Working World

Warren Buffet, 78, is considered probably the most successful investor in the world. He was also the richest person in the world during the first half of 2008 with $62 billion (Forbes), bumping Bill Gates out of a spot he had held for years. Then the economy soured, and Warren’s fortune plummeted to $37 billion in the first quarter of 2009, bringing him back to number two.

However, his day-to-day lifestyle will not be affected much, as he is known for his frugality and modest standard of living. His salary as CEO of Berkshire Hathaway is $100,000, a pittance for a position like that, and he still lives in the same house in Omaha that he bought for $31,500 in 1958 (although it has appreciated to a value of about $700,000).

At age 13, Warren had his first job as a newspaper delivery boy, and he was savvy enough to deduct the cost of his bicycle on his first tax return. At 20 he enrolled in Columbia Business School and studied under Benjamin Graham, a famous investment guru. After working a couple of years as a stockbroker, Warren accepted a position in Benjamin’s investment partnership for two years. In 1956, he returned home to Omaha with $140,000. He was only 26.  

Warren opened Buffett Partnership, Ltd., and by 1960 had seven operating partnerships, a wife and three children. By 1962, he was worth $1 million. His partnerships began purchasing the stock of a textile manufacturing firm called Berkshire Hathaway, and Warren was able to take over the company. Berkshire Hathaway began acquiring stock in other companies, initially media companies like The Washington Post, “Buffalo Evening News” and ABC. By 1979, at age 49, Warren was worth $620 million, earning him a spot on the Forbes 400.

Now, Berkshire Hathaway is a holding company invested in dozens of companies, including insurance, jewelry, furniture, apparel, and food and beverage companies, and it has noncontrolling stakes in others, including Coca-Cola.

Warren does not believe in inherited wealth, and he has pledged to give away 85 percent of his fortune, most of it to the Bill and Melinda Gates Foundation, which has already received millions of shares of Berkshire Hathaway stock. He told interviewer Charlie Rose that he wants his children to have “enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing.” He and his first wife Susan separated in 1977, but he remained married to her until her death in 2004. Then, at age 76, he married his long-time companion, Astrid Menks.

Nicknamed “The Oracle of Omaha” due to his knack for knowing how to invest in order to make money (lots of it), Warren’s investment philosophy is mostly inherited from Benjamin Graham. The basic unchanging principle, he explains, is “to look at stocks as business, use the market’s fluctuations to your advantage, and seek a margin of safety.”

In spite of having been an investor for more than 50 years, he said that during the current economic crisis, “people have changed their behavior like nothing I have ever seen.” His description of the state of the economy was that it “has fallen off a cliff,” but he remains optimistic. He wrote in his annual letter to investors and shareholders that even though the economy is “in shambles,” our system “has worked extraordinarily well over time,” and that the Standard & Poor’s index has risen 75 percent of the years since 1964. He “guesses” this pattern will hold true for the future, and Warren’s guesses are usually pretty good ones. He reminded them that our system has “unleashed human potential as no other system has, and it will continue to do so.” He remains convinced, despite the unprecedented events of the past year, that “America’s best days lie ahead.”    

Suzanne Ridgway is a freelance writer and regular columnist for Working World and Working Nurse magazines. She also writes grant proposals for nonprofit organizations.