Becoming Berkshire

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, they acquired an aging retailer whose competitive position was being attacked from every direction. Just three years later, they sold the business. Hochschild-Kohn became an important early lesson in the difference between buying a business simply because it appears cheap and buying a wonderful company with a durable competitive advantage.

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 beginning of Berkshire Hathaway as we know it today.

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. Buffett saw something different. He looked past the scandal and focused on the core business. Customers were still using American Express cards. Traveler’s checks were still growing. Merchants were still accepting the brand. The scandal was real, but the franchise was not broken. This investment became a major turning point in Buffett’s evolution from Ben Graham style cigar butt investing toward buying great businesses with durable competitive advantages. Most past episodes can be found in the Berkshire History playlist on YouTube.

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 Candies, GEICO, Apple, and the modern Berkshire Hathaway.

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.

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.

 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 something much better through insurance and banking. 

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, almost no one was paying attention. Goodman asked a simple question in 1971: Who is Warren Buffett? Even seasoned financial journalists didn’t know the answer. From a modest office in Omaha, Buffett had compounded capital at an astonishing rate for over a decade—without publicity, without committees, and without participating in the speculative culture of the 1960s. While others chased concepts and technology, Buffett applied Benjamin Graham’s principles with absolute consistency and stepped away entirely at the height of his success. This episode explores why the world missed him, how distance from Wall Street became an advantage, and what Supermoney reveals about temperament, discipline, and time—the real foundations of compounding.

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 concept that would define Berkshire Hathaway’s future. And inside Berkshire, the textile mill was fading, but insurance and banking were beginning to take root. This episode explores the contrasts of 1970: Wall Street’s crisis, Walmart’s rise, and the early blueprint of what Berkshire would become.

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 up to President Nixon. During this chaos, Warren Buffett strategically invested further in Berkshire Hathaway and Blue Chip Stamps as his partnership dissolved, navigating the challenging economic landscape.

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 ROA How this marked a strategic pivot for Buffett—away from failing textiles and toward cash-generating, float-rich enterprises like banking and insurance Read the full issue here: https://open.substack.com/pub/theweekendinvestor/p/becoming-berkshire-1969-part-2-illinois?r=21sroa&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false

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

Welcome to Issue 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 library.

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 is for sale".Buffett found himself increasingly "out of step with present conditions". He noted a sharp diminution in obvious quantitatively based investment bargains and a "hyper-reactive pattern of market behavior" due to a "mushrooming interest in investment performance". His analytical techniques had limited value against this backdrop, and he was skeptical of what he called "fashion" investing, refusing to invest based on anticipating market action rather than business valuations. Furthermore, his capital base had grown to approximately $65 million, making it harder to find suitable investment ideas, and his personal interests dictated a less compulsive approach.It was amidst these challenges that Buffett initiated a profound shift. He began allocating capital outside of the textile business, a decision that would forever change Berkshire's trajectory. The seminal event of 1967 was the acquisition of National Indemnity Company. This strategic purchase was "perhaps the most important event in Berkshire’s history," as it provided a strong platform for future growth and an immediate outlet for the cash freed up from Berkshire’s textile operations.Join us as we explore how these market dynamics, Buffett's changing approach, and this crucial acquisition laid the foundation for Berkshire Hathaway's enduring legacy. https://open.substack.com/pub/theweekendinvestor/p/becoming-berkshire1967-buffett-and?r=21sroa&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false

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