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Warren Buffett
(2005)
Born	August 30, 1930 (1930-08-30) (age 78) Omaha, Nebraska, United States
Occupation	Chairman & CEO, Berkshire Hathaway
Salary	US$100,000
Net worth	US $62 billion (2008)[1]
Spouse(s)	Susan Buffett (1952–2004), Astrid Menks (2006-)[2]
Children	Susie Buffett, Howard Graham Buffett, Peter Buffett
Website www.berkshirehathaway.com

Warren Edward Buffett (born August 30, 1930, in Omaha, Nebraska) is an American investor, businessman and philanthropist. He is regarded as one of the world’s greatest investors and is the largest shareholder and CEO of Berkshire Hathaway.[3] With an estimated net worth of around US$62 billion,[4] he was ranked by Forbes as the richest person in the world as of February 11, 2008.[5]

Often called the “Oracle of Omaha,”[6] Buffett is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth.[7] His 2006 annual salary was about $100,000, which is small compared to senior executive remuneration in other comparable companies.[8] When he spent $9.7 million of Berkshire’s funds on a business jet in 1989, he jokingly named it “The Indefensible” because of his past criticisms of such purchases by other CEOs.[9] 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.[10]

Buffett is also a noted philanthropist. In 2006, he announced a plan to give away his fortune to charity, with 83% of it going to the Bill & Melinda Gates Foundation.[11] In 2007, he was listed among Time’s 100 Most Influential People in The World.[12] He also serves as a member of the board of trustees at Grinnell College.[13]

[edit] Early life and Benjamin Graham

Warren Buffett was born in Omaha, Nebraska on August 30, of 1930 from Howard and Leila (Stahl). As the son of a local stock broker, it is likely that he was exposed to markets at a young age. One of his influential mentors was Benjamin Graham. Graham’s philosophy had such an impact on Buffett that he enrolled in Columbia Business School to study directly under him. In Buffett’s own words: “I’m 15 percent Fisher and 85 percent Benjamin Graham.”[14] As Buffett would often say about Graham’s teachings: “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.”[15]

Public stances

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Buffett:

• repeatedly criticized the financial industry for what he considers to be a proliferation of advisers who add no value but are compensated based on the volume of business transactions which they facilitate. He has pointed to the growing volume of stock trades as evidence that an ever-greater proportion of investors’ gains are going to brokers and other middlemen.

• emphasized the non-productive aspect of gold in 1998 at Harvard: “It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” In 1977 Buffett was also quoted as saying about stocks, gold, farmland and inflation: “stocks are probably still the best of all the poor alternatives in an era of inflation - at least they are if you buy in at appropriate prices.”[16]

• stated that he only paid 19% of his income for 2006 ($48.1 million) in total federal taxes, while his employees paid 33% of theirs despite making much less money.[17]

• believes that the U.S. dollar will lose value in the long run. He views the United States’ expanding trade deficit as an alarming trend that will devalue the U.S. dollar and U.S. assets. As a result it is putting a larger portion of ownership of U.S. assets in the hands of foreigners. This induced Buffett to enter the foreign currency market for the first time in 2002. However, he substantially reduced his stake in 2005 as changing interest rates increased the costs of holding currency contracts. Buffett continues to be bearish on the dollar, and says he is looking to make acquisitions of companies which derive a substantial portion of their revenues from outside the United States. Buffett invested in PetroChina Company Limited and in a rare move, posted a commentary[18] on Berkshire Hathaway’s website why he would not divest from the company despite calls from some activists to do so. (He did, however, sell this stake, apparently for purely financial reasons.)

• believes that the world is nearing its maximum capacity of oil production, and that gradually depleted oil fields could reduce the amount produced.[19]

• believes government should not be in the business of gambling. He believes it is a tax on ignorance.[20]

Buffett’s speeches are known for mixing business discussions with humor. Each year, Buffett presides over Berkshire Hathaway’s annual shareholders’ meeting in the Qwest Center in Omaha, Nebraska, an event drawing over 20,000 visitors from both United States and abroad, giving it the nickname “Woodstock of Capitalism”.[21]

Berkshire’s annual reports and letters to shareholders, prepared by Buffett, frequently receive coverage by the financial media. Buffett’s writings are known for containing literary quotes ranging from the Bible to Mae West,[22] as well as Midwestern advice and numerous jokes. Various websites extol Buffett’s virtues while others decry Buffett’s business models or dismiss his investment advice and decisions.

