In this video you will learn
how Warren Buffett, the world’s greatest investor and
one of the world’s richest men, made his first million dollars. How he went from zero figures
to seven figures at age 31. You will understand the events,
characteristics, and of course investments, which were pivotal for Buffett to become
successful at such a young age. But first, here’s a little rant. Some of the most popular
videos within the field of investing and personal finance on YouTube
these days are those that cover Buffett’s most recent
moves in the stock market. Whatever the world’s greatest investor
is doing, you should be doing too, right? WRONG. Let me explain Today, Warren Buffett is
managing a portfolio of companies worth hundreds of billions
of dollars at his Berkshire Hathaway. The difference between making money
when you are managing such sums and when your net worth is, say,
$1,000 - $500,000, is like night and day. You play a totally different game, and its actually rigged in
the smaller investor’s favour. Just look at this graph, which presents how Buffett’s wealth has
been growing during the last 10 years and compares that to how fast his
wealth grew when he was in his 20s. In terms of percentages, this is a
landslide victory for the younger Buffett. Buffett would never act like he is acting
today if he had $1,000-$500,000. He would do something similar to
what you will learn about in this video. And you should too. This is the Swedish Investor, bringing you the best tips and tools
for reaching financial freedom, through stock market investing. Our story begins in 1936, when
Warren Buffett was 6 years old. Buffett the grinder Ever thought that Buffett was
handed everything on a silverplate? Well, he did have two great
entrepreneurial role models in his father Howard and
grandfather Ernest, but the money, he had to
grind for himself. He earned his first few bucks by going
door to door selling chewing gums. He bought these packs from
his grandfather’s grocery store and earned 2 cents in profit for
each whole pack that he sold. Only 50 million packs to go before
he could reach that first million! Another excursion into
high-margin retailing was Buffett’s door to door selling of Coke. He purchased a pack of 6 for 20 cents
and could sell it for 25 cents. As a young boy, Buffett said that if he couldn’t amass a fortune of
at least $1 million by age 35 he would jump off the tallest
building in Omaha. We’re lucky that he eventually
found other ways of making money than through chewing gums
and Coca-Colas. Buffett the detective Buffett was a truly
curious child, and was looking for an informational edge
everywhere, just like a great investor does. One interesting example of this is that
he was a collector of bottle caps. He gathered them in order to be able to know
which soda was the most popular one. Judging by what he was selling, I guess he must’ve
concluded that it was Coke. Another, more amusing story, was
when he and a friend began writing down the license plate numbers of cars on
a particular road in his hometown Omaha. This road was the only one leading
to the Douglas Country Bank. Warren said that, were the bank
ever to be robbed, the police would need this information, and him and his friend would be
the only ones sitting on it. Was this an early attempt at
“cornering the market” perhaps? Buffett the math wiz Warren Buffett loved everything
about statistics and numbers. For example, he had found a huge record
of historical composers and decided to use this information to determine whether it was
worth being religious or not. How? Well, he compared the lifespan
of the hymn composers (those that were writing
about Christian worship) to all the others. Disappointed, Buffett’s math concluded
that the faithful composers weren’t rewarded with longer
lives than anyone else. Buffett the bookworm Warren Buffett spent much of his time as
a kid at the Benson Library in Omaha. He was reading everything
he could get his hands-on and one day he found a book that
seemed particularly useful. It was called “One Thousand Ways to Make $1,000”. Multiplying 1,000 with itself, Buffett realized
that if this book could keep its promise, this was everything he needed
to make that first million. And perhaps it would be quicker
than going door to door selling 50 million packs
of chewing gums? The book conveyed
an important message: Never before had the times been
so favourable for someone with little capital to
start his own business. But you cannot succeed until you start. You must start today. By the way, this book was first published
in 1936, and it was correct in saying that it was easier to start a business
without much capital at that time than it had ever been before. But in today’s age of software
