#279 What I Learned Before I Sold to Warren Buffett

Summary Notes


In the episode, Barnett Helzberg Jr. recounts his serendipitous encounter with Warren Buffett, which led to the sale of his family's 79-year-old jewelry business, Helzberg Diamonds, to Berkshire Hathaway. Helzberg shares the story of his company's growth, his reluctance to go public, and his commitment to maintaining a personal connection with every manager, despite the company's expansion to 143 stores nationwide. He details his strategy to grab Buffett's attention on a New York sidewalk and his conviction that their successful family business aligned with Buffett's investment criteria. Helzberg reflects on the importance of company culture, trust, and management autonomy, emphasizing that his decision to sell to Buffett was driven by the desire to preserve the company's character and jobs. He also discusses his father's influence, the value of attending Berkshire's annual meetings, and the lessons learned from Buffett's wisdom. Throughout the episode, Helzberg emphasizes the themes of seizing opportunities, entrepreneurial spirit, and the power of personal connections in business.

Summary Notes

Encounter with Warren Buffett

  • Barnett Hellsberg recounts a chance meeting with Warren Buffett on a New York sidewalk.
  • Hellsberg seizes the opportunity to pitch his family's jewelry business to Buffett.
  • He describes his company, Hellsburg Diamonds, as a good match for Berkshire Hathaway's investment criteria.
  • Buffett requests confidential information to consider the proposal.
  • Hellsberg reflects on the potential abruptness of his approach but is confident in the compatibility of his business with Berkshire Hathaway's portfolio.

"Hello, Mr. Buffett, I said. I'm Barnett Hellsberg of Hellsburg Diamonds in Kansas City. I didn't sense any recognition in his face, but he politely shook my hand and said, hello. Willing to hear me out?"

This quote captures the initial interaction between Hellsberg and Buffett, highlighting Hellsberg's direct and bold approach in introducing himself and his company.

"Send me the information. It will be confidential."

Buffett's response to Hellsberg's pitch is straightforward, indicating his openness to considering the business while emphasizing confidentiality.

Hellsburg Diamonds and Berkshire Hathaway

  • Hellsberg's company had grown to operate 143 jewelry stores nationwide.
  • Expansion beyond personal management comfort and resistance to going public are noted.
  • Hellsberg's admiration for Berkshire Hathaway and Buffett's investment philosophy is evident.
  • The success and reputation of Berkshire Hathaway are highlighted, along with its diverse business holdings.

"I believe that our company matches your criteria for investment, I said."

Hellsberg's assertion about his company's suitability for Buffett's investment reflects his understanding of Berkshire Hathaway's acquisition preferences.

"We associate ourselves with some real jewels of the American business world, he said. And I think it's quite fitting that Hellsburg joins this collection of jewels."

Buffett's eventual endorsement of Hellsburg Diamonds as part of Berkshire's "collection of jewels" underscores the alignment between the two companies' values and business approaches.

Personal Connection to Berkshire Hathaway

  • Hellsberg purchased shares of Berkshire Hathaway to learn from Buffett.
  • He emphasizes the value of attending annual meetings and absorbing Buffett's wisdom.
  • Buffett's people-oriented approach and advice on choosing a job resonate with Hellsberg's own business philosophy.

"I had purchased four shares of Berkshire Hathaway stock in 1989 just so I could attend Berkshire's annual meetings and pick up some of Buffett's wisdom."

Hellsberg's investment in Berkshire shares serves as a means to gain insight into Buffett's business strategies and philosophies.

"Great people do great things."

Buffett's quote, as recalled by Hellsberg, encapsulates the investor's belief in the power of exceptional individuals to achieve greatness in business.

Acquisition of Hellsburg Diamonds by Berkshire Hathaway

  • Hellsberg initially hesitates to send confidential information but is reassured by Buffett's written and personal assurances.
  • Buffett's content marketing via shareholder letters is lauded for creating unique business opportunities.
  • The acquisition process with Buffett is described as unusually fast and based on trust rather than extensive due diligence.

"I can smell these things, he said. And this one smells good."

Buffett's intuitive approach to evaluating Hellsburg Diamonds highlights his confidence in his ability to assess a company's potential without exhaustive investigation.

