At 80 years old, he became the richest man in the world with a rock star aura. With all the success he has enjoyed, he also suffered setbacks in his investments, but behind his humorous and folksy demeanor he will always be considered one of the world’s toughest businessmen.
In 2008, financial disaster hit the U.S. Some of Wall Street’s banks and investment firms were on the brink of extinction, bringing with them the entire world economy. They all wanted to reach just one person: Warren Buffett.
Throughout his career as an investor, Warren Buffett avoided the Wall Street investment style that involved risky speculations. He established his business headquarters in the place where he was born and raised: Omaha, Nebraska. It was also where he began learning everything he knew about investing.
Early Biography: In Love with Numbers
He grew up fascinated with numbers. It wasn’t hard for him to remember figures; once, his aunt gave him a world almanac and he easily memorized the population of every sizable city! This skill, matched with a passion for investing, would pave the way for greater success in the future.
Warren Buffett grew up during the Depression, and his family had little money because his father lost his job as a stockbroker. Warren started selling items from his grandfather’s grocery store as well as newspapers to his neighbors, and he would later recall, “I have all kinds of little ventures, not all successful… I like doing business early on.”
Money made from his “little ventures” gave him enough cash to later do what he loved: invest in the stock market. He first invested in Cities Service; around that time, his father, a former stockbroker, had won a seat in Congress and took Warren and the family to Washington.
While living in Washington, Warren started a new job: delivering newspapers for the Washington Post for about $50 per month. According to him, that was “a lot of money during those times.” He delivered newspapers from house to house early in the morning before school.
With that and other ventures, he was able to save over $5,000, which became his initial capital for his business empire. Although he was prepared to be a full-time businessman after graduating from high school, his father persuaded him to go to college, and he ended up studying at the Wharton School at the University of Pennsylvania.
Having Fun
At Wharton, his fellow Nebraskan roommate Charles Peterson recalled that Warren was “immature” but way ahead when it came to academics. He claimed that Warren had a photographic mind and used only a small amount of time studying by flipping pages in the books. He used his extra time to sing, listen to music and participate in college politics.
After finishing college at 19 years old, he applied to study at Harvard Business School, but was rejected. He then decided to study at Columbia Business School, where Benjamin Graham was a professor. Professor Graham has a very simple investment philosophy that defies what Wall Street does: “The market is there to serve you, not to inform you… [there’s a tendency] that the market will be very, very wrong.”
Graham’s way of investment, which is the topic of his book, “The Intelligent Investor,” is about finding an undervalued stock that is off the radar. For Warren, it was like finding a dollar bill that someone could buy for 50 cents and wait for it to cost $1 before selling it.
In 1951, after earning his Master of Science in Economics from Columbia Business School, Warren returned to Omaha. There, he formed a partnership with an initial member of what would become a group of seven investors. After the first seven, however, he found it difficult to convince more.
He then started to learn how to persuade people by enrolling in the Dale Carnegie public speaking course. He not only applied the lessons he learned to convince people to join his partnership, but also used the same strategy to propose to his girlfriend, Susan, who happily accepted.
Stocks Make Warren a Billionaire
He started picking stocks that were generally ignored and, as years went by, Warren’s investment strategy became popular in Omaha. Within the first five years that Warren was picking up stock, the Dow only grew by about 70%, a fraction compared to his stocks which reached up to 250%. Because of his investment style, he officially became a millionaire in 1961.
Some friends saw that Warren Buffett was doing the investing activities alone. He was also doing his study of the stocks at his house, and didn’t have an office. His net worth was growing rapidly, but his wealth was not obvious because of his family’s lifestyle. The family home, where he still lives today, was bought for $32,000 and his children continued to study in public schools.
As a result, his children were exposed to a world that was totally different from that of children whose parents were as rich – or even richer – than Warren’s. He was eventually encouraged to invest in more than just stocks; he wanted to buy companies in which he could have a controlling interest. That first company was the “Dempster Mill” in Beatrice, Nebraska. Although it was seen by many as a potential failure, its stock price was too cheap for Buffett to ignore.
