[From The Archives] Warren Buffett 1977 Profile In The

Wall Street Journal

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Rupert Hargreaves
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Today,
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called [From
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Buffett
Archives] Warren was still a rising star, and his methods of wealth
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attracted plenty of attention.
Buffett 1977 Profile
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During
March
follow this
link1977, The Wall Street Journal ran a profile of Warren
Buffett.
http://www.valuewa
Labeling Buffett the "Collector", the Journal took a look at the
lk.com/sign-email/.
rapidly
expanding portfolio of companies that were being brought
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under his wing, and why the Oracle was being drawn to such
businesses.

Warren Buffett: Buy what you know

"I'm having a lot of fun because I'm only buying into
businesses that I find interesting and where I like the people
running them, and their products." -- Warren Buffett in the
Wall Street Journal 1977.

The Journal's interview with Warren Buffett starts by questioning his desire to acquire such a broad
selection of businesses across so many different industries. Taking the $25 million in earnings from his
partnerships, Buffett, who was 46 at the time of the interview, had already built stakes in businesses
ranging from financial institutions, newspapers, insurance companies and candy stores through Berkshire
Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B). Just before the interview, Berkshire had spent $33 million to
acquire a stake in Buffalo Evening News, the largest newspaper in upstate New York.

"It's a tremendous relief being out of money management I'm not constantly thinking about
business anymore. During the pasrtnership my ego was on the line, and I was trying to lead
the league in hitting every year." -- Warren Buffett in the Wall Street Journal 1977.

The Journal then goes on to describe Buffett, calling him a " curious mixture of the sophisticated and
homespun." As an editor at the Washington Post described Buffett at the time:

"There's a lot more to Warren than just his business ability and 'aw shucks' manner. He
understands the First Amendment along with profit-and-loss statements."

In the last 70s, the cornerstone of Buffett's empire was of course Berkshire Hathaway. By the mid-70s
Berkshire's turnaround was in fall swing. From a failing textiles producer to a growing conglomerate,
Berkshire had just acquired Illinois National Bank & Trust Co. of Rockford, III., a highly profitable regional
bank. For full-year 1976 Berkshire reported revenues of $139 million and operating earnings of $16.1

million.

"Mr. Buffett also controls some 61% of the stock of Blue Chip Stamps, a Western tradingstamp concern that posted 1976 earnings of $11.7 million on revenues of $88 million. Blue
Chip, in turn, owns 99% of See's Candy Shops Inc., a West Coast chocolate maker and
retailer; 80% of Wesco Financial Corp. of Pasadena, Calif., a savings-and-loan association;
and now the Buffalo Evening News. Finally, Mr. Buffett has a controlling interest in
Diversified Retailing Co., operator of a discount women's-apparel chain of about 80 stores."

But aside from this network of operations, entities controlled by Buffett also controlled stockholding worth
more than $100 million in a number of other companies at the time. These included a 10% interest in
Washington Post Co, 25% of Pinkerton's Inc., the security concern, a 15% interest in Government
Employees Insurance Co (GEICO) and other smaller interests in Affiliated Publications Inc. (newspapers)
Munsingwear Inc. (clothing), Ogilvy & Mather, Interpublic Group (advertising) and the holding company for
McCann-Erickson.

Hands-off approach
Every time Warren Buffett acquired a new business for his portfolio he maintained an hands-off approach.
In the interview with the Journal Buffett commented that:

"I usually don't need to get involved because I'm careful to buy well-run companies from
owners who built the enterprises and stay on to run them...I like guys who forget that they
sold the business to me and run the show like proprietors. When I marry the daughter, she

continues to live with her parents."

At the time, Buffett was also running his portfolio with a similar hands-off approach. Berkshire Hathaway's
$140 million municipal bond portfolio was managed by one man, William Scott, who worked a five-hour
day and spent most of his time "playing handball and rehearsing his polka band."
Buffett liked to acquire businesses with low capital requirements, the ability to generate handfuls of cash
and a unique product. Unregulated products such as newspapers also offer the owners the ability to raise
prices whenever he or she pleased, maintaining growth even during periods of high inflation.
But along with Buffett's successes, the Journal's interview also details some of Buffett's early failures,
which are just as interesting .
In particular, a few years before the interview Buffett took a 50% hit on a $6 million investment in Vornado
Inc., a discount retailer.

"It turned out that the industry was over-stored, and Vornado and the rest of the discounters
were getting killed by competition from K mart stores."

Some of Buffett's plays on the trading stamp business also struggled to produce the desired returns. He
took, what the Journal labeled a "substantial loss" on a stock investment in Sperry & Hutchinson Co. in
1974. And, at the time of the Journal's profile, Buffett's holding in Blue Chip Stamps had been a lacklustre
performer.
Here's the full article: WSJ 1977 Article on Warren Buffett
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