Warren Buffet – The Story of Berkshire Hathaway’s Billionaire Chairman

  • lauren DeAlmeida
  • July 12, 2021
  • 0
Warren

Image courtesy of Small Caps/Warren Buffet's Success Story

Warren Edward Buffet is an American investor, business tycoon, and philanthropist. He is one of the most successful investors in the world. Moreover, he is also the CEO and chairman of Berkshire Hathaway. Buffett was born in Omaha, Nebraska. He was born on August 30, 1930. His father, Howard, is a stockbroker-turned-Congressman. Warren’s mother’s name is Leila. He has two sisters, and Warren is the second born.

In 1952, Buffett married Susan Thompson at Dundee Presbyterian Church. In 1953, they had their first child, Susan Alice. His second child was born in 1956, Howard Graham. In 1958 the Buffetts’ third child, Peter Andrew, was born.

Warren Buffet’s personal life

In 1952, Buffett married Susan Thompson at Dundee Presbyterian Church. In 1953, they had their first child, Susan Alice. His second child was born in 1956, Howard Graham. In 1958 the Buffetts’ third child, Peter Andrew, was born. Warren and Susan lived separately in 1977. However, they remained married until Susan Buffett’s death in July 2004.

When he was 76 years old, he married Astrid Menks, who was then 60 years old.

In 2006, his grandchild Nicole. His son Peter adopted Nicole. He disowned her because she participated in the Jamie Johnson documentary The One Percent. The documentary was based on the growing economic inequality between the wealthy and the average citizen in the United States.

Warren’s early life

Warren began his education at Rose Hill Elementary School. Howard, his father, was elected to the first of four terms in the United States Congress in 1942. Then, they moved with his family to Washington, D.C. Warren enjoyed reading. He found inspiration in a book he borrowed from the Omaha public library at seven – “One Thousand Ways to Make $1000”.

Warren attended Alice Deal Junior High School. He graduated in 1947 from Woodrow Wilson High School. Actually, his senior yearbook picture reads: “likes math; a future stockbroker.” After high school, Warren grew interested in entrepreneurship and investment ventures.

Warren’s first business venture began when he was a teenager. He sold weekly magazines door to door, Coca-Cola bottles, and chewing gum. Moreover, he also worked in his grandfather’s grocery store. In high school, he delivered newspapers, sold stamps and golf balls, and did car detailing.

In 1944, Warren took a $35 deduction on his first income tax return to use his bicycle and watched on his paper router. Later, in 1945, Buffet and his friend spent $25 to purchase a used pinball machine; they placed it in the local barbershop. A few months later, they owned several machines in three different barbershops across Omaha. Later in 1945, he sold the business to a war veteran for $1,200.

 Warren’s interest in the stock market

During school days, Warren spent his time in the customer’s lounge of a regional stock brokerage. In fact, the lounge was located near his father’s own brokerage office. That is where his interest in investing and the stock market initiated. At the age of 10, he visited the New York Stock Exchange. He bought three shares of Cities Service when he was 11 years old. Furthermore, he bought three for his sister Doris Buffett who later became a philanthropist.

Warren invested in a business owned by his father and bought a 40-acre farm. At this time, he was only 14 years old. He bought it with his $1,200 savings.

Warren made $175 when he was 15 years old by delivering the Washington Post Newspapers.

Warren’s University life

Warren Buffest saved $9,800 by the time he finished college. That is equivalent to around $105,000 today. Actually, he wanted to skip college to go directly into the business world. However, his father objected to this idea.

He entered the Wharton School of the University of Pennsylvania in 1947.

Later he joined the Alpha Sigma Phi fraternity, and he studied there for two years. After that, he transferred to the University of Nebraska, where at 19. Warren graduated with a Bachelor of Science in Business Administration. Later on, Warren wanted to join Harvard Business School for his MBA. However, he got rejected. Instead, he enrolled at Columbia Business School Columbia University. He joined Columbia Business School after he learned that Benjamin Graham taught there. Benjamin Graham is his biggest inspiration. In 1951, He earned a Master of Science in Economics. However, he did not stop there. Later, he attended the New York Institute of Finance.

