Warren Buffett (1930– ) financier

Warren Buffett was born in Omaha, Nebraska, on August 30, 1930, the son of a wealthy stockbroker. As a child he was allowed to work in his father’s firm, where he absorbed useful investment principles and also dreamed of acquiring great wealth. More important, Buffett acquired an acute grasp of statistics and financial analysis that served him well throughout his long career. He passed through the University of Nebraska in 1950 and was greatly influenced by reading the book Security Analysis (1934) by Benjamin Graham and David Dodd. That same year he enrolled at Columbia University’s business school to study under Graham and further inculcated his mentor’s strategy for success on the stock market. This entailed buying stocks at no more than two-thirds of net capital and usually traded at low prices because other investors were ignoring them. Buffett was so impressed by Graham’s approach that he offered to work at his investment firm without pay but was declined. He was eventually hired by Graham as an analyst in 1952, worked in New York City for four years, and then returned to Omaha in 1956. There, with $5,000 of his own money and $100,000 raised from other sources, he founded his own investment firm, the Buffett Partnership. At that time Buffett began formulating his own personal approach to investment, based on realistic appraisal of the companies in question and a determination to retain stock for as long as a firm was well managed. In time he also broke with Graham’s approach of looking for statistical bargains and sought out companies that were underrated for various reasons.

From the onset, Buffett proved himself to be one of the 20th century’s most brilliant investors. His success enabled him to purchase controlling stock in the failing American Express company in 1963 and, as interim CEO, he turned it around with tremendous profit. Two years later Buffett bought out Berkshire-Hathaway, a textile firm based in New Bedford, Massachusetts. This investment repeatedly failed to realize profits, but Buffett used it as a means for raising additional capital for investments elsewhere. As usual he was spectacularly successful, and in 1969 he dissolved the Buffett Partnership to concentrate more on building his own wealth. Over the next two decades Buffett carefully acquired profitable companies such as See’s Candies, various insurance companies, and numerous media outlets, all of which proved lucrative. By 1984 he was positioned to obtain controlling stock of the American Broadcasting Company (ABC) while also expanding his holdings in Time, Incorporated. The following year he orchestrated the takeover of ABC by Capital Cities and secured an 18-percent interest in the new company. In 1986 Buffett invested heavily in the Wall Street investment firm SALOMON BROTHERS, basically ignored the stock market crash of 1987, and reaped considerable profit by holding on to stock rather than selling it under adverse conditions. In 1995 Buffett fulfilled his most ambitious endeavor, that of arranging the acquisition of ABC by the Walt Disney Corporation. This resulted in formation of the world’s largest media conglomeration, again with windfall profits for Buffett.

Presently, Buffett is the country’s secondrichest man after Microsoft chairman Bill GATES. But for all his wealth and influence he consistently projects a simple, homespun persona and continues living modestly in a home he acquired in 1958 for $31,000. Buffett is also prone to dispensing folksy, down-to-earth advice to investors. His basic message is play the game for the long haul and ignore any notion of quick or easy profits. Investors are also advised to champion companies that are presently undervalued, yet are well managed, as these are most likely to return a steady profit on investments. He also looks unkindly upon venture capital firms as too unpredictable and feels that TV stations, advertising agencies, and newspapers are the best investment risks. Curiously, he declines to get involved with computers due to his unfamiliarity with high technology. The rumpled, down-toearth Buffett remains the chairman of Berkshire- Hathaway and is popularly viewed in investment circles as the “Sage of Omaha.”

Further reading

• Buffett, Warren E. Warren Buffett Speaks: Wit and Wisdom from the World’s Greatest Investor. New York: Wiley, 1997. 
• ———. Thoughts of Chairman Buffett: Thirty Years of Unconventional Wisdom from the Sage of Omaha. New York: Harper Business, 1998. 
• Kilpatrick, Andrew. Of Permanent Value: The Story of Warren Buffett. New York: McGraw-Hill, 1998. 
• Lowenstein, Roger. Buffett: The Making of an American Capitalist. New York: Random House, 1997. 

John C. Fredriksen