When it comes to investment success stories, there’s one name that usually comes to most people’s minds first. That’s right, the Oracle of Omaha, Warren Buffett. As he sits right now, probably at his desk making more million-dollar deals, the guy is worth a whopping $105 billion.
So, how did he get to become one of the richest people on Earth? Was it dumb luck? Or was it a cold calculated strategy that brought Buffett his extravagant wealth? I think you know the answer to that. In this article, I’m going to go through just how Warren Buffett got to the $105 billion that he’s sitting on today. And, hopefully, you can take a few pages out of his book and start stacking up your own wealth.
This is how Warren Buffett made $105 billion dollars. Let’s go!
Small Beginnings – The Early Days
Warren Buffett, just like everyone else, wasn’t born into this world as an investment mogul. He had to scratch and claw his way to the top. So, let’s take a look back to the beginning of his journey, a journey that started when Warren was very, very young.
From the age of about 11 years old, Warren Buffett was already thinking like an entrepreneur. He got a paper route like many kids back then would. But unlike the other kids, he saved up all of his earnings and eventually bought a plot of farmland in his home state of Nebraska. He also used some of the money to buy shares of preferred stock. That’s right, Warren Buffett was a landowner and a stock market investor probably before he hit puberty.
But the hustle didn’t stop there; Warren kept looking for new ways to make money. He would sell chewing gum, Coca-Cola, and weekly magazines door-to-door. He worked in his grandfather’s grocery store. When he was in high school, he started selling golf balls and stamps, and he was detailing cars. And when he was a sophomore, he and his friend bought a pinball machine for $25. Before long, they made enough money to buy a bunch more pinball machines, and they eventually sold the whole pinball business for $1,200, which was a lot of money back then.
By the time he was 15 years old, he had a net worth of over $5,000, the equivalent of over $54,000 in today’s money. Buffett kept working and investing while he went through college at both the Wharton School of Business and the University of Nebraska. And by the time he graduated, his net worth was up to $9,800, which is worth around $107,000 today.
But, let’s take a look at when things really started to ramp up, and Warren Buffett started to make more than just college-kid money. Well, $107,000 is more than I had in college, that’s for sure, but you get the point. This is how Buffett made his first million.
The First Million – First of Many
Buffett began his career by working for his mentor Benjamin Graham’s hedge fund for two years in New York. But, Buffett wanted to be the boss, so he went back to his hometown of Omaha and started his own hedge fund in 1956 called Buffett Partnerships with $100 of his own money and around $105,000 from other investors, including his sister Dorothy, his Aunt Alice, and his father-in-law.
Once Buffett got his hands on some investment money, he started making smart moves with other people’s money and rolling his commission payments into shares of his own fund. He eventually grew his investors’ assets to $7.2 million by 1962. What was his stake in all that? A big ol’ $1 million dollars.
At the age of 11, Warren Buffett predicted that he would be a millionaire before the age of 30. And like most other predictions that Warren Buffett makes, he was right. It was in that same year, 1962, that Warren Buffet would make his first investment in the company that we now associate with his name: the one that’s made him so many more millions, Berkshire Hathaway.
Getting Into Berkshire Hathaway – The Start of a Dynasty
In 1962, Warren Buffett first invested in Berkshire Hathaway, which was just a New England textile company at the time. And he became the majority shareholder in the company within that very same year. In 1965, Buffett’s partnerships took full control of the company and Warren appointed a new president and named himself chairman.
However, it wasn’t just smooth sailing for Berkshire from there. Buffett liquidated his investment partnership in the company in 1969, meaning he withdrew all his money but still remained as chairman and started putting that money into the insurance industry.
While Buffett did all he could to keep the business running, Berkshire was struggling to keep its head above water. Meanwhile, Buffett bought up National Indemnity Company in 1967 and bought $4 million worth of GEICO in 1976. And those investments were shooting to the moon.
