Warren Buffett

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From Wikipedia, the free encyclopedia

Warren Buffett

Buffett in 2015

Warren Edward Buffett

Born
August 30, 1930 (age 93)

Omaha, Nebraska, U.S.

 University of Pennsylvania

Education  University of Nebraska–Lincoln (BS)

 Columbia University (MS)

Occupations  Businessman
  investor

 philanthropist

Years active 1951–present

Known for Transforming Berkshire Hathaway and his philanthropy

Political party Democratic[1]

Susan Thompson

Spouses (m. 1952; died 2004)

Astrid Menks

(m. 2006)

 Susan Alice

Children  Howard Graham

 Peter

Father Howard Buffett

 Howard Warren Buffett (grandson)

Family Buffett family

Website [Link]

Signature

Warren Edward Buffett (/ˈbʌfɪt/ BUF-it; born August 30, 1930)[2] is an American businessman,
investor, and philanthropist who currently serves as the chairman and CEO of Berkshire Hathaway. As
a result of his investment success, Buffett is one of the best-known investors in the world. As of June
2024, he had a net worth of $135 billion, making him the tenth-richest person in the world.[3]

Buffett was born in Omaha, Nebraska. The son of US congressman and businessman Howard Buffett,
he developed an interest in business and investing during his youth. He entered the Wharton School
of the University of Pennsylvania in 1947 before graduating from the University of Nebraska at 19. He
went on to graduate from Columbia Business School, where he molded his investment philosophy
around the concept of value investing pioneered by Benjamin Graham. He attended New York
Institute of Finance to focus on his economics background and soon pursued a business career.

He later began various business ventures and investment partnerships, including one with Graham.
He created Buffett Partnership Ltd. in 1956 and his investment firm eventually acquired a textile
manufacturing firm, Berkshire Hathaway, assuming its name to create a diversified holding company.
Buffett emerged as the company's chairman and majority shareholder in 1970. In 1978, fellow
investor and long-time business associate Charlie Munger joined Buffett as vice-chairman.[4][5]

Since 1970, Buffett has presided as the chairman and largest shareholder of Berkshire Hathaway, one
of America's foremost holding companies and world's leading corporate conglomerates. He has been
referred to as the "Oracle" or "Sage" of Omaha by global media as a result of having accumulated a
massive fortune derived from his business and investment success.[6][7] He is noted for his adherence
to the principles of value investing, and his frugality despite his wealth.[8] Buffett has pledged to give
away 99 percent[9] of his fortune to philanthropic causes, primarily via the Bill & Melinda Gates
Foundation. He founded the Giving Pledge in 2010 with Bill Gates, whereby billionaires pledge to give
away at least half of their fortunes.[10]

Early life and education

Warren Edward Buffett was born on August 30, 1930 in Omaha, Nebraska, as the second of three
children and the only son of Leila (née Stahl) and Congressman Howard Buffett.[11] He began his
education at Rose Hill Elementary School. In 1942, his father was elected to the first of four terms in
the United States Congress, and after moving with his family to Washington, D.C., Warren finished
elementary school, attended Alice Deal Junior High School and graduated from what was then
Woodrow Wilson High School in 1947, where his senior yearbook picture reads: "likes math; a future
stockbroker".[12] After finishing high school and finding success with his side entrepreneurial and
investment ventures, Buffett wanted to skip college to go directly into business but was overruled by
his father.[13][14]

Buffett showcased an interest in business and investing at a young age. He was inspired by a book he
borrowed from the Omaha public library at age seven, One Thousand Ways to Make $1000.[15] Much
of Buffett's early childhood years were enlivened with entrepreneurial ventures. In one of his first
business ventures, Buffett sold chewing gum, Coca-Cola, and weekly magazines door to door. He
worked in his grandfather's grocery store. While still in high school, he made money delivering
newspapers, selling golf balls and stamps, and detailing cars, among other means. On his first income
tax return in 1944, Buffett took a $35 deduction for the use of his bicycle and watch on his paper
route.[16] In 1945, as a high school sophomore, Buffett and a friend spent $25 to purchase a used
pinball machine, which they placed in the local barber shop. Within months, they owned several
machines in three different barber shops across Omaha. They later sold the business to a war
veteran for a tidy sum of $1,200.[17]
 Investor Benjamin Graham was a major influential figure on the
young Warren Buffett.

