Warren Buffett

Business Leader, Investor, Philanthropist

                  The so-called Sage of Omaha, who turns 88 on Wednesday August 30, has a net worth of more than $82.8  billion, but lives a modest lifestyle.

  • Childhood


Businessman and investor. Warren Edward Buffett born on August 30, in 1930, the legendary Warren Edward Buffett’s birthplace was Omaha, Nebraska. He is the second child to his parents- father Howard Buffett and mother Leila. Warren Buffett’s father was a U.S. Congressman, who was Scandinavian by origin and his mother was Spanish.
A true entrepreneur at heart and a brilliant student with a knack of learning Economics and business studies, Warren Buffett is today the second richest person of the world after Bill Gates. He is popularly termed as the “Wizard of Omaha” and the “Sage of Omaha”.

  • Higher Education and Early Career 


Buffett enrolled at the University of Pennsylvania at the age of 16 to study business. He stayed two years, moved to the University of Nebraska to finish up his degree, and emerged from college at age 20 with nearly $10,000 from his childhood businesses.

Influenced by Benjamin Graham's 1949 book, The Intelligent Investor, Buffett enrolled at Columbia Business School to study under the acclaimed economist and investor. After earning his master's degree in 1951, he sold securities for Buffett-Falk & Company for three years, then worked for his mentor for two years as an analyst at Graham-Newman Corp.

In 1956, Buffet formed the firm Buffett Partnership Ltd. in his hometown of Omaha. Utilizing the techniques learned from Graham, he was successful in identifying undervauled companies and became a millionaire. One such enterprise Buffett valued was a textile company named Berkshire Hathaway. He began accumulating stock in the early 1960s, and by 1965 he had assumed control of the company.

  • Early Life


Businessman and investor. Born Warren Edward Buffett on August 30, 1930, in Omaha, Nebraska. Buffett's father, Howard, worked as stockbroker and served as a U.S. congressman. His mother, Leila Stahl Buffett, was a homemaker. Buffett was the second of three children and the only boy.

Buffett demonstrated a knack for financial and business matters early in his childhood. Friends and acquaintances have said the young boy was a mathematical prodigy who could add large columns of numbers in his head, a talent he occasionally demonstrated in his later years.

Warren often visited his father's stockbrokerage shop as a child, and chalked in the stock prices on the blackboard in the office. At 11 years old he made his first investment, buying three shares of Cities Service Preferred at $38 per share. The stock quickly dropped to only $27, but Buffett held on tenaciously until they reached $40. He sold his shares at a small profit, but regretted the decision when Cities Service shot up to nearly $200 a share. He later cited this experience as an early lesson in patience in investment.

  • Personal Life & Legacy


He married Susan Thompson in 1952. The couple had three children. Susan left him in 1977 to pursue her own career and started living separately. They never divorced and remained legally married till Susan’s death in 2004.

He married his longtime partner, Astrid Menks in 2006; the couple had known each other from the time his first wife left him.
He was diagnosed with prostate cancer in April 2012 and has successfully completed his treatment.

He believes in giving back to the society and has pledged to give away the major portion of his wealth to charity, with 83% of it going to the Bill & Melinda Gates Foundation.

  • First Entrepreneurial Venture


Warren Buffett was just 11years old when he purchased his first shares for himself and as well as for his sister. During his graduation and studies at age of 20 he saved $9,800, and he rushed to meet Graham who was on the board of GEICO insurance. Warren yearned to work for Graham and that too without any fees. But he was refused the job and soon he came back to Omaha. He then started pursuing classes on “Investment principles” during which he also purchased a gas station, which unfortunately didn’t turn out to be profitable for him.

By the age of 13, Buffett was running his own businesses as a paperboy and selling his own horseracing tip sheet. That same year, he filed his first tax return, claiming his bike as a $35 tax deduction.

In 1942, Buffett's father was elected to the U.S. House of Representatives, and his family moved to Fredricksburg, Virginia, to be closer to the congressman's new post. Buffett attended Woodrow Wilson High School in Washington, D.C., where he continued plotting new ways to make money. During his high school tenure, he and a friend purchased a used pinball machine for $25. They installed it in a barbershop, and within a few months the profits enabled them to buy other machines. Buffett owned machines in three different locations before he sold the business for $1,200.

  • Personal Life & Legacy


He married Susan Thompson in 1952. The couple had three children. Susan left him in 1977 to pursue her own career and started living separately. They never divorced and remained legally married till Susan’s death in 2004.
He married his longtime partner, Astrid Menks in 2006; the couple had known each other from the time his first wife left him.
He was diagnosed with prostate cancer in April 2012 and has successfully completed his treatment.
He believes in giving back to the society and has pledged to give away the major portion of his wealth to charity, with 83% of it going to the Bill & Melinda Gates Foundation.

  • Berkshire Hathaway


Berkshire Hathaway proved to be a very challenging business to run. During the next twenty years, Buffett, along with Ken Chace, who managed the textile group, labored intensely to turn around the New England textile mills. Results were disappointing. Returns on equity struggled to reach double digits.

