The Real Secret Behind Warren Buffett's Success Is Finally Revealed

“I buy expensive suits. They just look cheap on me”
-Warren Buffett

KEY STATISTICS: (Date of Analysis: November 7th, 2013)

Full Name: Warren Edward Buffett

STARTING CAPITAL: ZERO

NET WORTH NOW: $59 Billion (2013)

Date of Birth: August 30th, 1930 (age 83) Omaha, Nebraska
Current Residence: Omaha Nebraska
Parents: Howard Buffett and Leila Buffett
Education: Columbia Business School
Occupation: Chairman & CEO of Berkshire Hathaway
Family Life: Married to Astrid Menks (2006-present). 3 Children: Susan, Howard, Peter

QUICK SUMMARY:

Warren Buffett was born in 1930 to Howard Buffett a stock broker/US Representative and Leila Howard a housewife in Omaha, Nebraska. Buffett’s early life was unremarkable in many ways. Being born in the midst of a Great Depression to a typical American family and living in the heartland has allowed Buffett to learn American values from an early age. Starting his school in Omaha, Buffett later moved to Washington DC after his father was elected to the United States Congress.

Even from an early age Buffett showed that he had interest in stocks and an Entrepreneurial spirit. He often spend time in his father’s brokerage company trying to learn all that he could about stocks, finally pulling the trigger on his first stock investment at the age of 11. His young entrepreneurial exploits of buying soda, gum, investing in farms and other businesses is well documented as well. In 1950 he entered into a Columbia University Graduate School of Business to study under a well known analyst and investor Benjamin Graham (author of classic “The Intelligent Investor“) and that’s where Buffett’s story really begins.

After getting his graduate degree from Columbia in 1951 Buffett literally begged Benjamin Graham for a job at Graham’s investment firm for 3 years. At the time Graham didn’t think much of Buffett and turned him down on numerous occasions. That is until he reluctantly agreed to hire Buffett in 1954, most likely because he was sick of Buffett pestering him. Buffett worked for Graham in New York until 1956, the year Graham has decided to close down his business.

After closure, Warren Buffet moved back to Omaha to start his own investment partnership (aka hedge fund). Starting with a little over $100,000 raised ffamily and friends, Buffett has managed to accumulate a personal net worth of close to $25 Million in just 13 years by investing in undervalued stocks. In 1969 Buffett liquidated his investment partnership and returned all of the capital to investors. At the same time he kept most of his money invested in various companies, including Berkshire Hathaway, a company that he eventually brought under his control.

Thereafter, through his control of Berkshire Hathaway and through a series of brilliant investments spanning multiple decades Buffett has turned his $25 Million fortune into a $59 Billion mega fortune today. Simply put, Mr.Buffett is a brilliant investor, analyst and an oracle of sorts succeeding beyond belief in one of the most competitive fields in the world. The stock market. What we can learn from him and his approach is priceless.

FUN FACTS ABOUT WARREN BUFFETT:

Warren Buffett, the 3rd richest man in the world, still lives in the $31,500 house he bought in 1957.

Warren Buffett gave 85% of his money to charity (mostly to the Bill and Melinda Gates Foundation) to a total of 40.7 billion dollars.

Warren Buffett filed his first tax return in 1944, at the age of 14, and took a $35 deduction for the use of his bike and watch on his paper route.

In 2010, a lunch with Warren Buffett was auctioned off to a man for $2.63 million dollars

If you invested $1000 with Warren Buffett in 1957, you would have amassed upwards of $30 Million today.

WARREN BUFFETT QUOTES:

“If past history was all there was to the game, the richest people would be librarians.”

“Only when the tide goes out do you discover who’s been swimming naked.”

“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”

DIFFICULT TIMES & OVERCOMING PROBLEMS:

Being a money manager is one of the most difficult professions in the world. You are constantly dealing with various pressures while trying to perform to the best of your ability. There is no consistency and your world is always volatile (just like the stock market itself). Obviously Warren Buffett has thrived in this environment for many years.

His toughest challenge came in 1991 when Warren Buffett was unwillingly sucked into a huge Salomon Brothers scandal involving the US Government. Warren Buffett was forced to take over the company as the CEO and manage the company through its darkest days. The company was hours away from being literally destroyed by the US Government and it was only Mr. Buffett’s personal assurance at the time that saved the company. By leveraging his reputation and pushing through the rough times he was able to save Salomon and his own net worth.

PERSONAL CHARACTER TRAITS:

Down To Earth: Even though Warren Buffett is the fourth richest person in the world, he doesn’t show it. He still lives in the house he bought back in 1957 and is not known to splurge on luxury. He lives a simple life to the point where you wouldn’t be able to guess that he is even a millionaire if you see him walking down the street or eating in one of his favorite restaurants in Omaha.
Hard Working: Officially Warren Buffett has been working since 1951 without taking (as far as I know) any real time off. Unofficially, he has been hustling since the age of 8 or for 75 years. Yet, he doesn’t call it work. He has famously said that he tap dances to work every day. Simply put, he loves what he does and its more of a play than work for him.
Fair & Honest: Warren Buffett is famous for saying that rich should pay their fair share of taxes (arguing that they should pay more). He even lobbied the congress to increase taxes. You see the same consistency throughout his business career. He puts a significant amount of premium on his own reputation and believes the only way to get a good one is too be fair and honest in all of his business dealings.
A Great Sense Of Humor: Warren Buffett is known for his corky sense of humor and his ability to cut through the bullshit and point out the obvious. His annual report letter to the shareholders is as treasure throve of jokes and incredibly valuable real world advice. It should be on everyone’s reading list.
A Masterful Politician: Even though you wouldn’t think of Warren Buffett as a politician, he is a natural born pro. If you study his career you will never see him take extreme sides of any issue. He is always somewhere in the middle. Even though he knows a lot more than he says, he rarely takes sides either for or against something.

