To refer to Warren Buffett as the "Oracle of Omaha" is perhaps a disservice to one of the world’s wealthiest, most respected businessmen, as it suggests that his investment and business successes have been more a result of magic or supernatural powers than they are ones attributed to his hard work, intelligence, and acumen.
The second child and only son of Howard and Leila Buffett, Warren Buffett displayed an aptitude for numbers from an early age. He was fond of adding large numbers and doing complex mathematical calculations in his head, something he still takes great pleasure in.
In elementary school, Warren reveled in various entrepreneurial ventures. He sold gum, Coke bottles, newspapers, magazines, anything to keep himself engaged in numbers. During this time, Howard was a stockbroker, and when Warren visited his father’s office, he would write stock prices and keep track of them on an office blackboard. He developed his interest in stocks and investing here, but it wasn’t until he visited the New York Stock Exchange when he was eleven that he realized his calling.
From the money he had made from his various entrepreneurial pursuits, young Warren bought his first shares of stock – three shares of Cities Service Preferred each for himself and his sister Doris at $38 per share. He was dismayed but unbowed when the stock plummeted to $27, and he held on stubbornly until the shares reached $40, at which point he sold them for a small profit. When the stock later skyrocketed to almost $200 a share, he had learned his first lesson in investing – patience.
Throughout middle school and high school, young Warren ran a myriad of small businesses, making tidy profits from them all. In 1942, his father was elected to the U.S. Congress, so the Buffett family moved to Washington, DC. By the next year, when he was 13, Buffett was making hundreds of dollars a month running a newspaper-delivery business, selling horseracing tip sheets, and more.
In 1944, he filed his first tax return, claiming $35 in deductions for using his bike and watch while working. A year later, he owned several pinball machines in three different area barbershops, which he later sold for $1,200. He even bought a 40-acre farm for $1,200 while still in high school.
Buffett’s Turning Point
Warren Buffett never planned to attend college. He was making a lot of money through his various enterprises, and he wanted to focus on expanding them. However, his father insisted he go to college, so Warren went to the University of Pennsylvania but only stayed two years before transferring to the University of Nebraska, where he graduated with a Business Administration degree. Later, Warren decided to go to graduate school, but, amazingly, he was rejected by Harvard Business School, so he took his genius to Columbia Business School and graduated with a Master’s degree in economics.
Harvard’s loss was not only Columbia’s gain but also Buffett’s, for his idol Ben Graham taught there. Graham had gained widespread acclaim for his unique investing approach and for his successful investment in a Rockefeller-managed oil transport company called Northern Pipe Line. He had also written a book published in 1949, The Intelligent Investor, that had influenced many, including Buffett, who unabashedly still refers to it as the best investing book ever written.
Instead of seeing investing as a game of chance, Graham looked for companies with stock shares so inexpensive, there was almost no risk. He created an investing principle that focused on a company’s intrinsic value, which measured a company’s true worth completely unassociated with its stock price. This allowed him to measure more objectively a company’s worth and invest accordingly.
The Start of an Empire
After Columbia, Warren Buffett returned to Omaha to work for his father, who had finished his stint as a Congressman and had resumed running his brokerage firm Buffett-Falk & Co. In April 1952, Warren married Susie Thompson, and as his family grew, Warren continued investing and working for his father while teaching night classes at the University of Omaha. He took the latter position only after forcing himself out of his comfort zone to attend a Dale Carnegie course on public speaking. This gave him the confidence to shake his phobia of speaking before large groups of people. Then, in 1954, he got the break he had been looking for – Ben Graham asked Warren to come work for him at the Graham-Newman Corp. The Buffetts were moving to New York City.
Although greatly influenced by Graham and Graham’s investing principle, it was while working as an analyst for Graham that Buffett began crafting his own investing philosophy. Graham insisted that stocks be evaluated not only for balance between their intrinsic value and their price but also for their risk (or lack thereof). While Buffett couldn’t deny the soundness of this strategy, he also thought it was so rigid that big winners with other appealing characteristics were being overlooked. Where Graham put emphasis on balance sheets and income statements, Buffett was more interested in a company’s leadership and management style.
