From 1997 to 2007, Bill Gates was the richest person in the world. However, by 2008, a new player emerged in the financial field, and that was Warren Buffett. Today, Buffett is one of the world’s wealthiest individuals, who, at the age of just 10, predicted that if he lived long enough, he would become extremely wealthy—and that prediction came true. As the Chairman and CEO of Berkshire Hathaway, the 93-year-old Buffett now holds a fortune of $138.5 billion. His rise in the financial world is primarily due to his smart investment strategies and knowledge; he started with small investments and gradually established significant ownership in major American companies.
In addition to his financial achievements, Buffett is also well-known for his charitable work. This billionaire has donated a large portion of his wealth to the Bill and Melinda Gates Foundation. Moreover, his effortless influence, integrity, and excellence serve as an inspiration to everyone. In today’s feature, we will explore Warren Buffett and his journey in the business world.
Early Life
American billionaire Warren Buffett was born on August 30, 1930, in Omaha City, Nebraska State, USA. His father’s name was Howard Buffett, and his mother’s name was Leila Buffett. His father ran a family grocery business, but during the Great Depression, his father lost his job, leading the Buffett family through significant economic crises that profoundly impacted Warren’s childhood. Later, his father opened a brokerage firm. Watching his father work, Warren developed an early interest in numbers and the stock market, and he began collecting various economic charts.
In 1943, when his father was elected as a member of the US Congress, the family moved to Washington, and because of his father’s position, Warren had the opportunity to attend prestigious institutions. Warren had his first experience with business at a young age. He bought a six-pack of Coca-Cola from his grandfather’s store for 25 cents and sold each bottle for 5 cents, saving the money to buy three shares of a company at the age of just 11, with each share priced at $38. He also delivered newspapers door-to-door. According to Bloomberg, he earned about $150 per month delivering newspapers for The Washington Post. In addition, he sold used golf balls and stamps and did car detailing work. While in high school, he bought a pinball machine for $25 and placed it in a local salon. Within a few months, he owned several pinball machines in three salons. He later sold this business to a war veteran for $1,200, and through these activities, he was able to save $9,800 and filed a tax return at the age of just 14.
After high school, although Buffett was keen on joining his father’s business full-time, his father wanted him to attend college first. Consequently 1977, Buffett enrolled in the Wharton School at the University of Pennsylvania. Due to his photographic memory, he was academically ahead of many and could easily complete his coursework. After graduating from Wharton School, he enrolled at the University of Nebraska and earned a bachelor’s degree in Business Administration. He then applied to Harvard Business School but was rejected, so he applied to Columbia Business School, where he met Wall Street legend Benjamin Graham, whose investment philosophy greatly influenced him. After completing his master’s degree at Columbia Business School, Buffett worked as an investment salesman at his father’s brokerage firm, Buffett-Falk & Co. While working there, he realized the need to improve his communication skills, so he turned to the renowned self-help guru Dale Carnegie. During Carnegie’s course, he met his future wife, Susan Buffett, whom he later proposed to.
After marriage, he worked as a security analyst at Graham-Newman Corp. for a few years, and at the age of 26, he founded an investment firm in Omaha called Buffett Associates, Ltd. with a few close family members and friends. Warren Buffett was able to identify prime buying opportunities by analyzing the annual reports and balance sheets of various companies to recognize undervalued and overlooked shares. Meanwhile, the company Buffett started continued to profit every year, and his business partners’ wealth also increased, making him a millionaire by the age of 30. During this time, in 1959, Warren met Charlie Munger, who later became his long-term business partner.
Warren Buffett’s Rise
Buffett did not limit his business to merely owning stocks but also thought about expanding by owning companies. As a result, he identified undervalued stock in Dempster Mill in Beatrice, Nebraska, and invested in it. The company was struggling at the time, plagued by issues like excessive inventory and an oversized workforce. When many workers were laid off to resolve these problems, Buffett faced significant criticism. However, he took this incident as a learning experience and later started investing only in companies that did not require direct employee management.
In 1962, he purchased a textile firm called Berkshire Hathaway, and three years later, he acquired controlling shares in the company, which were trading at $8 at the time and had risen to $20 by the late 1960s. He later transformed this textile firm into an investment company. Buffett reinvested Berkshire’s profits into other insurance companies, taking advantage of float money, which he used to purchase more stocks and invest in other businesses that would, in turn, generate further profits. In a board meeting, Buffett took full control of Berkshire, appointing a man named Ken Chace as the company’s president to manage its operations. From 1966, he stopped taking new investments, and by 1969, he dissolved his investment partnership in Berkshire Textile Firm, offering shares of Berkshire in exchange for cash, and fully acquired the insurance companies in which he had invested, turning them into subsidiaries of Berkshire.
In 1972, he acquired See’s Candy, which later generated even more cash flow, and he invested that money in other popular brands and companies like American Express, Bank of America, Coca-Cola, and Apple. He made these investments with long-term planning, recognizing the potential of these companies to yield good returns in the future. This investment strategy is known as “Cigar Butt Investing.” In the 1990s, despite the rising popularity of tech company stocks, he did not purchase any because they did not fall within his investment mandate. Buffett would find innovative, shareholder-focused management companies with high-profit margins and buy their stocks when prices were low. He would hold onto these stocks for a long time, and shares of large companies like Coca-Cola and American Express are still owned by Berkshire. In some cases, he would buy entire companies and let the management continue as it was. During this time, he closed down Berkshire Hathaway’s textile mill completely and started running it as an investment firm. A survey conducted by Carson Group named him the Top Money Manager.
