Warren Buffett

Warren E. Buffett
File:Warren Buffett in 1994.JPG Warren Buffett in 1994
Born	August 30, 1930 Omaha, Nebraska
Occupation	Chief executive officer
Website	berkshirehathaway.com

Warren Edward Buffett (born August 30, 1930) is an American investor, businessman and philanthropist. Nicknamed the "Oracle of Omaha" or the "Sage of Omaha", Buffett has amassed an enormous fortune from astute investments, particularly through his company Berkshire Hathaway, in which he holds a greater than 38% stake. With an estimated current net worth of around US$42 billion, he is ranked by Forbes as the second-richest person in the world, behind only Microsoft chairman Bill Gates. In June 2006, he made the commitment to give away 85% of his fortune, most of which would be going to the Bill and Melinda Gates Foundation. This is the largest act ever of charitable giving in United States history.

Despite his immense wealth, Buffett is famous for his unpretentious and frugal lifestyle. He continues to live in the same house in Omaha he bought in 1958 for $31,500, although he also owns a summer house in Laguna Beach, California. His annual salary from Berkshire Hathaway of $100,000 is nominal by the standards of senior executive remuneration in the United States.

Biography

Buffett was born in Omaha, Nebraska, to Howard Buffett, a stockbroker and member of Congress and Leila Buffett. Buffett has two sisters, Doris and Bertie. His grandfather owned a grocery store in Omaha, where Charlie Munger, the current Vice Chairman of Berkshire Hathaway, once worked.

He began working at his father's brokerage at the age of 11, and that same year made his first stock purchase, buying Cities Services preferred shares for $38 each. He sold them when the price reached $40, only to see them rocket to $200 a few years later. This taught him the importance of investing in good companies for the long term. His entrepreneurial spirit was present even as an adolescent. At the age of 14 he spent $1,200 he had saved up from two paper routes to buy 40 acres of farmland which he then rented to tenant farmers.

He attended the University of Nebraska (transferring there from the Wharton School at the University of Pennsylvania) and is a brother of Alpha Sigma Phi Fraternity. There he began his interest in investing after reading Benjamin Graham's "The Intelligent Investor", the so-called bible of value investors. He obtained a Master's degree in economics at Columbia Business School, studying under Benjamin Graham, alongside other future value investors including Walter Schloss and Irving Kahn. Another influence on Buffett's investment philosophy was the well known investor and writer Philip Fisher.

After receiving the only A+ Benjamin Graham ever handed out to a student in his security analysis class, Buffett wanted to work at Graham-Newman but was turned down. He went to work at his father's brokerage as a salesman. A stock he pushed in this role was GEICO. Buffett picked GEICO after noticing Graham was a director and had a large position in it. Never one to buy a stock on a whim, Buffett visited GEICO's head office on a weekend to investigate further. He knocked until someone opened the door and he was led to the future president of GEICO. Buffett introduced himself as Graham's student and was given a crash course on the insurance business and what gave GEICO an advantage over their competitors. Buffett was exposed to the economics of selling direct and perhaps more importantly, to the benefits of insurance "float", that is the funds which an insurance company holds and is able to invest for its own profit. Over the long term the insurance industry makes minimal profits on underwriting policies, but float can make it a lucrative business to be in, providing the managers are skillful investors. Buffett places great emphasis on this point in his annual shareholders' letters.

Buffett married Susan Thompson in 1952. They had three children together, Susie, Howard, and Peter. The couple began living separately in 1977 but remained married until Thompson's death in July 2004. Buffett currently lives with long-time partner Astrid Menks, introduced to him by Susan Thompson when she separated from Buffett. His daughter Susie also lives in Omaha and does charitable work through her Susan A. Buffett Foundation and as a national board member of Girls Inc.

In 1954, Graham invited Buffett to Graham-Newman. There, he worked closely with Graham and Walter Schloss. Graham, who was a tough man to work for, was adamant that a stock provide a wide margin of safety after weighting the trade-off between its price and intrinsic value. Graham's demand that a stock be worth more than its price made sense to Buffett, but it also made him question whether the criteria were too stringent, causing them to miss out on some big winners that had more qualitative values.

Buffett returned to Omaha in 1956. He had no specific career plans in mind until he met his first major client, who sought Buffett's expertise to manage investments for him. This paved the way for Buffett to establish his investment partnership, financed with his own money together with money from friends and family.

