The Bledsoe Firm - May 2019

The Bledsoe Firm | 949.363.5551 MAY | 2019

T he E ducation of W arren B uffett

The day Warren Buffett graduated high school, he already had a considerable amount of money in the bank. But it wasn’t the $5,000 (or $52,000 in today’s money) that was remarkable. It was something else. Last month, I shared the first part of a three-part series on Warren Buffett. This series is based on a talk I gave on Warren Buffett earlier this year. Warren is an interesting person to study, and I want to share a little more of what I learned. Warren’s childhood set the stage for what he would become next. As a child, he developed a mindset that allowed him to graduate with thousands of dollars saved up. Interestingly enough, when he did graduate, he didn’t see the point in attending college. After all, he believed that he was already setting himself up for success without it. Warren’s father, Howard, disagreed. Howard was determined to see Warren attend college — and so he did. For two years, Warren attended the Wharton School at the University of Pennsylvania, a preeminent business school. Then, he moved back to Nebraska to attend the University of Nebraska, and by age 19, he graduated with a Bachelor of Science in business administration. While Warren had initially decided against college, he became determined to continue his education. He applied to Harvard Business School but was rejected (he was considered too young). After that rejection, he turned his attention to Columbia Business School at Columbia University, where one Benjamin Graham taught.

Ben Graham was the author of “The Intelligent Investor” — a book that was highly influential on Warren. The book, in part, helped form Warren’s philosophy on investing. Ben taught students that good investors should look at the value of the company and not just the price of the stock.

In other words, if the stock price is not below the book value of the business, don’t bother with it. A business should be worth every dime of the stock price.

As it happened, Warren received the only A+ grade Ben gave out. You could say Warren was "fully invested" in Ben’s classes. He went on to earn his Master of Science in economics before returning to Nebraska once again. There, Warren began working at Buffett-Falk & Co. — his father’s investment firm — as an investment salesman. But he ran into a few challenges, the biggest being that no one would buy from him. People seemed to appreciate his investment insight, but due to his young age, people hesitated to commit. Of course, that wasn’t much of an obstacle for Warren. Warren moved back to New York, where he had attended Columbia. In New York, he took a position at Graham-Newman Corp., an investment firm founded by Ben Graham. At about the same time, Warren also taught at Columbia. He was really getting his feet wet in the investment world. Though, considering his starting salary was $12,000 a year (or about $114,000 today), you could say he had dived into the investing world headfirst. But Warren’s life at this time wasn’t all business. In the interim, he had gotten married to Susan Thompson and started a family. To say the least, Warren was a busy man. And he would remain a busy man all the way. Next month, as this series on Warren Buffett continues, I’ll get more into his family life and what he did to become one of the world’s wealthiest people. —John Bledsoe

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