A History of Warren Buffett

Warren Edward Buffett was born on August 30, 1930 to his father Howard, a stockbroker-turned-Congressman.  He was one of three children, and displayed an amazing aptitude for money and business at an early age.  While most little boys played cowboys and Indians, Warren was buying 6-packs of Coca-Cola bottles at 25 cents and selling the each for a nickel.  At the age of eleven, Warren purchased his first shares of stock, buying three shares of Cities Service Preferred.  He sold his shares before their true value was realized, and Warren learned one of his most important financial lessons: patience is a virtue.

Warren graduated from high school at the age of seventeen, and attended the Wharton Business School.  After two years, Warren complained he knew more than his professors and returned home to Omaha to attend the University of Nebraska.  While working full time, he finished his undergraduate degree in three years.  He applied to Harvard Business School for graduate work, but was denied admittance because of his young age.  He then decided to attend Columbia, where he met a professor that would forever change his life.

The professor was Benjamin Graham, a famed investor who was the author of “Security Analysis”, one of the greatest works ever written on the stock market.  He introduced Warren to the idea of Value Investing, also known as Investing with Business Sense.  He taught Warren that the real value in investing is not in the capital gains made in a day, but rather measuring the intrinsic value of a company and finding a bargain price for its shares.  His investment strategy is more complex than this, but this idea is one of his founding tenets.  Warren completed his graduate studies quickly, and is the only student at Columbia to receive an A+ in one of Graham’s classes.

After college, Warren offered to work for the Graham partnership for free, but was turned down by Graham (who only offered spots to Jews).  Warren returned to Omaha to work for his father where he met Susie Thompson, whom he married in April of 1952.  He lived in a three-room apartment for $65 a month and his daughter slept in a dresser drawer.  After a few years, Graham contacted Warren and offered him a position in New York City, and Warren’s career was on its way.

On May 1, 1956, Warren rounded up several limited partners (including his sister and Aunt), raising $105,000.  He put in $100 of his own money and created the Buffett Associates, Ltd.  By the end of the year, the amount grew to $300,000, and Warren began to manage the pool of money from the bedroom of his $31,500 home.  By this time in his life, Warren had three children. 

Ten years after it’s founding, the Buffett Partnership’s assets were up 1,156%.  But as the Vietnam War raged on, Warren decided to liquidate the partnership and only maintain his holdings in Berkshire Hathaway and Diversified Retailing.  On May 10, 1965, after accumulating 49% of the common stock, Warren named himself the Director of Berkshire Hathaway, a position he still holds today.

Over the years, Berkshire has made many business deals, acquiring Graham’s company, GEICO, and See’s Candy to name a few.  Warren steered the company through some rough times, and has lead the stock to a price of $80,000 per share.  On top of acquiring companies through Berkshire Hathaway, Warren also made massive amounts of money through Coca-Cola stock.

He has established himself so well in the market that everyone mirrors any of his movements.  Due to the high volume of following, Warren’s actions have the ability to change the price of a stock in one day.  Because of his high prestige, Warren has been called upon to act on behalf of companies to help them out of situations.  Perhaps the most well known example is his relationship with Solomon Brothers.

During the market-cornering debacle with Paul Mozer, Salomon Brothers was in serious trouble with the Federal Reserve.  The company lost credibility and was in jeopardy of going bankrupt.  During this trying time, Warren was flown to New York and was named CEO of the company on the same day.  As CEO, Warren worked with the Treasury Department to permit Solomon to continue trading and effectively keep the company in business.  During the talks, Warren allowed the senior executives to choose his successor.  After the market-corning issues were settled, Warren stepped down from the position. 

As was mentioned earlier, Warren is an eccentric individual.  Though he is the second richest man in the world, he spends little of his money in acquiring material items.  Perhaps this is due to his incredible interest in the time value of money.  To Warren, a $20,000 automobile will be worth less than nothing in 10 years.  But Warren knows he can invest that money and get a 23% compounding rate or return and turn that $20,000 into $9,958,257 in 30 years.  He then looks at buying a car as wasting those millions of dollars.  In addition to driving a VW Beetle, Warren lives in his $31,500 home and eats the same meal everyday.  To his devastation, Warren’s wife decided to live on her own in an apartment in San Francisco, but remained married to him.  She encouraged several women in the Omaha area to go to dinner and a movie with her husband, and finally set him up with Astrid Menks, a waitress.  She moved in with Warren within a year and Susie, hi wife, gave her blessing.

In addition to his eccentric ways, Warren has amazing wisdom and valuable tenets that have earned him the nickname of the Oracle of Omaha.  Warren believes that owning a stock solely in hopes that it will go up in price next week is the stupidest thing you can do.  He believes that no one should evaluate common stock based on the expectation of a $25 percent return in the next six months.  He looks for business that will generate an annual compounding rate of 15% or better over the next 10 or 15 years.  Warren believes that diversification is something people do to protect themselves from their own stupidity.  Warren also believes that stockbrokers may be wildly optimistic but are not very intelligent in matters of finance.  In addition to these ideas, Warren has some commonly referred to sayings that encapsulate his business thinking.  These sayings include:

“Lethargy, bordering on sloth, should remain the cornerstone of an investment style.

“An investor should act as though he had a lifetime decision card with just twenty punches on it.”

“Never invest in a business you cannot understand.”

Perhaps his greatest tenet is with respect to business-like investing. 

