Warren E. Buffett
1930 –
 

Berkshire Hathaway Holdings, chairman and chief executive officer
Nationality: American.
Born: August 30, 1930, in Omaha, Nebraska.
Education: Attended University of Pennsylvania; University of Nebraska, BA, 1952; Columbia University, MA, 1953.
Family: Son of Howard Buffett (banker, investment broker, and four-term U.S. representative) and Leila Stahl (clerk, secretary, and homemaker); married Susan Thompson; children: three.
Career: Buffett Partnership, partner, 1956–1969; Berkshire Hathaway, 1969–, chairman and chief executive officer.
Address: Berkshire Hathaway, 1440 Kiewit Plaza, Omaha, Nebraska 68131; http://www.berkshirehathaway.com.

Warren E. Buffett was considered the second-wealthiest person in the United States in the early 2000s and the only one to have made his money through stock investing, as president and chief executive officer of Berkshire Hathaway Holdings, the most expensive and profitable listing on the New York Stock Exchange. Buffett, a deceptively shy and self-effacing man, sustained a reputation as the most astute investor in the United States for half of the twentieth century. He had become a genius at value investing and in the critical discernment of corporate talent and management. Conservative to a fault where money was concerned, he sustained a liberal, almost libertarian image in public life. Investors who followed his lead all became comfortably well off or even extraordinarily wealthy. His every investment was founded on an obligation to his investors to outperform every performance indicator.


Laying the Foundation

Buffett created Berkshire Hathaway in 1969, after shutting down his 13-year-long partnership with a select group of seven recruited investors (from among his family and friends). This group, formed in 1956, put in a total of $105,000, of which only $100 was Buffett's. By 1962 the group's capital had grown to more than $7 million, more than $1 million of which belonged to Buffett. He charged a fee of only 25 percent of profits above 6 percent, and he would forgo his fee if his performance did not exceed the return on government bonds, which yielded the same 6 percent.

Buffett alone had authority to make investments for the partnership, and he would answer no questions regarding them. New investments were allowed only once or twice annually, and he broadened his investor base as his profits grew, bringing in 90 more limited partners from throughout the nation at $100,000 each. (Laurence Tisch of Loews and CBS put in $300,000.) Buffett incorporated the group as Buffett Partnerships Limited and opened an office in Kiewit Plaza. This location would endure as the headquarters for what was to become Berkshire Hathaway, the most successful investment company in history. Within 10 years Buffett had assets of $44 million, of which nearly $7 million was his. In 1969 he determined that further suitable investments were unavailable and began to liquidate the partnership. By then the assets had grown to $104 million; Buffett's share came to more than $25 million. He had always said that someday he would be wealthy, but for Buffett this was only the beginning.

Buffett had become a master at arbitrage investing, taking large positions in stocks of companies that his research showed to be ripe for mergers, liquidations, or takeovers. He used margin borrowing to gain leverage, which helped him establish partnership positions that put him on corporate boards, where he could exercise influence. Undervalued companies were a specialty, as they proved vulnerable to large investments that enabled him to exert pressure for control. This was his key to gaining control of Berkshire Hathaway, which was to become the keystone of his rise to financial power.

He was joined in his enterprise in 1962 by Charles Munger, who became virtually an alter ego. Munger was possessed of a brilliant mind and a rapier wit and tongue, and the two became partners for over 40 years. During the years of the Buffett Partnership, they invested in a group of stagnant knitting mills that were slowly withering in New England. This was Berkshire Hathaway, which consisted of a struggling milling entity in the town of New Bedford, Massachusetts. Buffett examined the books of the company and began to discern greater value than was evident at first glance. The long history of the fabric industry in New England and the resolute men who had shaped it intrigued Buffett. He set about quietly purchasing blocks of shares as the stock began to slide. An internal fight between relatives over the future of the company played into his hands.

He visited the main plant in New Bedford and was shown the operations by Kenneth Chace. Chace was open and candid and shared with Buffett forty years' worth of corporate statements regarding the company. Buffett continued buying the stock both directly and through brokerage houses, and he saw in Chace a man who was virtually the model of the kind of business personality that interested him. Buffett invested in companies, but he always made sure that he was investing in the right kind of people. Chace was offered the presidency of the company as soon as Buffett took controlling interest. When he liquidated his original partnership, Buffett kept 29 percent of Berkshire, which would become the foundation of his new enterprise, the holding company Berkshire Hathaway.


