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Buffett, Warren - Overview, Personal Life, Career Details, Social and Economic Impact, Chronology: Warren Buffett

investment business graham omaha

(1930-)
Berkshire Hathaway Inc.

Overview

Warren Buffett is regarded as one of America’s most brilliant investors and was one of its richest men in the late twentieth century. The subject of a cult of personality among satisfied investors, Buffett has been variously dubbed “St. Warren,” the “Wizard of Omaha,” and the “Corn-Fed Capitalist,” among other nicknames. Despite his vast fortune, he is often seen wearing a rumpled suit and lives in Omaha, Nebraska, in the same house he bought in 1958 for $31,500. Outside of his business concerns, Buffett has professed interest in funding a foundation devoted to halting population growth worldwide and to reducing nuclear proliferation.

Personal Life

Warren Edward Buffett was born in Omaha, Nebraska, on August 30, 1930, the son of Howard Homan and Leila (Stahl) Buffett. His father was a stockbroker who was later elected to the U.S. House of Representatives. Buffett, quoted in a 1995 Time article, said he had always “wanted to be very, very rich.” As a boy, he was often taken by his father to his workplace, where he had an opportunity to learn the stock market business at a very early age. Before he was even a teenager Buffett was doing such routine duties at his father’s office as chalking in stock prices on the main blackboard in the office and charting the performance of various stocks. In 1942, when Buffett was 12 years old, he and his parents moved to Fredericksburg, Virginia, where they lived while his father served in Congress.

By the age of 16, Buffett was clearly a prodigy in the area of mathematics and statistics. He enrolled at the University of Pennsylvania, where he focused on mathematics and statistics, and then moved to the University of Nebraska to finish his degree. He graduated at age 20 with a bachelor’s degree, then entered Columbia University’s graduate school of business, where he obtained a master’s degree in business.

Career Details

Buffett has claimed that his career started when his father exposed him to the stock market business as a child and taught him the basics of investing. He has declared that the great turning point in his life and career came when he met his mentor in business, Benjamin Graham. In 1954, after having worked at his father’s brokerage business in Omaha, Buffett joined Graham’s Wall Street investment firm, Graham-Newman Corporation. Buffett was already a genius at mathematics and statistical analysis when he met Graham, but Graham had a theory about the investment market that Buffett has used during most of his career. The Graham theory involved what Graham called “value investing.” The core idea was that people picking stocks to invest in should buy shares of stock that are valued cheaper than the company’s worth on paper, in conventional auditing terms.

It was a simple theory, but required diligence and ambition to practice. Buffett’s mathematical and statistical talent plus ambition enabled him to excel at finding out what companies were undervalued. He had to ignore everything published about a company, including its annual reports, go back to the “raw data” of the company, and make his own patient analysis, starting from scratch. He personally analyzed every stock in which he invested, and has consistently avoided markets he did not understand or knew little about.

During this period Buffett married Susan Thompson, fathered two of his three children, and earned $140,000 in New York before he was 25. In 1956, when Graham shut down his firm on Wall Street, Buffett left New York, returned to Omaha, raised $105,000, and started an investment partnership. By the time Buffett ended the partnership in 1969, it had grown at an annual compounded rate of 29.5 percent and had a value of $105 million.

Buffett next turned his focus to Berkshire Hathaway, a Massachusetts textile mill, and bought several additional companies. Although he closed the textile manufacturing business in the mid-1980s, Buffett kept the name for the holding company he continued to head in the late 1990s. During the 1980s Buffet also developed what became known as the “white knight” strategy of investing, where he saved certain businesses from being bought out by competitors. He stepped in to save the business by infusing it with the money it needed to fend off takeovers, but he also demanded in return that his investment pay off well. He arranged to get a preferred stock that always carried a healthy dividend, whether the company did well or not. Buffett made a great deal of money by pursuing this strategy.

By this point in his career, Buffett had become a multi-billionaire and a kind of celebrity because he was so talented at making money. Many have sought his advice, but he has given interviews only rarely. His lifestyle remained immensely modest, especially for a man known to be one of the richest men in America. In the mid-1990s he still lived at the Omaha home he had bought in 1958 for $31,500, with his girlfriend and former housekeeper, Astrid Menks, 17 years younger than Buffett. His wife, from whom Buffett had long been separated, lived in California; but, if she outlives Buffett, she will take over the Buffett company after his death, since she is the second-largest shareholder of Berkshire Hathaway.

One of Buffett’s most dramatic successes was his brief stint as chairman of the investment firm Salomon Inc., one of the world’s largest investment services. Through Berkshire he had acquired a 12 percent minority interest in the firm in 1987—one of his white knight investments. In 1991 it was revealed that senior staff had engaged in illegal trading of government securities, and there was an apparent attempt to cover up the scandal once Salomon management learned of it. In addition, it grew evident that the company’s finances were perilously dependent on a heavy debt load.

