Chapter 16 13 The Rug Lady

When Buffett analyzes a business, he often asks himself how easy it is for him to compete, assuming he has enough money, people, and experience in a similar industry. In the spring of 1983, after one such analysis, he walked into Nebraska Furniture World, a large store across from Rose's Steakhouse.Walking through a hall lined with multi-purpose sofas and dining sets, he entered a carpeted room and met the owner of the shop.A woman with about the same length, width and height was standing in the middle of a large tweed carpet dotted with blue.Startled slightly, he stopped.According to Buffett, this woman is 10 feet tall.

Rose.Browning, or Mrs. B as Omaha people call her, was making the rounds in a golf cart.She drove down the aisle, talking and gesticulating energetically with a clerk like someone half her age—89.Her cheeks were flushed, and her brown hair was shaggy, graying only at the temples.Buffett thought he'd rather "fight a grizzly" than compete with Mrs. B -- which is why he's here. Buffett cautiously asked her if she would sell the store to Berkshire.Hathaway. Mrs. B said, "Yes." "How much do you want?" Buffett asked. "60 million." Mrs. B blurted out.

They shook hands and made a deal.Buffett came up with a deal -- Buffett's biggest acquisition to date. Mrs. B couldn't write English, and it was difficult for her to even read it, so she put a mark under it.A few days later, Buffett gave her a check for 90 percent (the Brownings still have a small stake).She folded the check without looking at it, and said, "Mr. Buffett, we're going to put all our competitors through the meat grinder." The deal was done. Mrs. B is exactly Buffett's ideal businessman. She seems to have jumped out of his report. Buffett created her to realize his ideal value. Mrs. B is resolute, courageous, and intelligent, like Buffett's grocer grandfather and retailer Ben.Rosner is like the other heroes of the Buffett family.

Her story is the quintessentially American story that Buffett is familiar with and thrills with.Like a Horatio.Alger's script, set to the theme music of Fiddler on the Roof, is simply incredible. New Year's Eve 1893, Rose.Goric was born in a small village near Moscow, Tsarist Russia. There were seven siblings, all huddled together in one room, sleeping on straw.Her father was a rabbi, but Rose was not a religious believer, because she found that his prayers did not bring an extra bed to the family.She often woke up in the middle of the night to see her mother, a grocer, baking bread on the fire.

She didn't want her mother to work so hard, so she helped in the store when she was 6 years old.At that time, the Cossacks often attacked the Jews, and bloody incidents occurred from time to time, which is another reason that affected the formation of her character. The Brownings couldn't afford to send their children to school, and Rose never saw what a classroom looked like inside, but she learned to read and count in a wealthy family.Influenced by her mother, she firmly believes that begging is a shameful thing. At the age of 13, she used her eloquence to get herself a job in a Moscow draper. At the age of 16, this store was run by her. An underage girl managed five big men. In 1914 she and Isardo.Bloomingke married and sent him to the United States to immigrate there.But in the end it didn't work out, and the war broke out.In that desperate winter of 1917, when Europe was at war and Russia was in jeopardy, she boarded a train across Siberia.On the Chinese border, she was stopped by a Russian soldier, who had no passport. Mrs. B told the soldier she was buying furs for the army and promised to bring him a bottle of vodka when she returned.So she crossed Manchuria to Japan, managed to get a berth on a peanut ship, and six weeks later landed in Seattle.

In 1919 she and her husband settled in Omaha.Despite being penniless, she took her parents and siblings over and the family lived together.Isado runs a pawn shop and second-hand clothing store. In order to earn more money to support the family, Mrs. B sold the furniture in the basement.She doesn't speak English, so the children in school teach her. In 1937, when she was 44, she had saved a total of $500.So she rented a space on Farnan Street, just a block east of Buffett's grocery store.She started the store, Nebraska Furniture World, and hoped for big growth.From the photos of her at that time, we can see a resolute face, black hair, a bun, and a strong chin.Her way of doing business is her motto: "Inexpensive, don't cheat."