and the internet, I’d say its at least 10x easier now
than it was in the 1930s. But, just like the book says,
you cannot succeed until you start. We’ve now come to the point
where Buffett decided to make his first move
in the stock market. Buffett’s first investment Thanks to his relentless efforts, Buffett had now amassed about $120. Before you scoff at that, consider that, due to inflation, $120 in 1941 is
the equivalent of $2,125 today. At age 11, that is pretty
damn impressive. Buffett had already understood
the power of compound interest and he desperately wanted
to get ahead of the curve. He knew that once that snowball
of wealth started to roll, nothing would be able to stop it. Going pretty much all-in, Buffet now bought his first
few shares in the stock market. The company was called Cities Service, and he bought three of its preferred
shares for a total of $114.75. The shares … immediately dropped. Not only had Warren invested
all of his hard-earned money, he had also convinced his older sister
Doris to invest with him. Doris picked on Buffett
every day in school, reminding him that her
shares were falling in value. Buffett felt terrible. At one point he got a chance to cash out at
a $5 profit for both of them and so he did. Puh! Or perhaps not so puh. It didn’t take long for the Cities Service
Preferred to soar to $202 a piece. Warren Buffett learned (at least) two
valuable lessons from this experience: Firstly – do not fixate on
what price you paid. Secondly – do not rush to grab
a small profit. Considering that it took Buffett about
5 years to accumulate those first $120, you’d understand why he was grieving when he realized that he was
sitting out on a $492 profit. Buffett’s motivation Howard Buffett, Warren’s father,
was elected a Congressman to represent his state in Washington, and so, the Buffett family
moved there in 1943. Warren didn’t like it there at all and
insisted on being sent back to Omaha to live with his grandfather Ernest. His wish was granted. On the week-ends during this time, Buffett
worked at his grandfather’s grocery store. Buffett later said about this experience: “I may have been the lowest-paid person to ever work in the grocery business. I didn’t learn anything – except that
I didn’t like hard [physical] work.” Warren’s grandfather Ernest
was hilarious by the way. In addition to running a grocery store, Ernest dreamed of one day
becoming an author. He had written a book
which he decided to call “How to run a grocery store and a few
things I learned about fishing.” Luckily, Warren’s father, the stockbroker
and Congressman, had a greater influence on
Warren than Ernest did. Buffett the newspaper boy Buffett’s reunion with Omaha
didn’t last for long though as in late 1943, he was called back
to his family in Washington. He still didn’t like it. But he liked to earn money, and so he started to deliver
multiple newspapers. Once again, Buffett showed his
determination to get ahead of the curve. He was no longer earning
pennies either. By the end of 1944, at age 14, he was the proud owner of $1,000,
or $14,795 in today’s money. This year, he also filed
his first tax return. We can see that Buffett was
quickly gaining momentum, increasing his income from
the newspaper routes from $42 in July 1944 to $86 in November
& December during the same year. Buffett deducted his bicycle and wristwatch,
which he knew was kind of questionable. He paid a total of $7 in taxes that year. By age 16 he was making $175 a month
from his newspaper routes. To put that number in perspective,
the average engineer in 1946 could expect to earn about $392 monthly. Even through I do not doubt
that Buffett was quite efficient when delivering his newspapers, he was basically working
a full-time job while in high school. Buffett the bodybuilder? You clearly can’t have everything in life,
and what Buffett had in his wallet, he lacked in the girls department. Like many other boys before
and after him (yours truly included), he decided that the answer to this dry spell
must be to start on a weightlifting routine. Inspired by Bob Hoffman and his magazine
“Strength and Health”, Buffett bought a set of dumbbells and
a barbell to keep in the family basement. He was disappointed though and said that no matter how many curls he did,
his arms didn’t become much larger. Buffett the farm(own)er Doubling his money in a year,
now at $2,000 at age 15, Buffett became the owner of a
forty-acre farm in Nebraska for $1,200. In other words, he put 60% of his net worth
into this stuff, quite a bold move. With smaller sums of money,
you can afford not to diversify so much. Buffett shared the profits with
the tenant farmer who worked there. Remembering the days
at the grocery store, Buffett thought he had made
