The World’s Second Richest Man Warren Buffet

A brilliant investor and businessman, the “Sage of Omaha” Warren Buffet is second only to Microsoft’s Bill Gates in Forbes’ World’s Richest Men.  He has an estimated net worth of US$46 billion.  He blew people’s minds when he committed ten million Class B Berkshire Hathaway shares to the Bill and Melinda Gates Foundation.  This single act of very generous giving rendered America and the world speechless.  Only two thoughts entered the people’s minds:  he was either very generous or very stupid.  I prefer to believe the former.

Lean Buffet

After all, Warren Buffet was not known to be extravagant.  Though he may not have been living a Spartan’s existence, his lifestyle was one of the most frugal and the least hedonistic of his contemporaries and peers.  He only has two houses, one is a mansion in Laguna Beach and the other is a piece of property in Omaha, Nebraska which he bought in 1958; he still resides at this Omaha home.  Although he has a corporate jet that set him back around $7 million, this extravagant expenditure may have actually been brought on by mere economics and practicality rather than the desire to indulge.  In fact when he bought it, Warren Buffet was a bit sheepish for doing something he had long criticized his fellow CEOs for doing.

Moreover, would you believe that Warren Buffet’s annual salary as CEO of Berkshire Hathaway is only $100,000?  Heck, The Apprentice winners get a contract with annual compensation higher than that.  CEOs of companies like Berkshire Hathaway have annual salaries averaging at around $9 million.  By all intents and purposes, Warren Buffet is indeed one of a kind.

Buffet Elements

Warren Buffet studied at the Wharton School then transferred to the University of Nebraska.  He got his master’s degree in economics from the Columbia Business School. He was a devout follower of Benjamin Graham’s investment philosophies.

In 1956, Warren Buffet put theory to practice in his Buffet Associates, Ltd, a partnership venture where he invested $100 and got limited partners to invest $105,000.  He made other partnership ventures such as this one.  When he had several, he formed them into one entity known as the Buffet Partnership, Ltd which was eminently successful and gained enormous rates of return.

In 1962, his partnership company acquired stocks of the Berkshire Hathaway, a textile manufacturing company then in trouble.  He eventually made the decision to let go of Buffet Partnership, Ltd, and focused solely on making Berkshire Hathaway a going concern.  He did not stop at making the company profitable.  He diversified his investments by buying whole companies and investing in public stocks, mostly from the insurance companies.

Berkshire Hathaway had broken away from its mere textile company origins but a large holding company.  Now, he did not buy mere commodity stocks (or stocks sold by companies which did not have brand or an enduring competitive advantage).  Instead, he bought solid and quality businesses which had the highest potential for long-term success; these companies are those which have already made a name for themselves in their niche markets or have a high potential to become a distinct brand to reckon with.

At the end of it all, Warren Buffet is determined to leave his children only enough money to empower them to make their own lives successful.  He has resolved not to give his children so much that hey wouldn’t be able to do anything.