The praise poured in for this book
Recommendation: A book that will get you hooked on Buffett role-playing | Choi Jun-cheol

Entering
prolog
Chapter 1.
Textile factory: 1955-1962
Chapter 2.
Investments: 1962-1965
Chapter 3.
Transition: 1965-1967
Chapter 4.
Acquisition: 1967-1969
Chapter 5.
Expansion: 1970s
Chapter 6.
Other companies
Chapter 7.
conglomerate
conclusion
annotation

Translator's Note: Even Great Things Begin Small | generalfox (Byun Young-jin)
Appendix _ My Favorite Stock | Warren Buffett

Buffett's Entrepreneurship Story Under a Microscope
Meet the young Warren Buffett, a businessman and investor who struggles to find answers.

Berkshire Hathaway was born in 1955 through the merger of two major textile mills in New England, USA.
Even though the company recorded accumulated deficits until 1961, the existing management continued to pay dividends and buy back treasury stock with funds raised by selling assets.
The author of "The Rebirth of Berkshire Hathaway" analyzes the financial statements and annual reports from that time and shows that as long as the company remained in the textile business, which had a low return on capital, there was no better capital allocation option.


In 1962, Warren Buffett decided that Berkshire's stock was undervalued and purchased it for the first time through the Buffett Partnership, which he was managing at the time.
In 1965, Buffett secured control by owning over 50% of the company's shares, and joined the Berkshire board of directors.
He later said it was "the worst investment decision ever."
The author uses the American Express case in particular to illustrate just how bad it was.

In just two years since Buffett took over, Berkshire has become a debt-free company by cutting costs and reaping capital from its textile business.
The author believes that Berkshire's first foray into non-textile businesses, with the acquisition of the insurance company National Indemnity in 1967, was crucial to its "rebirth."
We will dig deep into the 'float' that insurance companies 'keep' until they pay out the insurance money and analyze what it means.
The meticulousness in going into detail, even down to the method of raising funds for the acquisition, is attractive.


Illinois National Bank and Blue Chip Stamp acquire See's Candies.
Expand into businesses with better ROE

In 1969, it acquired the commercial bank 'Illinois National Bank and Trust Company'.
This is the opportunity for Berkshire to diversify into businesses that generate better returns on equity (ROE).
The author explores how cost-effective this bank is compared to its competitors and how appropriate and important Buffett's acquisition decision was, using detailed financial data such as loan receivable valuation and disposal losses, operating expenses, and deposit liabilities.
This is a passage that truly demonstrates Buffett's genius in seeing beyond superficial numbers to the essential figures that others cannot see.


The author analyzes the financial statements of Illinois National Bank from 1968 to 1978 in detail and concludes that “most bankers would laugh at the idea that such a bank could generate shareholder value.”
However, the bank generated higher shareholder returns than its competitors due to its high liquidity and low leverage.

In early 1972, another of Buffett's compounding machines, Blue Chip Stamp, acquired See's Candies.
Buffett is famous for evolving his investment strategy from focusing solely on price to finding "great companies" and staying with them for the long term.
See's Candies delivered double-digit sales growth every year for the next decade, generating excess cash for Berkshire and Blue Chip, which Buffett and Munger reinvested elsewhere to build the Berkshire empire.

How many times has it been since I've revived a company that was on the verge of bankruptcy and grown it into something bigger?
Buffett's Amazing Corporate CPR

Among the many Buffett stories, the most interesting are those in which he jumped into a company in crisis and turned it around.
Berkshire did it, and Geico did it.
Chapter 5 details how Buffett effectively saved Geico from bankruptcy in the mid-1970s.

Buffett had been interested in Geico long before Berkshire invested.
When I was twenty, I invested more than half of my personal net worth directly in Geico.
Geico is the subject of Buffett's article "My Favorite Stock," which appeared in the Commercial and Financial Chronicle in 1951.
This article is Buffett's first and last report analyzing an individual company, and the full text has been translated and included as an appendix.

Such a company faced a crisis that almost led to its collapse in the mid-1970s.
After 28 consecutive years of profits, the stock price plummeted from $58.88 in 1973 to $2.13 in 1976 as insurance operating losses grew.
That same year, Berkshire began buying up Geico, increasing its stake to 38% by 1985.
The author analyzes the financial statements of Berkshire and Geico to demonstrate Buffett's insight into Geico's excellent business model and the importance of his investment in Geico to Berkshire's insurance business.


