''Put her up against the top graduates of the top business schools or chief executives of the Fortune 500 and, assuming an even start with the same resources, she'd run rings around them'' - Warren Buffet on Rose Blumkin
Each year Warren Buffett publishes a shareholder letter on behalf of his company, Berkshire Hathaway. Those 58 letters constitute the entirety of Buffett’s written work. He has never authored a self-help book. He has never sold his secrets. Buffett has never published anything else because he doesn’t need to. The shareholder letters encompass the entirety of his investing and life philosophy.
When you sit down and read all 58 of these letters back-to-back what really pops out is his character. Buffett isn’t just a shrewd moneymaker. He’s also hilarious, weirdly anti-authoritarian, a history buff, and a loyal friend. Buffett’s letters reveal his deeper, fuller philosophy of life. He’s got principles, and they ooze off the pages like syrup off a stack of hot pancakes. You read his letters and you feel this quirky old man in your head, riffing with your inner-consciousness like a fiscally responsible Jiminy Cricket. There’s no better example of this complete philosophy than the parable of Rose Blumkin, as told by Buffett himself.
When Warren met Rose
Buffett first mentions Rose Blumkin in his 1983 letter, when he describes the acquisition of her company as “the high point of 1983.” He dedicates almost his entire letter to her [what follows in this green section is an excerpt of Buffett’s 1983 letter, edited for length]:
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 $1,400 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. We are delighted to be in partnership with them.
Buffett shareholder letters are not long, and the space not spent on business operations is scarce. Yet Buffett, so completely smitten by Mrs. B, dedicated half his letter to her again the following year, and then again the year after that. In fact, Buffett continued to bring up Mrs. B. every year for the next ten years, and almost every year after that. He even retells her entire story in his 1993 letter. Buffett’s talks about Mrs. B the way a high school English teacher talks about Shakespeare. The appendix of this post has a list of his best quotes on Mrs. B.
There’s something about Mrs. B
Buffett loves money. And Mrs. B, as you just read, made him a lot of money. However, that doesn’t explain his fanaticism. Mrs. B was not even in the top 100 profitable investments Buffett ever made. He acknowledges this when he brings her up in a 2013 letter:
“I can’t resist, however, giving you an update on Nebraska Furniture Mart’s expansion into Texas. I’m not covering this event because of its economic importance to Berkshire – it takes more than a new store to move the needle on Berkshire’s $225 billion equity base.”
-Buffett 2013 shareholder letter
Why, then? Why bring her up not once but constantly? Out of all the things happening in the world, why is Mrs. B so worth mentioning each year?
This takes us to the core of Buffett philosophy. Buffett loves making money, but it’s not his sole motivation. Buffett, all public evidence suggests, loves a good story, a funny joke, friends & family, curiosity for curiosity’s sake, philosophy for philosophy’s sake, art both fine and unfine, a cold Coca-Cola on a hot day, empowering the disenfranchised, a full nine innings of good ole’ American baseball, and a prosperous small-town Main Street where a smiling postal worker gently pushes mail through the front slot while gazing longingly at a steaming apple pie set on the windowsill to cool and then gets invited inside for the first slice by the homeowner. Buffett is more than capitalist, he’s a humanist capitalist.
