Why won't there be another Warren Buffett

Portrait of investor and entrepreneur Warren Buffett "Rule number 1: never lose your money."

"Never invest in a business that you don't understand."

These and other golden rules are among the stones with which Warren Edward Buffett paved his path to success. Today's multi-billionaire started out very small - in the truest sense of the word. Warren Buffett was seven years old when he first demonstrated his business acumen. He buys chewing gum packs from which he resells the individual chewing gum for a few cents profit. He is successfully testing the same principle with Coca-Cola bottles. He bought his first security at the age of eleven. At that time, the share of "Cities Service" cost him 38 US dollars. After the price initially weakens and then slowly rises again, the young Buffett sells them at $ 40. When the stock's value climbs to $ 200 after just a few months, Buffett learns his first important lesson: patience. Long-term investing is one of Warren Buffett's principles. It has paid off for him - he ranks 6th on Forbes' list of the richest people in the world with an estimated net worth of $ 96 billion.

The investor and entrepreneur was born on August 30, 1930 in Omaha, Nebraska. His father Howard Buffett is a broker, which explains Buffett's early interest in business and finance. In his childhood he experienced the Great Depression and borrowed books on finance and stock trading from the library or from his father. What he learns from it, he not only uses in his business with Coca-Cola bottles, he also restores old pinball machines that he rents out. He ended up selling that deal for $ 12,000. When he was 14, he bought a farm that he leased. At the age of 17, he and a friend bought an old Rolls Royce for $ 350, which they got together and rented out for $ 35 per trip. After high school, he wants to get straight into business, but still follows his father's wish to go to college. By the time he graduated, he already had savings of about $ 99,000 from his good business.

After Harvard Business School rejects the aspiring young man because he seems too convinced of himself, Columbia Business School accepts him. Benjamin Graham, himself a great investor and spiritual father of value investing, teaches there. He becomes Warren Buffett's mentor and confidante. He learns from him that the price of a share does not always represent its intrinsic value. The actual value can only be recognized over time. Buffett took up his first job at Graham and after his retirement founded the limited partnership "Buffett Partnership Ltd." One became a total of six partnerships, which he combined again into a single partnership in 1962 (Buffett became a millionaire this year).

In 1965 he lands the next coup by buying the financially troubled textile company Berkshire Hathaway, in which he already owns shares. He transforms it into a holding company whose conglomerate now includes more than 50 companies as well as holdings in over 50 other companies. The holding thus employs more than 360,000 people. That makes Berkshire Hathaway the largest conglomerate with a market cap of $ 518 billion. The company is still based in an Omaha office building on one floor. The annual shareholder meetings are known as "Woodstock for Capitalists". In the first year, 12 shareholders came - now more than 40,000 pilgrims to Omaha to hear the words of the major investor.

"Fortunately, there are several avenues that lead to financial heaven."

Warren Buffett is a simple person. He doesn't drive big sports cars, doesn't live in expensive mansions, and doesn't eat extravagant food. Instead, he has lived in the three-room house since 1957, which he bought for his family at the time. His favorite food is fast food with Coca Cola (which he holds shares in). Buffett said of his eating habits: “I've looked at the mortality tables and the lowest death rate is among six-year-olds. That's why I decided to eat like a six-year-old. That is the safest way I can take. "

As bizarre as his strategy for a long life may sound, it has worked so far - the investor will be 91 years old this year. As Buffett explains his relationship with his children in terms of wealth, "I believe in giving my children enough to do anything, but not so much that they cannot do anything."

In 2006 Buffett decided to gradually donate 85 percent of his fortune to the "Bill and Melinda Gates Foundation". Buffett proves that he is a philanthropist with the campaign "The Giving Pledge" - the promise to give something - which he founded in 2010 together with Bill Gates. The signatories vow to use the majority of their wealth for charity. Equally “modest” is the salary that he has had for thirty years. At $ 100,000 a year, his salary is on the low side compared to other CEOs in his class. The democrat has long denounced the class struggle between rich and poor, as well as the exorbitant manager salaries and the too low taxes for high earners.

“Be afraid when the others are greedy. Be greedy when others are scared. "

He adopted Warren Buffett's investment strategy from his mentor Benjamin Graham - value investing. This is based on four pillars or four factors that speak for or against an investment in a company:

  • economic constitution

  • Competitive position

  • Corporate governance

  • Share price (below net asset value)

Warren Buffett finds stocks whose market values ​​are below their intrinsic value, buys them cheaply and waits until they have reached their intrinsic value. The intrinsic value is determined using fundamental analysis. A company is undervalued especially when the overall market is weak. This was the case, for example, when Buffett invested in General Motors during the 2008 crisis. Investor panic also drove the price down during the crisis. This created a good safety margin for Buffett, i.e. a low risk of losing money with this investment. It remains to be seen whether saving the company was also his intention. Most of all, it was cheap business for Buffett.