Who is Warren Buffett?

Warren Buffett is an American business magnate, philanthropist, and perhaps the most quoted investor of all time. Born in Omaha, Nebraska, on August 30, 1930, Buffett is best known as the chairman of Berkshire Hathaway and for his frugal lifestyle despite immense wealth.

Early life

Buffet’s career as an investor started early.

At the tender age of 11, he purchased six shares of preferred stock in Cities Service for $38 a share.

Buffett split the purchase down the middle, with himself and sister Doris owning three shares each.

Shares in the public utility company briefly fell to $27 before rebounding to $40. Warren and Doris then sold for a profit, but not before the share price went to $200.

Buffett supplemented his income with a car detailing business, a paper/magazine route, and a soft drink stand.

He also purchased 40 acres of land for $1,200 which he then rented for a profit.

College education

Pressured by his father, Buffett put his entrepreneurial flair to one side for a moment and enrolled at the Wharton School of the University of Pennsylvania in 1947.

He then transferred to the University of Nebraska, earned a Bachelor of Science in business administration, and subsequently enrolled at Columbia university after he was rejected from Harvard.

At Columbia, Buffett was instructed and mentored by Benjamin Graham, the so-called father of value investing.

Upon learning that Graham was on the board of GEICO insurance, Buffet took a train to the company’s headquarters on a Saturday morning.

Once let in, he questioned executive Lorimer Dawson about the company for four hours.

Based on this discussion, Buffett invested around $13,000 in GEICO and today owns the company in its entirety. 

Buffet and Graham

After graduating from Columbia, Buffett was dissuaded from working on Wall Street by both his father and Graham.

He then offers to work for Graham for free but is rebuffed. 

Working as a stockbroker, he attended one of Dale Carnegie’s public speaking courses and started to teach a night class called “Investment Principles” at the University of Nebraska. Buffet was only 21 at the time and most of his students were twice his age.

Three years later, in 1954, Graham offered Buffett a job at his investment firm Graham-Newman Corp.

In 1956, Graham retired and folded his company while Buffett founded Buffett Associates Ltd. and a further four investment partnerships before the end of 1957.

Berkshire Hathaway

In 1962, Buffett merged his partnerships into one entity and started aggressively purchasing shares in a textile manufacturing company called Berkshire Hathaway.

Now a millionaire, he took control of the company at a board meeting, fired the owner, and moved the business into the insurance sector. In 1970, Buffett started writing his annual letter to shareholders.

Charlie Munger – whom Buffett met in 1959 after both were invited to dinner by a local Omaha businessman – became chairman of Berkshire Hathaway in 1978. By 1979, Buffett was worth around $140 million but continued to live on his $50,000 per annum salary.

Value investing

Buffett has adapted Graham’s original value investing philosophy to now possess a net worth that exceeds $100 billion.

Buffett likes to hold stock from undervalued and well-managed companies indefinitely, with Gillette, American Express, and Coca-Cola some of the stalwarts of Berkshire’s portfolio.

Some companies, such as GEICO, Dairy Queen, and Fruit of the Loom, have been purchased outright by the billionaire but given the autonomy to manage their day-to-day operations.

Key takeaways

  • Warren Buffett is an American business magnate, philanthropist, and perhaps the most quoted investor of all time. Buffett showed entrepreneurial flair from a young age but was pressured by his father to attend university.
  • At Columbia University, Buffett was instructed and mentored by Benjamin Graham, the so-called father of value investing. In 1954, Graham offered Buffett a job at his investment firm Graham-Newman Corp. Buffett then founded his own investment company in 1956 after Graham retired.
  • Buffett met friend and business partner Charlie Munger at a chance dinner in 1959, with Buffett buying into textile company Berkshire Hathaway in 1962. He eventually took control of the company and moved it into insurance while retaining the name. Since that time, Berkshire Hathaway has embodied Buffett’s value investing philosophy.

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Connected Business Concepts

Value Investing

Value investing is a strategy advocating the purchase of stocks that are underappreciated by other investors or the broader market. Value investing was popularised by investor Warren Buffett, but the approach was pioneered by Benjamin Graham and David Dodd at Columbia Business School in the early 1920s. Graham would later go on to release the seminal book The Intelligent Investor in 1949.