Berkshire Hathaway's Rebirth as a Conglomerate
Achieving profit diversification through business diversification

In the 1970s, Berkshire achieved significant diversification beyond its textile operations, and by the 1980s, its subsidiaries had expanded into insurance, candy, clothing, furniture distribution, automotive chemical manufacturing, and publishing, creating a diversified conglomerate.
Business diversification has led to diversification of profit generation.
Even though sales in the insurance sector declined, subsidiaries such as See's Candy were profitable, allowing the company to maintain its long-term perspective and principles.


It is noteworthy that Berkshire's stock valuation gains in the 1980s were enormous.
In 1985, the gains on the valuation of marketable securities amounted to 35.3% of equity capital, and the shares of GEICO and Washington Post were particularly notable at 59.6% and 21.2%, respectively.
The increase in float contributed significantly to securing cash for investment in securities.
The authors comment that float increased by an average of 17.4% per year from 1980 to 1985, and that no other insurance company had such a high float growth rate.
Berkshire was literally overflowing with capital.


The Key to Understanding Buffett and Munger
Capital allocation and an open and unbiased attitude

At Berkshire's 1994 annual meeting, Buffett said, "When it comes to capital allocation, I don't rely on anyone else.
“That’s our (Buffett and Munger’s) job,” he said.
In his 2014 shareholder letter, he stated, “Managing Berkshire is primarily about capital allocation and selecting and retaining outstanding managers to lead our subsidiaries.”
"The Rebirth of Berkshire Hathaway" is the basis and interpretation of these words, and is a culmination of Buffett and Munger's management and investment philosophies.
This book will make you realize that great entrepreneurs are also great investors.


Behind the flashy capital allocation play was Buffett and Munger's open-minded attitude.
Berkshire has existed in the textile business for a long time, but it is the flexibility to redeploy most of its invested capital to more productive industries that makes it what it is today.
Buffett and Munger focused on the facts even in negative situations and quickly adjusted course when things didn't go as planned.
Examples include acquiring the department store Hawk Shieldcon and then selling it after realizing it was a mistake, and owning Wesco Financial for a while but selling all of its banking assets except the headquarters to get out of the savings and loan business.


When Buffett took over in 1965, Berkshire didn't even make the Fortune 500 list, but by 2019, it was ranked fourth.
During this period, Berkshire's market capitalization increased by an average of 20.3% per year, and its stock price increased by 25,509 times.
And as of March 2024, it has become the world's largest company with a market capitalization of over $900 billion (KRW 1,000 trillion).
"The Rebirth of Berkshire Hathaway" is a book that reveals the secrets of this dramatic success.


A topic that even self-proclaimed 'Buffett fanatics' have never seen before
“A must-read if you study Buffett!”

There are many books about Buffett's life and investments, but this book is more of an attempt to supplement him rather than replace him or explain him simply.
Written by Jacob McDonough, founder of an asset management company and portfolio manager, and translated by generalfox (Byun Young-jin), who received rave reviews for his book "Letters from a Nomad Investor," and reviewed by Kwon Yong-tak, a certified public accountant in Korea, this book has been thoroughly reviewed once again.

In his recommendation, Choi Jun-cheol, CEO of VIP Asset Management, said, “I have gained a sharper understanding of economic moats, capital allocation, and float,” and, “If I had not read this book, I would have become arrogant as a self-proclaimed ‘Buffett fan.’”
Kim Hak-gyun, head of the research center at Shinyoung Securities, praised it as “a gem of a book that analyzes individual investment cases in the most detail among the numerous Buffett books.”


“Focus thoroughly on how Berkshire Hathaway is reborn as a ‘compounding machine’” (Kim Hyeon-jun, CEO of The Public Asset Management) and “the outstanding decision-making of a genius executed in a harsh environment” (Hong Jin-chae, CEO of Raccoon Asset Management) and “the golden age of Buffett and Munger, who equipped safe leverage with float and poured money into high-return sources” (Lee Eun-won, author of “How to Find Fair Stock Prices Like Warren Buffett”) are recommended as “there is a lot to learn even for individual investors” (Waimin, author of “Stock Studies to Lead to Good Investments on Your Own”).


“A book that covers the history of Buffett’s ‘discovery,’ ‘awakening,’ and ‘perfection’ of capital allocation.
“It is both an investment book and a complete management book” (Hong Young-pyo, co-author of “The Warren Buffett Bible 2021”) and “not just a book, but a stepping stone contributing to the Korean investment ecosystem” (BZCF, investment YouTuber). You will enjoy “a very valuable time peeking into Buffett’s mind” (Song Geun-yong, CIO, Ssulgi Asset Management).


If you study Buffett, you must read this book, which goes beyond the "narrative" and focuses on the "numbers" to verify Buffett's genius in capital allocation.
Not only corporate executives who directly allocate capital, but also individual investors seeking good stocks can satisfy their intellectual curiosity and gain useful insights through in-depth study of new topics.