Common Stocks and Uncommon Profits and Other Writings

 
Origins of a Philosophy 
2 2 9 
I was to realize how very few were the shares she owned and how 
extremely superficial were the comments I heard that day, but the
interest that was kindled by that conversation has continued all during 
my life. 
With this degree of interest and in a period when most businesses 
were far less concerned with the legal hazards of dealing with minors 
than is the case today, I was able to make a few dollars for myself dur- 
ing the roaring bull market of the middle 1920’s. I was strongly dis- 
couraged from this, however, by my physician father, who felt that it 
would simply teach me gambling habits. This was unlikely, as I am not
by nature inclined to take chances merely for the sake of taking chances,
which is the nature of gambling. On the other hand, as I look back upon 
it, my tiny scale stock activities of that period taught me almost noth- 
ing of any great value so far as investment policies were concerned. 
FORMATIVE EXPERIENCES 
Before the Great Bull Market of the 1920’s was to come to its crashing 
end, I did have an experience, however, that was to teach me much of 
real importance for use in the years ahead. In the 1927–28 academic year 
I was enrolled as a first-year student in Stanford University’s then fledg-
ling Graduate School of Business. Twenty per cent of that year’s course, 
that is one day a week, was devoted to visiting some of the largest busi-
ness enterprises in the San Francisco Bay area. Professor Boris Emmett, 
who conducted this activity, had not been given this responsibility 
because of the usual academic background. In those days, the large mail
order companies obtained a significant part of their merchandise through 
contracts with suppliers whose sole customer was one or the other of 
these firms. These contracts frequently were so hard on the manufactur- 
er and afforded him so little profit margin that from time to time a man- 
ufacturer would find himself in severe financial difficulty. It was not in 
the interest of the mail order houses to see their vendors fail. Professor 
Emmett had for some years been the expert employed by one such mail 
order firm with the job of salvaging these faltering companies when they 
had been squeezed too tightly. As a result, he knew a great deal about 
management. One of the rules under which this course was conducted 
was that we would visit no company that would just take us through the 
plant. After “seeing the wheels go around,” the management had to be 

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willing to sit down with us so that, under the very shrewd questioning 
of our professor, we could learn something of what the strengths and 
weaknesses of the business really were. I recognized that this was a learn-
ing opportunity of just the type that I was seeking. I was able to jockey 
myself into a position to take particular advantage of it. In that day, over 
a half century ago, when the ratio of automobiles to people was tremen- 
dously lower than it is today, Professor Emmett did not have a car. I did.
I offered to drive him to these various plants. I did not learn much from 
him on the way over. However, each week on the way back to Stanford,
I would hear comments of what he really thought of that particular com- 
pany. This provided me with one of the most valuable learning experi-
ences I have ever been privileged to enjoy. 
Also on one of these trips I formed a specific conviction that was
to prove of tremendous dollar value to me a few years in the future.
It was actually to lay the foundation for my business. One week we 
visited not one but two manufacturing plants that were located next 
door to each other in San Jose. One was the John Bean Spray Pump 
Company, the world leaders in the manufacture of the type of pumps 
that were used to spray insecticides on orchards to combat natural 
pests. The other was the Anderson-Barngrover Manufacturing Com-
pany, also world leaders, but in the field of equipment used by fruit 
canneries. In the 1920’s the concept of a “growth company” had not 
yet been verbalized by the financial community. However, as I some-
what awkwardly worded it to Professor Emmett, “I thought that
those two companies had probabilities of growing very much beyond 
their present size to a degree that I had seen in no other company we 
had visited.” He agreed with me. 
Also, through spending part of the time on these automobile trips 
by asking Professor Emmett about his previous business experiences, I 
learned something else that was to stand me in good stead in the years 
ahead. This was the extreme importance of selling in order to have a 
healthy business. A company might be an extremely efficient manufac- 
turer or an inventor might have a product with breathtaking possibilities, 
but this was never enough for a healthy business. Unless that business 
contained people capable of convincing others as to the worth of their 
product, such a business would never really control its own destiny. It 
was later that I was to build on this base to conclude that even a strong 
sales arm is not enough. For a company to be a truly worthwhile invest-
ment, it must not only be able to sell its products, but also be able to