Warren Buffet

The Story

Warren Buffet

Berkshire Hathaway Annual Shareholders Meeting

The  story of Warren Buffet, and how he changed the world of today. My goal of this paper is to provide a insight to the life of Warren Buffet. I will also explain the very simple strategy that he used to gain his wealth. I have read his Biography “Snow Ball Effect”, which tells everything about Warren from a early age to the present. Warren is a testament to the investment world, that it’s not as complicated as the world portrays it to be. I will shed light on Warren’s childhood and a timeline about how he got to where he go today. Warren buffet is a individual that made his own path. When he found something that he liked or wanted he went and got it. He is not a person that fell into luck, he was a go getter and made sure he surround himself with individuals of that nature.

The Story


The start of the Warren error, Warren was born on August 30, 1930( http://www.biography.com/people/warren-buffett-9230729). He was son of Howard Buffet, Nebraska businessman, investor, and four-term Republican United States Representative. As you can see Warren’s business values were instilled in him at a early age. Warren took a early liking to money. “At 11 years old he made his first investment; he bought three shares of Cities Service Preferred at $38 per share. The stock quickly dropped to only $27, but Buffett held on tenaciously until they reached $40. He sold his shares at a small profit, but regretted the decision when Cities Service shot up to nearly $200 a share. He later cited this experience as an early lesson in patience in investing. By the age of 13 he was running his own business, he was delivering papers and selling his own tip sheet at the horse track. He also filed his own tax return claiming a $35.00 deduction which was for the use of his bike (http://en.wikipedia.org/wiki/Warren_Buffett). He also went door to door selling Coca Cola and bubble gum. The skills he developed at a early age allowed him to become the business man he is today.

Warren Buffet had many other business as a young individual, another small business that he started was with another neighborhood boy. They sold golf ball business. They originally got their capital from stealing balls from his local Sears. His dad became suspicious of the growing number of golf balls Warren had started accumulating in his closet. His father finally made him settle up or he would lose his paper route. Once this happened he needed to find another way to keep his golf ball business alive. So he started sneaking on to the local golf course at night looking for balls. He persuaded another neighborhood boy that he could join the business if he would swim to the bottoms of the pond to get the balls.

At the age of 13 his father was elected to the house of representatives, so the family moved to Washington D.C. After arriving in D.C. Warren didn’t take much time to dive into another business. He bought a pinball machine, with in a month he had made a profit that allowed him to buy two more Machines. He than sold the business to a old Veteran for $1200.00. With the profit from the pinball business warren took on a large endeavor as sophomore he purchased a 40 acre farm back in Nebraska. He hired a farm to work the land and it has been worked ever since.

After High School Warren enrolled at the University of Pennsylvania at the age of 16. Many of his classmate said that Warren seemed to be a socially awkward individual, he seemed to be out of places and not fit in. Warren’s roommate at University of Pennsylvania said he never saw Warren study. After two years Warren dropped out of college and returned home.
After returning home he enrolled in the University of Nebraska and obtained his bachelors degree. From looking at Warren buffet and where he is today you would never figure he was a person that feared public speaking. He ended up enrolling in in public speaking course to get over his fears. Well attending University of Nebraska he also purchased a Texaco gas station (which turned to be a failing business).

Warren Buffet was a very ambitious individual, in all fascists of life. At the age of 20 buffet found out that Ben Graham a professor at the University of Columbia was on the board of GEICO Insurance Company. Warren Got on a train on a Saturday and headed to Washington DC where GEICO’s head quarters were located. He knock on the door until a janitor answered, unfortunately Graham was not there but he was introduced to the Vice President of GEICO Lorimer Davidson. Warren Buffet is a testament to the world that you need to make your own opportunities and not wait for them to come to you. He will proves this time an time and again that he created his own opportunities.

Warren was excepted to Columbia differently than your average student. Warren had missed the dead line to apply and so he wrote a letter to Ben Graham asking to be accepted, and that he admired his work. After completing college Warren Buffet had managed to save $9,800 from the business that he had well he was a child (adjusted for inflation $94,000 today). For a young individual to amass that kind of wealth at such a early age is a pretty incredible accomplishment.