"You wouldn't do anything to hurt this company, he said."

Buffett's trust in Hellsberg's integrity negates the need for a non-compete clause, illustrating Buffett's hands-off management style and belief in the honor of the business owners he works with.

Buffett's Investment Philosophy and Management Approach

  • Buffett's preference for holding investments indefinitely is conveyed.
  • The autonomy given to managers of Berkshire subsidiaries is cited as a key to their success.
  • Buffett's personal engagement with business owners is noted, including his courtesy in seeing Hellsberg off after their meeting.

"When we get somebody who is a 400 hitter, we don't start telling them how to swing."

Buffett's analogy emphasizes his non-interfering approach to managing acquired companies, trusting in the expertise of their leaders.

"We like dealing with owners who care what happens to their companies and people."

Buffett's preference for working with conscientious sellers who prioritize their companies' and employees' well-being is highlighted as a factor in his acquisition decisions.

Legacy and Pride in Hellsburg Diamonds

  • Hellsberg reflects on the legacy of his family business, founded in 1915, and its growth over the years.
  • He expresses confidence in the company's future under Berkshire Hathaway's ownership.
  • The pride in the company's accomplishments is shared, culminating in the successful acquisition by Buffett.

"Our business was in capable hands."

Hellsberg's final assessment of the acquisition outcome conveys his trust in Buffett's ability to steward the family business into the future.

Book Excerpt and Philosophy of Learning

  • The podcast excerpts from Barnett C. Hellsberg Jr.'s book, "What I Learned Before I Sold to Warren Buffett."
  • Hellsberg acknowledges the influence of others' ideas on his own thinking and practices.
  • The importance of learning from history and previous generations is underscored.

"I claim only one original idea in my entire life, and with this book wish only to reveal myself as a plagiarist of wonderful ideas from a lot of great people through the years."

Hellsberg's humble admission of borrowing ideas from others reflects his philosophy of learning and the value he places on collective wisdom.

"How do I do that?"

The podcast host's reflection on the impact of decisions across generations emphasizes the long-term significance of business and personal choices.

Early Family Business and Entrepreneurial Spirit

  • Barnett Hellsberg recounts his father taking over the family jewelry business at age 14 after his grandfather suffered a stroke.
  • The family business, a jewelry shop in Kansas City, Kansas, was initially managed by an uncle during the day until Barnett's father could attend after school.
  • Barnett's father demonstrated an entrepreneurial spirit by moving the business to a larger building and labeling himself a diamond merchant, despite selling common items.
  • Barnett was taught the value of learning by doing and was given a job in the family business at age 15, which instilled in him confidence and the joy of work.
  • The concept of "founder mentality" is emphasized as essential, even for those who did not start the business themselves.

My father was 14 when he took over the family business. My grandfather Morris had a stroke, and there was no one else to run this little jewelry shop in Kansas City, Kansas.

This quote introduces the background of Barnett's father's early start in the family business and sets the stage for the discussion on the importance of stepping up during challenging times.

So now, three years later, dad moved the business into a larger, grander building and with high spirits of youth, proclaimed himself a diamond merchant.

This quote illustrates Barnett's father's ambition and willingness to embrace a leadership role, which is a key aspect of entrepreneurial spirit.

Dad knew the importance of learning by doing. So, of course, he started me off in selling, and so he immediately feels the thrill of making his own money.

This quote underscores the value of hands-on experience in business and the positive impact it can have on a young individual's confidence and approach to work.

Overcoming Challenges and Positive Role Models

  • Barnett became president of Hellsberg Diamonds at age 29, stepping up due to his father's illness, mirroring his father's experience.
  • He acknowledges that all successful people face failures and the importance of maintaining a positive outlook.
  • Barnett highlights the significance of having positive role models, such as Ewing Kaufman, who demonstrated perseverance and entrepreneurship.
  • The story of Ewing Kaufman serves as an inspiration, showing one's ability to overcome adversity and achieve success through hard work and determination.

I became president of Hellsberg Diamonds in 1962 at age 29 when my father became ill.

This quote parallels the earlier situation with Barnett's father and emphasizes the cyclical nature of family businesses and the need for readiness to take charge.

