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How Warren Buffett made his billions and became the ‘Oracle of Omaha’
Berkshire Hathaway chairman and CEO Warren Buffett
Rick Wilking | Reuters
Warren Buffett is celebrating his 90th birthday on Sunday.
The longtime chairman of Berkshire Hathaway and investing icon is still going strong with a career that’s stretching toward seven decades. Buffett’s sustained market success has earned him the moniker “The Oracle of Omaha” and a cult following of want-to-be financial savants hoping to soak up some of the investing acumen that’s earned Buffett a net worth of more than $80 billion and made the nonagenarian one of the world’s wealthiest individuals.
While Buffett is famously frugal — he eats at McDonald’s for breakfast every day (spending no more than $3.17 each time) and he still lives in the same Omaha home he bought for just $31,500 in 1958 — he’s also been practicing at the art of turning a profit for the vast majority of his long life, which helps account for his massive fortune.
From childhood side-hustles and stock purchases to studying under investing gurus before launching his own investment firm more than 60 years ago, Buffett has spent his life fine-tuning his conservative approach to investing that favors long-term value over short-term gains.
Here’s a timeline of how Warren Buffett went from buying his first stock as a kid to becoming an investing icon:
— 1930, born in Omaha, Nebraska. Buffett is the second of three children born to Howard and Leila Buffett. Buffett’s father, Howard, was an investment broker and a four-term Republican congressman, who moved the family to Washington, D.C. in 1943.
— 1942, first stock purchase: When he was 11 years old, Buffett kicked off a lifetime of investing by making his first stock purchase. The future billionaire bought three shares of oil company Cities Service at about $38 per share. Buffett eventually sold the stock at $40, making a profit of $2 per share, but he learned an important lesson about patience when the price later shot up to $200 per share.
Now, Buffett’s advice to investors is “don’t watch the market closely.”
“The money is made in investments by investing,” Buffett said in 2016, “and by owning good companies for long periods of time. If they buy good companies, buy them over time, they’re going to do fine 10, 20, 30 years from now.”
— Childhood hustles: Long before he was the “Oracle of Omaha,” Buffett was a business-savvy kid looking to get a head start on amassing an impressive net worth. When he was only 6 years old, Buffett sold chewing gum to people in his neighborhood — Juicy Fruit, Spearmint and Doublemint cost a nickel per pack of five sticks — and even sold bottles of Coca-Cola door to door in the summer.
After his family moved to Washington, D.C., a 13-year-old Buffett took a job delivering The Washington Post. Waking up at 4:30 a.m. every morning, Buffett also sold new magazine subscriptions on the side and challenged himself to look for ways to make his deliveries faster than he had before. After making $2,000 delivering newspapers by the age of 15, Buffett invested $1,200 in a 40-acre Nebraska farm.
Buffett, on right, and his two sisters standing outside their childhood home.
Source: Warren Buffett
Other ways Buffett made money through his teenage years included selling stamps and used golf balls, and he partnered with a friend on a business venture where they bought pinball machines, placed them in local barbershops, and “built a small empire out of it,” Buffett said in 2018.
Buffett’s entrepreneurial childhood earned him about $5,000 in savings (the equivalent of about $53,000 today) before he’d turned 20.
— Education: Despite the Buffett’s wish to skip college so he could immediately start his business career (Buffett’s father insisted he continue his education), Buffett enrolled at the University of Pennsylvania’s Wharton business school at the age of 16. He would eventually transfer and graduate from the University of Nebraska in 1950. Buffett then attended the Columbia Business School in New York to work toward a Master’s degree in Economics and to study under famed investor Benjamin Graham, who touted the strategy of value investing (seeking out long-term upside in potentially undervalued investments) that greatly influenced the young Buffett’s investment philosophy.
— 1956, first company: After working for the investment firm of his mentor, Graham, for two years in New York, Buffett returned to Omaha and started his own investment company, called Buffett Partnership. Buffett started the company with $100 of his own money and roughly $105,000 in total from seven investing partners who included his sister, Doris, and his Aunt Alice, as well as his father-in-law.
