Warren Buffett
Warren Buffett, born in Omaha, Nebraska, is widely regarded as one of the greatest investors in history, with a wealth that places him among the richest individuals globally. His investment career began at a young age, demonstrating an early talent for finance that eventually led him to establish Berkshire Hathaway, which grew into a major holding company under his leadership. Known for his disciplined investment strategy, Buffett's reputation soared as he methodically acquired shares in diverse companies, such as Coca-Cola and GEICO, while emphasizing a hands-off management style.
Buffett's philanthropic endeavors are equally notable, as he has pledged to donate 99 percent of his wealth, with significant contributions to the Bill & Melinda Gates Foundation and other charities. His frugality contrasts sharply with his immense wealth; he continues to live in the home he purchased in 1958 for $31,500. Buffett has also been an outspoken advocate for economic issues, including tax reform and corporate governance, and has influenced public policy discussions, such as the "Buffett Rule," aimed at ensuring fair taxation for the wealthy. Over the years, Buffett's insights into investing and philanthropy have garnered him a dedicated following, making him a prominent figure in both finance and charitable circles.
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Warren Buffett
American investor and philanthropist
- Born: August 30, 1930
- Place of Birth: Omaha, Nebraska
Commonly considered one of the greatest investors, Buffett amassed one of the largest fortunes in the world. In 2006, sixty-five years after making his first investment, he announced the world’s largest philanthropic donation at the time: approximately $37 billion to the Bill & Melinda Gates Foundation. Buffett also is known for his frugality and for advocating improved corporate governance.
Early Life
Warren Edward Buffett was born in Omaha, Nebraska, the only son and second of three children of Howard Buffett, a congressman and stockbroker, and Leila Buffett. From an early age it was clear not only that Buffett was a gifted mathematician but also that he had an exceptional gift for business and financial markets. He began working for his father’s stockbroking firm at the age of eleven and made his first investment. At the age of fourteen he had saved enough money to buy forty acres of farmland, which he subsequently leased.
Despite showing little enthusiasm for academia, Buffett enrolled as an undergraduate at the Wharton School of the University of Pennsylvania, but upon his father’s electoral defeat in 1948, he transferred to the University of Nebraska–Lincoln, where he graduated while working full time. After being rejected admission by Harvard Business School, Buffett enrolled as a postgraduate at Columbia Business School, where Benjamin Graham, who would become his most influential mentor, taught. After graduating from Columbia, Buffett applied for a job with Graham’s firm, Graham-Newman, and despite an initial rejection, he started work there in 1954. He returned to Omaha upon Graham’s retirement two years later.
In 1956, Buffett founded Buffett Associates Ltd. with $100 of his own money and $300,000 that he managed to raise from friends and relatives. By 1962 the net asset value of the partnership was in excess of $7.2 million, and in that same year Buffett met Charles T. Munger, who was to become a key partner and friend over the coming years.
Life’s Work
In 1962, against Munger’s advice, Buffett began accumulating shares in a poorly run but cash-rich textile manufacturing company called Berkshire Hathaway, which would later become one of the largest holding companies in the world. By 1968, his original partnership had accumulated $104 million in assets and the following year he began liquidating the partnership. Upon the dissolution of Buffett Associates, he shifted his attention to running Berkshire Hathaway full time. He used the company’s excess cash to buy private business and publicly traded shares.
In 1970, Buffett named himself chair of the board of Berkshire Hathaway and began writing his now-famous annual letters to shareholders. Already in 1970, the company’s textile profits of $45,000 were overshadowed by its insurance and banking investments, which brought in $4.7 million. Soon thereafter Buffett broadened his investment interest to companies with premium products when he acquired See’s Candies.
Despite a Securities and Exchange Commission (SEC) investigation into the acquisition of Wesco Financial, Berkshire Hathaway’s share price had risen to $95 in 1965 from $20 ten years earlier, and Buffett increased his ownership to 29 percent of the outstanding share capital. One year later Buffett crossed paths with his former mentor, Graham, who was on the board of a poor-performing insurance company called GEICO, in which Buffett subsequently began buying shares.
As Berkshire Hathaway’s share price continued to rise exponentially, Buffett’s reputation as a shrewd investor spread across the globe. He became known as a patient investor using a systematic approach to identifying potential acquisitions and then waiting for the right market conditions before beginning to buy the stock. He also developed a specific management style with the acquired companies, although he would not interfere in their management. He was responsible for hiring and determining pay for the chief executive officers (CEOs), and he introduced a required rate of return on capital investments, ensuring that cash was not used for activities generating low return.