Buffet Indicator

The Buffet Indicator is a measure of the total value of all publicly-traded stocks in a country divided by that country’s GDP. It’s a measure and ratio to evaluate whether a market is undervalued or overvalued. It’s one of Warren Buffet’s favorite measures as a warning that financial markets might be overvalued and riskier.

Circle of Competence

The circle of competence describes a person’s natural competence in an area that matches their skills and abilities. Beyond this imaginary circle are skills and abilities that a person is naturally less competent at. The concept was popularised by Warren Buffett, who argued that investors should only invest in companies they know and understand. However, the circle of competence applies to any topic and indeed any individual.

Economic Moat

Economic or market moats represent long-term business defensibility. Or how long a business can retain its competitive advantage in the marketplace over the years. Warren Buffet who popularized the term “moat” referred to it as a share of mind, opposite to market share, as such it is the characteristic that all valuable brands have.

Golden Circle

The Golden Circle attempts to explain how certain businesses can inspire others and differentiate themselves in the market. Originally developed by author Simon Sinek, the concept helps businesses identify their purpose and then communicate that purpose to consumers in a meaningful way so that the brand can be highly differentiated in the marketplace.

5 Whys Method

The 5 Whys method is an interrogative problem-solving technique that seeks to understand cause-and-effect relationships. At its core, the technique is used to identify the root cause of a problem by asking the question of why five times. This might unlock new ways to think about a problem and therefore devise a creative solution to solve it.

First-Principle Thinking

First-principles thinking – sometimes called reasoning from first principles – is used to reverse-engineer complex problems and encourage creativity. It involves breaking down problems into basic elements and reassembling them from the ground up. Elon Musk is among the strongest proponents of this way of thinking.

Second-Order Thinking

Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and any eventuality. It also discourages the tendency for individuals to default to the most obvious choice.

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Related Personal Wealth Case Studies

Warren Buffet

Warren Buffett is an American investor, business tycoon, and philanthropist. Known as the “Oracle of Omaha”, Buffett is best known for his strict adherence to value investing and frugality despite his immense wealth. He is among the wealthiest people in the world. Most of his wealth is tied up in Berkshire-Hathaway and its 65 subsidiaries.

Jeff Bezos

Jeff Bezos was best known for founding eCommerce giant Amazon in 1994. However, the entrepreneur owns companies in several industries, including health care, retail, robotics, real estate, and media. Many of these companies have been acquired by Amazon over the years, but some have been the result of direct investment from Bezos himself (through his investment arm is called Bezos Expeditions).

Elon Musk

Elon Musk is one of the richest people in the world, with his main ownership in Tesla, making him worth more than a hundred billion dollars. The companies founded by Elon Musk range from electric vehicles and renewable energies, with Tesla, rockets, with SpaceX, infrastructure with The Boring Company, and neurotechnology with Neuralink.

Bill Gates

Bill Gates is an American business tycoon, software developer, investor, and more recently, philanthropist. After dropping out of Harvard University and founding Microsoft in 1975, Gates has at times been the richest man in the world with an estimated net worth of $129 billion. He founded Cascade Investment in 1995 to manage his investments outside of Microsoft. The firm employs over 100 people and has significant stakes in hotel, rail transport, beverage, and waste management companies. To further his philanthropic causes, he founded the Bill and Melinda Gates Foundation in 2000. The foundation holds almost $47 billion in assets and tackles entrenched global issues around poverty, healthcare, and climate change. The foundation also has several trust investments in companies such as Berkshire Hathaway, Caterpillar, FedEx, Walmart, and UPS.

Mark Zuckerberg

Mark Zuckerberg is the largest shareholder of the company. Zuckerberg retains ownership and control of the company. Like Google, Facebook has issued two common stocks, Class A and Class B. The holders of Class B common stocks are entitled to ten votes per share, and holders of our Class A common stocks are entitled to one vote per share. Mark Zuckerberg has a voting power of 56.9%; he’s the main decision-maker.

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