The Boy Becomes the Man

When he was asked how he had discerned any value in his investments, Buffett said simply that he read thousands of annual reports and corporate statements. Value Line, Moody's, and Standard and Poor's were the core of his studies, followed by corporate publications. Buffett saw the library as the true basis of anyone's education; the fact that it was cheaper than the cost of attending college warmed his conservative heart even more. Buffett did not like to spend; he was a gatherer and a holder. His childhood was replete with stories of youthful enterprise, beginning at the age of six, when he bought six-packs of cola for 25 cents and then sold individual bottles for 5 cents each. He scoured golf courses for lost balls, which he then sold individually and by the dozen. When his father went to the U.S. Congress, Buffett took over several paper routes conveniently confined to large apartment houses. He kept careful records of all his customers, and when someone did not renew a subscription, he was quick to remind them and even to sell them a competing newspaper.

Buffett was grateful when his father, who had served four terms in the U.S. Congress, lost one of his campaigns, and the family left Washington, D.C. His father was a staunch conservative and a member of the John Birch Society, which was dedicated to combating liberal, socialist, or communist tendencies in society. His father always asked whether legislation "would add or subtract from human liberty." When he returned to Omaha, he put the young Warren to work in his brokerage office, chalking prices and quotations. With his mathematical mind, he enjoyed the job immensely, and the experience was to serve him well in his future career.

Back home in Omaha, Buffett used $1,200 saved from his paper routes to buy 40 acres of land, which he leased out to a farmer. He also developed a keen interest in horse racing. The statistics involved with weights, speed ratings, pace, past performance, and breeding variables intrigued him. He formed a partnership with a friend to print the "Stable Boy's Tip Sheet," sold at Ak-Sar-Ben racetrack. He and a partner also went into the pinball machine business, which generated a nice profit. His first venture into the stock market was at the age of 11, when he bought three shares each of Cities Service stock for his sister and himself at $38 and saw it drop to $27 and then climb to $40, at which point he sold, garnering a profit after costs of $5. The same stock then began to climb, reaching $200. This was a lesson to Buffett about staying in the market.


Foundations of Learning

While Buffett admired and loved his father, he tried to stay clear of his mother, who was given to rages that traumatized her children. To keep out of her way, Buffett spent more time in his father's offices. He was fascinated by numbers and money, especially how money could grow through compound interest. The notion of compounding interest never ceased to intrigue and delight him. He could compute and project interest rates off the top of his head in mid-conversation. His lifelong guiding credos were "Number One: Never Lose Money!" and "Number Two: Never Forget Number One!"

Buffett entered the Wharton School of Business at the University of Pennsylvania in 1947 and, after two years, determined that the instructors knew less about finance than he did. He returned to Omaha and finished undergraduate work at the University of Nebraska. Buffett then applied to Harvard graduate school but was denied admission. In the meantime, he had read what was to become a classic, The Intelligent Investor, by Benjamin Graham. Graham taught at Columbia University, and Buffett determined to go there to study; he soon became a Graham disciple. Graham believed that profits could be generated through ownership of stocks that were undervalued on the market. His concept was that stocks of companies that were well managed, sound, and grounded in a belief in their product could and should prosper as investments. Buffett's penchant for research and analysis, joined with a dogged conservatism about money, made him a natural believer in the Graham principles. He sought a job in Graham's investment firm, Graham and Newman, but was rejected. Graham was Jewish and was dedicated to providing openings in finance to Jewish students, who had a limited presence in investment houses. So Buffett went back to Omaha to sell stocks for his father.

In 1952 he married Susan Thompson, a student and friend of Buffett's sister at Northwestern University. In the early days of their marriage, he attempted to run a gas station, which did not succeed. In 1954, however, Graham relented and hired Buffett. He stayed with the firm for two years and became immersed in the Graham formula for money management and investments. Then Graham retired and closed down his company, but by then Buffett had generated a net worth of $140,000 and a wealth of knowledge and confidence about value investing. At the age of 26, he returned to Omaha and set about forming his own company, the Buffett Partnership.


Philosophy

His experience, combined with a reputation for honesty, hard work, and an encyclopedic knowledge of securities and finance stood him in good stead. Buffett possessed an ability to fuse self-interest with a desire to have his investors do well. He did not believe in stock tips, preferring instead that investors do the work, as he did, to find a stock worthy of investment. He believed that all stewardship of funds demanded an accounting and that leaving money at rest was unconscionable when there were opportunities to put it to work.

