MGT 301 - International Successful Businessman

He is called the "Oracle of Omaha" or the "Sage of Omaha" and is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth. Warren Edward Buffett was born on August 30, 1930 to his father Howard, a stockbroker-turned-Congressman. He was the only boy among three children, as he displayed an amazing aptitude for the world of business at a very early age with an amazing ability to calculate numbers off the top of his head. [1]

At only six years old, Buffett bought 6 packs of Coca Cola from his grandfather's grocery store for twenty five cents and resold each for a nickel, pocketing a five cent profit. While other children his age were playing hopscotch and jacks, Warren was making money. While still in high school, he brought up and worked on several bright ideas to make money. For example: delivering newspapers, selling golf balls and stamps, and detailing cars among them. He even purchased three shares of Cities Service at $38 a share for himself and his older sister. Although the stock fell to just over $27, he held his shares until they rebounded to $40. Unfortunately, he sold them just right before they climbed to $200. The experience taught him one of the basic lessons of investing: patience is a virtue. [2]

In 1947, at his age of 17, he graduated from High School and while he never intended to go to college. He had already made his first $5,000 as he was delivering newspapers. His father had other plans, however, and urged him to attend the Wharton Business School at the University of Pennsylvania. Buffett stayed two years, complaining that he knew more than his professors did. When Howard was defeated in the 1948 Congressional race, Warren returned home to Omaha and transferred to the University of Nebraska-Lincoln. Working full-time, he managed to graduate in only three years with a Bachelor of Science degree, and went on to be rejected by Harvard Business School because he was too young. He completed a master’s in economics at Columbia University where he met Ben Graham a lecturer and famed investor. [2]

Warren worked for his father who owed an investment banking company for the next three years during which he meet Susie Thompson and in 1952 they were married and had three children together. Warren didn’t have a lot of money at this point until he was asked by Ben Graham to join his company as a security analyst, which he did and by 1956 his fortune rose to $140,000. In 1956 at the age of twenty five, Warren started his own investment company, the Buffett Partnership, using a small amount of his own funds and collecting around $100,000 from partners and family he managed to increase his capitol to $300,000 by the year’s end. Berkshire Hathaway was eventually liquidated but the name was kept and turned into an investment business. Its main interest was with insurance, which added considerable cash flow for future investments. He liquidated the Buffett partnership in 1969, and spent the remainder of the year liquidating its portfolio. [3]

Through his simple yet profound investment principles, Ben Graham became an idyllic figure to the twenty-one year old Warren Buffett. Reading an old edition of Who's Who, Warren discovered his mentor was the Chairman of a small, unknown insurance company named GEICO. He hopped a train to Washington D.C. one Saturday morning to find the headquarters. When he got there, the doors were locked. Not to be stopped, Buffett relentlessly pounded on the door until a janitor came to open it for him. He asked if there was anyone in the building. As luck (or fate) would have it, there was. It turns out that there was a man still working on the sixth floor. Warren was escorted up to meet him and immediately began asking him questions about the company and its business practices; a conversation that stretched on for four hours. The man was none other than Lorimer Davidson, the Financial Vice President. The experience would be something that stayed with Buffett for the rest of his life. He eventually acquired the entire GEICO Company through his corporation, Berkshire Hathaway. [2]

In 1962, Buffett became a millionaire, because of his partnerships, which in January 1962 had an excess of $7,178,500, of which over $1,025,000 belonged to Buffett. Buffett merged all partnerships into one partnership. Buffett invested in and eventually took control of a textile manufacturing firm, Berkshire Hathaway. Buffett's partnerships began purchasing shares at $7.60 per share. In 1965, when Buffett's partnerships aggressively began purchasing Berkshire, they paid $14.86 per share while the company had working capital 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. In 1966, Buffett closed the partnership to new money. [1]

Buffett became a billionaire on paper when Berkshire Hathaway began selling class A shares on May 29, 1990, when the market closed at $7,175 a share. In 1998, he acquired General Re (Gen Re), (in a rare move, for stock). In 2002, Buffett became involved with Maurice R. Greenberg at AIG, with General Re providing reinsurance. On March 15, 2005, AIG's board forced Greenberg to resign from his post as Chairman and CEO under the shadow of criticism from Eliot Spitzer, former attorney general of the state of New York. On February 9, 2006, AIG and the New York State Attorney General's office agreed to a settlement in which AIG would pay a fine of $1.6 billion. In 2010, the federal government settled with Berkshire Hathaway for $92 million in return for the firm avoiding prosecution in an AIG fraud scheme, and undergoing 'corporate governance concessions'. [1]

In 2002, Buffett entered in $11 billion worth of forward contracts to deliver U.S. dollars against other currencies. By April 2006, his total gain on these contracts was over $2 billion. In 2006, Buffett announced in June that he gradually would give away 85% of his Berkshire holdings to five foundations in annual gifts of stock, starting in July 2006. The largest contribution would go to the Bill and Melinda Gates Foundation. In 2007, in a letter to shareholders, Buffett announced that he was looking for a younger successor, or perhaps successors, to run his investment business. Buffett had previously selected Lou Simpson, who runs investments at Geico, to fill that role. However, Simpson is only six years younger than Buffett. [1]








References:
[1] http://en.wikipedia.org/wiki/Warren_Buffett
[2] http://beginnersinvest.about.com/cs/warrenbuffett/a/aawarrenbio.htm
[3] http://www.investingvalue.com/investment-leaders/warren-buffett/index.htm
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Muhannad Alharbi