Warren Buffett

Warren Edward Buffett (/ˈbʌfɪt/; born August 30, 1930)^[2] is an American investor, business tycoon, and philanthropist, who is the chairman and CEO of Berkshire Hathaway. He is considered one of the most successful investors in the world^[3][4] and has a net worth of US$88.9 billion as of December 2019, making him the fourth-wealthiest person in the world.^[5]
Buffett was born in Omaha, Nebraska. He developed an interest in business and investing in his youth, eventually entering the Wharton School of the University of Pennsylvania in 1947 before transferring and graduating from the University of Nebraska at the age of 19. He went on to graduate from Columbia Business School, where he molded his investment philosophy around the concept of value investing that was pioneered by Benjamin Graham. He attended New York Institute of Finance to focus his economics background and soon after began various business partnerships, including one with Graham. He created Buffett Partnership, Ltd in 1956 and his firm eventually acquired a textile manufacturing firm called Berkshire Hathaway, assuming its name to create a diversified holding company. In 1978, Charlie Munger joined Buffett and became vice-chairman of the company.^[6][7]
Buffett has been the chairman and largest shareholder of Berkshire Hathaway since 1970.^[8] He has been referred to as the "Oracle" or "Sage" of Omaha by global media outlets.^[9][10] He is noted for his adherence to value investing and for his personal frugality despite his immense wealth.^[11] Research published at the University of Oxford characterizes Buffett's investment methodology as falling within "founder centrism" – defined by a deference to managers with a founder's mindset, an ethical disposition towards the shareholder collective, and an intense focus on exponential value creation. Essentially, Buffett's concentrated investments shelter managers from the short-term pressures of the market.^[12]
Buffett is a notable philanthropist, having pledged to give away 99 percent^[13] of his fortune to philanthropic causes, primarily via the Bill & Melinda Gates Foundation. He founded The Giving Pledge in 2009 with Bill Gates, whereby billionaires pledge to give away at least half of their fortunes.^[14]

 

Early life and education

Buffett was born in 1930 in Omaha, Nebraska, the second of three children and the only son of Leila (née Stahl) and Congressman Howard Buffett.^[15] Buffett began his education at Rose Hill Elementary School. In 1942, his father was elected to the first of four terms in the United States Congress, and after moving with his family to Washington, D.C., Warren finished elementary school, attended Alice Deal Junior High School and graduated from Woodrow Wilson High School in 1947, where his senior yearbook picture reads: "likes math; a future stockbroker."^[16] After finishing high school and finding success with his side entrepreneurial and investment ventures, Buffett wanted to skip college to go directly into business but was overruled by his father.^[17][18]
Buffett displayed an interest in business and investing at a young age. He was inspired by a book he borrowed from the Omaha public library at the age of seven, One Thousand Ways to Make $1000.^[19] Much of Buffett's early childhood years were enlivened with entrepreneurial ventures. In one of his first business ventures, Buffett sold chewing gum, Coca-Cola bottles, and weekly magazines door to door. He worked in his grandfather's grocery store. While still in high school, he made money delivering newspapers, selling golf balls and stamps, and detailing cars, among other means. On his first income tax return in 1944, Buffett took a $35 deduction for the use of his bicycle and watch on his paper route.^[20] In 1945, as a high school sophomore, Buffett and a friend spent $25 to purchase a used pinball machine, which they placed in the local barber shop. Within months, they owned several machines in three different barber shops across Omaha. The business was sold later in the year for $1,200 to a war veteran.^[21]
Buffett's interest in the stock market and investing dated to schoolboy days he spent in the customers' lounge of a regional stock brokerage near his father's own brokerage office. On a trip to New York City at age ten, he made a point to visit the New York Stock Exchange. At 11, he bought three shares of Cities Service Preferred for himself, and three for his philanthropic sister Doris Buffett.^[22][23][24] At the age of 15, Warren made more than $175 monthly delivering Washington Post newspapers. In high school, he invested in a business owned by his father and bought a 40-acre farm worked by a tenant farmer. He bought the land when he was 14 years old with $1,200 of his savings. By the time he finished college, Buffett had accumulated $9,800 in savings (about $105,000 today).^[21][25]
In 1947, Buffett entered the Wharton School of the University of Pennsylvania. He would have preferred to focus on his business ventures, but his father pressured him to enroll.^[21] Warren studied there for two years and joined the Alpha Sigma Phi fraternity.^[26] He then transferred to the University of Nebraska where at 19, he graduated with a Bachelor of Science in Business Administration. After being rejected by Harvard Business School, Buffett enrolled at Columbia Business School of Columbia University upon learning that Benjamin Graham taught there. He earned a Master of Science in Economics from Columbia in 1951. After graduating, Buffett attended the New York Institute of Finance.^[27]

The basic ideas of investing are to look at stocks as business, use the market's fluctuations to your advantage, and seek a margin of safety. That's what Ben Graham taught us. A hundred years from now they will still be the cornerstones of investing.^[28][29][30]

— Warren Buffett

Investment career

Further information on Warren Buffett's time at Berkshire Hathaway: List of assets owned by Berkshire Hathaway

Early business career

Buffett worked from 1951 to 1954 at Buffett-Falk & Co. as an investment salesman; from 1954 to 1956 at Graham-Newman Corp. as a securities analyst; from 1956 to 1969 at Buffett Partnership, Ltd. as a general partner; and from 1970 as Chairman and CEO of Berkshire Hathaway Inc.
In 1951 ^[31], Buffett discovered that Graham was on the board of GEICO insurance. Taking a train to Washington, D.C. on a Saturday, he knocked on the door of GEICO's headquarters until a janitor admitted him. There he met Lorimer Davidson, GEICO's Vice President, and the two discussed the insurance business for hours. Davidson would eventually become Buffett's lifelong friend and a lasting influence,^[32] and would later recall that he found Buffett to be an "extraordinary man" after only fifteen minutes. Buffett wanted to work on Wall Street but both his father and Ben Graham .

Assuming Berkshire

In 1962, Buffett became a millionaire because of his partnerships, which in January 1962 had an excess of $7,178,500, of which over $1,025,000 belonged to Buffett. He merged these partnerships into one. Buffett invested in and eventually took control of a textile manufacturing firm, Berkshire Hathaway. He began buying shares in Berkshire from Seabury Stanton, the owner, whom he later fired. Buffett's partnerships began purchasing shares at $7.60 per share. In 1965, when Buffett's partnerships began purchasing Berkshire aggressively, they paid $14.86 per share while the company had working capital of $19 per share. This did not include the value of fixed assets (factory and equipment). Buffett took control of Berkshire Hathaway at a board meeting and named a new president, Ken Chace, to run the company. In 1966, Buffett closed the partnership to new money. He later claimed that the textile business had been his worst trade.^[42] He then moved the business into the insurance sector, and, in 1985, the last of the mills that had been the core business of Berkshire Hathaway was sold.

As a billionaire

Buffett became a billionaire when Berkshire Hathaway began selling class A shares on May 29, 1990, with the market closing at $7,175 a share.^[50] In 1998 he acquired General Re (Gen Re) as a subsidiary in a deal that presented difficulties—according to the Rational Walk investment website, "underwriting standards proved to be inadequate," while a "problematic derivatives book" was resolved after numerous years and a significant loss.^[51] Gen Re later provided reinsurance after Buffett became involved with Maurice R. Greenberg at AIG in 2002.^[52]