Warren Buffet

Written by Claire Fournier

Biographical Highlights

Guided by deep-rooted Midwestern family values, Warren Edward Buffett possessed a brilliant business mind evident from a very young age. Known for his keen ability to invest in profitable companies, Buffett has become one of the world’s wealthiest individuals and most generous philanthropists. Buffett built his company Berkshire Hathaway, where he serves as CEO today, to be one of the most highly respected global investment conglomerates. In 2006, Buffett publicly joined Bill and Melinda Gates in creating the Giving Pledge, urging other billionaires to give away at least half of their net worth to philanthropic causes.

Historic Roots

Warren Edward Buffett was born in Omaha, Nebraska on August 30, 1930. He was the only boy of 3 children born to Howard Buffet and Leila Stahl Buffet. Howard was a stockbroker exposing a highly interested Warren to the principles of making money at a very young age. His mother Leila was a homemaker, raising her three children. Young Warren made his first investment in Citi Service Preferred stock at age 11. (Schroder, p. 61). Intrigued by making money (and possibly a desire to get out of the house), by age 13 he was running his first business with a robust paper route. Buffet filed his first tax return in 1944 at age 14. Working hard and using money wisely was part of Buffett’s character, inheriting his father’s “scruples and concern for society” (Lowenstein p. 27).

Howard Buffett demonstrated his commitment to public service, when he moved the family to Fredericksburg, Virginia after winning a Congressional seat in 1942. He met a lifelong friend there and together started a business placing pinball machines in barbershops, splitting profits with the barber. Warren graduated sixteenth out of 350 in his graduation class, putting “future stockholder” under his picture in the yearbook (Schroder, P. 102). His preference would have been to go directly into the business world but Warren adhered to his father’s wishes and enrolled at age 16 at the University of Pennsylvania.

Warren was academically advanced though socially awkward and younger than most other students. He only endured two years at Penn before transferring home to the University of Nebraska. He graduated from Nebraska with a business degree at age 19. Turned down by the Harvard Business School, Buffett attended Columbia Business School. At Columbia, Buffett studied under Benjamin Graham, securities dean and author of the 1949 book Intelligent Investor, (Lowenstein p. 37). This mentor/student relationship would lay the foundation for Buffett’s investment strategy and future business success.

After graduating from Columbia with a Master’s Degree in Economics in 1951, Buffett sold securities for three years before he joined mentor Benjamin Graham’s firm Graham-Newman Corporation. In 1952, Buffett married his hometown sweetheart Susan (Susie) Thompson and they had three children, Susie Jr., Howard (Howie) and Peter. In 1956, he left Graham-Newman and formed Buffett Partnerships Ltd. back in Omaha. Buffett utilized Graham’s investing principles of buying undervalued companies based on a long-term investment approach. He took over controlling interest of Omaha’s Berkshire Hathaway in 1965. Buffet began building an empire investing in media, insurance, energy, beverage and food. Today Buffett is respected not only for being the #3 ranking wealthiest individual in the world, (Forbes 2016) but heralded as one of the greatest philanthropists of modern time.

Importance

In times when Wall Street has become synonymous with short term thinking and lack of integrity, Warren Buffet’s image as a well-respected investor and generous philanthropist provides an ethical example for generations to come. His Midwestern values and commitment to patience in the market, coupled with his brilliant business sense, led to wealth beyond his small-town Omaha beginnings. Warren Buffet found a way to ethically profit from big business while remaining true to his small-town values and integrity. Buffet’s frugality is well known, still living in the Omaha home purchased by he and his late wife Susie for $31,500 in 1958 (Forbes 2016).

Buffett’s current wealth is estimated at approximately $64.6 billion USD (Forbes 2016). He acknowledges that wealth does not necessarily make you happier and has committed to leave 99% of his wealth to future generations. One of his philanthropic philosophy that he and older sister Doris share is the belief “many people get the short straws in life, and they wanted to help” (Christian Science Monitor 2014). His wealth will be gifted to his family foundations and to the Bill and Melinda Gates Foundation. By joining forces with Bill and Melinda Gates, as of 2016 over 154 billionaires from around the world have taken the Giving Pledge to give away most of their wealth (Forbes 2006).

Ties to the Philanthropic Sector

Warren Buffet has committed to give away most his massive wealth during his lifetime. He supports both small, one-time individual requests administered by his sister Doris’s Sunshine Lady Foundation (Christian Science Monitor 2014). In 2006, he announced a multiyear plan to give away 85% of his Berkshire Hathaway shares amounting to $2.9 billion in 2016 (Forbes, July 14, 2016) to the Bill and Melinda Gates Foundation. Approximately 83% of his wealth will go to the Gates Foundation and rest to the foundations of his children. Funding areas include education, health and economic development, nuclear threats, children and community services.  