The big companies thought her selling price was too low to be able to keep the business, so they refused to supply.But Mrs. B is a shrewd speculator, and she'll take the train to Chicago or Kansas City, like Marshall there.A retailer like Field would sell her the surplus for a little more than it cost.When she was really out of stock, she moved out her own furniture.Once, her grown-up daughter got a call from her and said, "Clear out that cupboard where the kids stuff is, I have a customer." When she applied for a loan from the bank, they mockingly rejected it, and she hated the "big guys" ever since.The only thing that keeps her in business is her will.She works every day and never rests.And she found her business attractive to the middle class, whom she called "lovely Brits".These loyal customers always come with cash when Mrs. B is in stock.

In 1949, Mojawick Carpet Factory took her to court for violating fair trade laws. Owner Mojavek's rugs start at $7.25 a yard, and Mrs. B sells them for $4.95. "So what?" the judge asked, and the case was over.The next day, the judge came to Nebraska Furniture World and bought a $1,400 rug. In the second year, Mrs. B couldn't pay the supplier's bill.A well-intentioned banker gave her a $50,000 loan for 90 days.Desperate to survive, she rented a lobby, bought $250,000 worth of furniture in three days and vowed never to go into debt.In this way, when she was 57 years old, her wish came true.

She is tough on her employees, and no exception to her family members. "You useless piece of shit!" she would yell, "You fool! Slacker!" Only her gentlemanly son Louie could change her.Louie was as shrewd as his mother, but much softer.When the salesman came, Mrs. B would bargain hard, and Louis would increase the price instead. Mrs. B would fire the helpers and Louie would hire them back. "Mommy is tough," Louie said, "but I like soft, sweet things." After Isado's death, Louis remained in the store.No matter what Mrs. B said, Louis always replied sweetly: "Mom, you know the most."

Mrs. B's method is very simple: buy in bulk, minimize expenses, and save money when you can.Her selling price is usually only 10% higher than the cost, of course, there are exceptions.If a young couple came here with little money and tears in their eyes, although Mrs. B clearly remembered the price of each item, she would only ask for the cost price, and the couple would come here often in the future. The world of furniture has become the final venue of all ceremonies, where people come after weddings, births or promotions.Omaha people who bought furniture at Mrs. B's store came back whenever they moved, or when their children moved.Getting older did not relax Mrs. B.Once a tornado blew the roof off, she continued to operate.Another time a store caught fire, and she gave the firefighters a few free-to-air TVs. Mrs. B never takes a vacation. "I never lie," she said, "I never cheat, and I don't make promises easily. It brings me good luck."