The Next Step

Warren’s Business Career


Once he graduated he wanted to go work on Wall Street, but both his father and  Ben Graham urged him not to. Warren than offered to work for Graham for free, but Graham would not allow it. Warren returned to Omaha where he was employed by Buffet-Falk & Company from 1951-1954. Where he was and investment sales men. In 1954-1956 he took a job working for Graham’s firm Graham-Newman Corp (his pay was 12,000 a year, a adjusted today that would be $104,000), where he was a securities analyst. In 1956 Ben Graham decide to retire, and Warren made the leap of faith and started his own business named Buffet Partnership. At this point Buffet had managed to save a $174,000 ($1,470,000 million) The Buffet Partnership started to become a power house by 1960 Buffet owned and operated seven different partnerships. In 1962 Warren Buffet became a Millionare and decide to combined all of his partnerships into one. In 1970 he acquired Berkshire Hathaway, were he is the CEO and Chairmen to this day.

The Making of a Future Billionare


Prior to 1962 Warren had began to purchase shares of Berkshire Hathaway (for $11.76 Share). Berkshire has not always been a investment firm they started as a textile company. In 1965 the CEO of Berkshire offered Warren a buy back of his stock at $11.50 per share which Warren agreed to. A few weeks later Warren received a buy back offer from Berkshire for $11.38 per share. Warren declined the purchase and was furious and began to acquire more shares. After acquiring enough shares to become majority share own Warren fired the CEO and took over ownership of Berkshire Hathaway. Berkshire remained in the textile business shortly. In 1967 Berkshire began it’s first venture into the insurance industry by purchasing National Indemnity Company. In late 1970 Berkshire purchased it’s first equity stake in GEICO ( which is it main insurance business to this day). In 1985 the last textile planet of Berkshire was shut down. Despite Berkshire Hathaway being what it is today Warren Buffet claims that it was one of the worst investments he ever made. Warren Stated that if he were to have take that money and invested it in the insurance business, with compounding growth he would have made additional $200,000,000,000 Billion. But we say would of could of should of.

The Expansion and Growth of a “Power House”

Thought the last 40 years Berkshire Hathaway has grow to be a power house in the invest world. Warren buffet almost immediately started purchasing companies and acquiring major positions in companies. In this section I’m going to provide a timeline on the expansion of Berkshire and there major purchase.

1964: Buffett invests one-quarter of the partnership in American Express, whose stock value had been hurt by a salad oil scandal but whose traveler’s checks, charge cards and brand image carry strong value.

1967: Buffett buys National Indemnity Co. of Omaha, his entry into the insurance business.

1969: Buffett liquidates the partnership, saying, “I am not attuned to this market environment, and I don’t want to spoil a decent record by trying to play a game I don’t understand just so I can go out a hero.”

Buffett has $25 million at age 39. The partnership gained 7 percent in its final year for a compound annual growth rate since 1957 of 25.5 percent, compared with the Dow’s 7.4 percent. Some partners retain their Berkshire holdings, then at $43 a share.

1971: The Washington Post sells shares to the public, and Buffett begins acquiring. By 1974 Chairwoman Katherine Graham invites him to join the newspaper’s board of directors. He remains a director today.

1972: Buffett acquires See’s Candy Shops for $25 million and ever since has cited it as the perfect company, with high customer loyalty and a brand-name advantage.

Early ’70s: Buffett and Charlie Munger control Blue Chip Stamps, a trading stamp company. Buffett invests cash that the company accumulates.

1974: Buffett buys Wesco Financial, a savings and loan and investment company. Munger begins to handle its investments.

1976: Buffett invests in GEICO, the auto insurer, which is slumping. Berkshire eventually owns the whole company.

1977: Through Blue Chip, Buffett buys the Buffalo (N.Y.) Evening News newspaper for $32.5 million.

1979: Buffett invests in ABC-TV.

1980: Buffett turns 50, and Berkshire stock is $375 a share.

1983: Buffett buys 80 percent of the Nebraska Furniture Mart for $55 million.

