An ambitious young businessman, Warren Buffett,
is in the early stage of building his financial empire. He's set his sight on a struggling
company out of midwest, hoping to break it apart and sell its assets. Sanborn Maps provides minute-by-minute maps
of power lines, water mains, and city traffics to insurance companies. Before the event of GPS, accurate real-time
maps are very difficult to make and they're very valuable for insurance companies. They
help insurance companies analyze risk factors to come up with better insurance policies. But as the industry gets consolidated, Sanborn's
customers base declines, sending its stock price well below its book value. To Buffett, this is an opportunity to make
money almost at no risk. He discovers that the company owns a portfolio of assets that,
if liquidated, would generate 65 dollars per share. But there's just one problem - to convince
the company to liquidate that portfolio, he will have to gain a board seat. To do that,
he will need more capital and Buffett knows precisely where to raise money! [Music] Because Buffett thought this investment was
a sure thing, he got his entire family on board - his aunt, his mother, his father...
He tried to raise money from everyone he knew. Buffett has one purpose - to have enough money
to gain a board seat in the company. Six months later, he's successfully elected as a board
member of Sanborn. Buffett immediately calls for a board meeting
proposing to other members his plan to liquidate a portfolio to unlock value. But to his surprise, they reject Buffett's
plan. Buffett discovered that none of these board
members own enough stock. They were just a bunch of freeloaders, using company resources
for themselves. Warren Buffett has no interest in standing
down. He is going to intimidate the board members into submission. [Music] Buffett was taught by his mentor Ben Graham
to avoid concentrating too much money on one investment. But Buffett goes against that advice and immediately
buys more shares of Sanborn. With enough control of the company, Buffett returns to the board
meeting. He informs the board if they don't follow his plan, he will fire them all. Afraid for their own benefits, the board members
cave in, agreeing to split the company and the young investor from Omaha walks away with
45% profit on his investment. He will go on to dominate the investment industry
for the next 60 years. He will leave such a mark on finance. He's nicknamed - The Oracle
of Omaha! [Applause] Warren Buffett is born into an affluent family.
His grandfather owns a successful grocery store. His father makes a comfortable living
as a stockbroker. But when Buffett turns 2, all of that prosperity
comes to an end when the country crashes into the Great Depression. It's hard for us to imagine the suffering
and the immediacy and the fear and the sense of being out of control, the loss of control
over one's life that the Great Depression brought on to so many families. Losing all of his fortunes during the crash,
his father Howard Buffett struggles to recoup. But he quickly figures out a way to turn the
catastrophe into an opportunity. He realizes that since people have lost their
fortunes in speculative stocks, he will instead start selling safe stocks, ones that will
help his clients protect their capital. Howard Buffett quickly earns reputation as
a prudent stockbroker who can help his clients protect their assets. His honest and principled
way of doing business leaves a huge mark on young Warren Buffett. The best gift I was ever given was to have
a father that I had when I was born. So in all ways he was teaching me. Never taught
by telling me things. He just taught by example. He had unlimited confidence in me, even when
I screwed up, I mean and that takes you a long long way. To Warren Buffett his father is his hero.
Warren idolizes Howard Buffett mostly because he can never get any love from his mother. Well I think we were terrified of her! When
I'd wake up in the morning, I'd listen to hear her voice. I could tell by her voice,
it was gonna be a terrible day or not. Warren Buffett's mother has a family history
of mental disorders, many of whom were admitted to insane asylums. My mother would have terrific headaches and
you didn't want to be around her when she was having the headaches and she would she
would lash out more. She would never do it in public. Even when Warren was a young boy Leila Buffett
often verbally abuses Warren Buffett and his sister. If you have a parent who's constantly making
backhanded comments at you, constantly criticizing you, constantly comparing you with other kids
and shaming you and you know that's kind of hard for a child to hear, especially from
your parents who are supposed to be your protector, supposed to be your your primary caretakers.
