Table of Contents
Warren Buffett’s Childhood
Warren Buffett’s Education
Warren Buffett’s early professional career
Warren Buffett’s career, 1990-present
Key Traits of Buffett Leadership
Will You Learn
Ability to go against the flow
Being Humble Despite His Fortune
Buffett Will Give
Takeaways from the Author
In closing
Warren Buffett is likely to be remembered as one of the greatest and most successful investors of all time. Buffett’s patience has paid off. Buffett, who has a net worth in excess of $87.6 million, is a man of patience. He also excelled in finance business education. Buffett is a well-known figure in the world of finance. Many documentaries and books have been written about him. They also include annual speeches he delivers at his Value Investors Conference in Omaha, Nebraska. This paper examines Warren Buffett’s leadership style and his life. Who is Warren Buffett?
For many years, Warren Buffett was the most frequently asked question. Most people would be unable to tell you that Buffett, a Wall Street billionaire, is the answer. I’m sure that even a nerd like me who is an investor would be able to tell you that this isn’t all of it. Buffett is the ideal investor. Buffett, who is self-described “Wall Street Insider”, claims they can help find magic stocks that double overnight. However, Buffett’s life has seen him quietly build a jaw-dropping fortune “being greedy when people are afraidful, fearful when people are greedy”. Warren Buffett is currently third in wealth behind Bill Gates and Jeff Bezos. This wealth was achieved by investing in companies with a high valuation but an enormous growth potential. Berkshire Hathaway is his company’s chairman, and he handles all transactions. Berkshire Hathaway, a holdings firm, is located in Omaha. The company’s annual report for 2016 shows that it has achieved an average annual gain in earnings of 19%. In comparison, Standard & Poor’s 500 index, also known by the S&P 500, has gained an average annual 9.7% percent between 1965 and 2016. The company’s 2016 annual report shows that Buffett has enjoyed a very successful career. However, Buffett isn’t as obsessed with money as some might think. We’ve seen Buffett’s generosity as a philanthropist since the turn of this century. Warren Buffett declared in 2010 that “more than 99 percent of his wealth will be donated to philanthropy within his lifetime or his death.” This was in response his friends Bill and Melinda Gates’ campaign ‘The Give Pledge’. In addition to his 2006 pledge to give all his Berkshire Hathaway stock gradually to charities, this was also a part of his 2010 pledge. The campaign has grown to include billionaires who have pledged to donate 50% of their wealth to charities and causes. The Path of Warren Buffet
Warren Buffett’s childhood Jane Levere of Forbes writes that Buffett gained his wealth when he turned seven and read One Thousand ways to make $1000 (2017). Buffett took the advice from this book and started to put it into practice. Buffett started his career selling gum and Coca-Cola drinks, as well as delivering newspapers on paper routes and magazines to customers. Buffett’s business ventures would be temporarily suspended when Howard Buffett, his father, announced that he had been fired from his bank job due to the Great Depression. Hagstrom’s The Warren Buffet Way later reveals that Buffett’s grandfather actually bailed the Buffett family out of his grocery store. Howard Buffett was offered a job as a stock broker, where he would explore the markets and seek out clues. Buffett’s first stock purchase was in 1941 when he was eleven years old. Warren Buffett’s Education. His father Howard encouraged Buffett to attend college at Wharton School of Finance and Commerce. Buffett was not able to learn from Wharton professors so he transferred closer to home at Nebraska at Lincoln. Buffett finished his University of Nebraska degree in just one year. After that, he returned to Omaha. The Intelligent Investor would become his next life-changing book. Buffett was rekindled by the book and began to search for graduate schools to further his investment knowledge. He chose Harvard Business School as his first choice. Buffett was refused admission, but it is true. Soon after, Buffett discovered that Benjamin Graham was actually a Columbia University graduate school of business professor. Warren Buffett learned a lot of his investment knowledge from this school and became the genius that he is today. Buffett would frequently say that Graham was the source of most of his investment knowledge. Graham’s famous line, “There’s only two rules about investing,” is still widely used today. The first rule of investing is to not lose. The second rule, ‘Don’t lose’ is the key. One can only imagine how simple and powerful these lessons were for Buffett’s young self. It was better to sell stocks early and not make large profits than to hold stock too long and incur a significant loss. Graham and Buffett developed a strong mentor-student relationship. Buffett would later receive his first A+ as a professor. Warren Buffett’s Early Professional CareerAfter completing his Columbia University degree, Buffett was invited to join Graham-Newman, where he worked with Benjamin Graham. The company was eventually disbanded when Graham retired shortly after. After learning from his brokerage experience, he decided to go home and start his own business. Buffett’s family