Warren Edward Buffett (born August 30, 1930) is a U.S. investor, businessman, and philanthropist. He is one of the most successful investors in history, the largest shareholder and C.E.O. of Berkshire Hathaway,[4] and in 2008 was ranked by Forbes as the richest person in the world with an estimated net worth of approximately $62 billion.[5]
Buffett is often called the "Oracle of Omaha"[6] or the "Sage of Omaha"[7] and is noted for his adherence to the value investingphilosophy and for his personal frugality despite his immense wealth.[8]
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.[9]
In 1999, Buffett was named the top money manager of the twentieth century in a survey by the Carson Group, ahead of Peter Lynch andJohn Templeton.[10] In 2007, he was listed among Time's 100 Most Influential People in the world.[11]
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.[12] After his father was elected to Congress, Buffett was educated at Woodrow Wilson High School, Washington, D.C.[13] 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.[14]
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.[15]
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.[16]
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 1951, 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 [17] 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.[18]
Buffett returned to Omaha and worked as a stockbroker while taking a Dale Carnegie public speaking course.[citation needed] 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 1952 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.[18] 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 toCharlie 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.
Business
[edit]Acquisitions
In 1973, Berkshire began to acquire stock in the Washington Post Company. Buffett became close friends with Katharine Graham, who controlled the company and its flagship newspaper, and became a member of its board of directors.
In 1974, the SEC opened a formal investigation into Warren Buffett and Berkshire's acquisition of WESCO, due to possible conflict of interest. No charges were brought.
In 1977, Berkshire indirectly purchased the Buffalo Evening News for $32.5 million. Antitrust charges started, instigated by its rival, the Buffalo Courier-Express. Both papers lost money, until the Courier-Express folded in 1982.
In 1979, Berkshire began to acquire stock in ABC. Capital Cities' announced $3.5 billion purchase of ABC on March 18, 1985, surprising the media industry, as ABC was some four times bigger than Capital Cities was at the time. Berkshire Hathaway chairman Warren Buffett helped finance the deal in return for a 25 percent stake in the combined company.[25] The newly merged company, known as Capital Cities/ABC (or CapCities/ABC), was forced to sell off some stations due to FCC ownership rules. Also, the two companies owned several radio stations in the same markets. [26]
In 1987, Berkshire Hathaway purchased 12% stake in Salomon Inc., making it the largest shareholder and Buffett the director. In 1990, a scandal involving John Gutfreund (former CEO of Salomon Brothers) surfaced. A rogue trader, Paul Mozer, was submitting bids in excess of what was allowed by the Treasury rules. When this was discovered and brought to the attention of Gutfreund, he did not immediately suspend the rogue trader. Gutfreund left the company in August 1991.[27] Buffett became CEO of Salomon until the crisis passed; on September 4 1991, he testified before Congress.[28]
In 1988, Buffett began buying stock in Coca-Cola Company, eventually purchasing up to 7 percent of the company for $1.02 billion. It would turn out to be one of Berkshire's most lucrative investments, and one which it still holds.
In 2002, Buffett entered in $11 billion worth of forward contracts to deliver U.S. dollars against other currencies. By April 2006, his total gain on these contracts was over $2 billion.
In 1998, he acquired General Re, (in a rare move, for stock). In 2002, Buffett became involved with Maurice R. Greenberg at AIG, with General Re providing reinsurance. On March 15, 2005, AIG's board forced Greenberg to resign from his post as Chairman and CEO under the shadow of criticism from Eliot Spitzer, attorney general of the state of New York. On February 9, 2006, AIG and the New York State Attorney General's office agreed to a settlement in which AIG would pay a fine of $1.6 billion.[29]
In 2009, Warren Buffett invested $2.6 billion as a part of Swiss Re's raising equity capital.[30][31] Berkshire Hathaway already owns a 3% stake, with rights to own more than 20%
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