At Clayton Homes, Jordan’s Furniture, Benjamin Moore, and Johns Manville, investing in the value of reputation has clearly paid off. But such integrity is not easy to maintain. While people generally say they want the kinds of things today’s Johns Manville promises—a clean environment and safe workplaces—they are not always willing to pay for them.52 If they did, all businesses would readily choose the moral high ground and pass the costs on to customers. But reality poses challenges for businesses to simultaneously protect consumers, secure employees, control habitats, and deliver shareholder returns. Reputation is vital to the family firm, where intangibles such as legacy and identity prove to have great economic payoffs, as the stories of several prominent Berkshire family companies in the next chapter will attest.
6
Kinship
Until the year before Rose Blumkin died in 1998 at age 104, she was gainfully occupied in the job she had held most of her adult life: chairman of the Nebraska Furniture Mart, Inc., her family business.1 A decade earlier, she engaged in a family feud over her retirement—insisting on working despite the urging of her grandchildren, by then in their sixties, to step down. Berkshire stayed out of the dispute, respecting the principle of autonomy, but in the end played a unique mediating role to help resolve the family quarrel.
The Nebraska Furniture Mart story represents a good introduction to the advantages and challenges of working with family companies. They often have an ingrained sense of permanence that makes them attractive to Berkshire and fit the Berkshire culture, but they can also bring prickly problems that cannot be solved as easily as replacing one CEO with another. Despite these difficulties, the values that many family companies carry with them—like mutual support and loyalty—have made them worth the effort for Berkshire.
Rose was born on December 3, 1893, near Minsk, Belarus, into a family of eight children. Her father, Solomon Gorelick, was a rabbi; her mother, Chasia, ran a grocery store where Rose worked from the age of six. Rose, who stood at less than five feet tall, became a grocery clerk at thirteen and store manager at sixteen, supervising six men. At twenty, she married Isadore Blumkin, a shoe salesman.2
In 1916, before the Russian Revolution, the Blumkin family was destitute and fled to America. This required traveling separately. Two of Rose’s siblings and her husband departed before her, and her parents and other siblings followed.3 Rose managed her escape by sweet-talking a Russian border guard—demonstrating a skill in salesmanship that would prove of great value in her future.
When she arrived in the U.S., Rose lacked education (she had not even attended elementary school) and spoke no English. By 1922, the entire family reunited in Nebraska, where Rose and Isadore settled down and had four children. Rose learned English in her first few years in the country, sharpening her knowledge with tutorials from her eldest daughter based on what she had learned in school each day.
In Omaha, Isadore and Rose ran a secondhand clothing shop. Their business model was simple: cut prices, expand product offerings, and market heavily. After toiling in this business for years, Rose adopted a new vision in 1937. On a visit to Chicago, center of the country’s wholesale furniture trade, she had seen the vast American Furniture Mart. Inspired, she decided to open a rival facility in Omaha, the Nebraska Furniture Mart, which would sell appliances, carpets, and home furniture.
The business was intensely competitive, with many area furniture sellers commanding abundant resources, ideal locations, and brand name recognition. Undeterred, Rose found ways to buy furniture cheaply and sell it at prices that beat the competition. She operated her business out of the family home, storing furniture and appliances in spare rooms and assuring enough sales to meet inventory bills on time. Such thrift and customer service produced favorable word of mouth around town. People interested in good deals on furniture were told to see Mrs. B., as she came to be known. Her credo also became famous: “Sell cheap, tell the truth, don’t cheat nobody.”
That motto, of course, could apply equally to other Berkshire subsidiaries. For example, Nebraska Furniture Mart’s business model echoes that of GEICO’s: both seek to be the low-cost seller and thereby generate enough volume to drive top-line sales for superior bottom-line results. Budget consciousness is a conservative description of the mindset at Nebraska Furniture Mart.
In response to Mrs. B.’s low-cost strategy, Nebraska Furniture Mart’s competitors cried foul, as rivals often do when facing such a business model. They alleged that Mrs. B. was using illegal tactics to outsell them with such low prices. Local businesses urged manufacturers to boycott Mrs. B., and at least one supplier complained that its suggested retail prices were being ignored.4 Mrs. B. responded aggressively, finding other suppliers in neighboring cities at even lower cost that enabled her to cut prices yet again, gaining market share.