Warren Edward Buffett (born August 30, 1930 in Omaha, Nebraska, United States) is an American investor, businessman, and philanthropist. He is one of the world's most successful investors and the largest shareholder and CEO of Berkshire Hathaway. He is constantly ranked by Forbes as the second richest person in the world after Bill Gateswith an estimated net worth of approximately $37.0 billion.
Buffet is often called the "Oracle of Omaha" or the "Sage of Omaha"and is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth. His 2006 annual salary was about $100,000, which is small compared to senior executive remuneration in comparable companies. In 2007, he earned a total compensation of $175,000, which included a base salary of just $100,000. In 2008, he again earned a total compensation of just $175,000, which included a base salary of $100,000. He lives in the same house in the central Dundee neighborhood of Omaha that he bought in 1958 for $31,500, today valued at around $700,000 (although he also does have a $4 million home in Laguna Beach, California). When Buffett spent $9.7 million of
In 1999, Buffett was named the top money manager of the twentieth century in a survey by the Carson Group, ahead of Peter Lynch and John Templeton, and in 2007, he was listed among Time's 100 Most Influential People in the world.
Warren Buffett was born in
Buffett first enrolled at The Wharton School, University of Pennsylvania, (1947–1949) where he joined the Alpha Sigma Phi Fraternity. His father and uncles were Alpha Sigma Phi brothers from the chapter in
Buffett then enrolled at Columbia Business School after learning that Benjamin Graham, (the author of The Intelligent Investor), and David Dodd, two well-known securities analysts, taught there. He then received a M.S. in Economics, Columbia University, in 1951.
In Buffett’s own words:
The basic ideas of investing are to look at stocks as business, use the market's fluctuations to your advantage, and seek a margin of safety. That’s what Ben Graham taught us. A hundred years from now they will still be the cornerstones of investing.
Buffett was employed from 1951–1954 at Buffett-Falk & Co., Omaha as an Investment Salesman, from 1954–1956 at Graham-Newman Corp.,New York as a Securities Analyst, from 1956–1969 at Buffett Partnership, Ltd., Omaha as a General Partner and from 1970–Present atBerkshire Hathaway Inc, Omaha as its Chairman, CEO.
In 1951, Buffett discovered Graham was on the board of GEICO insurance. Taking a train to
Buffett returned to
In 1952 Buffett married Susan Thompson and the next year they had their first child, Susan Alice Buffett. In 1954, Buffett accepted a job atBenjamin Graham's partnership. His starting salary was $12,000 a year. Here, he worked closely with Walter Schloss. Graham was a tough man to work for. He was adamant that stocks provide a wide margin of safety after weighting the trade-off between their price and their intrinsic value. The argument made sense to Buffett but he questioned whether the criteria were too stringent and caused the company to miss out on big winners that had more qualitative values. This same year the Buffetts had their second child, Howard Graham Buffett. In 1956, Benjamin Graham retired and closed his partnership. At this time Buffett's personal savings were over $140,000 and he started Buffett Partnership Ltd., an investment partnership in
In 1957, Buffett had three partnerships operating the entire year. He purchased a five-bedroom stucco house in
In 1962, Buffett became a millionaire, because of Buffett's partnerships, which in January 1962, had in excess of $7,178,500, of which over $1,025,000 belonged to Buffett. Buffett merged all partnerships into one partnership. Buffett discovered a textile manufacturing firm, Berkshire Hathaway. Buffett's partnerships began purchasing shares at $7.60 per share. In 1965, when Buffett's partnerships aggressively began purchasing
unless it appears that circumstances have changed (under some conditions added capital would improve results) or unless new partners can bring some asset to the partnership other than simply capital, I intend to admit no additional partners to BPL.
In a second letter, Buffett announced his first investment in a private business — Hochschild, Kohn and Co, a privately owned
However, he lived solely on his salary of $50,000 per year, and his outside investment income. In 1979,
In 2006, Buffett announced in June that he gradually would give away 85% of his
In 2007, in a letter to shareholders, Buffett announced that he was looking for a younger successor, or perhaps successors, to run his investment business. Buffett had previously selected Lou Simpson, who runs investments at Geico, to fill that role. However, Simpson is only six years younger than Buffett.
In 2008, Buffett became the richest man in the world dethroning Bill Gates, worth $62 billion according to Forbes, and $58 billion according to Yahoo. Bill Gates had been number 1 on the Forbes list for 13 consecutive years.
In 1974, the SEC opened a formal investigation into Warren Buffett and
In 1987, Berkshire Hathaway purchased 12% stake in Salomon Inc., making it the largest shareholder and Buffett the director. In 1990, a scandal involving John Gutfreund (former CEO of Salomon Brothers) surfaced. A rogue trader, Paul Mozer, was submitting bids in excess of what was allowed by the Treasury rules. When this was discovered and brought to the attention of Gutfreund, he did not immediately suspend the rogue trader. Gutfreund left the company in August 1991. Buffett became CEO of Salomon until the crisis passed; on September 4 1991, he testified before Congress.
In 1988, Buffett began buying stock in Coca-Cola Company, eventually purchasing up to 7 percent of the company for $1.02 billion. It would turn out to be one of
In 1998, he acquired General Re, (in a rare move, for stock). In 2002, Buffett became involved with Maurice R. Greenberg at AIG, with General Re providing reinsurance. On March 15, 2005, AIG's board forced Greenberg to resign from his post as Chairman and CEO under the shadow of criticism from Eliot Spitzer, attorney general of the state of New York. On February 9, 2006, AIG and the New York State Attorney General's office agreed to a settlement in which AIG would pay a fine of $1.6 billion.
Late 2000s recession
Berkshire Hathaway acquired 10% perpetual preferred stock of Goldman Sachs at $123 only for it to fall to below $60. Furthermore some of Buffett's Index put options (European exercise at expiry only) that he wrote (sold) are currently running around $6.73 billion mark-to-market losses. The scale of the potential loss prompted the SEC to demand that
Buffett also helped Dow Chemical pay for its $18.8 billion takeover of Rohm & Haas. He thus became the single largest shareholder in the enlarged group with his Berkshire Hathaway, which provided $3 billion, underlining his instrumental role during the current crisis in debt and equity markets.
In October 2008, the media reported that Warren Buffett had agreed to buy General Electric (GE) preferred stock, when it was trading in the mid 20s of dollar. The operation included extra special incentives: he received an option to buy 3 billion GE at $22.25 in the next five years and also received a 10% dividend (callable within three years). However, shortly after, GE gave up tens of billions in market capitalization and just bounced off a low of $8.80 in February 23, 2009, a price that has not been seen in over a decade. GE's stock price continued to fall after that point, and by early March, for example, it had declined to an 18 year low. Events like these have prompted a wave of criticism against Berkshire Hathaway and Warren Buffett. In February 2009, Warren Buffett unloaded part of Procter & Gamble Co and Johnson & Johnson shares from his portfolio.
Some have claimed that there is a financial incentive for Berkshire Hathaway to keep the myth that Buffett is an “oracle” alive and that the company is dependent on the Warren Buffett myth: that exaggerated sense of comfort investors share when it comes to Buffett’s beliefs and recommendations. In addition to suggestions of mistiming, questions have been raised as to the wisdom in keeping some of