What I learned from reading What I Learned Before I Sold to Warren Buffett: An Entrepreneur's Guide to Developing a Highly Successful Company by Barnett Helzberg Jr.

1 of my favorite things about making this podcast is that I get to talk to so many founders.

A lot of those founders are dead, so I have one-sided conversations in the form of reading their autobiographies or their biographies, but in addition to that, because so many different entrepreneurs and founders listen to

the podcast, I get to meet and talk to founders still building companies today.

these conversations, a lot of these conversations I have with founders, is that a large part of your life is actually searching for your life's work.

There are a lot of them are looking for something that is uniquely them that they can do forever.

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As I walked past the Plaza Hotel on a glorious May morning in

I heard someone call out, Warren Buffett.

Turning in the direction of the voice, I saw a woman stop Buffett on the sidewalk and start a friendly conversation with him.

Buffett listened patiently to the woman who, as it turned out, was a shareholder of Berkshire Hathaway.

At the time, the legendary investor was the second richest man in the United States.

As it happened, I was in New York that day to meet with our financial advisors at Morgan Stanley to talk about our company, which at the time operated 143 jewelry stores nationwide.

Personally, I felt uncomfortable expanding the company beyond my ability to know every single manager on a first-name basis.

We had grown well beyond that point and we were still growing.

And we certainly didn't want some financial butcher carving up this jewel and selling it piecemeal.

As the woman said her goodbyes and turned to go, and as Buffett prepared to cross the street, I saw my own opportunity.

I'm Barnett Helzberg of Helzberg 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.

Then, right there on the sidewalk, I told 1 of the most astute businessmen in America why he ought to consider buying our family's 79-year-old jewelry business.

I believe that our company matches your criteria for investment I said to which he replied simply send me the information it will be confidential.

My conversation with Buffett lasted no more than half a minute.

My idea of course was to grab his attention.

How often do you encounter Warren Buffett on a sidewalk and pique his curiosity in your family company?

As I walked away, I wondered whether my approach might have seemed abrupt, if not downright presumptuous.

Yet I felt certain that our successful three-generation family business made a perfect fit with Buffett's Berkshire Hathaway, which Fortune magazine had repeatedly named as 1 of the 10 most respected companies in America.

Berkshire's $11.9 billion net worth was greater than Coca-Cola and PepsiCo combined.

It was at the time a collection of 30 businesses, including such signature names as See's Candies, World Book, and Nebraska furniture mart.

It was the largest shareholder in Gillette, Coca-Cola, and American Express.

Imagine our gut-busting pride when as the third generation owners of Helzberg, Buffett later explained why he decided to buy our business.

We associate ourselves with some real jewels of the American business world, he said.

And I think it's quite fitting that Helzberg joins this collection of jewels.

It's just exactly the kind of company that we like to invest in.

I would hate to compete with you fellows.

I'd rather be on your side of the fence and that's the side we're going to be on." My dream buyer for the family business all along was Warren Buffett.

I knew we could trust him to keep the headquarters in Kansas City, resist changing the company's character, and retain the jobs of all of our associates.

It might have been simpler to sell to the highest bidder, but that notion seemed as sensible as choosing a brain surgeon based on the lowest price rather than on talent and reputation.

That sounds like something Buffett would say himself.

But that notion seemed as sensible as choosing a brain surgeon based on the lowest price rather than on talent and reputation.

I had purchased 4 shares of Berkshire Hathaway stock in 1989 just so I could attend Berkshire's annual meetings and pick up some of Buffett's wisdom.

So that is 4, 5 years before he randomly runs into him on the sidewalk in New York City.

She said I'd push it, purchase the shares so I could attend Berkshire's annual meeting and pick up some of Buffett's wisdom.

His presentations are warm and unpretentious.

He's often quoted saying, great people do great things.

He also likes to say, we only buy companies that we trust.

My first visit to a Berkshire Hathaway annual meeting was quite a revelation and taught me a great deal about Warren Buffett and his philosophies.

My notes included, hire 7 footers, that is hire people with incredible abilities.

Another very, very strong impression was obtained through an answer he gave a Kellogg Business School student who asked him, how do I determine which job to take?

Warren's answer was simply, get a job you love at a company you respect.

His people orientation was obvious and since I had been taught from day 1 by my dad that business is people, this was most impressive.

Buffett recounted the story of how he acquired our company to shareholders this way.

Barnett said he had a business that we might be interested in.

When people say that, it usually turns out that they have a lemonade stand with potential.

Of course, to quickly grow into the next Microsoft.

So I simply asked Barnett to send me the particulars.

That, I thought to myself, will be the end of that.

I promptly went home and sent Buffett nothing, afflicted with hangups about confidentiality.

