‐shares, which Warren purchased in 1962 at $7.50, today trade for $334,000. What is spectacular about this achievement is that Berkshire reached this milestone not by inventing a blockbuster drug or new technology but rather from perfecting an older miracle—the seventeenth‐century idea of financial compounding.
Notes
1 1. F. C. Minaker, One Thousand Ways to Make $1000: Practical Suggestions, Based on Actual Experience, for Starting a Business of Your Own and Making Money in Your Spare Time (The Dartnell Corporation, 1936), p. 14.
2 2. Alice Schroeder, The Snowball: Warren Buffett and the Business of Life (New York: Bantam Dell, 2008), p. 64.
3 3. Minaker, One Thousand Ways, p. 15.
4 4. Ibid.
5 5. Ibid.
6 6. Ibid., p. 17.
7 7. Ibid.
8 8. Andrew Kilpatrick, Of Permanent Value: The Story of Warren Buffett: 2015 Golden Anniversary Edition (Birmingham, AL: AKPE Publishing, 2015), p. 39.
9 9. Ibid., p. 40.
10 10. Schroeder, The Snowball, p. 129.
11 11. Ibid., p. 130.
12 12. Ibid., p. 146.
13 13. Roger Lowenstein, The Making of an American Capitalist (New York: Random House, 2008), p. 46.
14 14. Jeremy C. Miller, Warren Buffett's Ground Rules (New York: HarperCollins, 2016), p. xii.
15 15. Lowenstein, The Making of an American Capitalist, p. 114.
16 16. John Train, The Masters, p. 12.
17 17. Miller, Warren Buffett's Ground Rules, p. 250.
18 18.