For many investors around the world, Warren Buffett has been and continues to be a role model. When he purchased his first stock at the age of just 11, he began a long career in investing. Every investor, whether a novice or a seasoned pro, has been urged to imitate him through the use of his inspiring story in hundreds of speeches around the world. But who exactly is Warren Buffett? In this article, we'll take a closer look at the life of the so-called Oracle of Omaha, highlighting the choices and investments he made along the way to becoming one of the wealthiest and most well-known businessmen in the world.
Warren Buffett was born in 1932 in Omaha, Nebraska. Warren was described as a mathematical prodigy who could add huge columns of numbers in his head as a child. This talent would serve him well in the future. Warren also showed a keen interest in financial and business matters. At age 11, he bought three shares of Cities Preferred Service, now known as CITGO, for $38. The stock quickly rose to $40, and he sold it for a small profit. He would later come to regret this decision when the stock reached $200 per share. He later referred to this experience as a formative lesson in patience and investing.
At 13 years old, Warren started working as a paperboy. He would get up at 4:30 a.m. every morning to deliver copies of The Washington Post. On the side, he sold magazine subscriptions and calendars to his newspaper subscribers. By the age of 15, Warren had made $2,000 delivering papers. He put $1,200 of it into a 40-acre farm after making a profit-sharing agreement with a Nebraska farmer. As a high school sophomore, Buffett, then 17 years old, partnered up with a friend to buy a used pinball machine for $25, which they then installed in a local barbershop. Within a few months, they had several machines in various barber shops throughout Omaha, bringing in about $25 per week. The business was later sold to a war veteran for $1,200. Warren earned a Bachelor of Science degree from the University of Nebraska and later applied to Harvard Business School. Unfortunately, Warren was rejected, and he instead enrolled at Columbia Business School after learning that Benjamin Graham taught there. In 1951, he graduated with a Master of Science in Economics. And the following year, Warren returned to Omaha and worked as a stockbroker while enrolling in a Dale Carnegie public speaking course.
Putting what he'd learned to use, he began teaching at the University of Nebraska in the evenings. However, in 1954, he relocated his family to New York to work for his mentor, Benjamin Graham. So far, we can see that Warren was not afraid to work multiple jobs in order to achieve his long-term goal of attending business school. He bravely pursued various business opportunities in order to make money and wisely invest it later.
Warren accepted a position at Benjamin Graham's partnership, his mentor and former university professor's firm, in 1954. His starting salary was $12,000 per year, which is about $109,000 in today's money, but Benjamin Graham retired and ended this partnership in 1956. By this point, Warren's personal savings had surpassed $174,000, or approximately $1.5 million in today's money.
Warren had moved around a lot over the years, but he eventually decided to settle in his hometown of Omaha, in a $31,500 house.
Warren worked as an investment salesman and analyst for most of his career. He founded the Buffett Partnership with close friends and family later that year. The partnership came with some unusual terms. To begin, Warren asked one of his partners, a doctor, to locate ten other doctors willing to invest $10,000 each in his partnership. 11 eventually agreed, and while Warren would only invest $100 of his own money at first, he would reinvest management fees and later increase his stake in the partnership.
By 1960, Buffett had formed seven partnerships and owned a 9.5% stake in over a million dollars in partnership assets. By 1962, Warren Buffett had become a millionaire as a result of his partnerships, which totaled more than $7 million, of which a million belonged to him. He then merged these partnerships into one.
Later that year, Warren Buffett bought Berkshire Hathaway, most likely because he knew the company was entering a seasonal period of higher profitability. The 1830s-era New England textile company had seen better days, but Warren Buffett saw an opportunity to profit. He believed that the company's problems stemmed from its poor management style. So he started buying shares aggressively after a disagreement with its management convinced him that the company needed a change in leadership. Nonetheless, the company continued to lose money. In 1966, it became clear that the old New England textile company's golden days were over. As a result, Warren made a major shift in the company's business model that propelled it into the company that it is today. Buffett gradually shifted Berkshire's focus away from its long-standing textile business and toward using it as a holding company to make investments in other companies. National Indemnity Company and National Fire & Marine Insurance Company were among the first of many insurance companies that Berkshire would buy in 1967 with the remaining funds he had. The phenomenal success story of Berkshire Hathaway changed at this point. Warren went on to use the insurance companies' large cash flow to fund additional acquisitions like GEICO in 1996.
Today, Berkshire Hathaway manages a portfolio of more than a thousand companies with assets in excess of $700 billion.
When Berkshire began selling Class A shares in 1990, Warren Buffett hit the billion-dollar mark. Currently, Warren is well-known for his charitable giving. One of his largest gifts was 185 million shares of Berkshire Hathaway, with a market value of $28.3 billion, which he gave to the Bill and Melinda Gates Foundation. Warren's current net worth exceeds $84 billion.
No matter how great the talent or effort, some things just take time: you can't produce a baby in one month by getting nine women pregnant.
— Warren Buffet