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FEATURED! How exactly did Warren Buffet Become a Billionaire?

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Deleted58904

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I know he bought Berkshire Hathaway in 1964, which today is a holding company and conglomerate that owns large percentages or even 100% of many companies. In other words, he's an activist investor today, not a retail investor. But was he ever a retail investor before he became an activist investor? In Unscripted, MJ said that usually when Warren mentions Berkshire makes an investment the shares of that company go up since people usually buy more shares of the company. Is he rich just because people tend to copy his moves so when the price is up he can sell for a profit?
 

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TrowelHead

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Read the book, it's all in here:
The Snowball: Warren Buffett and the Business of Life

As far as i can remember, he got started managing OPM (other peoples money) in his own funds - so in effect charged high fees on managing investment funds for others, seemingly using a retail / value investing methodology.

As that built and was profitable, he bought insurance companies and used the "float" (the fees people are paying upfront in premiums) to invest and therefore was able to collect OPM in form of insurance premiums to invest and profit from. Plus many many more things i forget from the book...


 

Danny Sullivan

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I can recommend reading The Snowball too. It's has it's length but there are some valueable life lessions in it. The exponential growth of dividend paying stocks plays a major role in his current net worth.
 

CPisHere

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Read the book, it's all in here:
The Snowball: Warren Buffett and the Business of Life

As far as i can remember, he got started managing OPM (other peoples money) in his own funds - so in effect charged high fees on managing investment funds for others, seemingly using a retail / value investing methodology.
Yes, and before managing OPM he had done quite well starting/owning his own businesses and investing. He also had some family money.

As that built and was profitable, he bought insurance companies and used the "float" (the fees people are paying upfront in premiums) to invest and therefore was able to collect OPM in form of insurance premiums to invest and profit from. Plus many many more things i forget from the book...
This is the real answer to how Buffett became a Billionaire... investing the float from insurance.

He also moved away from being a value investor into a very shrewd investor. He only later benefited from other people following his moves - that's responsible for almost none of his wealth.
 

Xeon

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If I remember correctly from an article some time back, he was pretty well-off to begin with (dad was a congressman I think), so his family had the connections.
Also, at one point (before he was in his 20s), he managed to get people (the people he personally knew) to invest about $100,000 while he manages that. $100K in those days would be at least multi-millions in today's money (that was before he made it big, so his street cred probably wasn't that strong to begin with, and yet....).

So, he's definitely not the "Homeless-Cashless guy who became a billionaire" type.
Now that I think about it, pretty much all billionaires (Gates, Zucks, Buffett and probably Bezos too) were all pretty well-off to begin with.

*All these are from the top of my head, the details are kinda fuzzy.
 

MJ DeMarco

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Ah yes, good ole Warren, the ultimate Slowlane figurehead when in fact his fortune is from Fastlane activities....

How exactly did Warren Buffett Become a Billionaire?
From charging outrageous fees on money management back in the late 50s 60s and 70s, the kind of fees he now advocates against. That was a good launch point. At the end of the day, WB is an entrepreneur and someone who looks to "add value" where value is lacking, or not being utilized efficiently.

From Pragmatic Capital (a book under the same name, recommended read.)

https://www.pragcap.com/investment-myth-1-you-too-can-become-warren-buffett/

upload_2018-7-30_8-39-19.png

Buffet is rich mostly because he's an entrepreneur, not some guy sitting at his desk buying 100 shares of Apple via his eTrade account.
 
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Danny Sullivan

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There are interesting reads about Buffett's early years in the book: selling gum and cola, delivering papers, selling used golfballs, scavenging losing tickets at the horse track, setting and maintaining flipper machines in barber shops... and some more... He certainly has a Do'er spirit.
 

WJK

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What's interesting to me is that he buys existing companies and makes them better through improved management. He studies business and social systems and how things are working, or not working. He says that he reads several hours a day gathering information and understanding. When he makes a buy, he looks for long-term value rather than an unvalued stock. I have read several of his yearly letters in which he tells about his failures as well as his successes. He also included analysis about what he was thinking and where he went wrong.
 

Arun Siva

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socaldude

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I've never looked into how he "really" got rich. I knew he didn't get rich trading stocks through a brokerage or anything like that.

I always had the impression that he got rich "flipping" companies and selling different forms of insurance.

I have mad respect for the guy, but he's a hypocrite for sure.