His personal ethics and business acumen played out in private and in public. He once took umbrage when Boys Town of Omaha continued to plead poverty and exploit orphaned and homeless children to gain contributions, which Buffett found were simply hoarded by the home. He forced an exposé in the Omaha papers that compelled the home to change its practices. As a money manager, he insured that all investments made by Berkshire Hathaway returned cash to the headquarters in Omaha. He had a basic instinct about the capability of people and required only that they submit a monthly financial statement and, in the event of bad news, to report it immediately. His company moved to gain control of Borsheim Jewelry, Scott and Fetzer, Blue Chip Stamps, GEICO and General Reinsurance, Western Financial, the Omaha Sun Herald, See's Candies, the Omaha Furniture Mart, Executive Jet, and the Buffalo News as well as taking large stakes in Salomon Securities, Coca Cola, McDonald's, and International Bridge. He was always wary of getting a reputation as a liquidator or parasite bent on draining a company of its assets. Only the Buffalo News acquisition, through the auspices of Blue Chip Stamps, bore the heavy handprints of a take-no-prisoners capitalist assault.

Buffett and his personal newspaper agent from Omaha, Stanford Lipsey, sought to gain a monopoly on newspapers in the city of Buffalo. He made no secret that challenging the Buffalo Courier-Express's right to control publication of a Sunday edition would inevitably cause that paper's demise. The Sunday edition was the lifeblood of the Courier, a morning paper. The Buffalo Evening News was constrained as an evening paper with no Sunday edition. The message Buffett gave to the unions at both papers was that their influence and numbers were to be severely curtailed and that their best interests would be served by agreeing to publication of a weekend edition by the Evening News. The unions understood their position, and the collapse of the Courier soon followed. Buffett, in his triumphant, though hardly his finest, hour, coldly told the existing unions, which had assumed they would be rewarded financially for their help, that the workforce made no worthy contribution to production of profits, given the solitary control of the market by the new Buffalo News.


Economic Discipline

Buffett's foremost strength was loyalty. He possessed an unyielding faith in his system, and his investors placed great faith in him in return. His admonition "Don't sell B-H stock!" was a watchword never to be taken lightly. His own children disappointed him by selling some of their stock when they could more easily have borrowed against it as collateral. He encouraged his investment partners to hold on to their stakes through good times and bad. Though he insisted on complete control over investment decisions, he also believed that business leaders had to provide an accounting to investors. He despised the practice of doling out options to executives and board members. To him, this was virtual charity. He also did not care for dividend distributions, which represented an inability of the managers to usefully devote the funds to the company's growth.

From his first investing experience in Cities Service to the creation of Berkshire Hathaway, Buffett stayed the course of his convictions. By the early 2000s, he and his wife controlled almost 39 percent of Berkshire Hathaway, some $40 billion in value. Wealth as a way to fund personal expenditures was insignificant to Buffett. It meant more to him to have the ability to buy without actually making a purchase. He continued to live in the house that he had bought for $31,500. He owned just one car, a Lincoln Continental. His only luxury was a personal jet; though he named it Indefensible, he justified having it by pointing out that commercial aircraft had become uncomfortable for him after he became well known.

In a speech at the Wharton School of Business (April 21, 1999), Buffett laid out four rules for investment: 1. Understand the business in which you are investing. Look for businesses within a circle of personal competence. 2. Look for sound, fundamental economics. Seek out companies that have a sustainable economic advantage, one he called "a castle with a moat around it," using Coca Cola as an example whose brand name has endured for generations and which could not be bought even for millions of dollars. 3. Find competent leadership. Honest, capable, hardworking leaders are needed to lead companies with a sustainable economic advantage. His instruction to Berkshire Hathaway managers was to "Widen the moat. That keeps the castle valuable." 4. Buy at the right price if you want an investment to pay off. He explained how he had gone through company after company in Moody's investment manuals, searching for those that had large cash values yet were selling at low percentages of that value.


Social Concerns

Buffett did not like to give money away, which meant that he was losing it. His tastes were simple; he ate hamburgers and drank cherry Coke, and he loved to use baseball metaphors in his talks about investing. He gave over $1 million dollars to keep minor league baseball in Omaha. He also helped Grinnell College in Iowa purchase (for $13 million) a public radio station. Two years later, to Buffett's dismay, the college sold it for $48 million dollars. His wife was prone to take up causes in poor neighborhoods and pushed him to donate to them. He did so reluctantly, and inevitably his better sense proved correct, as the money ended up being wasted, in his view. He also supported the formation of a liberal magazine in Washington that proceeded to fail. Abortion and birth control were two of his wife's special projects, as was the welfare of the homeless and street youths. The two formed a group called the Glide Foundation as a vehicle to channel money to that cause. In the early 2000s it seemed that a Buffett foundation would be the eventual beneficiary of his wealth, but Buffett preferred not to think about it.
 

