 |
| Warren Buffett |
Warren Edward Buffett ( BUFF-itt; born August 30, 1930) is an American business magnate, investor, and philanthropist. He is the chairman and CEO of Berkshire Hathaway, a multinational conglomerate holding company headquartered in Omaha, Nebraska. Buffett is widely considered the most successful investor of the 20th and 21st centuries.[^1] His profound wisdom, folksy demeanor, and extraordinary long-term track record have earned him the nickname the "Oracle of Omaha" or the "Sage of Omaha."[^2]
Author: Sam Gardner Genre: Biography Language: English Pages: 217 Formats Available: Kindle, Paperback, Hardcover
Oracle of Omaha: Warren Buffett
| Warren Buffett | |
|
|
|
| Born | August 30, 1930 Omaha, Nebraska, U.S. |
| Education | University of Pennsylvania University of Nebraska Columbia University (MS) |
| Title | Chairman and CEO of Berkshire Hathaway |
| Net worth | $120+ billion (2024) |
| Spouses |
|
| Children |
|
| Awards |
|
|
|
Buffett is a primary proponent of value investing, a strategy pioneered by his mentors Benjamin Graham and David Dodd at Columbia Business School. His philosophy emphasizes buying excellent companies at a fair price rather than fair companies at an excellent price, focusing on intrinsic value, a strong "moat" (durable competitive advantage), capable management, and long-term ownership.[^5] His annual letters to Berkshire Hathaway shareholders are revered in the business world for their insightful commentary on investing, management, and the economy, laced with wit and wisdom.[^6]
Early Life and Education
Childhood and Early Business Ventures
Warren Buffett was born in Omaha, Nebraska, to Congressman Howard Buffett and his wife Leila (née Stahl). He was the second of three children and the only son. His father was a stockbroker and a four-term United States congressman.[^7]
Buffett's prodigious aptitude for business and mathematics was evident from an extremely young age. In his biography The Snowball, he recounted memorizing the populations of numerous cities and performing complex calculations in his head.[^8] His first business ventures began at age six when he purchased six-packs of Coca-Cola from his grandfather's grocery store for twenty-five cents and resold the individual bottles for a nickel each, netting a five-cent profit.[^9] He also worked in his grandfather's grocery store.
As a young boy, Warren Buffett was fascinated by the stock market. At age 11, he purchased his first stocks: three shares of Cities Service preferred stock at $38 per share for himself and three for his sister, Doris. The price initially dropped to $27 but rebounded to $40. He sold, netting a small profit, but the stock later soared to nearly $200. This early experience taught him the lesson of patience in investing.[^10]
His entrepreneurial activities continued throughout his youth. He delivered The Washington Post and other newspapers, generating significant income. By age 15, his various ventures, including a pinball machine business placed in barber shops, had generated a savings of $2,000 (approximately $30,000 in 2023 dollars). In 1945, as a high school sophomore, he and a friend spent $25 to purchase a used Rolls-Royce, which they rented out for $35 a day.[^11]
Author: Sam Gardner Genre: Biography Language: English Pages: 217 Formats Available: Kindle, Paperback, Hardcover
Oracle of Omaha: Warren Buffett
Education: University of Pennsylvania and University of Nebraska
Despite being rejected by Harvard Business School, Warren Buffett discovered the works of Benjamin Graham, the father of value investing. He enrolled at Columbia Business School after learning that Graham taught there.[^12] Under Graham's tutelage, Buffett honed his investment philosophy. He was the only student in Graham's class to ever receive an A+.[^13] He also absorbed crucial lessons from David Dodd, Graham's colleague and co-author of the seminal text Security Analysis.
Buffett also attended the University of Pennsylvania's Wharton School for two years before transferring to the University of Nebraska–Lincoln to finish his undergraduate degree, motivated in part by a desire to be closer to his future wife, Susan Thompson. He graduated in just three years at the age of 19 with a Bachelor of Science in Business Administration.[^14]
Early Career and Partnerships (1951-1969)
Graham-Newman Corporation
After graduating from Columbia, Buffett was eager to work for his idol, Benjamin Graham. He even offered to work for free, but Graham declined, initially hesitant to hire Jews and feeling Wall Street was not yet ready for other minorities; he considered Buffett "not Jewish, but... something."[^15] Buffett returned to Omaha and worked as a stockbroker at his father's firm, Buffett-Falk & Co., while also teaching night classes in investing at the University of Nebraska-Omaha.
In 1954, Benjamin Graham finally offered him a job in New York with a starting salary of $12,000 a year. At Graham-Newman Corp., Buffett's analytical skills flourished. He worked closely with Graham, analyzing securities and uncovering deeply undervalued "cigar butt" companies—those so cheap you could have "one free puff" before discarding them.[^16] When Graham decided to retire and dissolve the firm in 1956, Buffett returned to Omaha.
