Tag: Warren Buffett

How Warren Buffett became one of the richest people in the world At age 7, he was selling gum, lemonade, and bottles of Coca-Cola to earn some money of his own. Today, he is one of the richest people in the world, with a fortune of more than $100 billion, and is recognized as the best investor of all time… How did he do it? The protagonist of this story is Warren Edward Buffett, an American investor born on August 30, 1930, in Omaha, Nebraska. Curiously, its birth occurs in the early years of the Great Depression, shortly after the famous "Crack of '29", one of the most catastrophic falls in the stock market in the United States. His father, Howard Homan Buffett, worked as a stockbroker, but due to the difficult economic situation in the country, he would end up losing both his job and his savings. This caused the early years of little Warren's childhood to be full of limitations and difficulties. Fortunately, in the following years, his family managed to stabilize a bit. Growing up in a family linked to the world of investments and business, from a very young age he became obsessed with the idea of earning his own money and becoming rich. Among his first ventures was the sale of chewing gum, lemonade, and even bottles of Coca-Cola that he got from his grandfather's store. Also, he worked carrying golf clubs for $3 a day. The money he earned was saved to reinvest in his business. Thanks to the influence of his father, he was able to acquire some knowledge about investments and financial markets. Warren Buffett's Early Businesses and Investments At the age of 10, he began to follow the prices of the stock market prices on his own from home, while reading some of his father's books to continue learning. At the age of 11, he would make his first investment: it was 6 preferred shares, three for him and three for his sister Doris, in the Cities Service Company, for a value of $38 per share. These shares would initially be devalued to $27, but would later be priced at $40. The boy got excited and sold the part of it to get the first profit from it; However, a few weeks later these shares would be trading at $200, which would have represented a profit of $162 .per share. The little investor would never forget that great lesson: patience is one of the greatest virtues when it comes to investing because it teaches not to be carried away by emotions when selling. By the year 1942, his father decided to close his brokerage firm to venture into the world of politics, managing to be elected as a congressman for the Republican Party. After winning the election, Mr. Howard Buffett moved with his family to Washington, where Warren, at the age of 13, began working as a delivery boy for The Washington Post newspaper. Day after day, he got up very early to be the first to arrive at work and get the best routes, since some of the people to whom he delivered the newspaper used to give him good tips for his punctuality. With this business, he came to earn around $175 a month, but this was not enough to satisfy his ambition. He wanted so much more. At age 14, with a large amount of money saved, he invested $1,200 in a farm acreage in Nebraska. He first bought a piece of land and then reached an agreement with a farmer about the benefits that the land would bring, thus diversifying his sources of income. Despite doing very well in Washington, Warren returned to Omaha to live and work with his grandfather. There he would finish school and learn the value of hard work. With his savings, he teamed up with one of his friends to buy a pinball machine. This machine was installed in a barbershop. A short time later, with the profits they acquired another six machines that they located in different locations in the neighborhood. The business represented earnings of about $50 a week. While the business was thriving, Warren spent his time reading the stock market charts and making a few financial moves, like his short investment in AT&T, the phone company in which his professors owned shares. After graduating from school, his father wanted to persuade him to enter The Warthon School, something the young man did not want as he was focused on growing his business. However, in the end, he followed his father's advice and entered the university, but after a short time, he abandoned his studies when he was frustrated that his teachers had nothing new to teach him about investments. After leaving Wharton, he returned to Omaha to enroll at the University of Nebraska. Warren Buffett's Grandmaster: Benjamin Graham After graduation, he wanted to enroll in an MBA at Harvard University but was turned down. While thinking about what to do, a friend told him that the famous investor and author Benjamin Graham taught at Columbia University in New York, which motivated him to enroll there. Warren had been familiar with the figure of Graham since he was 19 years old when he read "The Intelligent Investor", a book in which the author exposes the fundamentals of "Value Investing", an investment philosophy characterized by buying shares at a price low, but whose “intrinsic value” is much higher; that is to say, a value that in the present is not reflected in the price, but that will be reflected in the future when the market realizes its true