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Warren Buffett’s 1986 investment in Fechheimer Brothers, the uniform manufacturer, produced good returns for Berkshire in the early years (returning its investment in seven years through dividends and still holding 84% of the shares). But with increased competition, and the conspicuous lack of publicly available information on profits in more recent years we have to doubt that Fechheimer was one of Buffett’s better investments. It remains very small, and it got smaller over the years. This, together with Buffett’s need to change the leaders, suggests that all was not well.
A changing of the guards
It was in 1990 that George Heldman, co-chief along with brother Bob, decided to retire aged 69. Buffett didn’t want him to go, but took comfort from the continued attention of Bob, Fred, Gary and Roger Heldman. George was leaving “us with an abundance of managerial talent” said Buffett in his 1990 letter to Berkshire shareholders.
But then Bob fell ill and had to leave the company, so Buffett had lost two highly competent managers in short order. Bob’s son took over, but as Carol Loomis, a friend and confidant of Buffett, wrote in Fortune that he “couldn’t cut the mustard and was ousted” (2001).
There followed a few years with no settled CEO. In 1997 Patrick Byrne was appointed chief at Fechheimers. He is the son of Jack Byrne of GEICO insurance fame (a very successful Buffett investment, which was rescued by Jack Byrne) and had experience in insurance – naturally – and a tool-and-die firm.
Byrne was once asked what it was like working for Buffett. “It’s like drinking from a firehose…one of the highlights of my life to able to call him up and ask about different business issues….There was a physicist Richard Feynman who died some years ago and another physicist said of him that there are two kinds of geniuses in the world. There’s the kind that you and I would be if we were a lot smarter. And there’s the kind we’d never be no matter how much smarter we were. They are somewhere off to the side. That’s Buffett.” (Quoted in Kilpatrick, A (2006) Of Permanent Value: The Story of Warren Buffett, 2006 Literary Edition. p607)
But Byrne departed in 1999 to take up the CEO position in a small online business later renamed Overstock.com in which he held 60% of the shares (which he had bough
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