Omaha's Explosion of Creativity

Color by Michael Hooper

By Michael Hooper

A small encounter in the physical world can be a gigantic moment of the heart.  I recently spent three wonderful days getting reacquainted with an old friend named John Giles. He and I met through a mutual friend Arlen Lazaroff, a Nebraska poet and artist who was active in the poetry circles in Omaha from 1985 to 1995. 

Lazaroff and Giles were part of an explosion of creativity happening in the music, art and literary scene in Omaha at the time.  Poets and writers often met at The Antiquarian Book Store run by Tom Rudloff in the historic Old Market neighborhood. I often went to the Old Market several times per year in those days, particularly when I lived in Omaha's Hanscom Park neighborhood and worked at the Papillion Times in 1987. The Old Market had a Bohemian ambiance in those days, with its record stores, bars and restaurants, including the French Cafe.

Rudloff was a scholar and linguist who owned a five-story building full of books, records and art. With bushy eyebrows and a deep voice, he was a charming man who was curious about everything. He often sat with other book people on couches and chairs near the entrance. When you entered his salon, he asked if you would like a cup of coffee. Rudloff encouraged Erich Christiansen in his study of philosophy. I bought The Sun Also Rises by Ernest Hemingway. Arlen found great records in the music room for his growing collection of psychedelic rock. Among others in this movement were Margery Coffey, and Richard Chilton, Randy Galaska, and Eadweard Rhawn York.

Margery Coffey was the Godmother of this emerging crowd. She and Richard Chilton live on the Winnebago Reservation and had adopted a lifestyle of creating art and literature. Coffey's paintings of native Americans are highly regarded by critics. I love her blue period when she painted lonely souls at a nursing home in Alma, Neb. The faces of her subjects seem haunting and tragic. Coffey is not afraid to tell the truth. Human life is a tragedy. We're born. We live. We die.

Perhaps the greatest emerging poet at the time was a young woman named Renee "Talonia" Novy.

Talonia had big frizzy hair, soft brown skin and mysterious eyes. Her race, she said, was a mix of European, African, Bohemian and Jewish. She often performed at Kilgore’s, a coffee shop popular among the poets at the time. Arlen took me to Kilgore’s one night, where I saw Talonia perform in a raging, majestic fashion, as if she were floating on stage. Broken promises, shattered dreams and lust for living, her poem Fast Against the Train speaks volumes to the intense emotion she gave to living.

Tragically, Talonia, 29, and her 7-month old daughter Jamesin Novy-Sullivan died after getting struck by a motor home on Interstate 680 in Omaha in 2003.

These Nebraska poets, including Giles and Lazaroff, were involved in the Youth for Peace movement. The group traveled all the way to Washington DC to deliver their message of peace, meeting with Senator Bob Kerrey of Nebraska.

They loved creating art and music in a collaborative way. Arlen recorded with musicians like David Nordin and Dereck Higgins, a musician who has been an Omaha pioneer with rock bands over the years. My favorite was Digital Sex with Higgins, Stephen Sheehan and John Tingle. 

311 of Omaha, and Lincoln's For Against and The Millions were popular bands in the late 1980s and early 1990s.

Saddle Creek Records was founded in Omaha in 1993 as Lumberjack Records by Mike Mogis and Justin Oberst; Bright Eyes and The Faint were among its recording artists.

The Reader

John Heaston, editor of The Reader, was active in these groups, he supported them by publishing their news and events in his magazines. 

"Johnny championed my work," said visual artist Eadweard Rhawn York. "He featured me twice on the front page."

John Giles worked for Heaston in publishing articles in Sound magazine. Indeed they published an article of mine about a seminal poetry gathering on the Platte River, where we built a fire and read late into the night and danced to jazz in the early 1990s.

The Omaha Press Club was going to roast Heaston in May but he died the day of the roast, said his friend Kris Kluver. The roast, led by his brother Ben, went on anyway. Those who spoke spared nothing. Heaston would have loved it, Kluver said.

Heaston, 53, died after a four-year battle against leukemia. John Giles says he got to see him before he passed.

