He’s just like you and me, except for the£31bn fortunePROFILE: Warren BuffettWhen F Scott Fitzgerald observed that “the very rich are different from you and me”, thenovelist was clearly not thinking of people like Warren Buffett. Proclaimed the world’s richestman last week, the American investment strategist eats at his local grill and drives to workfrom the modest home that he bought in unfashionable Omaha, Nebraska, in 1958, which istoday valued at about £350,000.Such is the frugality of the 77-year-old “sage of Omaha”, whose wealth increased by £5 billionlast year to £31 billion, that when he married in 2006 he bought a discount ring from his ownjewellery company. He has vowed to pass on only a small chunk of his fortune to his children,Susie, Howard and Peter. He wants them to have “enough to do anything but not to donothing”.His advice has enriched more investors than anyone else in history, but Buffett pays himself amere £50,000 a year and prefers such ordinary fare as steaks and hamburgers, washeddown with Cherry Coke. Not for him the bright lights of New York, even though he owns aprivate jet, his one extravagance: “I have everything I need and am very comfortable righthere at home in Omaha. I feel sorry for people who are consumed by possessions.”Known for his wry homilies, Buffett has bet his house in jest against that of his friend andbridge partner Bill Gates, the Microsoft co-founder now relegated from first to third place inthe zillionaire stakes, according to Forbes magazine. They used to meet for games at aHoliday Inn near Buffett’s home, but of late they play online - Buffett’s only concession tonewfangled technology - under the user names “T-bone” (Buffett) and “Challenger X”.Buffett’s ranking may seem puzzling, given that in 2006 he announced he was donating hisfortune to charity, with about £15 billion going to the Bill and Melinda Gates Foundation,dedicated to combating Aids, tuberculosis and malaria. The donations are in instalments - thelatest for £880m - but Buffett just gets richer.This act of philanthropy was an indirect consequence of Buffett’s unorthodox role as ahusband and lover. In 1952 he married Susan Thompson, a former cabaret singer who, afterraising their children, announced in 1977 that she was leaving Omaha to pursue her singingcareer in San Francisco. They remained married and on good terms, holidaying together andhelping charitable groups.
Buffett had always expected that Susan would inherit his wealth and pass it to charitablecauses, he explained later: “When we got married, I told Susie I was going to be rich . . . [not]because of any special virtues of mine, but simply because I was wired at birth to allocatecapital.” Susie was less than thrilled by this prospect: “But we were totally in sync about whatto do with it - and that was to give it back to society.”In 1978 Susan introduced her husband to Astrid Menks, a Latvian working as a waitress in arestaurant, who soon moved in with him. Buffett sent out Christmas cards signed “Warren,Susie and Astrid”.Two years after Susan died from a stroke in 2004, Buffett married Astrid, then 60. “Astridloves him and takes care of him,” his daughter Susie said. “If Warren didn’t have a cent she’dstill be with him.”Just before their wedding, he revealed his plan to release his ever-growing riches tocharitable causes for decades to come.Buffett likes to make wealth-generation sound simple. He once summed it up thus: “Rule No1: never lose money. Rule No 2: never forget rule No 1.” His prescience is world-renowned:he refused to buy stocks in the booming 1960s, only to strike gold in the plummeting 1970s.He walked away from the dotcom boom in the 1990s, sticking with boring blue-chips such asGillette, Coca-Cola and American Express. He always came up smelling of greenbacks.He is one of the most respected voices in financial America, embodying Midwest virtues ofprobity, modesty and common sense, so his recent warning that America was in recessionstirred panic. His utterances attract 20,000 acolytes to the annual meeting of his businessempire, dubbed the “Woodstock of capitalism”.A journalist who attended recalled: “He was amiable, chatty, and spoke for four hours off thetop of his head. He is what he seems: a modest and ferociously bright man to whom money isan intellectual pursuit, not something to spend.”Buffett is a Democrat who has funded the pro-choice group Planned Parenthood and hasraised money for both Hillary Clinton and Barack Obama, rivals for the party’s presidentialnomination, without endorsing either. He would be happy whichever won, he said. Yet heremains a close friend of Arnold Schwarzenegger, California’s Republican governor, whom heserved as an economic adviser in 2003.If anything gives him sleepless nights, it is the certainty that a nuclear holocaust will wipe outthe planet. “It is the ultimate depressing thing. It will happen, it’s inevitable,” he said,reasoning that as the number of “bad guys” increases, so do the odds of one obtaining anatom bomb.
He was born in 1930 in a house in Omaha on the banks of the Missouri River, the son of Leilaand Howard, a Republican stockbroker elected to Congress on a platform described as “tothe right of God”. His grandfather ran the family’s grocery store dating from 1869, whereBuffett’s fortune began.“My grandfather would sell me Wrigley’s chewing gum and I would go door to door around myneighbourhood selling it,” he recalled. “He also sold me a six-pack of Coca-Cola for a quarter[25c] and I would sell it for a nickel [5c] each, so I made a small profit.” He supplemented hisearnings by selling lost golf balls. When the family moved to Washington, the 12-year-oldWarren took on five paper rounds, using his access to customers to sell them magazinesubscriptions.By the following year he was making £80 a month, an incredible sum in the 1940s. Throughshrewd investment, at the age of 14 he saved the £400 needed to buy 40 acres of localfarmland, which he rented out. His first dabble in the stock market earned him a $2 profitbefore the shares shot up, teaching him that patience pays off.After a first degree at the University of Nebraska Lincoln, he went to Columbia BusinessSchool in New York, where he fell under the spell of Benjamin Graham, an investment guruwho awarded Buffett the only A+ grade he ever bestowed.Buffett worked for his mentor after graduation but outgrew him, according to RogerLowenstein, Buffett’s biographer: “Graham would amaze the staff with his ability to scan apage with columns of figures and pick out an error. But Buffett was faster at it.”His strategy was to search for “cigar butt” companies, no longer of interest to the market andthus undervalued, but which still had “a few puffs” left in them.In 1962 he spotted a run-down Massachusetts textile firm, Berkshire Hathaway, which hebought and transformed into an insurance company. His empire now extends to sweet shopsand Fruit of the Loom clothing. He has shares in The Washington Post, Tesco and acontrolling stake in CE Electric, which supplies energy to 3.7m English homes.He denounced the “outright crookedness” of Enron, the collapsed American conglomerate,and the dubious methods used by corporations to calculate pension charges and stock optioncosts: “CEOs will be respected and believed . . . only when they deserve to be. They shouldquit talking about some bad apples and reflect instead on their own behaviour.”This rigour extends to his family dealings, notably his past stinginess with his children. On oneoccasion his daughter Susie needed $20 to get her car out of an airport car park, but Buffettmade her write a cheque to him first. He doesn’t spare himself either: “Only my clothes aremore expensive now, but they look cheap when I put them on.”
Buffett has critics, drawing flak over his profits from PetroChina, the oil company with links toSudan’s government. His recent offer to stand behind America’s municipal bond payments,issued by local councils, was seen as a self-serving gesture – only one such bond on averagehas gone into default over the past 40 years.To most Americans, however, Buffett is a national treasure. But as he put it: “You only learnwho has been swimming naked when the tide goes out.”