Warren Buffett

Warren Edward Buffett (born August 30, 1930) is an American investor, businessman, and philanthropist. He is one of the most successful investors in history, the primary shareholder and CEO of Berkshire Hathaway,and in 2008 was ranked by Forbes as the richest person in the world with an estimated net worth of approximately $62 billion.

Buffett is often called the "Oracle of Omaha"or the "Sage of Omaha"and is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth.

Buffett is also a notable philanthropist, having pledged to give away 85 percent of his fortune to the Gates Foundation. He also serves as a member of the board of trustees at Grinnell College.

In 1999, Buffett was named the top money manager of the twentieth century in a survey by the Carson Group, ahead of Peter Lynch and John Templeton. In 2007, he was listed among Time's 100 Most Influential People in the world.



Biography

Early life
Warren Buffett was born in Omaha, Nebraska, the only son of Howard Buffett and second of three children. He worked at his grandfather's grocery store. In 1943, Buffett filed his first income tax return, deducting his bicycle and watch as a work expense for $35 for his work as newspaper delivery boy.After his father was elected to Congress, Buffett was educated at Woodrow Wilson High School, Washington, D.C. In 1945, in his freshman year of high school, Buffett and a friend spent $25 to purchase a used pinball machine, which they placed in a barber shop. Within months, they owned three machines in different locations.

Buffett first enrolled at The Wharton School, University of Pennsylvania, (1947–49) where he joined the Alpha Sigma Phi Fraternity. His father and uncles were Alpha Sigma Phi brothers from the chapter in Nebraska. In 1950, he transferred to the University of Nebraska where he received a B.S. in Economics.

Buffett then enrolled at Columbia Business School after learning that Benjamin Graham, (the author of The Intelligent Investor), and David Dodd, two well-known securities analysts, taught there. He then received a M.S. in Economics from Columbia University in 1951.

In Buffett’s own words:

I’m 15 percent Fisher and 85 percent Benjamin Graham.

The basic ideas of investing are to look at stocks as business, use the market's fluctuations to your advantage, and seek a margin of safety. That’s what Ben Graham taught us. A hundred years from now they will still be the cornerstones of investing.

Career

Buffett was employed from 1951–54 at Buffett-Falk & Co., Omaha as an Investment Salesman, from 1954–1956 at Graham-Newman Corp., New York as a Securities Analyst, from 1956–1969 at Buffett Partnership, Ltd., Omaha as a General Partner and from 1970–Present at Berkshire Hathaway Inc, Omaha as its Chairman, CEO.

In 1952, Buffett discovered Graham was on the board of GEICO insurance. Taking a train to Washington, D.C. on a Saturday, he knocked on the door of GEICO's headquarters until a janitor allowed him in. There he met Lorimer Davidson, Geico's Vice President, and the two discussed the insurance business for hours. Davidson would eventually become Buffett's life-long friend and a lasting influence and later recall that he found Buffett to be an “extraordinary man” after only fifteen minutes. Buffett graduated from Columbia and wanted to work on Wall Street, however, both his father and Ben Graham urged him not to. He offered to work for Graham for free, but Graham refused.

Buffett returned to Omaha and worked as a stockbroker while taking a Dale Carnegie public speaking course.Using what he learned, he felt confident enough to teach an "Investment Principles" night class at the University of Nebraska. The average age of his students was more than twice his own. During this time he also purchased a Sinclair Texaco gas station as a side investment. However, this did not turn out to be a successful business venture.

In 1953 Buffett married Susan Thompson and the next year they had their first child, Susan Alice Buffett. In 1954, Buffett accepted a job at Benjamin Graham's partnership. His starting salary was $12,000 a year (approximately $97,000 adjusted to 2008 dollars). There he worked closely with Walter Schloss. Graham was a tough man to work for. He was adamant that stocks provide a wide margin of safety after weighting the trade-off between their price and their intrinsic value. The argument made sense to Buffett but he questioned whether the criteria were too stringent and caused the company to miss out on big winners that had more qualitative values.That same year the Buffetts had their second child, Howard Graham Buffett. In 1956, Benjamin Graham retired and closed his partnership. At this time Buffett's personal savings were over $174,000 and he started Buffett Partnership Ltd., an investment partnership in Omaha.