Buffett also:

• favors the inheritance tax, saying that repealing it would be like “choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics“.[23] In 2007, Buffett testified before the Senate and urged them to preserve the estate tax so as to avoid a plutocracy. Some critics, including John Berlau writing in the August 23, 2004 issue of the National Review, have pointed out that Buffett (through Berkshire-Hathaway) has a commercial interest in the continuation of the estate tax, since it has benefited from the estate tax in past business dealings and is also involved in developing and marketing insurance policies which protect policy holders against future estate tax payments.[24]

• has been recognized as most responsible[citation needed] for FASB 123 (r), or Stock Option Expensing on the GAAP Income Statement. When asked about the subject at Berkshire Hathaway’s 2004 annual meeting, he compared the United States Congress and the Securities and Exchange Commission’s decision to override FASB, who wanted to consider company-issued stock-option compensation as an expense, to a bill proposed in the Indiana house for Pi to be changed from its real value of about 3.14159 to 4.

• has called the 2007—present downturn in the financial sector “poetic justice“.[25]

• was inducted into the Junior Achievement U.S. Business Hall of Fame in 1997.

Historical timeline

Education: Woodrow Wilson High School, Washington, D.C. in 1947[26] The Wharton School, University of Pennsylvania, 1947–1949 B.S. University of Nebraska, 1950 M.S. in Economics, Columbia University, in 1951. Employment: 1951–1954 Buffett-Falk & Co., Omaha - Investment Salesman 1954–1956 Graham-Newman Corp., New York - Securities Analyst 1956–1969 Buffett Partnership, Ltd., Omaha - General Partner 1970–Present Berkshire Hathaway Inc, Omaha - Chairman, CEO

1943: (13 years old)

• Buffett filed his first income tax return, deducting his bicycle as a work expense for $35.[27]

1945: (15 years old)

• In his senior year of high school, Buffett and a friend spent $25 to purchase a used pinball machine, which they placed in a barber shop. Within months, they owned three machines in different locations.

1949: (19 years old)

• In 1949, he was initiated into Alpha Sigma Phi Fraternity while an undergraduate at the Wharton School at the University of Pennsylvania. His father and uncles were also Alpha Sigma Phi brothers from the chapter at Nebraska, where Warren eventually transferred.

1950: (20 years old)

• Buffett applied for admission to Harvard Business School but was turned down.[28]

• Buffett enrolled at Columbia Business School after learning that Benjamin Graham and David Dodd, two well-known securities analysts, taught there.

1951: (21 years old)

• Buffett discovered Graham was on the Board of GEICO insurance at the time. After taking a train to Washington, D.C. on a Saturday, Buffett knocked on the door of GEICO’s headquarters until a janitor allowed him in. There, he met Lorimer Davidson, the Vice President, who was to become a lasting influence on him and life-long friend.[29] They talked for four hours about the insurance business. Davidson recalled that he found Buffett to be an “extraordinary man” after fifteen minutes.

• Buffett graduated from Columbia and wanted to work on Wall Street. Both his father and Ben Graham urged him not to. Buffett offered to work for Graham for free but Graham refused.[28] He purchased a Sinclair Texaco gas station as a side investment, but that venture did not work out as well as he had hoped. Meanwhile, he worked as a stockbroker. During that time, Buffett also took a Dale Carnegie public speaking course. Using what he learned, he felt confident enough to teach a night class at the University of Nebraska, “Investment Principles.” The average age of the students he taught was more than twice his own.

1952: (22 years old)

• Buffett married Susan Thompson.

1953: (23 years old)

• Susan had her first child, Susan Alice Buffett

1954: (24 years old)

• Benjamin Graham offered Buffett a job at his partnership with a starting salary of $12,000 a year. Here, he worked closely with Walter Schloss.

• Graham, who was a tough man to work for, was adamant that a stock provide a wide margin of safety after weighting the trade-off between its price and intrinsic value. Graham’s demand that a stock be worth more than its price made sense to Buffett, but it also made him question whether the criteria were too stringent, causing them to miss out on some big winners that had more qualitative values.[28]

• Susan had her second child, Howard Graham Buffett.

