The billionaire Warren Buffett has had an exceptional life and is truly rich even though he may not indulge in many of the other material fancies that other billionaires revel in. Buffett describes part of his definitional of wealth.
“I love every day. I mean, I tap dance in here and work with nothing but people I like. I don’t have to work with people I don’t like.” – Warren Buffett
Born in Omaha, Nebraska 1930 Warren enjoyed entrepreneurial pursuits as a youngster. His grandfather owned a store and he allowed Warren to sell items such as bottles of Coca-Cola for a profit to people around the community. He would also deliver newspapers and sell other items for a profit.
His father Howard Buffett invested in stocks and this gave Warren access to the world of investing. He bought his first stock at the age of 11 and this act would be the first of many purchases that would provide an immense amount of wealth for Warren.
He also had he ability to save as well as make money, which also enabled him to put money into more ventures. He filed his first tax return at the age of 13 and kept investing in ventures and by the age of 16 he had accumulated thousands of dollars in savings.
He loved to read and had consumed every book on investing in his local library on investing as a boy. In 1947 Warren entered the Ivy League Wharton School at the University of Pennsylvania to complete a BSc in business, however he transferred to the University of Nebraska-Lincoln to complete the course. Warren aimed to complete a MS in economics at Harvard University, and was not accepted into the course. He noticed that an author that he admired was teaching Economics at Columbia University, and he went to study with him, the authors name was Benjamin Graham and he would have a significant influence on Warren’s investment philosophy.
In 1951 after he graduated from Columbia Warren went to work for his father’s brokerage firm Buffett-Falk & Co. to sell investments for the company until 1954. After that Buffett went to work for his mentor Ben Graham at Graham-Newman Corp. as a securities analyst. This experience provided Warren with key knowledge of how to find the real intrinsic value of companies, and this would be a cornerstone to his success in the future. Graham retired in 1956, so Warren started his own partnership in the same year. At this time Buffett had saved up around $175,000 in his investments and savings from his various roles.
He bought his first and only house for $31,500 in Omaha then opened more partnerships within his company. The way that the partnerships typically worked is that Warren would find a number of partners to invest around $10,000 and then Warren would combine the money into a single partnership and he would get a percentage for a fee, then he would attempt to maximize the performance of the partnership with a compounded rate of return, which means that the longer that the money would be invested for the greater the compounded rate of return would be.
“Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.” – Warren Buffett
Warren used the accumulated leverage of the money from the other investors to grow the amount of capital within the partnership and he became a millionaire by using this method. In 1969 Warren closed the partnership and gave the profits to the partners that had invested with him. Warren used the same strategy to become a billionaire and would buy larger stakes in high quality companies. In the early part of his career Warren would buy fair companies at wonderfully cheap prices, then as he developed his investment philosophy he would buy wonderful companies at fair prices. He gained this insight from his business partner Charlie Munger.
One of his early acquisitions was a textiles company called Berkshire Hathaway, and although the original business did not work out, the name was used as a holding company to control the rest of Warren’s acquisitions and ventures. The Berkshire Hathaway stock now is one of the most expensive in the world and will cost over $240,000 for a single share. As J. P. Morgan understood the prices of stocks will always fluctuate so the prices may increase or decrease drastically due to unforeseen events.
Warren Buffett Revealed
Entrepreneur: Warren Buffett
Company: Berkshire Hathaway
Channel: Bloomberg Game Changers