In 1957, Buffett had three partnerships operating the entire year. He purchased a five-bedroom stucco house in Omaha, where he still lives, for $31,500. In 1958 the Buffett's third child, Peter Andrew Buffett, was born. Buffett operated five partnerships the entire year. In 1959, the company grew to six partnerships operating the entire year and Buffett was introduced to Charlie Munger. By 1960, Buffett had seven partnerships operating: Buffett Associates, Buffett Fund, Dacee, Emdee, Glenoff, Mo-Buff and Underwood. He asked one of his partners, a doctor, to find ten other doctors willing to invest $10,000 each in his partnership. Eventually eleven agreed. In 1961, Buffett revealed that Sanborn Map Company accounted for 35% of the partnership's assets. He explained that in 1958 Sanborn stock sold at only $45 per share when the value of the Sanborn investment portfolio was $65 per share. This meant that buyers valued Sanborn stock at "minus $20" per share and were unwilling to pay more than 70 cents on the dollar for an investment portfolio with a map business thrown in for nothing. This earned him a spot on the board of Sanborn.

Path to wealth

In 1962, Buffett became a millionaire, because of his partnerships, which in January 1962 had an excess of $7,178,500, of which over $1,025,000 belonged to Buffett. Buffett merged all partnerships into one partnership. Buffett discovered a textile manufacturing firm, Berkshire Hathaway. Buffett's partnerships began purchasing shares at $7.60 per share. In 1965, when Buffett's partnerships aggressively began purchasing Berkshire, they paid $14.86 per share while the company had working capital of $19 per share. This did not include the value of fixed assets (factory and equipment). Buffett took control of Berkshire Hathaway at the board meeting and named a new president, Ken Chace, to run the company. In 1966, Buffett closed the partnership to new money. Buffett wrote in his letter:

unless it appears that circumstances have changed (under some conditions added capital would improve results) or unless new partners can bring some asset to the partnership other than simply capital, I intend to admit no additional partners to BPL.

In a second letter, Buffett announced his first investment in a private business — Hochschild, Kohn and Co, a privately owned Baltimore department store. In 1967, Berkshire paid out its first and only dividend of 10 cents. In 1969, following his most successful year, Buffett liquidated the partnership and transferred their assets to his partners. Among the assets paid out were shares of Berkshire Hathaway. In 1970, as chairman of Berkshire Hathaway, Buffett began writing his now-famous annual letters to shareholders.

However, he lived solely on his salary of $50,000 per year, and his outside investment income. In 1979, Berkshire began the year trading at $775 per share, and ended at $1,310. Buffett's net worth reached $620 million, placing him on the Forbes 400 for the first time.

In 2006, Buffett announced in June that he gradually would give away 85% of his Berkshire holdings to five foundations in annual gifts of stock, starting in July 2006. The largest contribution would go to the Bill and Melinda Gates Foundation.

In 2007, in a letter to shareholders, Buffett announced that he was looking for a younger successor, or perhaps successors, to run his investment business.Buffett had previously selected Lou Simpson, who runs investments at Geico, to fill that role. However, Simpson is only six years younger than Buffett.

In 2008, Buffett became the richest man in the world dethroning Bill Gates, worth $62 billion according to Forbes, and $58 billion according to Yahoo.Bill Gates had been number one on the Forbes list for 13 consecutive years. March 11 2009, Bill Gates regained number one of the list according to Forbes magazine, with Buffett second. Their values have dropped to $40 billion and $37 billion respectively, Buffet having (according to Forbes) lost $25 billion in 12 months during 2008/2009