Scherzkopf

In the early 1990s, Eadweard Rhawn York tried to get press in The Omaha World-Herald. But he kept getting rejected. The Bemis Gallery also rejected the local artist, preferring instead to favor artists from New York and Europe. So York created a character named Scherzkopf (which means joke head), who was supposedly a rising German artist. York painted multiple paintings and attributed them to Scherzkopf. He sent out press releases and photos of his work. The Omaha World-Herald became interested and wrote a story about the German artist based on the press releases. When the art show was displayed, a reporter tried to interview the German artist only to find out it was York the whole time. Needless to say York was banned from the OWH after that.

Margery Coffey encouraged artists to publish their works and she helped several poets create chap books through her own publishing firm, Black Prairie Dog Woman Studios, featuring the works of Dennis Hastings, Arlen Lazaroff, and John Giles. Margery and Richard Chilton published many works on their web site Jackalope Arts. Looking over the statistics of the web site usage, it turned out a lot of hits were coming from France, Giles recalled.

Sometimes it's hard to be loved in your own country. 

Roar by John Giles

In the 1990s, Arlen and I wrote a book called Shattered on the Plains, about eccentric men and women in Kansas and Nebraska.

The act of creation. That was what this movement was all about. Margery and Arlen made the front page of The Omaha World-Herald

when their art was censored in Fremont, Neb. Fremont conservatives were offended by Arlen's art featuring a nude man and woman with the phrase, "The End of Sex is a Family."

John Giles and I have been talking about doing an art retreat for a couple of years now, and it finally came together this summer when we spent three days together at our cabin in northern Minnesota, working on art projects, and discussing our mutual history with these fascinating people in the late 1980s and early 1990s. 

Michael Hooper and John Giles

I took John to a hayfield near a grove of trees by our cabin. The sun was shining, the wind was blowing, we felt so alive. It was in that moment, he told me his full name was John Matthew Giles. As a preschooler he was called Matthew. When he went to first grade, he said there were four other Matthews in his class so he went home that day and asked his mother for another name and his mom said, "well your Dad calls you John." The next day he told his teacher, "I am John."

John and I ate fruit and drank water and then went swimming in the lake. We stayed in the water for a long time, the water felt so refreshing.

That night John Giles painted a figure emerging from blackness with big lips and hypnotizing eye.

He painted in low light inside of a garage in the night time so there was not much to be seen, only imagined and his imagination went wild.

The spirit of creation brought us together again, after a separation of almost 20 years. 

I am grateful for the time with my friend creating new memories and remembering the glorious time we experienced in the late 80s and early 1990s with all that great art, poetry and music coming out of Nebraska. What an incredible time to be alive.

Meditations on the US Stock Market, the Economy, and the Presidential Election

A $4 pint of beer at Long Pine Store.

By Michael Hooper

I’ve heard grumblings from people who are worried about a recession coming to the United States.

I know a portfolio manager who has been predicting a recession for two years now.

He says consumers have increased their debt levels at a time of higher interest rates. They no longer have Covid money from the government, and credit and car loan delinquencies are rising. Yet the recession has not happened.

Against all odds, the consumer is very resilient. 

Looking at government data and railroad reports, I can see there should be no discrepancy here, the economy is positively growing.

Real gross domestic product increased at an annual rate of 2.8% in the second quarter of 2024, according to the advance estimate released by the US Bureau of Economic Analysis. In the first quarter real GDP increased 1.4%. That was a reduction from the 3.4% growth in the fourth quarter of 2023.

The 2.8% increase in the second quarter 2024 in real GDP reflected increases in consumer spending, private inventory investment, and non-residential fixed investments, the government said. Imports, which are a subtraction in the calculation of GDP, increased. Consumers spent more in both services and goods. Within services, the leading contributors were healthcare, housing and utilities and recreation services. Within goods the leading contributors were motor vehicles and parts, recreational goods and vehicles, furnishings and durable household equipment, gasoline and other energy products.

Railroads in America have been hauling more freight in the first half of 2024, according to the Association of American Railroads. In the first 29 weeks of 2024 US railroads reported a combined US traffic of 13.5 million carloads and intermodel units, an increase of 2.2% compared to last year year.

It appears to me that a lot of traffic is coming from shipping containers and trailers, as intermodel units were up 8% while carload numbers were down 4%. These intermodel units carry lot of freight from China and around the world.

