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When Passion Meets Acumen - Views on News from Equitymaster

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When Passion Meets Acumen
Mar 1, 2018

In 1917, a lady from Russia in her early twenties immigrated to the US and landed in Seattle. Barely four feet ten inches tall, she had never been to any school. She did not know a word of English...and could not learn the language until next two years.

In 1919, she and her husband moved to Omaha. She was more comfortable here as she found a Russian colony. She gradually started to pick the language from her daughter Francis who would teach her a few words every day as she came back from school.

She spent the next 20 years saving money, bringing her siblings and her parents to US. Also, she had four children in the meanwhile.

After 20 years, she managed to put together US$ 2500, went to Chicago...and founded a furniture store (she had always been quite passionate about furniture business).

In 1983, at the age of 89, she sold that business for US$ 60 million dollar.

The buyer was Warren Buffett.

The business in question is Nebraska Furniture Mart (NFM), which Buffett acquired from the late Mrs Blumkin (Mrs B). NFM is the largest home furnishing store in North America selling furniture, flooring, appliances and electronics.

How did NFM manage to become so big, given the humble beginnings?

The reason - it offered cost advantage to customers, and that became one of the strongest competitive advantages for the business.

As per Mrs B: "If you have the lowest price, customers will find you at the bottom of a river."

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  1. 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report.
  2. Equitymaster holds 1 share of National Fittings, Captain Polyplast and Arrow Textiles and 5 shares of Pokarna Limited as per the guidelines prescribed by the Board of Directors of the Company. The investment is made for research purposes only.
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