1956: (26 years old)

• Benjamin Graham retired and folded up his partnership.

• Buffett’s personal savings are now over $140,000.

• Buffett returned home to Omaha and created Buffett Partnership Ltd., an investment partnership.

“	I’ll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It’s addictive. And there’s fantastic brand loyalty.	”
—Warren Buffet[30][31], 1987

1957: (27 years old)

• Buffett had three partnerships operating the entire year.

• Buffett purchased a five-bedroom, stucco house on Farnam Street for $31,500.

1958: (28 years old)

• Susan had her third child, Peter Andrew Buffett

• Buffett had five partnerships operating the entire year.

1959: (29 years old)

• Buffett had six partnerships operating the entire year.

• Buffett was introduced to Charlie Munger.

1960: (30 years old)

• Buffett had seven partnerships operating the entire year.

• The partnerships were: Buffett Associates, Buffett Fund, Dacee, Emdee, Glenoff, Mo-Buff, and Underwood.

• Buffett asks one of his partners, a doctor, to find ten other doctors who will be willing to invest $10,000 each into his partnership. Eventually, eleven doctors agreed to invest.

1961: (31 years old)

• Buffett revealed that Sanborn Map Company accounted for 35% of the partnerships’ assets.

• Buffett explained that in 1958, Sanborn sold at $45 per share when the value of the Sanborn investment portfolio was $65 per share. This meant buyers valued Sanborn at “minus $20″ per share, and buyers were unwilling to pay more than 70 cents on the dollar for an investment portfolio with a map business thrown in for nothing.

• Buffett reveals that he earned a spot on the board of Sanborn.

1962: (32 years old)

• Buffett becomes a millionaire because Buffett’s partnerships, in January 1962, had in excess of $7,178,500 of which over $1,025,000 belonged to Buffett.

• Buffett merges all partnerships into one partnership.

• Buffett discovered a textile manufacturing firm, Berkshire Hathaway. Buffett’s partnerships began purchasing shares at $7.60 per share.

1965: (35 years old)

• When Buffett’s partnerships began aggressively purchasing Berkshire they paid $14.86 per share while the company had working capital (current assets minus current liabilities) of $19 per share, this did not include the value of fixed assets (factory and equipment).

• Buffett took control of Berkshire Hathaway at the board meeting and named a new President, Ken Chace, to run the company.

1966: (36 years old)

• Buffett closes the partnership to new money.

• Buffett wrote in his letter “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 Baltimore department store.

1967: (37 years old)

• Berkshire paid out its first and only dividend of 10 cents.

1969: (39 years old)

• Following his most successful year, Buffett liquidated the partnership and transferred their assets to his partners. Among the assets paid out were shares of Berkshire Hathaway.

1970: (40 years old)

• As chairman of Berkshire Hathaway, began writing his now-famous annual letters to shareholders.

1973: (43 years old)

• Berkshire began to acquire stock in the Washington Post Company. Buffett became close friends with Katharine Graham, who controlled the company and its flagship newspaper, and became a member of its board of directors.

1974: (44 years old)

• The SEC opens a formal investigation into Warren Buffett and one of Berkshire’s mergers. The reason was possible conflict of interest. Nothing ever came of it.

1977: (47 years old)

• Berkshire indirectly purchases the Buffalo Evening News for $32.5 million. Antitrust charges started.

1979: (49 years old)

• Berkshire began to acquire stock in ABC. With the stock trading at $290 per share, Buffett’s net worth neared $140 million. However, he lived solely on his salary of $50,000 per year.

• Berkshire began the year trading at $775 per share, and ended at $1,310. Buffett’s net worth reached $620 million, placing him on the Forbes 400 for the first time.

1988: (58 years old)

• 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 Berkshire’s most lucrative investments, and one which he still holds.

1990: (60 years old)

• Scandals involving Greenberg and Gutfreund appear.

1999: (69 years old)

• Buffett is named the top money manager of the 20th century in a survey by the Carson Group, ahead of Peter Lynch and John Templeton.[32]

2002: (72 years old)

• Buffett entered in $11 billion worth of forward contracts to deliver US dollars against other currencies. By April 2006, his total gain on these contracts was over $2 billion.