In 2006, a New York Times headline read: Buffett to Give Bulk of His Fortune to Charity. Buffett’s donation was described as, “a singular and historic act of charitable giving that vaults him into the top tier of industrialists and entrepreneurs like Andrew Carnegie, John D. Rockefeller Sr., Henry Ford, J. Paul Getty, W.K. Kellogg and Mr. Gates himself, all men whose fortunes have endowed some of the world’s richest private foundations.” Yet Buffett “is a very hands off philanthropist, preferring to entrust his wealth to those he knows will spend it wisely on worthwhile philanthropic causes” (Inside Philanthropy 2016). As one of the great philanthropist of the Twenty First Century, Buffet authored My Philanthropic Pledge, part of the Giving Pledge with advice for generations to come:

• “Too often, a vast collection of possessions ends up possessing its owner. The asset I most value, aside from health, is interesting, diverse, and longstanding friends.” (The Giving Pledge)
• “The reaction of my family and me to our extraordinary good fortune is not guilt, but rather gratitude. Keep all we can conceivably need and distribute the rest to society, for its needs. My pledge starts us down that course”. (The Giving Pledge)

Warren Buffett quotes about financial investing and investing in one’s character (Lowenstein and Schroder) include:

• “Price is what you pay. Value is what you get.”
• “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently”. As told to his son Howard (known as Howie) as a child.
• “The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long term values”.
• “I learned that it pays to hang around with people better than you are, because you float upward a little bit. And if you hang around with people that behave worse than you, soon you’ll start sliding down the pole. It just works that way.”

Key Related Ideas

• Bill and Melinda Gates Foundation- largest private foundation in the world where Buffett serves as a trustee.
• The Giving Pledge -inspired by Bill and Melinda Gates Foundation, the Giving Pledge encourages billionaire’s globally to give at least half of their net worth to charity.
• Berkshire Hathaway -Warren Buffett’s company where he serves as Founder and CEO.
• Oracle of Omaha- nickname of Warren Buffett based on his keen ability to identify undervalued companies resulting in significant growth in value.
• My Philanthropic Pledge – an essay written upon his commitment to The Giving Pledge, explaining his thoughts on leaving most of his wealth, through Berkshire Hathaway stock, to the Bill and Melinda Gates Foundation.
   

Important People and Non-Profit Organizations Related to the Topic

• Doris Buffet: Warren’s older sister, founder and hands on administrator of The Sunshine Lady Foundation Inc. She has given away over $100 million of her own money since inheriting it in 1996. http://www.sunshinelady.org
• Howard (Howie) G. Buffet: Warren’s oldest son and founder of the Howard G. Buffett Foundation - a private family foundation working to improve the standard of living and quality of life for the world's most impoverished and marginalized populations. www.thehowardgbuffettfoundation.org
• Peter and Jennifer Buffet: Warren’s son and his wife who founded the NoVo Foundation fighting violence against women and girls and gender equality. www.http://novofoundation.org
• Susan Thompson Buffett: Warren Buffett’s late wife, and name of scholarship awards given to first-time, entering freshmen who are residents of Nebraska and graduates of a Nebraska high school. buffettscholarships.org
• Susan (Susie) Buffet Jr.: Warren’s daughter, founder of the Sherwood Foundation who supports non-profits in Omaha and funds early childhood initiatives nationally. www.sherwoodfoundation.org
• Bill and Melinda Gates: Founders of the Bill and Melinda Gates Foundation who along with Warren Buffet continue to urge billionaires globally to take the Giving Pledge, committing to give away at least half of their net worth. www.givingpledge.org
• Benjamin Graham: Columbia Business School professor, mentor and lifelong friend of Warren Buffet whose investing advice had a profound impact on Buffett’s successful business career.www.investopedia.com/articles/07/ben_graham.asp

Reflection Question - If you were one the richest people in the world, would you commit to give away 99% of your wealth to help others? How much money is enough to make you happy?

Bibliography and Internet Sources 

• Christian Science Monitor, May 27, 2014, http://www.csmonitor.com/Business/Latest-News-Wires/2014/0527/Doris-Buffett-works-one-on-one-to-help-with-billionaire-brother-s-charity
• CNN Money. 8/30/12: Warren Buffet Celebrated his 83rd birthday – Gives $2.5 billion to each of his 3 children’s foundations. http://money.cnn.com/2012/08/30/news/companies/buffett-donation
• Forbes. 11/9/2008. Warren Buffet, “You Pay a Very High Price in the Stock Marketing for a Cheery Consensus”, 08/11/08/buffett-forbes-article-markets-cx_pm-1107stocks.html
• Forbes, July 14, 2016, http://www.forbes.com/sites/chasewithorn/2016/07/14/warren-buffett-just-donated-nearly-2-9-billion-to-charity/#13e947c25489
• Forbes 2016 Billionaire Ranking http://www.forbes, 10/25/16
• The Giving Pledge. Org https://givingpledge.org/Content/media/My%20Philanthropic%20Pledge.pdfInside Philanthropy, January 22, 2016, Focus on Wall Street Donors. http://www.insidephilanthropy.com/wall-street-donors/warren-buffett.html
• Lowenstein, Roger. Buffett, The Making of an American Capitalist. Random House, 2008.
• New York Times, 6/26/2006 “Buffett to Give Bulk of His Fortune to Gates Charity”.https://www.nytimes.com/2006/06/26/business/26buffett.html?_r=0
• Schroeder, Alice. The Snowball: Warren Buffett and the Business of Life. Bantam Books, 2008.
• Warren Buffet: My Giving Pledge. https://givingpledge.org/Content/media/My%20Philanthropic%20Pledge.pdf

This paper was developed by students taking a Philanthropic Studies course taught at the Lilly Family School of Philanthropy at Indiana University in 2017. It is offered by Learning To Give and the Center on Philanthropy at Indiana University.