All successful people have failures. And the one thing I love about this guy, he's just super positive.

This quote reflects the acceptance of failure as part of the journey to success and the importance of maintaining a positive attitude.

Entrepreneurship and Founder Mentality

  • Barnett discusses the essence of entrepreneurship, which involves a relentless drive, resilience, and a willingness to take risks.
  • He stresses that entrepreneurship is not for everyone and that one must have a genuine passion and determination to succeed in this path.
  • The "founder mentality" is crucial, even for those who inherit or join existing businesses, and it is characterized by taking ownership and striving for success.

No one has an easy prescription to become a successful entrepreneur. If they say they do, they're fibbing.

This quote emphasizes the complexity and uniqueness of the entrepreneurial journey, dismissing the idea of a one-size-fits-all formula.

If you possess this obsession of seeing your own creative notions succeed and are willing to pay the price, then you have no choice but to pursue the life of an entrepreneur.

This quote encapsulates the intrinsic motivation and commitment required to be an entrepreneur, suggesting it is not merely a choice but a calling for some.

Overcoming Generational Cycles and Embracing Challenges

  • Barnett is motivated to disprove the "shirt sleeves to shirt sleeves in three generations" myth, which suggests wealth is often squandered by the third generation.
  • He believes that with the right mindset and actions, one can avoid this cycle and continue building upon the family's success.
  • The idea of being an entrepreneur does not necessarily require starting a business from scratch; it is about having the mentality and approach of a founder.

Proving wrong the shirt sleeves to shirt sleeves in three generations. Myth.

This quote reveals Barnett's determination to challenge a common belief about generational wealth and success, aiming to sustain and grow the family business beyond the typical cycle.

Focus on Controllable Elements and Opportunity Cost

  • Barnett learned from his father the importance of focusing only on controllable aspects of business, a trait common among successful people.
  • He discusses the concept of opportunity cost and the importance of prioritizing time and resources on the most promising aspects of business.
  • The lesson of "upgrading the herd annually" by closing weaker stores to focus on more successful ones is highlighted.
  • Barnett echoes Warren Buffett's investment philosophy of focusing on successful companies rather than turnaround opportunities.

You should only concern yourself with things that you can control.

This quote underlines a key strategy in business and life: to focus on areas where one can make a difference, rather than worrying about uncontrollable factors.

What is the actual cost of sending a highly talented person to create an average performance out of a dry well, rather than sending him or her to a gusher that can be turned into a super gusher?

This quote addresses the concept of opportunity cost and the importance of allocating resources to areas with the highest potential for growth and success.

Commitment to Excellence

  • Barnett emphasizes the importance of committing to being the best in one's industry.
  • He suggests defining what "the best" means and focusing intently on achieving that status.
  • Estee Lauder is used as an example of someone who excelled at doing things that don't scale, a concept from Paul Graham.

"Commit yourself to be the best. Define what that means, and focus on the head of that pin like no one in your industry."

This quote highlights the importance of having a clear goal and a laser-focused approach to becoming the best in one's field.

The Advantage of Personalized Service

  • Barnett discusses the value of providing exceptional service as a competitive advantage for entrepreneurs.
  • He shares an experience at a locally owned grocery store that illustrated personal service, with owners Mike and Libby providing their home phone numbers for customer feedback.
  • Personal service is seen as something large companies struggle to replicate.

"Unloading the groceries, I found that the home phone numbers of the owners, Mike and Libby, were listed right on the sack with the invitation to call."

The quote exemplifies the level of personal service that can differentiate a small business from larger competitors and create customer loyalty.

Wisdom through Quotes

  • Barnett appreciates maxims and includes quotes from various founders and historical figures at the end of each chapter in his book.
  • He believes these quotes distill the essence of the chapter's main idea into a single, impactful sentence.
  • A quote from Thomas Watson about having one's heart in their business is highlighted, as well as the importance of ego management.

"To be successful, have your heart in your business and your business in your heart."

This quote from Thomas Watson emphasizes the importance of passion and dedication in business success.

Ego Management

  • Barnett stresses the significance of keeping one's ego in check, using a quote from his father to illustrate the concept.
  • The quote "Big people grow, little people swell" is used to summarize the idea that personal growth is preferable to ego inflation.
  • He ties ego management to business success, suggesting that humility is a valuable trait for entrepreneurs.

