In the previous article, we learned how Warren Buffett used his sincerity to win the heart of Washington Post owner Katherine. Let's continue learning about this fascinating turn of events.

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Winning Hearts with Sincerity

We witnessed how Buffett completely altered the way Katherine saw him. In their meeting, Buffett made it clear to her that he wouldn't get involved in The Washington Post's internal matters and let the management make all the important decisions independently.

He then agreed to Katherine Graham's invitation to visit The Washington Post, which allowed him to meet Katherine and the other people running the company. After that, Buffett had a lot of confidence in the whole team at The Washington Post. He even said he wanted Berkshire Hathaway to hold onto the company forever. In a speech at a university in 1993, he talked excitedly about buying The Washington Post. “Because it was purchased at a price significantly below its intrinsic value, the investment in The Washington Post is extremely safe. Even if I put all my wealth into it, I don't think I would mind.”

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Buffett's Commitment to The Washington Post's Autonomy

Due to this connection and mutual understanding, Buffett became an irreplaceable advisor to Katherine in the business aspect, and the two of them formed a deep friendship. Buffett joined The Washington Post's board of directors in 1974 and subsequently took on an important role within the board as the chairman of the finance committee. Katherine said, 'Being with him, you will always feel interesting and pleasant.' She was completely won over by Buffett's sincerity and profound understanding of investment. 

Buffett also didn't hesitate to impart basic business principles to managers, such as financial capabilities and shareholder responsibilities. For example, The Washington Post repurchased 43% of its stock from the market from the mid-1970s to the early 1990s. Few companies in the 1970s engaged in large-scale repurchases of their stocks, which was a method to utilize shareholder capital effectively. Compared to the stock price in the early 1990s, the average repurchase price was only a quarter, which resulted in significant wealth for shareholders.

Why is this so? The reason is simple. The Washington Post generated ample cash flow while its stock price was significantly below its intrinsic value. Therefore, the most attractive investment opportunities are in the newspaper industry, which can generate substantial cash flow, but their stock prices are relatively low. By using ample funds to purchase stocks of the newspaper industry (their own companies) at a very low price, current shareholder equity increases, and the distributed earnings also increase.

By the mid-1990s, although Buffett did not make additional purchases in the stock market, his ownership percentage increased by about 15% due to the repurchase of treasury stocks.

We just learned about Buffett's becoming close friends with Katherine, the owner of The Washington Post, and how he became a core part of her company.

In the next article, let's continue learning about Warren Buffett’s success story.

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What are Treasury Stocks?

Treasury stocks refer to the financial practice of a company using cash on hand to repurchase its own company's stocks. After a company repurchases its stocks in the market, these repurchased stocks cannot be traded externally and are considered treasury stocks.

Once a company repurchases treasury stocks, the total number of outstanding shares in the market decreases. At this point, the company's management can use treasury stocks for various purposes, such as canceling them or issuing them back to the market to increase the number of outstanding shares.

It's worth noting that because treasury stocks are not counted as the company's outstanding shares, they do not have voting rights or participate in other shareholder activities. Therefore, when a company calculates earnings, dividends, and other financial metrics, treasury stocks do not enjoy these rights.

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