a tremendous deal here. He didn’t have to do any of
the physical work himself! Warren sold the farm in 1950 at 2x the price
he had paid for it and in the meantime, he had received profits
from the land for 5 years. Impressive stuff. Buffett the entrepreneur One of the ideas in the book “One Thousand Ways to Make $1,000” stood out to Buffett. This was the idea of buying a scale and
having people pay to weigh themselves. It wasn’t specifically the weighing machines
that Buffett was impressed with, but the exponential growth
that could occur if the money was reinvested
in buying new scales. If it took 30 days to buy the second scale
with profits from the first one, it took just 15 days to buy a 3rd one. 10 days to buy the 4th,
7.5 days for the 5th, and so on. Buffett never bought any scales,
perhaps he decided that it would be too difficult
to collect the money, but he used the idea in forming
his first business partnership with his friend Don Danly. They decided to buy pinball machines. The business plan looked like this: - Warren would buy old pinball machines,
“fixer-uppers” at the price of $25. The new ones were $300, so the old ones
would have a much greater return on capital - Don Danly would repair these machines - The machines would then be
placed at local barbershops and profits would be split
with the barber. Warren and Don had to convince the barbers
that repairing pinball machines was an art, truly difficult, so that the barbers wouldn’t
start to compete with the boys. Buffett and Danly quickly built up
a small empire of machines, and everybody in high school
knew about this at the time, so Buffett and Danly were
the cool kids for a while. Buffett was able to sell this business for
$1,200 before graduating from high school. Buffett’s high school promise It wasn’t entrepreneurship that seemed
the most alluring at the time though. When Warren Buffett graduated
from high school he put “future stockbroker” under his
picture in the yearly schoolbook. Buffett and college Buffett attended Wharton School at
the University of Pennsylvania in 1947. He didn’t actually want to go
to college himself, he thought it was only going to slow him down
as he was already making enough money. However, Howard wanted him to go, and he couldn’t defy his father
on something so important. Buffett’s favorite class at
Wharton was “Industry101” where the course curriculum included
the ins and outs of running a business within a few of the largest
industries at the time such as textiles, steel and petroleum. Howard Buffett didn’t become
re-elected in 1948, so the family moved back to Omaha
and for Warren’s final year of college, he chose to go to
the University of Nebraska. There, he took classes in accounting, which he now refers to as
“the language of business”. It would be an understatement to say that Warren Buffett thinks that
any ambitious investor must learn to speak
this language fluently. At fraternity night parties
Buffett was very shy when discussing topics
such as girls and sex and he didn’t like either
drinking or small talk. He did attract attention though, and could almost always be seen
sitting with a small crowd in a corner, lecturing about subjects such as
stocks, money, business & politics. Up until the age of 19,
Buffett had devoured every book he could get
his hands on within the field of investing. He read classics such as “New Methods for Profit
in the Stock Market” and “Technical Analysis of
Stock Market Trends”. He had been lead astray
more than a few times, trying to master the arts of technical
analysis and candlestick charts. Yes, even Warren Buffett tried
to be a trader at one point. I guess we all have to go
through such a phase. That was about to change. Buffett the intelligent investor With a net worth of around $9,000 Buffett was probably the
richest among his friends, but he had built this fortune
primarily through selling newspapers and through his entrepreneurial endeavors,
not through investing in the stock market. I repeat: That was about to change. In 1949 Benjamin Graham released
the book "The Intelligent Investor". Graham had long been
a successful “value investor”, pretty much the polar
opposite of a technical trader, and his fund
The Graham-Newman Corporation had outperformed the Dow consistently
since its inauguration in 1936. The Intelligent Investor pushed three big
ideas about the stock market which Buffett instantly connected with: - Intrinsic value: A stock is a
piece of a business which means that it has
an intrinsic (or real) value - Mr Market: The stock market swings
from too pessimistic to too optimistic. A true investor is not swayed by Mr Market’s
unpredictable moods and merely sees rising and falling prices as an opportunity,