Buffett made it clear that he expected the textile group to earn positive returns on modest capital expenditures. "I won't close down a business of sub-normal profitability merely to add a fraction of a point to our corporate returns," said Buffett. "I also feel it is inappropriate for even an exceptionally profitable company to fund an operation once it appears to have unending losses in prospect. Adam Smith would disagree with my first proposition and Karl Marx would disagree with my second; the middle ground," he explained, "is the only position that leaves me comfortable."

As Berkshire Hathaway entered the 1980s, Buffett was coming to grips with certain realities. First, the very nature of the textile business made high returns on equity improbable. Textiles are commodities and commodities by definition have a difficult time distinguishing their products from those of competitors. Foreign competition, employing a cheap labor force, was squeezing profit margins. Second, in order to stay competitive, the textile mills would require significant capital improvements, a prospect that is frightening in an inflationary environment and disastrous if the business returns are anemic.

By 1980, the annual report revealed ominous clues for the future of the textile group. That year, the group lost its prestigious lead-off position in the Chairman's Letter. By the next year, the textile group was not discussed in the letter at all. Then, the inevitable: in July 1985, Buffett closed the books on the textile group, thus ending a business that began some one hundred years earlier.

Despite the misfortunes of the textile group, the experience was not a complete failure. First, Buffett learned a valuable lesson about corporate turnarounds: they seldom succeed. Second, the textile group did generate enough capital in the early years to buy an insurance company, and that is a much brighter story.

  • The Buffett Partnership


The Buffett Partnership began with seven limited partners who together contributed $105,000. Buffett, the general partner, started with $100. The limited partners received 6 percent annually on their investment and 75 percent of the profits above this bogey; Buffett earned the other 25 percent. But the goal of the partnership was relative, not absolute. Buffett's intention, he told his partners, was to beat the Dow Jones Industrial Average by ten percentage points.

Buffett promised his partners that "our investments will be chosen on the basis of value not popularity" and that the partnership "will attempt to reduce permanent capital loss (not short-term quotational loss) to a minimum." Initially, the partnership bought undervalued common stocks based on Graham's strict criteria. In addition, Buffett also engaged in merger arbitrage — a strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless profit.

Out of the gate, the Buffett partnership posted incredible numbers. In its first five years (1957-1961), a period in which the Dow was up 75%, the partnership gained 251% (181% for limited partners). Buffett was beating the Dow not by the promised ten percentage points but by an average of 35.

In the beginning, Buffett confined the partnership to buying undervalued securities and certain merger arbitrage announcements. But in the fifth year, he purchased his first controlling interest in a business, the Dempster Mill Manufacturing Company, a maker of farm equipment. Next he began buying shares in an ailing New England textile company called Berkshire Hathaway, and by 1965 he had control of the business.

Since 1956, the valuation strategy outlined by Graham and used by Buffett dominated the stock market. But by the mid 1960s a new era was unfolding. It was called the "Go-Go Years" (the "go-go" referred to growth stocks). It was a time when greed began driving the market and where fast money was made and lost in the pursuit of high-flying performance stocks.

Despite the underlying shift in market psychology, the Buffett Partnership continued to post outstanding results. By the end of 1966, the partnership had gained 1,156% (704% for limited partners), blitzing the Dow, which rose 123% over the same period. Even so, Buffett was becoming increasingly uneasy. Whereas the market had been dancing to the principles outlined by Graham, the new music being played in the stock market made little sense to Buffett.

In 1969, Buffett decided to end the investment partnership. He found the market highly speculative and worthwhile values increasingly scarce. By the late 1960s, the stock market was dominated by highly priced growth stocks. The "Nifty-Fifty" were on the tip of every investor's tongue. Stocks like Avon, Polaroid, and Xerox were trading at fifty to one hundred times earnings. Buffett mailed a letter to his partners confessing that he was out of step with the current market environment. "On one point, however, I am clear," he said. "I will not abandon a previous approach whose logic I understand, although I find it difficult to apply, even though it may mean forgoing large and apparently easy profits, to embrace an approach which I don't fully understand, have not practiced successfully and which possibly could lead to substantial permanent loss of capital."

When Buffett disbanded the partnership, many thought the "money-changer's" best days were behind him. In reality, he was just getting started.

  • Achievements


In 2008, Buffett became the richest person in the world. He then went on to become a billionaire with an estimate of his company valuing approximately US$62 billion. In 2009, he donated billions of dollars to the charity and even after that Buffett was ranked as the second richest man in the United States with a net worth of US$37 billion.Warren Buffett despite having two children and a full-fledged happy family is known to donate 99.9 percent of his wealth. Warren Buffet is a perfect example for the budding entrepreneurs conveying a clear message of vision, mission, focus and hard work.Countless books have been written about him and his investment strategies:

1. Robert Hagstrom, “The Warren Buffett Way”
2. Carol J. Loomis, “Tap Dancing to Work (Warren Buffett on Practically Everything, 1966-2012) A Fortune Magazine Book”.

                     Warren Buffett was named as the top money manager of the Twentieth CenturyPresidential Medal of Freedom by President Barack ObamaTime's 100 Most Influential People in the world by Time Magazine.



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