A Lesson From The Grandfather of Warren Buffett



Take a minute and read this letter in its entirety. I promise you won’t regret it. It is a letter written from Ernest Buffett (Warren’s grandpa) to his son Fred (Warren’s uncle) in 1939:

Dear Fred & Catherine:

Over a period of a good many years I have known a great many people who at some time or another have suffered in various ways simply because they did not have ready cash. I have known people who have had to sacrifice some of their holdings in order to have money that was necessary at that time.

For a good many years your grandfather kept a certain amount of money where he could put his hands on it in very short notice.

For a number of years I have made it a point to keep a reserve, should some occasion come up where I would need money quickly, without disturbing

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Why Dairy Queen Franchises Lead To Riches

With the exception of McDonald’s, Dairy Queen franchisees have quietly amassed the most substantial wealth out of any food franchise that operates at more than 1,000 locations in the United States.

It has been intriguing to study how much Warren Buffett chose to emulate Ray Kroc’s early years at McDonald’s in drafting the incentive systems that exist at Dairy Queen. Instead of opting to build wealth at the expense of franchisees, Buffett chose to build wealth by giving his franchisees a chance to reap significant gains for themselves. In other words, instead of trying to extract as much as he could from a fixed pie, Buffett chose to create a incentives that encourages Dairy Queen franchisees to expand the size of the pie as much as possible.

Since I know my readership is numerically inclined, let’s look at the numbers:

Entering 2018, the average franchise with 1,000 locations required liquid Read the rest of this article!