That's definitely going to interfere with your beliefs about your world and yourself. His mother's constant verbal assault makes
young Warren scared and withdrawn from socializing with other people. He develops the habit of
collecting stamps and bottle caps. Buffett as young boy really enjoyed sorting
and counting things. I think it because it gave him a sense of order and predictability. But as Buffett enters his teenage years, his
childhood problems send him down a dark path. In the nation, the only permanent way to prosperity
is a balanced budget. You have heard Congressman Howard LH Buffett, Republican member of the
House of Representatives from Nebraska. Howard Buffett is elected as a congressman
and he moves his family to live in Washington DC. The young Warren Buffett certainly finds himself
in an unfamiliar environment, unable to adjust to the life in the country's capital. With Howard being consumed by the duty of
a congressman and as his mother continues to terrorize him and his sister, the teenage
Warren Buffett becomes rebellious. Te started skipping schools and hanging out
with the wrong crowds. He stole stuff like golf balls and was involved in practical pranks
and scams. Warren Buffett's rebellious behavior continues
until finally Howard Buffett decides to intervene. He' tellsl his son - you can do better than
this! Knowing that his father, the man who means more to him than anyone else in the
world, is disappointed, Warren Buffett is devastated. H e vows to change his ways and
to never let his father down again! [Music]
On a trip to New York with his father, Warren Buffett is introduced to Sidney Weinberg,
the senior partner of Goldman Sachs. The meeting left a huge impression on the
young Warren Buffett. He saw Weinberg as the kind of archetype that he wanted to become. The young man is determined to become rich
and he will do that by starting his own businesses. He made a lot of money from delivering newspapers
and he also owned a pinball machine and he was able to convince the local barber shop
to put his machine in. Buffett excels at calculating odds. He realizes
he can leverage the skill by getting into horse betting. By the time Buffett graduates
high school, he's earned five thousand dollars through his many ventures, the equivalent
of fifty thousand dollars today! [Music] While initially planning to skip College,
Buffett is persuaded by his father to continue his higher education. Since he graduated top
of the class, Buffett is accepted to Wharton School of Business. While most students attend Wharton to become
future executives for companies like GE, Warren Buffett has only one purpose - to become a
better investor. He's delighted to learn that a co-author of
his favorite book is teaching at Wharton. The book is called Security Analysis and the
author is David Dodd. A year went by, and and I got very good grades
in college. I may not... my grades improved as I as I went along in school and but I I
didn't feel I was learning that much there. But his attitude changes when David Dodd introduces
Buffett to his co-author, a man who will change Buffett's life forever!
[Music] Benjamin Graham is a professor at Columbia
pioneering an investment technique that comes to be known as "Value Investing." After witnessing the calamity caused by irrational
speculation during the Roaring Twenties, Graham re-thought a better investment strategy, one
that could make profits without taking on much risk. And everybody on Wall Street is so smart that
their brilliance offsets each other! [Music] And whatever they know is already reflected
in the level of stock prices pretty much and consequently what happens in the future represents
what they don't know. Buffett has been admirer of Graham long before
they meet and Graham immediately sees the potential in Warren Buffett. There are half a dozen that had a tremendous
influence and certainly Ben Graham uh influenced me enormously in terms of giving my me the
investment framework to work, to go for it. I wouldn't be remotely where I am without
without Ben Graham. After graduating college Buffett enrolls in
Columbia University's MBA program and also begins working for the investment firm that
Graham owns. Buffett is hired as a stock analyst. His job
is to search for companies that are called "Cigar Butts." Cigar Butt approach to investing which is
where you try and find a kind of pathetic company but it sells so cheap that you think
there's one good free puff left in it. And and uh we used to pick up a lot of soggy
cigar butts you know? By working at Graham-Newman, Buffett hones
investment skills but more importantly, his job allows him to search for investment ideas
to grow his own money, which by now stands at $19k or about $200k in today's money. And
he soon finds the perfect opportunity! [Music] Rockwood is a chocolate maker in Brooklyn,
New York. But due to a sudden spike in the price of cocoa beans, the company struggles
to remain profitable. But Graham and Buffett discover that the company has a large storage
of cocoa beans that can be sold to make a profit. There's a problem though. If the company sells the cocoa beans at the
market price, they will have to pay a large tax bill, which will eat away a lot of the
profit. The opportunity is too good to miss! Still
unsure of how to solve the tax problem, Ben Graham finds a deal partner who comes up with
an ingenious solution. JayPritzker is an investor with a savvy knowledge
on tax laws. At the age of 32 , just 7 years older than Buffett, Pritzker is looking to
build his own business empire. To avoid paying taxes, he realizes he could
offer the cocoa beans to the shareholders of Rockwood, in exchange for their stocks.
Jay Pritzker purchases enough shares for himself to build up a controlling interest. And he
offers to exchange the cocoa beans at a premium of two dollars more than the market value.