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Warren Buffett (born 1930) is America's most brilliant investor, compiling a year-after-year record of phenomenal returns for the shareholders of his holding company, Berkshire Hathaway, Inc.

For example, if someone had given him $10,000 to invest in 1956 he or she would be worth over $60 million by 1994. Buffett is one of the richest men in America, and he is a success story in the classic mold. As of 1995 Buffett, with a personal fortune of some $12 billion in Berkshire stock, was the second-wealthiest individual in America, right after his friend, Microsoft chairman Bill Gates.

Throughout it all Buffett has retained a seeming simplicity that goes along with his down-home, Midwestern roots. His associates, however, say his hayseed manner disguises a brilliant sophisticate. He shuns New York and Los Angeles, preferring to run his far-flung empire from modest offices in Omaha, Nebraska. The periodic insights into his success that he dispenses are usually witty and simple. However, each time Buffett - known in the financial world as the "Oracle of Omaha" - speaks, just about everyone, from the most accomplished professional prognosticator to the stock-playing hobbyist, pays attention.

Born in 1930 in Omaha, Nebraska, Buffett always "wanted to be very, very rich," as a Time article put it. The boy received an early, close-up look at the stock market: his father Howard was a broker, and young Warren, just nine years old, often visited the shop and charted stock performances. He chalked in stock prices on the big blackboard at his father's office, and at age 13 ran paper routes and published his own horse-racing tip sheet.

In 1942 Buffett's father was elected to the U.S. House of Representatives and the family moved to Fredricksburg, Virginia. Young Warren Buffett expanded his business interests by placing pinball machines in Washington, D.C. barbershops. At age 16, a prodigy in statistics and mathematics, he enrolled at the University of Pennsylvania. He stayed two years, moved to the University of Nebraska to finish up his degree, and emerged from college at age 20 with $9,800 in cash from his childhood businesses. Harvard Business School rejected him, but Columbia University's Graduate School of Business accepted his application.


Finds Niche

Columbia was a key turning point in Buffett's life, for it was there that he met Benjamin Graham, co-author with David Dodd of the landmark textbook Security Analysis. "I don't want to sound like a religious fanatic or anything, but it really did get me," Buffett was quoted as saying in the New York Times Magazine about Graham's writings.

Graham's philosophy has permeated most of Buffett's decision in the 40-plus years since they first met. Essentially, Graham's theory, called value investing, urges stock pickers to buy shares that are much cheaper than a company's net worth would indicate. That is, look for stocks that sell below their "intrinsic value," a measurement Graham calculated by subtracting a company's liabilities from its assets. Eventually, Graham theorized, the stock market will catch on to the true value of a company and its share price will rise; by that time, a savvy investor following Graham's principles already will be locked into the stock at a low price. It's a simple enough theory, but one that requires much research into companies to determine their net worth, their "book value," and other factors. It is research for which Buffett is eminently suited.

After graduate school, at his father's brokerage firm, Buffett would often travel to Lincoln, Nebraska and pore through company reports. As he told Forbes magazine, "I read from page to page. I didn't read brokers' reports or anything. I just looked at raw data. And I would get all excited about these things." Today, he conducts his business the same way. Buffett does not have a stock ticker in his office, nor a computer or calculator. According to numerous published reports, he spends about five to six hours each day reading annual reports and trade publications. Fortune magazine reported that in Omaha, Buffett "does what he pleases, leading an unhurried, unhassled, largely unscheduled life….He spends hours at a stretch in his office, reading, talking on the phone, and, in the December to March period, agonizing over his annual report, whose fame is one of the profound satisfactions in his life."

Buffett left Omaha and joined Graham's investment firm on Wall Street in 1954. There he was able to view his mentor's work first-hand. Over the next two years, Buffett got married, fathered two children, and made $140,000 by the time he was 25. Graham shut down his investment firm in 1956 and Buffett gladly left New York. When he returned to Omaha family members asked him for advice, so Buffett set up an investment partnership. As he told the New York Times Magazine, he said to his investors, "I'll run it like I run my own money, and I'll take part of the losses and part of the profits. And I won't tell you what I'm doing."