"Big people grow, little people swell."

This quote serves as a metaphor for the idea that truly successful individuals focus on growth and improvement, while those driven by ego tend to become self-inflated without substantial development.

The Two Supplier Principle

  • Barnett recounts a lesson from his father about the importance of having multiple suppliers, which he calls the "two supplier principle."
  • He shares a story from the 1960s when one bank refused a loan despite a long-standing relationship, highlighting the risks of relying on a single supplier.
  • The principle of maintaining relationships and not burning bridges is emphasized, even when faced with challenging situations.

"We were saved by the two supplier principle when at death's door, you may be saved by a relationship."

The quote illustrates the practical benefit of having more than one supplier or partner, as it can provide a safety net in critical times.

Testing New Ideas

  • Barnett discusses the importance of testing new business ideas and the strategy of focusing on core competencies.
  • An executive's suggestion to outsource credit services to focus on selling diamonds is highlighted as a case study.
  • Barnett underscores the necessity of assigning competent individuals to test important new ideas.

"Only a fool tests the depth of the water with both feet."

This African proverb is used metaphorically to convey the importance of cautious experimentation in business rather than recklessly diving into untested waters.

Business is People

  • Barnett asserts that treating people well and creating a welcoming environment can be a competitive edge.
  • He compares his approach to rival jewelry stores, opting for inclusivity over restrictive policies.
  • The idea that businesses should operate on customer terms is emphasized.

"Your food and drink are welcome here."

The quote demonstrates Barnett's philosophy of creating a customer-friendly environment as a means of differentiation and attracting business.

Urgency and Movement

  • Barnett values speed and urgency in business actions, believing it sets an example for associates.
  • He quotes psychologist and author Alfred Adler to reinforce the idea that consistent action is more trustworthy than words or intentions.
  • The emphasis is on the idea that actions reveal true priorities and are the basis for real progress.

"Trust only movement."

The quote from Alfred Adler is used to emphasize the importance of action over mere words or intentions in business.

Execution Over Ideas

  • Barnett believes that execution is more critical than ideas alone.
  • He shares maxims that highlight the importance of belief and quality in execution.
  • The chapter emphasizes that while many people have ideas, successful execution is what differentiates successful businesses.

"Quality is never an accident. It is always the result of high intention, sincere effort, intelligent direction and skillful execution."

This anonymous quote stresses that high-quality outcomes are the result of deliberate and skillful effort, not chance.

Trusting Your Own Judgment

  • Barnett highlights the importance of trusting one's own judgment, even when receiving advice from mentors.
  • He shares a personal story of a missed opportunity by not critically evaluating advice regarding mall locations.
  • The lesson learned is that advice should be considered, but the ultimate responsibility for decisions lies with the individual.

"He who takes bad advice is the one and only culprit in the scenario. Advice is advice, not a command."

The quote serves as a reminder that individuals must take responsibility for their decisions and not blindly follow advice.

Leveraging Accumulated Knowledge

  • Barnett advocates for utilizing the vast reservoir of human knowledge and experience to inform business decisions.
  • He emphasizes learning from others, including family, mentors, and literature, as a key theme of the book.
  • The importance of acknowledging one's limitations and seeking wisdom from those who are more knowledgeable is underscored.

No specific quote provided for this section.

Learning from Others' Experiences

  • Entrepreneurs often face challenges that others have already encountered and overcome.
  • Studying an existing industry and improving upon it can lead to success.
  • Henry Ford and Kinkos are examples of businesses that did not invent new products but improved existing ones.

"Study an existing industry and just do it lots better. Henry Ford did not invent the automobile, nor did Kinkos invent copying."

This quote emphasizes the idea that innovation does not always require inventing something completely new but can also come from enhancing what already exists.

The Value of Seeking Advice

  • Seeking advice and reaching out to experienced individuals can accelerate progress.
  • Steve Jobs exemplified this approach by actively asking for help, which often led to positive outcomes.
  • The risk of asking for help is minimal compared to the potential rewards of gaining knowledge or forming valuable connections.

