Happy Fourth of July!Â While the rest of the country celebrates with the customary barbeques, fireworks and road trips, I thought a fitting way to celebrate America would be to learn about one of its greatest businessmen, investors, and now philanthropists, Warren Buffett.Â Buffett, the world’s 2nd-richest man behind Bill Gates, just announced he’d be giving away most of his $44 billion dollar fortune to the Bill and Melinda Gates Foundation.Â This single act of charity has made Buffett the greatest philanthropist ever - the gifts of famous givers of the past like Carnegie and Rockefeller, adjusted for inflation, don’t even come close.Â What better way to celebrate independence than by learning how a great man achieved his own financial independence?
Warren E. Buffett, b. 1930, investor, businessman, philanthropist, Berkshire Hathaway Inc.
- Born to a stockbroker-turned-Congressman father.
- Started making money at age 6 by reselling bottles of Coke.
- Bought his first stock at age 11 for $38/share and sold at $40/share, only to watch it rise to $200/share.Â The experience taught him to be patient with investing.
- Earned a Masters in Economics from Columbia Business School under the mentorship of Benjamin Graham, a.k.a. the "Dean of Wall Street" and author of The Intelligent Investor
- Started his first investment partnership, Buffett Associates Ltd., in 1956.Â As general partner he contributed $100, and had seven limited partners who contributed $105,000.Â Over the next 13 years he achieved 30% year-over-year gains, compared to ~10% for the general market.Â Buffett’s investment strategies focused on finding undervalued companies and purchasing significant holdings large enough to effect change in the companies.
- Continually adding on new investment partners, Buffett merged all his parnerships into Buffet Partnerships, Ltd and moved the operations to New York.Â Buffett found a textile manufacturing firm, Berkshire Hathaway, and aggressively purchased every available share to gain a controlling stake.
- Buffett liquidated his other investments except for Berkshire Hathaway, where he used the small textile profits to transform the company into a holding company focusing on insurance and banking.Â By 1970, textile profits were $45,000, while insurance and banking brought in $4.7 million.Â
- Through savvy investment and management decisions, Buffett has grown the share price of Berkshire Hathaway from $8/share in 1962 to $91,600/share today.Â Berkshire stands as one of only seven companies to have Moody’s Aaa credit rating, the highest possible.
- Known as the "Oracle of Omaha", Buffett’s annual reports and shareholder meetings are followed and analyzed with a near-religious fervor.
- Despite having such a large personal fortune, Buffett almost never sold any of his own Berkshire shares – he lived off his CEO’s salary of $100,000 per year.
- Buffett has never lived like a wealthy man – he lives in the same house he purchased in 1958, loves eating at Dairy Queen and drinks 15 cans of Coke each day.
- Though it generates billions in annual profits, Berkshire Hathaway only has 13 full-time employees.
- Though he is the public face of Berkshire, Buffett is quick to point out that much of his success is due to forming the right partnership with the right person – Charlie Munger.
- Buffett views his role primarily as a capital allocator – his job is to find the right companies to invest in, while giving the existing management full freedom to continue running their operations.
- Buffett and Munger believe strongly in choosing the right workers and giving them as much freedom as possible.Â They are famously hands-off and avoid doing anything that someone else could do better.
- "Risk comes from not knowing what you’re doing."
- "I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over."
- "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."
- "You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing."
- "It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently."
- Wikipedia: Warren Buffett
- About.com: Warren Buffett Biography
- AskMen.com: Warren Buffett
- Fortune.com: Warren Buffett gives away his fortune
The more I learned about Buffett, the more I came to admire him; not only for what he did, but how he did it.Â Here is a guy who’s achieved more financial success than anyone could ever hope for, and has managed to do so while maintaining a great reputation for humility, humor, fair play and strong morals.Â He’s become a hero for those who believe that being a decent person and being successful in business are not mutually exclusive, which happens to be something we’re trying to show as well. Â
It just so happens that today we’re also celebrating our Two-Bit Independence – it’s been 5 months to the day that we left our corporate jobs to start up this start-up!Â It’s amazing (and scary) how quickly time passes – we’ve gotten a ton of stuff done, but there’s still so much left to do.Â It’s been a fun and crazy ride, to say the least.Â The coming month is a particularly busy one and a bit of a make-or-break time for us – stay tuned for more on that.
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