This Is How Warren Buffett REALLY Made 85 Billion Dollars
Warren Buffett has been and continues to be a role model for millions of investors across the globe. His rich investment history going back to when he was just 11 years old when bought his first stock, his impressive story has been used in hundreds of speeches globally, with every investor, beginner or pro, being asked to emulate him.
However, who is Warren Buffet? In this post, we are going to look into the life of the man known as the “Oracle of Omaha”, highlighting the investments and decisions he made to become one of the richest and most respected businessmen in the world.
Warren Edward Buffett, was born in 1930 to Howard and Leila Buffett in Omaha, Nebraska. As a child, Warren demonstrated a keen interest in financial and business matters, and was described as a mathematical prodigy who could add large columns of numbers in his head, a gift that would serve him well in the future.
Legend has it that he allegedly told his friend that if he was not a millionaire by the time he was 30, he would jump off the tallest building in Omaha. If you are glad he did not follow through leave a like, if you wished he had jumped of leave a dislike. So, When Warren was 11 years old he made his first investment, he bought three shares of Cities Service Preferred at $38 a share.
The stock soon rose to $40 and he sold it, making him a small profit, a decision he would later regret when the stock rose to $200 a share. He later cited this experience as an early lesson in patience in investing. At 13 years old, Warren worked as a paper boy, he would wake up at 4:30 In the morning to deliver copies of the Washington post, he also sold magazine subscriptions and calendars to his newspaper subscribers on the side.
By 15, Warren had made $2,000 delivering papers. This is about $26,000 in todays’ money. He invested $1,200 of that in a 40 acre farm where he had a profit sharing agreement with a Nebraska farmer. As a sophomore in high school, 17 year old Buffett partnered with a friend to purchase a used pinball machine for $25 which they placed in the local barber shop.
Within months, they owned several machines in different barber shops across Omaha, bringing in about $25 a week. The business was later sold in the year for $1200 to a war veteran. Warren graduated from the University of Nebraska with a Bachelor of Science Degree, and soon applied to Harvard Business School.
Unfortunately, Warren was rejected, but this did not deter him in the slightest, and so he enrolled at Columbia Business School instead upon learning that Benjamin Graham taught there. He graduated with a Master of Science in Economics in 1951. In 1952 Warren returned to Omaha and worked as a stockbroker, while taking a Dale Carnegie public speaking course.
Using what he learned, he began teaching night classes at the University of Nebraska, but in 1954, he moved his family to New York, where he worked for his mentor, Benjamin Graham. So far, we can see that Warren was not afraid to take up different jobs to achieve his long term goal of going to business school.
He bravely took on diverse business opportunities in order to make money, and to invest it wisely later on. In 1954 warren accepted a job at Benjamin Graham’s partnership, his mentor and university professors firm. His starting salary was $12,000 a year, about $109,000 in today’s money. But in 1956 Benjamin Graham retired and closed this partnership.
By this time, warrens personal savings were over $174,000 which is about $1.5 million in today’s money. Although warren had moved around a lot over the years, he eventually decided to settle in his hometown of Omaha, in a house that cost him $31,500. Most millionaires live in houses that cost millions of dollars, but surprisingly, Warren’s frugal nature made it difficult for him to accept that price tag.
Warren spent most of his time as an investment salesman, and a securities analyst. In 1956, he started the Buffet Partnership, with his close friends and family. The partnership had unique conditions attached to it, starting off warren asked one of his partners a doctor to find ten other doctors willing to invest $10,000 each in his partnership, eventually eleven agreed, and although warren would initially only invest $100 of his own money, he would reinvest management fees and grow his stake in the partnership.
By 1960 Buffett had opened a total of seven partnerships and had a 9.5% stake in a more than a million dollars of partnership assets. By 1962, Warren Buffett became a millionaire because of his partnerships, which had an excess of $7 million dollars, over which a Million belonged to Warren.
He soon merged these partnerships into a single entity. In 1962, Warren Buffett made what he called his worst ever acquisition, the now famous Berkshire Hathaway. The New England textile company, originally started in the 1830’s had seen better days, but warren Buffett saw an opportunity to make money, he believed that the root cause of the companies woos was because of its poor management style.
So he began to aggressively buy shares after a dispute with its management convinced him that the company needed a change in leadership. But still the business kept losing money. Times were not kind for the old textile giant. In 1966 it became obvious that the golden glory days of the old New England textile company were over, and so warren made a radical shift in the company’s business dynamics that would propel it into the giant it is today.
Buffett shifted Berkshires focus gradually, away from its traditional textile endeavors instead using it as a holding company to invest in other businesses. In 1967 Berkshire had enough money left to purchase two insurance companies, the first of many insurance companies he would buy. This was the turning point of Berkshire Hathaway’s phenomenal success story.
Warren used the insurance companies’ substantial cash flow to finance further acquisitions. Berkshire Hathaway today has a portfolio of over a 1000 companies under management, with total assets exceeding $700 billion dollars. Warren Buffett, became a billionaire in 1990, when Berkshire started the sale of class A shares.
Warren is currently known for his contribution towards charity. One of his biggest donations was to the Bill and Melinda Gates Foundation, where Warren gave 185 million shares of Berkshire Hathaway at a market value of $28.3 billion dollars.
Today warren is worth over $84 Billion dollars. And although physically he is unremarkable, with looks that resemble grandfatherly than a corporate titan, intellectually he is unrivalled and considered a genius. His simple, straightforward, and honest nature is hard not to love, and his wit and charm have captivated the world. While it’s easy to think of him as a mythical figure.
Warren Buffett is simply a person who found what he loved at an early age and stuck with it his entire life. Thanks you so much for reading, and if you liked this post “How Warren Buffett REALLY Made 85 Billion Dollars by Practical Wisdom” please share it with your friends and family.
Credit: Practical Wisdom