Buffett's interest in the stock market and investing dated back to his schoolboy days he spent in the
customers' lounge of a regional stock brokerage near his father's own brokerage office. His father
took interest in cultivating and educating the young Warren's curiosity surrounding the subject of
business and investing, even at one point taking him to visit the New York Stock Exchange when he
was 10.[18] At 11, he bought three shares of Cities Service Preferred for himself, and three for his
sister Doris Buffett (who also became a philanthropist).[19][20][21] At 15, Warren made more than $175
monthly delivering Washington Post newspapers. In high school, he invested in a business owned by
his father and bought a 40-acre farm worked by a tenant farmer.[22] He bought the land when he was
14 years old with $1,200 of his savings.[22] By the time he finished college, Buffett had amassed
$9,800 in savings (about $125,000 today).[17][23]

In 1947, Buffett matriculated at the Wharton School of the University of Pennsylvania. He would have
preferred to focus on his business ventures, but enrolled due to pressure from his father.[17] Warren
studied there for two years and joined the Alpha Sigma Phi fraternity.[24] He then transferred to the
University of Nebraska where at 19, he graduated with a Bachelor of Science in business
administration. After being rejected by Harvard Business School, Buffett enrolled at Columbia
Business School of Columbia University upon learning that Benjamin Graham taught there. He
earned a Master of Science in economics from Columbia in 1951. After graduating, Buffett attended
the New York Institute of Finance.[25]

The basic ideas of investing are to look at stocks as business, use the market's fluctuations to your
advantage, and seek a margin of safety. That's what Ben Graham taught us. A hundred years from
now they will still be the cornerstones of investing.[26][27][28]

— Warren Buffett

Business career

Further information on Warren Buffett's time at Berkshire Hathaway: List of assets owned by
Berkshire Hathaway

Early business career

Buffett worked from 1951 to 1954 at his father's firm, Buffett-Falk & Co., as an investment salesman;
from 1954 to 1956 at Graham-Newman Corp. as a securities analyst; from 1956 to 1969 at several
investment partnerships as the general partner; and from 1970 as chairman and CEO of Berkshire
Hathaway Inc.

In 1951, Buffett discovered that Graham was on the board of GEICO insurance. Taking a train to
Washington, D.C., on a Saturday, he knocked on the door of GEICO's headquarters until a janitor
admitted him. There he met Lorimer Davidson, GEICO's vice president, and the two discussed the
insurance business for hours, and Buffett made his first purchase of GEICO stock.[29] Davidson would
eventually become Buffett's lifelong friend and a lasting influence,[30] and would later recall that he
found Buffett to be an "extraordinary man" after only fifteen minutes. Buffett wanted to work on
Wall Street but both his father and Ben Graham urged him not to. He offered to work for Graham for
free, but Graham refused.[31]

Buffett returned to Omaha and worked as a stockbroker while taking a Dale Carnegie public speaking
course.[32] Using what he learned, he felt confident enough to teach an "Investment Principles" night
class at the University of Nebraska-Omaha. The average age of his students was more than twice his
own. During this time he also purchased a Sinclair gas station as a side investment but it was
unsuccessful.[33]

In 1954, Buffett accepted a job at Benjamin Graham's partnership. His starting salary was $12,000 a
year (about $136,000 today).[23] There he worked closely with Walter Schloss. Graham was adamant
that stock picks should provide a wide margin of safety after weighing the trade-off between their
price and their intrinsic value. In 1956, Benjamin Graham retired and closed his partnership. At this
time Buffett, who had amassed personal savings over $174,000 (about $1.95 million today)[23],
decided to return to Omaha, where he would quickly start a series of investment partnerships.