While his insurance company stakes were doing fantastic, Berkshire wasn’t doing quite as hot. In fact, Warren Buffett once said in an interview that investing in Berkshire was the dumbest thing he ever did, and that if he had focused on insurance instead of the textile industry a lot earlier, Berkshire Hathaway would be worth about $200 billion dollars more than it is today. That’s a lot of money to miss out on, but something tells me that Warren Buffett’s doing alright anyway…
In 1978, Buffett convinced his longtime friend Charlie Munger to quit his law practice and join Berkshire Hathaway as vice president. And, not long after, in 1983, Berkshire Hathaway was fully turned around and had hit a major milestone. Their stock crossed the $1,000-per-share mark.
At that point, since Buffett owned a large percentage of the company’s shares, he was starting to get filthy rich. His estimated net worth in 1963 was $620 million. But, in 1985, Buffett crossed a milestone himself. That’s right, I’m talking about his first billion.
The First Billion – Welcome to the 1%
In 1985, Forbes estimated that Buffett’s net worth was around $1 billion. And the way he got there wasn’t all that astounding. It was sort of what he’d been doing for his entire life: making sound investments that played out well. Some of the most notable investments that got Buffett to his first billion were Washington Post Company, GEICO, ABC Broadcasting, and RJ Reynolds, which is a tobacco company for those of you who don’t know.
After he made those investments, his Berkshire shares just started to take off and grow in market cap, with Warren Buffett’s net worth growing right beside it. In 1990, Berkshire started selling Class A shares with the market closing at over $7,000 per share.
And, over time, Warren Buffet has just continued to do what he has always done: making smart moves with his money and outperforming the market. Today, Berkshire’s Class A shares are trading at over $400,000 per share, making it the most expensive publicly traded stock in the world.
The reason for this is that, even though Berkshire has grown significantly in value, Buffett has never allowed the company to have a stock split. He wants to invite only high-net-worth investors to buy shares of his company, investors that know what makes up a good business. And, once they’re invested, he doesn’t want to dilute the value of their investment with a stock split.
But a lot of people make good investments, right? I mean, as of 2021, there are over 3,000 hedge funds in the USA alone. So what makes Warren Buffett so special? Why is he the one who ended up with over $100 billion in his purse?
Investment Strategy – Keys to Success
Alright, first of all, Warren Buffett appreciates the value of money as well as anyone on Earth. And he notoriously doesn’t ever spend more money than he has to. He lives in the same house in Omaha he bought in 1958 for a little over $30,000, he buys damaged cars because they’re a good deal, he eats at freakin’ McDonald’s and Dairy Queen, he used a Nokia flip-phone for years after the smart phone was invented.
I mean, even at a net worth of over $100 billion, the guy is still looking to shave cents on the dollar. But that’s just the mindset you need to get to where he is. Every dollar is a tool that you can use to make more money, which leads me to my next point.
Like many super-rich people, Buffett has always let his money work for him. It’s always being invested. All that money that he’s saving from being frugal and working hard is going right into shares of a company or into buying a company entirely. When Warren Buffett gets a dollar in his hand, he doesn’t look at it as a dollar, he looks at it as something that he can turn into $10, and then $100, and then a $1 million. You get the point.
And the way he does that isn’t just by dumb luck. Buffett is among the most discerning investors in the world. He’ll scour through news articles about a company and study their financial statements for years until he’s sure that his investment is going to be a good one. Once he’s sure in his mind that an investment is going to make him money, he puts large amounts of capital into that company, which will help the company succeed and will also help Warren make good on his investment.
So, to put it as simply as possible, Warren Buffett really got to where he is today because of three things: he saves his money, he lets his money work for him through investing, and he does the research necessary to make sure that his investments are good ones. And if there’s anything you should take away from this article, it’s those three lessons.
Sure, you might never be a hundred-billionaire. But, by using those three tools, you can grow your own net worth significantly and taste the freedom of financial security.
You must be logged in to post a comment.