Warren E. Buffett

Written by Maqsood A. Rahim. Posted in Businessmen

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Published on November 16, 2009 with 11 Comments

Warren Edward Buffett
warren_buffet

Birth: 30th August 1930 in Omaha, Nebraska USA
Father: Howard Buffett
Marriage: Married Susan Thompson in 1952
Children: 3 children, Sussie, Howard and Peter
Education: Woodrow Wilson High School, Washington D.C. (1945). Wharton School, University of Pennsylvania (1947-49). Transferred to University of Nebraska (1950) and received a B.S. in Economics enrolled in Columbia Business School for an M.S. in Economics from Columbia University in 1951 (to benefit from Benjamin Graham, the teacher and author of book “The Intelligent Investor”).

Career

An American investor, business man and a Philanthropic.

Net Worth

Over US$ 60 Billion (2009)

Early Life

Warren Buffett started his business career in early life. He worked at his grandfather’s grocery shop. He was also a newspaper delivery boy and deducted $35 as his work expense for his cycle and watch, from his first tax return filed in 1943. Buffett and his friend purchased a used pinball machine for $25 and placed in barber’s shop. Soon they owned three such machines.

 sPhoto by trackrecord

He married Susan Thompson in 1952. They had 3 children. By the time the children matured this couple began to live separately from 1977. Susan wanted to pursue her singing career in San Francisco. At the age of 76 Buffett married his long time companion, Astrid Menks, 60 years old. His wife had herself introduced them before leaving.

He had purchased his small house for $31’500 in 1958 in the Central Dundee (now valued at $700’000) and still prefers to live there, although he has a $4 million house in Laguna Beach, California. He never preferred a lavish life nor was spendthrift. He was brought up a Presbyterian but seldom follows religious beliefs strictly. He does not have a desk computer nor carries a cell phone. He drives his car himself.

Business Career

Buffett was an Investment salesman at Buffett-Falk and Company, Omaha (1951-54)

He was securities analyst in Graham-Newman Corporation, New York (1956-59)

He was a General Partner in Buffett Partnership Limited, Omaha in 1970 and Chairman and CEO of Berkshire Hathaway Inc. Omaha-Till date.

Buffett Still remembers his teacher Ben Graham described stock market as “Consider stocks as business, take advantage of market fluctuations while keeping safety margins”

Buffett was a stock broker in Omaha at a starting salary of $12’000 a year, with Benjamin Graham Partnership that closed in 1956. Buffett initiated Buffett Partnership Limited, an investment company from his personal savings of around $170’000. By 1960 he was operating successfully eight partnerships-Buffet Associates, Buffet Fund, Dacee, Emdee, Glenoff, Mo-Buff, Underwood and Sanborn Map Company. In 1958 Sanborn shares book value was $65 against stock selling at $45.

His Wealth Glide

In 1962 Buffett’s partnerships worth put together was $7’178’000 that included his own $1’025’000. He merged all companies into one and invested most of it in a manufacturing firm Berkshire Hathaway Limited. He bought enough shares and took control at the board meeting and named his own new President, Ken Chace. In 1956 he discouraged new capitol unless the incoming partners brought new assets.

Berkshire paid its first and only dividend of 10 cents in 1967. Buffett liquidated his partnership in 1969 and transferred all assets to all partners. The success career continued. Berkshire share traded in early 1979 at $775 each and ended same year at $1310. Thus, raising his net worth to $620 million and Forbes placed him among the 400 richest persons in the world.
Buffett decided in 2006 to gradually gift 85% of his Berkshire Holding to 5 Charity Foundations with over 80% to Bill and Gates Foundations. He is also looking for his management successor.

Forbes declared Buffett as the world’s richest man in 2008 with net worth over $60 billion, breaking Bill Gates 13 years continued lead. However, Bill Gates re-gained the lead in 2009.

