Arnold Van Den Berg Talks at Texas Lutheran University on Investing, Sacrifice and Forgiveness
By Dave Sather
For quite some time I knew Arnold Van Den Berg merely by reputation. His firm manages $2 billion in Austin and is widely followed by the value investing community. Since I had discussed him several times with my Texas Lutheran University students, I thought I’d get him on campus.
After sending letters and emails I almost gave up convinced that Van Den Berg was too busy for us. And then the phone rang. It was Arnold himself.
I told Arnold about our program at TLU and about previous speakers. He said he didn’t think he was the right person to address my students. He explained that he did not have an M.B.A. from Harvard, and that he didn’t go there for an undergraduate degree either. In fact, he didn’t even go to college. He is a completely self-taught student of the world.
As Arnold spoke, I was quickly confused. How does a Dutch immigrant build a $2 billion asset management firm—without the benefit of formal education? Although I focused on the lack of a college degree, I soon learned there was a far different story to be told.
To look at Arnold Van Den Berg, there is nothing unusual about him. He is 73 years old, has a sincere smile and tons of enthusiasm for life. His story is one of perseverance, the will to overcome, and the ability to forgive and love.
Arnold’s family name at birth was Mandelberg. Van Den Berg, along with a variety of other aliases, was chosen to hide his Jewish heritage from the Nazi’s. In 1933 Arnold’s mother and father moved from Germany to Holland to escape Hitler. Arnold and his brother Sig were born in Holland, just four blocks from Anne Frank. Today, you can see the family listed in the Anne Frank Museum.
The Van Den Berg’s challenges were quite similar to Anne Franks’. His parents hid in a small closet, just large enough for two people to stand in. They stayed in hiding for two and a half years, until the Nazi’s found them and took them to Auschwitz—the notorious concentration camp, better known as an extermination camp. At the time, the Nazi’s were exterminating 10,000 people a day.
Prior to being found, Arnold’s parents knew if a mother and child showed up to Auschwitz they would both be immediately gassed. In a “Hail Mary” attempt, Arnold’s parents sent him, carrying forged documents, with a nineteen year old girl they didn’t know from the Dutch underground. At four years of age, complete strangers smuggled Arnold across enemy lines to the safety of an orphanage—with full knowledge that if caught—they would be executed on the spot.
For the next three years Arnold suffered, but survived in the orphanage. There were extreme shortages of food and water, which took their toll. Arnold said that food was so short that you didn’t dare close your eyes during the prayer for fear of opening them to see all the food on your plate was taken by the other kids!
After the war, as a developing child, Arnold was smaller than when he arrived at the orphanage. He was so emaciated that his father didn’t even recognize him and almost left without him.
It took years for Arnold’s body and mind to deal with the stresses endured, but he was alive. More amazingly, after fifteen months of being marked for death, both of his parents survived Auschwitz—a near statistical impossibility.
As Arnold discussed this time with my students, he commented on how bad people can be if the wrong kind of leadership and thoughts are encouraged. He added that people assume he is bitter towards the German people—but he is not at all. “I learned to forgive, and this is one of the most important things I can teach you about life. You must learn to forgive—if you don’t, you get stuck in that moment. You become bitter and angry. If you retain bitterness, it will kill you. However, when you learn to forgive you see people in a completely different light.”
While Arnold spoke, I looked around the room. The audience was speechless. They expected a talk on investing, but received a message worth more than any investment could ever return.
After World War II the Van Den Berg’s moved to the United States. The war was over, but its effects were not. Arnold struggled physically and academically, but he never quit. He recognized that no matter how tough things get, if you stick it out, you achieve a mental breakthrough that allows you to overcome all obstacles.
Arnold’s mental toughness was inspired by the stories his parent’s told of surviving Auschwitz. The Nazi’s marched captives twenty miles between camps in sub-zero temperatures. Twenty four hours of marching: no breaks, no water, no food. If you fell, or your knee touched the ground, you were executed.
During the grueling marches, Arnold’s father focused on locking his knee, one step at a time, ignoring the pain, hunger, thirst and fatigue. He weighed a mere 85 pounds. Eventually, he realized his mind had powers beyond anything he thought possible.
In time, Arnold recovered from the malnutrition incurred during the war. In high school he joined the gymnastics team and began to focus his attentions on the rope climbing competition. He visualized what he wanted to accomplish and reinforced that vision every day. Eventually, the skin-and-bones-kid realized his vision, becoming a top ten gymnast in his specialty in the nation. In doing so, he was able to climb a 20 foot rope from a sitting position in 3.5 seconds. It was a miraculous transformation.
Later in life, Arnold recognized he had tapped the power of his subconscious mind, allowing him to persevere and overcome.
As an adult, Arnold still faced serious obstacles. He could not communicate well, had no money and no formal education.
He tackled these challenges head-on, enrolling in a communications class. On the advice of his teacher, he volunteered for every assignment in class realizing it would force him to practice. In 1968, he earned his securities license at the peak of the market—but no investment firm would hire him.
Undeterred, Arnold borrowed $2,500 and started his own firm—Century Management. By the look of things, his timing could not have been worse; people were reeling from high unemployment, high inflation and plummeting stocks.
With his trademark tenacity, Arnold read everything he could on financial analysis. He observed that investors who followed the teachings of Benjamin Graham (the father of value investing) did well during this difficult time. It was 1974 and the stock market sat at a six year low. Blue chip stocks were down 45% and the average stock had fallen 75%. Arnold thought this was a great opportunity to launch his business.
Arnold learned rapidly and took good care of clients—but business was tough. He stressed to my students that you must have faith to build a business—“the key is faith.” He continued that people must see “the goal” and know what they are working towards. Furthermore, Van Den Berg told my students you must “overwhelm your goals with positive thoughts as the smallest negativity can sink you.”
In establishing his fledgling firm, Arnold recalled advice from his mother. She told him if you don’t take a risk, you’ll never make progress. As the firm grew, Arnold realized these risks must be intelligent ones, as the job of the smart investor is to reduce risk and preserve capital.
In the field of investing, Arnold emphasized discipline over genius. Century Management doesn’t use complex formulas. It is all basic math. Despite the simplicity, Century Management has earned 13% per year for the past 38 years!
Arnold then changed topics, asking my students “Where else but in America can you make something from nothing? Human ingenuity is the most important factor to society today. Ingenuity and capitalism in America creates something out of nothing.”
Making observations about the greatness of the United States, Arnold pointed out that we have the universal currency. Unlike other nations, there are no currency restrictions. We have the choice to vote and democracy—“a system that corrects the persistence of error.” We have property rights, the largest capital markets and the strongest military. We have the opportunity to create anything we want in our lives.
These characteristics attract people, talent and capital from all over the world to America.
Given these things, Arnold said “The only thing you are owed in this country is an opportunity--that doesn’t exist everywhere. In Germany, my parents couldn’t own land because we were Jewish; in Holland we couldn’t be citizens--we weren’t Dutch. But in America you can own land and become a citizen after living here only five years.”
As Arnold concluded, I realized that at age 73 he had spoken for three and a half hours—and had the energy and enthusiasm to go three and a half more.
I’m not sure I’ll ever come close to Arnold Van Den Berg’s accomplishments as an investor or businessman. However, he is the kind of man I aspire to be.
Dave Sather is a Certified Financial Planner and the president of the Sather Financial Group in Victoria, Texas. Sather Financial is a value investing and financial planning firm which manages about $300 million.
Dave also teaches a program on value investing and financial statement analysis at Texas Lutheran University and is a director of Business Bank of Texas.