The company, at that time, had a lot of inventory with a large working force that needed to be downsized. It was his first taste of managing a company, and he took the heat when downsizing was enforced. From then on, his strategy changed to owning interest in the company, but not being directly involved in managing it. In his own words: “buy business with management you trust enough to lead in place.”
In 1962 he purchased the “Berkshire Hathaway,” a textile mill and another potential failure with cheap stock prices nevertheless ($7.50 per share). Buying that company was, Warren says, “a mistake.”
Saving Berkshire Hathaway
The company he bought, according to an analyst, was not a good business because it didn’t have the competitive advantage that brought in a sufficient return on the capital invested in it. When the cash was extracted from Berkshire Hathaway, it was reinvested to an insurance business, which was Buffett’s first major investment to become profitable.
When Berkshire Hathaway ceased operations, Warren kept its name to become the name of his new multi-billion-dollar company. The way he names his companies says a lot about his personality and investment strategy.
He then started to buy stock of “Blue Chips Stamp,” a popular program for shoppers in the 1950s and 1960s, and “See’s Candies” in California. These cheap stocks he purchased delivered interest-free cash that was needed for his company’s future investments.
Warren was introduced to Charlie Munger, a lawyer, in 1959. About two years after Warren Buffett persuaded him to be his partner, Munger stopped practicing law to concentrate on managing investments.
“Be fearful when others are greedy, be greedy when others are fearful”
The growing U.S. economy in the late 1960s led to a boom on Wall Street. Instead of lunging to hoard stock like most investors, however, Warren kept still: “Be fearful when others are greedy, be greedy when others are fearful.” Seeing that everybody wanted to buy stocks, it was time for him to move out. He terminated his partnership in 1969 and created a net worth of $25 million.
In the early 1970s, Warren Buffett acquired “WESCO,” a California bank, which eventually brought him under investigation by SEC due to a possible conflict of interest; the bank was about to merge with the Financial Corporation of Santa Barbara. However, no charges were filed against Warren.
In 1973, the insurance businesses of Berkshire Hathaway had driven the company’s price-per-share to $93. By this time, the company also owned shares in banks, clothing manufacturers and even candy factories. Being passionate about newspapers, Warren also purchased a local Omaha weekly newspaper, called “Sun.”
The next newspaper Warren purchased through Berkshire Hathaway was “The Washington Post.” It was during the Watergate scandal when The Post’s price-per-share declined, partly because the Nixon administration declared a “war” (as proclaimed by Warren) against it. The decline of the share price moved Buffett’s company to buy a large amount of stocks from the newspaper.
In 1977, Warren Buffett’s wife, Susie, left him in Omaha and moved to San Francisco to pursue her dream of becoming a singer. Although Susie had left their home, their relationship didn’t change and, according to his daughter, Warren and Susie would still talk 5 to 6 times a day and travel together from time to time.
Warren Remarries After Susie’s Death
Susie, who still loved Warren, introduced him to Astrid Menks before she left for San Francisco. Susie and Warren were still married until her death in 2004. In 2006, Warren, at the age of 76, and Astrid, 60, got married.
Following his desire to delve deeper into newspapers, Warren Buffett acquired the “Buffalo Evening News” for $33 million, the highest investment made by Berkshire Hathaway during that time. The Buffalo Evening News had competition in the Buffalo-Courier Express; in order to survive, the Evening News included a Sunday paper, but the Courier Express responded with anti-trust charges.
The case resulted in the dwindling of advertisers and, eventually, both newspapers losing money. The trial went on until the Buffalo-Courier Express folded in 1982, and the Buffalo Evening News went on to become a profitable newspaper.
In 1985, Warren Buffet became a billionaire when the price-per-share of Berkshire Hathaway reached $2,000. He also surprised the media in that year when he helped finance the Capital Cities’ $3.5 billion purchase of the giant TV network ABC, giving him 25% stake of the two companies combined.
Advising U.S. Treasury Against Closing Salomon Brothers
In 1987, Warren got a 12% share of one of the largest investment banks on Wall Street at the time: Salomon Brothers. He purchased stocks totaling $700 million, but in 1991 the investment firm got into trouble by submitting false bids in order to purchase more treasury bonds. Responsible for this was the company trader, Paul Mozer.