The Fed has been fighting inflation for the past two years. And they’ve been largely succeeding as inflation has dropped to around 3% from a high of 9%. The fed’s goal is 2% inflation yet the Fed has given indications it will start lowering interest rates soon; that has helped propel the stock market to all-time highs.

The S&P 500 is up 14.8% year to date; the Dow Jones industrial average is up 7.6% and the NASDAQ is up 16.3% YTD. About 25% of my portfolio is invested in the S&P 500.

The unemployment rate spent much of the last two years around 3%, but has moved up to 4.1% in the latest estimates from the Bureau of Labor Statistics. I’m not too worried about this increase because 4.1% unemployment is still a fairly healthy economy. This just means that employers will have more to choose from in their next hire.

Jobless people suffer, especially those who have multiple debts, including credit card and car payments, student loans and mortgage payments. Because interest rates are so high, a lot of home owners are refusing to sell their properties because their next home will likely carry a higher interest rate mortgage. People who have to move for a job face tough choices.

I had opportunities to leave Topeka but I turned them down because after moving three times in three years, I felt like I’d be losing by starting over somewhere else. The real estate agent who sold us our house stopped sending us annual flowers after about five years. She figured it out. We weren’t going anywhere.

It’s tough to say at this juncture who is going to win the presidential election, but in all likelihood, I think Donald Trump will be our next president. I hope not. I think the man is despicable, and I’m voting for Kamala Harris. She’s a solid woman who has demonstrated courage and tenacity as a prosecutor and has learned the ropes of what it takes to be a president by working as vice president for Joe Biden for the past three and half years.

We may see a dip in the stock market ahead of the election, as third quarters are often negative. People fear the unknown, sell stocks and put the proceeds in money markets. I think the stock market will likely recover in the fourth quarter after the election is over.

One thing for sure I will not be betting against America. Business cycles come and go. Bear markets and recessions happen. But overtime the US economy seems to pick itself up and move ahead. The U.S. economy is full of inventors, entrepreneurs and creative people who come up with new and innovative ways for people to spend money.

When Warren Buffett bought BNSF Railway in 2010 he said it was “an all-in wager on the economic future of the United States.” At the time the economy was recovering from the financial crisis of 2008-09. His bet on America proved to be a good one, as the economy grew substantially over the past 14 years. He paid $44 billion for BNSF Railway; the railroad is probably worth $145 billion today, based on the market cap of Union Pacific Railway, its chief competitor.  

Warren Buffett did not make his money shorting stocks. He studied losers, just to avoid them, but he made his money investing in winners. I think the US economy is a winner, so I’m betting on it.

The Villages' History of Caring for Children

Hay bales at The Villages by Michael Hooper

By Michael Hooper, a volunteer on the board of directors.

The origin of The Villages dates back to the 1964. Dr. Karl Menninger founded the Villages after a judge told him there was a shortage of places where juvenile delinquents could stay.

He partnered with E. Kent Hayes, who had begun his career as the superintendent of the Boys Training School in Nebraska before moving south to Topeka. He would later serve as The Villages’ first executive director between 1967 and 1973.

Dr. Karl formed a nonprofit organization with a board of directors and trustees. He brought onto the board many of his friends in business, banking, medicine, academia, people who cared about helping troubled or abandoned children.

The first home opened in 1970, more homes were built in the early 1970s, for a total of five on 300 acres of land donated by W. Clement Stone. Dr. Karl believed children benefited from living close to nature. He believed kids should live in a family-style home, not an institution. People would refer children to the Villages and the state would cover the expense, although there was always shortages of money, so Dr. Karl was fundraising all the time.

The children went to school at Washburn Rural. 

Dr. Karl formed alliances with people in Lawrence Kansas, including Virginia Weaver and Hortense Oldfather, wife of local actor and KU theater professor Charley Oldfather. Hortense known as Tinsie, was on the board at the Villages for many years. The Oldfather father family donated land south of Lawrence, where two homes were constructed and began to house kids there.

The Villages hired an extensive staff to spread the word on the value of Dr. Karl's model helping troubled children.  The organization took its group home house parent model to other organizations around the country. Several homes were created in Indiana at one time, but are no longer part of the Villages. The house parent model included a full-time set of house parents who lived in the home with their own children, and who worked to care for the kids, took them to school, and basically were their parents. 

