Encyclopedia of the Great Plains

David J. Wishart, Editor

Buffett, Warren (b. 1930)

Warren Edward Buffett, businessman and investor, was born August 30, 1930, in Omaha, Nebraska, to Howard Homan Buffett and Leila Stahl Buffett. He is the youngest of three children, with sisters Doris and Roberta. In 1952 he married Susan Thompson. They have three children, Susan, Howard, and Peter. In 2000 Buffett was the second wealthiest individual in the United States.

Buffett attended elementary school in Omaha, then junior high school and high school in Washington dc while his father served as a congressman from Nebraska. During this time, he became interested in business and pursued a variety of money-making ventures, including a newspaper route, a pinball machine business, a Rolls Royce rental business, and used golf ball sales. He also purchased forty acres of farmland for $1,200 in his home state, Nebraska. When he graduated from high school, Buffett had about $6,000 in savings.

In 1947 he enrolled in the Wharton School of Business at the University of Pennsylvania. After two years, he transferred to the University of Nebraska-Lincoln and graduated in 1950 with a degree in business. During his senior year, he read The Intelligent Investor by Benjamin Graham, a finance professor at Columbia University in New York. Having tried various investment strategies, Buffett became intrigued and enrolled in the graduate program at Columbia to study under Benjamin Graham. In 1951 he graduated with a master's degree and applied for a job at Graham-Newman, an investment firm. Graham turned him down, so Buffett returned to Omaha to work for his father's brokerage firm. In 1954 Graham offered Buffett a job that he accepted. Two years later, Graham-Newman closed, and Buffett again returned to Omaha. At that time, Buffett started his own investment company, the Buffett Partnership, with $100 of his own money and $105,000 contributed by seven limited partners.

In 1962 Buffett began investing in Berkshire Hathaway, a textile mill located in New Bedford, Massachusetts, gaining control of the firm in 1965. Instead of reinvesting money in textiles, Buffett used capital to invest in other companies. Disappointed with opportunities in the stock market, Buffett ended the partnership in 1969, suggesting to his partners that they either cash out, remain invested with Berkshire Hathaway, or invest in a fund managed by a classmate from Columbia, William Ruane. Buffett retained his shares in Berkshire Hathaway and is currently the chairman and chief executive officer. Berkshire Hathaway, no longer a textile company, is a holding company with investments in Coca-Cola, Gillette, the Washington Post, Disney, and other wellknown firms. It also owns the Nebraska Furniture Mart, Borsheim's jewelry store, See's Candies, geico insurance, Dairy Queen International, and several other businesses.

From 1955 to 1969 the partnership earned an astounding 29.5 percent annual compound rate of return. Since Buffett gained control of Berkshire Hathaway, the average annual gain in net worth is approximately 25 percent compared to the average percentage gain in the S&P 500 of approximately 13 percent. His personal wealth has grown from $9,800 at the time he left Columbia University to about $30 billion in 2000.

Benjamin Graham, Philip Fisher, and Buffett's current partner, Charlie Munger, have influenced Buffett's investment philosophy. Buffett learned from Graham quantitative techniques and the importance of margin of safety, which is the difference between the market value and the intrinsic value of a business. Fisher and Munger stress the importance of business economics and management. Buffett, who uses aspects of both quantitative and qualitative techniques, believes that an investor should understand the business, not worry about stock market volatility, and should buy when the market price is significantly less than the intrinsic value of the business.

Buffett achieves success with hard work, diligence, dedication, honesty, enthusiasm, and humility. These characteristics reflect the spirit and heritage of the Great Plains people. A native Nebraskan, Warren Edward Buffett has earned a place in history as one of the greatest investors of all time.

Thomas Johansen Fort Hays State University

Hagstrom, Robert G., Jr. The Warren Buffett Way. New York: John Wiley and Sons, 1995.

Kilpatrick, Andrew. Of Permanent Value: The Warren Buffett Story. Birmingham: AKPE, 1998.

Lowenstein, Roger. Buffett: The Making of an American Capitalist. New York: Doubleday, 1995.

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