In 1957, Buffett operated three investment partnerships. By 1959, the total had grown to six
partnerships. That year, Buffett met future partner Charlie Munger. In 1961, Buffett revealed that
35% of the partnerships' assets were invested in the Sanborn Map Company. He explained that
Sanborn stock sold for only $45 per share in 1958, but the company's investment portfolio was worth
$65 per share. This meant that Sanborn's map business was being valued at "minus $20". Buffett
eventually purchased 23% of the company's outstanding shares as an activist investor, obtaining a
seat for himself on the board of directors, and allied with other dissatisfied shareholders to control
44% of the shares. To avoid a proxy fight, the board offered to repurchase shares at fair value, paying
with a portion of its investment portfolio. 77% of the outstanding shares were turned in.[34][35] Buffett
had reaped a 50 percent return on investment in just two years.[36]

Assuming Berkshire

In 1962, Buffett became a millionaire with the success of his partnerships, which by then had grown
to 11 entities and held in excess of $7,178,500, of which over $1,025,000 belonged to Buffett. At the
start of the year, he merged the various partnerships into the single entity Buffett Partnership, Ltd.,
which would be his primary investment vehicle for the remainder of the decade. [37] Buffett invested
in and eventually took control of a textile manufacturing company, Berkshire Hathaway. He began
buying shares in Berkshire from Seabury Stanton, the owner, whom he later fired. Buffett's
partnerships began purchasing shares at $7.60 per share. In 1965, when Buffett's partnerships began
purchasing Berkshire aggressively, they paid $14.86 per share while the company had working capital
of $19 per share. This did not include the value of fixed assets (factory and equipment). Buffett took
control of Berkshire Hathaway at a board meeting and named a new president, Ken Chace, to run the
company. In 1966, Buffett closed the partnership to new money. He later claimed that the textile
business had been his worst trade.[38] He then moved the business into the insurance sector, and, in
1985, the last of the mills that had been the core business of Berkshire Hathaway was sold.

In a second letter, Buffett announced his first investment in a private business — Hochschild, Kohn
and Co, a privately owned Baltimore department store. In 1967, Berkshire paid out its first and only
dividend of 10 cents.[39] In 1969, Buffett liquidated the partnership and transferred their assets to his
partners including shares of Berkshire Hathaway. He lived solely on his salary of $50,000 per year and
his outside investment income.

In 1973, Berkshire began to acquire stock in the Washington Post Company. Buffett became close
friends with Katharine Graham, who controlled the company and its flagship newspaper and joined
its board. In 1974, the SEC opened a formal investigation into Buffett and Berkshire's acquisition of
Wesco Financial, due to possible conflict of interest. No charges were brought. In 1977, Berkshire
indirectly purchased the Buffalo Evening News for $32.5 million. Antitrust charges started, instigated
by its rival, the Buffalo Courier-Express. Both papers lost money until the Courier-Express folded in
1982.

In 1979, Berkshire began to acquire stock in ABC. Capital Cities announced a $3.5 billion purchase of
ABC on March 18, 1985, surprising the media industry, as ABC was four times bigger than Capital
Cities at the time. Buffett helped finance the deal in return for a 25% stake in the combined company.
[40]
The newly merged company, known as Capital Cities/ABC (or CapCities/ABC), was forced to sell
some stations due to Federal Communications Commission ownership rules. The two companies also
owned several radio stations in the same markets.[41]

In 1987, Berkshire Hathaway purchased a 12% stake in Salomon Inc., making it the largest
shareholder and Buffett a director. In 1990, a scandal involving John Gutfreund (former CEO of
Salomon Brothers) surfaced. A rogue trader, Paul Mozer, was submitting bids in excess of what was
allowed by Treasury rules. When this was brought to Gutfreund's attention, he did not immediately
suspend the rogue trader. Gutfreund left the company in August 1991.[42] Buffett became chairman of
Salomon until the crisis passed.[43] In 1988, Buffett began buying The Coca-Cola Company stock,
eventually purchasing up to 7% of the company for $1.02 billion.[44] It would turn out to be one of
Berkshire's most lucrative investments and one which it still holds.[45]

As a billionaire

In 1998 Buffett acquired General Re (Gen Re) as a subsidiary in a deal that presented difficulties —
according to the Rational Walk investment website, "underwriting standards proved to be
inadequate", while a "problematic derivatives book" was resolved after numerous years and a
significant loss.[46] Gen Re later provided reinsurance after Buffett became involved with Maurice R.
Greenberg at AIG in 2002.[47]