As of 2024, Berkshire Hathaway has about 66 subsidiaries, including companies like Kraft Heinz, Duracell, and International Dairy Queen, with a total portfolio market cap of over $947 billion.
Business Crisis
Warren Buffett faced a significant downturn in his business career at one point. In 1987, Berkshire Hathaway purchased a 12% stake in Salomon Brothers, making Buffett a director in the company, and its value increased to $9 billion. However, in 1990, a company employee submitted several bids outside of the US Treasury’s approved rules. Even though this came to the attention of then-CEO John Gutfreund, he failed to take action against the employee, leading the US Treasury Department to impose sanctions on Salomon Brothers. Buffett personally got involved, negotiating with the Treasury Department to remove the sanctions. If the ban had not been lifted, the company was at risk of immediate bankruptcy. Such a bankruptcy would have been seen as a major failure in Buffett’s management abilities, severely damaging his reputation and affecting future investments in his other companies. The ban was eventually lifted, but there was a nerve-wracking four-hour gap between the two decisions. During the entire negotiation process, Buffett himself managed Salomon Brothers.
Business Controversy
Warren Buffett first encountered controversy in 1974. At that time, Buffett’s business partner, Charlie Munger, purchased shares of Wesco Financial Corporation through their company, Blue Chip Stamps. This company primarily produced and distributed trading stamps, and some of their stamps could be exchanged for various merchandise with selected retailers. Another company was also trying to acquire Wesco at the time, but Blue Chip Stamps bought the majority of Wesco’s shares to prevent this. When the truth was revealed in an investigation by the USA’s Security and Exchange Commission, a fine of $115,000 was imposed. Later, in 1977, Buffett faced anti-trust charges. At the time, Buffett acquired the Buffalo Evening News for $33 million through the same company, Blue Chip Stamps. It is believed that Buffalo Evening News’ competitor, Buffalo Courier Express, filed these charges against them with the intention of removing competition from the market through legal battles. Eventually, Berkshire Hathaway Media Group sold the Buffalo Express, along with 30 other newspapers, to Lee Enterprises. Additionally, Berkshire was also criticized for its charitable work. Shareholders used to donate the company’s funds allocated for charity to their preferred organizations, but Buffett found this practice inappropriate. He later decided that shareholders could donate their portion of the charity money to organizations of their choice. However, when most shareholders donated to pro-choice organizations, conservatives started a negative campaign against Berkshire.
In 2006, Berkshire’s subsidiary, General Reinsurance Corporation, was accused of collaborating with American International Group to conduct a Finite Reinsurance scheme.
During the 2008 financial crisis, Buffett invested $5 billion in Goldman Sachs Investment Bank, and when the investment bank redeemed its shares in 2011, Warren earned approximately $3.7 billion. However, Buffett faced criticism for investing in Goldman Sachs, given the bank’s not-so-stellar reputation.
In 1989, Berkshire Hathaway purchased a 10% stake in Wells Fargo Bank for approximately $12.7 billion. Buffett considered the bank one of his favorite holdings. However, in 2016, the bank was fined around $185 million for proven illegal business practices. They had opened numerous fraudulent accounts and charged customers for products and services they had never availed. Buffett later sold most of his shares in the bank in 2021, and the remaining shares in 2022.
Wealth
Warren Buffett has been featured in Forbes’ billionaire list for nearly four decades. In 1993, he surpassed Bill Gates to reach the top of Forbes’ Richest Person list for the first time. In 2008, with a net worth of approximately $62 billion, Warren Buffett again topped Forbes’ Richest Person list, once more surpassing Bill Gates. Despite a long-standing competition with Bill Gates for the top spot on Forbes’ Richest Person list, they remain close friends in their personal lives. As early as 2006, Buffett was already contemplating donating all of his Berkshire Hathaway stock. Inspired by this idea, in 2010, Buffett, along with Bill and Melinda Gates, founded The Giving Pledge, where billionaires from the USA and around the world commit to donating their net worth to various charitable foundations. Buffett pledged to donate 99% of his wealth. He announced plans to donate approximately 12 million Class-B shares of Berkshire Hathaway to five foundations. Additionally, he has also donated to various charity foundations established by his children. Currently, with a net worth of $137.8 billion, Warren Buffett ranks 7th on Forbes’ World’s Richest Person list.
Personal Life
In his personal life, Buffett first married Susan Buffett, and after her passing, he married Astrid Menks. He has three children. Despite being an extremely wealthy man, Warren Buffett leads a very simple life. He still lives in the house he bought over 60 years ago for $31,500, which is now worth about $330,000. He goes to McDonald’s for breakfast and drinks Coca-Cola. He has never changed his office, and he still works at the same desk his father used when he worked. For his exceptional contribution to American society, then-President Barack Obama awarded him The Presidential Medal of Freedom in 2011.
Conclusion
Warren Buffett’s life began quite humbly, and from there, he became one of the world’s wealthiest individuals. Buffett, who was interested in business from a young age, built his investment foundation under the guidance of Benjamin Graham, and using this knowledge, he transformed Berkshire Hathaway from an ordinary textile company into a massive conglomerate. His wise investments in undervalued stocks, along with investments in companies like Coca-Cola, American Express, and Apple, have played a significant role in his success. His investment strategy serves as a great example for new investors. While his visionary decisions in his business career have earned him praise, he has also faced criticism for some of his actions. Alongside earning wealth, he has been dedicated to serving humanity. Despite all his achievements, his simple lifestyle remains an inspiration to many.
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