SUCCESS ANALYSIS:

Warren Buffett’s success is very difficult to analyze. First, he wasn’t involved in one company that made him rich. He has built his fortune over the last 57 years, one day at a time and through acquiring over 50 companies that now reside under Berkshire Hathaway. He did have major scores, but a steady annual compounding of his money is what really did it for him. Second, most of his work is analytical in nature and out of the public eye. He spent most of his time analyzing companies and making investment decisions. That in itself is very difficult to pinpoint. Luckily for you, I do something very similar. Here are the factors that contributed directly to his success.

Right Timing: While you might not see a direct connection, Warren Buffett’s timing was perfect. If he would have been born just 5 years later, he wouldn’t be as much of a success as he is today. He would still be rich, but probably not that rich. Here is why. US Financial markets started a major BULL move in 1949 and completed it in 1966. Warren Buffett started his investment firm in 1956, giving him 10 years of one of the fastest BULL markets in history to work with. Yes, he is a great stock picker, but having a BULL market at your back makes one hell of a difference. That’s what helped him to accumulate his initial capital of $25 million. If he would have shown up just 5 years later, I doubt he would have been able to accumulate as much capital in the tough bear market years of 1970’s. With a smaller nest egg to work with, his net worth would be a lot less today.
Loves To Make Money: From an early age Warren Buffett loved to make money. Starting with selling gum and soda at his school he quickly transitioned to buying farmland and investing in stocks. While the money itself is meaningless to him, he uses it to keep score and to make sure he is winning.
Highly Intelligent & Analytical: I firmly believe that investment world (and not academia) attracts the best minds in the world. Among those people Warren Buffett is the king. Very few have been able to replicate his success over an extended period of time. This speaks to his high level of intelligence and analytics ability. Is he the smartest guy on the planet? Well, even if he is not, he is not that far behind.
Incredibly Aggressive: You might view Warren Buffett as this grandfatherly character who is always smiling and is a nice person. Surely he is, but he is a naturally born predator as well. Case in point, his $5 Billion investment in Goldman Sachs in the darkest days of 2008 financial crisis. He has done the same thing throughout his career on multiple occasions. You have to be aggressive to do that.
Consistency & Concentration: Starting at a young age Warren Buffett never really deviated from his original investment strategy. He has always made Value Investing his bread and butter and has spent the last 75 years perfecting his skills. I believe sticking to what he knows and understands the best is what has made him a huge success.
Balls Of Steel: If you have ever been in an investment business you know that at certain points you will be standing on a edge of a cliff looking down into the deep abyss. Just as night follows day, that is unavoidable. Yet, it is the quality of staying calm while everyone else is freaking out is what separates great investors from everybody else. Warren Buffett has proved on multiple occasions that he can stand on the brink and whistle without a care in the world. That takes major cojones when billions of dollars are at stake.
Great Manager & Motivator: Delegation and letting his managers run his companies is what has made Warren Buffett so rich. He is not interested in running day to day operations and he prides himself on finding top management talent, motivating them and letting them do the hard work.
Ruthless Shark: A well known saying in the investment community that is incredibly difficult to follow. As Warren Buffett himself says “Be fearful when others are greedy and be greedy when others are fearful”. Meaning, one should buy stocks when the blood is running on the streets (Ex: 2007-2009 collapse). Yet, very few investors can do that. Warren Buffett has done so consistently throughout his long career.

CONCLUSION:

While Warren Buffett seems like a friendly Mr. Rogers from a few doors down the road, he is not. He is a ruthless capitalist who loves making money and allocating capital. I do not believe the money itself play an important role in his life, but the process of making it is everything to him. It is a score card of sorts that shows him how well he has done and in what areas he needs to improve.

Warren Buffett plays to win. It is no accident that he was named the most successful investor of the last century. Yes, investing provides his with a way to show off his intelligence, but it goes much deeper than that. Warren Buffett has also redefined the game and has shown everyone that it is possible to take it easy and be nice to people while at the same time being one of the most coldblooded capitalist on the face of this earth.

So, what can we learn from Mr. Buffett to help us become Billionaires as well? Taking out factors that we cannot control, here is what you can replicate.

Do What You Love: In most cases you will not become filthy rich overnight. Most of us will have to build our fortunes over an extended period of time while working incredibly hard. The only way to do that is to find something that you love and stick to it. As Warren Buffett says, you must love being in the office.
Fall In Loves With The Money: There is absolutely nothing wrong with loving money. In fact, if you don’t love money, you will never attract enough of it into your life. Warren Buffett loves money, so why shouldn’t you?
Become Aggressive: As we see with most of our Billionaires you must be aggressive and you must play to win in all of your business dealings. Get it through your head and start winning.
Consistency & Concentration: A truly important and timeless quality to have. If you are to become an expert in your field you are bound to outperform your competition. Plus, maintaining consistency helps you get through the hard time without sacrificing your integrity or the integrity of your business.
Grow A Pair: Listen, you need to grow a big pair if you want to play with the big boys. Simple as that.
Delegate: Find great people and delegate as much work as you possibly can to them. This will allow you to concentrate on more important tasks that you love.
Become Ruthless: Not ruthless enough to take candy from a crying baby, but ruthless enough to make money from the misfortunes of others. There is nothing wrong with buying assets when others are fearful or filing for bankruptcy. It’s their problem, not yours. Buy low, sell high. Get rich.