But 1 night, I reread the chairman's letter in the Berkshire Annual Report.

And I'm just gonna interrupt this real quick.

This is another example of why I've repeated over and over again.

I think Berkshire's Warren Buffett shareholder letters may be the greatest example or the most successful example of content marketing in the history of business.

The amount of opportunity, unique opportunity that flows to Buffett or that has flowed to Buffett as a result of this is just remarkable.

But 1 night I reread the chairman's letter in the Berkshire Annual Report.

There was Buffett again, inviting companies that meet his acquisition criteria to send him information.

And he would promise complete confidentiality.

While shaving the next morning, I looked at the slow learner in the mirror and began to scold myself for procrastinating.

He told you in person it would be confidential.

Not long after we sent Buffett our financial information, so Buffett also talks about the fact that you'll get a response from him really rapidly.

Not long after we sent, and this is another example of that, not long after we sent Buffett our financial information, He called us and told us he wanted to talk.

Soon we were in his office in Omaha negotiating a sale.

And this is more on the speed of the process.

This can be the fastest deal in history, Buffett said.

Surprised at how fast the negotiations were moving.

Most suitors demand to see every scrap of paper you've ever generated and to interview every top manager.

I can smell these things, he said, and this 1 smells good.

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

When a guy says that to you, he has you on your honor for the rest of your life.

When Buffett buys a company, he's not looking for a quick resale to make a buck.

He told us, someone asked 1 time what my favorite holding period for securities is, and I said forever.

And that's exactly the way we feel about our businesses.

When we were ready to leave his office and asked if a cab could be called, he insisted on walking us to the elevator, riding it down with us, and standing on the street to wait with us for the cab.

Warren Buffett's approach to purchasing companies is very straightforward.

He will give you an answer immediately if he has any interest, and he will immediately give you a non-negotiable price.

I read another, I read an entire book called Jim Clayton First Dream.

It's episode number 91 of Founders about this non-negotiable price.

Buffett bought that guy's company as well.

I think I talk about it in episode number 91, but they start out, Buffett's like, okay, I'll give you, you know, 1250 bid, if I remember correctly.

So apparently, I'm curious if you have any other examples of him, of Buffett actually willing to negotiate a price, but this is something I've seen a few times, the fact that he will immediately give you a non-negotiable price.

So back to this after buying Helzberg, Buffett explained to shareholders that our ownership structure enables sellers to know that when I say we are buying to keep the promise means something.

Buffett continued, we like dealing with owners who care what happens to their companies and people.

A buyer is likely to find fewer unpleasant surprises dealing with that type of seller than with 1 simply auctioning off his business.

Explaining how he makes this hands-off approach work, Buffett said that it was because the managers operate with total autonomy and they do such a terrific job, we don't really need anyone to supervise them.

Managers of Berkshire subsidiaries run their own shows.

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

I think if my dad, Barnett Sr., and my grandfather Morris had still been alive, they too would feel proud and comfortable that our family business, which started in 1915 from a single store in Kansas City, Kansas, had grown by 1994 into a group of 143 stores in 23 states, with total sales of $282 million.

As Buffett himself finally described the deal that began on a New York sidewalk, we weren't talking lemonade stands.

That is an excerpt from the book I'm gonna talk to you about today which is What I Learned before I sold to Warren Buffett, an entrepreneur's guide to developing a highly successful company and is written by Barnett C.

Okay so I want to jump to the very first page even before the introduction I just read you and he has a very unique I guess you almost consider it's like a preface It says a confession of plagiarism And he says I was always taught that many many people were out there developing ideas that I could use I have found that to be true throughout my life These thoughts and ideas have all been borrowed or stolen from many wise people.

I have always solicited other people's opinions and tried to listen intently when they were espousing things, even when I was in pretty violent disagreement.

Therefore, I claim only 1 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.

Think of the world as your garden of marvelous people and ideas with unlimited picking rights for you.

So it's obviously an idea I very much agree with.

Obviously, I'm dedicating my life's work to uncovering the ideas from people in the past and hopefully like push those ideas and help push those ideas rather down the generations.

But this idea of like we all use other people's ideas is something almost every single person you and I study on this podcast also did.

I was telling a friend of mine, 1 of my favorite quotes, which comes from Poor Charlie's Almanac, which is that he...

Obviously, Charlie Munger is an advocate for this idea.

He said he's read hundreds and hundreds of biographies.

He says, if he ever had a chance to teach...

I think he said teach finance, maybe teach business, but I'm pretty sure he said, if I ever had the chance to teach finance, my entire curriculum would just be studying a hundred different companies that did something right and did something incorrectly.

But 1 of my favorite quotes from Munger is that Cicero is famous for saying that a man who doesn't know what happened before he's born goes through life like a child.