Ben Graham immediately knows this is the perfect arbitrage opportunity. He could buy the stock of Rockwood at $34
a share and then immediately exchange to $36 a share's worth of cocoa beans. He then would
use the futures contract to hedge against any price fluctuations of cocoa beans, which
guarantee about two dollars per share of profit at no risk! Ben Graham may have found a way to make a
quick buck, but his student Warren Buffett is planning something even bigger! [Music] Buffett realizes that if Jay Pritzker is willing
to overpay two dollars in order to buy more stocks from Rockwell's shareholders, he must
be convinced that it's a great company to own! Contrary to Graham's strategy, Buffett puts
down 75 percent of his own savings in the company's shares, betting everything on a
rebound of the company's stock! [Music] If Pritzker is wrong, Buffett risks losing
not just money but his reputation at his company, especially from his mentor Ben Graham. From the ruins of the Great Depression and
the savagery of the second World War, American economy is bouncing back even stronger. As
the country enters the 1950s, fortunes are being made everywhere, and the finance industry
reaps the reward. Buffett is an ambitious young investor from
the Midwest. He's determined to become a millionaire by 30. While working for the legendary investor Ben
Graham, Buffett thinks he has found an opportunity to make his first killing. Putting down the
majority of savings in just one stock, Buffett is betting everything on the chocolate manufacturer! Rockwood's stock eventually shoots up from
$36 to $85 a share, and the young investor nets over $13,000 of pure profit, the equivalent
of $144k in 2022. Warren Buffett is a follower of Ben Graham
but not an imitator.He understands the essence of value investing so well that sometimes
he goes against his mentor's ideas. Impressed by his protege's performance, Graham
quickly advances him through the ranks. Buffett is content with his wealth and status,
and he expects to be made partner at Graham-Newman's company in no time. But everything is about to change! Just when Buffett is ready to be made partner,
Ben Graham decides to retire and dissolve his partnership. Ben Graham lost interest in investing because
he thought he had enough for the rest of his life. On top of that, he wanted to spend more
time on other interests, like women and fine arts. To Buffett, this event is a reminder of how
much he hates not being in control of his own career. With his credential, he could
easily land a lucrative job on Wall Street, but Buffett decides to do the unthinkable. At the age of 26, Buffett leaves New York
and goes back to his hometown Omaha to start his own shop. Months after I came back, some members of
the family said what should we do with our money and I said well I'm not going back in
the business of selling stocks but if you would like to join me in a partnership, I
said I'll be glad to do it. So within a couple of months after coming back, I set up the
first partnership. With the help of Graham, Buffett is introduced
to many wealthy investors who entrust their money to his new investment partnerships. With enough funding for his new company, all
he needs to do now is find a big idea. [Music] Buffett knows to make above average Returns
on Investment, he needs an edge, one that other investors don't have. At that period of time, Buffett loved the
pink sheets which contain companies traded away from the stock exchange, often at a very
low price. To be fair, a lot of those companies are scams. But Warren Buffett believes there are potential
gold needles in this haystack and after a diligent search, one company catches his attention. National American is an insurance company
located in Nebraska. Like many insurance companies, it started off as a fraud, but after years
of legal maneuvering and with changes of management, it has turned itself into a legitimate company.
[Music] Many of the stockholders are farmers and they
are unaware of the company's changes, thinking their shares are still worthless. But Buffett estimates the stock for the company
is worth at least $100 a share. The problem is where to find those farmers. So Warren Buffett and his crew go visit those
farmers in person and to buy the stock off their hands, sometimes at a 70% discount from
the original value and a lot of those farmers are just happy that their stocks are finally
worth something. By going places his counterparts aren't willing
to go, Buffett's BET on National American generates him handsome profits, and he applies
the same approach of bargain hunting to many more obscure companies, generating 100% annual
return for the first five years! By 1962, Buffett partnership grows to have
7.2 million dollars in assets, bigger than what Graham-Newman could ever be. At the age of 32, Warren Buffett is on the
fast track to becoming a financial titan but what he doesn't know, is that his next investment
will be the biggest challenge in his career! Buffett's early success is largely due to
his ability to find obscure information that others don't have, such as the pink sheets. In 2022 we have an explosion of information,
so overwhelming that many of today's investors are unable to find any real value anymore. But there's one company that is solving that
problem. The Daily Upside, founded by a group of investment bankers and scholars, was designed
