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By Root 3324 0

Tom Knapp, and said, “I want you to go thirds with me.”5 Over several years, the trio got hold of eleven percent of the stock—second only to the Dempster family—and Warren joined the board. In early 1960, the board hired Lee Dimon, formerly purchasing manager of Minneapolis Molding Co., as Dempster’s general manager, over Buffett’s reservations.6 Buffett maneuvered Clyde Dempster into a figurehead role and continued buying stock.7 He wanted every share that he could lay his hands on. He rang up Schloss in New York and said, “Walter, I want to buy your stock.”

“Gee, I don’t want to sell it to you,” said Schloss. “You know, it’s a nice little company.”

“Look, I’m doing all the work on this idea. I’d like your stock,” said Buffett.

“Warren, you’re a friend of mine. If you want it—take it,” said Schloss.8

In the adult version of absconding with Doris’s bicycle, Buffett took it. He had a weakness: If he felt he needed something, he needed it, and that need must be satisfied. He did this, however, without any apparent malice or arrogance. If anything, it was the opposite; he was just so terribly needy. People like Schloss generally gave in to him because they liked him, and besides, whatever it was he wanted, he obviously seemed to feel he needed it more than they did.

As he gained more stock, Buffett also bought out the Dempster family. With that transaction, he achieved control, eased out Clyde Dempster, and made an offer to all other shareholders on the same terms.9

Here Buffett was treading on tricky ground. As chairman, he felt he could not rightly urge other investors to sell when he was buying. He even bent over backward to warn them that he thought Dempster stock would do well. Nevertheless, money and human nature could be counted on to do their job. People convinced themselves that they would rather have the cash than a thinly traded stock of dubious value. Soon, therefore, Dempster made up twenty-one percent of the partnership’s assets.

In July 1961, Warren wrote his partners that the partnership had invested in a nameless company that might prove to be “a deterrent to short-range performance, but it gives strong promise of superior results over a several-year period.”10 He named Dempster, which the partnership now controlled, and wrote a little sermon about it in his January 1962 letter, explaining Ben Graham’s philosophy of cigar butts.11 The “deterrent to short-range performance” part would prove more prescient than he expected.

During 1962, Buffett coached Lee Dimon and tried to explain to him how to manage inventory. But Dimon seemed to think he could just keep buying windmill parts no matter how many windmills Dempster sold. As a former purchasing manager, he knew how to purchase—so he did. The warehouse bulged with windmill parts12 as Dempster sucked up cash. By early 1962, the company’s bank prepared to seize the inventory as security for its loan, then grew alarmed enough to make noises about shutting Dempster down.

Buffett was looking at only a few months before it all caved in and he would have to report to the partners that a business into which he had sunk a million dollars of their money was broke. He tried to recruit his old Columbia friend Bob Dunn to leave his job at U.S. Steel, move to Beatrice, and run Dempster. Dunn actually made a trip out to Beatrice but in the end wasn’t interested. Buffett rarely asked advice, but finally that April he took the situation up with his friend Munger while he and Susie were visiting Los Angeles.

“We were going to dinner with the Grahams and the Mungers, Susie and I. We met them at the Captain’s Table on El Segundo in L.A. During the dinner, I’m telling Charlie, ‘I’m in this mess with this company; I’ve got this jerk running Dempster, and the inventories keep going up and up.’” Munger, who dissected his law clients’ businesses and thought like a manager, said immediately, “Well, I know this guy that used to bring around tough situations out here. Harry Bottle.” He knew of Bottle through an acquaintance who specialized in business turnarounds.

Six days later,