While he might have kept investors in the dark about his methods, Buffet's bottom-line returns were crystal clear: over the next 13 years Buffett Partnership Ltd. generated a 29.5 percent compounded annual return. He raised $105,000 from investors to start the partnership, and when he closed it 13 years later, the partnership was worth $105 million, and Buffett worth $25 million.

One of the investments along the way was Berkshire Hathaway, a textile manufacturer in Massachusetts. Buffett would create his multibillion-dollar empire around that business, although the textile company itself remains - in Buffett's opinion - one of the biggest investment mistakes he made. Sure, Berkshire Hathaway's stock price was cheap, satisfying a requirement of the Graham strategy. But the textile industry as a whole, and the company itself, was weak. In one of his much-anticipated annual reports, quoted in Fortune magazine, Buffett summed up part of his philosophy in the wake of that mistaken textile purchase: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." (He would shut down the textile mill in the mid-1980s.)

Buffett ended the lucrative partnership in 1969. As the New York Times Magazine reported, "The partnership's capital had grown so large that small investments were no longer reasonable, and he could find no big investments to his liking. In addition, the market was too speculative for his taste." He then focused on Berkshire Hathaway, buying up companies under its umbrella, investing "where and when he pleased," according to the Times.

Buffett's holdings, and his strategies, from the late 1960s on are clear. He first bought a series of insurance companies, which are considered excellent sources of cash. (People regularly pay insurance premiums; insurance companies usually pay claims on those insurance policies - if they have to pay them at all - years down the line. Therefore, there is usually a great amount of cash on hand for the company owners.) Buffett used that cash to buy a series of businesses, which have remained at the core of his investments.

His so-called "Sainted Seven Plus One" are sizeable, profitable companies that, according to the Wall Street Journal, "provide a steady stream of profits and capital to fund the investments that bring him renown." Among the eight core businesses are: the Buffalo News, World Books, Kirby vacuum cleaners, Fechheimer Brothers uniform company, and See's Candies. According to Money magazine, those businesses alone generated $173 million in cash in 1990, and the New York Times estimated in 1991 that their combined worth was approximately $1.6 billion. The cash generated by the eight companies is, in turn, invested in other corporations, which comprise the other core chunk of Berkshire Hathaway's holdings.

All of the companies in which Buffett invested are businesses he understands, underlining one of Buffett's main rules: "Stick to what you know." Forbes once quoted him as explaining why he had not invested in the immensely profitable computer company, Microsoft: "Bill Gates is a good friend, and I think he may be the smartest guy I ever met. But I don't know what those little things do."

Instead Buffett bought into what the New York Times Magazine called his "permanent holdings": The Washington Post, Geico (an insurance company), Capital Cities/ ABC, and Coca Cola. He bought $45 million of Geico stock, which by 1989, according to the New York Times, was worth $1.4 billion. His $10.6 million investment in the Washington Post group of publications ballooned to an investment worth $486 million 16 years later. When he purchased seven percent of Coca Cola for $1 billion in 1988, some said he had bought too high, too late. But Buffett predicted Coke's expansion into foreign markets and thought the company could grow. It did, more than doubling his investment.

Investments in the big, brand-name companies is an example of how Buffett's buying strategy has evolved from the teachings of his mentor, Graham. Buffett became interested in what he called "franchise" businesses, or companies that are well-managed, with an established product line, and which are not subject to low-cost competition. His strategy changed because the market changed. The companies that Graham liked - companies trading far below their actual value - are rarer.


White Knight

Also in the 1980s, Buffett engaged in a series of transactions that are available only to someone with enormous wealth. He stepped in as a so-called "white knight" to help companies fend off hostile takeovers by other corporations. Buffett's strategy works like this: a company, such as Gillette, faces a takeover and needs an infusion of cash. Buffett invests in the company's "preferred stock." According to the Wall Street Journal, the preferred stock options are "not available to other investors. Typically [Buffett] gets preferred stock bearing a healthy dividend - assuring a modest return no matter what happens - and the ability to convert to common stock if the company's fortunes rise." In the case of Gillette, Buffett invested $600 million in 1989, and in converting the stock two years later, received 11 percent of the company, which was worth, at the time, $1.05 billion.

In 1991 Buffett stepped in as interim chairman of Solomon Brothers brokerage firm after that it was accused of making false bids at Treasury auctions. Buffett, who had invested $700 million of Berkshire Hathaway cash in Solomon Brothers, was its largest shareholder. He is credited with streamlining the company and, over his six-month tenure as interim chairman, helping to rebuild its reputation after the scandal.