with the sole purpose of giving you real intelligence in this noisy world we live in. Their free newsletter is packed with crisp
insights, actionable Intel, and heavy hitting analysis to make you a more well-rounded investor. Just recently, they published a piece on Warren
Buffett and Kathy Wood, which analyze the widely different investing strategies they
both follow. Every weekday they deliver a morning brief followed by more detailed stories
that are shaping the business world! It's becoming something I read every morning! Join
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It's totally free and you can unsubscribe anytime if you don't like it. [Music] Applying the same investment strategy, Buffett
searches for his next cigar butt's companies, ones only he can unlock the value. And soon,
a forgotten windmill company catches his attention. Dempster Mill manufacturing is a family-run
company that makes windmills and water irrigation systems in Beatrice Nebraska, a small town
of fewer than 10,000 people. Buffett discovers that the company has an
abundance of physical assets while the business performs poorly. The company was traded at $18 a share at a
book value of $72. It's virtually unheard of, nowadays. So Buffett kept on buying and
waiting for the stock price to go up or he could liquidate the company to make a profit. Buffett purchases enough shares to have a
controlling position at a company but he fails to realize just how incompetent the company's
management team is. The managers of Dempster Mill did not understand
business cycles. They kept buying more parts and making more windmills when there was no
demand in the market. It caused the company to accumulate a lot
of short-term debt. Unable to pay off their debt, banks are ready
to seize Dempster's inventories and shut down the company. [Music] To Warren Buffett, it's the worst
news. Buffett has put 1/5 of his partnership's capital
into this company. If the company goes bankrupt, he may lose all of it and his dream of building
a financial empire will be ruined. Desperate to salvage his investment in the
company, Buffett will need help from someone who has the resources and the toughness to
get things done and he knows just the man! Charlie Munger [Music] [Music] Munger is a prominent lawyer in California
and a budding investor who dreams of achieving financial success. He bought a windmill company! A little town
in Nebraska. And Warren didn't know anything about running a windmill company! He bought
it because it was cheap. He said what do you do? Why can't you fix my windmill company?
Who can you get to help me? I said I've got just a man for you. After assessing the situation, Munger realizes
the windmill company is broken. To turn it around, Munger brings on a colleague of his
to replace the chief executive of the Dempster Mill. So one of my old colleagues from a transformer
business who was an accountant. I said he will fix your windmill company and Warren
was desperate he he didn't. He just hired him on the spot. They fired hundreds of workers, sold off equipment
and closed five branches, not only to have enough money to pay the bank obligations,
but also to survive as a business! After the bloodshed, the company is viable again. Buffett
thinks he has solved the dilemma and he may finally get out of the mess by selling a company
to another buyer. But he has no idea what is about to happen! [Music] Buffett may have saved the company from bankruptcy,
but in return he has disrupted the lives of thousands of working-class people in the small
town of Beatrice. Many take to the street to protest. The news
that Buffett is selling the business to another corporate raider causes massive outrage. In the eyes of the folks at Beatrice, Buffett
is nothing but a ruthless liquidator who only cares about making a quick buck for himself. Together, the people of Beatrice start a fundraising
campaign and put out three million dollars of their own money and buy Dempster Mill back
from Warren Buffett. The company is once again back in the hands
of the local people. What Buffett did to Dempster Mill is known
today as activist investing, but at the time it had a different name - Corporate Raiding.
What bothered Buffett a lot was that he never had any ill intentions and people should be
thankful that he saved the company! Even in defeat, Warren Buffett nets two million
dollars profit from this investment. To his investors, Warren Buffett seems like a maverick.
But to Buffett, he needs to find a way to repair his reputation. His next investment
will present an opportunity to do just that! The 1960s is a turbulent decade for the country.
For millions of young Americans, they feel pessimistic about the future. But an aspiring
young investor out of Midwest is just as optimistic as ever! Warren Buffett has gained prominence
by buying failing companies and turning them around for profitability or ruthlessly liquidating
their assets. But his latest investment with a windmill company has made him rethink his
approach. After facing protests with his involvement with Dempster Mill, Buffett now must prioritize
his reputation along with profit. It's a difficult balance in the finance world, but he soon
sees an opportunity to prove that it can be done. American Express is on the rise to become
a financial conglomerate, while the main business is a credit cards, American Express also has
a more secretive division that is raking in huge profit! it's a business of issuing warehouse receipts.