He ran the partnership out of his bedroom, adhering closely to Graham's investment approach and compensation structure. The partnership was named Buffett Partnership Limited (BPL). BPL made approximately 30% gains year-over-year between 1956 to 1969, in a market where 7% to 11% was the norm.

His partnership employed a three-pronged approach:

1. Generals: undervalued securities that possess margin of safety (e.g. trade below book value) and meet expected risk/return characteristics
2. Arbitrages: company events that are not related to broader market changes, such as mergers and acquisitions, liquidation, etc.
3. Controls: build sizeable holdings, ally with other shareholders or employ proxies to effect changes in companies

In 1962, BPL established a position in Berkshire Hathaway, a large manufacturing company in the declining textile industry that was selling below its working capital. Buffett and Seabury Stanton, the President of Berkshire and a large shareholder at the time, differed in the buy back price by three-eighths. Negotiations broke off and BPL purchased every share in sight until it established a 49% position and installed Ken Chace as President.

Buffett would dissolve all partnerships to focus on running Berkshire Hathaway. Charlie Munger, Berkshire's Vice Chairman, at the time remarked that purchasing the company was a mistake, due to the failure of the textile industry. Berkshire, however, became one of the largest holding companies in the world. (The company kept the Berkshire name as a reminder that buying companies based on value alone does not guarantee a good investment.)

As the bull market continued to soar, Buffett was strained to come up with investment ideas. In 1969, Buffett decided to liquidate his Partnership. He gave his limited partners a choice between cash or Berkshire shares (the one of two holdings he decided to keep).

Buffett redirected the cash not required to maintain the textile business to acquire private businesses and stocks of public companies. At the core of his strategy was to purchase or build insurance or reinsurance companies and use them as super margin accounts to buy equities. Berkshire chooses managers who demonstrated unwavering underwriting discipline and cost consciousness throughout their careers. To align the interest with Berkshire shareholders, insurance managers are compensated for underwriting profit and not for meeting revenue growth targets.

Buffett is currently working on an animated series with DiC Entertainment chief Andy Heyward. According to information presented by Buffett at the Berkshire Hathaway annual meeting on May 6, 2006, the series will feature Buffett and Munger in roles and the series will teach children healthy financial habits for life. Cartoon drawings of Buffett and Munger were displayed throughout the events during the weekend and the special movie before the meeting began was in animation form by Heyward.

Philanthropy

In June of 2006, Warren Buffett announced plans to contribute approx. 10 million Berkshire Hathaway Class B shares to the Bill & Melinda Gates Foundation (worth approximately US$30.7 billion as of June 23, 2006), making it the largest charitable organization in history. The foundation will receive 5% of the total donation on an annualized basis each July, beginning in the 2006. Buffett will also join the board of directors of the Gates Foundation, although does not plan to be actively involved in running the foundation. Buffett also announced plans to contribute additional Berkshire stock valued at approx. $6.7 billion to the Susan Thompson Buffett Foundation and to other foundations headed by his three children. This is a significant shift from previous statements Buffett has made, having stated that most of his fortune would pass to his Buffett Foundation. The bulk of the estate of his wife, valued at $2.6 billion, went to that foundation when she died in 2004. His children will not inherit a significant proportion of his wealth. These actions are consistent with statements he has made in the past indicating his opposition to the transfer of great fortunes from one generation to the next. Buffet once commented, "I want to give my kids enough so that they could feel that they could do anything, but not so much that they could do nothing."

Management style

Buffett views himself as a capital allocator above anything else. His primary responsibility is to allocate capital to businesses with good economics and keep their existing management to lead the company.

When Buffett acquires a controlling interest in a business, he makes clear to the owner that:

1. he will not interfere with the running of the company;
2. he will make the hiring and compensation decision of the top man; and
3. capital allocated to the business will have a price tag (a hurdle rate) attached; this process is to motivate owners to send excess capital that does not return more than its cost to Berkshire headquarters rather than investing it at low returns. This cash is then free to be invested in opportunities that offer higher returns.

Buffett's hands-off approach has held strong appeal and created room for his managers to perform as owners and ultimate decision makers of their businesses. This acquisition strategy enabled Buffett to buy companies at fair prices because the sellers wanted room to operate independently after selling.