susie.Buffett was on good terms with the Brownings, and it was from her that Warren heard about the store that dresses up half of Omaha.Buffett wanted to buy it shortly after he took office, but Mrs. B refused, saying that his bid was too low. Getting rejected only increased Buffett's interest and determination.He watched the store closely, watching how Mrs. B beat one competitor after another. In the early 1970s, Buffett and the writer Adam.As Smith drove around the city, Buffett pointed to the store and gave him an endless introduction—business volume, square footage, turnover, etc. "Why didn't you buy it?" Smith asked. "It's being planned." "Oh." "I'm going to buy it someday," Buffett said. When that day came, Louis and his three sons were running the store. Mrs. B is the chairman and full-time owner of the carpet department.When Buffett heard she wanted to sell, he went to visit Louie first—to inquire about a price and see if he could understand Mrs. B's heavily accented English. Before buying, Buffett checked Furniture World's tax records, which said it made $15 million a year in pre-tax profits.He made no routine inspections, no audits, no inventories, receivables, and inventories.The average American is sure to read a lot of reports when spending $60 million.Buffett's behavior may be a bit strange in modern society, but it coincides with JP Morgan's point of view - in business, it is mainly about people.Buffett said if he couldn't trust the Bronkins, why would he work with them? People often can't help but ask Buffett, is it that simple?The answer is that he has the ability to simplify.Before the deal, he wrote a "Statement to Buy" in his 1982 report, giving his buying criteria.He promises to respond to offers as quickly as possible—"five minutes, usually." Buffett means he won't procrastinate.Of course, this opportunity is also of interest to him-Bronkin's shopping mall is naturally such an opportunity. Furniture World is the largest in the country with an annual turnover of $100 million.In the same industry in Omaha, its turnover accounts for 2/3, and this ratio is unmatched by the largest shopping malls in other places.As a result, chains like Dillard's ($400 million in annual sales) are reluctant to sell furniture in Omaha, lest they compete with Mrs. B.Buffett might say she has a "toll bridge" to the Omaha furniture market. Business in the furniture world is so booming that the trucks it delivers the sofas in are afraid to put a mark on them lest they offend merchants in other cities. "If someone advertised a Maytag washing machine, she would tear it off and stick it on her Maytag washing machine," Buffett said in amazement. "Competing with her would be hell." Buffett's pinball buddy Donald the day he bought Furniture World.Danley is also in Omaha. After the steak dinner, Buffett took him to visit the world of furniture and told in detail the extraordinary deeds of the Browning family.Another visitor, Hollywood producer Norman."Warren adored Mrs. B like a child," Lear said. "He talked about Mrs. B like a child would talk about his grandmother." Since Buffett had no intention of running the mall himself, nor did he want to oversee too much, he wanted a manager who was "like me" to get the mall on track the day it opened. Mrs. B is just such a self-conscious, self-disciplined ideal candidate, ideally like a fictional character.Buffett's annual salary after promotion is 100,000 U.S. dollars, and he paid Mrs. B 300,000 U.S. dollars.Normally he referred to her as a "hero." He must have known that Mrs. B was like a double of him, not so good in some places, but generally very similar.It wasn't her habit (she worked 10-12 hours a day without a break in her 90s), nor was she distrustful of her lenders (the 43-acre mall was unmortgaged).Buffett said: "She started with 500 yuan, but she knocked everyone else to the ground." This is her only purpose. "The World of Omaha" - When Herald interviewed her and asked her which movie she liked the most, Mrs. B said: "Too busy." Which cocktail do you like, and the answer is: "No. People who drink it will go bankrupt." And what about hobbies? "Driving to spy on competitors." A reporter who visited Mrs. B's home said her living room was like a gallery.Lovers seats, glass coffee tables, and various glass and brass sculptures are lined up neatly, like in a mall.The shades are covered with price tags. Mrs. B wasn't there very often, and she never played. "I'm not like other rich people," "Rich people are rude to you when you have no money. I can't get over that," she said. As an uneducated immigrant, she thought everything Buffett wrote was complicated and useless stupid stuff.She has no clue about business-school trade terms like "elasticity," but she tells Buffett that she can't miss a penny with her cash balance.During a lecture at Columbia Business School, Buffett said that Mrs. B understood depreciation and interest rate growth "better than anyone present," even though she didn't know the terms.He believes that Mrs. B has an instinct to cling to things she is familiar with, which is very similar to Buffett himself. (Because of Buffett's admiration, New York University awarded Mrs. B the title of "Honorary Doctor of Business", along with Federal Reserve Chairman Paul Walker and Citibank's first executive chairman Walter Christon.) A guest