A Discussion of Mr. Warren Buffett with Dr. George Athanassakos and Ivey MBA and HBA students Omaha, NB, March 31, 2008, 10:00 am - 12:00 pm
Question: How can you make money without investing a lot of money? Is it hard to raise money?
Buffett:
Yes, well I didn’t raise money. I bought my first stock when I was 11. I bought 3 shares of Citi Service Preferred. I spent 5 years saving $120 bucks. I saved money from when I was 6 until I was 11 and by that time I had enough money to buy 3 shares of a stock. I read many books about investing by that point. And I kept buying and selling stocks. I wasn’t anchored in any philosophy, for example there was a famous book by Edwards and McGee on technical analysis. I was very interested by the statistics in that book. I thought about many different ways of investing. By the time I was out of school at 20 years old I had made and saved $9,800 dollars. The first stock I bought where I invested heavily (I had invested three quarters of my net worth) is a stock now called Geico. I got very excited about that company. I just kept looking and I didn’t worry (I was always having fun - even now). You can have fun working with small sums or big sums - I like playing the game. I didn’t have to get rich in order to have a better life or for my kids to have a better life. In 1954 I went to work for Benjamin Graham. In 1956 I came back and had about $175,000, at that time I though it was enough to live the rest of my life. About 2 months after I got back my 7 investors were not happy. They would not trust the gut instinct of someone as young as I. What does a 21 year old know about managing money?
It was an inhibiting factor for people to know what they own. I said to these 7 people we would form a partnership and the money would flow in the exact same way except they wouldn’t know what they owned. I would treat the money as if it were my own. I wouldn’t get paid unless they did well. That’s the form I elected. And then I thought that was the end of it. And then people started coming along. By 1961 I had 11 partnerships. I had no employees and worked out of my bedroom. I wrote all the cheques so every
time I would buy a stock I would have to write 11 cheques to split it up into 11. I had to file 11 tax returns. In 1962 we started the company. That is the history of it. But the history is not of a master plan. The history is doing what you like to do every day and figuring out if people want to do it with you, what is the most logical way to do it. And that is the way we run Berkshire Hathaway. Berkshire Hathaway is run as a partnership.
What can I possibly do with billions and billions of dollars? I don’t see the fuss in having 6 houses with greenskeepers; I don’t see the fuss in having 20 cars in the garage. If you think about it you are living better than John D. Rockefeller. If you want to watch the Super Bowl you just turn on the TV and watch it. If he wanted to see the World Series it would take him a long time to get there, and he would not have air conditioning and that type of thing. The problem is not getting rich, but finding a game you enjoy and living a normal life. The most important thing is finding the right spouse. If you make the wrong decision on that you will regret it, there is a lot of pain involved, but if you have the right spouse it is just wonderful. What qualities do you look for in a spouse? Humour, looks, character, brains, or just someone with low expectations. The most important decision that you will make is that. If you make that one decision right I will guarantee you a good result in life.
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