Buffett, humanist capitalist
The foundations of capitalism are the laws of the free market, the self-regulating power of supply and demand, and the belief that optimal allocation of resources can be achieved through open trade. These economic forces have always been treated with a sort of mysticism. Why? Well, that individuals acting in their own self-interest could unwittingly achieve communal perfection - that order can emerge from chaos - is a fundamentally spiritual concept. It requires faith. Devout capitalists, when they talk about free markets, sound like they are quoting scripture. Even Adam Smith, father of capitalism himself, used the famous analogy of the invisible hand that guides the market. The invisible hand of who? God? For many, capitalism is a religion. Investors tend to be the priests of this religion. They are dogmatic in their free market faith, they believe that capitalism, and only capitalism, can solve all of society’s ills. In the most radical forms, they are Gordon Gekko:
Buffett, while a proponent of capitalism and free markets, is not a fanatic. What comes across in his letters is that in his version of capitalism, the free market is subverted to something else - humanism. More specifically, Buffett doesn’t seem to believe greed is good. He believes self-interest is good. The two are often conflated but there is a big difference. Self-interest has a longer time horizon than greed. It is to act selfishly on behalf of yourself in a distant future. My interpretation of Buffett has always been that his self-interest is actually selfless: to act in such a way that, if everyone acted that way, the world would approach perfection. Self-interest, in other words, is the golden rule. Treat others how you want to be treated. That’s the magic behind the “invisible hand” of the free market. The secret isn’t greed, it’s humanism. The people who hoarded toilet paper in the early days of COVID weren’t capitalists, they were avaricious tenderfoots, and they stifled the free market - because of them, there wasn’t enough toilet paper to go around even though there was enough to go around. They broke capitalism. They broke it because they used the wrong fuel. Capitalism doesn’t run on greed, it runs on self-interest. True self-interest requires a thoughtful approach to life, an enlightenment state of mind. Enlightened, self-interested people don’t hoard toilet paper. To be self-interested one needs to go beyond the world of money and reflect deeply on what makes a good life. One needs to embrace the tenets of humanism: people are of prime importance, not material possessions nor divine affairs. This explains why Buffett asks for higher taxes, is donating his fortune while he’s alive, never traded in his old Cadillac, and never moved out of his first, simple home. The best example of Buffet’s humanism-capitalism is his takeover of the criminally corrupt Salomon Brothers, which he describes perfectly himself in a two-minute speech to Congress:
This is Buffett at his Buffetist: first, he scolds the greedy bankers who deceived their way into wealth. Anyone can get rich that way, it isn’t noble, and it certainly isn’t capitalism. Then he defends the good people - the people who were exploited by the greedy. Finally, he lays down the law: we’re going to run this business the right way.
“Lose money for the firm and I will be understanding, lose a shred of reputation for the firm and I will be ruthless”
- Buffett explaining his management philosophy to U.S. Congress
Plato said that “not life, but a good life, is to be chiefly valued.” Buffett suggests that not business, but good business, is to be chiefly valued. That is humanistic capitalism.
Now back to Mrs. B. Warren Buffett talks about Mrs. B like she’s a minor Greek goddess because to him she is. He sees in her the divine tenets of humanist capitalism. A woman with god-like business prowess, a tongue sharp enough to cut tungsten, a steady dedication to her community and family, and a thirst for living that kept her wheeling and dealing even when she needed an oxygen tank at age 103. The handshake deal by which Berkshire Hathaway acquired Nebraska Furniture Mart wasn’t the most profitable deal Buffett ever made, but to him it was the most prosperous. This was a deal of enlightened self-interest. An honest deal with an honest person - the only type of business worth doing.
Appendix: Buffett on Rose Blumkin (Excerpts from Annual Letters)
1984: Last year I introduced you to Mrs. B (Rose Blumkin) and her family. I told you they were terrific, and I understated the case. After another year of observing their remarkable talents and character, I can honestly say that I never have seen a managerial group that either functions or behaves better than the Blumkin family.
Mrs. B, Chairman of the Board, is now 91, and recently was quoted in the local newspaper as saying, “I come home to eat and sleep, and that’s about it. I can’t wait until it gets daylight so I can get back to the business”. Mrs. B is at the store seven days a week, from opening to close, and probably makes more decisions in a day than most CEOs do in a year (better ones, too).
In May Mrs. B was granted an Honorary Doctorate in Commercial Science by New York University. (She’s a “fast track” student: not one day in her life was spent in a school room prior to her receipt of the doctorate.) Previous recipients of honorary degrees in business from NYU include Clifton Garvin, Jr., CEO of Exxon Corp.; Walter Wriston, then CEO of Citicorp; Frank Cary, then CEO of IBM; Tom Murphy, then CEO of General Motors; and,
most recently, Paul Volcker. (They are in good company.)
The Blumkin blood did not run thin. Louie, Mrs. B’s son, and his three boys, Ron, Irv, and Steve, all contribute in full measure to NFM’s amazing success. The younger generation has
attended the best business school of them all - that conducted by Mrs. B and Louie - and their training is evident in their performance.