With President Barack Obama at the White House

During a 2005 investigation of an accounting fraud case involving AIG, Gen Re executives became
implicated. On March 15, 2005, the AIG board forced Greenberg to resign from his post as chairman
and CEO after New York state regulators claimed that AIG had engaged in questionable transactions
and improper accounting.[48] On February 9, 2006, AIG agreed to pay a $1.6 billion fine.[49] In 2010,
the U.S. government agreed to a $92 million settlement with Gen Re, allowing the Berkshire
Hathaway subsidiary to avoid prosecution in the AIG case. Gen Re also made a commitment to
implement "corporate governance concessions", which required Berkshire Hathaway's chief financial
officer to attend General Re's audit committee meetings and mandated the appointment of an
independent director.[46]

In 2002, Buffett entered in $11 billion worth of forward contracts to deliver U.S. dollars against other
currencies. By April 2006, his total gain on these contracts was over $2 billion. Buffett announced in
June 2006 that he would gradually give away 85% of his Berkshire holdings to five foundations in
annual gifts of stock, starting in July 2006—the largest contribution going to the Bill and Melinda
Gates Foundation.[50] In 2007, in a letter to shareholders, Buffett announced that he was looking for a
younger successor, or perhaps successors, to run his investment business.[51]

2007–08 financial crisis

Buffett ran into criticism during the subprime mortgage crisis of 2007 and 2008, part of the Great
Recession starting in 2007, that he had allocated capital too early resulting in suboptimal deals.[52]
"Buy American. I am." he wrote for an opinion piece published in the New York Times in 2008.[53]
Buffett called the downturn in the financial sector that started in 2007 "poetic justice".[54] Buffett's
Berkshire Hathaway suffered a 77% drop in earnings during Q3 2008 and several of his later deals
suffered large mark-to-market losses.[55]

On September 23, 2008, Berkshire Hathaway acquired 10 percent of perpetual preferred stock of
Goldman Sachs.[56] Some of Buffett's put options (European exercise at expiry only) that he wrote
(sold) were running at around $6.73 billion mark-to-market losses as of late 2008.[57] The scale of the
potential loss prompted the SEC to demand that Berkshire produce, "a more robust disclosure" of
factors used to value the contracts.[57] Buffett also helped Dow Chemical pay for its $18.8 billion
takeover of Rohm & Haas. He thus became the single largest shareholder in the enlarged group with
his Berkshire Hathaway, which provided $3 billion, underlining his instrumental role during the crisis
in debt and equity markets.[58]

In 2008, Buffett became the richest person in the world, garnering a total net worth estimated at
$62 billion[59] by Forbes and at $58 billion[60] by Yahoo, dethroning Bill Gates, who had been number
one on the Forbes list for 13 consecutive years.[61] In 2009, Gates regained the top position on the
Forbes list, with Buffett shifted to second place. Both of the men's values dropped, to $40 billion and
$37 billion respectively—according to Forbes, Buffett lost $25 billion over a 12-month period during
2008/2009.[62]

In October 2008, the media reported that Buffett had agreed to buy General Electric (GE) preferred
stock.[63] The operation included special incentives: he received an option to buy three billion shares
of GE stock, at $22.25, over the five years following the agreement, and Buffett also received a 10%
dividend (callable within three years). In February 2009, Buffett sold some Procter & Gamble Co. and
Johnson & Johnson shares from his personal portfolio.[64] In addition to suggestions of mistiming, the
wisdom in keeping some of Berkshire's major holdings, including The Coca-Cola Company, which in
1998 peaked at $86, raised questions. Buffett discussed the difficulties of knowing when to sell in the
company's 2004 annual report:

That may seem easy to do when one looks through an always-clean, rear-view mirror. Unfortunately,
however, it's the windshield through which investors must peer, and that glass is invariably fogged. [65]
In March 2009, Buffett said in a cable television interview that the economy had "fallen off a cliff ...
Not only has the economy slowed down a lot, but people have really changed their habits like I
haven't seen". Additionally, Buffett feared that inflation levels that occurred in the 1970s—which led
to years of painful stagflation—might re-emerge.[66][67]