Becoming Berkshire

In 1967, Warren Buffett’s partnership returned 35.9%, yet he was finding it harder to put money to work. In this episode, I look at the go-go years on Wall Street, the new generation of money managers, and the changing market that had Buffett rethinking his goals. I also take a look at Berkshire’s struggling textile business and the decision that would begin to change the company’s future: buying National Indemnity.

In 1966, Warren Buffett, Charlie Munger, and Sandy Gottesman joined forces to purchase Hochschild-Kohn, a respected Baltimore department-store chain, for approximately $12 million.

In this episode, we explore the history of Hochschild-Kohn, its expansion from downtown Baltimore into the suburbs, and why the company initially appeared to be another classic Buffett bargain. We also examine the enormous changes reshaping American retail after World War II, including suburbanization, rising car ownership, the disappearance of streetcars, and the emergence of regional shopping malls.

Buffett and Munger believed they were purchasing a second-class department store at a third-class price. Instead...

In Episode 7, we travel back to 1966, when semiconductor stocks were booming, the Dow crossed 1,000 for the first time, and Buffett was struggling to find investments he could understand at attractive prices.

We explore the rise and fall of Fairchild Semiconductor, the go-go years of the 1960s, Buffett’s refusal to chase “fashionable” stocks, and why being right about the future of an industry does not mean knowing which company will win. We also look at Berkshire Hathaway’s struggling textile operations, its return to profitability, and the shrinking share count that helped increase book value per share.

In Episode 6, I revisit Warren Buffett’s 1965 partnership letter and the year he took control of Berkshire Hathaway.

What began as a cheap cigar-butt investment became personal after Seabury Stanton offered Buffett 12½ cents less per share than they had agreed upon. Buffett responded by buying more stock, taking control of the company, removing Stanton, and placing Ken Chace in charge.

I also explore Buffett’s evolving views on control, valuation, diversification, and his willingness to concentrate heavily in his best investment ideas.

It was one of the worst investments Buffett ever made, and the b...

In Episode 5 of Becoming Berkshire, we look at Warren Buffett’s 1964 Partnership Letter and Berkshire Hathaway’s 1964 annual report.

Buffett explains why so many smart investment firms fail to beat the market, why “a public opinion poll is no substitute for thought,” and why the goal is not to minimize taxes but to maximize after-tax compounding. We also look at Berkshire’s struggling textile business, Seabury Stanton’s share repurchases, and how Buffett was moving closer to control.

In Episode 4 of Becoming Berkshire, we are still in 1963.

This episode covers one of the strangest and most important investments in Warren Buffett’s early career: American Express and the salad oil scandal.

At the time, Buffett was still running Buffett Partnership Limited and was building his position in Berkshire Hathaway. American Express was caught in a major scandal involving fake soybean oil inventory, warehouse receipts, margin calls, failing brokers, and a fraudster named Anthony “Tino” DeAngelis.

The stock collapsed because investors feared the American Express name had been permanently damaged.

Buffet...

In Episode 3 of Becoming Berkshire, we enter 1963, the year Buffett’s partnership letter and Berkshire Hathaway’s annual report start to feel like two parts of the same story.

Buffett was still running the Buffett Partnership, but Berkshire Hathaway was now in the picture.

The partnership letter shows Buffett’s investing playbook: generals, workouts, and controls. The annual report shows the struggling textile company he was buying.

One document shows the investor.

The other shows the problem.

This episode looks at the early Berkshire story before insurance, float, See’s Candie...

In 1962, Warren Buffett began buying shares of Berkshire Hathaway, a struggling New England textile mill selling far below book value.

On paper, it looked like a classic Ben Graham cigar butt: cheap, asset-heavy, and ignored. But the annual report showed a much harder reality — losses, mill closures, overproduction, falling prices, and constant capital needs.

This episode looks at Berkshire Hathaway’s 1962 annual report and the early mistake that eventually became the vehicle for one of the greatest compounding stories in history.

In this episode, we look at Warren Buffett’s 1962 partnership letter and the early framework behind his investing style.

Buffett was still deeply influenced by Ben Graham, but you can already see him evolving. He breaks down the partnership’s investments into generals, workouts, and controls, discusses the power of compounding, and explains why true conservatism comes from facts, reasoning, and price — not from simply owning blue-chip stocks.

This episode also covers Dempster Mill, one of Buffett’s key control investments, and how it helped teach him the power of capital allocation.

 How a $25 million candy company helped Buffett and Munger understand the power of brands, pricing power, and businesses that produce cash without needing much capital.

In 1971, the world was changing fast.

The Nasdaq opened as the world’s first electronic stock market. Intel released the first microprocessor. Starbucks opened its first store. Blue Ribbon became Nike. Federal Express was born.