— 1962, first million: Buffett continued forming additional partnerships with investors throughout the early 1960s. By 1962, he’s grown his investors’ assets to a total of $7.2 million, with his own stake worth over $1 million (including his fees for the partnerships’ gains).
— 1965, Berkshire Hathaway: Buffett first invested in Berkshire Hathaway, then a New England textile manufacturing firm, in 1962 and became the company’s largest shareholder within a year. In 1965, Buffett’s partnerships took full control of Berkshire Hathaway and Buffett named a new president of the company while assuming the role of chairman himself.
After Buffett liquidated his investment partnership in 1969, he spent several years trying to prop up Berkshire’s struggling textile business. However, he eventually turned his attention to investing in insurance businesses (buying National Indemnity Company in 1967 and investing $4 million in GEICO in 1976) and Berkshire’s textile operations were all shut down by 1985.
Despite Berkshire Hathaway becoming the holding company for Buffett’s eventual billions, in 2010 the famed investor called the business the “dumbest” stock he ever bought, as he estimated he ultimately cost himself up to $200 billion by trying to succeed in the textile industry instead of turning sooner to insurance.
— 1978, Munger joins Berkshire: After nearly two decades of friendship, Buffett finally convinced his longtime friend, Charlie Munger, to join Berkshire Hathaway as vice chairman.
Charles Munger, vice chairman of Berkshire Hathaway Inc., left, and Warren Buffett, chairman of Berkshire Hathaway Inc., attend a BYD Co. press event in China, on Monday, Sept. 27, 2010.
Nelson Ching | Getty Images
In 1959, a mutual friend had introduced Buffett to Munger, then a real estate attorney — and, the two men hit it off immediately.
“We went to dinner and in five minutes, Charlie was rolling on the floor laughing at his own jokes — and I do the same thing,” Buffett told CNBC in 2018. “We knew we were sort of made for each other.”
They remained friends as Munger opened his own investment partnership in the 1960s, with Buffett convincing his friend that his law practice “didn’t use his full talents,” Buffett told CNBC. The two friends have now worked side-by-side for over 40 years.
Portrait of Warren Buffett, January 1980.
Lee Balterman | The LIFE Images Collection | Getty Images
— 1983, $1,000 and Forbes: Berkshire Hathaway’s stock hit $1,000-per-share milestone in 1983 after Buffett spent the 1970s making a string of successful investments in stocks such as the Washington Post Company, GEICO, ABC Broadcasting, and RJ Reynolds. A year earlier, Buffett appeared in the debut issue of the Forbes 400, with an estimated net worth of $250 million. By 1983, that number had jumped to $620 million.
— 1985, billionaire status: In 1985, Forbes estimated Buffett’s net worth at $1 billion.
Warren Buffett, CEO of Berkshire Hathaway, with wife Susan and daughter Susan at the Berkshire Hathaway shareholders meeting in 1997.
Mark Peterson | Getty Images
— 2006-2010, philanthropy: By 2006, Buffett had grown Berkshire Hathaway into a behemoth with stock worth over $100,000 per share, while the investor’s own net worth had grown exponentially to top $40 billion. That same year, Buffett first pledged to gradually give away 85% of his fortune over the remainder of his life to charity, primarily to the Bill & Melinda Gates Foundation.
In 2010, Buffett and Microsoft co-founder Bill Gates launched the Giving Pledge campaign and began recruiting fellow billionaires to pledge to give at least half of their net worth to philanthropic causes. As of 2019, over 200 people have joined the campaign, with more than $500 billion pledged to the cause in total.
— 2020: Despite donating roughly $37 billion to charity since 2006, Buffett’s net worth continues to swell overall, topping $81 billion today to make him the world’s sixth-wealthiest person, according to Bloomberg. Meanwhile, Berkshire Hathaway’s stock is currently valued above $320,000 per share (with a market value over $500 billion), as the company’s portfolio represent a cross-section of the U.S. economy and include some of the world’s most high-profile companies, including Amazon, Apple, American Airlines, American Express, Coca-Cola, Procter & Gamble and General Motors.
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