This model worked successfully for many years until about 10 years ago, during the Sam Brownback administration. The Villages started having really serious problems with this model. Many of the kids were extremely difficult, volatile, and even violent and dangerous. Worse yet, The Villages couldn't find anyone who wanted to be house parents.

Former executive director Sylvia Crawford was extremely good at management with limited resources, but still found herself short of staff. One time she and her husband actually moved into a house to become house parents because the previous house parents left, and we couldn't find replacements. One of the more aggressive children we had destroyed property causing over $6000 in damage. We did not have the psychiatric and clinical workers available to deal with such a difficult kids. Something had to change.

Sylvia found an opportunity to take care of immigrant children, unaccompanied children, from the border. These are children who left their homes and sought asylum in the United States. The Villages leadership applied for a grant to take care of unaccompanied children. We won that grant and began taking care of these immigrant children refugees seeking political asylum in 2017.

This caused our organization to grow. We used to have around a $3 million budget now our budget is closer to $7 million. We have about 100 employees. Currently we have about 35 unaccompanied minors living in Topeka. We plan to open the Lawrence homes to immigrant foster care children who will live with us a little longer than our typical kids. The federal foster care program for immigrant children will start around May 1 in Lawrence.

Most of our children are from Central America. As you may know, there is a lot of gangs and crime and political upheaval in Honduras, Guatemala, and El Salvador.

Our immigrant children are typically well behaved. They appreciate at the Villages. We take them to doctors and dentists to take care of their health. We have teachers on staff who teach them English, mathematics, science, geography. Our staff works to reunite the children with their parents, relative, or qualified sponsor. Candidates for placement are examined thoroughly and vetted to make sure the children will not end up in some kind of abusive situation.

Most the 400 acres owned by The Villages has never been plowed, it’s full of natural tall grass prairie. And there are two old Native American Indian burial sites on the land.

Rosemary Menninger, daughter of Dr. Karl Menninger, has been a volunteer board member for many years. She has been a tireless advocate for the children and the land.

About five years ago, we found ourselves running out of room, particularly in our administrative center, which was a split-level house. We were conducting school in the homes. We formed a building committee, with Judette Padilla, executive director, and started working with architects and consultants to come up with a plan. Ultimately Architect One was chosen as architect and KBS Construction as the builder.

The project would not have been possible without the generous help of multiple donors, including the Sunderland Foundation and many friends of The Villages, plus The Villages' endowment. The entire construction project cost around $7.2 million.

My Encounters With Warren Buffett and Charles Koch

By Michael Hooper

When I got married in 1993, I was determined to do well with our money, so I asked a stockbroker for advice on how to get started. He said read everything you can about money. So I read furiously about stocks and the financial markets. I opened two IRAs and a brokerage account with Charles Schwab and started investing in stocks. Living in Nebraska, I met several people who had an opportunity to invest with Warren Buffett, but did not and regretted it.

In 1996, Warren Buffett offered Class B Shares of Berkshire Hathaway. I drained all of our bank accounts and came up with $4,400 for four Class B shares with the IPO price of $1,100 apiece. I told my wife don't buy anything for a week, we only have $10 in our checking account. 

I quickly read Roger Lowenstein's book Buffett The Making of American Capitalist, published in 1995, and then devoted my investment style to emulating Warren Buffett. 

For this article, about my encounters with Warren Buffett and Charles Koch, I have gathered information from Warren Buffett's annual reports and two major biographies, The Lowenstein book, and The Snowball, Warren Buffett and the Business of Life by Alice Schroeder. I read The Science of Success, by Charles Koch for material about Koch's philosophy in business. I also read Kochland, The Secret History of Koch Industries and Corporate Power in America by Christopher Leonard.

What is capitalism? 

Capitalism is an economic system in which people are allowed to earn money, and keep it for themselves and invest it for a profit. This system allows investors to take a risk in investing their money into a business and to reap a profit based on their percentage of ownership in that business. The government collects taxes on a portion of their income and on the sale of investments, but allows the means of production and distribution to remain privately owned. 

