The making of Warren Buffett

The man who “triumphed in the long game by practising a simpler, purer version of capitalism” is widely hailed as the world’s greatest living investor. How did he get to where he is today?

On the walls of Berkshire Hathaway’s offices, framed front pages from days of market panic, such as the 1929 crash, “serve as a reminder not to succumb to the passions of the moment”, says The New Yorker. Warren Buffett’s “ability to divorce himself from emotion” has always been part of his genius as an investor. And he hasn’t lost his head now. But he does seem to have lost his edge and is the first to admit it.

Asked last year which would be the better investment to put in a child’s account – a share in Berkshire Hathaway or a share in an S&P 500 tracker fund – Buffett didn’t hesitate, “I think the financial result would be very close to the same”. The statement, notes the FT, was made “without qualification”. Still, it’s hard not to wonder if Buffett, even at 89, is underplaying his ambitions. After all, he’s a PR genius too – “cultivating an aw-shucks, Midwest-wholesome image of a man who has triumphed in the long game by practising a simpler, purer version of capitalism”. 

A schoolboy out-earns his teachers

Buffett’s “plain-dealer persona” is integral to the Berkshire enterprise: “I buy expensive suits – they just look cheap on me”, is one of his famous quips. The business continues to occupy “a single floor in an unexceptional office tower in Omaha that bears another company’s name”. Buffett himself lives in “the same house he bought in the 1950s” and still works at the desk used by his father, a stockbroker turned Republican congressman. “Both Buffett and Berkshire are superficially unchanged.” Yet their investment formula has shifted considerably down the years. The man who warned in 2003 that derivatives were “weapons of mass destruction” made good use of them himself after the crisis. Indeed, until this latest blip, “the degree to which Buffett has outwitted successive generations of Wall Street rivals almost defies comprehension”.

Buffett’s financial career began officially at the age of 14 when he filed his first tax return having saved $1,000 from early ventures including a paper round, says The Observer. He had bought his first shares aged 11. Born in 1930, his early years were shaped by the Great Depression and “his corrosive relationship with his mother”, who all the children were terrified of. An unusual boy, “obsessed with numerical calculation and arcane research”, Buffett would “compare the lifespans of those who composed hymns” at church on Sundays, says The New York Times. By the time he finished high school his ventures had come to include pinball machines and he was earning “more money than his teachers”. 

The great investor learns how to live

A key turning point came when, on rejection by Harvard Business School, he went to Columbia instead. A professor there, Benjamin Graham, the so-called “father” of value investing, became Buffett’s mentor and role model, says The New Yorker. From Graham, Buffett – who put in a short stint on Wall Street before returning to Nebraska to marry and set up shop on his own – learned the idea of buying “cigar butts”: companies on their last legs, but so undervalued they’re worth “one last puff”. But it was his partnership with Charlie Munger – the pair first met in 1959 – that was “instrumental in moving Buffett from buying bad businesses at cheap prices to buying great businesses – most famously, Coca-Cola – for reasonable prices”, a move that was the foundation of his great fortune.

Buffett’s children later described him during those years as “the disengaged, silent presence, feet up in his stringy bathrobe, eyes fixed on The Wall Street Journal at the breakfast table”. Cerebral and inward-looking, he “attributes much of his later success to taking a Dale Carnegie public-speaking course as a young man”, says The New Yorker, and much of his “evolution as a person” to his late wife, Susan, who pushed him to give more of his money away during his lifetime. “Buffett was born to be great at investing. He had to work really hard to be good at living.” 

Recommended

Just how green is nuclear power?
Energy

Just how green is nuclear power?

Nuclear power is certainly very clean in terms of carbon emissions, but what about the radioactive waste produced as a byproduct? It’s not as much of …
22 Jan 2022
Why GSK should turn down Unilever’s billions
UK stockmarkets

Why GSK should turn down Unilever’s billions

Unilever has offered GSK £50bn for its consumer division. But while the cash will be a temptation, the deal is not in the interests of shareholders or…
22 Jan 2022
The charts that matter: the start of the big crash?
Global Economy

The charts that matter: the start of the big crash?

US tech stocks fell further this week, more than 10% down on their November high. There’s what happened to the charts that matter most to the global e…
22 Jan 2022
Cryptocurrency roundup: authorities tighten the screw
Bitcoin & crypto

Cryptocurrency roundup: authorities tighten the screw

Saloni Sardana looks at the cryptocurrency stories that caught our eye this week.
21 Jan 2022

Most Popular

Ask for a pay rise – everyone else is
Inflation

Ask for a pay rise – everyone else is

As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why yo…
17 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022
US inflation is at its highest since 1982. Why aren’t markets panicking?
Inflation

US inflation is at its highest since 1982. Why aren’t markets panicking?

US inflation is at 7% – the last time it was this high interest rates were at 14%. But instead of panicking, markets just shrugged. John Stepek explai…
13 Jan 2022