Secrets of the Wealthy: Warren Buffett, Part 1
You can watch my YouTube series about Warren Buffett here!
Warren Buffett, CEO of Berkshire Hathaway (the world’s largest holding company) was one of the first ultra-wealthy people I studied when I became a wealth mindset researcher, and he is a truly fascinating man with a colorful personal story. You can read all about his life in his 2008 biography.
What makes Warren Buffet’s story so interesting? When I was reading his autobiography, what struck me the most was that it was extremely lucky he didn’t end up in jail and instead went on to become one of the world’s top 10 wealthiest people, at a current net worth of $115 billion. Buffett is very open about his shortcomings and quite literally told his biographer, “Whenever my version is different from somebody else’s, Alice, use the less flattering version.” As a young man in his hometown of Omaha NE and then in Washington D.C. while his father was serving as a congressman, Buffett and his friends would routinely shoplift at their neighborhood stores, their favorite being the Sears department store sporting goods section.
He got such poor grades and wasn’t even allowed to graduate with the rest of his high school class, because as he puts it, “I was disruptive and wouldn’t wear clothes that were appropriate. It was major. It was unpleasant. I was really rebelling.”
Buffett credits his loving parents for keeping him out of any more serious trouble: “My dad never gave up on me. And my mother didn’t either, actually. Neither one. It’s great to have parents that believe in you.”
Buffett discovered his love of investing while studying at Columbia University in the 1950s, where he learned the concept of “value investing,” which is picking stocks that are trading at less than their actual value. Buffett went on to become a leading value investor, focusing not just on stock prices, but also on the company’s management and their competitive advantage in the marketplace. Berkshire Hathaway, which was a dying textile mill when he bought it in 1965 and turned it into what is today the world’s largest holding company. He became known as the “Oracle of Omaha” because of his uncanny ability to predict financial market and economic trends.
The most notable time his crystal ball seemed to fail him was during the tech boom of the 1990s, when Buffett resolutely refused to invest in the tech sector. Buffett had long held to his mantra of “Never invest in a business you cannot understand” and continued to do so as the tech boom went on, drawing criticism from his fellow investors. Not until 2016 did Buffett finally jump on the tech bandwagon.
Buffett is famous for being a thrifty man of simple tastes. He still lives in the same house in Omaha that he bought in 1958 for $31,500, despite his massive wealth. He dragged his feet at buying a private jet and when he finally did he nicknamed it the “Indefensible,” due to all his prior criticism of the ultra-rich owning private jets. He picks up the same $4 breakfast at McDonald’s on his way to work each morning, and used a $20 flip-phone until recently. He lives by the motto “Do not save what is left after spending, but spend what is left after saving.” After an attempted kidnapping in 1987, Buffett reluctantly started investing in more personal security and eventually hired body guards as his fame and wealth grew.
What’s Buffett, who is getting ready to celebrate his 93rd birthday, planning to do in the future? He hinted to his biographer that he plans to retire at age 103, which gives him another decade at least to pursue his passion for investing. When it comes to his enormous wealth, he’s been making sizable donations to multiple different charities over the years, the largest being a $44 billion donation pledge in 2006 to the Bill & Melinda Gates Foundation.
What’s the top life advice Warren Buffett has given over the years? He’s eminently quotable but here’s my favorite, from a 2003 address to a group of students at Georgia Tech:
“Basically, when you get to my age, you’ll really measure your success in life by how many of the people you want to have love you actually do love you. I know people who have a lot of money, and they get testimonial dinners and they get hospital wings named after them. But the truth is that nobody in the world loves them. If you get to my age in life and nobody thinks well of you, I don’t care how big your bank account is, your life is a disaster. That’s the ultimate test of how you have lived your life. The trouble with love is that you can’t buy it…You can buy testimonial dinners. You can buy pamphlets that say how wonderful you are. But the only way to get love is to be loveable. It’s very irritating if you have a lot of money. You’d like to think you could write a check: I’ll buy a million dollars’ worth of love. But it doesn’t work that way. The more you give love away, the more you get.”