The makings of the world’s greatest investor
goddamnit>topitWarren Edward Buffett was conceived approximately one month after the Wall Street crash in 1929, to be born in Omaha, Nebraska in the United States on 30 August, 1930. His early childhood was deeply affected by the crash and the great depression that follo wed. Buffett’s father, Howard, was a curities broker in Omaha, but he lost his job and his savings when the bank he worked for went bankrupt in 1931 –shortly before Warren’s first birthday. Howard responded by establishing his own stockbroking firm, but it was a tough way to earn a living in the early thirties. For a long while, as investors shunned the market, Buffett’s business was little more than a sign on a door. Buffett’s mother, Leila Stahl, had been brought up in West Point, Nebraska, with a family that owned and operated a local newspaper: the Cuming County Democrat. She moved to Omaha with Howard after they married in 1925.
Buffett’s tough early years probably helped to forge his parsimonious nature and his desire to make certain that he would never have to struggle for money. Combined with his early exposure to the stockmarket and investing, through his father’s work, Buffett was light years ahead of most children at money management by the time he began school at the age of six.
Around this time, Buffett is said to have embarked on the first of
many money making schemes, buying six-packs of Coca-Cola
for 25 cents and then lling the individual bottles for 5 cents
each. According to his mother, during a vere illness at age
ven, Buffett lay in a hospital bed calculating his future riches
on a sheet of paper, exclaiming to a nur ‘I don’t have much
money now, but someday I will and I’ll have my picture in the paper’.
Howard Buffett was a man of high principles and this led him into politics. Politics, in turn, led to the family being relocated to Washington DC in 1942, when Buffett was twelve, after his father won a
dismissive
at in congress. Warren was very unhappy about being away from Omaha, but his time in the capital was significant in terms of his fledgling business career. A paper round began a very profitable lifelong association with The Washington Post. When his paper round was at its peak, Buffett was making US$40 a week from it. To this could be added US$20 a week earnings from his share of a partnership with his friend Don Danly, owning, operating and rvicing pinball machines in barber
shops. He filed a tax return in respect of his earnings and refud to let his father pay the taxes.
In 1947, the venteen-year-old Buffett went, somewhat reluctantly, to the Wharton School of Finance and Commerce at the University of Pennsylvania. He didn’t feel that he was learning very much from his university studies, however, and in 1949 he returned to Omaha, after his father lost an election, and he transferred to the University of Nebraska. In Omaha, he was rushing through his studies and at the same time adding to his funds with various jobs on the side, including one where he managed 50 paper boys for the Lincoln Journal.
For all his business acumen and earning power, though, Buffett was still unsure about what to do with the money. Buffett’s stockmarket epiphany came in 1949 when he first read Benjamin Graham’s legendary book on investing, The Intelligent Investor, which had been published that year. This encouraged him to enrol at the University of Columbia to study under Graham.
频道英文What Buffett learnt from Graham laid the foundations for his investing career, by ramming home the crucial distinction between price and value. After scoring the only A+ that Graham had awarded in 22 years of teaching, Buffett had hoped to be employed by Graham’s investment firm, Graham Newman, but he was rejected becau the firm only employed Jews (since they were shunned by the traditional Wall Street investment hous). Buffett even offered his rvices for free, for the honour of working with the Master, but his approach was rebuffed.
So Buffett returned to Omaha, where he took employment with his father’s firm of Buffett Falk. Asked whether the firm would be renamed Buffett & Son, he is said to have retorted: ‘No, Buffett & Father.’ At this time, Buffett courted Susan Thompson, who parents were family friends, and the two were married in 1952. They raid three children, Howard, Susan and Peter.
In 1954, Ben Graham relented and Buffett completed his education by working for two years, for US$12,000 a year, at Graham’s firm in New York, until Graham retired in 1956. The firm was wound up becau, as one investor said at the tim e, ‘Graham Newman can’t continue becau the only guy they have to run it is this kid named Warren Buffett. And who’d want to ride with him?’
It turned out that plenty of people did want to ride with Buffett. When he returned to Omaha, his own investing partnership began with friends and
family, but veral notable clients of Graham Newman were directed his way, and word of mouth spread. Soon Buffett was managing many millions of dollars. His rule was that his partners were not to know anything about how their money was invested, but they would be given a simple annual statement of returns. In addition to this, and so that he wouldn’t be at the whim of fickle investors, he would allow partners to withdraw or add money on only one day each year.
