The Essence of Warren Buffett Life

By Isa Singh

One of the world’s wealthiest person and perhaps the most influential philanthropists of our times, Warren Buffett do not need an introduction. He is the chairman, CEO and the largest shareholder of Berkshire Hathaway, a multinational conglomerate holding company headquartered in Omaha. He is much respected by his peers and the world alike for his frugality and adherence to ethical principles when it comes to successful business management. Called the ‘Oracle of Omaha’, Buffett rose from a modest beginning to become one of the richest men on earth through his sheer hard work and a keen sense of investing. He started demonstrating his financial abilities from his early years when he would go from door to door selling candies and soft drinks.

• Language: English
• Publisher: Mahesh Dutt Sharma
• Release date: Jun 2, 2018
• ISBN: 9780463632543

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The Essence of Warren Buffett Life

Isa Singh

Published by M.D. Sharma

Smashwords Edition

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Table of Contents

Chapter: 1. Warren Buffett: A Brief Biography

Chapter: 2. Warren Buffett Speaks

Chapter: 3. Growth, Hero, History

Chapter: 4. Opportunities, Owner, P&G

Chapter: 5. United States, Value, Wealth

Chapter: 6. Like, Love, Happiness

Chapter: 7. Product, Traffic, Effect

Chapter: 1. Warren Buffett: A Brief Biography

One of the world’s wealthiest person and perhaps the most influential philanthropists of our times, Warren Buffett do not need an introduction. He is the chairman, CEO and the largest shareholder of Berkshire Hathaway, a multinational conglomerate holding company headquartered in Omaha. He is much respected by his peers and the world alike for his frugality and adherence to ethical principles when it comes to successful business management. Called the ‘Oracle of Omaha’, Buffett rose from a modest beginning to become one of the richest men on earth through his sheer hard work and a keen sense of investing. He started demonstrating his financial abilities from his early years when he would go from door to door selling candies and soft drinks.

Early Years

Buffett was born to Howard and Leila Buffett on August 30, 1930, in Omaha, Nebraska, USA. He was the second of three children, and the only boy. His father was a stockbroker and four-term United States congressman. Howard served non-consecutive terms on the Republican ticket but espoused libertarian views.

Making money was an early interest for Buffett, who sold soft drinks and had a paper route. When he was 14 years old, he invested the earnings from these endeavours in 40 acres of land, which he then rented for a profit. At his father’s urging, he applied to the University of Pennsylvania and was accepted. Unimpressed, Buffett left after two years, transferring to the University of Nebraska. Upon graduation, his father once again convinced him of the value of education, encouraging him to pursue a graduate degree. Harvard rejected Buffett, but Columbia accepted him. Buffett studied under Benjamin Graham, the father of value investing, and his time at Columbia set the stage for a storied career, albeit one with a slow start.

Upon graduation, Graham refused to hire Buffett, even suggesting that he avoid a career on Wall Street. Buffett’s father agreed with Graham, and Buffett returned to Omaha to work at his father’s brokerage firm. A short while later, Graham had a change of heart and offered Buffett a job in New York.

The Foundation of Value

Once in New York, Buffett had the chance to build upon the investing theories he had learned from Graham at Columbia. Value investing, according to Graham, involved seeking stocks that were selling at an extraordinary discount to the value of the underlying assets, which he called the intrinsic value. Buffett internalized the concept but had an interest in taking it a step further. Unlike Graham, he wanted to look beyond the numbers and focus on the company’s management team and its product’s competitive advantage in the marketplace.

In 1956, he returned to Omaha, launched Buffett Associates, Ltd., and purchased a house. In 1962 he was 30 years old and already a millionaire when he joined forces with Charlie Munger. Their collaboration eventually resulted in the development of an investment philosophy based on Buffett’s idea of looking at value investing as something more than an attempt to wring the last few dollars out of dying businesses.

Along the way, they purchased Berkshire Hathaway, a dying textile mill. What began as a classic Graham value play became a longer-term investment when the business showed some signs of life. Cash flows from the textile business were used to fund other investments. Eventually, the original business was eclipsed by the other holdings. In 1985, Buffett shut down the textile business but continued to use the name.

Buffett’s investment philosophy become one based on the principle of acquiring stock in what he believes are well-managed, undervalued companies. When he makes a purchase, he intends to hold the securities indefinitely. Coca-Cola, American Express and the Gillette Company all met his criteria and had remained Berkshire Hathaway’s portfolio for many years. In many cases, he purchased the companies outright, continuing to let their management teams handle the day-to-day business. A few of the better-known firms that fit into this category include See’s Candies, Fruit of the Loom, Dairy Queen, The Pampered Chef and GEICO Auto Insurance.