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.
– Warren Buffet

Warren’s business career

From 1951 to 1954, Warren worked at Buffett-Falk & Co. He was an investment salesman. Warren came to know that Benjamin Graham was on the board of GEICO insurance. He took a train to Washington, D.C., on a Saturday. Warren knocked on the door of GEICO’s headquarters until a janitor admitted him. Actually, Davidson was Buffett’s lifelong friend and a lasting influence. He met Lorimer Davidson, GEICO’s Vice President. They discussed the insurance business for hours. He offered to work for Graham for free, but Graham refused.

In 1952, Warren Buffett returned to Omaha. He worked as a stockbroker while taking a Dale Carnegie public speaking course. As a result, he gained confidence and taught at the University of Nebraska-Omaha about “Investment Principles.” Furthermore, he decided to purchase a Sinclair gas station as a side investment. However, it was unsuccessful.

Graham-Newman Corp

He joined Graham-Newman Corp and worked as a securities analyst from 1954 to 1956. His starting salary at the organization was $12,000 a year. That is equivalent to $114,000 today. Walter Schloss and Warren worked together. Benjamin Graham was a tough boss to impress. Graham wanted to provide a wide margin of safety after weighing the trade-off between their price and intrinsic value. In 1956, Warren closed his partnership and retired from Graham-Newman Corp.

Buffett Partnership Ltd

After his exit from Graham-Newman Corp, Warren decided to begin his own business. At that time, his personal savings were over $174,00. That was equivalent to $1.64 million today. So, he used his savings and began Buffett Partnership Ltd.

Buffett operated three partnerships by 1957. By 1959, the company grew to six partnerships. In 1970, Charlie Munger joined the company as a partner. Thus, there were seven partnerships by 1960. Later, Warren requested his partners, who a doctor, to find ten other doctors willing to invest $10,000 into the partnership. 11 doctors ended up agreeing.

In 1961, Warren said 35% of the partnership’s assets were invested in the Sanborn Map Company. At that time, Sanborn stocks sold for $45 per share. However, the company’s share was worth $65 each. Warren bought 23% of Sanborn and became an activist investor. He got a seat on the Board of Directors.

Warren as a millionaire

In January 1962, Warren had $1,025,000, making him a millionaire. In 1965, when Buffett’s partnerships began purchasing Berkshire aggressively, they paid $14.86 per share. The company had working capital of $19 per share by then, excluding the value of fixed assets. By 1966, Warren Buffest closed the partnerships. He said the textile business was his worst trade. Later, he moved into the insurance sector.

Later, Buffett announced his first investment in a private business called Hochschild, Kohn, and Co. A Baltimore department store owned the business. Berkshire paid out its first and only dividend of 10 cents by 1967. Warren liquidated the partnership and transferred their assets to his partners, including shares of Berkshire Hathaway, in 1969. By 1985, it was the core business of Berkshire Hathaway.

In 1970, Warren became the Chairman and CEO of Berkshire Hathaway Inc. He began writing his now-famous annual letters to shareholders. His salary then was $50,000 per year, and he lived solely on it.

Berkshire acquired stock in Washington Post Company in 1973. In 1974, the SEC opened a formal investigation into Buffett and Berkshire’s acquisition of Wesco Financial due to possible conflict of interest. However, no charges were brought forward. Berkshire indirectly purchased the Buffalo Evening News for $32.5 million in 1977. However, both the newspaper companies lost money.

The arithmetic makes it plain that inflation is a far more devastating tax than anything that has been enacted by our legislatures. The inflation tax has a fantastic ability to simply consume capital. It makes no difference to a widow with her savings in a 5 percent passbook account whether she pays 100 percent income tax on her interest income during a period of zero inflation, or pays no income taxes during years of 5 percent inflation.

— Warren Buffett -1977

The company acquired stock in ABC in 1979. In March 1985, Capital Cities announced a $3.5 billion purchase of ABC.

Berkshire Hathaway purchased a 12% stake in Salomon Inc. in 1987. It made it the largest shareholder. Warren became the director.

Warren Buffet bought the Coca-Cola company stock in 1988. He purchased 7% of the company for $1.02 billion.

