Warren Buffett
The richest man in Babylon:
Ravi PERERA
“I have never met a man who could forecast the market”
- Warren Buffett
With an estimated worth of US $ 62 Billion, American investor Warren
Buffett is presently the richest man on the planet according to the
Forbes magazine. Bill Gates who held the position for the last 13 years
is in the third place with Mexican business magnate Helu slightly ahead
of him. Incidentally, breaking the pattern hitherto, there are four
Indians, Mittat, the Ambani brothers and KP Singh among the top ten
richest.
For a single human being to command this kind of wealth is
mind-boggling. As a comparison, Sri Lanka with a population of about 20
million has an economy of approximately US $28 billion.
The most expensive commercial plane the A380 goes for about US $ 250
million. It is estimated that the Queen of England has a worth of about
US $ 700 million.
Now 77 years old, to the devoted wealth creators of the world,
Buffett is the world’s greatest investor. Living modestly in distant
Omaha Nebraska in the same four bed roomed house he has occupied for
more than four decades now, an uninitiated can be excused for taking
Buffett at first glance for a University Professor pre-occupied with the
unworldly.
But that woolly image will only last till he begins to talk. One is
then left breathless by the wit and sweep of a mind, which has fashioned
a whole new way of looking at investments and business.
In the words of Jack Welch the famous CEO of General Electric “which
ever room Buffett walks into he is the cleverest among those present”.
Buffett’s writings, speeches and witticisms are avidly studied and
analyzed by a world-wide following giving life to a credo referred to
commonly as Buffetolgy.
Now that you are the richest man in America asked a shareholder at a
Berkshire Hathaway annual meeting, what is your next goal? “That is
easy” Buffett replied, “To be the oldest man in America.”
Warren Buffett is unique among those who have worn this crown, for
his wealth has been built up on investments made on businesses not his
own. The riches of the Gates, Waltons, Rockefellers and Fords are based
on enterprises they have created and controlled.
They more or less had some expertise in their chosen domains and owe
the ensuing success to fortuitous timing. Ford came out at the time when
we were abandoning the horse driven carriage in preference for the
motorcar.
The exploding inter-net made Gates and his Windows system possible.
Walton envisioned the time conscious American consumer would want to do
all his regular shopping at one time under one roof and built up
Wal-Mart, the huge discount marketing empire to cater to this need.
The extraordinary success of Buffett on the other hand is not based
on any particular business but on a series of uncannily successful
investments. In a period spanning five decades he has built up an
epochal fortune by patient and consistent investing in a wide range of
businesses.
From insurance to hamburgers, shaving blades to furniture, Buffett
has been able to time after time choose eventual winners when other
investors were shying away from them. And what an investor he has been!
“All there is to investing is picking good stocks at good times and
staying with them as long as they remain good companies”
There are thousands of investors, hedge fund managers and other so
called stock experts who would wish investing was as easy as Buffett
makes out. But then his success as an investor has been so remarkable it
may well be that he sees things very differently from other mortals.
Buffett’s unique skills and insight has enabled him to hugely
outperform the notoriously volatile stock markets every year for an
incredible forty years, a performance which has now made him the richest
man on earth.
“You don’t need to be a rocket scientist. Investing is not a game
where the guy with 160 IQ beats the guy with 130 IQ. Rationality is
essential.”
In 1965 Buffett bought Berkshire Hathaway a struggling cotton mill in
Massachusetts. After an unrewarding effort at reviving its fortunes he
began converting the company to an investment vehicle.
Its singular success has been such that today a single share of
Berkshire Hathaway goes for about US $ 120,000/00. Those investors who
sensed the unusual brilliance of the young Buffett and put their money
in the company in the 1960s are millionaires many times over today. Even
the latecomers to the party have not done too badly.
“Happily, there’s more than one way to get to financial heaven.”
Buffett is a disciple and devotee of Ben Graham the revered teacher
of investments and the author of ‘Intelligent Investor’ the Bible of
value investors. “Graham wasn’t about brilliant investments and he
wasn’t about fads or fashion. He was about sound investing, and I think
sound investing can make you very wealthy if you are not in too big of a
hurry. And it never makes you poor, which is better.”
As a major shareholder in several large corporations Buffett often
has a say in choosing senior managers. “Somebody once said that in
looking for people to hire, you look for three qualities: integrity,
intelligence and energy. And if they don’t have the first, the other two
will kill you.”
Buffett is always on the look out for businesses that cannot go
wrong, “You should invest in a business that even a fool can run,
because someday a fool will.”
Buffett has no hesitations in acknowledging the role historical
circumstances have played in his success. The United States with an
economy of about US $ 15 Trillion and a stock market with a
capitalization even larger than that provides him with an almost endless
landscape to search for sound investments.
“I personally think that society is responsible for a very
significant percentage of what I have earned. If you stick me down in
the middle of Bangladesh or Peru or someplace, you’ll find out how much
this talent is going to produce in the wrong kind of soil. I will be
struggling 30 years later.”
Buffett’s attitude and philosophy is not relaxed when it comes to his
children who will inherit very little of his enormous wealth. His
partner Charles Munger explains “ Warren doesn’t believe that if you
love somebody the way to do him good is to give him something he is not
entitled to.” In the words of Buffett “They have all gone their own ways
to accomplish a lot. They are productive, and they don’t expect to just
be some rich guys kid”
In fact 85 per cent of his wealth is already pledged to five major
Foundations including a whopping US $ 30 Billion to the Bill and Melinda
Gates Foundation focused on world health. But meanwhile Buffett
maintains his grueling pace, repeatedly proving to his amazed admirers
that the world’s greatest investor can continue beating the markets year
after year. |