The resulting management shake-up brought in Buffett, already a director at Salomon, as the firm’s chairman. Simultaneously, Salomon was on the brink of bankruptcy because the U.S. Treasury Department penalized it with a ban on participating in federal securities auctions. The same day the crippling ban was announced, Buffett pleaded successfully with authorities at the Treasury and the Federal Reserve to reverse the ban. This critical victory saved Salomon from financial collapse; and both Buffett’s management decisions and his high esteem in the investment world quickly stabilized Salomon’s market position, which was heading into a free fall until he stepped in. Though he withdrew as chairman less than a year later, Buffett reduced Salomon’s debt and, more importantly, helped restore confidence in Salomon. His investment in Salomon paid off in 1997 when the firm was sold to the Travelers Group for $9 billion. Of that amount, Berkshire Hathaway’s share was worth about $1.9 billion, more than twice his initial investment a decade earlier.

Though he has been described as a quiet person with a Midwestern simplicity, Buffett is recognized as a brilliant and sophisticated personality. He has consciously shunned New York and Los Angeles, and yet every time the famous “Oracle of Omaha” has spoken, it is reported that everyone in the financial world listens to him.

Social and Economic Impact

Warren Buffett’s investments have held significant sway over a number of large U.S. companies and even whole industries. He has built up a major position in the insurance industry, which accounted for about two-thirds of Berkshire’s 1997 revenues, by purchasing such companies as GEICO Corporation and General Re. Other fully owned subsidiaries include the H.H. Brown Shoe Company, International Dairy Queen, and See’s Candies. Buffett has also purchased long-standing minority stakes in American Express, Coca-Cola, the Washington Post, and Gillette. In a surprise 1998 move, however, Buffett invested heavily in silver—capturing over a third of the world market—because he thought it was undervalued. This was an uncharacteristic choice for Buffett because commodity investments are usually regarded as more speculative and short-lived than his conservative long-term approach deems appropriate.

At the close of the twentieth century, Buffett was well known as a billionaire capitalist who made his own fortune. He is famous for such eccentricities as wearing rumpled suits and drinking five Cherry Cokes a day. He has declared himself an agnostic, and has arranged that after his death his money is to be used to establish a philanthropic foundation that will work to halt population growth worldwide and to fight nuclear proliferation.

Buffett has also said, in the entrepreneurial spirit, that he intends to leave his three children just $5 million apiece out of his more than $10 billion. He explained this decision in a 1988 interview with Esquire : “I think kids should have enough money to be able to do what they want to do, to learn what they want to do, but not enough money to do nothing.”

In Berkshire Hathaway’s 1989 annual report, Buffett wrote: “We do not wish to join with managers who lack admirable qualities, no matter how attractive the prospects of their business. We’ve never succeeded in making a good deal with a bad person.” In applying the investment strategy he developed with Graham, Buffett has always done his own company analyses. He is known by this hands-on style, and is perhaps the only billionaire who has always figured his own income taxes.

Chronology: Warren Buffett

1930: Born in Omaha, Nebraska.

1954: Joined Benjamin Graham’s investment firm on Wall Street.

1956: Established Buffett Partnership Ltd. in Omaha.

1969: Dissolved successful partnership.

1991: Became interim chairman of Salomon Brothers brokerage firm.

1998: Net worth estimated at $23 billion.

Buffett has been one of the most successful capitalists of the twentieth century. Using his analytical skills, he has invested in other people’s ideas, inventions, and organizations, and through them has amassed great personal wealth. In 1991 a Wall Street Journal reporter described Buffett as “a standard bearer for long-term investing, the perfect antidote to the get-rich-quick schemers of Wall Street.”

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almost 7 years ago

Dear Sir,



I am Chidi, 25 years old boy and a Nigerian. I graduated 2006 and I read statistics and since then I have been jobless. Here in Nigeria, if you don’t have anyone that can help you in a company that means you are going to remain jobless, so I have made up my mind instead of been jobless, doing nothing, I then decided to go into business of buying and selling of electronics, laptops, etc, which I have not started, because I come from a poor background. I don’t have anyone to run to in terms of raising me the fund to start up the business. My siblings are all out of school because there is no money to train them. Please sir, I beg you in the name of God to help me, so that I can also be the joy of my family. I know is very wrong me sending you this type or kind of mail telling you my problems. I just taught of you and searched for your I.D, then decided to tell you this. Please sir I need your help or assistant. Thanks very much sir. I will be glad 2 hear from your.

My regards to your family and friends. Take care of yourself and I pray that no evil can ever get you down. God is with you and your family and will continue blessing you. Long life and prosperity. Happy Xmas in advance sir.





Yours Faithfully,



Chidi.