potential. As a student of Benjamin Graham, Warren was excellent: he was involved, enthusiastic, got straight A's, and always had something to contribute. Thanks to the university environment, he got to know other legendary investors who applied his teacher's method, such as Walter Schloss, Tom Knapp, and William Ruane, founder of the well-known firm Sequoia Fund. In 1951, Buffett earned his master's degree and returned to Omaha, where he would meet his first wife, Susie Thompson, mother of his three children: Susan, Howard, and Peter. In the years that followed, he would try his luck at various jobs: first, at his father's new brokerage firm, as a salesman and not as an analyst, which was what he was most passionate about; and then he wanted to work in association with his mentor Graham, even offering to work for free, but he initially turned it down, although he would later call him to hire him. Warren accepted without hesitation, but soon his desire to work alongside the idol and his teacher turned into a nightmare, as he began to feel frustrated due to the strict investment rules that he had to follow. His first investment company: Buffett Associates In 1956, Graham closed his company for good and retired from the professional world of investments. Warren, for his part, with all the learning and experience he had accumulated, ventured to take the next step in his career by starting, at the age of 26, his own investment company which he called "Buffett Associates", managed from his room and with a capital of $105 thousand. Its operating rules were simple: it did not allow its partners to withdraw or enter new capital until December 31, and it did not tell them what it was investing in either. Since he did not charge monthly fees, he obtained his income by charging 25% of the profits when they exceeded 6% per year. The investment style he used was the same as that of his teacher Graham's company, the classic "value investing", which invests in arbitration situations and "cigar butts", which in Buffett's words would be described as follows: “If you buy a stock at a low enough price, there will usually be some bounce in the price of the deal that will give you an opportunity to make a decent profit, even if the long-term performance of the deal is terrible. I call this the “cigarette butt” investment approach. A cigarette butt found on the street, with only a puff left, may not offer much to smoke, but "getting it free" will make that puff all the more worthwhile." In 1958, he bought for $31,500 (approximately $265,000 current dollars ), the house in which he currently lives, located on Farnam Street, Omaha. Four years later, in 1962, Buffett Associates already managed $7.2 million, with $1 million owned by Warren. Of the 7 partners, he started the firm with, he now has 99, and the only reason he didn't increase his number was that a US law prevented him from having more members. Berkshire Hathaway: From Bankrupt Company to Multi-Billion Dollar Empire At that time, he would make one of his most significant financial moves: investing in Berkshire Hathaway, a textile company in which he bought a large number of shares for $14.86 each. The company's performance on the stock market was quite mediocre and the value of the shares began to fall. Seabury Stanton, who was the company's president, offered to buy Warren's shares for $ 11.50 per share, which he initially accepted; However, a few weeks later, as the deal was to close, Warren received a written offer stating that the payment per share would be$11.37. This fact bothered him a lot because he realized that Seabury only wanted to deceive him and take advantage of the transaction. Furious, he decided not to sell and instead began buying more Berkshire Hathaway shares. By 1966, he already had control of Berkshire as the majority shareholder, and his first decision was to fire Seabury and hire a new president. Although he tried to get the company to continue its textile function, this did not work, so he decided to turn it into a parent company and investment vehicle. In 1970, he would close Buffett Associates for good and become the president of Berkshire Hathaway. For all the success of his powerful business conglomerate, Warren Buffett has on several occasions stated that Berkshire was one of his worst investments, considering the circumstances at the time. By the 1970s, the successful investor was spending all his time reading annual reports, and business publications, and answering his phone. One of the people with whom he used to have long conversations was his friend and adviser Charles Munger, future vice president of Berkshire, whom he appreciated very much. “Charlie taught me that it is much better to buy a wonderful business at a fair price than to buy a fair business at a wonderful price.” Buffett said in an interview. This philosophy implied a change in the investment criteria of Warren, who no longer only bet on the slight rebound of companies at bargain prices, but also on companies that could continue to be a good investment in the future. In partnership with Charlie, he made investments in American Express, Blue Chip Stamps, See's Candy Shop, and The Washington Post, the newspaper he delivered in his youth. His next strategy would become one of the