BUFFETTS ALMOST THROTTLE BUT WAS SAVED BY BOTTLE

🧢 The Set Up

• Back in the late 1950s / early 1960s, Buffett’s partnership started buying shares of Dempster Mill Manufacturing Co. — a farm‐equipment / windmill maker in Beatrice, Nebraska.

• Why it caught his eye: the stock was really cheap — somewhere around $18 a share when book value was like $72. So on paper, it looked like major value.

😬 The Problem

• Even though the price looked juicy, the business sucked in practice:

  
  

  • tons of inventory piling up

  • flat sales

  • weak cash flow

  • management not really doing what needed to be done.

  
  

• At some point, Buffett controlled a large share of Dempster, but the business wasn’t pulling its weight. It was more liability than asset.

💡 Enter Harry Bottle

• Charlie Munger (Buffett’s right‐hand man) recommended Harry Bottle — a dude known for “operating turnaround” and being willing to do the dirty work.

• Bottle was basically brought in as the fixer — someone who could make bold decisions, cut costs, and stop the bleeding.

🔧 The Fixes

Harry Bottle got to work:

• Closed or shut down unhelpful/failing branches.

• Cut inventory — streamlined stuff so cash wasn’t tied up in junk.

• Layoffs 😬 (unpopular but sometimes necessary) when branches or operations were dragging.

• Raised prices for items where Dempster had the monopoly or unique supply.

One memorable anecdote: Bottle had a white line painted 10 feet up the warehouse wall and warned that if inventory piled above that line (except for shipping dept), people would be fired. Over time, he kept lowering the line. Harsh? Yep. Effective? Also yep.

📈 The Payoff (and the Messy Feelings)

• After Bottle’s changes, Dempster improved a lot. It turned from struggling to having excess capital, so the Buffett Partnership could redeploy funds elsewhere.

• Eventually, in 1963, the business was sold / restructured, and the partnership made a solid profit. Reported profit almost tripled the investment.

BUT — it wasn’t all sunshine & rainbows:

• People in Beatrice weren’t happy (jobs, community, all that). Buffett got flack for layoffs and firings.

• It cost Buffett emotionally / reputationally (he didn’t like being “the guy who shuts things down”), but he learned a ton.

🔍 Key Lessons (Buffett’s Takeaways)

1. Cheap ≠ good business. A low price is tempting, but if the operations suck, you need to do something (or risk everything).

2. Management matters a LOT. You need someone who can execute tough decisions. Bottle was that person. Without him, the turnaround might never have happened.

3. Be willing to take the emotional heat. Doing the right thing isn’t always popular. Even if financially it makes sense, people don’t love layoffs or closures.

4. Better to deploy capital into things that generate real returns, rather than holding on to assets just because you owned them or because it’s sentimental.

5. Experience with crappy businesses builds your muscle. Buffett later said that working through miserable situations taught him more about what not to do, and sharpened judgment.

⚡ Fun Extras / Offshoots

• The “cigar butt” analogy comes up: buying something cheap that others write off, squeezing out a little value, then moving on. Dempster was kind of that.

• Buffett later applied many of these lessons (especially around good management, knowing when to intervene, and not just chasing bargains) in building Berkshire Hathaway.

👍 TL;DR (Too Long, Didn’t Read)

Buffett found a super cheap company that looked like a steal. Problem: it was messed up. So he brought in Harry Bottle, who cleaned house — fired people, cut waste, turned inventory into cash. It was ugly, but worked. Made money. And Buffett learned that price value + leadership + guts = sometimes big win.