Warren Edward Buffett (born August 30, 1930) is an American business magnate,
investor, and philanthropist. He is widely regarded as one of the most
successful investors in the world. Often introduced as "legendary
investor, Warren Buffett, he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is consistently ranked among the world's wealthiest people. He was ranked as the world's wealthiest person in 2008 and is the third wealthiest person in the world as of 2011.
Buffett is called the "Wizard of Omaha", "Oracle of Omaha"or the "Sage of Omaha"and is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth.Buffett is also a notable philanthropist, having pledged to give away 99 percent of his fortune to philanthropic causes, primarily via the Gates Foundation. He also serves as a member of the board of trustees at Grinnell College.
Warren Buffett house, Omaha, Nebraska Warren Buffett Net worth: $39 billion Annual property taxes: $13,859. Residence: Omaha, Neb.
Buffett was born in 1930 in Omaha, Nebraska, the second of three children and only son of U.S. Representative Howard Buffett, a fierce critic of the interventionist New Deal domestic and foreign
policy, and his wife Leila (née Stahl). Buffett began his education at
Rose Hill Elementary School in Omaha. In 1942, his father was elected to
the first of four terms in the United States Congress,
and after moving with his family to Washington, D.C., Warren finished
elementary school, attended Alice Deal Junior High School, and graduated
from Woodrow Wilson High School in 1947, where his senior yearbook picture reads: "likes math; a future stock broker."
Even as a child, Buffett displayed an interest in making and saving money. He went door to door selling chewing gum, Coca-Cola,
or weekly magazines. For a while, he worked in his grandfather's
grocery store. While still in high school he was successful in making
money by delivering newspapers, selling golfballs and stamps, and
detailing cars, among other means. Filing his first income tax return in 1944, Buffett took a $35 deduction for the use of his bicycle and watch on his paper route.
In 1945, in his sophomore year of high school, Buffett and a friend spent $25 to purchase a used pinball machine, which they placed in the local barber shop. Within months, they owned several machines in different barber shops.
Buffett's interest in the stock market and investing also dated to
his childhood, to the days he spent in the customers' lounge of a
regional stock brokerage
near the office of his father's own brokerage company. On a trip to New
York City at the age of ten, he made a point to visit the New York Stock Exchange. At the age of 11, he bought three shares of Cities Service Preferred for himself, and three for his sister.
While in high school he invested in a business owned by his father and
bought a farm worked by a tenant farmer. By the time he finished
college, Buffett had accumulated more than $90,000 in savings measured
in 2009 dollars.
Buffett entered college as a freshmen in 1947 at the Wharton Business School of the University of Pennsylvania and studied there for two years from 1947 to 1949. In the year 1950, when he entered his junior year, he transferred to the University of Nebraska–Lincoln where at the age of nineteen, he graduated with a Bachelor of Science in business administration. After the completion of his undergraduate studies, Buffett enrolled at Columbia Business School after learning that Benjamin Graham (author of "The Intelligent Investor" – one of his favorite books on investing) and David Dodd, two well-known securities analysts, taught there. He earned a Master of Science in economics from Columbia in 1951. Buffett also attended the New York Institute of Finance.
In Buffett’s own words:
| I’m 15 percent Fisher and 85 percent Benjamin Graham. 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 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 1950, at the age of 20, Buffett had made and saved $9,800. In April 1952, 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 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.
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-Omaha.
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 at Dundee Presbyterian Church 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.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 ($1.2 million
inflation adjusted to 2009 dollars) 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 to Charlie 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, and Buffett
pooled their money with a mere $100 original investment of his own. 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.
As a millionaire
In 1962, Buffett became a millionaire because of his partnerships,
which in January 1962 had an excess of $7,178,500, of which over
$1,025,000 belonged to Buffett. Buffett merged all partnerships into one
partnership. Buffett invested in and eventually took control of a
textile manufacturing firm, Berkshire Hathaway. Buffett's partnerships
began purchasing shares at $7.60 per share. In 1965, when Buffett's
partnerships began purchasing Berkshire aggressively, they paid $14.86
per share while the company had working capital
of $19 per share. This did not include the value of fixed assets
(factory and equipment). Buffett took control of Berkshire Hathaway at
the board meeting and named a new president, Ken Chace, to run the
company. In 1966, Buffett closed the partnership to new money. Buffett
wrote in his letter: "... unless it appears that circumstances have
changed (under some conditions added capital would improve results) or
unless new partners can bring some asset to the partnership other than
simply capital, I intend to admit no additional partners to BPL."