not as a conveyor of information. - Margin of Safety: Decisions in
the stock market must always be made with
a built-in margin of safety. This means that you should
insist on buying stocks with a large discount to their
intrinsic (or real) business value. Something in Buffett
just clicked with this. He had seen the light. During this time Warren
did something which, in the long run, became one
of his greatest assets. He started to study individual companies to build up an internal and
mental library of stocks. He read the Moody’s and Standard &
Poor’s Manuals page by page, learning about several
hundreds of companies. The Moody’s Manual he even read twice. In addition, he looked at something
called the Pink Sheets, a weekly which gave information about companies too small to be
traded on a stock exchange. There was also the National Quotation
book, with an edition every six months, which presented companies so small they
couldn’t even make it into the Pink Sheets. This is also important. For the investor with a small account, smaller companies are
important to consider, there’s just so much less
competition there. Buffett: The A+ student During high school and (lower)
secondary school, Buffett wasn’t doing too
well as a student. He didn’t exactly flunk, but he didn’t live up
to his father Howard’s expectations either. Howard even threatened Warren that
he’d have to give up his newspaper routes if he didn’t improve
his grades at one point. That of course, had the effect
Howard wished for. Warren was NOT going to give up
his largest stream of income. After graduating from college Buffett had
set his eyes on Harvard Business School. He was rejected though,
as he was not deemed to be a future “leader”,
still too boyish for his age. This turned out to be one of the
happiest misfortunes of Warren’s life as he had now learned
that his favorite investor – Benjamin Graham – was teaching
at Columbia Business School. Buffett decided to try his luck
by applying there instead. Even though his application
arrived after the deadline, he was accepted to the school,
without an interview. When Buffett started at Columbia in 1950
he had $12,500 to his name, of which $500 was a scholarship and
$2,000 came from his father Howard, some kind of combination of a graduation
gift and a deal not to start smoking. Before his introductory
course at Columbia, “Finance 111-112: Investment management
and security analysis”, Buffett had already read
the course material, which was Benjamin Graham and David
Dodd’s masterpiece - Security Analysis. David Dodd, who kind of acted
as the junior partner of Graham, and who was teaching the first
course, loved Warren for this. Buffett basically knew the book
better than its authors did. Benjamin Graham wasn’t just
a teacher at Columbia, he was also a partner in a fund, some would
call it the first hedge fund, Graham-Newman. One thing that I find quite funny is that Graham used to teach
using real-world examples in his class at Columbia, and in that, he was giving away a few of
Graham-Newman’s best investment ideas. The students would then rush
to buy these stocks, so that they became too expensive
and were no longer worth acquiring. The other partner in the firm,
Jerome Newman was furious about this. But apparently, Benjamin
Graham thought that they were making enough
money already so, who cares? Nonetheless, Graham-Newman did beat
the Dow by an average of 2.5% per year over its 20years of existence,
a record that few can compete with. Finally, Buffett had found teachers who
were teaching something interesting and useful to him. While he produced mostly Bs, Cs and Ds
in upper secondary school and high school, he was the first person ever to receive
an A+ in one of Benjamin Graham’s courses. Buffett was the greatest student
to ever take the course. Buffett the insurance king Well, perhaps would-be insurance king. During his time at Columbia, Warren Buffett
had found out that Benjamin Graham was the chairman of a company called Governmental Employees
Insurance Company. I’m not sure if it was Buffett’s skills
as a detective which revealed this or if Graham just spilled
the beans in class. Anyhow, does it sound familiar? That’s because this is the company
which was later renamed GEICO, and eventually became Warren Buffett’s
greatest investment of all time, in terms of percentual returns. On his 1976-1980 purchases, GEICO
became a 1000-bagger for Buffett. An important step in Buffett’s career was
on a Saturday morning in January 1951, when he decided to travel down
from Columbia in New York, to GEICO’s headquarters
in Washington. He wanted to learn more
about the company and about the insurance business itself. Buffett simply went to the office
and knocked on its doors. There, he met Lorimer Davidson, who was an assistant to the