2004: (73 years old)

• His wife, Susan, passes away.

2006: (75 years old)

• Buffett announced in June that he would gradually give away 85% of his Berkshire holdings to five foundations in annual gifts of stock, starting in July 2006. The largest contribution will go to the Bill and Melinda Gates Foundation.[33]

2007: (76 Years old)

• In a letter to shareholders, Buffett announced that he was looking for a younger successor or perhaps successors to run his investment business.[34] Buffett had previously selected Lou Simpson, who runs investments at Geico, to fill that role. However, Simpson is only six years younger than Buffett.

2008: (77 Years old)

• Buffett becomes the richest man in the world according to Forbes,[35] dethroning Bill Gates, who held the title for thirteen years straight.

Personal life

Mr. Buffett married Susan Thompson in 1952. They had three children, Susie, Howard, and Peter. The couple began living separately in 1977, though they remained married until her death in July 2004. His daughter Susie lives in Omaha and does charitable work through the Susan A. Buffett Foundation and is a national board member of Girls, Inc.

In 2006, on his 76th birthday, he married his never-before-married longtime-companion, Astrid Menks, who was age 60 and had lived with him since his wife’s departure in 1977 to San Francisco.[36] Interestingly, it was Susan Buffett who arranged for the two to meet before she left Omaha to pursue her singing career. All three were close, and holiday cards to friends were signed “Warren, Susie and Astrid”[37]. Susan Buffett briefly discussed this relationship in an interview on the Charlie Rose Show shortly before her death, in a rare glimpse into Buffett’s personal life.[38]

Mr. Buffett and Ms. Menks formalized a relationship of more than 20 years in a brief civil ceremony at his daughter’s house in Omaha Wednesday afternoon.

The new Mrs. Buffett, 60, has been the constant companion to the 76-year-old financier, even as he remained married to his first wife, Susan T. Buffett, who died in 2004.

The first Mrs. Buffett, who had lived apart from her husband since the late 1970’s, knew and approved of the relationship with Ms. Menks.

“She has been with my father all these years for all the right reasons,” Mr. Buffett’s daughter, Susie Buffett, said in a telephone interview. “I’m so thankful. She loves him and takes care of him. If Warren didn’t have a cent, she’d be with him.”

Investors who thought Berkshire Hathaway shares might have been affected by Mr. Buffett’s domestic bliss saw hardly a blip in the price yesterday — up $296, or 0.3 percent, to close at $96,097.

The marriage is the second time this year that Mr. Buffett has made headlines. In June, he agreed to donate the vast bulk of his $40 billion personal fortune to foundations run by Bill and Melinda Gates, his children and one named for his late wife. Mr. Buffett said when announcing those plans that his health was excellent.

When together and out socially, Mr. Buffett, the older, wise-cracking businessman, seems proud to be with the former Ms. Menks, who is known for putting others at ease.

Mr. Buffett declined to comment, his assistant, Debbie Bosanek, said. Susie Buffett said her new stepmother also preferred not to comment. The wedding was reported yesterday in The Omaha World-Herald.

In many ways, Mr. Buffett has portrayed himself as the business world’s guardian of homespun values — decrying fat paychecks for executives, shunning technology stocks because he didn’t personally understand the businesses, and criticizing tax policies that encourage trading of stocks rather than the patient buy-and-hold approach he favors.

In his personal life, however, Mr. Buffett has been less conventional. His first wife, Susan, left the family home in Omaha in the late 1970’s, after raising the couple’s three children, and moved to San Francisco.

And she introduced a friend, Ms. Menks, to her husband and encouraged Ms. Menks to take care of Mr. Buffett.

The two women had become friends at an Omaha restaurant where Susan Buffett sang and Astrid Menks seated patrons.

“Unconventional is not a bad thing,” Susie Buffett said. “More people should have unconventional marriages.” She said her mother, who was also known as Susie, wanted to be known for who she was, especially as her father’s wealth and fame grew.

“She basically wanted a room of her own. They were very connected in a very deep way,” speaking frequently on the telephone and traveling together, Susie Buffett said. “They didn’t need to be in the same room.”

