Warren Buffett

About Warren Buffett

Warren Edward Buffett was born on August 30, 1930, to Leila Stahl Buffett and Howard Buffett.^[2] Buffett lived with his parents and two sisters, Doris and Roberta, in Omaha until age twelve, when his father was elected to Congress, and the family moved to Washington, D.C.^[3] It was there that Buffett attended and graduated from Woodrow Wilson High School in 1947.^[4]  

As a child, Buffett developed an interest in business and investing. At six years old, he went door-to-door selling Coca-Cola, chewing gum, and magazines. In high school, he earned money delivering newspapers, selling golf balls, running a pinball machine business, and investing in a local 40-acre farm.^[5]  

The paper route earned Buffett over $2,000 per year, which would be worth over $30,000 in 2023. He sold the pinball machine business for over $1,000. He bought his first stock at age eleven, purchasing three shares of Cities Service stock for himself and three shares for his sister.^[6]   

Despite Buffett’s business success during childhood, his personal life was more difficult. In Giving It All Away: The Doris Buffett Story, Buffett’s older sister describes their mother, Leila, as emotionally abusive. Buffett explained after his mother’s death that he did not have a good relationship with his mother. He said, “She had her good parts, but the bad parts kept me from having a relationship with her.”^[7]   

Following high school graduation, Buffett wanted to skip college and focus on his business ventures, but his father encouraged him to enroll in school. He attended the Wharton School of the University of Pennsylvania for two years before transferring to the University of Nebraska, where he earned his bachelor’s degree in business administration.^[8]   

He then applied to Harvard Business School to study economics but was rejected. Instead, he attended Columbia University and met his mentor, renowned economist Benjamin Graham.^[9] After earning his Master’s of Economics at Columbia, he continued his studies at the New York Institute of Finance.^[10]   

Early Career

After graduating college in 1951, Buffett returned to Omaha, worked as a stockbroker, and taught a night class on investment principles.^[11] In 1954, he accepted a position as a securities analyst at Graham-Newman Corp, Benjamin Graham’s investment firm. He remained at Graham-Newman Corp until 1956, when Graham retired and closed the firm. Buffett took that opportunity to open his own firm, Buffett Partnership Ltd.^[12] 

Berkshire Hathaway

In 1962, Buffett started buying shares in a struggling textile manufacturing company called Berkshire Hathaway for $7.50 a share. By 1963, he was the largest shareholder.^[13] In 1964, Berkshire Hathaway’s owner, Seabury Stanton, offered to buy back all of Buffett’s stocks. While Buffett initially agreed, Stanton’s offer was lower than Buffett expected. This made him angry. Instead of accepting the offer, he bought the rest of the company and fired Stanton as the owner.^[14]  

His investment resulted in control over a textile business that was slowly failing. So he used the money from operations to expand to other industries, primarily insurance, and he slowly shut down the textile branch of the business. By 1985, the company had completely left the textile manufacturing industry.^[14] 

Since Buffett took over the company in 1964, it has seen average annual returns of roughly 20%, an astounding rate compared to the S&P 500’s 10% average annual returns.^[15] In 1980, Berkshire Hathaway’s stocks were trading at $290 a share. As of 2023, stocks were trading for over $460,000 a share.^[16]  

As of 2023, the majority of Berkshire Hathaway’s holdings are in five companies—American Express, Apple, Coca-Cola, Chevron, and Bank of America.^[17] The investment firm is known for holding stocks long-term. The company first invested in American Express in 1964, buying a 5% stake in the company. Since then, that position has grown to around a 20% stake.^[18] Buffett first purchased Coca-Cola stock in 1988, buying a 7% stake in the company,^[13] which has since grown to a 9.2% stake.^[19]  

Investment Strategy

Warren Buffett’s investment philosophy is based on the principles of value investing. He looks for companies that are undervalued by the market but have strong long-term prospects. Buffett is known for his emphasis on finding companies with a durable competitive advantage that can protect them from competition and sustain their earnings power.^[20] 