The results of the Buffett Partnership were spectacular. Over the 14 years from 1957 to 1970, he never lost money and always beat the stockmarket index, compounding his investments at an average of 28% and multiplying each original dollar 32 times (for more detail, e here). A notable investment success was American Express, who stock price was hammered by a fraud in New Jery but who business franchi and intrinsic value, Buffett famously surmid by watching the tills at his favourite steakhou, was largely undamaged.
探骊得珠
But by the end of the sixties, the markets were flying upwards to ever greater heights and Buffett was finding it increasingly hard to find suitable investment opportunities. In the end, he decided to liquidate the partnership in 1970 and, instead, he focud his investments on a small Massachutts textile company named Berkshire Hathaway.
Buffett had first invested in Berkshire in 1962 when its stock price was just
US$8, compared with net working capital per share of US$16.50. As further stock came on the market, he just kept buying more, and soon the Buffett Partnership was the company’s largest shareholder. Berkshire Hathaway was, however, in an absolute mess, with huge mills that cost more to maintain than they generated in cash. Buffett either needed to get out for a small profit, or he needed to engineer a change in management. In the end, he opted for the latter cour and, in 1965, with the stock price at US$18, Buffett took co ntrol of the company.
Buffett’s first step was to put a new man, Ken Chace, in charge of the textile operations. He explained that he needn’t bend over backwards to cha unprofitable sales, but that he would be judged according to cash return on invested capital. Buffett was about thirty years ahead of his time in using this measure, which achieved buzzword status in the 1990s (and was conquently badly abud), but it t the scene for his long tenure at the company: the Berkshire subsidiaries should only utilize cash at attractive rates of return, otherwi Buffett himlf would take it and find other opportunities.
And there were plenty of other opportunities. The Washington Post Company, Gillette and Coca-Cola are among the more famous listed companies in which Berkshire has made huge profits. But equally successful have been the company’s purchas of entire business, such as the Governme
nt Employees’ Insurance Company (GEICO) (a former favorite of Ben Graham’s), See’s Candies, the Buffalo News, Nebr aska Furniture Mart and Borsheim’s Jewelry. Whether purchad in full or in part, all of the business benefit from having a strong, defensible business franchi, enabling them to churn out increasing quantities of cash for investment in new opportunities. There is more about Buffett’s investing approach in this ction, and on The Intelligent Investor website.
In April 2005, the Berkshire Hathaway share price was edging towards
US$100,000, giving an average annual return of about 26% per year since Buffett first took control. The market value of the company is now well over US$100 billion and its main challenge is finding big enough investment opportunities to make a difference to such a huge company—a fact that Buffett frequently moans about in his annual letters to shareholders. Having too much money, though, is a problem that few people get to complain about.
不要介意的英文Warren Buffett is one of the world's richest men, with an estimated personal wealth of approximately US$40 billion. He began his journey by cobbling together a few thousand dollars during his childhood: collecting golf balls, operating a pinball-machine business (with a mechanically minded friend), running paper rounds and doing any other odd jobs that came his way.
By the time he took Ben Graham’s investing cour at the University of Columbia at the age of 20, Buffett had accumulated $9,800 (e Note 1). Working with Ben Graham in New York, Buffett analyd stocks all day and he achieved the best returns of his career, compounding his money at 56% per year to reach a total of $140,000 when he returned to Omaha, Nebraska in 1956.
Buffett then placed this money into his investing partnership, with various friends, family members and acquaintances. Between 1957 and 1970, he compounded his investments at an average rate of 28% per year. However,
through this period, his own personal wealth benefited from a kicker effect thanks to performance bonus from the partnership.
When he liquidated the Buffett Partnership in 1970, he was able to convert his share into a stake of approximately one third in Berkshire Hathaway. Since then, Berkshire Hathaway’s net asts have compounded at an average rate of 23% per year (though the intrinsic value of Berkshire Hathaway, and its shares, have compounded at a slightly higher rate).
Over the full 54 years, therefore, Buffet t’s investments have grown at an average rate of 27.6%. The graph below charts the progress of one of Buffett’s 1950 investment dollars up until 2004, compared
to how one might have fared being invested in the overall US stockmarket (e Note 2).
vagina$1 travelling with Warren Buffett compared to $1 travelling
凑合是什么意思with the US Stockmarket
pedaloYou’ll e that we’ve done the chart on a logarithmic basis. It sounds a bit scary, but it’s the best way
to do charts of things that compound over time, becau it gives equal weight to the same proportional increas. But there’s another very good reason for doing it this way, and that is that if we didn’t, then the US stockmarket would not even register on the same chart as Buffett –quite literally, becau the dollar invested with the US stockmarket dollar ends飞翔的翅膀