But the shareholders are not complaining. Berkshire Hathaway stock was trading for $12 a share in 1965. As of December, 1994, a single share of the investment company was the most expensive traded on the New York Stock Exchange: it cost $19,900 a share. Buffett owns over 40 percent of Berkshire Hathaway, which accounts for his $8.3 billion net worth. (Incidentally, Buffett does his own taxes.) And in August 1995, Buffett brokered a spectacular deal when his Berkshire Hathaway arranged the $19 billion purchase of Cap Cities/ABC by the Walt Disney Company. While the brokerage already had a $345 million in investments, this one merger raised the value to $2.3 billion.

Those not fortunate enough to own Berkshire Hathaway often mimic Buffett's buys. Fortune reported that when the general public learns Buffett has bought a particular stock, the public also buys the stock, running up the price. That led the magazine to quip: "Now there are two ways to make a killing in the stock market. The first, goes the old saw, is to shoot your broker. The second, it seems, is to shadow Warren Buffett."

The strategy doesn't always work, as a 1995 Money article warned. "Awe-inspiring though Buffett's record is, he's had a few clunkers. The $322 million investment he made last spring in Salomon common stock is down roughly 26%, and an albeit tiny (for him) $38.7 million stake in [an aircraft leasing company] has plummeted 68% since 1990." Prior to that, Buffett had bought Disney low and sold it later for a small profit; but that company rose spectacularly after Buffett's sale. He bought a $358-million chunk of USAir only to see the investment sour. (He was later quoted in Fortune as telling a group of business students at Columbia, "Don't invest in airlines.") In his 1989 annual report, quoted in Fortune, Buffett candidly wrote, "It's no sin to miss a great opportunity outside one's area of competence. But I have passed on a couple of really big purchases that were served up to me on a platter and that I was fully capable of understanding. For Berkshire's shareholders, myself included, the cost of this thumb-sucking has been huge."

Aside from his business acumen and opinions, many people are interested in Buffett himself, asking: What's a billionaire like? He does not give frequent interviews, preferring to let his corporate report speak for him. He lives in the same Omaha home he bought in 1958 for $31,500. He lives in that home with his girlfriend and former housekeeper, Astrid Menks, 17 years his junior. His wife of 40-plus years lives in California and is friends with his girlfriend. (Mrs. Buffett is the second largest shareholder of Berkshire Hathaway and is slated to take over the company after Buffett's death.)

One of his few extravagances is his corporate jet, and playing bridge by computer with friends from around the country. According to the Wall Street Journal, he wears rumpled suits, although very expensive Italian ones, and drinks about five cherry Cokes a day. He says he is an agnostic. As Roger Lowenstein related in his unauthorized biography Buffett: The Making of an American Capitalist, the investor once promised his young daughter a $10,000 check if he didn't lose a certain number of pounds by a certain date. He lost the weight, and kept the cash.

"He is a standard bearer for long-term investing, the perfect antidote to the get-rich-quick schemers of Wall Street," the Wall Street Journal said of Buffett. Forbes opined that "He has not the psychological need for the constant wheeling and dealing, buying and selling that afflicts so many successful business and financial people." His philosophy - as well as his enormous wealth - allows him to be pickier and choosier. As he stated in his 1989 annual report, "We do not wish to join with managers who lack admirable qualities, no matter how attractive the prospects of their business. We've never succeeded in making a good deal with a bad person."

Which leads to the obvious question he is often asked: How do you succeed in the stock market? Throughout the years Buffett has offered bits of advice, such as: 1) If you buy into a great business, stick with it no matter how high the stock price goes; 2) avoid staggering debt; 3) think long term and don't hop in and out of the market; 4) in a bidding war between companies, buy stock in the side you think will lose; 5) easy does it (meaning, avoid businesses with big problems), and 6) concentrate on a small number of stocks.

Buffett has already made preparations for his money when he dies. He intends to set up a philanthropic foundation which, given the 23 percent annual rate of return he has averaged throughout his career, could generate a multibillion-dollar legacy to put the Ford and Rockefeller foundations to shame. He wants the fund's trustees to focus on halting population growth and nuclear proliferation. His three children will not make out that well; Buffett has said he plans to leave them "only" about $5 million apiece. He was quoted in Esquire as saying, "I think kids should have enough money to be able to do what they want to do, to learn what they want to do, but not enough money to do nothing."

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