HOW BUFFET GOT STARTED IN LIFE

Here is a good article on how Buffett got started.

After being rejected by the Harvard Business School, he enrolled in graduate studies at Columbia Business School. While there, he was taught by Benjamin Graham and David Dodd, both well-known securities analysts. Buffett was a fan of Graham’s book “The Intelligent Investor,” and it was under Graham that Buffett learned the fundamentals of value investing.

The Buffett that modern investors admire almost wasn’t. When he graduated from Columbia he intended to work on Wall Street, but Graham convinced him to make another career choice. Back in Omaha, Buffett worked as a stockbroker and opened several partnerships. The size of the investing partnerships grew substantially, and by the time he was 31 he was a millionaire.

It was at this point – in 1961 – that Buffett’s sights turned to directly investing in businesses. He made a $1 million investment in a windmill manufacturing company, and the next year in a bottling company. Buffett used the value investing techniques he learned in school, as well as his knack for understanding the general business environment, to find bargains on the stock market. Looking for new opportunities, he discovered a textile manufacturing firm called Berkshire Hathaway (BRK.A), and began buying shares in it. He later took control of the company in 1965. Like Berkshire Hathaway, he made some other good investments, like American Express (AXP), a company that doubled in price within two years of his initial.

Warren Buffett’s investments weren’t always successful, but they were well thought out and followed value principles. By keeping an eye out for new opportunities and sticking to a consistent strategy, Buffet and the textile company he acquired long ago are considered by many to be one of the most successful investing stories of all time.

The ultra-affluent invest their money in many different ways. In truth, there doesn’t seem to be a “one habit” that stands out.

Interestingly, I have found that the ultra-affluent tend to be much less diversified, though this changes over generations. Usually, the wealth-creating generation became wealthy by putting all of their eggs in one basket. That is somewhat deceptive though, because they are the ones carrying the basket!

Almost no billionaires I know of would be highly concentrated in an investment over which they have no control. Which means, it is rare for the ultra-affluent to invest a significant portion of their net worth without getting control of the business in return.

After the wealth-creating generation, the assets tend to become much more diversified. This makes sense: getting rich is an assymetric result: you only need one “win” to get there. Staying rich has the inverse problem: you only need on “failure” to be poor. Better to not bet the farm on any one thing when you have more to lose than to gain.

Other than that, billionaires invest in a wide variety of things. Some are using public markets, some would never invest in public markets and are almost entirely in private businesses and real estate. It just depends!

Unless they are running a hedge fund, most billionaire investment habits (for personal wealth) is reserved to wealth preservation. Essentially, boring investment vehicles that are unlikely to return a lot of money, but will hold their current value over time.

But as far as habits are concerned, you will see these repeated among the ultra successful:

• Consistency
• Risk averse (low downside risk)
• Hedged bets (Make money when markets go down as well)
• Long-term focused

There are so many ways to make money that for the most part people have their specific niches. Some prefer commercial real estate over stocks, or residential real estate over bonds, or long positions over shorts etc etc…

There is no ‘one strategy’ other than the 4 items listed above, which can be utilized across all investment platforms.