The merchants of Venice and Antwerp in the 1500s and 1600s invested capital into shares of a ship and received a proportionate amount in the spoils. This way they diversify their capital into several ships, in case one goes under, they don't lose all their money.

The first formal financial exchange was created in 1531 in Antwerp, where traders exchanged loans, promissory notes and bonds.

The Dutch East India Company founded in 1602 was the first joint stock company. Shares were traded on the Amsterdam Stock Market, founded in 1602. Ships that brought spices from the East gave investors income through dividends. The Dutch East India Company's regular dividend yielded between 12% to 40% from 1679 to 1772.

In the 1800s, British and American investors made fortunes on investments in American railroads. In the modern era businesses like Google and Amazon that operate on the Internet became the new fortune makers.

Today US Capitalism with support from the Federal Reserve has produced a country with low unemployment, wage growth, and opportunities to create a tremendous amount of wealth. But the downside with capitalism is if you are not an owner of money-appreciating assets, such as real estate, stocks, bonds, ETFs, mutual funds, you get left behind and that is where this huge divide between the rich and the poor is found, in the disparity between the people who own capital and the people who don’t.

In the investment world, a great average annual return is 15% to 20%. That is when you are doubling your money every 4 to 5 years. That’s tough to do, very few people have done it over 10-year periods.

Two investors in the Midwest who have achieved more than 15% annual returns for more than 20 years are:

Charles Koch of Wichita at 18% annual returns for Koch Industries from 1967 through 2007, when I interviewed Koch; and Warren Buffett at 19.8% annual returns at Berkshire Hathaway from 1965 to 2023. 

Over the past five years, Berkshire Hathaway stock is up 100% or an average of 15% annually; the S&P500 is up 84% in the past five years or an average of 13%. Through June 6, 2024.

Warren Buffett, age 93, is the 6th wealthiest person in the world, worth about $134 billion. Charles Koch, age 88, is worth $59 billion, ranked as the 25th richest man in the world.

I interviewed Charles Koch in 2007 for an article about his book The Science of Success. 

Charles Koch

When I met Koch, when I shook his hand, I noticed his skin was as smooth as a baby's skin. In person Koch is affable, he is like a scholar, when he talks about business and philosophy.

I wrote, "Charles Koch is a capitalist who believes the role of business is to create value in our society. If it doesn't, the business should be shut down or sold."

Over his long career Koch developed his Market Based Management. MBM begins with a vision for determining the greatest long-term value; using virtue and talents to ensure employees with the right values, skills and capabilities are hired, retained and developed; creating, acquiring, sharing and applying relevant knowledge and measuring and tracking profitability; and ensuring the right people are in the right roles with the right authorities to make decisions and holding them accountable. MBM rewards people according to the value they create for an organization.

Charles Koch inherited a $10 million stake in Koch Industries, but after he became president of the company in 1967, he grew it into a much larger conglomerate, with an emphasis on oil, energy, refining, chemicals, lumber, paper, fibers, investments, trading and arbitrage, electric battery production, and cell phone components.

Koch's best acquisition was Georgia Pacific in 2005, which more than doubled the size of Koch, which now has 120,000 employees. His worst acquisition was Purina Mills of St. Louis in 1998 because deep within the company were agreements with farmers to buy baby pigs and then resell them. But the pig market fell apart and nobody wanted the pigs. Koch fired the manager who engineered the deal, for failing to find this obscure contract that obligated them to buy some $240 million worth of pigs that had no market because of overproduction. Purina Mills went into bankruptcy, and Koch lost all of its $100 million investment in the company plus paid another $60 million on top of that. Purina was purchased by Land O Lakes in 2001.

Koch is not afraid to take over a company that is in trouble financially. He applies his market based management philosophy to increase the value of his businesses, While he is more hands-on in applying these principles and capabilities, Buffett lets his managers run their businesses.

In the early 2000s, I wrote an article about Koch's trading and arbitrage floor, where some 50-75 people were making trades on financial markets.

I interviewed a trader at Koch who had a million dollar profit in a long gas futures position, the trader sold out his position for a big profit going into the summer driving season, typically the time for the highest gas prices of the year. He told me the job was highly stressful, he hoped he could do it for 10 years.