Buffett’s mystique remained intact until technology stocks became popular. As a resolute technophobe, Buffett sat out the incredible run-up in technology stocks during the late 1990s. Sticking to his guns and refusing to invest in companies that didn’t meet his mandate, Buffett earned the scorn of Wall Street experts and was written off by many as a man whose time had passed. The tech wreck that occurred when the dotcom bubble burst bankrupted many of those experts. Buffett’s profits doubled.

Personal Life

Despite a net worth measured in billions, Warren Buffett is legendarily frugal. He still lives in the five-bedroom house he bought in 1958 for $31,000, drinks Coca-Cola and dines at local restaurants, where a burger or a steak are his preferred table fare. For years, he eschewed the ideas of purchasing a corporate jet. When he finally acquired one, he named it the ‘Indefensible’ public recognition of his criticism about money spent on jets.

He remained married to Susan Thompson for more than 50 years after their 1952 wedding. They had three children, Susie, Howard and Peter. Buffett and Susan separated in 1977, remaining married until her death in 2004. Before her death, Susan introduced him to Astrid Menks, a waitress. Buffett and Menks began living together in 1978 and were married in August 2006.

Philanthropy1

In June 2006, Buffett announced that he would be giving his entire fortune away to charity, committing 85 per cent of it to the Bill and Melinda Gates Foundation. This donation became the largest act of charitable giving in United States history. In 2010, Buffett and Gates announced they had formed The Giving Pledge campaign to recruit more wealthy individuals for philanthropic causes.

In 2012, Buffett disclosed that he had been diagnosed with prostate cancer. He began undergoing radiation treatment in July and completed his treatment in November.

The health scare did little to slow the octogenarian, which annually ranks near the top of the Forbes world billionaires list. In February 2013, Buffett purchased H.J. Heinz with private equity group 3G Capitals for $28 billion. Later additions to the Berkshire Hathaway stable included battery maker Duracell and Kraft Foods Group, which merged with Heinz in 2015 to form the third-largest food and beverage company in North America.

Awards & Achievements

He was presented with the Presidential Medal of Freedom by President Barack Obama in 2011.

He is the chairman and CEO of Berkshire Hathaway and ranks among the world’s wealthiest people. Considered to be the most successful investor of the 20th century, he is also the biggest philanthropists of our times and had pledged to donate most of his fortunes to social causes.

The Evolution of Warren Buffett’s

1936 – Age 6

Buffett started selling Juicy Fruit chewing gum packs. When asked for one piece, he would not sell as he thought he might be left with four pieces he could not sell. He made 2 cents profit per pack.

Buffett would also purchase Coca-Cola six packs for 25 cents from his grandfather’s grocery store – Buffett and Son. He would sell each Coke for 5 cents. Profit of 5 cents per pack.

1941 – Age 11

At 11 years old, Buffett buys his first stock – 6 shares of Cities Service (now known as CITGO – an Oil company) at $38 per share. He bought 3 for himself and 3 for his sister Doris.

That is all the money he had at that time. Practised little to no diversification at a young age which he continued to do throughout his investment career. The stock price fell to $27 but soon went to $40. He sold the stock at $40, but, the stock shot up to $202 in the next few years.

He later cited this experience as an early lesson in patience in investing.

1943 – Age 13

Buffett files his first tax return and deducts his bike as a work expense for $35.

1945 – Age 15

Buffett makes $175 a month selling Washington Post newspapers and saves $1200 to buy 40-acre farmland in Omaha, Nebraska.

1947 – Age 17

Buffett joins his friend Donald Danly to start a company called Wilson Coin Operated Machines. The business buys a pinball machine at the cost of $25 and places it in a nearby barbershop. Wilson Coin makes $50 per week for Buffett and Donald.

Buffett does tax returns for himself and Wilson Coin. In next few months, they own three machines and a year later sells it for $1200.

1949 to 1954 – Age 19 to 24

Buffett’s savings reach $9800.

He joins Columbia University and learns from Benjamin Graham. He was willing to work for Benjamin Graham, even for free, but was not offered a job.

Buffett returned to Omaha, purchased a Texaco station, but did not go well. He was also working as an investment salesman for Buffett-Falk & Company, at his father’s brokerage firm.

In 1954, Benjamin Graham called him again and offered him a job for $12,000 a year. During this period, Buffett was able to also work closely with Walter Schloss.

1956 – Age 26

Graham decides to retire and fold his business. Buffett’s savings have grown from $9,800 to $140,000.

Buffett returned to Omaha and on May 1, created Buffett Associates Ltd. Seven family members and friends invest a total of $105k. Buffett invested only $100k.

1957 – Age 27

Buffett created more partnerships and was managing a total of 5 partnerships, all from his home.

1958 – Age 28

After three years, Buffett doubled the partner’s money.

1959 – Age 29

Buffett was introduced to Charlie Munger by his friend Edwin Davis at a dinner. Charlie Munger later becomes the Vice