president of the company. Upon understanding that Buffett
was an unusual kid, who had prepared himself
well for this meeting Davidson decided to give Buffett
some four hours of his time instead of the initially
planned 5 minutes. Buffett just kept asking questions
and he soon learned about what’s important in the
insurance industry, why GEICO was gaining
in market share and which competitors
the company had. Buffett decided to bet big. By year-end 1951, Buffett had
65% of his net-worth in GEICO. The share quickly rose
50% in 1952 so Buffett decided to sell off and
switch into another insurer, Western Insurance Securities, a company which was trading
at a P/E of just above 1. Buffett notes: "a p/e ratio that for some
reason caught my eye.” GEICO itself was, at the time, selling at
about eight times its earnings. But yeah, Buffett would
return for more later. Buffett and Susie Buffett had had some difficulties
in the girls' department up until this point in his life. He was sad to see that girls didn’t
want to hear about Benjamin Graham or concepts such as Mr Market
and a Margin of Safety (I know that feel). However, times were about to
change in the summer of 1950 when his younger sister Roberta
set him up on a date with a girl named Susan
(or Susie) Thompson. Problem was that Susie was already kind
of taken, by a guy named Milton Brown. Luckily for Buffett, Susie’s father,
Bill Thompson, didn’t approve of this Milton-guy. Buffett, on the other hand,
started dating Susie’s father almost as much as the girl herself, and that proved to be
the winning strategy. In September 1951, Buffett and
Susie became a couple and Buffett reckons that this was partly
due to the influence of Bill Thompson. “It was two against one” he later said
about the situation. In April 1952 Warren and
Susie got married, and Buffett allegedly spent 6%
of his net worth on a wedding ring. Buffett has said that this was the
best investment of his life, so apparently there are times
when it pays to not be so damn frugal. On the cross-country car trip
that was their honeymoon, Buffett had loaded up
the car with readings, including his mistresses
- the Moody’s Manuals. In 1958 Buffett and Susie purchased
their first home together. Up until that point they had been renting
and living with their parents. They paid $31,500 for the house and Buffett promptly began
referring to it as “Buffett’s Folly”. He knew that he could earn much better
returns in the stock market than what he could hope for from
appreciation in housing prices. Consider that Buffett thought this was
a stupid move even though the house only represented some
10% of his net worth at that point - not 500% like it does for
most first home buyers today. Buffett the stockbroker After graduating from
Columbia Business School in 1951, Buffett wanted to work for his favorite
teacher-investor, Benjamin Graham. He even offered to take
the job without a salary. However, during this time, there was still
some prejudice against Jews, perhaps especially on
Wall Street, so Graham, who came from a Jewish family,
had decided that he was only hiring Jews. Because of this, in 1951, Buffett returned to
Omaha to work at his father’s brokerage firm. He didn’t feel too good
at this job though. As a broker, you must sell. Buffett felt like a man
selling prescriptions. He didn't earn based on how good
his tips were but based on turnover. In other words, he wasn’t
looking to cure his patients, just to sell them as
many pills as possible. He also thought he didn’t get
the respect he deserved from his clients. And to be honest,
who could blame them? Not every 21-year old working at their
father’s brokerage firm is a wonderchild. Buffett & public speaking In January 1952 Buffett completed
a Dale Carnegie speaking course. He still keeps a certificate of this
on his wall in his Omaha office and has said about the course: “That’s the most important
degree that I have”. Long before the course, Buffett
had read Dale Carnegie’s book “How to Win Friends and Influence People” and he knew that if he were to get
anywhere in this world, he would need to learn
how to handle people. And how to speak well
in front of an audience. To practice his skills, he started
teaching an evening course in investing and personal finance
at the University of Nebraska. He enjoyed emulating his idol
Benjamin Graham. Buffett was teaching until 1958 I think, although he was at three different
universities during this period. In 1956 he was teaching a class called
“Investment Analysis for Men Only”. I understand were Buffett came from, but I’m glad to hear that
he later decided to expand to also teach a course called
“Investing for Women”. From 1951-1954 Buffett sent