most popular of his career. Warren began to invest in the purchase of financial companies, such as banks and insurance companies; This is because, for example, when insurance companies collect premiums from their customers, that money is not immediately spent on covering other insurance claims, but rather stays with the company and is available for use; that is to say, that, through his company From him Berkshire from him, he could use that money to make other investments without having to pay any type of interest. “We enjoy the use of free money, and better yet, we get paid to have it.” -Commented the investor. Due to the energy and inflationary crisis and the high-interest rates that the United States was experiencing in those years, he also decided to invest in other newspaper companies and advertising agencies, because their operating costs were very low, unlike those companies that needed a great infrastructure to operate. In 1977, he separated from his first wife, Susie Thompson. Years later, he begins a relationship with Astrid Menks, a woman to whom he is currently still married. The 1980s were key to his business career. Warren and Charlie invested in all kinds of businesses: media, retailers, mining, insurance, tobacco, and more. In 1986, Warren Buffett's fortune exceeded $1 billion, thus becoming a billionaire at age 56. On “Black Monday” in 1987, he lost $342 million in his fortune, but he would soon win it back and become even richer. In 1987, seeing that Coca-Cola was going through many problems with the little success brought by its new product, the so-called "New Coke", it acquired 7% of the company for a value of $1,299 million. By 1994, his shares brought him $8.58 billion in dividends. Today, Berkshire owns 9% of the company and its stock is worth more than $21 billion. All these financial moves made him a very popular character. His circle of friends included well-known politicians, movie stars, journalists, and businessmen. Throughout the country, he became known as "The Oracle of Omaha" due to his investment skills. When some thought the tycoon had lost his touch by not investing in the up-and-coming tech companies of the 1990s, his reputation would only soar after the .com bubble burst, bankrupting thousands of investors. , while he had absolutely nothing to regret about it. The best investor in history In 2002, he was named "The Best Money Manager of the 20th Century", beating Peter Lynch and John Templeton. In addition, he received the 21st century as one of the richest men in the world and recognition as "The best investor in history". His ex-wife, Susie Thompson, died in 2004, the same year that Buffett's longtime friend Bill Gates joined Berkshire Hathaway's board of directors. In 2006, Warren announces that he will donate 99% of his fortune to various family foundations and the Bill and Melinda Gates Foundation, which is considered one of the largest charitable acts in the history of the United States. In 2008, he topped the list of the richest people in the world according to Forbes Magazine, with an estimated fortune of $68 billion. In 2009, it acquired 77% of the shares it did not already own in the Burlington Northern Santa Fe railroad company, for a value of $44 billion. This is considered one of the most important business operations in his career. In 2010, with his friend Bill Gates, he founded the "The Promise to Give" campaign, which aims to persuade more billionaires to donate their fortunes upon death, and which personalities such as Larry Ellison, Mark Zuckerberg, David Rockefeller, and George Lucas, among many others. In 2012, the Oracle of Omaha would give the whole world a scare when he was diagnosed with prostate cancer; Fortunately, that same year, thanks to the high-quality medical services he received, he managed to be cured of the disease. Currently, Warren Buffett is 90 years old, continues to be one of the richest men in the world, and is one of the six people who have come to have a fortune of more than $100 billion, along with Jeff Bezos, Bernard Arnault, Elon Musk, Mark Zuckerberg, and Bill Gates. Also, he continues to be the executive director of Berkshire Hathaway, one of the most powerful business conglomerates on the planet, with a very broad investment portfolio and holding the record for being the company with the most expensive shares on the market, each trading at more than $410. One thousand dollars. On several occasions, Warren has publicly stated that he is already looking for a successor. Thus we conclude the exciting story of Warren Buffett, a man made by hand who, since he was a child, showed great business skills and managed to build one of the largest business groups in history with savings and investment, becoming one of the richest people. in the world and one of the best investors of all time, being an inspiration to many other entrepreneurs who see him as a benchmark when it comes to investing and doing business. In his own words: “If you can't control your emotions, you can't control your money. The stock market is a means of transferring money from the impatient to those who are patient. No matter how great your talent and effort, there are things that just take time. The most important investment you can make is to invest in yourself.”