The Bledsoe Firm - June 2019

The Bledsoe Firm | 949.363.5551 June | 2019

T he A ge of W arren B uffett

The old Berkshire Hathaway textile mill.

No one reads like Warren Buffett.

By the mid-1950s, Warren decide to step out on his own. He moved to Omaha and opened up a firm, Buffett Associates, Ltd. A number of people invested in the firm, and it wasn’t long before it took off. Within a year, Warren had established several partnerships all while working out of his home.

After college, he developed a reading habit few people try to match. Buffett read through the entire “Moody’s Manual” — which is 10,000 pages. Making it through the gigantic work is accomplishment enough, but he read it twice. Buffett is constantly reading to this day, a habit he picked up from his youth. According to him, he spends about 80 percent of his day reading, so his face is always buried in a book or a newspaper. One of his mantras is, “If you want to be successful, you have to read.” In the 1950s, Buffett read for information. Following the path of his mentor, Ben Graham, he was on the lookout for undervalued stocks and companies, because these represented opportunities. One such opportunity came in the form of a life insurance company that sold policies all over the Midwest to farmers and rural residents. This company appeared to be insolvent, but Warren saw an opportunity and went to the farmers and their families. He bought their policies and stock in the company, and the company was effectively turned around.

But Buffett had his methods, and he didn’t like to be questioned. He told his partners and investors, “You turn money over to me, I invest, and you let me do my thing.” He didn’t want investors to know exactly how the money was being invested. While that sounds nerve-wracking, it makes sense. Most people are tempted to constantly check on their investments, but as prices fluctuate day to day, it’s tempting to sell and get out, which almost always results in money lost. So, Warren said he would keep investors updated, but if they didn’t like his methods, they could take their money and go. Very few people opted out, and he reinvested every cent from every fee he charged investors. At 27, Buffett moved out of the small apartment and bought a five-bedroom home in Omaha for $31,500. But he continued to run his investment business out of one of the bedrooms for several more years. In 1962, Buffett assumed control of textile maker Berkshire Hathaway. He went to work buying shares of the company from its owner — who he eventually fired. In fact, Buffett did some major housecleaning when he got into Berkshire, and upper management didn’t stand a chance. Over the next two decades, Buffett transformed Berkshire. He moved the business away from textiles into insurance and investing. While he had already done well financially leading up to taking control of Berkshire, it was during the ‘60s and ‘70s that At this time, he still did everything out of his home, which was a small apartment where he, his wife, Suzy, and their two kids lived.

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