Buffett also emphasizes the importance of investing in companies with strong management teams aligned with shareholders’ interests. He has a long-term investment horizon and believes in holding onto investments for the long term. Additionally, Buffett believes in conducting thorough research and analysis before making investment decisions rather than relying on short-term market trends or speculation.^[20]  

Buffett emulates his former mentor and the father of value investing, Benjamin Graham. But he also believes in the philosophies of economist Irving Fisher, who emphasized the importance of investing in assets that would provide a steady and reliable income stream, strategically using leverage, and adjusting investment strategies based on market conditions.^[20] He explained his philosophy when he said, “I’m 15 percent Fisher and 85 percent Benjamin Graham.”^[20] 

Buffett’s often-quoted investment philosophy is simply described in one of his most famous quotes. Buffett said, “Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1.”^[21] 

While Buffett has never published a full-length book, the wisdom found in his annual shareholder letters has been compiled by others in various books. In these letters, he shares his investment methods and wisdom with other investors.^[22] 

Philanthropy

In 2022, Buffett topped Forbes’ list of America’s most generous givers, with a lifetime giving amount of $51.5 billion.^[23]  

The majority of his donations have gone to the Bill and Melinda Gates Foundation, which focuses on world health and education. His other donations have gone toward the four charities set up by Buffett’s children and late wife.^[24]  

In 2010, Buffett created the Giving Pledge with Bill Gates, which invites wealthy individuals to make a commitment to give away the majority of their wealth. Buffett has pledged to give away 99% of his wealth.^[25]  

Personal Life

Buffett met his wife, Susan Thompson, through his younger sister, Roberta, who was Susan’s roommate. Thompson and Buffett were married at a Presbyterian church in Omaha in 1952.^[26]  

One year later, the couple’s first daughter, Susie, was born, followed by sons Howard and Peter soon after. In 1977, after all three children had reached adulthood, Susan moved to San Francisco and lived separately from her husband. Despite living separately, the Buffetts stayed married until Susan’s death in 2004.^[27]   

Two years after Susan’s death, Buffett married Astrid Menks, who he had lived with since Susan left for San Franciso in 1977. Buffett met Menks when his wife, Susan, introduced the two of them and encouraged Menks to take care of Buffett while she was away.^[27]  

Susan remained on good terms with both Buffett and Menks for the rest of her life. She occasionally attended public events with Buffett and was good friends with Menks. The Buffett’s Christmas cards were often signed from Warren, Susie, and Astrid.^[26]   

Reading is an important hobby for Buffett, who reportedly spends six hours a day reading.^[28]  His other hobbies include playing bridge, playing the ukelele, and following University of Nebraska football.^[29][30] He also loves Coca-Cola products and McDonald’s, reportedly drinking five cans of Coke per day and eating McDonald’s every morning for breakfast.^[31] 

Buffett is known for being very frugal, despite his billionaire status. He has lived in the same home since 1958, which he purchased for $31,500. Zillow estimates the home is now worth over $1 million.^[32] He is similarly hesitant to upgrade his vehicle. He drives a 2014 Cadillac, which he bought for around $45,000.^[33] 

Warren Buffett Today

Warren Buffett continues to lead Berkshire Hathaway from his hometown of Omaha, Nebraska. In 2022, Berkshire Hathaway reported a loss of $22.8 billion as the market fell and investors at every level experienced major losses. However, in Buffett’s annual report to shareholders, he explained these numbers are misleading and the holding company is, in fact, doing well.^[34]  

Buffett remains dedicated to the same routines he has followed for decades, including a strict sleep schedule. He goes to sleep each night at 10:45 p.m. and wakes up at 6:45 a.m.^[35] He spends the majority of the day reading news from his favorite sources, including the Omaha World-Herald, The Washington Post, Financial Times, and The New York Times.^[36] 

After work, he often plays bridge. Buffett says he enjoys playing bridge because, “It’s a game you can enjoy when you are in your 90s, and you are seeing a different intellectual challenge every seven minutes.”^[37]