The Buffet Story

Summary

• The Early Years

• Growing Up

• Schooling Years

• Mastering the Stock Market

• Biggest Failures

• Buffett's Recent Path

• Interesting Facts

• Cash Movements

It's the afternoon of August 30th, 1930 and it’s a warm day. Leila's belly is swollen with anticipation, and Howard stands by her side, holding her hand tightly. Today marks the arrival of their second child, but little do they realize, this child will grow up to become one of the most influential figures in the world of finances. In time, he will amass such wealth that he'll rank among the wealthiest people on the planet.

The Early Years

Born into a modest family in Omaha, Nebraska, Warren Edward Buffett shared his childhood with two other siblings, an older sister named Doris and a younger one named Roberta, all under the guidance of their parents, Howard and Leila Buffett.

Leila and Howard met each other while studying at the University of Nebraska. After dating for some time, they finally got married in 1925 and chose to settle down in Howard's hometown, Omaha. Howard worked as a stockbroker and also served as a U.S. representative, and Leila, on the other hand, dedicated her time to homemaking and taking care of the family.

In 1928, three years into their marriage, Leila became pregnant for the first time. Doris was born first, in 1928, followed by Warren in 1930, and finally, in 1933, Roberta arrived.

Growing Up

As they grew up, the three siblings faced occasional challenges as Leila, their mother, would often verbally abuse them. Warren spent many hours working at his grandfather's grocery store during his childhood, and soon, the people around him started noticing that he displayed a unique interest in numbers and mathematics, unlike his classmates. At the age of 5, he started his first entrepreneurial venture, selling bottles of coke from his grandfather's store for a 5 cent profit. Additionally, he sold packs of two gums, a strategy he used to make sure he could sell them all without any remaining unsold if sold individually. Growing up with a father whose primary profession was a stockbroker, he gained a lot of financial knowledge from an early age, which he made sure to apply in his “ventures”.

At the age of 10, Warren's father took him to the East Coast, fulfilling one of his dreams to visit the New York Stock Exchange. This visit marked the beginning of his journey toward a future focused on investments.

At the age of 11, he purchased three shares of Cities Service (now Citgo Oil) for himself and three for his sister Doris. He earned his first stock profit by selling them for $2 more than their initial purchase price. Remarkably, when he was 13, he filed his first tax return, listing his bike as a "work expense."

After trying out various extra jobs and looking for money in different ways, he made $175 per week, more than his teachers' earnings.

Schooling Years

At the time he finished high school, he had assets totaling $5,000, which would be equivalent to around $55,000 in today's money. After finishing, Warren wanted to focus on growing his businesses and wasn’t initially planning on going to college because he believed it might slow him down. However, his father convinced him to enroll at the Wharton School of Business in Philadelphia.

After starting his studies, he realized he had more knowledge than his teachers. As a result, he switched to the University of Nebraska to be closer to home and eventually completed his Bachelor of Science degree in Business Administration.

Later on, he decided to apply to Harvard, believing he would be accepted because of his intelligence. However, his aspirations took a down turn when he received the rejection letter. It was at this moment that he came across "The Intelligent Investor," a book he now considers the best on investing ever written.

He finally got accepted at Columbia Business School, where he crossed paths with Benjamin Graham and David Dodd. Graham would later become his idol and the second most significant influence in his life after his father.

Mastering the Stock Market

Later in his life, he embarked on numerous business ventures and investment collaborations, including partnering with Graham, his university teacher and idol. He would learn to choose companies for their intrinsic value and hold them forever. He eventually established Buffett Partnership Ltd. in 1956. His investment company gradually took over a textile manufacturing company, Berkshire Hathaway, adopting its name to establish a diversified holding corporation. Buffett emerged as the chairman and primary shareholder of the company in 1970. In 1978, Charlie Munger, who would later become one of his best friends, fellow investor and long-standing business associate, joined Buffett as the vice-chairman.

Biggest Failures

Throughout his years, Warren Buffett maintained an almost impeccable track record, but like anyone else, he made some errors that ultimately shaped him into the investor he is today.

When he was 21, Warren decided to put 65% of his modest $20,000 fortune into Geico, eventually selling it for a substantial profit. However, over time, the value of that stock would increase by 100 times.

In 1965, while acquiring Berkshire Hathaway, a relatively young textile company, Warren initially intended to withdraw from the deal. However, Berkshire Hathaway altered the terms at the last minute, making it unfeasible for him to do so. Subsequently, he dismissed the CEO at the time due to deception. Over the ensuing years, it's believed that this decision cost him approximately $200 billion.

Another significant mistake he made was not purchasing Amazon back in the 2000s. In later interviews, Warren admitted that during that period, he didn't anticipate Jeff Bezos would achieve the level of success he eventually did, and he regrets not investing in the company early on.

Buffett's Recent Path

As of now, Berkshire Hathaway stands as the top global insurance firm. In 2022, it amassed a total revenue of $300 billion. Additionally, Berkshire Hathaway boasts the highest-priced stock in the market. At the time of writing this episode, 1 single share would set you back $599,793. Yes, — more than half a million USD for 1 share of Warren's company. Warren, also known as the “Oracle of Omaha” has a self-made net worth of $84 billion and, some experts consider that he 93-year-old is the greatest investor of all-time.

Interesting Facts

• 2nd most generous philantropist of all time, already given away $30.8 billion of his fortune.

• Named One of the Most Influential People of All Time in the Times Newspaper in 2007.

• Awarded the Presidential Medal of Freedom by Barack Obama in 2010.

• Named The Most Influential Global Thinker by Foreign Policy, alongside Bill Gates.

As you may have noticed, Warren has consistently emphasized that the key to success is conducting thorough research on your investments and holding onto them for the long term. This approach has not only benefited him but also thousands of other investors in accumulating wealth over the long term. Next week, we'll take a look into My Portfolio and discuss the reasons behind my current holdings. If you have any questions, feel free to reach out to me on Instagram or via Email! Until then, keep smiling, keep learning, and I'll catch you next time!

Trevor

Disclaimer: This post is NOT financial advice. It is intended for educational purposes only. Investing involves risks, and there is a possibility of losing capital. Always conduct thorough research and consider consulting with a financial advisor before making any investment decisions. Your financial well-being is important, so please invest responsibly.

Cash Movements

Unfortunately, there haven’t been any Cash Movements this week.

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