Warren Buffett is a successful investor from America and the largest shareholder and CEO of Berkshire Hathaway. He is ranked as the second richest man in the world by Forbes with an estimated net worth of 37 billion dollars. This biography of Warren Buffett reflects many more achievements of his life…
Warren Edward Buffett was born on August 30, 1930, in Omaha, Nebraska, to Howard Buffett, a stockbroker-turned-Congressman. He was the second of three children, and had an amazing aptitude for both money and business at a very young age.
In 1947, Buffett graduated from Woodrow Wilson High School, Washington, D.C. He enrolled at The Wharton School, University of Pennsylvania for 2 years, where he joined the Alpha Sigma Phi Fraternity. In 1950, he went to the University of Nebraska, where he received a bachelor’s degree in economics. Later, he joined Columbia Business School, where two well-known securities analysts Benjamin Graham and David Dodd taught. After one year, Buffett received a Master’s Degree in Economics by the Columbia University.
In 1952, Buffett married Susan Thompson and the couple had three children, Susie, Howard and Peter. The couple lived separately from 1977 onwards, when his wife moved to San Francisco, but they remained married until Susan’s death in 2004. In 2006, on his seventy-sixth birthday, Buffett married his never-married sixty years old longtime-companion, Astrid Menks, who lived with him since his wife’s departure in 1977.
In 1956, Buffett established his first investment partnership called Buffett Associates, Ltd. This partnership was financed by $100 from Buffett and $105,000 from seven other partners, which comprised his family and friends. He created many other partnerships which later amalgamated as Buffett Partnership Limited. He ran his partnership in accordance to Graham’s investment approach and compensation structure. These investments made in excess of 30% compounded annually, whereas in the market 7% to 11% was the norm.
He applied a three-pronged approach:
- Generals: depreciated securities which possess margin of safety and meet expected return-to-risk characteristics that concentrate on the ratio of “Return versus Risk” (RTR).
- Arbitrages: company events which are not linked to broader market changes, like mergers, acquisitions, liquidation, etc.
- Controls: build sizable holdings, friendly with other shareholders or employ procurators to affect changes in companies.
In 1962, Buffett Partnerships bought shares of Berkshire Hathaway, a large manufacturing company in the declining textile industry, selling its shares below its working capital. He dissolved all his partnerships to concentrate on running the Berkshire Hathaway. During that time, Berkshire’s Vice Chairman, Charlie Munger mentioned that buying the company was a big mistake.
But Buffett redirected the company’s excess cash to gain private businesses, and stocks of public companies, thus making Berkshire one of the largest holding companies in the world. At the core of his strategy were the insurance companies to pay future claims as they had large cash reserves. Along with his friend and business partner Charlie Munger, Buffett’s investment approach drifted away from the Graham’s principles to high-quality businesses with enduring competitive advantages.
In 1988, he started purchasing stocks in the Coca Cola company and eventually bought up to 7% of the company for $1.02 billion. This was considered to be one of Berkshire’s most lucrative investments. In 2002, he enrolled in $11 billion worth of forward contracts to deliver US dollars against other currencies. By April 2006, Buffett’s total profit on these contracts was over $2 billion.
Buffett is an avid player of the card game bridge, and plays with Sharon Osberg and Bill Gates. He is agnostic when it comes to religious beliefs. It was reported that he does not like to carry a cell phone, drives his own car and doesn’t have a computer at his desk.
Buffett is well-known for his adherence to the value investing philosophy and personal frugality, irrespective of his immense wealth. Often known as the ‘Oracle of Omaha’ or ‘Sage of Omaha’, Buffett is a renowned philanthropist, and has announced to give away 85% of his fortune to the Gates Foundation as charity.