Besides his skills in managing Berkshire's cash flow, Buffett is skilled in managing the company's balance sheet. Since taking over Berkshire Hathaway, Buffett has weighted every decision against their impact on the balance sheet. He has succeeded in building Berkshire into one of the seven companies today that are still rated by Moody's as Aaa, the highest credit rating achievable and thus with the lowest cost of capital. Buffett takes comfort in the knowledge that, for the foreseeable future, his company will not be one of those shaken by economic or natural catastrophes. He repeated over the years that his catastrophe insurance operation is the only one he knew that can keep the checks clearing during financial turmoil.

Investment approach

Buffett's philosophy on business investing is a modification of the value investing approach of his mentor Benjamin Graham. Graham bought companies because they were cheap compared to their intrinsic value. He was of the belief that as long as the market undervalued them relative to their intrinsic value he was making a solid investment. He reasoned that the market will eventually realize it has undervalued the company and will correct its course regardless of what type of business the company was in. In addition he believes that the business has to have solid economics behind it.

The following are some questions to determine what business to buy, based on the book Buffettology by Mary Buffett:

• Is the company in an industry of good economics, i.e., not an industry competing on price points. Does the company have a consumer monopoly or brand name that commands loyalty? Can any company with an abundance of resources compete successfully with the company?
• Are the earnings on an upward trend with good and consistent margins?
• Is the debt-to-equity ratio low or is the earnings-to-debt ratio high, i.e. can the company repay debt in few years from its earnings?
• ROE is consistent over its history and high compared to industry averages? Is it more than 12%? Or does the company have high and consistent Return on total capital?
• Does the company retain earnings for growth?
• The business should not have high maintenance cost of operations, low capital expenditure or investment cash outflow. This is not the same as investing to expand capacity.
• Does the company reinvest earnings in good business opportunities? Track record of management accomplishing these investments?
• Is the company free to adjust prices for inflation?

Buffett's next concern would be when to buy. He does not hurry to invest in a business if the value is not discernible. He will wait for market correction or downturn to buy solid businesses at reasonable prices, as he views downturns in the stock market as buying opportunities. He is conservative when greed and speculation is rampant in the market and he is greedy and aggressive when others are fearing for their capital. This strategy is what led Buffet's company through the internet boom and bust without significant damage, although critics have also noted that it may have led Berkshire to miss out on potential opportunities during the same period.

Then he asks at what price is the business a bargain, and his answer typically is when it provides a higher rate of compounded return relative to other available investment opportunities.

Buffett has coined the term "economic moat", preferring to acquire companies which possess sustainable competitive advantages over their competitors.

Warren Buffett's letters to shareholders are a very valuable source in understanding his investment style and outlook.

Buffett's views

Views on taxes

Estate tax

Buffett told The New York Times that the inheritance tax played a "critical role" in promoting economic growth by helping create a society in which success is based on merit rather than inheritance. Repealing the estate tax, he said, would be equivalent to "choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics."

Dividend tax

When the U.S. Senate discussed a proposal that dividends be made 50% tax free in 2003, then 100% tax free in 2004 through 2006, Buffett wrote an opinion piece in the Washington Post saying it would "further tilt the tax scales toward the rich".

Buffett posed a hypothetical situation in which Berkshire Hathaway, which does not pay a dividend, paid $1 billion in dividends next year. His 31% ownership would give him an additional $310 million in income (tax free). This would reduce his tax rate from about 30% to 3%, while his office secretary would still have a tax rate of about 30%. "The 3% overall federal tax rate I would pay - if a Berkshire dividend were to be tax free - seems a bit light", Buffett wrote.

Instead of the Senate's tax-cut plan, Buffett proposed it provide tax reductions to those who need and will spend the money in the form of a Social Security tax "holiday" or a tax rebate to lower-income people. "Putting $1,000 in the pockets of 310,000 families with urgent needs is going to provide far more stimulus to the economy than putting the same $310 million in my pockets", Buffett added.

Property tax

Warren Buffett used his own properties to illustrate an example.