1985: Capital Cities buys ABC-TV, and Buffett becomes Cap Cities’ biggest shareholder.

1989: Buffett buys 80 percent of Borsheim’s Fine Jewelry for an undisclosed amount. Purchases of other jewelry and furniture retailers in the U.S. follow.

1991: Buffett meets Microsoft founder Bill Gates, who becomes a Berkshire board member and influences Buffett to put his wealth to work on humanitarian issues.

1996: Buffett creates Class B shares, worth one-thirtieth of a Class A share, making it easier for stockholders to give shares as gifts without facing tax consequences and stopping investment groups from collecting fees for selling small pieces of Berkshire stock through investment trusts.

1998: Buffett buys General Reinsurance for $22 billion, Berkshire’s biggest purchase to date.

2000: Buffett heads a $9 billion purchase of MidAmerican Energy Holdings, based in Des Moines and with ties to executives from Omaha’s Peter Kiewit Sons’ Inc.

2001: Insurance claims from the 9/11 terrorist attacks total $2.28 billion. Buffett apologizes to his shareholders for failing to foresee the risk and properly price insurance coverage.

2002: Berkshire and other investment groups buy $500 million in bonds issued by Level 3 Communications, the former Omaha fiber network company.

2003: Buffett buys Clayton Homes Inc. of Maryville, Tenn., a modular-home manufacturer and finance firm, for $1.7 billion after University of Tennessee students give a book to Buffett on the company’s history.

2004: Securities officials investigate misconduct by some General Re executives and American International Group, resulting in indictments of some executives. After an interview with investigators in New York City, Buffett says, “I told them everything I know.” Regulators say he helped with the case.

2006: Berkshire buys 80 percent of Iscar Manufacturing, an Israeli tool manufacturer and his first big international company purchase.

2008: Buffett visits Germany, Switzerland, Spain and Italy, partly to introduce himself to European business owners who might want to sell to Berkshire.

Buffett writes an opinion piece titled “Buy American. I am,” which is credited with helping calm the 2008 financial crisis. Berkshire stock gains while the rest of the market drops, but by March 2009, the market is at its low point, and Berkshire’s share price is down 50 percent.

2009: A $5 billion “paper” loss on investments and derivatives triggers a first-quarter loss by Berkshire, its biggest since the 9/11 terrorist attacks. But earnings rebound later in the year.

Buffett joins the American Philosophical Society, founded in 1743 by Benjamin Franklin to promote the sciences and humanities.

2010: Berkshire purchases the remaining shares of Burlington Northern Santa Fe Corp. for $26 billion, the company’s biggest purchase ever. As part of the purchase, Berkshire splits its Class B stock 50 for 1, the first split in company history.

I want to reiterate Warren Buffent was a very hard working individual and investor. By no means did his success come easy. Berkshire is the highest valued company on the market with a market value of 173,810.00 (http://finance.yahoo.com/q/hp?s=BRK-A).

Some interesting facts to the power of investing in Berkshire Hathaway (http://www.usnews.com/usnews/biztech/personalfinance/personal_investing_buffett/timeline/amazing_record.htm)

Information provided By http://www.omaha.com/article/20100501/MONEY/705019979

Here is a link to the exact equity holding of Berkshire Hathaway (http://en.wikipedia.org/wiki/List_of_assets_owned_by_Berkshire_Hathaway)

Preparing for the Inevitable

Everyone knows that an end must come, and Warren is no exception he understands that he will not be able to manage Berkshire forever. He has began to select individuals to manage the company. He is currently working on a team that will consist of a CEO, and three to four investment managers that will manage the company. has selected one investment managers Ted Combs and the CEO which will be hired internally. He is still looking for the rest of the investment management team “It could be YOU”.



Some interesting facts to the power of investing in Berkshire Hathaway (http://www.usnews.com/usnews/biztech/personalfinance/personal_investing_buffett/timeline/amazing_record.htm)

Information provided By http://www.omaha.com/article/20100501/MONEY/705019979

Here is a link to the exact equity holding of Berkshire Hathaway (http://en.wikipedia.org/wiki/List_of_assets_owned_by_Berkshire_Hathaway)