The Oracle of Omaha earned his reputation and his wealth over the long term, and has kept it the same way. Let’s look at some of the features of his long run.
Warren Buffett’s life and career is one of the most studied in business. But how much do you know of it, and how well can you relate to it? Let’s look at how Warren Buffett became one of the richest men in the world, and see if there are any lessons to be learned.
- He started early in life. Warren Buffett made his first bets early. He bought his first stock at age 11, got into real estate at 14.
- He had excellent teachers, both formal and informal. Buffett studied at Columbia Business School in New York, under ‘the father of value investing’, Benjamin Graham. It was Graham who laid the foundation for Buffett’s investing mindset, and gave him the tools to recognize the value in his future partner Charlie Munger’s view on investing. Informally, Munger’s “buy great companies at fair prices” strategy resonated with Buffett.
- Close partnerships with good people. Buffett’s partnership with Charlie Munger when they ran Berkshire Hathaway together is famous, as is the fact that they never argued. Did they disagree? Yes. They were quite open about their disagreements over Costco and Wells Fargo. However, they never let those disagreements dent their mutual respect for each other.
- Focus beyond the numbers. One way in which Buffett went beyond Graham’s value investing ethos was to look at the way a perspective purchase was being run. Factors that were not on the spreadsheet took on greater importance. Management and product featured greatly in these assessments.
- Buying the cash generators. Buffett’s investments, especially as Berkshire Hathaway was growing, often had a specific feature: they generated a pool of cash that could be invested elsewhere. Insurance companies are one example of that. Keeping the cash flow coming in made further investments possible.
What about Warren Buffett’s philanthropy? He is now as famous for how much he has given away and for his connection with the Bill and Melinda Gates Foundation as he is for his ability to earn money. However, in this article, we have wanted to focus on how he became one of the world’s richest men, and not what he did once that happened. There’s a lot to cover when it comes to Warren Buffett’s philanthropy, so we’ll focus on that separately!
