Warren Buffett
Early Life
Warren Edward Buffett was born on August 30, 1930, in Omaha, Nebraska. He is the second of three children and the only son of Leila (née Stahl) and Congressman Howard Buffett. Buffett 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 Woodrow Wilson High School in 1947, where his senior yearbook picture reads: "likes math; a future stockbroker."
Education
Buffett displayed an interest in business and investing at a young age. He was inspired by a book he borrowed from the Omaha Public Library at the age of seven, "One Thousand Ways to Make $1000". 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 bottles, or 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. 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. The business was sold later in the year for $1,200 to a war veteran.
Buffett's interest in the stock market and investing dated to schoolboy days he spent in the customers' lounge of a regional stock brokerage near his father's own brokerage office. On a trip to New York City at age ten, he made a point to visit the New York Stock Exchange. At 11, he bought three shares of Cities Service Preferred for himself, and three for his sister Doris Buffett (founder of The Sunshine Lady Foundation).
In 1947, Buffett entered the Wharton School of the University of Pennsylvania. He would have preferred to focus on his business ventures; however, he enrolled due to pressure from his father. Warren studied there for two years and joined the Alpha Sigma Phi fraternity. 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.
Career
The basic principles of investing that Buffett learned from Benjamin Graham at Columbia guided much of his successful investments. Graham, known as the "father of value investing," taught Buffett to look at stocks as business, use the market's fluctuations to your advantage, and seek a margin of safety. That is, the difference between the intrinsic value of the stock and its market price.
Buffett worked from 1951 to 1954 at Buffett-Falk & Co. as an investment salesman; from 1954 to 1956 at Graham-Newman Corp. as a securities analyst; from 1956 to 1969 at Buffett Partnership, Ltd. as a general partner and from 1970, as Chairman and CEO of Berkshire Hathaway.
When Buffett began managing money in 1956 with $100,000 cobbled together from a handful of investors, he marked the beginning of Buffett Partnership, Ltd. By 1960, he had opened a total of seven partnerships and had a 9.5% stake in more than a million dollars of partnership assets. In 1962, Buffett became a millionaire because of his partnerships, which in January 1962 had an excess of $7,178,500, of which over $1,025,000 belonged to Buffett.
Buffett's partnerships began purchasing shares at $7.60 per share of Berkshire Hathaway, a struggling New England textile mill, in 1962. Buffett's partnerships aggressively began purchasing shares, and by 1965 they controlled the company and Buffett's partnerships were effectively merged into Berkshire Hathaway. Buffett's investment in Berkshire Hathaway was initially a value investment. However, Berkshire Hathaway's business was deteriorating. Buffett, instead of selling, bought more shares.
Buffett took control of Berkshire Hathaway at a board meeting and named a new president, Ken Chace, to run the company. Buffett has been the chairman and largest shareholder of Berkshire Hathaway since 1970, and his business exploits have had him referred to as the "Oracle" or "Sage" of Omaha by global media outlets. He is noted for adherence to value investing and for his personal frugality despite his immense wealth.
Investment Philosophy
Buffett follows the value investing strategy that he learned while he was a student of Benjamin Graham. This approach looks for securities with prices that are unjustifiably low based on their intrinsic worth. Rather than focusing solely on a company's balance sheet and income statement, Buffett looks at a variety of factors including how well the company is managed, its competitive position, and its ability to generate free cash flow.
Buffett often holds his positions for a long-term period, believing that "our favorite holding period is forever." This approach does not mean that Buffett never sells stocks, but he does not aim to profit from short-term market fluctuations. Instead, he chooses stocks that he believes offer good prospects for long-term growth. This strategy can be contrasted with the speculative approach, where a trader buys and sells stocks quickly based on short-term market fluctuations.
Buffett's approach is grounded in value investing. He looks for companies that he understands and feels comfortable owning. Buffett maintains that it is easier for investors to understand a few types of businesses well, and to stick with those types of businesses. He advises investors to make investments as if they were buying entire businesses, not just pieces of paper.
Philanthropy
Buffett has been a prolific philanthropist, having pledged to give away 99 percent of his fortune to philanthropic causes, primarily via the Bill & Melinda Gates Foundation. He donated $2.9 billion to the foundation in July 2020. He has also made significant donations to the Giving Pledge, a campaign to encourage wealthy people to contribute a majority of their wealth to philanthropic causes.
In June 2006, Buffett made a commitment to give away his fortune to charity, with 83% of it going to the Bill & Melinda Gates Foundation. The largest contribution would go to the Bill and Melinda Gates Foundation; as of 2016, the total donation amounted to $2.8 billion. In 2007, he was listed among Time's 100 Most Influential People in The World. He also pledged $50 million to the Nuclear Threat Initiative, in Washington, where he began serving as an adviser in 2002.
Personal Life
Buffett married Susan Thompson in 1952. They had three children: Susan Alice Buffett (born 1953), Howard Graham Buffett (born 1954), and Peter Buffett (born 1958). They began living separately in 1977, although they remained married until Susan Buffett's death in July 2004. Their daughter, Susan, died in 2004 at the age of 50 due to a stroke.
In 2006, on his 76th birthday, Buffett married his longtime companion, Astrid Menks, who was then 60. She had lived with him since his wife's departure to San Francisco in 1977.
Buffett is an avid bridge player, which he plays with fellow fan Gates—he spends 12 hours a week playing the game. Buffett is also a dedicated, lifelong follower of Nebraska football, and attends as many games as his schedule permits. He is a trustee of the Bill and Melinda Gates Foundation.
Buffett has written several times of his belief that, in a market economy, the rich earn outsized rewards for their talents: "A market economy creates some lopsided payoffs to participants. The right endowment of vocal chords, anatomical structure, physical strength, or mental powers can produce enormous piles of claim checks (stocks, bonds, and other forms of capital) on future national output. Correspondingly, a person talented in a valued activity and born into the right surroundings can earn sums reaching to thousands of times the average pay of his fellow citizens."