So you have now it's me quoting Munger who's quoting Cicero back to Munger.

Cicero is right to ridicule somebody so foolish as to not know history.

And so Barnett Jr., 2 of the people that he constantly references learning from are his grandfather Morris, who started the company over 100 years ago, and his dad.

And so I'm gonna tell you this right up front, because I discovered this as I went through the pages almost to the very end of the book he's constantly talking about what his father taught him.

He's the third generation that has been trusted to manage this family business right.

And what's crazy about this is that his dad had been dead for almost 30 years by the time that this book came out and the book is almost 20 years old itself and that is a main this is such an important part I'm getting like tears in my eyes I don't even know why This is such an important part to reading all these books over and over again.

And you see this pattern, the fact that I had no idea, maybe it's just because I was younger, but I had no idea how it was possible that the decisions that you and I are making now are going to resonate through the generations and in many cases the people that we study are fixing poor decisions made by previous generations.

I was just recently thinking about this because when I read the book Cable Cowboy on episode 268, the founder of the cable company, TCI, that John Malone's going to come in and try to rescue, really.

Bob didn't have a lot of money he goes to his father and his father loans him 2500 dollars on a very speculative.

You know decisions like I'm gonna jump into this new industry called cable and you'll see what happens and it hit me later on in the book on my oh my god.

That 2500 dollar loan that Bob's father gives him winds up because the business is so successful, obviously Malone plays a part in that, that $2, 500 loan turns into hundreds of millions of dollars for his grandsons.

Imagine the difference in his grand that 1 decision had on the effect of the lives of people that weren't even born yet.

And so the book that I'm holding my hand is an example of like a great dad that took time to teach his son by example and through action, all of the importance that he learned, the lessons he learned, most of which were how to build and run a successful business that generated unbelievable wealth for that family.

And so when I read a book like this and I get to the end, it's not okay.

Well, I learned all about Barnett, Helzberg Jr.

And his dad and maybe his grandfather Morris and like, how do I do that?

So that was playing through my mind As I worked my way through the book, I have a lot of highlights, so let me jump into, he gives us the background.

miniature chapters, just about lessons he learned, what he said, what did I learn before I sold to Warren Buffett, but he starts the book talking about what he learned as a young child growing up in this family business.

My father was 14 when he took over the family business.

My grandfather Morris had a stroke and there was no 1 else to run this little jewelry shop in Kansas City, Kansas.

Because dad was in school, the family persuaded an uncle to watch the store each day until dad arrived from school.

I don't believe my father ever questioned the family's decision.

So the year that is happening, His dad is 14, has to take over the jewelry shop.

At 17, so now 3 years later, dad moved the business into a larger, grander building, and with high spirits of youth, proclaimed himself a diamond merchant.

The shop sold the same mix of rings and watches as everyone else, but that label let the world know that he had big plans for himself and his family business.

And so we see his dad through his actions saying, hey, I was forced.

He threw it threw me into the deep end of the pool as like a metaphor for that.

So he says he nurtured and demanded that same positive drive to succeed, whatever the challenges in his 3 sons.

He gave me summertime employment when I was 15.

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.

He starts making his first sale and he says I began to have confidence that I could do this.

And another main theme of the book is like hey listen I didn't start this business I didn't found this business people might not even consider me an entrepreneur but he has founder mentality and that's the way he thought about himself he had he thought about even at such a young age like I'm gonna take ownership of this I was an entrepreneur a master of my own destiny I could do whatever I set my mind to.

Listen to, these are all lessons that he got from his dad.

Like, I tried to do the same thing with my kids.

It's like, I don't care what you do, just know that if you really love to do it you can do whatever you want to do.

I could do whatever I set my mind to anything was possible.

I can't tell you where other entrepreneurs get their drive but I'll bet many catch the bug young like I did.

That feeling that you're your own boss that your future is in your hands is a frightening and thrilling prospect.

That's something you and I talk about euphoria and terror, right?

We are addicted to the ones and the tens.

We are not living how most people live lives of quiet desperation, right?

That famous quote, the range bound between maybe 4 and sixes.

So entrepreneurs, we get a lot of ones, but we also get a lot of tens.

I became president of Helzberg Diamonds in 1962 at age

His dad's at 14, has to take over because his father had a stroke, got sick.

Now we see that Barnett Jr., 29, his father's ill.

So he's like, I need to jump in and do exactly what my dad did.

I made mistakes and had my share of failures.

And the 1 thing I love about this guy, he's just super positive.

I mean, maybe you could say, yeah, you'd be positive too.

You sold your family business for a fat bag of cash to Buffett.

But I do love his optimism, his positivity.

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#279 What I Learned Before I Sold to Warren Buffett