found Mrs. B at work when she visited on a Sunday afternoon.She was wearing a sweater and fine-grained clothes, and there was a rug sample in a basket.She had a great sense of humor and a good memory, and she vividly recounted the day she saw the Tsar's two daughters in Moscow, soon after they were killed. When she saw a young woman pointing at a certain carpet, she immediately ran over like an electric mouse.There was a wary, almost suspicious expression on his face. "39 bucks. Beautiful." "I already have blue and pink ones." The young woman said hesitantly. "This one goes with any color." Mrs. B. drove to the counter, where the saleswoman was on the phone to a man who had bought a rug and hadn't paid for it. "Damn it," said Mrs. B. "To hell with him and shame on him." The salesperson still wants to try it. "Hang up! What are you talking about with him!" The phone was complaining about the bad color and the salesperson had to listen. "I've been honest all my life. Say 'goodbye' to her and hang up. This kid is so slippery he's going to get cancer." If it weren't for the bulging veins in her face, she wouldn't look like a 90-something at all.Her diet is fruits and vegetables, she wakes up at 5 o'clock every day, does not exercise, her legs can walk, she is completely healthy.Perhaps this is what Buffett admires most. He can't bear the thought that illness (or death) will force him to quit his job, and he often jokes about having a ghost to run the company in the future. (He always expressed his worst fears with humor.) Mrs. B. was somewhat comforted by the fact that he was going to die one day.When writing a report to shareholders, he related Mrs. B's age to his own. I think her days are numbered, 5 to 10 years at most.Therefore, I persuaded the board of directors to create a policy of mandatory retirement at 100 years old. (Time will tell: with each passing year, I think this policy is stupid.) Mrs. B's temper is getting rougher, which is her shortcoming.She has a bad relationship with her two grandchildren, who will of course be managers of the mall in the future.One of Ronald.Browning had had enough of Grandma's scolding, and they stopped talking.The Bronkins don't matter to Buffett because the furniture The world is still making big money. Buffett was so pleased with the Brownings that Berkshire bought another family store: Poshan Jewelers in Omaha.Poshan's situation is really a lightning strike twice thunder. Mrs. B's sister and brother-in-law Rebecca and Louis 48 years ago.Frittinan bought the shop, and they ventured west out of Russia to Latvia.Now Poshan has become the second largest jewelry store in the United States, after Tiffany in New York.Like the furniture world, it's all about small profits but quick turnover, although jewelry can be far more profitable than rugs. Buffett sees similar dynamics in the two stores, both of which have moats that keep competitors at bay. (Buffett's distaste for competition can be seen in the Buffalo News incident, which is characteristic of him.) Whoever wants to compete with the furniture world has to invest enough and fight a long-term war-this line The neck-deep moat makes it impossible for others to think about competing with it. Standing by the counter of Furniture World, Buffett was very excited when he watched them close the deal with just a phone call.He often brought out-of-town guests to visit Mrs. B's mall, and even provided a bus for Berkshire's annual meeting so that shareholders could come and see the mall.In part, the world of furniture has replaced the red-brick New Bedford mill as the symbol of Berkshire.The actual situation is also the same. The money Matt made for Buffett in 15 months is equivalent to the money a textile factory made in 19 years. The comparison is telling, because Hathaway is a conglomerate and Furniture World is an entity.People can't tell the difference between a group and a group, and ultimately consumers don't even know it exists.Buffett joked with a wry smile that no one has ever gone to a clothing store to buy a striped suit made by "Hathaway". Mrs. B's huge turnover caused her to invest very little money in stock, whereas the mills cost money.Every time a factory raises specs, Berkshire and others have to follow suit.So nobody benefits, there is no moat, and every business has to spend the same amount of money. Although Buffett is well aware of this, sometimes he can't help but think that with a little more investment, things might change. In the mid-1970s he bought another textile mill, in Manchester, Hampshire.On paper, the acquisition looked predatory and cheap, but it turned out to be a disaster.Looking back, Buffett realizes that the textile industry was a trap. Individually, each company's capital investment decisions are cost-effective and sensible; collectively, these benefits cancel each other out and are unwise (like watching a parade with everyone standing on tiptoe I thought I could see something more.) More and more shareholders asked him why he still runs a textile factory.Buffett explained that the group is a large local employer, and the labor union is also very cooperative, at least he can still get some profits.He thinks Ken.Chasi is also faithful, and he was the one who ran it from the beginning.He reminded shareholders that Chase's efforts to run the textile mills fueled