Last year NFM’s net sales increased by $14.3 million, bringing the total to $115 million, all from the one store in Omaha. That is by far the largest volume produced by a single
home furnishings store in the United States. In fact, the gain in sales last year was itself greater than the annual volume of many good-sized successful stores. The business achieves this success because it deserves this success. A few figures will
tell you why.
In its fiscal 1984 10-K, the largest independent specialty retailer of home furnishings in the country, Levitz Furniture, described its prices as “generally lower than the prices charged
by conventional furniture stores in its trading area”. Levitz, in that year, operated at a gross margin of 44.4% (that is, on average, customers paid it $100 for merchandise that had cost it $55.60 to buy). The gross margin at NFM is not much more than half of that. NFM’s low mark-ups are possible because of its exceptional efficiency: operating expenses (payroll, occupancy, advertising, etc.) are about 16.5% of sales versus 35.6% at Levitz.
None of this is in criticism of Levitz, which has a well-managed operation. But the NFM operation is simply extraordinary (and, remember, it all comes from a $500 investment by Mrs. B in 1937). By unparalleled efficiency and astute volume purchasing, NFM is able to earn excellent returns on capital while saving its customers at least $30 million annually from what, on average, it would cost them to buy the same merchandise at stores maintaining typical mark-ups. Such savings enable NFM to constantly widen its geographical reach and thus to enjoy growth well beyond the natural growth of the Omaha market.
I have been asked by a number of people just what secrets the Blumkins bring to their business. These are not very esoteric. All members of the family: (1) apply themselves with an enthusiasm and energy that would make Ben Franklin and Horatio Alger look like dropouts; (2) define with extraordinary realism their area of special competence and act decisively on all matters within it; (3) ignore even the most enticing propositions failing outside of that area of special competence; and, (4) unfailingly behave in a high-grade manner with everyone they deal with. (Mrs. B boils it down to “sell cheap and tell the truth”.)
Our evaluation of the integrity of Mrs. B and her family was demonstrated when we purchased 90% of the business: NFM had never had an audit and we did not request one; we did not take an inventory nor verify the receivables; we did not check property
titles. We gave Mrs. B a check for $55 million and she gave us her word. That made for an even exchange.
You and I are fortunate to be in partnership with the Blumkin family.
Warren Buffett & Mrs. B
1985: I also am happy to report that NFM’s Chairman, Rose Blumkin (the legendary “Mrs. B”), continues at age 92 to set a pace at the store that none of us can keep up with. She’s there wheeling and dealing seven days a week, and I hope that any of you who visit Omaha will go out to the Mart and see her in action. It will inspire you, as it does me.
1986: Mrs. B, Chairman of Nebraska Furniture Mart, continues at age 93 to outsell and out-hustle any manager I’ve ever seen. She’s at the store seven days a week, from opening to close. Competing with her represents a triumph of courage over judgment.
1987: Agatha Christie, whose husband was an archaeologist, said that was the perfect profession for one's spouse: "The older you become, the more interested they are in you." It is students of business management, not archaeologists, who should be interested in Mrs. B (Rose Blumkin), the 94-year-old chairman of Nebraska Furniture Mart. Mrs. B continues to work seven days a week at the job from the opening of each business day until the close. She buys, she sells, she manages - and she runs rings around the competition. It's clear to me that she's gathering speed and may well reach her full potential in another five or ten years. Therefore, I've persuaded the Board to scrap our mandatory retirement-at-100 policy. (And it's about time: With every passing year, this policy has seemed sillier to me.)
1988: At Nebraska Furniture Mart, Mrs. B (Rose Blumkin) and her cart roll on and on. She’s been the boss for 51 years, having started the business at 44 with $500. (Think what she would have done with $1,000!) With Mrs. B, old age will always be ten years away.