Koch will start a small business from scratch and then if it grows, Koch will invest more capital to grow the business. Buffett generally invests only in profitable existing businesses, and does not conduct startups. Charles Koch would never take his company public, but Buffett's company has been publicly traded for decades.

Warren Buffett probably undergoes more scrutiny because he operates a publicly traded company. But this allows people an opportunity to own shares in Berkshire Hathaway.

Koch supports libertarian and Republican politics while Buffett has been a longtime Democrat, who believes the wealthiest incomes should be taxed higher than they are now, while Koch is about less government and less taxes.

Another big difference between Koch and Buffett is ethics. Buffett is more willing to lose money but not reputation. Buffett isn't without problems; he took over Solomon Brothers after a bond trading scandal in 1991 and his real estate firm recently paid $250 million in fines for inflated broker commissions.

In his early days Charles Koch was willing to risk damaging his reputation for the sake of profits. In 1999, Koch Industries was convicted of stealing oil from federal and Indian lands, including the Osage Nation, something the company had done for years. Koch admitted to earning $10 million annually from taking oil without paying for it. Employees were encouraged to be long or over what Koch paid for when they extracted oil from tanks in the fields.

In 1999, Koch Industries pled guilty to violating environmental laws, for dumping ammonia and allowing leaks to pollute land and waters for years at its Pine Bend refinery in Minnesota. The company paid big fines and got a lot of bad press for stealing from the Indians and polluting the Earth.

After these disasters, including the big loss from Purina Mills, Charles Koch fired all of his division managers and gutted his Wichita office, eliminating 500 positions and 300 contractors. The company changed its corporate structure, hired new leaders, who added a new incentive program that included rewards for compliance, not just profitability. 

His new slogan was 10,000% compliance meaning that employees obey 100% of all laws 100% of the time.

This ushered into an era of substantial growth, funded in part by the huge cash generated by the Pine Bend operation in Minnesota.

"This change in Koch's corporate structure and strategy ushered in a decade of unprecedented growth," Christopher Leonard wrote in Kochland (page 223). That growth included the acquisition of Georgia Pacific.

Warren Buffett

In 1997, I went to the annual meeting of shareholders of Berkshire Hathaway in Omaha and listened to Warren Buffett and Charlie Munger for over six hours. I asked Warren Buffett a question about tobacco stocks, and he and Charlie talked about tobacco stocks for about 20 minutes. Buffett said that Berkshire had owned tobacco stocks in the past and they looked at buying a chewing tobacco company, but didn’t. Berkshire owns assets that distribute tobacco products and he said he doesn’t have a problem with that. With tobacco companies, He said “we were uncomfortable enough about their prospects overtime that we did not feel like making a big commitment to them.”

In Warren Buffett’s response, you can hear the caution in his analysis of tobacco stocks. So he set their eyes elsewhere on where to deploy capital.

Warren Buffett was born on August 30, 1930, the second child of Howard Buffett and his wife, Leila Stahl. 

From a very early age, Warren Buffett excelled at mathematics. He had a knack for business and also loved journalism. He sold cola, magazines and chewing gum door to door. He also delivered newspapers. When his father Howard Buffett was elected to Congress Warren Buffett started carrying the Washington Post. He found out he could make more money by serving the high-rises where he could quickly deliver hundreds of newspapers from apartment to apartment pretty quickly.

Another early venture was investing in pinball machines. He and a friend bought some machines and had them installed in barbershops. When these teenagers came to collect the money from the machines, the barbers thought they were just working for somebody else but actually these kids were pure play Capitalists, they owned the machines. They sold the pinball business for $1200 to a WWII veteran.

The pinball machine is sort of symbolic of the type of business Warren Buffett likes to own: a machine that generates lots of cash and is low maintenance.

While Charles Koch got a nice lift financially from his father Fred, Warren Buffett received mostly mentorship and encouragement from his father, Howard Buffett, who was a stockbroker. As a teen-ager and young adult Buffett worked various jobs, saved his money and invested it.

Warren Buffett early on, wanted to become rich and study business. He was net worth about $10,000 at age 19, $140,000 by age 26 and $1 million by age 30.

Buffett went to Wharton Business school for two years, but finished his bachelor's degree at the University of Nebraska-Lincoln and later went to Columbia University to study under Benjamin Graham. 