Berkshire's growth.But privately he warned Chasi, "It looks like the factory is starting to lose money, and I don't want that." Chath continued to work hard—almost like Mrs. B.He changed production lines and textile fibers, increased machine specifications, and improved relations with union leaders. (They knew the owner in Omaha was a cheapskate.) But he couldn't get far in a competition whose commitment seemed endless.Buffett draws a truth from this: Good managers are powerless in bad industries.There is also a cliché about troubled industries that "circumstances that change seldom change back..." In 1980, Buffett suspended production in Manchester and reduced the number of looms by 1/3. But in 1981, the textile mill still lost $2.7 million and became Seaberg.Stanton at his worst.Buffett said to Cha Si: "If you don't reduce your expenses, I will let you stop working." It worked.It really surprised and regretted Buffett. After buying the furniture market in 1983, Buffett's conglomerate breathed a sigh of relief.He ends up obliquely openly admitting that he adores Ben.Graham, made him long-term dependent on industries with factories, such as textiles; and neglected such a business as Mrs. B. was engaged in. I quit too late, partly because I was too influenced by my teacher, whose theories always seemed valuable. Now his views have changed dramatically.Chase retired the following year and was replaced by Morrison, an MBA player with a degree in textiles.He applied for new funding, and Buffett turned it down.Without money, the factory will definitely suffer losses.By 1985, Buffett had shut it down. The 400 employees, mostly skilled Portuguese, were given months of advance notice and training in new skills, with many taking jobs that paid less.They asked for a higher severance pay than the contract stipulated and gave a period of about a month. "For people who will lose their jobs, these things are really useless." David.Lima, treasurer of the New Bedford American Textile Workers Union, recalled: The union also requested a separate meeting with Buffett.He replied coldly that he thought the meeting was pointless.Gary.Morrison believes: "Warren wants to be fair." He is fair, but not generous. Buffett is sensitive to these discussions.In his later account of the event, he wrote that over the past five years, 250 textile mills had closed, and Berkshire's textile mills had lost more than $5 million.He thought that in all his time at the factory he had found a "middle ground," unlike Adam.Smith was not as disregarding the interests of the workers as Karl.Max wraps everything up like that.That is, he is willing to bear "temporary abnormal profit state", but not "never-ending loss". Of course, Buffett also has his "Marxist" heart, but it is hidden so deeply that others cannot see it.He wanted to reassure Adam.According to Smith's economic principle, sacrifice "a small part" of his own profit rate-but not completely abandon Adam.Smith.Again the argument of the article is to abandon Smith - to abandon capital - is destructive.The villain of the article is himself, because he has invested his money in industries other than textile mills according to Smith's principles.The article also mentions another textile mill—Burlington Industries.Burlington didn't invest his money elsewhere, but kept his eyes on the textile mills.In the same year that Buffett made his fortune at Berkshire, Burlington poured another $3 billion into textiles.It is now the largest textile company in the United States, but it is a dubious empty name.Over the past 25 years, its stock has only risen from a pathetic 60 to 68. After adjusting for inflation, its investors have lost 2/3 of their purchasing power.Marx may agree with its approach, but Smith and Buffett do not. Huge losses for stockholders are the inevitable consequence of spending a great deal of intellect and energy in the wrong industry.In this case you can use Samuel.Using Johnson's horse as an analogy, a horse that can count to ten is a great horse—not a great mathematician. Likewise, a well-run textile mill is not a very good business. Book.Chase, who has retired to the coast of Maine, says Buffett has been running the plant for 10 years, which is too long.He stressed that he treasured his experience with Buffett — “I can’t even tell you how nice it is to work for him” — but he wanted Buffett to express it. “One thing I never understood,” he admits, “is why he chose me. When I resigned, he said, “I remember from the first day I walked through the factory, you had complete trust in me.” . ' That was his only comment. " The plant's subsequent fate vindicated Chase's assessment that Buffett closed the plant too late.It's a joke that the equipment was auctioned off to a gang of dead-eating crows for a total of $163,122. Looms bought for $5,000 each in 1981 were disposed of in 1985 for $26.But Buffett insisted on keeping the real estate on Cove Street, rented out to small companies that made silk screens, musical instruments and digital forms, and they would not remember that there was a textile factory here. The former headquarters of BHR Corporation, where Seabury once proudly called the shots, BHR is Berkshire.The abbreviation of Hathaway Industries, the name often reminds people of a big factory that once moored like a musty ship at the southern end of the city.