Buffett Partnership Ltd.
With $174,000 of his own money and $105,000 from seven limited partners (mostly family and friends), the 25-year-old Warren Buffett started the Buffett Partnership Ltd. on May 5, 1956.[^17] He established the partnership's ground rules: he would manage the investments, receive 25% of the profits above a 4% annual hurdle rate, and would reinvest his own money alongside his partners.
The partnership was phenomenally successful. From 1956 to 1969, it generated an average annual return of 29.5%, crushing the Dow Jones Industrial Average's return of 7.4% over the same period.[^18] There was not a single down year for the partnership. His strategies included:
- Generals: Undervalued securities quantitatively, the classic Graham-style "cigar butts."
- Workouts: Arbitrage operations related to corporate events like mergers, acquisitions, and liquidations.
- Controls: Taking a large enough stake in a company to influence its policies and management, a strategy that would foreshadow his later approach with Berkshire.
A pivotal moment came in 1962. Buffett began buying shares of a struggling textile manufacturing company called Berkshire Hathaway. He initially saw it as a classic "cigar butt" investment. After a contentious verbal agreement on a buyback price with the company's president, Seabury Stanton, who then offered a slightly lower price, Buffett felt cheated. In response, he instead bought enough shares to take controlling interest of the company in 1965 and fired Stanton.[^19] He would later call this move a monumental mistake, as it diverted capital from far superior investments into a dying business. However, the company's name would live on as his investment vehicle.
By 1969, Buffett found the market environment increasingly speculative and devoid of the bargains he sought. Feeling he could no longer meet his partners' expectations, he made the surprising decision to dissolve the Buffett Partnership. He offered his partners a choice: they could receive a cash payout or take shares in Berkshire Hathaway. Most chose the latter.[^20]
Affiliate Single Product Box
Oracle of Omaha: Warren Buffett
Author: Sam Gardner
Genre: Biography
Language: English
Pages: 217
Formats Available: Kindle, Paperback, Hardcover
Buy Now
Oracle of Omaha: Warren Buffett
Author: Sam Gardner
Genre: Biography
Language: English
Pages: 217
Formats Available: Kindle, Paperback, Hardcover
Buy NowBerkshire Hathaway Era (1965–Present)
 |
| Berkshire Hataway |
Transformation into a Conglomerate
With the capital from the partnership now under the control of Berkshire Hathaway, Warren Buffett began the process of transforming it from a failing textile mill into a diversified holding company. He used the company's cash flow from the textile business (and eventually its capital) to acquire insurance companies, recognizing their potential. Insurance companies collect premiums upfront and pay out claims later, creating "float"—money that can be invested for substantial returns in the interim.[^21]
A key acquisition was National Indemnity Company in 1967, which provided a stable and growing source of float. This float became the engine of Berkshire's growth, providing Buffett with billions of dollars of "free" leverage to invest in stocks and buy entire companies.[^22]
The Charlie Munger Influence
In 1959, Buffett was introduced to Charlie Munger, a Los Angeles-based lawyer and investor. Despite their different temperaments—Buffett the optimistic Nebraskan and Munger the caustic, brilliant Californian—they formed one of the most legendary partnerships in business history. Munger became Buffett's vice chairman and partner at Berkshire Hathaway.[^23]
Munger's profound influence on Buffett was to shift his investment philosophy away from strictly buying statistically cheap "cigar butt" companies. Munger famously quipped, "I never want to go back to the cigar butt. A dying business at a cheap price? That is not a good business."[^24] He persuaded Buffett that it was "better to buy a wonderful company at a fair price than a fair company at a wonderful price."[^25] This led Buffett to invest in high-quality businesses with strong brands and durable competitive advantages, such as See's Candies (acquired in 1972) and Coca-Cola (a major investment starting in 1988).
Major Acquisitions and Investments
Berkshire Hathaway's portfolio is a mix of wholly-owned subsidiaries and large minority stakes in publicly traded companies. Key acquisitions and investments include:
- See's Candies (1972): Berkshire's first major purchase of a quality business. It demonstrated the power of a strong brand and pricing power.
- The Buffalo News (1977): A newspaper acquisition that generated significant cash flow for many years.
- GEICO (1976-1995): Buffett had first bought GEICO stock as a student in 1951. He began aggressively buying the company's stock in 1976 when it was near bankruptcy. Berkshire eventually acquired the entire company in 1995. It is now a cornerstone of Berkshire's insurance operations.[^26]
- Capital Cities/ABC (1986): A large investment in a media company that demonstrated Buffett's comfort with large, well-managed businesses.