After Graham retired in 1956, Warren Buffett and his family moved back to Omaha, where Buffett founded Buffett Partnership, Ltd. Utilizing all that he had learned under Graham, combined with his own twist on investing, Buffett began investing in undervalued companies, one of which you may have heard of – a textile company called Berkshire Hathaway. As Buffett continued accruing shares, he also became unhappy with how the company was being run. Thus, in 1965, once he had enough shares, Buffett took control and named a man he trusted, Ken Chace, as company president.
Five years later, Buffett became Berkshire Hathaway’s Chairman and started the now-famous tradition of writing annual letters to shareholders. The 1970s also was the decade of explosive growth for Berkshire Hathaway, which began diversifying its portfolio by acquiring interest in companies from other industries like media, oil, and insurance.
Continuing to utilize his finely-tuned investment strategies, both Buffett and Berkshire Hathaway exploded in growth and value. At the end of 1979, Berkshire Hathaway was trading at just over $1,300 per share; it had started the year at $775 a share.
By the time Buffett acquired a 25% interest in the newly formed Capital Cities/ABC in the mid 1980s, his reputation for turning companies around while also profiting wildly was well established. In fact, whenever word got out that Warren Buffett was buying stock in a company, it was enough to significantly drive up share prices.
The 1980s didn’t slow either the man or his company, even with the 1987 crash that saw Berkshire Hathaway lose a quarter of its market cap. Unfazed, Buffett began buying shares in Coca-Cola until he had acquired 7% of the company, worth just over $1 billion.
The “Demise” of Warren Buffett
Even though Buffett was worth hundreds of millions of dollars at the end of the 1980s, nearly all of it was tied up. Because he had never sold a single share he had bought, all the cash he had available came from his salary. Thus, he began investing for himself on the side. Although he was much more a gambler in his personal investments, it shouldn’t surprise you that his touch was just as golden. One of his most well-known, purely over-the-top speculative investments was in copper futures, from which he made a quick $3 million.
In May of 1990, Warren Buffett became a “paper billionaire” when Berkshire Hathaway’s shares reached nearly $7,200 each. As the decade headed toward the new millennium, shares topped out at $80,000 a pop. Yet, when Berkshire Hathaway experienced only a 0.5% increase per share in 1999 as the dot-com frenzy took the country by storm, rumors spread that Buffett had lost his magic.
However, Buffett had never relied on magic, just old-fashioned hard work and an adherence to proven principles. Even when Berkshire shares plunged to $45,000 each, the old master was unfazed. He continued following his principles while predicting the collapse of the technology bubble. When the bubble did indeed burst, the Berkshire stock recovered and, once again, Warren Buffett was feted for his investment acumen.
Even a health scare doesn’t stop Warren Buffett. Two years after turning 80 in 2010, Buffett was diagnosed with prostate cancer, for which he successfully underwent radiation treatment. Not long after he was cancer-free, in early 2013, Buffett continued expanding the Berkshire Hathaway charge by purchasing H.J. Heinz for $28 billion. Two years later, he added Kraft Food Groups, merging it with Heinz to form North America’s 3rd-largest food and beverage company. In 2016, used his influence and reach to launch a website called Drive2Vote, which encouraged his neighbors and fellow Nebraskans to get out and vote.
Buffett shows no signs of slowing down. He continues expanding Berkshire Hathaway and is always near or at the top of the Forbes annual list of world billionaires. To blow off steam, he loves to play bridge and attend football games of his beloved University of Nebraska when his schedule allows. With his folksy style, Midwestern pragmatism, and self-deprecating charm, is it any wonder he’s adored by millions the world over?
Turns out the “Oracle of Omaha” is not superhuman after all, just simply a brilliant, hard-working, and much-admired man.