"Advice is like just reach out and ask somebody... What's the worst case scenario? You wasted a phone call. What a fabulous risk reward ratio."

The quote highlights the minimal risk involved in seeking advice, suggesting that the potential benefits far outweigh the possibility of a wasted effort.

Trusting Your Intuition

  • Successful entrepreneurs like Barnett Hellsberg's father relied on intuition as well as business plans.
  • Intuition is informed by one's unconscious mind, which stores all life experiences.
  • Warren Buffett trusted his intuition when purchasing Hellsburg Diamonds, bypassing extensive due diligence.

"Intuition is a very powerful thing, more powerful than intellect, in my opinion... Your inner voice talks to you through your gut feelings."

This quote from Steve Jobs underlines the importance of intuition in decision-making and suggests that it can be more influential than intellectual reasoning.

The Role of Luck and Preparation

  • Luck can be viewed as being prepared to take advantage of opportunities.
  • Chance encounters, like Barnett's meeting with Warren Buffett, can be significant if one is prepared and proactive.
  • The concept of luck is linked to having everything in order, which can lead to success.

"Victory awaits him who has everything in order, or luck, as some people call it."

The quote from explorer Roald Amundsen connects luck with preparation, implying that being organized and ready can lead to what is perceived as fortunate outcomes.

Hiring the Right People

  • The quality of employees can significantly impact a company's success.
  • Larry Bossity and Max Levchin emphasized hiring competent individuals to maintain high standards.
  • Bill Gates noted that poor hiring decisions benefit the competition.

"Good people hire good people. I fear the reverse is true also."

This quote reflects the belief that competent employees tend to recruit similarly capable individuals, while the opposite can lead to a decline in overall company performance.

Focus as a Lever of Success

  • Narrowing a company's product line can lead to increased profits and success.
  • Hellsburg Diamonds' decision to focus solely on diamonds resulted in both higher volume and profits.
  • Focus allows businesses to leverage their strengths and improve efficiency.

"We had decided that the future course of Hellsburg diamonds was indeed in diamonds... Both volume and profit went up."

The quote describes the positive outcome of Hellsburg Diamonds' strategic decision to focus on their core product, which unexpectedly led to an increase in both sales and profits.

Collaborative Problem Solving

  • Diverse perspectives can lead to innovative solutions to problems.
  • Bringing together smart individuals for brainstorming can be highly effective.
  • The collective knowledge of a group is often greater than that of an individual.

"All of us know more than one of us."

This quote encapsulates the idea that a group's collective knowledge can surpass the knowledge of any single member, highlighting the value of collaboration and diverse input.

Mentoring as Brain Marination

  • Mentoring should not be seen as providing direct advice but rather as a process of absorbing various perspectives.
  • Over time, one's own thoughts and the insights gained from mentors blend to form solutions that best fit an individual's unique situation.

"My personal vision of mentoring is that no individual advice will necessarily fit you... When your brain is adequately marinated, you will look in the mirror, and a light bulb on top of your cranium will flash the answer that best fits you and your situation."

This quote presents mentoring as a process of thought assimilation, where the mentee eventually arrives at a personalized solution through reflection and integration of accumulated wisdom.

Maintaining Humility and Secrecy

  • Success can sometimes be more effectively managed by maintaining a low profile.
  • Entrepreneurs like Barnett Hellsberg's father and Leonard Lauder of Estée Lauder practiced discretion about their achievements.
  • Keeping success under wraps can be a strategic move in business.

"Bad boys move in silence... don't communicate your success."

The quote combines advice from Barnett Hellsberg's father and Leonard Lauder, both endorsing the idea that it can be advantageous to keep one's success quiet.

Balancing Work and Personal Life

  • Entrepreneurs must find a balance between work and personal life, including family time and health.
  • Missing important family events for work can lead to regrets, as the work emergency is often forgotten, but the absence is remembered by loved ones.
  • Decisions made today can have long-lasting effects on oneself and future generations.

"I wish that I had known sooner that if you miss a child's play or performance or sporting event, you will have forgotten a year later the work emergency that caused you to miss it, but the child won't have forgotten that you were not there."

This quote stresses the importance of prioritizing family and personal events over work emergencies, as the latter are often transient while the impact of absence on loved ones can be enduring.

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