stock tips to Graham-Newman and occasionally dropped
by their office. It took him three years before
Graham changed his mind about Buffett’s employment. But finally, Warren became
Graham-Newman’s first employee with a non-Jewish background. Buffett & his dream job Buffett arrived in New York, where the Graham-Newman office
was situated, in August 1954, a whole month before his
actual starting date. His salary was $1,000 per month. He quickly became the golden boy
of the company through his wits and absolute dedication to stocks. In 1956 he was offered to take over
the fund when Graham wished to retire and when he didn’t accept the offer,
Graham-Newman decided to shut down. Without Graham, Buffett thought that
he might as well go his own way. Buffett’s first partnerships At age 26, Buffett had accumulated
something like $174,000 and he had now moved back to Omaha
from his two years in New York. He talked about “retiring” as he knew
that his family could sustain on something like $12,000 per year. Apparently, Buffett thought that
investing and handling a few other peoples’ money
equaled retirement, because that’s exactly what
he chose to do at this point. On May 5th 1956, when Buffett
was 25 years old, he formed Buffett Associates, Ltd., an investment partnership
similar to Graham-Newman. It was much smaller though, consisting of only seven partners
among family and friends. Buffett was the general partner,
meaning that he was in charge. The seven limited partners had
contributed a total of $105,000. Buffett himself added just $100. There are some conflicting data
about the fees of the partnership, and it seems a few of the most popular
books about Buffett have got this wrong. The deal was not that the limited partners
would be guaranteed a 4% interest and that Buffett and the partners
then split the profits. In truth, during the period when
he operated multiple partnerships between 1956-1961 there were
various deals to opt for, as stated in Buffett’s
partnership letter in July 1961. In 1962, when he combined all of
these separate partnerships into a single larger one, the deal was a 6% interest
and Buffett took ¼ of all profits, as stated during Berkshire Hathaway’s
annual shareholder meeting of the year 2000. When we put them together we settled
on the 6 percent preferential with a quarter of the
profits over that, with a carry forward of
all deficiencies. Nobody was guaranteed
anything on them. There were some additional
interesting rules. The limited partners could basically
only add or withdraw money once each year, during the month of December. Buffett didn’t want people
in and out of the partnership. Moreover, he wasn’t going to tell them
anything about what he invested in, as Buffett didn’t want people to bid up
the prices of the stocks he was interested in. Because of this secrecy, some people
in Omaha came to think that Buffett was running a Ponzi-scheme. Those that were dubious about Buffett’s
skills and trustworthiness were missing out. During the period 1957-1961, Warren
managed to beat the Dow-Jones Industrials by as much as 16% per year,
or a compounded 177%. Even after Buffett’s fees, this allowed
the limited partners to beat the index by an average of 10.2% per year,
a compounded 107%. Buffett’s competencies as an asset
manager got more attention, and by the end of 1961, he managed
a total of 10 different partnerships, plus he also had one with his father. Buffett and the cigar butts So, how did he achieve
these types of returns? At Columbia, Graham had taught
Buffett an investing strategy which they referred to
as “buying cigar butts”. Such stocks were soggy, unloved
and often just thrown away, but they were typically useful
for at least one more “puff”. Okay, enough with the analogies. The cigar butt strategy meant
buying cheap companies, really cheap ones. Their stocks were typically trading
at very low price to earnings ratios and/or at a low price compared
to cash and assets. These mispricings would often
correct themselves in a few months or perhaps a year or two, when the stocks “lit up”, and this
represented the final “puff”. Buffett would then sell the company
and buy something that was cheaper. Buffett was screening through
resources such as the before mentioned Moody’s Manuals, the Pink Sheets, and the
National Quotation book for small companies which people in
the stock market had forgotten about. Their market caps were
often between $1-$10m, which would be the equivalent
of $8-$80m today. It wasn’t unusual that the liquidity in
these companies were so thin that Buffett had to meet the shareholders
in person and negotiate prices with them. Two important examples
of cigar butts that Warren Buffett bought early on
in his career were: - Sanborn Map; and - Dempster Mill Sanborn Map was a company delivering