Benjamin Graham was a deep-value-investor who wrote The Intelligent Investor which showed a Quantitative way to come up with an analysis on a company to see if it’s trading below its intrinsic value. Often times they would find stocks that were trading well below their intrinsic value and look for a way to make profit on them. 

"The basic ideas of investing are to look at stocks as business, use the market's fluctuations to your advantage, and seek a margin of safety. That's what Ben Graham taught us. A hundred years from now they will still be the cornerstones of investing," Buffett has said.

Buffett worked for Graham Newman for awhile and was a star analyst and investor there and probably could have become a partner there but turned it down to go his own way.

As early an investor, Buffett was looking at companies that were trading below book value, so there was a margin of safety in the stock. Sometimes a company trading so cheap, at 7 times earnings and less than book value, was because its best days were behind it and now it's on the decline.

One of those companies was the Sanborn Map Company, which started in 1866. It provided maps to fire insurance companies to help them determine risk of fire.

Sanborn maps have detailed descriptions of buildings and addresses, and potential hazardous places but they also showed in great detail what was of in a community at the time. 

For example, you can find some old Sanborn maps of the Topeka Room at the Topeka and Shawnee County Library. These maps will show your house lot in say 1905. By 1958 the stock was trading at $45 per share, which was really cheap considering Sanborn's investment portfolio alone was worth $65 per share. To get a hold of that investment portfolio Warren Buffett got on the board with the help of friends and family who bought the stock. Eventually he controlled 1/3 of the stock, he convinced the to repurchase shares at fair value, paying with a portion of its investment portfolio. 77% of the outstanding shares were turned in. Buffett had reaped a 50 percent return on investment in just two years.

By 1959 Warren Buffett met Charlie Munger who was to have a lasting influence on Buffett's investment style. Rather than chasing cigar butts, Munger encouraged Buffett to buy high quality businesses, he said, "Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices." 

In 1963, American Express got caught having to support receipts for the sale of  soybean oil from Anthony Tino DeAngelis. DeAngelis had a shady past and once sold tainted meat to the government school lunch program, he had become a huge dealer in soybean oil. He found out nobody really cared to check what’s actually inside the tanks of oil, so he began filling them with seawater, and still getting receipts that he used as collateral to borrow from 51 banks. American Express stood as guarantor of the quantity of oil behind those receipts.  DeAngelis owed his lenders about $150,000,000 to $175,000,000. Stock in American Express fell about 50%. Warren Buffett put Henry Brandt on the case. Brandt researched American Express extensively. Buffet began to buy the stock furiously trying to buy as many shares as he could without driving up the price.

Buffett encouraged the American Express management to pay the liability to retain the good name and trust of customers in American Express. Buffett had what he would later call a "high probability insight" about American Express that confounded Benjamin Graham's core idea. Unlike companies whose value came from cash, equipment, real estate and other assets that could be calculated and if necessary liquidated, American Express had a little more than its customers' Goodwill. This goodwill had value, and Buffett put a price on it. American Express turned out to be a fantastic investment and is still held by Berkshire Hathaway today.

Warren Buffett would in his early days put as much is 30% of his portfolio in one stock. Which is very risky really. But he calculated his risk pretty carefully he knew mathematically what things were worth.

$10,000 invested in his Buffet partnership in 1957 was worth $260,000 in 1969, according to Forbes. In an article the partnership at that time had $100 million and had grown at an annual compound rate of 31%. Over that 12 year. and during that time it hasn’t lost or it hasn’t had one year in which it lost money. 

You’re doubling your money, every 2.3 years.

His net worth was about $26.5 million in 1969.

Berkshire Hathaway 

In 1888 Horacio Hathaway and Joseph Knowles organized a group of partners to create textile mills. Aschnet Mill Corporation & Hathaway Manufacturing Company was formed. One of the partners was Hettie Green, the notorious witch of Wall Street, a shipping heiress raised in New Bedford, Massachusetts. She was so tight that when her son broke his leg, she didn’t want to take him to the hospital and his leg got deformed. She supposedly had a hernia but kept a stick on it to keep it in. She inherited $7 million but turned that into a fortune of over $100 million; she made a fortune in Northern Civil War bonds.