So if you're an owner of a large amount of commodity like oil or cocoa beans, you can
pay American Express to inspect your warehouse and issue receipts. And then you can use them
as collateral to borrow more money for the banks. But one American Express customer realizes
that this process could be easily rigged for his benefit. He's an owner of soybean oils,
but he fills a large part of the tanks with seawater and installs a device to trick the
inspector to think there are all soybean oils. His scheme allows him to deceive American
Express inspectors to issue him more oil receipts, which he uses to borrow a large amount of
money from banks. He spends hundreds of millions of loans to
gamble in the financial market and suffers a huge loss, until his scheme is exposed. Nnable to collect money from him, the banks
turn to American Express, trying to claim hundreds of millions of dollars of losses. [Music] Its share price is cut in half as
investors run scared. The future of the company now hangs in the balance. Former partners of Anthony D'Angelis, the
key figure in the multi-million dollar food oil swindle were given federal prison sentences
today. They were charged with conspiring with D'Angelis to defraud American Express warehousing
of 50 million dollars with fraudulent receipts. While American Express suffers one of the
worst crises in its history, Warren Buffett sees an opportunity to invest and a chance
to remake his reputation. Buffett saw American Express as a very well-run
company and the market over exaggerated this little setback. He purchases one million dollars worth of
shares, expecting the company to rebound in the future. But banks who lost money from the scam are
demanding American Express to pay up! Legally, American Express could take it to
court and argue that they don't have to pay because they are just as much a victim as
the banks. The president of the company Howard Clark
plans to pay banks $60 million as a settlement, but many shareholders of American Express
think it's too expensive and the company should fight it out in the court! Warren Buffett is not forced to make a stand.
He decides to support Howard Clark's plan to pay $60 million to the banks that lost
money. He believes that while it comes at a huge
short-term cost to the company, by paying a settlement, American Express strengthens
its brand for the long term as a trustworthy company that can be accounted on. Buffett goes on to win the argument, and American
Express stock bounces back, making Buffett $3.5 million dollars in profit! Buffett's partnership keeps growing as he
keeps finding bargain companies to invest. [Music] By 1965, his fund has $37 million dollars
under management. While Buffett's investing approach has made his investors and himself
a fortune, it still has flaws. And his friend Charlie Munger knows it! Well, it was perfectly obvious and he made
so much money in the other technique that it was hard for him to leave something that
had worked so well. But it was not going to scale. Buffett has made his investment success by
going against the crowd. He isn't about to change his ways. And now his stubborn persistence
is about to get him in trouble yet again, as he begins to Target another struggling
company - Berkshire Hathaway! [Music] To Buffett, Berkshire Hathaway looks
like another quick cash grab - a badly rung company but full of valuable assets that can
be liquidated for profit. I bought the first shares of Berkshire in
1962 and it was a northern textile business destined to become extinct eventually and
it was a statistically cheap stock and a terrible business. Berkshire Hathaway was closing mills and as
they closed the mills it would free up some capital and then they would repurchase shares. So I bought some stock but the idea that there
would be another tender offer at some point. And we would sell the stock at a modest profit! Buffett buys enough shears that are about
to make him the majority owner. The current boss of the company Seabury Stanton takes
Buffett's actions as a hostile takeover threat and he invites Buffett for a meeting. During
the meeting Seabury offered to buy back buff his shares at a premium and they agreed on
a price. But Seabury quickly goes back on his words
and it turns out the meeting was just a setup to gauge Buffett's intentions. Warren Buffett is furious! If he weren't going
to take over the company before, he's certainly going to now! [Music] His emotion gets the better of him as Buffett
is about to start a war to take over a company that's worth essentially nothing! [Music] Buffett keeps buying shares of Berkshire
Hathaway, determined to own the company and to get revenge on Seabury Stanton. Buffett
wins the fight, and Berkshire Hathaway is now under his control! [Music] But it quickly turns into a hollow victory.
The company is broken. One of the reasons Warren's successful is he's brutal in appraising
his own past. He wants to identify misthinkings and avoid them in the future. But it was an
accident that he chose Berkshire Hathaway, if the chairman hadn't tried to cheat him
out of an eighth, there wouldn't have been any Buffett - Berkshire Hathaway history. Buffett may have defeated his enemy, but in
return, he now owns a declining textile company. But he's finally ready to learn his lesson
and to turn this failure into an opportunity for growth. He is determined to build Berkshire
Hathaway into an Empire that is unlike anyone has ever imagined. But he also knows he can't
go at it alone! While Buffett has been taking on failing companies
to make incredible profits, Charlie Munger has been quietly building his own investment
fund. But the two future Titans of American Finance
realize they share the same purpose, and it's time to join forces! [Applause]
