The Sage of Omaha

“Warren Buffett told me to put my money in the S&P index because that’s exactly how he got wealthy.”

This is an INCORRECT statement. Every time I see a Youtuber saying “be like Warren and buy an index fund” I can easily tell that the content creator did not do their homework. Let me explain why it is only part true. While it can absolutely be a good idea to set aside to invest in the S&P, it is not how Warren Buffett created a multi-billion-dollar empire. Buffett created a fortune through business operation. Warren was proactive with his ventures. He got off of his butt and made it happen.

The story begins selling Coca-Cola door to door. He also delivered newspapers at a young age. In 1945, Buffet purchased a pinball machine and placed it in a local barbershop. He bought a few more and then sold the business to a older gentleman for $1,200 (a great return in today's dollars). Buffett also purchased a farm and leased the ground to a local farmer.Everybody ignores the hustle stage, and funny enough Buffett learned calculated odds through horse racing. 

Following these business ventures Buffett went on to attend Columbia, where he learned under Benjamin Graham (author of the “Intelligent Investor”). Buffett always had an keen interest in the stock market, and thereby was able to refine his skills under Graham. After studying economics at Columbia, Buffet went on to be an investment salesman. 

Buffett at one time purchased a gas station, which resulted in being a flop. Even the GOAT misses some shots. Buffett went on to start multiple investment partnerships, this is indeed where he CRUSHED it as a capital allocator. Warren utilized the partner capital to become an activist investor in multiple ventures, some of which he used his share power to garner extra return (potential proxy wars). Warren eventually consolidated the multi-partnership to form Buffett Partnership.

After a couple years, Warren set his eyes on a textile/manufacturing company, Berkshire Hathaway. Buffett bought so many shares that he eventually gained controlling interest in the company, but there was a problem, it was not providing a return. It actually was losing value. At one point in his life Warren stated, “it might have been his worst trade”. Buffett eventually acquired the failing company and decided to switch strategies. He shifted focus of Berkshire into the insurance sector, and then went on to utilize Berkshire as a conglomerate tool. Through many years of patience and calculated picking, Buffett’s Hathaway went on to build monster positions in some of the world’s most notable companies.

KEY TAKEAWAY: Warren Buffett doesn’t speculate in the stock market. Warren buys ownership in businesses (that happen to trade in stock markets). This is great case study to be diligent in your investing/ventures. Buffett's life was far from lazy and you should dismiss the notion that he just sat back a collected dividends.

Source of Inspiration: "How to Be a Billionaire" by Martin Fridson