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The six-year old Buffett’s first entrepreneurial venture might have been with Coca-Cola, but by the time he was 10 he figured that the best seller was Pepsi because a customer could have 12 ounces for the same price as a 6-ounce Coke. For the next 45 years Buffett was a Pepsi drinker – I know, shocking isn’t it!
So how come Buffett changed the habit of almost half a century? This story goes back to the time when he and his wife Susie had recently settled into the five-bedroomed house he bought for $31,000 in 1958 in a quiet neighbourhood in Omaha (he still lives there – on Youtube videos you can see how modest it is, for a billionaire).
Across the street lived Don Keough, then a Butter-Nut coffee salesman with four kids. Keough ruefully recalls the time he turned down the offer of a lifetime from his friend living only a few yards away in a TV interview hosted by former Disney CEO Michael Eisner:
“I lived across the street from guy who had no celebrity at the time. He didn’t go to work. He did some funny thing on the telephone. His name was Warren Buffett. He came over to see me in 1960, and he said “Don, I was just thinking about you….You know you’ve got to think about college [for your children]”.
The 30-something Keough, taken aback responded, “Warren I’m working on grade school right now, I’ll get around to college a little later.”
Not to be shaken off that easily, Buffett launched into “I’m forming a little partnership. A few of us have put in $10,000 into it. I might be able to turn that into something”.
Keough couldn’t really understand why someone who didn’t have a conventional job and salary could ask for investment money “Remember, he didn’t go to work. I worked. When I came home after working all day one of my kids would say ‘we had a wonderful time with Mr Buffett today. He took us to the park, or he had a train set up on the third floor of his house’. And he said ‘If you give me $10,000 I might be able to do something about it.’ Well, I didn’t have it, but I could’ve borrowed it from my father. But can you imagine giving $10,000 to a guy who doesn’t get up and go to work in the morning?” (Don Keough on Warren Buffett (2009) Conversations with Michael Eisner, CNBC Prime, January 2009, https://www.youtube.com/watch?v=6jAB0eJk2E4.)
You can understand where the 1960 Keough is coming from, but that $10,000, a third of the price of a house in a nice Omaha suburb in 1960, compounded at 25% for ten years – the average for the Buffett Partnership after Buffett’s fee – followed by 20% pa – the average return on Berkshire Hathaway 1970 – 2018 – would amount to $93m. Enough for whole blocks of houses.
Having known Buffett as an ordinary, if slightly eccentric, neighbour and friend, for a very long time Keough’s comment on Buffett’s character holds particular resonance,
“He was exactly the same then as he is now…What you see is what you get. He had the same values. His story is not money. It’s values. People should know about his values.” (Don Keough quoted in Kilpatrick, A. (2006) Of Permanent Value)
An incensed Keough
Don Keough was a brilliant manager and when his company was taken over by the Swanson family of Omaha, and then by the Duncan Foods Company he………..
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