In the 1980s, Berkshire Hathaway’s share price continued to rise but took a severe blow with the 1987 stock market crash. Less than a year later the investment powerhouse was back on track, making one of its most successful investments, Coca-Cola, and quickly acquiring 7 percent of the beverage company.
In 1989, Buffett again courted controversy after a Salomon Brothers banker had repeatedly traded illegally using client accounts to acquire US Treasury bills, thereby allowing Salomon to buy more than the 30 percent limit imposed by the SEC. The bank was in a crisis, so Buffett was called in and made CEO. The government intended to withdraw the bank’s trading privileges, a move that would bankrupt the bank. Buffett mediated with the Federal Reserve, meeting with its chair, Alan Greenspan. Eventually the potential trading ban was lifted, thus saving the company.
The momentum continued through the 1990s and into the new millennium. In 2016, Berkshire Hathaway’s share price had risen to $217,000, from $20 in 1955. Among the higher-profile companies that have been held by Berkshire Hathaway are Coca-Cola, GEICO, the Washington Post, American Express, Borsheim’s Fine Jewelry, Acme Brick Company, Fruit of the Loom, General Re, Helzberg Diamonds, Nebraska Furniture Mart, and See’s Candies. In 2013, Buffett, along with 3G Capital, bought H. J. Heinz Company.
Despite the incredible wealth that Buffett accumulated—Forbes ranked him as the world's second-richest person in 2017, following Bill Gates and ahead of Jeff Bezos, with an estimated fortune of $75.6 billion—he has been portrayed as living a frugal life, notably remaining in his home in Omaha that he purchased for $31,500 in 1958. In July 2016, Buffett made a $2.84 billion donation in Berkshire stock to the Bill and Melinda Gates Foundation and other charitable foundations. After Forbes's 2017 list was released, Buffett fell to fourth place behind Bezos and Spain's Amancio Ortega. However, when he donated nearly $3.2 billion to charity in July 2017, breaking his own record for largest single-day donation, the resulting decrease of his personal fortune from $76.3 billion to $73.1 billion was not enough to knock him out of the number-four spot.
In 2022, he had announced his resignation from his Bill and Melinda Gates Foundation trustee post while still asserting his common goals with the organization, and it was reported that upon another $4.1 billion charity donation, he had reached the halfway mark of his pledge to philanthropically distribute 99 percent of his net worth. Throughout this time, he had frequently been consulted for analysis of the economic impact of the coronavirus disease 2019 (COVID-19) pandemic that had been declared in early 2020.
In 2022, Trident Mortgage Company, one of Buffett's holdings under Berkshire Hathaway, reached a settlement with the Department of Justice regarding allegations that the company implemented illegal redlining policies in both low-income areas and neighborhoods of color in Philadelphia, New Jersey, and Delaware. The settlement involved the allocation of $20 million in loans to the communities affected by the company's redlining practices. In 2024, Forbes ranked Buffett in the sixth position of its world billionaires list with a net worth of $113 billion.
Buffett married his first wife, Susan, in 1954, and they had three children: Susie, Howard, and Peter. In 1977, Susan and Buffett separated, but they remained married until her death in 2004 and maintained an amicable relationship. It was Susan who introduced Buffett to Astrid Menks, who married Buffett in 2006.
Significance
Buffett is broadly regarded as one of the most successful American investor of modern times. Even though he rarely speaks about his investments, he has achieved a cult status among investors, with people paying more than $620,000 to have dinner with him. He has written many best-selling books that claim to explain the secrets of his investment methodology. Often, his acquisition of stock in a company raises that company’s share price by as much as 10 percent.
Buffett’s announcement on June 25, 2006, that he would donate an equivalent of $37 billion to the Bill and Melinda Gates Foundation, the world’s largest-ever charitable donation, stunned the world. He has also donated $6.7 billion to a foundation set up by his late wife, Susan. In 2010, he vowed to give 99 percent of his wealth to philanthropic causes. By 2023, he was worth $117 billion.
