Warren Buffett: Why I Paid Someone $60 Million for Their $2,500 Investment
Written by
Andrew Lisa
Edited by
Molly Sullivan
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Generations of aspiring investors and entrepreneurs have looked to Warren Buffett for inspiration, but who does the Oracle of Omaha turn to when he wants to be inspired?
It turns out that few people on earth have motivated and energized history’s most successful investor more than an immigrant born in 1893 in a Russian village near Minsk in what is now Belarus.
She came to America alone and penniless before turning $2,500 into an empire. Along the way, she earned Warren Buffett’s respect — and 60 million of his dollars.
Meet Mrs. B.
At the 2022 Goldman Sachs 10,000 Small Business Summit, Buffett dedicated much of his closing session remarks to the story of a woman he’s spoken and written about frequently over the years, whom he affectionately refers to as “Mrs. B.”
The story begins with an immigrant named Rose Blumkin, who landed in Seattle in 1917. Unable to speak a word of English, she wore a sign around her neck that read “Fort Dodge, Iowa.” The Red Cross helped get her there, and when she arrived, she reunited with her husband, who had come to America first. Frustrated with being unable to learn the language or find a familiar community, she moved to Buffett’s hometown of Omaha, Nebraska, two years later.
There, she found a community of Russian Jews, assimilated and settled down.
The American Dream Didn’t Come Easy, but It Came
With the help of her school-age daughter, Mrs. B’s English began to improve and she spent the next 20 years selling used clothing, saving her pennies and bringing her family to America one by one.
In the late 1930s, after two decades of frugality and scrimping, Blumkin had $2,500.
You might assume that someone with a 12-figure net worth would scoff at such a pittance, but Buffett knows that the term “a lot of money” is relative.
“It was everything they had in the world,” he said to the Summit audience.
Despite not being able to read or write, Blumkin, who Buffett said “had never gone to school one day in her life,” took her life savings to Chicago and achieved her lifelong dream of opening a furniture store. Thanks to her dogged perseverance, thrifty nature and natural talent, a small business became a big business — very big.
How $2,500 Became $60 Million
By 1983, Nebraska Furniture Mart had become so successful that it caught the attention of Blumkin’s former near-neighbor in Omaha, who had made quite a name for himself, as well.
“She built a business, which she sold to me in 1983 for $60 million, approximately,” Buffett told the cheering crowd. “And which did a billion and a half dollars worth of business last year.”
The fourth generation of her family now runs the business and Mrs. B stayed with Buffett almost until the end.
“She worked for me until she was 103,” Buffett said to gasps from the crowd.
She died one year later at 104 in 1998 without having invested another dollar into her business for the entire 60 years.
“Incidentally, there’s been no money put in it since the $2,500,” Buffett told the audience. “That’s been the total capital.”
Buffett Didn’t Buy a Furniture Store, He Bought the Legacy of an Understated Business Genius
So, why would one of the world’s wealthiest and most respected business leaders pay $60 million for what started as an immigrant’s $2,500 investment?
According to Buffett, it wasn’t about the $2,500 or the $60 million — it was about Mrs. B and her brand of business.
“She didn’t bring anything unique in furniture,” he told the Goldman Sachs audience. “But she brought a determination to succeed. She knew she could outwork anyone else and she cared about her customers. She worked at very low gross margins, but she built this incredible business.”
Buffett summed up the secret to Mrs. B’s success and his ongoing admiration for her and her business acumen in his annual letter to Berkshire Hathaway shareholders in 1983.
“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,” he wrote. “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.”
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