However, a scandal was raised in 1990 in Salomon Inc. John Gutfreud was involved in the scandal. Apparently, Paul Mozer submitted bids over what was allowed by Treasury rules. John Gutfreud left the company in August 1991. Warren Buffet became the Chairman of Salomon until the crisis ended.

Billionaire – Warren Buffet

On the 29th of May 1990, Berkshire Hathaway began selling class A shares. The closing share was going for $7,175 per share. This made Warren a billionaire.

Warren acquired General Re as a subsidiary in 1998. In 2002, Gen Re provided reinsurance after Buffett became involved with Maurice R. Greenberg at AIG.

In 2005, an accounting fraud case involving AIG. Gen Re executives became implicated. As a result, the AIG board forced Greenberg to resign from his post as Chairman and CEO on the 15th of March, 2005. Moreover, the New York state regulators claimed that AIG had engaged in questionable transactions and improper accounting. However, AIG agreed to pay a $1.6 billion fine by the 9th of February 2006.

Gen Re and the U.S Government agreed to a $92 million settlement in 2010. This allowed the Berkshire Hathway subsidiary to avoid prosecution in the AIG case. Furthermore, Gen Recommitted to implementing “corporate governance concessions.” Therefore, Berkshire Hathaway’s Chief Financial Officer was required to attend General Re’s audit committee meetings and mandated the appointment of an independent director.

Warren Buffet got into $11 billion worth of forwarding contracts in 2002 to deliver U.S. dollars against other currencies. He gained over $2 billion on the contracts by April 2006. In June 2006, Warren announced he gave 85% of Berkshire holdings to 5 foundations in annual gifts of stock. In fact, his largest contribution went to Bill and Melinda Gates Foundation.

Warren Buffet sent a letter to his shareholders in 2007. He announced he was looking for a younger successor to run his business.

Financial crisis

In 2007 and 2008, Buffet was criticized for allocating capital too early. It resulted in suboptimal deals. Berkshire Hathaway suffered a 77% decline in earnings during Q3 2008. Moreover, Warren’s other deals suffered massive mark-to-market losses.

The company decided to acquire 10% of Goldman Sachs stock. In late 2008, the company was running at around $6.73 billion mark-to-market losses. SEC demanded that Berkshire produce “a more robust disclosure” of factors used to value the contracts. Furthermore, Warren helped Dow Chemical pay for its $18.8 billion takeovers of Rohm & Haas. Hence, it made him the single largest shareholder in the enlarged group. It provided $3 billion, underlining his instrumental role during the crisis in equity markets and debt.

Warren becoming the richest person in the world.

Warren became the richest person in the world in 2008. His net worth was $62 billion by Forbes and $58 billion by Yahoo. He overtook Bill Gates. However, in 2009 Bill Gates regained his position and Warren was second.

Warren bought General Electric (GE) in October 2008. He received an option to buy three billion shares of GE stock at $22.25. Furthermore, Warren received a 10% dividend (callable within three years). Buffett sold some Procter & Gamble Co. and Johnson & Johnson shares from his personal portfolio in February 2009. In 2009, Warren invested $2.6 billion as a part of Swiss Re’s campaign to raise equity capital. Berkshire Hathaway already owned a 3% stake, with rights to own more than 20%.

Furthermore, Warren bought Burlington Northern Santa Fe Corp. for $34 billion in cash and stock in the same year. Apparently, Warren bought it to diversify Berkshire Hathaway from the financial industry. As a result, as of June 2009, Berkshire Hathaway became the eighteenth largest corporation in the world.

Berkshire Hathway – 55 years later

Federal Reserve gave Goldman Sachs approval on March 18th, 2011, to buy back Berkshire’s preferred stock in Goldman. Warren was reluctant to give up the stock. It averages $1.4 million in dividends per day.

“I’m going to be the Osama bin Laden of capitalism. I’m on my way to an unknown destination in Asia where I’m going to look for a cave. If the U.S. Armed forces can’t find Osama bin Laden in 10 years, let Goldman Sachs try to find me”.
– Warren Buffet, 2011.

