WARREN BUFFETT

Warren Buffett is a famous American investor who’s worth over 66 billion dollars. He attributes his ability to accumulate so much wealth to his mentor and Columbia College Professor, Benjamin Graham. Warren claims that Graham’s books, The Intelligent Investor and Security Analysis, are the primary sources of learning that he continues to reference even today. Buffett’s the third wealthiest person in the world. He’s the owner and CEO of Berkshire Hathaway and he has pledged to give away 99 percent of his wealth to charity upon death.

WARREN BUFFETT’S CHILDHOOD

While it is true that Warren Buffett has become a very successful investor in today’s society, he has actually invested in many things throughout his life. His desire to be an investor started in childhood. That desire has never truly gone away at any point in his life.

Born in Omaha in 1930, Buffett was the son of a member of the United States House of Representatives. He worked at a grocery store run by one of his relatives for a good period of time. He even sold assorted products as a door to door salesman.

Warren Buffett - Cashier
Warren Buffett - Pinball Machine

He used some of the money that he earned to fund a bank account. He also used some of his money to buy different items that he could invest in with the intention of earning money. One of the most notable examples came from how he bought a pinball machine to place in a public spot in town. He eventually used the money from that venture to buy more pinball machines to place in more spots so he could earn even more money.

In fact, Buffett even invested in shares while growing up. He bought three shares in Cities Services Preferred when he was eleven. He had a minor profit in his investment but sold his shares before they experienced massive price increases

WARREN BUFFETT’S EDUCATION

It is estimated that he had earned about five thousand dollars from his work when he graduated from high school. He did not have an interest in going to college but he did anyway, spending two years at the University of Pennsylvania’s Wharton Business School and then two years at the University of Nebraska at Lincoln.

Part of his education came from a major influence in his life. This influence came from Ben Graham, a prominent investor who created the concept of intrinsic business value. This refers to how the real worth of a business is often separate from the stock value that comes with it. His belief was that intrinsic value could be used to guide decisions in investments rather than stock numbers. This was a critical point of Buffett’s development in terms of how he was able to get into so many different investments after a while.

Buffett went to the Columbia Business School after graduating from Nebraska. He went to Columbia after hearing that Graham taught there. Interestingly enough, this came not too long after Buffett had tried to get into the Harvard Business School. He was rejected from Harvard because admissions assumed he was too young to attend it.

Buffett had studied many of Graham’s works including the Intelligent Investor, a book that Buffett continues to herald to this day as a book that was critical to his education as an investor. It includes one of the most important analogies that Buffett continues to follow to this very day in his investments.

Part of this education from Graham included his support of a value about investing that Graham introduced in this book. His Mr. Market analogy states that stock quotes are simply quotes given out by a business partner that is often going to keep on trying to sell stock and will keep on doing so until the point where that stock ends up being lower in value than what was originally offered or what the business in question might actually be worth.

The final part of Buffett’s education came from a visit with Lormier Davidson, the financial vice president of Geico in the late 1940s. Buffett went to the Geico offices in the hopes of meeting Graham because he was the chairman of that company at the time.

However, Graham was not there but Buffett was able to talk with Davidson for several hours about business practices, how to find a profitable group and what a company should do in order to be more successful. This is a critical part of Buffett’s education. Ironically enough, Geico would be a part of Buffett’s business career thanks to how he bought out that company.

WARREN BUFFETT’S BUSINESS CAREER

The business career of Warren Buffett started out relatively small in the early 1950s but this was primarily from Buffett’s lesson in patience with investing after his early experience with Cities Services Preferred. He started out by buying a small Sinclair Texaco station in the area while he was working as a night class professor at the University of Nebraska in Omaha. He did not make any money off of his Sinclair Texaco investment.

He eventually received a call from Graham asking if he was interested in working for him. He eventually got into a partnership with Graham. However, Buffett had some differences between him and Graham.

Buffett was more interested in seeing how a company manages itself and how it might be better than other companies when thinking about who to invest in. This is different from the emphasis on numbers that Graham had been using.

Buffett’s money would eventually grow while working alongside Graham. It got to the point where Buffett had made more than $100,000 from 1950 to 1956. This was much higher than the nearly $10,000 that he had at the start of that time.

The amount of time Buffett spent with Graham was relatively limited though. Graham tended to focus on hiring Jewish people who were not being taken in by organizations that were Gentile-based. This prompted Buffett, who is not Jewish, to go elsewhere.

Buffett created Buffett Associates, Ltd. in 1956. He did this with a few other partners with his sister and aunt being among those people who got in on it. The group was dedicated to work towards investing in shares with businesses in a responsible manner. He was able to get a few partnerships with some businesses during this time and eventually got to where he had nearly $300,000 in capital around the end of that year. The partnership of Buffett Associates, Ltd. helped make Buffett a millionaire in 1962. Nearly a million dollars of the $7 million that the partnership had came out of his money.

It would not be long until Buffett bought Berkshire Hathaway, a textile company. He also met Charlie Munger around this time. Munger was a lawyer who eventually focused on investments and has become a quick friend of Buffett. Today Munger continues to work alongside Buffett at Berkshire Hathaway.

Buffett’s first private business investment came in 1966. He invested in a department store in the Baltimore area. Buffett continues to invest in varying stocks and commodities. His efforts with Berkshire Hathaway eventually became more noticeable among investors to the point where times when he would end up investing in something were often signs that something of use was more interesting and potentially more likely to be profitable over time. It eventually got to the point where Buffett had a net worth of a little over half a billion dollars by the end of the 1970s.

However, Buffett was not always successful in his business career. One example involves how he lost a good deal of money in his investment of the Buffalo Evening News newspaper. This came from an antitrust case that was started by that paper’s rival, the Buffalo Courier-Express. However, Buffett continues to hold ownership in the Buffalo News.

There was also the concern about a market correction in 1987. This caused nearly a quarter of Buffett’s value to be wiped out. However, he rebounded in 1988 by buying up shares of Coca-Cola. He eventually got to the point where the shares that he owned would be close to a billion dollars in value.

In 1990 Berkshire Hathaway started to sell class A shares. The shares were around $7,000 each at the time, thus helping to get Buffett to technically become a billionaire.

Buffett had a very minimal increase in his assets in 1999, thus leading people to fear that he was losing his touch and that he could be a victim of his own investments. However, he focused on intrinsic value and invested in businesses that were selling shares below their intrinsic values. This helped him to keep on moving ahead and to avoid the pains that came with the technology bubble bursting around that time.

He had invested in a series of banks in recent years. He has spent some money on Wells Fargo and has experienced very mixed results with Goldman Sachs and Bank of America. His results in his investments have involved some losses due to the financial crisis that have harmed the banking industry over the last couple of years