Then, in the 1989 letter, the Mrs. B saga takes a twist:
1989: I am a moderate in my views about retirement compared to Rose Blumkin, better known as Mrs. B. At 99, she continues to work seven days a week. And about her, I have some particularly good news. You will remember that after her family sold 80% of Nebraska Furniture Mart (NFM) to Berkshire in 1983, Mrs. B continued to be Chairman and run the carpet operation. In 1989, however, she left because of a managerial disagreement and opened up her own operation next door in a large building that she had owned for
several years. In her new business, she ran the carpet section but leased out other home-furnishings departments.
At the end of last year, Mrs. B decided to sell her building and land to NFM. She'll continue, however, to run her carpet business at its current location (no sense slowing down just when you're hitting full stride). NFM will set up shop alongside her, in that same building, thereby making a major addition to its furniture business.
I am delighted that Mrs. B has again linked up with us. Her business story has no parallel and I have always been a fan of hers, whether she was a partner or a competitor. But believe me, partner is better.
This time around, Mrs. B graciously offered to sign a non-compete agreement - and I, having been incautious on this point when she was 89, snapped at the deal. Mrs. B belongs in the
Guinness Book of World Records on many counts. Signing a non-compete at 99 merely adds one more.
Buffett continues to mention Mrs. B in almost every letter:
1993: Mrs. B - Rose Blumkin - had her 100th birthday on December 3 (the candles cost more than the cake.) That was a day on which the store was scheduled to be open in the evening. Mrs. B, who works seven days a week, for however many hours the store operates, found the proper decision quite obvious: She simply postponed her party until an evening when the store was closed. Naturally, I was delighted to attend Mrs. B's birthday party.
After all, she's promised to attend my 100th.
1996:
Nebraska Furtniture Mart’s main store, located on a 75-acre site about a mile from Aksarben, is open from 10 a.m. to 9 p.m. on weekdays, 10 a.m. to 6 p.m. on Saturdays, and noon to 6 p.m. on Sundays. Come by and say hello to "Mrs. B" (Rose Blumkin). She's 103 now and sometimes operates with an oxygen mask that is attached to a tank on her cart. But if you try to keep pace with her, it will be you who needs oxygen. NFM did about $265
million of business last year - a record for a single-location home furnishings operation - and you'll see why once you check out its merchandise and prices.
After she passed at the age of 103, Buffett continued to talk about Mrs. B:
2003:
NFM was founded by Rose Blumkin (“Mrs. B”) in 1937 with $500. She worked until she was 103(hmmm . . . not a bad idea). One piece of wisdom she imparted to the generations following her was,“If you have the lowest price, customers will find you at the bottom of a river.” Our store serving greater Kansas City, which is located in one of the area’s more sparsely populated parts, has proved Mrs. B’s point. Though we have more than 25 acres of parking, the lot has at times overflowed.
2011: Mrs. B’s son, Louie, now 92, helped his mother build the business after he returned from World War II and, along with his wife, Fran, has been my friend for 55 years. In turn, Louie’s sons, Ron and Irv, have taken the company to new heights, first opening the Kansas City store and now gearing up for Texas.The “boys” and I have had many great times together, and I count them among my best friends. The Blumkins are a remarkable family. Never inclined to let an extraordinary gene pool go to waste, I am rejoicing these days because several members of the fourth Blumkin generation have joined NFM.
2013: I think back to August 30, 1983 – my birthday – when I went to see Mrs. B (Rose Blumkin), carrying a 1 1⁄4 -page purchase proposal for NFM that I had drafted. (It’s reproduced on pages 114 - 115.) Mrs. B accepted my offer without changing a word, and we completed the deal without the involvement of investment bankers or lawyers (an experience that can only be described as heavenly). Though the company’s financial statements were unaudited, I had no worries. Mrs. B simply told me what was what, and her word was good enough for me. Mrs. B was 89 at the time and worked until 103 – definitely my kind of woman. Students from 40 universities visit me every year, and I have them start the day with a visit to NFM. If they absorb Mrs. B’s lessons, they need none from me.
Buffett last retold the entire Mrs. B saga in his 2020 letter, ending with this:
Mrs. B, it should be noted, worked daily until she was 103 – a ridiculously premature
retirement age as judged by Charlie and me.
''Sell cheap, tell the truth, don't cheat nobody.'' from Rose Blumkin’s New York Times obituary (1998)
