Today, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) is recognized as one of the largest businesses in the world. Its CEO and largest shareholder, Warren Buffett (Trades, Portfolio), is also thought to be one of the best investors of all time.
However, back in 1977, the group was only just finding its feet. Its assets were only $1 billion compared to $500 billion today, and Buffett was snapping up businesses to add to his empire at a rapid pace.
In the mid-70s, the financial media and the rest of Wall Street started paying attention to Buffett and his activities. Before that, the investor was relatively unknown, and his reputation was nowhere near as impressive as it is today.
Wall Street Journal
In March 1997, the Wall Street Journal ran one of its first profiles on Buffett and his activities at Berkshire.
The newspaper described the Oracle of Omaha as a "bespectacled man of medium height and medium build whose hairline is receding." The article went on to describe his personality as a "curious mixture of the sophisticated and homespun."
The Wall Street Journal article gives an excellent overview of Buffett's business interests in the late 1970s. At the time, he controlled 53% of Berkshire's stock, a stake built up in the mid-1960s.
The newspaper described Berkshire as "a once-rundown New England textile concern" that the investor was able to revive by using its excess cash to "diversify into the auto and casualty insurance field and acquire Illinois National Bank & Trust Co. of Rockford, Ill, a highly profitable regional bank."
The 1977 profile also highlighted the fact that Buffett controlled 61% of Blue Chip Stamps.
Buffett acquired control of this business because he saw another opportunity to replicate the success he had with Berkshire. Blue Chip's main business was deteriorating, but the company had plenty of cash and a "float" of customer funds to deploy.
It was with Blue Chip that he made the offer to acquire See's Candy and 80% of Wesco Financial.
"Finally," the newspaper reported, "Mr. Buffett has a controlling interest in Diversified Retailing Co., an operator of a discount women's apparel chain of about 80 stores."
Buffett's private business also owned $100 million of stocks at the time. These included a 10% interest in the Washington Post, a 25% interest in Pinkerton's Inc. and 15% of GEICO.
Commenting on his investments, Buffett told the Wall Street Journal:
"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 of this profile, Buffett was only 46 years old, and he was only at the start of his career. This tells us a lot about the power of compounding over the long term.
Long-term thinking
Buffett had a controlling interest in three large back then. Over the next few decades, he piled up cash and waited for the perfect opportunity to turn capital into new investments. The result of this slow and steady approach is the Berkshire that we see today.
Buffett was never in a rush to get rich, and this mentality has helped him build one of the largest and stable conglomerates that has ever existed. We can learn a lot from his approach to investing in these early years, because that's when he built the foundations of the empire he has today.
Disclosure: The author owns shares in Berkshire Hathaway.
Read more here:
- Warren Buffett's 1974 Advice on Market Selloffs
- Warren Buffett: Cash Is King, Especially in Times of Crisis
- Learning From Warren Buffett's Early Mistakes
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