contributed $105,000. He used some of the money to invest in stocks, while the rest was used to expand his portfolio by forming more partnerships. In 1958, two years after his return, Buffett doubled the contributions of his partner. Buffett saw an opportunity in his sixties to expand the profits of his partners when American Express was among the banks that felt the effects from the “Salad Dressing Scandal”. American Express lost over 50% of its stock price. Buffett saw an opportunity. Buffett received consumer feedback about the company and invested $13 million. This was Buffett’s way of showing how greed can be rewarded when others are afraid. Buffett’s investment was profitable. The company made $20 million in profit in just two years. Buffett then found Berkshire Hathaway, an American textile mill, and purchased significant shares. Contrary to popular belief, Buffett said that this was one of his worst investments. Buffett bought a large stake in the company, despite the fact that he was the majority shareholder. Buffett became the majority shareholder in Berkshire Hathaway. As many businessmen, Buffett liked the insurance business as it gave him a steady monthly income and he didn’t have to pay large amounts of money for any particular event. The Buffett Partnership Ltd. achieved its greatest success in 1968 with a profit of $40 million. The next year Warren Buffett resigns from his partnership and sells all his assets. Buffett still controls Berkshire Hathaway and is named chairman. Buffett makes the company, originally a mill for textiles, more profitable through investments, banking, insurance, and other activities than its sales during the seventies. The honeymoon stage did not last. From 1973 to 1974 the stock market fell and Berkshire Hathaway, Warren Buffett lost their portfolios. Also, note that Buffett bought stock in The Washington Post between 1973 and 1974. Warren Buffett’s personal net worth fell 50 percent during the brief bear market. Investors use this term to refer to a decline in stocks. Buffett was not stopped, as you might have guessed. This was another obstacle that Buffett had to overcome. His family survived and prospered during the Great Depression. Buffett was willing and able to put aside his wealth insecurity to help them overcome this obstacle. After years of selling and buying stocks successfully, Warren Buffett was able to lead Berkshire Hathaway into new heights. In fact, the stock traded at a staggering $290 per share. Buffett was the majority shareholder and chairman, increasing his personal wealth to $140million. But he also realized the importance in reinvesting funds and allowed himself only a $50,000 per year salary. Berkshire Hathaway, a journalist who knew the intricacies of journalism, began purchasing shares in American Broadcasting Companies. Yes, that’s ABC. In 1985, Buffett would play a major role in the Capital Cities Communications acquisition by American Broadcasting Companies. This merger was one of the most significant in American history. Buffett was awarded three million shares of the new company through his participation and the title director. The Career of Warren Buffett, 1990-present. Hagstrom says that by 1994 Berkshire Hathaway had informed its shareholders it was the majority shareholder in GEICO. Berkshire bought the remainder of GEICO’s shares in 1996 to become the entire owner. It cost $2.3 billion. The company’s poor record in 1970, when it almost went bankrupt was a major reason for this controversial move. However, this acquisition proved to be very profitable for Buffett, Berkshire Investments, and their shareholders. According to Berkshire Hathaway’s 2013 10-K Financial Statement, GEICO received $1.8 billion in premiums. Berkshire Hathaway purchased Clayton Homes, a west Tennessee-based company in 2003. Clayton Homes was started in Tennessee by Jim Clayton. The company had also added a mortgage and manufacturing division by 1983 when it went public on New York Stock Exchange. Warren Buffett purchased the company from the owner for $1.7 billion. He was impressed and it has remained in Berkshires’ hands ever since. Although the list does not cover every significant event in Buffett’s entire life, it can be used to help us understand his leadership style. Key traits of Buffett’s leadership Anyone who attends Columbia University’s Wharton School of Business can assume that they are knowledgeable. We are certain to be right in assuming that Warren Buffett has a high level of intelligence based on his life. Buffett did not inherit the God-given gift of choosing winning stocks. Buffett made use of his resources to learn all he could. Buffett claimed that certain books were what helped him to become an investor. Buffett would not have been able to see Benjamin Graham’s stock market analysis if he hadn’t read The Intelligent Investor. He wouldn’t have applied to Columbia for his lectures at graduate school. If he hadn’t read One Thousand Ways to Make $1000, he might not have had the entrepreneurial drive and ambition to go to college for a degree in business administration. Ability to resist the flowIf Buffett’s famous statement “Be greedy in fearful times, and fearful in greedy times,” was not convincing you, then you don’t understand Buffett. Buffett was ridiculed on several occasions for selling or buying large quantities stock stocks of companies. Buffett was able to make these decisions regardless