The life of Warren Buffett

Warren Buffett is widely regarding as one of the greatest investors of all-time. As the chairman of Berkshire Hathaway, he commands an empire that encompasses railroads, candy, homebuilders, and underwear. His company now has a market cap of over $ billion and is widely considered one of the best run companies in the world. Every year, Warren holds his annual shareholder meeting in Omaha, Nebraska. Here over 100,000 participants fly from around the world to listen to Warren Buffett’s advice. During this over 6 hour sessions, participants ask a litany of questions that range from investment advice to life advice. Much of this advice is almost always posted on prominent financial websites and publications.

Warren Buffett was born in Omaha, Nebraska in 1930. He developed an early interest in investing through his father, who was a stock broker and an eventual congressman. Warren often read books in the public library related to investing and finance. He has often said that he read every book related to finance in the Omaha public library. Eventually, Warren eventually attending the Wharton School of Business at the University of Pennsylvania eventually transferring to the University of Nebraska. Warren eventually graduated for the University of Nebraska at the age of 19. After graduating Warren went on to attend and graduate from Columbia Business School. Here, Buffett molded his value investing approach while learning under Benjamin Graham, the father of value investing. Eventually, Buffett began to partner with Graham on other ventures and partnerships. He eventually founded the Buffet Partnership in 1956, which eventually acquired the struggling textile mill Berkshire Hathaway. Berkshire Hathaway at the time, was failing to make an adequate profit and return on invested capital. He later turned the struggling textile mill into the massive conglomerate it is today.

Buffett is widely known for his value investment principles. Here Warren uses discounted cash flow analysis to identify undervalued stocks in the public markets. He looks for companies with a strong competitive advantage in their respective industries, a management with integrity, a business he understands, and trading at an attractive price. He typically purchases stock of companies that are out of favor or are experiencing mass pessimism in the public markets. He researches the company heavily reading annual reports, quarterly reports, and any other information related to the company. He often interviews management and researches competitors in the field as well. Through, this mosaic approach, Buffett then appraises the merits of the company relative to companies he already owns in his portfolio. This theory of value investing is widely followed by over 1 million shareholders in Berkshire Hathaway and millions of other followers around the world.

Another major component of Buffett’s philosophy is a long term time horizon. Most of the financial and investing public look to emphasize short term gains and speculation. Buffett however, looks to emphasize longer term investing which is often characterized as a buy and hold strategy. Buffett, looks to purchase companies to hold for very long periods of time to allow the principle of compounded to take effect. A longer term approach also allows practitioners to whether any economic decline or recession over a given period. Buffett often emphasizes the need for patient capital within the financial markets using the example of baseball. Here, Buffett says that investors unlike baseball players cannot be called out on strikes. Here, the investor can wait for as many pitches as they desire, only swinging at pitches that are within their own comfort zone. Pitches, in these instances, stock prices should only be swung at if they are in a investors competence level.

In regards to implications for the current filed of advice-giving, Buffett is rare in that he provides candid advice that can immediately impact the financial well-being of others. He has a wide following but does not use that to take advantage of others. In fact, much of his advice is free and widely available for those who are willing to read. His annual shareholder letters are often widely read as they provide timely advice for all individuals. Due in large part to his ability to distill complex terms into easy to understand anecdotes, he possesses a strong appeal to the masses seeking financial independence. In addition, as one of the wealthiest men on the planet, he doesn’t need to sell his advice like many of his financial counterparts. Many self-described financial gurus often need to sale their advice or their expertise. Buffett on the other hand does not need to do so and often provides timeless advice for free. This has strong implications for the advice-giving field as it provides a sense of credibility and believability. Buffett first possesses credibility as he has earned very substantial sums of money started from a very low base. He did not inherit millions of dollars nor did he become rich through luck. Instead he utilized the very same approach he advocates for today over a substantially long period of time. In addition, he has done it with honesty and integrity which aids in his overall credibility. Second, in regards to advice giving, he is believable. Due in part to his ability to provide real world examples of both successes and failures. These two concepts have very strong implications for the advice-giving field as it runs counter to many of the more academic approaches. First, Buffett utilizes both his successes and failure to illustrate his points. Many in the advice-giving field only emphasize their successes while downplaying their losses. Others simply omit their failures altogether to make their past track record to seem more attractive than it otherwise is. Second, Buffett provides his advice for free. His annual reports can be read online with no charge at all. His interviews can be viewed freely. All of which provides valuable advice that often stays with an individual forever. Further, this advice is timely in the sense that it can be passed down for generations. Wealth in particular, can be passed down from generation to generation. As a result, the advice giving today, could impact an individual that has yet to be born in regards to their overall lifestyle and well-being. This has strong implications for the advice-giving field as Buffett’s advice is very long term oriented.