In a second letter, Buffett announced his first investment in a
private business — Hochschild, Kohn and Co, a privately owned Baltimore
department store. In 1967, Berkshire paid out its first and only
dividend of 10 cents. In 1969, following his most successful year,
Buffett liquidated the partnership and transferred their assets to his
partners. Among the assets paid out were shares of Berkshire Hathaway.
In 1970, as chairman of Berkshire Hathaway, Buffett began writing his
now-famous annual letters to shareholders. However, he lived solely on
his salary of $50,000 per year, and his outside investment income. In
1979, Berkshire began the year trading at $775 per share, and ended at
$1,310. Buffett's net worth reached $620 million, placing him on the Forbes 400 for the first time.
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 surprised the
media industry, as ABC was four times bigger than Capital Cities at the
time. Berkshire Hathaway chairman Warren Buffett helped finance the deal in return for a 25% stake in the combined company.
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.
In 1987, Berkshire Hathaway purchased a 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.Buffett became Chairman of Salomon until the crisis passed; on September 4, 1991, he testified before Congress.In 1988, Buffett began buying stock in Coca-Cola Company,
eventually purchasing up to 7% 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.
As a billionaire
Buffett became a billionaire on paper when Berkshire Hathaway began
selling class A shares on May 29, 1990, when the market closed at $7,175
a share. In 1998, in an unusual move, he acquired General Re (Gen Re) 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,
former 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. In 2010, the federal government settled with Berkshire Hathaway for
$92 million in return for the firm avoiding prosecution in an AIG fraud
scheme, and undergoing 'corporate governance concessions'.
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 2006, Buffett
announced in June that he gradually would give away 85% of his Berkshire
holdings to five foundations in annual gifts of stock, starting in July
2006. The largest contribution would go to the Bill and Melinda Gates Foundation.
In 2007, in a letter to shareholders, Buffett announced that he was
looking for a younger successor, or perhaps successors, to run his
investment business. Buffett had previously selected Lou Simpson, who runs investments at Geico, to fill that role. However, Simpson is only six years younger than Buffett.
Buffett married Susan Buffett (née Thompson) in 1952. They had three children, Susie, Howard and Peter.
The couple began living separately in 1977, although they remained
married until her death in July 2004. Their daughter, Susie, lives in
Omaha and does charitable work through the Susan A. Buffett Foundation
and is a national board member of Girls, Inc.
In 2006, on his seventy-sixth birthday, Warren married his
never-married longtime-companion, Astrid Menks, who was then 60 years
old. She had lived with him since his wife's departure to San Francisco
in 1977.
It was Susan Buffett who arranged for the two to meet before she left
Omaha to pursue her singing career. All three were close and Christmas
cards to friends were signed "Warren, Susie and Astrid". Susan Buffett briefly discussed this relationship in an interview on the Charlie Rose Show shortly before her death, in a rare glimpse into Buffett's personal life.
Warren Buffett disowned his son Peter's adopted daughter, Nicole, in
2006 after she participated in the Jamie Johnson documentary, The One Percent. Although his first wife had referred to Nicole as one of her "adored grandchildren", Buffett wrote her a letter stating, "I have not emotionally or legally
adopted you as a grandchild, nor have the rest of my family adopted you
as a niece or a cousin." He signed the letter "Warren."
His 2006 annual salary was about $100,000, which is small compared to senior executive remuneration in comparable companies In 2007 and 2008, he earned a total compensation of $175,000, which included a base salary of just $100,000.He lives in the same house in the central Dundee
neighborhood of Omaha that he bought in 1958 for $31,500, today valued
at around $700,000 (although he also owns a $4 million house in Laguna
Beach, California). In 1989 after having spent nearly 6.7 million dollars of Berkshire's funds on a private jet, Buffett sheepishly named it "The Indefensible".
This act was a break from his past condemnation of extravagant
purchases by other CEOs and his history of using more public
transportation.
He remains an avid player of bridge, which he learned from Sharon Osberg, and plays with her and Bill Gates.[72] He spends twelve hours a week playing the game. In 2006, he sponsored a bridge match for the Buffett Cup. Modeled on the Ryder Cup
in golf, held immediately before it, and in the same city, a team of
twelve bridge players from the United States took on twelve Europeans in
the event. He is a dedicated, lifelong follower of Nebraska football, and attends as many games as his schedule permits. He supported the hire of Bo Pelini following the 2007 season stating, "It was getting kind of desperate around here". He watched the 2009 game against Oklahoma from the Nebraska sideline after being named an honorary assistant coach.
Warren Buffett worked with Christopher Webber on an animated series with chief Andy Heyward, of DiC Entertainment, and then A Squared Entertainment. The series features Buffett and Munger, and teaches children healthy financial habits for life. Buffett was raised Presbyterian but has since described himself as agnostic.In December 2006 it was reported that Buffett does not carry a cell
phone, does not have a computer at his desk, and drives his own
automobile, a Cadillac DTS.Buffett wears tailor-made suits from the Chinese label Trands; earlier he wore Ermenegildo Zegna.
