As Warren Buffett mostly leaves the scene, his lasting impact on our industry is worth recounting in the context of The Wall Street Journal’s November 10 article, “Nine Big Takeaways From Warren Buffett’s Last Letter as CEO.” The following observations are mostly based on my second- or third-hand observations over the past 55 years. However, I had one personal encounter that told me a lot about Mr. Buffett. In 2010, I was fortunate to attend an event marking the 10th anniversary of Mr. Buffett’s purchase of MiTek. As I was entering the dining room amongst a group of colleagues, we passed the table for four where Mr. Buffett was seated. For some unknown reason, MiTek CFO Ron Burkhardt motioned for me to take the empty chair at their table. I can still recall the midwestern graciousness of Mr. Buffett, who addressed me as Joe and asked me to call him Warren. I also recall that we discussed mostly business issues, like his current acquisitions of oil-related businesses and railroads. He spoke in an easy-going gait, like an 80-year-old next-door neighbor with a very active and incredibly sharp mind. Now that I’m 75 and having started in 1970 with Hydro-Air Engineering in St. Louis, a MiTek predecessor, I have gleaned four relevant lessons from Mr. Buffett’s nine takeaways.
Buffett on Buffett: He “feels generally good” at age 95 and goes to the office “five days a week and works with wonderful people.” Lesson #1 – as we age, we should keep engaged with as many good people and as much meaningful work as possible.
Buffett on hometown heroes: “More than two pages of the letter recount the good life in Omaha and the successes and wisdom of fellow Nebraskans.” Lesson #2 – MiTek has also been blessed to grow up in a medium-sized Midwest metro area which has a much lower cost of living than those touted as high-growth areas. MiTek associates can live in city, suburban, or rural areas and still enjoy an easy commute. The only reason we ended up with our incredibly successful CEO, Gene Toombs, who convinced Buffett to buy us, was because he didn’t want to leave St. Louis when he was transferred to Columbia, SC. Gene, himself, grew up in New Jersey and worked in New York, so he wasn’t a native. Since he took over the company, MiTek has moved hundreds of people to St. Louis from across the country and around the world, and only a tiny fraction of these have left.
Buffett on tough conversations: Buffett acknowledges that he failed to act several times when he encountered loyal executives with dementia or another debilitating disease. Lesson #3 – we nearly lost the company as I have written here in July 2024 (see The Near Demise of Once-Great Companies), due to the owner’s mental decline, and later we suffered through times when senior executives stayed onboard as they approached my current age. Despite their past record of exemplary service, that practice did not serve the company well. It took me several years of reflection to understand why it was good for the company for me to retire at age 70, but now I do. Mr. Buffett’s amazing abilities are a rare exception to this lesson.
Buffett on big comebacks: “Berkshire’s stock fell by 50% at three different points over 60 years of his management.” Lesson #4 – our company nearly went down twice in its 70-year tenure, the first time being when our owner lost his faculties. But we eventually benefitted from that owner’s earlier wisdom in hiring top-notch board members, who helped facilitate the sale of the company to a highly respected new owner. The second time was 15 years later, when we were close to being put in the hands of private equity, but Mr. Buffett rescued us, and, of course, the rest is history.
Of course, Mr. Buffett’s purchase wasn’t the only reason for MiTek’s success. Former CEO Gene Toombs was the key facilitator. However, much of Gene’s and MiTek’s success could not have been achieved without Mr. Buffett’s steady and largely “hands off” ownership and his generous finances.
In comparison, two of our major competitors’ businesses were unable to come back nearly as well as we have when they had unfavorable ownership changes. Our largest competitor, Alpine, lost its highly successful CEO, Charlie Harnden, unexpectedly in 1998 at age 63, and afterwards, the company went through a series of disconcerting changes of ownership. In 1998, Alpine was sold to a South African owner for the vastly deflated price of $50 million, then in 2005, flipped to Stonebridge Private Equity for $159 million, and finally, seven months later, sold for $250 million to ITW. MiTek’s second largest competitor, Truswal Systems, went through a similar series of dislocations and management changes, moving suddenly from Detroit to Dallas in 1984, then sold to Allstate Venture Capital Private Equity Group in the late 1980s, and finally sold to ITW in 2006 and merged with Alpine under ITW’s Building Component Group.
What an incredible blessing has been bestowed on the many thousands of us who have prospered under Warren Buffett’s stewardship. His leadership has been pivotal to the evolution of the component manufacturing industry as we know it today.