But the biggest story came on August 15, 1971, when President Nixon ended the dollar’s convertibility into gold and changed the global monetary system forever.

In this episode of Becoming Berkshire, we look at the end of Bretton Woods, the rise of stagflation, and Berkshire Hathaway’s 1971 results, where Buffett was still fighting the textile business while quietly building somethi...

In this episode of Becoming Berkshire, we continue through 1971 with George Goodman’s Supermoney and the investing philosophy that shaped Warren Buffett.

Benjamin Graham gave Buffett the foundation: margin of safety, Mr. Market, intrinsic value, and the discipline to avoid permanent loss of capital. But investments like American Express and Disney showed the first signs of Buffett’s evolution from buying cheap stocks to recognizing the value of great businesses.

This episode explores Graham’s influence, Buffett’s partnership years, and the early bridge between cigar-butt investing and franchise value.

Welcome to 1971.

The markets are reeling from one of the worst bear markets since the Great Depression. Speculation has collapsed, confidence is shaken, and the financial world is searching for answers.

In this episode of Becoming Berkshire, we turn to an unlikely source: George Goodman, writing under the name Adam Smith, and his book Supermoney. Written in the depths of the 1969–72 bear market, Supermoney captured the unraveling of Wall Street’s excesses—and quietly documented the most extraordinary investment record of the era.

At the time, alm...

Episode 17 | 1970: Goodbody’s Fall, Walmart’s Rise, and Buffett’s First Float Play

1970 opened with chaos on Wall Street. Broker-dealers were failing, the Fed was scrambling, and Goodbody & Co.—once a pillar of the brokerage world—collapsed in scandal before being rescued by Merrill Lynch. Meanwhile, in Bentonville, Arkansas, Sam Walton was taking Walmart public, setting the stage for one of the greatest retail stories ever told.

At the same time, Warren Buffett, Charlie Munger, and Rick Guerin were quietly buying into Blue Chip Stamps, discovering the power of float—a co...

Episode 16

Our podcast delves into 1970, a year of profound financial turmoil where the Dow Jones plummeted amidst recession fears and an "uneasy Republican administration". We'll uncover two critical events: the Penn Central Transportation Company's bankruptcy, which sent "shock waves through the commercial paper market" and required urgent Federal Reserve intervention to prevent a domino effect on Wall Street. Simultaneously, the near-collapse of Hayden, Stone & Co., a major securities firm plagued by "terrible" record-keeping and bad investments, threatened to freeze 90,000 customer accounts and bankrupt "perhaps another fifty firms," narrowly averted by last-minute efforts involving figures...

Ep. 15

In 1969, Warren Buffett and Charlie Munger redirected their capital away from stripped-down sectors like textiles and retail—seeking businesses with resilience, reliable cash flow, and fulfillment of Berkshire’s long-term vision. That quest led them to the Illinois National Bank of Rockford, run by Eugene Abegg—a vivid character who carried large sums in cash, rented safe deposit boxes at cocktail parties, and even printed his own currency.

This episode explores:

The backstory behind the acquisition and purchase price dynamics

The bank’s financial health: assets, equity, ROE, and...

In 1969, Warren Buffett retired from managing money and dissolved his partnership, shifting his focus more towards Berkshire Hathaway. This decision occurred during a period of significant economic change marked by the onset of "stagflation" and sharp drawdowns for "high-flying go-go stocks", as Buffett found the investing environment increasingly "negative and frustrating" and struggled to find new opportunities that aligned with his investment style. Throughout his partnership, Buffett consistently followed fundamentalist investment principles, focusing on basic value, a margin of safety, and avoiding "glamour stocks" or "concept companies," a disciplined approach that contrasted sharply with the speculative market of the lat...

1968 was a year of profound upheaval for the United States and Wall Street, marked by assassinations, widespread social unrest, and a "back-office crisis" that overwhelmed manual trading systems. Amidst this national and financial turmoil, Warren Buffett's disciplined partnership delivered an impressive 45% return, significantly outperforming the modest gains of the Dow Jones. This strategic steadfastness was exemplified by Berkshire Hathaway's acquisition of Sun Newspaper and Blacker Printing Company, showcasing Buffett's ability to thrive when the world seemed to be crumbling.

