8 Unusual Things I Learned from Warren Buffett
1) House. I really did drive right up to his house in a cab. Here’s his house:
It’s a 5 bedroom house he bought in 1956 for $31,500. Its one house among many on a normal suburban block. The guy next door to him might as well be worth $0 and his next door neighbor is worth $60,000,000,000.00
To me, that shows a lot of discipline. Every time in my life I’ve ever made money I would make the mistake of buying a home. Here’s a story about Buffett. He’s playing golf with a bunch of people and they all bet a dollar on a particular hole. Buffett won’t bet. “Why not, Warren?” they ask him, “you’re worth a gazillion.”
He said, “I never break my discipline.”
By contrast here’s the house of his bridge partner Bill Gates:
2) His worst investment ever. I asked this question on Twitter earlier. I said, “he lost his self-esteem and 20% in that order.” Everyone came back with very smart responses: Conoco Phillips, where he lost $1 bb (but not 20% of his net worth (not even 2% of his net worth) and certainly not his self-esteem). The Berkshire Hathaway business itself was a bust. But the stock zoomed and Buffett made the bulk of his net worth on Berkshire Hathaway.
No, the answer is a Sinclair gas station he bought in 1951 with a friend of his. On the weekends he’d even squeegee people’s windows. But the Texaco station right across the street destroyed him. He lost $2000, when his savings was about $9600 at the time. He put a lot of work and love into that little baby and it all went down the drain. But that experience probably gave him the desire to have a more passive management style. A style he later mastered at Berkshire.
3) He was rejected from Harvard Business School. If you think about it, Harvard must have a pretty bad reputation by now. Bill Gates and Mark Zuckerberg hated it so much that they dropped out. And the one time they could’ve landed the best businessman ever, they rejected him. Like most smart people, Buffett didn’t even really want to go to college. He started out at Wharton but then switched back to his hometown college in Omaha because he didn’t like it. Then, after being rejected by the best business school in the country, he went to Columbia.
The reality is that people at the genius level (Buffett, Einstein, Gates, etc) have no use for college but some cases (Buffett) reluctantly go through the motions.
4) He was a victim of reverse anti-Semitism. When he originally wanted to work for his mentor Ben Graham, on Wall Street, Graham said, “no”. Buffett was shocked and asked why. Graham told him it was because he wasn’t Jewish. Graham wanted to save a spot in the firm for a Jewish person. To be fair, Graham was worried that Jews couldn’t be hired anywhere else on Gentile Wall Street so he wanted his firm to be Jewish-friendly.
The key to success though is persistence. Buffett went back to Omaha but kept pitching ideas to Graham until Graham eventually hired him. Persistence is the only sure-fire method for obtaining success.
5) Adam Smith. Its useful to look at the history of the field you want to master. When I was trading for Victor Niederhoffer I saw that he had collected just about every finance book from 1800 on. So I started reading books anywhere from 100 to 30 years old just to see what people were thinking and how finance and trading had evolved.
One book, “Supermoney” was by the pseudonymous “Adam Smith” detailing random adventures he had as a reporter in finance in the late 60s, early 70s. On one adventure he decided to visit a retired investor (the book was written around 1972) who was trying to figure out what to do with the rest of his life now that he had $20 million after shutting down his hedge fund. They drove around and had a rambling conversation. At one point they passed a furniture store and the investor pointed out the window, “I’m going to own that one day.”
Obviously, that investor was Warren Buffett. But Smith didn’t know then that he was dealing with WARREN BUFFETT because he wasn’t in all-caps yet. And, in fact, many years later Buffett did buy that furniture store. I thought Supermoney was fascinating for its predictive abilities. How could Smith know that Buffett would be the best investor to profile? In the next profile after Buffett , Smith wrote about a guy who was sitting in a Swiss jail. If you screw up a bank in Switzerland you are going to jail, no get-out-of-jail free cards. What was this guy doing while in jail? Trying to write some fiction. That’s where the profile ends. Paul Erdmann went on to become the bestselling finance thriller writer ever. I highly recommend his novels.
In any case, it’s a great chance to see how someone described Buffett before he became BUFFETT. I mentioned this to Pamela van Giessen at Wiley (see Why I Still Write Books Even Though I’ve Lost Money on Every One of Them) and she ended up republishing the book as a Wiley Investment Classic. I give myself full credit on that one even if she disagrees with me.
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