- Coca-Cola (1988): Berkshire began building its stake in 1988, eventually becoming the company's largest shareholder. This investment is a quintessential example of Buffett's "buy what you know" philosophy and his preference for simple, understandable businesses with an unassailable moat.[^27]
- American Express (1991): A major investment following the "salad oil scandal," another demonstration of betting on a strong brand during temporary adversity.
- BNSF Railway (2010): Berkshire's largest-ever acquisition at the time, purchasing the remaining 77.4% of Burlington Northern Santa Fe Corp. for $26.5 billion. Buffett called it an "all-in wager on the economic future of the United States."[^28]
- Precision Castparts Corp. (2016): Acquired for $37.2 billion, an aerospace and industrial parts manufacturer.
- Apple Inc. (2016-2018): In a move that surprised some, given his historical aversion to technology stocks, Berkshire built a massive position in Apple, becoming one of its largest shareholders. Buffett came to see Apple as a consumer products company with a phenomenal brand and loyal customer base.[^29]
Berkshire's Shareholder Culture
A hallmark of the Warren Buffett era at Berkshire is its unique and loyal shareholder base. The annual meeting, nicknamed "Woodstock for Capitalists," draws tens of thousands of attendees to Omaha every year to hear Buffett and Munger answer questions for five hours.[^30]
Buffett's annual shareholder letters are masterclasses in business writing, blending financial results with lessons on ethics, patience, and rational decision-making. He is renowned for his transparency, admitting his mistakes in detail, such as his "$200 billion mistake" of not investing in Google when he understood its business model.[^31]
Berkshire Hathaway's Class A shares are famously the highest-priced stock in the world, trading at hundreds of thousands of dollars per share, as Buffett has never split the stock, believing it attracts long-term, quality-oriented investors.[^32] The company did create Class B shares in 1996 at a fraction of the price to thwart the creation of unit trusts that would sell fractional shares to small investors at high fees.[^33]
Author: Sam Gardner Genre: Biography Language: English Pages: 217 Formats Available: Kindle, Paperback, Hardcover
Oracle of Omaha: Warren Buffett
Investment Philosophy
The investment philosophy of Warren Buffett is a refined evolution of the value investing principles of Benjamin Graham, heavily influenced by the perspective of Charlie Munger and Buffett's own six decades of experience.
Core Principles
- Circle of Competence: Invest only in businesses you understand. Buffett avoids technology companies for years because he felt he couldn't reliably predict their future. He famously avoided the dot-com bubble of the late 1990s, for which he was criticized, but was ultimately vindicated when the bubble burst.[^34]
- Economic Moat: A company must have a durable competitive advantage that protects it from competitors, like a castle with a moat. This can be a strong brand (Coca-Cola), a cost advantage (GEICO), a regulatory monopoly (BNSF Railway), or network effects (Apple's ecosystem).[^35]
- Management: Buffett invests in companies run by honest, capable, and shareholder-oriented managers. He values rational capital allocation above charismatic leadership.
- Intrinsic Value: The core of value investing. Intrinsic value is the discounted value of the cash that can be taken out of a business during its remaining life. Buffett focuses on estimating this value, independent of the stock's current market price.[^36]
- Margin of Safety: Only buy a security when its market price is significantly below its calculated intrinsic value. This difference is the "margin of safety," which protects the investor from errors in calculation or market downturns.[^37]
- Long-Term Orientation: Buffett's favorite holding period is "forever." He believes in buying and holding excellent businesses through market cycles, allowing compounding to work its magic and minimizing transaction costs and taxes.[^38]
- Rationality over Emotion: "Be fearful when others are greedy and greedy when others are fearful."[^39] Buffett is a master of controlling emotion and capitalizing on market panics to buy great companies at discounted prices.
Notable Quotes: Warren Buffett
Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Price is what you pay. Value is what you get.
Only when the tide goes out do you discover who's been swimming naked.
Our favorite holding period is forever.
Oracle of Omaha: Warren Buffett
Author: Sam Gardner
Genre: Biography
Language: English
Pages: 217
Formats Available: Kindle, Paperback, Hardcover
Buy NowPersonal Life
 |
| Warren Buffett Family |
Family
Warren Buffett married Susan Thompson in 1952. They had three children: Susie, Howard, and Peter. The couple lived separately after 1977, though they remained married until Susan's death in 2004. Susan moved to San Francisco to pursue a singing career, but they maintained a close relationship, speaking frequently on the phone.[^42] In 2006, at age 76, Buffett married his long-time companion, Astrid Menks, who had lived with him in Omaha since his wife's departure.[^43]
Lifestyle and Frugality
Despite his immense wealth, Warren Buffett is famously frugal. He still lives in the same house in the Dundee neighborhood of Omaha that he purchased in 1958 for $31,500.[^44] He does not carry a cell phone or have a computer on his desk, though he is an avid bridge player and plays online with friends. His diet consists of hamburgers, Coca-Cola, and ice cream. He drives his own car, a Cadillac, and does not employ a security detail or a large staff.[^45] This frugality is a core part of his persona and investment philosophy, emphasizing the value of money and the perils of wasteful spending.
