The friendship with Warren Buffett that led to her $1 billion donation
Becoming Warren Buffett.") Their personal friendship turned into a professional relationship by 1966, when Buffett was looking for companies to buy and Gottesman called him with an idea: What about buying a department store in Baltimore? As it happened, the department store Hochschild Kohn was run by Ruth’s extended family (her mother was a Kohn), and Sandy knew they were ready to sell. Buffett, Munger and Gottesman formed a company called Diversified Retailing and bought it. It soon became clear they had made a big mistake.
“We had a lemon on our hands," Buffett says. Munger once put it another way: “Buying Hochschild Kohn was like the story of a man who buys a yacht: The two happy days are the day he buys it and the day he sells it." It was an especially happy day when Gottesman was able to resell the department store for only a minimal loss. They eventually turned a lemon into lemonade.
The three partners merged Diversified, which by then owned a separate chain of women’s clothing stores, into Berkshire at the end of 1978, handing Diversified stockholders a golden ticket: shares of Berkshire. Over the years, Buffett acquired businesses from See’s Candies to insurer Geico and placed successful bets on stocks like Apple, Coca-Cola and American Express, propelling Berkshire’s growth into one of the most valuable U.S. companies.
Since the Diversified merger, Berkshire’s stock has soared more than 400,000%, compared with the S&P 500’s total return of roughly 18,000%. Gottesman and Buffett’s friendship lasted much longer than their ownership of the department store. “We never had an argument or even a disagreement of any kind, and we were in a lousy business together to start," Buffett says.
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