He shows up on these interviews and says you can get rich putting $100 into an index fund every month.
And yet he doesn't do this nor has he ever.

There is more to warren than how the media portrays him as a Coca Cola-addict-jolly-penny-kisser-stock picker.

To me hes more of a brutal secretive mega-finance zero sum game master.
 

Arun Siva

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If Buffet is a hypocrite, then Soros is a demagog; they both are two peas in a pod; albeit extremely brilliant and borderline psychotic. However there are enough people that cant do a bit of research and or go one step further in seeking the truth and will believe anyone based on their status, title etc etc. IMHO, I would listen to CHarles Munger he was Buffet's right hand man, (aka the Courtier)
 

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Ninjakid

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Warren Buffet is so F*cking rich he probably has people who coach him on "how to appeal to the masses." You don't get to be worth $85B accidentally, if you look at his life story literally everything he's ever done is for the purpose of being the richest MF on the planet.
 

Tommo

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Ah yes, good ole Warren, the ultimate Slowlane figurehead when in fact his fortune is from Fastlane activities....



From charging outrageous fees on money management back in the late 50s 60s and 70s, the kind of fees he now advocates against. That was a good launch point. At the end of the day, WB is an entrepreneur and someone who looks to "add value" where value is lacking, or not being utilized efficiently.

From Pragmatic Capital (a book under the same name, recommended read.)

https://www.pragcap.com/investment-myth-1-you-too-can-become-warren-buffett/

View attachment 20410

Buffet is rich mostly because he's an entrepreneur, not some guy sitting at his desk buying 100 shares of Apple via his eTrade account.
I was going to quote this book also MJ as I have it in my library. Buffet is described as running a Hedge fund as it were. He isn't the Grandfather figure the media make him out to be.
 

garyfritz

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And Buffet isn't nearly the investing genius people think he is, either. Not any more.

He made some good calls, and he was investing during The Most Ideal Time for his buy-and-hold-forever strategy. But for the last 15+ years, most of the time he doesn't even beat the market.

Since about 2003, BRK.A has essentially been an S&P index fund. Most of the time it tracks .INX almost perfectly. BRK.A got ahead in 2000-2003 because Buffet didn't believe in investing in Internet companies he didn't understand, so he didn't get killed in the Dot Bomb. Since 2003 BRK.A got a boost in 2007 (not sure why). In the last 2-3 years it's gotten ahead a bit, but it's done that before and then pulled back, so the jury is still out if this one will stick.

Other than that, in spite of all the sweetheart deals that only he can swing, in spite of his vaunted ability to pick companies -- he's just matching the market.
 

MJ DeMarco

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he's just matching the market.
Which actually isn't that good because anytime there is NEWS that Buffet has made an investment in XYZ, the stock rockets. Imagine if we had that power, to move markets based on what we buy... we'd all be a lot richer...
 

garyfritz

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Well, that's true, but it doesn't really help him much. He doesn't sell very often, and he almost never tries to time the market. So any short-term jump from the "Buffet Effect" would be long gone by the time he thought about selling.
 

mex-i-can

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And Buffet isn't nearly the investing genius people think he is, either. Not any more.

He made some good calls, and he was investing during The Most Ideal Time for his buy-and-hold-forever strategy. But for the last 15+ years, most of the time he doesn't even beat the market.

Since about 2003, BRK.A has essentially been an S&P index fund. Most of the time it tracks .INX almost perfectly. BRK.A got ahead in 2000-2003 because Buffet didn't believe in investing in Internet companies he didn't understand, so he didn't get killed in the Dot Bomb. Since 2003 BRK.A got a boost in 2007 (not sure why). In the last 2-3 years it's gotten ahead a bit, but it's done that before and then pulled back, so the jury is still out if this one will stick.

Other than that, in spite of all the sweetheart deals that only he can swing, in spite of his vaunted ability to pick companies -- he's just matching the market.

Charlie Munger has been saying for quite a few years that he doesn't recommend buying Berkshire stock anymore simply because the company is so big that its capability for growth is hindered by its own size. I mean they have a big share of Coca Cola, American Express and many other companies for a total market value of 100´s of billions of dollars. Just do the math, it's unfeasible for them to grow at a faster rate.

And he is an investing genius as well as an overall genius, it's funny anyone would think otherwise based on the sole fact that he is one of the top 5 richest people in the world.
 

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