Additional issues also arose during that time, which led the U.S. Treasury to make moves toward stopping the firm’s operation, which could have resulted in the downfall not only of the company, but of the U.S. economy. Warren’s capability was tested and, with his foresight and perseverance, he persuaded the U.S. Treasury to refrain from its decision to close the firm and work out a solution to the problem. Buffett emerged as a hero.
In 1993, the price-per-share of Berkshire Hathaway stock reached $17,000, and Warren Buffet became a rock star with a worldwide reputation. His business also brought him to various parts of the world, but no amount of travelling could change the eating habits he had acquired over time: several cans of Coke every day, McDonalds’ burgers and fries, and cake.
Berkshire Hathaway has expanded rapidly since the 1990s. Some companies that the investment firm has acquired are CORT Business Service, Jordan Furniture, Nebraska Furniture Mart, Clayton Homes, Fruit of the Loom, Benjamin Moore Paints, Dairy Queen, GEICO Insurance, Anheuser-Busch, The Coca Cola Company, Procter and Gamble and IBM. There are about 70 companies that Berkshire Hathaway has acquired, and the firm has interest with about 250,000 employees.
Buffett also bought a local Omaha newspaper, called the “Omaha-World Herald,” and the Burlington Northern Santa Fe Corporation. The Berkshire Hathaway annual shareholders’ meeting, which hosts tens of thousands of members, has become a sort of a pilgrimage. The people are dying to see Warren Buffett and hear what he has to say. Characteristically, he still becomes more energetic as the meeting moves toward the end.
Net Worth Reaches Billions but half goes to Giving Pledge
The dawn of 2000 also brought more money for Warren as his net worth, reaching billions of dollars, was set aside to fund the foundation that was supposed to be managed by his wife, Susie. However, Susie died in 2004 due to complications from oral cancer.
Two years after remarrying to Astrid, Warren [who does not believe in “dynastic wealth”] pledged much of his wealth to charitable causes, and a large chunk will go to the “Bill & Melinda Gates Foundation.”
In 2007, one year before the onset of the global financial crisis, the stock price for a single share of Berkshire Hathaway reached $150,000. The companies and bankers that were on the verge of bankruptcy were lucky enough to receive lifelines from Buffett, and these included GE, Bank of America and Goldman Sachs.
Undeterred by age or Prostate Cancer
In 2011, he was awarded the Presidential Medal of Freedom by President Barack Obama, who said in a speech: “He [Buffett] had demonstrated that integrity isn’t just a good trait, it is good for business.”
In April 2012, Warren announced that he had been diagnosed with prostate cancer, but a type that was not life-threatening, and treatment would be completed in September of that year. He also announced the successor of Berkshire Hathaway in 2012, but did not mention the name in public.
Buffett was vocal when it came to economic and political causes for which he had passion, including tax inequality between the rich and poor, which is very disadvantageous to those who earn less and does not affect the rich. It was known as the “Buffett Rule.”
Warren Buffett lives a simple but extraordinary and successful life: “I just have the best time every day. I’m getting to do exactly what I wanted to do in life and it doesn’t get any better than that.”
Organizations Supported
- Bill & Melinda Gates Foundation
- Buffett Foundation
- Nuclear Threat Initiative
- Girls, Inc.
- Glide Foundation
- Animal Rescue Foundation
- James Redford Institute for Transplant Awareness
- Make-A-Wish Foundation
- Music Rising
- NoVo Foundation
- Smile Train
Awards and Achievements
- 1962: Bought stocks of Berkshire Hathaway
- 2007: TIME’s “100 Most Influential People”
- 2010: Named “World’s Most Influential Global Thinker in Foreign Policy”
- 2011: Received the Presidential Medal of Freedom
- “Carson Group Top Money Manager of the 20th Century”
- CEO of Berkshire Hathaway
- Forbes’s “Richest Person of 2008”
- Forbes’ #15 on “Most Powerful People,” #2 on “Forbes 400” and #3 on “Forbes Billionaires”
- Practices frugality despite immense wealth