His home in Omaha, Nebraska, is valued at about $500,000 and its recent annual property tax was $14,401. His first home in Laguna Beach, California, purchased in the 1970s is valued at $4 million and its recent annual property tax was $2,264. His second home adjacent to the first was bought in the 1990s and is valued at $2 million with a recent tax of $12,202.

Buffett said in a Wall Street Journal interview that taxes on the two homes should be based on value, just like his home in Omaha, but instead is based on purchase date, as a consequence of limitations on increases in property tax established by California Proposition 13 (1978).

"In effect, it makes no sense", Buffett told the Wall Street Journal, in reference to large differences in tax assessments by purchase date.

Income tax

Buffett opposed President George W. Bush's income tax cuts as favoring the wealthy. "If class warfare is being waged in America", he wrote, "my class is clearly winning". In the 2004 presidential election he supported Democratic candidate John Kerry and served as Kerry's economic adviser.

Views on other topics

Buffett believes that many of the problems with the economies of the United States and other industrialized countries in recent years result from the proliferation of persons and organizations who produce nothing directly but are compensated based on the volume of business transactions which they facilitate.

Buffett feels that most stock trades are recommended and made primarily to benefit the brokers rather than the investors and has stated that he feels that the world would benefit if each person had a lifetime maximum number of stock trades (e.g. ten or twenty trades).

Buffett emphasized the non-productive aspect of gold in 1998 at Harvard: "It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

Buffett also views compensation under employee option plans as a direct business expense. He is appalled that Corporate America does not recognize this as a direct deduction from their earnings. He was consistently lobbying for a change in the Accounting Rules to reflect the compensation as an expense and not merely as a footnote. He was quoted as saying: "If it is not compensation, then what is it? If it does not belong in the profit and loss statement, then where does it belong?"

Buffett believes that the US dollar will lose value in the long run. He views the expanding trade account deficit as an alarming trend that will devalue the US dollar and US assets. As a result it is putting a larger portion of ownership of US assets in the hands of foreigners. This induced Buffett to enter the foreign currency market for the first time in 2002. And his foreign asset base has expanded ever since.

Popularity

Every year, over 20,000 visitors descend on the Qwest Center in Omaha, Nebraska for what is called the "Woodstock of Capitalism". This unique event mixes some serious business philosophy with humor and a revival-like atmosphere. Fans and devoted followers come to Nebraska from all over the world to hear Buffett present the Berkshire Hathaway annual report. Past annual reports contained literary quotes that ran the gamut from the Bible to Mae West, as well as hokey Midwestern advice and a few jokes.

Many of those who make the trek to Omaha, have personally made millions investing in Berkshire, or have coat-tailed on Buffett's moves and made money on the markets. Either way, people often become devoted followers. Some have bought a single share just to ask Buffett a question at each year's meeting.

Berkshire Hathaway's website has been called the Berkshire Hathaway "homely" page by the Washington Post and Buffett is notoriously technophobic. He claims not to have an e-mail address. Websites have sprung up that extol his virtues [1] while others decry Buffett’s business models and attempt to dissect the "Sage of Omaha's" investment advice and decisions.

Historical timeline

Education: Woodrow Wilson High School, Washington D.C. in 1947 Wharton School of Finance, University of Pennsylvania, 1947-1949 B.S. University of Nebraska, 1950 M.S. in Economics, Columbia University, in 1951. Employment: 1951-1954 Buffett-Falk & Co., Omaha - Investment Salesman 1954-1956 Graham-Newman Corp., New York - Securities Analyst 1956-1969 Buffett Partnership, Ltd., Omaha - General Partner 1970-Present Berkshire Hathaway Inc, Omaha - Chairman, CEO

1943: (13 years old)

• Buffett filed his first income tax return, deducting his bicycle as a work expense.

1944: (14 years old)

• He invested $1,200 of his savings into 40 acres (0.2 km²) of farmland.

1945: (15 years old)

• Buffett's first job was writing stock prices on a chalkboard at his father's brokerage. Later, he made $175 monthly delivering Washington Post newspapers.

1947: (17 years old)

• In his senior year of high school, Buffett and a friend spent $25 to purchase a used pinball machine, which they placed in a barber shop. Within months, they owned three machines in different locations. They sold their business later in the year for $1,200 to a war veteran.
• By this time he had earned over $5,000 delivering newspapers.
• His father suggested he should attend college, a suggestion Buffett did not take well. