Warren Buffett's Advice to Entrepreneurs Presentation Transcript

Warren Buffett recently gave advice to entrepreneurs in the presentation below. He tells the stories of intelligent fanatic’s Rose Blumkin, founder of Nebraska Furniture Mart, and Jack Taylor, founder of Enterprise Rent-A-Car Company. I’ve attached the full transcript below.

Warren Buffett: Thank you, thank you. I appreciate that. When you get to be 87, people stand and applaud at the start because they’re not sure whether you’re going to be wrong at the end. And it’s great to be with this group. It was eight years ago, I just turned 80. I never really talked to any graduation groups or anything of the sort. It was not on my bucket list, particularly.
And then I got invited to go to LaGuardia, to the LaGuardia Community College, and I met a truly remarkable group. Whether it was male, female, Hispanic, African American, whatever it might be, these people had one thing in common. They knew they had it in themselves, they knew they could be something beyond where they were. They were willing to put their time, their energies, to better themselves, and behind them, as I saw when I got to the graduation on September 22nd, they had a frequently they had parents who were crying as they received, their children received their degrees.
They had spouses, they had siblings, it was one of the great experiences of my life, and at that point I was hooked. So, I went to New Orleans, I went to Chicago, I went to Detroit, I went to Cleveland, I went to Baltimore, and I met the most remarkable group of people, and if you’d told me that 22 or 2300 out of those people would be here just eight years later, having proven yourself to yourself what you really could do with more skills, it’s just remarkable.
So, I would like to just tell you a couple short stories, and we’ll draw maybe a couple of lessons from them. As I came in, Mike Bloomberg was talking and he talked about immigrants, and I echo his remarks. But I would like to tell you of two women that each sold a business Berkshire Hathaway, to me actually, for many, many, many millions of dollars. Both of them started with $2500, by a coincidence it was the exact same amount. It was everything they had in the world, and one of them was a woman who landed in Seattle in 1917, couldn’t speak a word of English, had a tag around her neck.
The tag said, “Fort Dodge, Iowa.” The Red Cross got her to Fort Dodge where she was reunited with her husband who had come to the country a couple of years earlier, and she lived in Fort Dodge for two years, and as she put it, she felt like a dummy. She couldn’t pick up the language, she couldn’t learn a word. And so, she decided, she and her husband, decided to move to Omaha. So, they came to Omaha, in 1919, and there she found a small colony of Russian Jews, so she started feeling more at home.
And then, as her oldest daughter went to school, she would come home, this daughter, Francis, and she would teach her Mother the words she had learned in school that day. And this woman, Rose Blumkin, spent 20 years saving money, bringing first her siblings over, her Mother and Father, $50 at a time. She sold used clothing to do it. She had four children during this period, and by 1937, after 20 years, she’d saved $2500.
She went to Chicago, and she bought what she could of furniture. Her dream had always been to open a furniture store. And this woman, who had never gone to school one day in her life, with $2500, but with the same spirit that the people in this room had, about having a dream and working to accomplish that dream, she built a business which she sold to me in 1983 for 60 million dollars approximately, in which did a billion and a half dollars worth of business last year.
The fourth generation is working in that business. This woman, Rose Blumkin, she worked for me until she was 103, and then she retired and she died the next year, which is a lesson to all the Berkshire managers, that premature retirement … You can’t tell what’s going to happen. But Mrs. B, with her $2500 … One further fact about her, she could not read or write. And she went into a furniture business, and she didn’t bring anything unique in furniture, but she brought a determination to succeed. She knew she could outwork anyone else, she cared about her customers, she worked at very low gross margins, but she built this incredible business.
And I saw one other woman, who did a similar thing with $2500. I paid her hundreds of millions of dollars for her business. So, I decided to go to the source, and get these people before … I don’t want you guys coming around to me asking me hundreds of millions of dollars. I’d like to join in with you much earlier. So, I’ve followed this group, and today I’d like to tell you about one other small business person.
This person, I went to buy this business from him, and he turned me down, which was very wise. But this was a fellow who was born about eight years before I was. He was born in 1922. He was, we’ll call him Jack. Lived in the Midwest. He was a pretty good athlete. Didn’t like school much, and I’m gonna tell you one thing early in this story. Maybe you can figure out who the guy was. The company he built, hires more college graduates each year than any other company in the United States, and this fellow, who was destined for this but did not know it, Jack, went to college for a year, and then dropped out.
He really wasn’t that interested in the school. And the year he dropped out was 1941, and when the country, United States, became under attack, he went down to the Army Air Force recruiting station, volunteered, and they turned him down because he had hay fever. So, he went over to the Navy, and again volunteered, and they took him. They put him on an aircraft carrier. He flew small fighter planes during World War 2, got two distinguished flying crosses from the Navy, and then he came back to the Midwest.
So, now we’ve got a young guy, probably by this time he would be 23, or 24 years old, and the interesting thing is, he got back to the Midwest, and he actually kind of went from one job to another for a short period … Or not just such a short period of time, and he finally became a used car salesman at a Cadillac dealership in St. Louis Missouri. And at age 35, having moved up in the organization, the sales organization, he said to his boss, “Could I go in the car leasing business with you?” The boss said, “Well, if you’ll cut your salary in half, and you’ll come up with …” I think it was $25 000, which he borrowed, “We can become partners in the car leasing company.”
So, my friend Jack started at age 35 in the car leasing business. And he had seven cars. It was pretty slow. In fact, one of the things he did, was whenever the phone rang, he let it ring three or four times so people would think that he was very busy answering other phones, and of course it was the only call he was gonna get all day. So, his first venture was okay. But it wasn’t really going to go any place.