Welcome to episode 11, where we delve into the transformative 1967 acquisition of National Indemnity (NICO) by Berkshire Hathaway for $8.6 million. This pivotal move marked Berkshire's strategic shift from its struggling textile operations, which Warren Buffett was actively shrinking due to mounting costs and competition. The acquisition was fundamentally driven by the significant "float" NICO provided, offering Berkshire valuable, deployable capital and laying the groundwork for its future as a powerful insurance conglomerate.

https://open.substack.com/pub/theweekendinvestor/p/becoming-berkshire-1967-national?r=21sroa&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false

Welcome to Becoming Berkshire Episode 10! Today, we're delving into the pivotal year of 1967 for Berkshire Hathaway, a period that marked its transformation into the diversified powerhouse it is today.In 1967, Warren Buffett faced significant challenges in deploying capital. The market environment was changing, with a new generation of money managers emerging, many of whom were far removed from the traumatic experiences of the 1929 Depression. This era saw the rise of figures like Gerald Tsai Jr., known for momentum investing and rapid portfolio turnover, and Fred Carr, a "gunslinger" who preached, "We fall in love with nothing. Every morning, everything...

Welcome to Episode 9 of Becoming Berkshire! As we continue our journey through 1966, a pivotal year for Warren Buffett and Berkshire Hathaway, we're diving deep into one of his most fascinating early investments: his acquisition of 5% of The Walt Disney Company. This period also saw Berkshire Hathaway pay its only dividend of 10 cents per share, signaling Buffett's active exploration of new capital allocation avenues. You'll discover how Buffett's curiosity was piqued by Mary Poppins' theatrical success, leading him to ponder Disney's "Moat" and conduct unconventional due diligence, broadening his definition of "intrinsic value" to include Disney's "off the books" film libr...

The year 1966 was marked by a fluctuating stock market, with the Dow Jones Industrial Average briefly breaching the 1,000 mark for the first time before closing significantly lower, while the Buffett Limited Partnership achieved a 20.4% return, outperforming the Dow. During this period, Warren Buffett took control of Berkshire Hathaway and, for the first time, partnered with Charlie Munger on a business venture to acquire the Hochschild, Kohn & Co. department store, an investment that would later be considered a mistake.

https://open.substack.com/pub/theweekendinvestor/p/becoming-berkshire-1966-hochschild?r=21sroa&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false<...

Episode 7 details Warren Buffett's 1965 hostile takeover of Berkshire Hathaway after a tender offer dispute, resulting in his control, chairmanship, and Ken Chace's appointment as president.

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In 1964, Warren Buffett continued to build his partnership (Buffett Partnership Limited or "BPL"), focusing on investment strategies that included "Generals," "Workouts," and "Controls," while criticizing institutional management for groupthink and advocating for independent, data-driven decisions. Crucially, Buffett's "monumentally stupid decision" not to tender his Berkshire Hathaway shares at $11.375 due to a personal slight over a $0.125 price difference led him to aggressively acquire more shares of the struggling textile manufacturer, eventually resulting in his control of the company.

Welcome to Episode 5 of Becoming Berkshire, as we look at the fascinating story of the American Express salad oil scandal, which almost brought down the New York Stock Exchange (NYSE). We also get to witness the beginning of Buffett’s investment ideology evolving as he starts to be influenced by Charlie Munger.

https://open.substack.com/pub/theweekendinvestor/p/becoming-berkshire-196364-the-american?r=21sroa&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false

Explore the world of Warren Buffett's investment strategies in 1963, a year marked by significant historical events. This discussion delves into insights from Buffett's BPL letter, highlighting the extraordinary power of compounding through a compelling example. Discover his framework for identifying investment opportunities, categorized into three main approaches:

1. Generals: This approach focuses on undervalued stocks purchased at bargain prices.

2. Workouts: This strategy capitalizes on predictable outcomes from corporate activities such as mergers.

3. Controls: This involves acquiring a significant percentage of a company's stock.

We also examine...

In 1962, Warren Buffett was still investing like a student of Ben Graham, buying cheap, unloved stocks with one last puff left in them.

That year, he took control of Dempster Mill, watched Harry Bottle turn a struggling business into a source of cash, and began buying shares of a dying New England textile company called Berkshire Hathaway.

At the time, Berkshire was just another cigar butt. It was statistically cheap, trading far below book value, but it was also a poor business in a declining industry.

Buffett thought he was buying one more...

In Issue 2 of Becoming Berkshire, Warren Buffett heads from college life at the University of Pennsylvania to Nebraska, nearly takes a full-time job at JCPenney, gets rejected by Harvard, and then finds the teacher who changes everything: Benjamin Graham.

This episode covers Buffett’s years from 1947 to 1951, his arrival at Columbia, the lessons he learned from Graham, and the three core ideas that became the foundation of his investing life: owning pieces of businesses, using a margin of safety, and treating Mr. Market as your servant, not your master.

Before Warren Buffett became the Oracle of Omaha, he was a numbers-obsessed kid selling gum, Coca-Cola, golf balls, newspapers, and pinball machines while dreaming of a life without a boss. This episode follows Buffett from his Great Depression childhood to his first stock purchase, his early businesses, and the lessons that shaped the investor he would become.