“Astrid and my mother were very close — really loved each other,” Susie Buffett said.

In an interview with Charlie Rose shortly before her death, the first Mrs. Buffett said of Ms. Menks’s relationship with her husband: “She takes great care of him, and he appreciates it and I appreciate it. She’s a wonderful person.”

Mr. Buffett and his new wife are both known for their frugality. He hunts for bargain stocks and lives simply for a man of his wealth. She often shopped in thrift stores for clothing, assembling fashionable outfits.

“They had a relationship that was so unusual, so fine, and so sophisticated — all three of those people,” said Cedric Hartman, an Omaha furniture maker and friend to the Buffetts for many years.

“We all got to know Astrid about the same time,” Mr. Hartman said. An immigrant from Latvia, “she appeared in town and you couldn’t miss her. She was smart, good-looking and had personal style — she would have been a standout anywhere.”

After she and Mr. Buffett became a couple, friends often received cards signed, “Warren, Susie and Astrid,” according to “Buffett: The Making of an American Capitalist” (Random House, 1995), a biography by Roger Lowenstein.

After his first wife’s death, Mr. Buffett changed his plans for his fortune. Initially, the bulk was to go to the foundation named for his late wife, which supports birth control efforts internationally. But watching the work of the Bill and Melinda Gates Foundation, he became convinced it could make better use of the bulk of his fortune.

He also began to think about marrying Ms. Menks, his daughter said. “He’s been talking about this for a while. It’s something he wanted to do.”

Last Saturday, Mr. Buffett and his daughter went to Borsheim’s Fine Jewelry in Omaha, which is owned by his conglomerate, Berkshire Hathaway, to pick out a ring.

Did Mr. Buffett get the employee discount? “I’m sure he did,” Susie Buffett said.

The bride didn’t see the ring until Wednesday afternoon’s ceremony. “It’s lovely,” Ms. Buffett said. “I think she’s thrilled with it.”

A local judge performed the 15-minute ceremony. The only witness besides Susie Buffett was the bride’s sister; Mr. Buffett’s two sons were out of the country. Afterward, Mr. and Mrs. Buffett, ever thrifty, took them to dinner at Bonefish Grill, a casual seafood restaurant.

He remains an avid player of the card game bridge, and has said that he spends 12 hours a week playing the game.[39] He often plays with Bill Gates and Paul Allen.

In 2006, he sponsored a bridge match for the Buffett Cup. In this event, modeled on the Ryder Cup in golf (and held immediately before it and in the same city), a team of twelve bridge players from the United States took on twelve Europeans.

In 2006, he auctioned his 2001 Lincoln Town Car[40] on eBay to raise money for Girls Inc.[41]

Warren Buffett is currently working with Christopher Webber on an animated series with DiC Entertainment chief Andy Heyward. According to information presented by Buffett at the Berkshire Hathaway annual meeting on May 6, 2006, the series will feature Buffett and Munger in roles and the series will teach children healthy financial habits for life. Cartoon drawings of Buffett and Munger were displayed throughout the events during the weekend and the special movie before the meeting began was in animation form by Heyward.

In December 2006 it was reported that Mr. Buffett does not carry a cell phone, does not have a computer at his desk, and drives his own car,[42] a Cadillac DTS.[43]

Buffett’s DNA report revealed that his paternal ancestors hail from northern Scandinavia, while his mother’s side most likely has roots in Iberia or Estonia.[44]

Philosophy

On Wealth

From a NY Times article: “I don’t believe in dynastic wealth,” [Warren Buffett] said, calling those who grow up in wealthy circumstances “members of the lucky sperm club.” Source: Greg Mankiw’s Blog, On Lucky Sperm, July 01, 2006

Buffett has written several times that his belief that in a market economy the rich earn outsized rewards for their talents. The following is taken from one of Buffett’s articles: “A market economy creates some lopsided payoffs to participants. The right endowment of vocal chords, anatomical structure, physical strength, or mental powers can produce enormous piles of claim checks (stocks, bonds, and other forms of capital) on future national output. Proper selection of ancestors similarly can result in lifetime supplies of such tickets upon birth. If zero real investment returns diverted a