Warren bought 64 million shares of International Business Machine Corp (IBM) stock in November 2011. It was worth around $11 billion. The investment raised his stake in the company by 5.5%. It was the largest stake in IBM. Warren said on several prior occasions that he would not invest in technology. He explained that it was because he did not fully understand it, so the move surprised many investors and observers.

He revealed in an interview that the investment to the public, Buffett stated that he was impressed by the company’s ability to retain corporate clients and said, “I don’t know of any large company that really has been as specific on what they intend to do and how they intend to do it as IBM.”

Warren acquainted Media General in May 2012. It consisted of 63 newspapers in the south-eastern U.S. Media General’s 2nd newsprint purchase made by Warren in 1 year. In July 2013, Interim publisher James W. Hopson announced the Press of Atlantic City would be sold to Buffett’s BH Media Group by ABARTA. BH Media Group is a private holding company based in Pittsburgh, U.S.

Warren Buffet’s health

On the 11th of April, 2012, Warren was diagnosed with Stage one prostate cancer. He did a routine test. He revealed that he needed daily radiation treatment from mid-July 2012. Warren wrote a letter to shareholders and said, “I feel great as if I were in my normal excellent health and my energy level is 100 percent.”

Later, on the 15th of September 2012, Warren announced he completed his 44-day radiation treatment cycle. He said, “it is a great day for me and I am so glad to say that’s over.”

In May 2013, the Berkshire shareholders held a meeting. Warren explained that he did not expect to “move the needle” at Berkshire with newspaper acquisition. However, he anticipated an annual return of 10 percent. As a result, the Press of Atlantic City became Berkshire’s 30th daily newspaper.

In September 2013, Warren presented to Georgetown University students in Washington, D.C. Warren compared the U.S. Federal Reserve to a hedge fund and stated that the bank is generating “$80 billion or $90 billion a year probably” in revenue for the U.S. government. Furthermore, Warren advocated on the issue of wealth equality in the society:

“We have learned to turn out lots of goods and services, but we haven’t learned as well how to have everybody share in the bounty. The obligation of a society as prosperous as ours is to figure out how nobody gets left too far behind.”
– Warren Buffet

In February 2013, Warren bought H. J. Heinz with private equity group 3G Capital for $28 billion. Furthermore, Berkshire Hathaway stable included battery maker Duracell and Kraft Foods Group, which merged with Heinz in 2015 to form the third-largest food and beverage company in North America.

Berkshire Hathaway’s shares hit $200,000 a share for the first time on the 14th of August, 2014. This capitalized the company at $328 billion. By then, Buffet gave much of his stock to charity, yet he helps 321,000 shares. The shares were worth $64.2 billion.

Berkshire Hathaway was fined $896,000 on the 20th of August, 2014, for failing to report the December 9, 2013, purchase of shares in USG Corporation as required.

Later, in 2016, Warren launched Drive2Vote. Drive2Vote is a website made to encourage people in his Nebraska community to exercise their vote. Moreover, it assists in registering and driving voters to a polling location if they needed a ride.

Buffet sold approximately 81 million shares he owned in IBM stock in May 2017. Moreover, he pointed out that he did not value the company as highly as he did six years earlier. A few months later, his stake in the company dropped to about 37 million shares. However, Warren increased his investment in Apple by 3 percent. In addition to that, he increased his investment in Apple by 3 percent. He exercised warrants for 700 million shares.

According to a report by USA Today, between 2006 and 2017, Buffett gave away close to $28 billion in charity.

Healthcare Venture

Berkshire Hathaway, JPMorgan Chase, and Amazon delivered a joint press release on the 30th of January 2018. They revealed plans to team up and form a new healthcare company for their U.S. employees.

According to the release, the company would be “free from profit-making incentives and constraints” as it tried to find ways to cut costs and improve the overall process for patients, with an initial focus on technology solutions.

In spring 2020, Warren announced that Berkshire Hathaway had dumped its holdings in the “big four” airlines — Delta, United, American, and Southwest. Moreover, he expressed concerns that the airline industry would never fully recover because of the coronavirus pandemic.

Read more on: The Journey of Steve Ballmer

Previous «
Next »