Philanthropy
Warren Buffett is one of the most significant philanthropists in history. His views on wealth and giving were profoundly shaped by his father and by his friends Bill and Melinda Gates.
The Giving Pledge
In 2006, Buffett announced he would gradually give away 85% of his Berkshire Hathaway fortune, primarily to the Bill & Melinda Gates Foundation, which focuses on global health and education, and to foundations run by his three children.[^46] This commitment, valued at approximately $37 billion at the time, was the largest charitable donation in history.
In 2010, he and Bill Gates launched The Giving Pledge, a commitment by the world's wealthiest individuals and families to dedicate the majority of their wealth to philanthropic causes.[^47]
Method of Giving
Rather than establishing a large foundation bearing his name, Buffett donates annual installments of Berkshire Hathaway Class B shares directly to a handful of foundations, primarily the Gates Foundation and his children's foundations: the Susan Thompson Buffett Foundation, the Howard G. Buffett Foundation, and the NoVo Foundation.[^48] This allows the foundations to handle the grant-making while he focuses on what he does best: growing Berkshire's value to ultimately increase the amount available for philanthropy.
As of August 2024, Buffett had donated over $55 billion to charity.[^49]
Political and Economic Views
Warren Buffett is generally a supporter of the Democratic Party. He has been an advisor to several presidents and has been vocal on economic issues.
- Taxation: He is a prominent advocate for higher taxes on the ultra-wealthy. He famously pointed out that his effective tax rate was lower than that of his secretary, a phenomenon now known as the "Buffett Rule."[^50] He argues that the wealthy should pay a higher percentage of their income in taxes to support societal infrastructure.
- Corporate Governance: He is a strong critic of excessive CEO compensation and the use of stock options without properly accounting for their cost.[^51]
- Economy: He is a long-term optimist on the American economy, famously stating, "I'll tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful. And never bet against America."[^52]
Criticism and Controversies
Despite his revered status, Warren Buffett and Berkshire Hathaway have faced criticism.
- Salomon Brothers Scandal (1991): Berkshire was a major shareholder in Salomon Brothers when a trading scandal involving illegal bids at U.S. Treasury auctions nearly destroyed the firm. Buffett took on the role of interim chairman to save the company, cooperating fully with regulators. The episode is detailed in his biography as a stressful period that threatened his reputation.[^53]
- Tax Avoidance: While advocating for higher taxes, Berkshire has at times engaged in complex strategies to minimize its tax bill, such as the "Killer B" and "Sainty B" transactions, though these were legal.[^54]
- Succession Planning: For years, critics argued that Buffett, due to his iconic status, had failed to adequately plan for his succession. Berkshire has since named Greg Abel as the designated successor to become CEO, and investment managers Todd Combs and Ted Weschler are handling more of the portfolio.[^55]
- Investment in Fossil Fuels: Environmental groups have criticized Berkshire's significant investments in and ownership of fossil fuel-intensive businesses, including utilities (via Berkshire Hathaway Energy) and BNSF Railway.[^56]
Legacy and Influence
Warren Buffett's legacy is multifaceted. He is the paragon of the long-term, value-oriented investor. His teachings, disseminated through his letters, annual meetings, and numerous biographies, have educated generations of investors.
He demonstrated that integrity and rationality are not just ethical choices but profitable ones in the long run. His philanthropic pledge has reshaped modern philanthropy, inspiring other billionaires to give away their wealth during their lifetimes.
The annual meeting of Berkshire Hathaway remains a pilgrimage for investors from around the world, a testament to the enduring power of his ideas. As the CEO of Berkshire Hathaway, he built a sprawling conglomerate from a failing textile mill, creating immense wealth for his shareholders and becoming a defining figure in global capitalism.
Author: Sam Gardner Genre: Biography Language: English Pages: 217 Formats Available: Kindle, Paperback, Hardcover
Oracle of Omaha: Warren Buffett
See Also
- Benjamin Graham
- Value Investing
- Berkshire Hathaway
- Charlie Munger
- The Giving Pledge
- Bill Gates
- List of wealthiest Americans in history
References
- Buffett, Warren E. The Essays of Warren Buffett: Lessons for Corporate America. Edited by Lawrence A. Cunningham. Carolina Academic Press, 2013.
- Cunningham, Lawrence A. Berkshire Beyond Buffett: The Enduring Value of Values. Columbia Business School Publishing, 2014.
- Pabrai, Mohnish. The Dhandho Investor: The Low-Risk Value Method to High Returns. Wiley, 2007.
0 Comments