detailed information of different structures in cities all over the United States, showing, among other things, the diameter
of water mains underlying streets, the locations of fire hydrants and
the composition of roofs, information which was of interest
to a fire insurance company. Buffett put up 35% of his partnership’s
money during the period 1958-1960. In 1958 you could buy a share
of the company for $45, while it held $65 worth of blue-chip
securities in its balance sheet. The business wasn’t performing great,
as insurance companies were trying new techniques for their underwriting, but it was still cashflow positive
and came with a dividend. And at this price, essentially,
you got the Sanborn business for free. In addition to this, you were getting
$20 worth of blue-chip stock. Not a bad deal, and Buffett earned about
50% on this investment over two years. Dempster Mill Manufacturing
was a manufacturer of farm implements and
water systems. Buffett started acquiring shares in 1956,
although most of them were bought in 1961, when the company was selling at $30
per share and was breaking even on profits. It had earned good money in
the past, but not anymore. What made Buffett
salivate was the fact that the company had $75
per share in book value. He realized that, could this
value be unlocked, the current share price would
allow for great returns. Buffett Associates acquired
73% of the company at an average of $28 per share and used about 21% of its assets to take control over the company and
sell off assets to make it more efficient. Eventually, Buffett managed to sell
Dempster to an acquirer in 1963 for 80$ per share, or a 185% return. If you wish to screen for similar
companies today, I suggest using either Joel Greenblatt’s “Magic Formula”, Tobias Carlisle’s “Acquirer’s Multiple” or Benjamin Graham’s “Net-Net” stocks. I will link to three videos where
I explain these strategies in the description of this video. Buffett: Completely focused It’s clear that Buffett was fully occupied
in his quest of accumulating wealth. He didn’t spend very
much time with his kids, and when he did, he was often
somewhere else mentally. On a vacation in California,
he took the kids to Disneyland. While they were running around and
having a grand time on their own, Buffett just sat on a bench reading. It’s also clear that Susie
sustained Buffett, both emotionally, and practically
in their household. Her husband didn’t have
too many needs but she saw to it that
they were always fulfilled: a lightbulb in his reading lamp,
some Pepsi in the refrigerator (yes, Buffett hadn’t
switched to Coke yet), meat and potatoes for dinner,
and ice cream in the freezer. And then there was everything else that
a household requires to work of course. Buffett and Charlie Munger In 1959, Warren Buffett met
Charlie Munger at a local dinner party. Munger was a Los Angeles Lawyer
and “book with legs”. The two truly hit it off intellectually
and, well, the rest is history. Munger is the vice-chairman of Warren
Buffett’s company Berkshire Hathaway and has been since 1978. Munger challenged Buffett’s
beliefs about cheap companies. Prior to meeting Charlie Munger,
Buffett focused on:“ "investments in mediocre companies
that traded at bargain prices” After being convinced by Munger,
he instead started to focus on: “Great companies at fair prices” While both strategies are valid,
Graham’s approach is more suitable for the investor with smaller
amounts of capital, while Munger’s approach
is more all-around. “Graham [his approach] was not scalable. I mean, you could not do it
with really big money. ”Charlie Munger helped
Buffett find companies such as See’s Candies and Coca Cola. Buffett: Becoming a millionaire By January 1962 Buffett had
a total of 10 different partnerships, or 11 if you include the one
he had with his father. These partnerships were all with
different groups of people and Buffett now decided to
combine them into a single larger one – Buffett Partnership Ltd. He had about $7.2m in assets
under management and him and Susie’s interest in the
new partnership was $1,025,000. Buffett was now a millionaire. Here’s the quickest recap ever: Through grinding, reading,
delivering newspapers, starting businesses, learning about
value investing, going to business school, working for his idol and role-model,
leveraging other peoples’ money, being on the constant lookout for
cheap companies to invest in, and most of all, staying completely
focused the whole time, Buffett became a millionaire at age 31. If you want to get a more detailed explanation
of the 25 most important investments that Warren Buffett ever made,
check out this video. Cheers guys, I hope you enjoyed
this one and see you soon!