of the external noise, and he listened to his established guidelines. Warren Buffett didn’t seem to be bothered by stock market crashes when investors panicked and sold their stocks. As long as his companies were on the right track, he was fine with the selloff. Buffett may be willing to purchase more stock when it was “discounted priced”. Warren Buffett’s humility despite his fortune Why isn’t everyone familiar with him, compared to Bill Gates, Jeff Bezos and Mark Zuckerberg? It is not surprising that Buffett’s business is more popular than Buffett’s. I credit his humble spirit. Buffett is known to be frugal with money. Buffett has lived at the same Omaha home with five bedrooms since 1957. The house was purchased for $31,500. The Buffett Partnership Ltd. (later Berkshire Hathaway) and later Berkshire Hathaway also lived in the same building that Buffett’s office occupied from 1962 until today. Many people, including myself, cannot imagine how it would feel to have a million dollars or even a billion. We can easily criticize Buffett for not purchasing a larger house or a more expensive office building. Buffett is quick to point out that we are foolish to think it is better for us to spend money on extravagant things than for our growth and success. Also, Buffett is known for not investing in areas he doesn’t know. Buffett would buy stock in McDonalds instead of a semiconductor company chip company. This is because he understands food business better than technology. It’s easy to see that Buffett’s humility should be emulated. Buffett’s Will To Give Many people assume it’s easy to give money to charities if you have billions. This is a misleading and unfortunate mindset. Warren Buffett might not be working today if his wealth was only given to charities in recognition. In 2010, Buffett made a pledge to give 99 per cent of his wealth to charity, either during his lifetime or after his death. He is not going to let his children or grandchildren inherit billions in wealth without working. His continued work shows that he wants to make his wealth more accessible to charities, and not just his current wealth. Conclusion about Buffett’s Leadership Style. I believe Buffett is a leader who can transform people. Warren Buffett brings his best to every job. He expects nothing less from his employees. Buffett is not a fan of efficiency. He also values the opinions of his employees to help him in his research. Buffett doesn’t believe he can be in charge of everything. Buffett is open to admitting when he’s wrong or when he doesn’t know something. Warren Buffett also values the importance of others. Buffett believes the shareholders own the business, not the employees, board members, or chairmen. Buffett was a firm believer in this belief and allowed his investors to donate $2 for each share of stock. This enabled him to encourage others to generously contribute to those in need. Although little information was available, I believe Warren Buffett’s transformational leadership style was appropriate. The Author’s TakeawaysI was passionate about investing and wanted to learn from Warren Buffett. I am pleased to report that I gained new insights and was able strengthen the ways I thought before I started this assignment. Buffett’s advice to live within your means was the first lesson that I learned. This was something I had heard before. This is something I’ve learned from research. It will be easier for me not to get into debt than if I spend money recklessly. I will be able to save money and invest. Although it can be scary and speculative for some to invest, there are practical methods that people can use to ensure they receive an annual income. This concept could be summarized by saying, “it’s better to let your money work for yourself than to have it work for us.” It seems that people nowadays prefer to view videos to learn information to reading a book. But, it seems that there is always a significant gr
There is a greater reward for those who read than for those who watch the videos. I have been reading books to learn more about investing in preparation for next semester. My goal is to stay current with the market, learn investment techniques and keep up my studies in order to be in a successful position when I graduate from Freed-Hardeman’s Clayton Investment Team in spring 2020. Buffett was a great addition to my library of books that I’ve read to help me make better decisions about stocks and my daily life. My research has also taught me the importance of pursuing entrepreneurial opportunities. People will always seek out a solution to a problem. It doesn’t matter how attractive it might be. All that matters is whether you can make money from it. This has taught me to be more proactive in looking for opportunities, and to then find ways to solve them myself rather than allowing others to profit from them. This paper will be of benefit to anyone interested in Warren Buffett’s leadership and the wisdom he has shared. However, I am unable to confirm Warren Buffett’s transformational leadership. His leadership qualities fit the criteria best when he can only define one style of leadership. One final thought: Warren Buffett is a true man of his word. He may be rich beyond our wildest dreams but he also knows that money doesn’t buy happiness. While money may be able to buy financial security or temporary status, the key to happiness is love, community, and friendship.
