The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [172]
“A cheap little scroungey” is how Munger described Associated Retail Stores, the parent of the Cotton Shops.14 Seeing a set of third-class stores for a fourth-class price, he and Buffett were immediately interested. Associated owned eighty stores with $44 million of sales and earned a couple of million dollars a year. Benjamin Rosner, its sixty-three-year-old proprietor, ran discount dress shops, in tough neighborhoods in cities such as Chicago, Buffalo, New York, and Gary, Indiana, under names like Fashion Outlet, Gaytime, and York. Sometimes he installed several tiny stores carrying the same goods under different names on the same city block. They ranged in size from that of a modest New York City apartment to a well-appointed suburban house. Rosner kept the overhead microscopic and sold only for cash. Running these outlets required unusual skills. In Chicago, a manager at the Milwaukee Avenue store, a big, hard-boiled woman, “blew a whistle every time she saw somebody come in that she knew was a shoplifter type. All the employees would look over and watch the guy from then on. She knew them all and had the lowest ‘shrinkage’ rate of practically any store you could ever find in the toughest neighborhood you could imagine.”*23
Born in 1904 to Austro-Hungarian immigrants, Ben Rosner dropped out of school in the fourth grade. In 1931, the downdraft of the Great Depression, he started with one little store on the North Side of Chicago, $3,200 in capital, a partner, Leo Simon, and a batch of dresses they sold for $2.88 apiece.15 When Simon died in the mid-1960s, more than three decades later, Rosner continued to pay his widow, Aye Simon†24 (daughter of communications mogul Moses Annenberg), Leo’s salary in exchange for the nominal task of signing the rent checks for their eighty stores.
“This went on for about six months, and then she started complaining and second-guessing and criticizing. And that really got to Ben. She was a spoiled, spoiled, spoiled woman. Now, Ben was a guy whose principle, as he later explained to me, was to screw everybody except his partner. And in his mind, she’s no longer his partner. So he decided that he had to end this whole thing.
“So as the switch flips in his mind, he’s going to screw her. He decided that he was going to sell the business to me too cheap, even though he owns half of it, because it’ll show her. When we met with him, he started talking and I got the picture very quickly.”
Buffett had been there before with people who were talking themselves into thinking they were better off without something, and he knew not to do anything that would interfere. “He’s talking about selling his business that he’s built up all his life, and he’s going crazy because he can’t stand it and he can’t stand her. He’s just a total mess. So Charlie goes back in the room with me. And after about half an hour, Ben was jumping up and down, and he said, ‘They told me you were the fastest gun in the West! Draw!’ And I said, ‘I’ll draw on you before I leave this afternoon.’”
Buffett needed a manager, but Rosner told him that he would stay only until the end of the year, then turn the business over to the new owners. Buffett could see, however, that, just as the business couldn’t carry on without Rosner, fortunately, Rosner couldn’t carry on without the business.
“He loved it too much to quit. He kept a duplicate set of store records in the bathroom so that he could look at them while he was sitting on the can. He had this rival, Milton Petrie of Petrie Stores. One time, Ben went to a big bash at the Waldorf. Milton’s there. They immediately started talking