Warren Edward Buffett was born on August 30, 1930 to his father Howard, a stockbroker-turned-Congressman.  He was one of three children, and displayed an amazing aptitude for money and business at an early age.  While most little boys played cowboys and Indians, Warren was buying 6-packs of Coca-Cola bottles at 25 cents and selling the each for a nickel.  At the age of eleven, Warren purchased his first shares of stock, buying three shares of Cities Service Preferred.  He sold his shares before their true value was realized, and Warren learned one of his most important financial lessons: patience is a virtue.

Warren graduated from high school at the age of seventeen, and attended the Wharton Business School.  After two years, Warren complained he knew more than his professors and returned home to Omaha to attend the University of Nebraska.  While working full time, he finished his undergraduate degree in three years.  He applied to Harvard Business School for graduate work, but was denied admittance because of his young age.  He then decided to attend Columbia, where he met a professor that would forever change his life.

The professor was Benjamin Graham, a famed investor who was the author of “Security Analysis”, one of the greatest works ever written on the stock market.  He introduced Warren to the idea of Value Investing, also known as Investing with Business Sense.  He taught Warren that the real value in investing is not in the capital gains made in a day, but rather measuring the intrinsic value of a company and finding a bargain price for its shares.  His investment strategy is more complex than this, but this idea is one of his founding tenets.  Warren completed his graduate studies quickly, and is the only student at Columbia to receive an A+ in one of Graham’s classes.

After college, Warren offered to work for the Graham partnership for free, but was turned down by Graham (who only offered spots to Jews).  Warren returned to Omaha to work for his father where he met Susie Thompson, whom he married in April of 1952.  He lived in a three-room apartment for $65 a month and his daughter slept in a dresser drawer.  After a few years, Graham contacted Warren and offered him a position in New York City, and Warren’s career was on its way.

On May 1, 1956, Warren rounded up several limited partners (including his sister and Aunt), raising $105,000.  He put in $100 of his own money and created the Buffett Associates, Ltd.  By the end of the year, the amount grew to $300,000, and Warren began to manage the pool of money from the bedroom of his $31,500 home.  By this time in his life, Warren had three children. 

Ten years after it’s founding, the Buffett Partnership’s assets were up 1,156%.  But as the Vietnam War raged on, Warren decided to liquidate the partnership and only maintain his holdings in Berkshire Hathaway and Diversified Retailing.  On May 10, 1965, after accumulating 49% of the common stock, Warren named himself the Director of Berkshire Hathaway, a position he still holds today.

Over the years, Berkshire has made many business deals, acquiring Graham’s company, GEICO, and See’s Candy to name a few.  Warren steered the company through some rough times, and has lead the stock to a price of $80,000 per share.  On top of acquiring companies through Berkshire Hathaway, Warren also made massive amounts of money through Coca-Cola stock.

He has established himself so well in the market that everyone mirrors any of his movements.  Due to the high volume of following, Warren’s actions have the ability to change the price of a stock in one day.  Because of his high prestige, Warren has been called upon to act on behalf of companies to help them out of situations.  Perhaps the most well known example is his relationship with Solomon Brothers.

During the market-cornering debacle with Paul Mozer, Salomon Brothers was in serious trouble with the Federal Reserve.  The company lost credibility and was in jeopardy of going bankrupt.  During this trying time, Warren was flown to New York and was named CEO of the company on the same day.  As CEO, Warren worked with the Treasury Department to permit Solomon to continue trading and effectively keep the company in business.  During the talks, Warren allowed the senior executives to choose his successor.  After the market-corning issues were settled, Warren stepped down from the position. 

As was mentioned earlier, Warren is an eccentric individual.  Though he is the second richest man in the world, he spends little of his money in acquiring material items.  Perhaps this is due to his incredible interest in the time value of money.  To Warren, a $20,000 automobile will be worth less than nothing in 10 years.  But Warren knows he can invest that money and get a 23% compounding rate or return and turn that $20,000 into $9,958,257 in 30 years.  He then looks at buying a car as wasting those millions of dollars.  In addition to driving a VW Beetle, Warren lives in his $31,500 home and eats the same meal everyday.  To his devastation, Warren’s wife decided to live on her own in an apartment in San Francisco, but remained married to him.  She encouraged several women in the Omaha area to go to dinner and a movie with her husband, and finally set him up with Astrid Menks, a waitress.  She moved in with Warren within a year and Susie, hi wife, gave her blessing.

In addition to his eccentric ways, Warren has amazing wisdom and valuable tenets that have earned him the nickname of the Oracle of Omaha.  Warren believes that owning a stock solely in hopes that it will go up in price next week is the stupidest thing you can do.  He believes that no one should evaluate common stock based on the expectation of a $25 percent return in the next six months.  He looks for business that will generate an annual compounding rate of 15% or better over the next 10 or 15 years.  Warren believes that diversification is something people do to protect themselves from their own stupidity.  Warren also believes that stockbrokers may be wildly optimistic but are not very intelligent in matters of finance.  In addition to these ideas, Warren has some commonly referred to sayings that encapsulate his business thinking.  These sayings include:

“Lethargy, bordering on sloth, should remain the cornerstone of an investment style.

“An investor should act as though he had a lifetime decision card with just twenty punches on it.”

“Never invest in a business you cannot understand.”

Perhaps his greatest tenet is with respect to business-like investing.