The “Oracle of Omaha.” Regarded as the most successful investor in the world. A
2,000-fold return for his investors. Eschewing gimmicks and rocket science.
Investing in solid fundamentals.
As an American investor, businessman and philanthropist, Warren Edward
Buffett is by some reckonings, the third richest person in the world —and in 2012
his wealth was estimated to be about $44 billion. His investment vehicle,
Berkshire Hathaway Corporation, is a public company, with millions of American
shareholders.
Warren’s mantra is “value investing”—a la David LeFevre Dodd and Benjamin
Graham—insisting on the companies he invests in having very low operating
costs, abundant cash, and little or no debt. In addition, his investing “morals”
include no program trading, no long-shot bets or bets on the next quarter’s
earnings announcements, and no hostile takeovers.
Warren Edward Buffett was born August 30, 1930 in Omaha, Nebraska, in the
midst of the Great Depression. As the second from the eldest of three children, in
a family of French Huguenot origins, he was the only son in the family. He
attended the public elementary school in Omaha and public high school in
Washington, DC—where his father served four terms as a United States
Congressman.
In 1927 Warren’s father, Howard Homan Buffett, became a stockbroker for the
Union State Bank in Omaha. There he met Warren’s mother, the future Mrs.
Buffett, Leila Stahl, who was a small town reporter for her father’s newspaper.
Warren was born about ten months after “Black Tuesday,” October 29, 1929—the
stock market crash which signaled the start of the Great Depression. After the
crash, Howard Buffett hung on to his job for about two years, until August, 1931,
when the bank failed. Just one of thousands to succumb to the more than brutal
economic environment. He had no job and all of his savings were invested in his
employer’s failed bank.
Undaunted, he took the only course of action which made sense to him, given his
background. Where he had both bowed and chafed before, now he struck out on
his own—opening his own stock and bond brokerage firm, Buffett-Falk &
Company, and selling a few diamonds as an inflation hedge. He dared to bet on
his luck, his personality, and his knowledge of stocks and the stock brokerage
industry. His sales strategy reflected the lessons of recent history: invest
conservatively for both himself and his few customers.
Steadily the Buffett family’s economics moved upward. And while Howard
navigated the stock market shoals, his wife did her part—always watching her
meager funds and buying Warren and his siblings thrifty, practical gifts at giving
time. Those purchases couldn’t have excited the children’s fantasies, but they fit
the times and supplemented necessities.
Howard Buffett’s political leanings were isolationist, and vigorously opposed to
Roosevelt’s New Deal. He eventually parlayed those sentiments as a Republican
Congressman (1942–1948, 1950–1952). Both his business and family worlds
were cold and analytical. He gave no credence to warm and fuzzy emotions.
Warren never received the “I love you’s” or putting a child to bed that other
parents followed for their children. His mother, although lively with an easy
humorous mien to outsiders, had emotional problems. She was especially volatile
after Howard left for work and she was alone with Warren and his siblings.
During those times she often raged and lashed out verbally. Under such attacks,
Warren, an introverted child, retreated frequently into a world of numbers or his
model train catalogs. Mentally fleeing his mother’s religious beliefs, what
mattered most to young Warren was rationality, facts, numbers, and money.
Warren attended three universities: Wharton School of the University of
Pennsylvania (1947–1949). Then a Bachelor’s degree in Economics from the
University of Nebraska, Lincoln (1950). And a Master’s degree in Economics
from Columbia Business School, Columbia University, New York (1951). He
enrolled in Columbia after learning that Benjamin Graham, author of “The
Intelligent Investor” and David Dodd, two well-known securities analysts, taught
there.
Warren’s first employment after college was as an investment salesman, then as a
securities analyst, then as a General Partner in the securities firm Buffett
Partnership, Ltd.
By 1962 Warren consolidated several partnerships and invested in a small New
England textile company, Berkshire Hathaway—ultimately taking control of it.
That became the investment vehicle which he used to move from millionaire to
billionaire. Along the way his investments have generated spectacular results for
the shareholders of Berkshire Hathaway, and created an aura of invincibility
around Warren. He continues to act in a rather passive investment manner—
allowing the acquired company’s management to continue and work
unobstructed. If the company falls out of favor with Warren, he generally sells his
investment rather than act against management. He is not a fan of hostile takeovers, as they usually result in too much animosity for future workability
together, or require replacement of management. Major investments he has made
along the way include The Washington Post Company, Capital Cities/ABC,
Salomon Inc., Coca-Cola Company and General Re.
Warren married nightclub singer Susan Thompson in 1952. Together they had a
daughter and two sons. Warren and Susan separated in 1977, and he began living
with Ms. Astrid Menks, whom he married in 2006. She was his long-time
companion and never previously married. Warren’s first marriage was atypical in
that even after separation from Susan (she moved to San Francisco) they still
attended major social functions together as husband and wife. And Susan
continued to sit on the Board of Directors of Berkshire Hathaway as a major
stockholder. She was also the one who introduced Warren to Astrid Menks and
remains friends with her and Warren.
With a well-deserved reputation for frugality, Warren Buffett and his second wife
continue to live in the same house in Omaha that he bought in 1958 for $31,500.
His diversions today include bridge (an extremely avid player), Nebraska football,
and attending minor league baseball games.
Warren Buffett is now in the process of giving away the vast portion of his wealth
to the Gates Foundation (targeting world health and education) and the Buffett
Foundation (providing scholarships for Nebraska children who attend college in
the state, and donations to groups specializing in family planning and
reproductive rights).
Culled from Wommack’s The Art Of Parenting by David R.Wommack