And there’s a lesson in this for all of us. At age 40, he decided, with 17 vehicles, 17 cars, he was going to go into competition in the rent a car business. So, now he’s taking on Hertz, and Avis, and National, and people like that, who have hundreds and hundreds of thousands of cars, and he’s got 17 cars, and his cars aren’t any different than theirs. I mean, he’s buying them from General Motors, or Ford, or Chrysler.
And he can’t get the airport locations. Those companies have them all sewed up. But he was determined that he would basically offer the customer, can’t offer them a different car, but he can offer them friendlier service than they’ve ever seen. And so, he started a company, he named it after the battleship that he’d flown from in the pacific, which was the USS Enterprise, and he died about a year, year and a half ago, but when he died, his rent a car company, starting with those 17 cars, was worth more than Hertz, and Avis, and all the rest of the rental cars put together.
The man’s name was Jack Taylor, and his son, Andy Taylor, is a good friend of mine. Runs the business now. A grandchild is in the business. They’ll probably be a fourth generation in line. So, this man, in the United States, he didn’t invent artificial intelligence. He didn’t do anything that, just like Mrs. B selling furniture, I mean, any one of us could’ve entered those businesses. But he lived by the creed basically of delighting his customers and working with people at establishing the relationship with them, so that they in turn would want to delight the customers.
He couldn’t go out there and take care of every rental car a possibility. But he learned how to project himself, and his attitude toward his fellow man, and his desire to make a friend out of every customer. He managed to take very ordinary cars, and turn them into this extraordinary business from virtually nothing. And it illustrates several points. One is, you don’t necessarily get it exactly right the first time. I mean, the car leasing business basically you were competing on the cost of money to finance cars, and it’s very hard to delight a customer when you just give them the car and tell them to send you a monthly cheque for five years, and you lean back, at that time.
So, his talents were being wasted basically in that business. But at the age of 40, with all of that experience behind him, he found the golden key, and he took a very ordinary business and turned it into an absolutely extraordinary operation. And just like Mrs. B, what Rose Blumkin did with furniture. And he didn’t worry about whether the Federal Reserve was going to tighten or ease. He didn’t worry about whether the stock market was up or down yesterday. He didn’t worry about the things he couldn’t change, but he did focus on the one thing he could change, and that was the customers experience.
I have seen … The one that got away, Enterprise, I went down to Florida and tried to talk him into selling to Berkshire and he was smart enough not to do it. Probably the value of the company’s quadrupled since I made that visit, but he was smart enough to see that he would find that business. Henry Ford, as you may know, failed twice before he started the Ford Motor Company in 1903. I mean, the test isn’t whether you get the greatest business idea in the world the first time out. The test is whether you keep learning as you go along, what your strengths are, and what you can do for your customers, what you can bring especially to the party. And to do that, you need the education that I know you’ve received through 10 000 Small Businesses.
But you need a genuine desire day in, day out, to delight the customer. I’ve never seen a business, and I’ve seen a lot of businesses, and but I’ve never seen one that delights the customer that doesn’t succeed. I mean, what you want is that customer, the next day, when they think, “Do I want to rent a car? Or do I want to buy some furniture?” What goes through their mind? It’s the place where they’ve had a great experience.
I don’t know what I paid for this tie. Actually, probably somebody gave it to me, but for the purposes of this speech, I will say I have no idea, or the shirt, or the … But I do know, I will remember how I was treated when I bought it. I mean, you long forget about the price, but you never forget whether you had a good experience, or a poor experience with the purchase experience. And you’ll have a hard time finding a person whose had a wonderful experience, a delighted experience, in purchasing anything that isn’t going to come back.
And similarly, if the memory is of rudeness, indifference, and whatever it may be, they’re never going to come back. And as a small business owner, and as you grow, you have to not only be able to project that interest in people’s wellbeing in delighting them yourself, but you have to do it through other people. And you won’t be able to do it through people who themselves do not feel they’re being fairly treated. That their views aren’t appropriately considered, so you really do have to learn to multiply yourself through other people.
I advise the young people to come to Omaha, and we have a number of classes, and the key is to certainly, in terms of your personal life, the most important you’ll make is the spouse that most of you will likely have. And it’s very important to surround yourself with people that are better than you are. You are going to move in the direction of the people you associate with. So, if you constantly …
I’ve been enormously lucky in that respect. I’ve just had teachers, and friends, and a spouse that really was a better person than I was, and I had enough sense to learn from these people that life went better if you behave better yourself. And so, it took a while. So, I advise you to seek out as your partner in business, your partner in life, whatever it may be, look for the people that actually are examples to you, rather than somebody that you think you need to straighten out yourself. And simple rules like that. Delighting customers, working through other people, associating with people that will cause you to move in a better path than you might otherwise have, they will take you so far in life that it’s hard to believe.
They took Rose Blumkin without being able to speak a word of English, that couldn’t read or write, and they took her to what is now a billion and a half dollar business. And incidentally, there’s been no money been put in it since the $2500. That’s been the total capital paid into the Nebraska Furniture Mart. And I think if you looked at Enterprise, I don’t know their books the same way, but my guess is that very little equity capital has been added to Enterprise over the years. The business built on itself.
So, I wanna tell you, I admire this group enormously. When I met Dr. [Mellow’s 00:19:57] class, on September 22nd, eight years ago, I was thrilled. And I admire people that are doing what you have done. Working hard at your job, at the same time you took on an added, really a lot of hard work, to further your skills. 99% graduate. I mean, that’s a mind blowing statistic, and I’m looking at 2200 people here who I admire. I’m cheering for you, and I can tell you, the best is yet to come. Thank you.
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