In 1955, Berkshire Fine Spinning Associates, founded in 1889, merged with the Hathaway Manufacturing Company.

Eventually, the Stanton family took control of Berkshire Hathaway. Seabury Stanton was the prince leader, who butted heads with Warren Buffett in the early 1960s.

Seabury Stanton had agreed to buy stock from Buffett at a certain price, but reneged on the deal and pissed off Warren Buffett, according to snowball author, Alice Schroeder. Eventually Buffett started buying more shares of Berkshire Hathaway and took control of the company in 1965.

Buffett said Berkshire Hathaway was a terrible investment because the long term prospects of the textile industry was not promising. Over time, the company eventually closed all its mills. Buffett decided to make Berkshire Hathaway as a holding company for other investments.

Since Berkshire purchased National Indemnity Insurance in 1967, property and casualty insurance has been a core business and the propellent for growth. Insurance provided a float -- insurance premium held before being paid out in claims. This float was used for investments in securities, stocks, bonds and other businesses that have given the company a multitude of cash generating machines.

He was buying Berkshire stock at $9 to $11 per share. A single share of Berkshire Hathaway class A is now worth $619,000 per share

Today after a 50 for one split and the significant appreciation of our B shares, our original $4400 investment today is worth a $82,000.

Buffett actually is a fairly conservative investor. Using his valuation techniques, he determines a margin of safety and a target price for acquisition. He uses fluctuations in the market to acquire the stock at discounted prices.

In the 1970s, when the stock market was really cheap, Buffett sold stocks trading at 7 times earnings to buy stocks trading at 3 times earnings.

Northern Natural Gas had been headquartered in Omaha, but Ken Lay of Enron wrestled it away and moved it to Houston in the 1980s. 

When Enron went bankrupt, Dynegy acquired Northern Natural Gas, but that company needed cash and quickly sold it to Buffett at 7 times earnings. Northern Natural Gas is now part of the Berkshire's energy unit.

Warren Buffett has always loved trains, he enjoys travel by train and has an extensive model train set in his house. 

Yet for many years, he and Charlie Munger avoided railroads because of their high overhead, constant need for capital, with so much for maintenance and upkeep.

Buffett and Munger watched a lot of railroads go bankrupt by 1980 but by year 2000 they had consolidated to the point where the largest railroads had more economies of scale and higher profit margins.

Buffett started buying all the publicly traded railroads in 2009, and then particularly focused on Burlington Northern Santa Fe Railway, news of this spread on CNBC, Wall Street Journal. I followed him, buying shares in all the railroads, particularly BNSF Railway and Union Pacific.

When Buffett bought BNSF Railway in 2010, it was his biggest acquisition to date, about $40 billion including debt, he called it an all in wager on the economic future of the United States, "I love these bets.” He paid $100 per share of BNSF Railway stock, about 18 times earnings.

Another big bet was placing $35 billion into Apple stock. That position grew into a $174 billion position by on Dec. 31, 2023, but is now worth $150 billion after Buffett sold some Apple shares.

Berkshire Hathaway operating earnings were $37 billion in 2023, up 17% over 2022's $30 billion.

Buffett is worth about $134 billion. He plans to pass his assets to charity after his death. He already gave some assets to his children. He is 93 years old.

So prized by collectors, the old annual reports of Berkshire Hathaway sell for a lot of money on eBay. For example the company's 1998 annual report sells for $1099.99 on eBay.

Favorite Warren Buffett Quotes

The first rule of an investment is don't lose money. And the second rule of an investment is don't forget the first rule.

The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.

It's what you do right now, today, that determines how your mind and body will operate ten, twenty, and thirty years from now.”

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.

“You’ve gotta keep control of your time, and you can’t unless you say no. You can’t let people set your agenda in life.”

“There seems to be some perverse human characteristic that likes to make easy things difficult. ”

Some online dictionaries even call such a person a 'complicator.'

Honesty is a very expensive gift, Don't expect it from cheap people

The most important investment you can make is in yourself.

Buffett's wealth is 99% in Berkshire Hathaway stock. "Charlie and I feel totally comfortable with this eggs-in-one-basket situation because Berkshire itself owns a wide variety of truly extraordinary businesses."