Business Acquisitions

  • 1973: Berkshire Hathaway acquired stock of Washington Post Company.
  • 1974: Berkshire Hathaway acquired WESCO.
  • 1979: Berkshire acquired stock in ABC and Capital City also bought $3.5 Billion stock in ABC. Warren helped finance the deal for 25% stake in combined company Capital City / ABC.
  • 1987: Berkshire bought Salomon Inc. 12% stock.
  • 1988: Buffett bought 7% stock in Coca Cola Company for dollars 1.02 Billion.
  • 1998: He acquired General Re, a Re-Insurance Company.
  • 2002: Buffett concluded $11 Billion Forward Contracts to provide $US against World Wide Currencies. In four years he gained $2 Billion.
  • 2008: Buffett agreed to buy General Electric preferred stock of $3 Billion at $22.25 per share in 5 years and receive 10% dividend in 3 years.
  • 2009: Warren invested over $2 Billion in Swiss Re to raise its equity. Most of the above acquisitions placed Buffett on their Board of Directors with major individual share holding.

Recession Since 2006

During the World wide recession Berkshire Hathaway suffered over 70% loss in earnings. His other investments also declined in profits. The assets devalued around $7 Billion. Buffett is still maintaining his all major holdings inspite of the allegations of mistiming and misplanning of deals. He believes in and practices “Buy America”.

Politics

Warren Buffett has political attachments and numerous contributions to his credit. This time he openly supported Barrack Obama in Presidential run and attended $28’500 a plate fund raiser. His own views differed widely from John McCain’s.

His Writings

He writes very adequate annual reports himself. His articles on various economic topics are very straight forward and hit the target. He described inflation as an indirect devastating tax that consumes capital. The end result is same with 15% tax deduction or 15% inflation without tax deduction. In an article for Fortune, he warns investors on unrealistic expectations.

Philanthropy

He does not feel any guilt on accumulation of wealth with him. It is the result of talent bestowed on him. He feels the indirect injustice for the deprived. He feels that his own policies may have affected some people adversely and terms it society’s numerous claim checks on him that ought to be returned to society by way of charity. He further cautions the “members of the Lucky Sperm Club” who, with zero real investment, inherit fortunes equal to many jackpots put together, are at risk to Divine intervention. He sums up his very positive intentions and feelings on inherited wealth saying “I want to give my kids just enough so that they would feel they could do anything, but not so much that they would feel like doing nothing”. He declared that all his surplus wealth is for charity.

Public Exposure and Response

Berkshire Hathaway’s annual 20’000 share holders meeting in Qwest Centre, Omaha, is nick named “wood stock for capitalism” and is a mixture of business and humor cum jokes. Some like Buffet’s style while others underrate his virtues and advices. He analyzed profit in tobacco business as excessive but pledged never to invest in it.

Buffett was pursuing 6 projects to produce electricity from coal near Salt Lake City. The local petitioners and citizens along with regional organizations approached him personally to consider and uphold the interest of the local population, their health, water contamination and so on. Buffett responded very positively and cancelled all six coal fired power plants.

On one occasion Buffett commented on non-productive aspect of Gold, saying “it is dug out of Earth, melted, transformed and again buried (stored) and people are paid to guard it. It has no utility. Anyone watching from Mars could be scratching his head.

Warren Buffett’ s advice for 2009

Hard work: All hard work brings a profit, but mere talk leads only to poverty.
Laziness: A sleeping lobster is carried away by the water current.

Earnings: Never depend on a single source of income. [At least make your Investments get you second earnings)
Spending: If you buy things you don’t need, you’ll soon sell things you need. (i particularly like this one! H.A.)

Savings: Don’t save what is left after spending; spend what is left after saving.

Borrowings: The borrower becomes the lender’s slave.

Accounting: It’s no use carrying an umbrella, if your shoes are leaking.

Auditing: Beware of little expenses; A small leak can sink a large ship.

Risk-taking: Never test the depth of the river with both feet. [Have an alternate plan ready]

Investment: Don’t put all your eggs in one basket .

I’m certain that those who have already been practicing these principles remain financially healthy. I’m equally confident that those who resolve to start practicing these principles will quickly regain their financial health.
Let us become wiser and lead a happy, healthy, prosperous and peaceful life.
“Warren Edward Buffett”

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