Tuesday, January 1, 2013

Could this have been the real Mrs Walther ?

For those who have trained in some form of Rational Problem solving with Kepner Tregoe [if not, then never mind, but please don't solve problems, make decisions, evalute risks on my behalf as probability suggests are not very good at it. Unconcious incompetance and all that], was this inspriation for the real Mrs Walther of the Donut machine?

Taken from the Warren Buffet Berkshire Hathaway shareholders letter 1983 [ A worthwhile read I am finding. Working my way from 1977 to the present day].

Nebraska Furniture Mart

     Last year, in discussing how managers with bright, but 
adrenalin-soaked minds scramble after foolish acquisitions, I 
quoted Pascal: “It has struck me that all the misfortunes of men 
spring from the single cause that they are unable to stay quietly 
in one room.”

     Even Pascal would have left the room for Mrs. Blumkin.

     About 67 years ago Mrs. Blumkin, then 23, talked her way 
past a border guard to leave Russia for America.  She had no 
formal education, not even at the grammar school level, and knew 
no English.  After some years in this country, she learned the 
language when her older daughter taught her, every evening, the 
words she had learned in school during the day.

     In 1937, after many years of selling used clothing, Mrs.  
Blumkin had saved $500 with which to realize her dream of opening 
a furniture store.  Upon seeing the American Furniture Mart in 
Chicago - then the center of the nation’s wholesale furniture 
activity - she decided to christen her dream Nebraska Furniture 
Mart.

     She met every obstacle you would expect (and a few you 
wouldn’t) when a business endowed with only $500 and no 
locational or product advantage goes up against rich, long-
entrenched competition.  At one early point, when her tiny 
resources ran out, “Mrs.  B” (a personal trademark now as well 
recognized in Greater Omaha as Coca-Cola or Sanka) coped in a way 
not taught at business schools: she simply sold the furniture and 
appliances from her home in order to pay creditors precisely as 
promised.

     Omaha retailers began to recognize that Mrs. B would offer 
customers far better deals than they had been giving, and they 
pressured furniture and carpet manufacturers not to sell to her.  
But by various strategies she obtained merchandise and cut prices 
sharply.  Mrs. B was then hauled into court for violation of Fair 
Trade laws.  She not only won all the cases, but received 
invaluable publicity.  At the end of one case, after 
demonstrating to the court that she could profitably sell carpet 
at a huge discount from the prevailing price, she sold the judge 
$1400 worth of carpet.

     Today Nebraska Furniture Mart generates over $100 million of 
sales annually out of one 200,000 square-foot store.  No other 
home furnishings store in the country comes close to that volume.  
That single store also sells more furniture, carpets, and 
appliances than do all Omaha competitors combined.

     One question I always ask myself in appraising a business is 
how I would like, assuming I had ample capital and skilled 
personnel, to compete with it.  I’d rather wrestle grizzlies than 
compete with Mrs. B and her progeny.  They buy brilliantly, they 
operate at expense ratios competitors don’t even dream about, and 
they then pass on to their customers much of the savings.  It’s 
the ideal business - one built upon exceptional value to the 
customer that in turn translates into exceptional economics for 
its owners.

     Mrs. B is wise as well as smart and, for far-sighted family 
reasons, was willing to sell the business last year.  I had 
admired both the family and the business for decades, and a deal 
was quickly made.  But Mrs. B, now 90, is not one to go home and 
risk, as she puts it, “losing her marbles”.  She remains Chairman 
and is on the sales floor seven days a week.  Carpet sales are 
her specialty.  She personally sells quantities that would be a 
good departmental total for other carpet retailers.

     We purchased 90% of the business - leaving 10% with members 
of the family who are involved in management - and have optioned 
10% to certain key young family managers.

     And what managers they are.  Geneticists should do 
handsprings over the Blumkin family.  Louie Blumkin, Mrs.  B’s 
son, has been President of Nebraska Furniture Mart for many years 
and is widely regarded as the shrewdest buyer of furniture and 
appliances in the country.  Louie says he had the best teacher, 
and Mrs. B says she had the best student.  They’re both right.  
Louie and his three sons all have the Blumkin business ability, 
work ethic, and, most important, character.  On top of that, they 
are really nice people.  We are delighted to be in partnership 
with them.

2 comments:

  1. i can't figure out if you are pro Kepner-Tregoe or not?

    /tpo004

    ReplyDelete
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