Lineage
Buffett's DNA report revealed that his paternal ancestors hail from northern Scandinavia, while his maternal ancestors most likely have roots in Iberia or Estonia.
Recognition
In 1999, Buffett was named the top money manager of the Twentieth Century in a survey by the Carson Group, ahead of Peter Lynch and John Templeton.In 2007, he was listed among Time's 100 Most Influential People in the world.In 2011, President Barack Obama awarded him the Presidential Medal of Freedom.[85] Most recently, Buffett, along with Bill Gates, was named the most influential global thinker in Foreign Policy's 2010 report.
Politics
In addition to other political contributions over the years, Buffett has formally endorsed and made campaign contributions to Barack Obama's presidential campaign. On July 2, 2008, Buffett attended a $28,500 per plate fundraiser for Obama's campaign in Chicago hosted by Obama's National Finance Chair, Penny Pritzker and her husband, as well as Obama advisor Valerie Jarrett.
Buffett backed Obama for president, and intimated that John McCain's views on social justice were so far from his own that McCain would need a "lobotomy" for Buffett to change his endorsement. During the second 2008 U.S. presidential debate, candidates John McCain and Barack Obama, after being asked first by presidential debate mediator Tom Brokaw, both mentioned Buffett as a possible future Secretary of the Treasury. Later, in the third and final presidential debate, Obama mentioned Buffett as a potential economic advisor. Buffett was also finance advisor to California Republican Governor Arnold Schwarzenegger during his 2003 election campaign
Buffett invested in PetroChina Company Limited and in a rare move, posted a commentary
on Berkshire Hathaway's website stating why he would not divest from
the company despite calls from some activists to do so, due to its
connection with the Sudanese civil war that caused Harvard to divest
from the company in 2005. He did, however, sell this stake soon
afterwards, sparing him the billions of dollars he would have lost had
he held on to the company in the midst of the steep drop in oil prices
beginning in the summer of 2008.
In October 2008, Buffett invested in new energy automobile business by paying $230 million for 10% of BYD Company (SEHK: 1211), which runs a subsidiary of electric automobile manufacturer BYD Auto. In less than one year, the investment has reaped him over 500% return of profit.
Tobacco
During the RJR Nabisco, Inc. hostile takeover fight in 1987, Buffett was quoted as telling John Gutfreund:
I’ll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It’s addictive. And there’s fantastic brand loyalty.—Buffett, quoted in Barbarians at the Gate: The Fall of RJR Nabisco
fraught with questions that relate to societal attitudes and those of the present administration. I would not like to have a significant percentage of my net worth invested in tobacco businesses. The economy of the business may be fine, but that doesn't mean it has a bright future.—Buffett, Berkshire Hathaway annual meeting (1994)
Coal
In 2007, Buffett's PacifiCorp, a subsidiary of his MidAmerican Energy Company, canceled six proposed coal-fired power plants. These included Utah's Intermountain Power Project
Unit 3, Jim Bridger Unit 5, and four proposed plants previously
included in PacifiCorp's Integrated Resource Plan. The cancellations
came in the wake of pressure from regulators and citizen groups,
including a petition drive organized by Salt Lake City commercial real
estate broker Alexander Lofft and directed at Buffett personally.
The
1,600 petitioners, who described themselves in a letter to Buffett as "a
collection of citizens, business owners and managers, service
professionals, public servants, and organization representatives ...
your friends and new customers here in Utah," explained that, in their
view, any further expansion of coal generation in Utah would "compromise
our health, obscure our viewsheds, shrink and contaminate our
watersheds, and thin out our most beloved snow pack," concluding that
"our attractiveness as a place to live and work is also threatened, and
so is our economic competitiveness as a major metro area and a state,
compromising our recent gains in income and property values".
Expensing of stock options
He has been a strong proponent of stock option expensing
on the Income Statement. At the 2004 annual meeting, he lambasted a
bill before the United States Congress that would consider only some
company-issued stock options compensation as an expense, likening the
bill to one that was almost passed by the Indiana House of Representatives to change the value of Pi from 3.14159 to 3.2 through legislative fiat.
When a company gives something of value to its employees in return for their services, it is clearly a compensation expense. And if expenses don't belong in the earnings statement, where in the world do they belong?
Klamath river
American Indian tribes and salmon fishermen sought to win support
from Warren Buffett for a proposal to remove four hydroelectric dams
from the Klamath River. He had David Sokol respond that the FERC would decide the question.
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