Buffett also has been outspoken on issues such as inheritance tax and abortion. Indeed, along with his friend, Munger, he supported in 1969 a doctor convicted of referring a woman for an abortion, which set a precedent for the landmark Roe v. Wade abortion-rights case. In 2011 Buffett wrote an op-ed for the New York Times criticizing tax breaks for "mega-rich" Americans like him, saying that while he paid federal income taxes of 17.4 percent of his taxable income in 2010, the twenty other people in his office had tax burdens that averaged 36 percent of taxable income. President Barack Obama was inspired by Buffett's op-ed to call for what he called the "Buffett Rule," a 30 percent tax on millionaires. In 2012, Buffett renewed his call for such a rule, writing another op-ed in the same paper that those making $1 million or more annually should pay a minimum tax of 30 percent while those making $10 million or more per year should pay 35 percent.
Bibliography
Buffett, Mary, and David Clark. The New Buffettology: The Proven Techniques for Investing Successfully in Changing Markets That Have Made Warren Buffett the World’s Most Famous Investor. Rawson, 2002.
Buffett, Warren. The Essays of Warren Buffett: Lessons for Corporate America. Edited by Lawrence A. Cunningham, 3rd ed., Carolina Academic Press, 2013.
Buffett, Warren. "A Minimum Tax for the Wealthy." The New York Times, 25 Nov. 2012, www.nytimes.com/2012/11/26/opinion/buffett-a-minimum-tax-for-the-wealthy.html. Accessed 27 Sept. 2024.
Buffett, Warren. The Oracle Speaks: Warren Buffett in His Own Words. Edited by David Andrews, B2 Books, 2012.
Buffett, Warren. "Stop Coddling the Super-Rich." The New York Times, 14 Aug. 2011, www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html. Accessed 11 July 2017.
Buffet, Warren. Tap Dancing to Work: Warren Buffett on Practically Everything, 1966–2012; AFortuneMagazine Book. Collected and expanded by Carol Loomis, Portfolio / Penguin, 2012.
Buffet, Warren. Warren Buffett Speaks: Wit and Wisdom from the World’s Greatest Investor. Compiled by Janet Lowe, rev. and updated ed., John Wiley & Sons, 2007.
Foroohar, Rana. "Warren Buffett Is on a Radical Track." Time, 23 Jan. 2012, pp. 32–39. Academic Search Complete, search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=70364117. Accessed 11 July 2017.
Heyward, Andy, and Amy Heyward. Secret Millionaires Club: Warren Buffett’s 26 Secrets to Success in the Business of Life. John Wiley & Sons, 2013.
Li, Yun. "Warren Buffett Gives Away Another $4.1 Billion, Resigns as Trustee at Gates Foundation." NBC News, 23 June 2021, www.nbcnews.com/business/business-news/warren-buffett-gives-away-another-4-1-billion-resigns-trustee-n1272094. Accessed 27 Sept. 2024.
Lowenstein, Roger. Buffett: The Making of an American Capitalist. Random House, 1995.
"Mortgage Lender Owned by Warren Buffett Accused of Housing Discrimination."CBS News, 27 Jul. 2022, www.cbsnews.com/news/trident-mortgage-homeservices-berkshire-hathaway-warren-buffett-discrimination/. Accessed 27 Sept. 2024.
O’Loughlin, James. The Real Warren Buffett: Managing Capital, Leading People. Nicholas Brealey Publishing, 2003.
Peterson-Withorn, Chase. "Warren Buffett Sets Personal Record, Donates Nearly $3.2 Billion in a Single Day." Forbes, 10 July 2017, www.forbes.com/sites/chasewithorn/2017/07/10/warren-buffett-sets-personal-record-donates-nearly-3-2-billion-in-a-single-day/. Accessed 27 Sept. 2024.
Ramaswamy, Jeeva. Creating a Portfolio Like Warren Buffett: A High-Return Investment Strategy. John Wiley & Sons, 2012.
Swedroe, Larry E. Think, Act, and Invest Like Warren Buffett: The Winning Strategy to Help You Achieve Your Financial and Life Goals. McGraw-Hill, 2013.
"The World's Real-Time Billionaires." Forbes, 2024, www.forbes.com/real-time-billionaires/#49659ce03d78. Accessed 27 Sept. 2024.
Vinton, Kate. "Jeff Bezos Ends Week $3 Billion Richer, Second Richest on Planet." Forbes, 31 Mar. 2017, www.forbes.com/sites/katevinton/2017/03/31/jeff-bezos-ends-week-3-billion-richer-second-richest-on-planet/. Accessed 27 Sept. 2024.
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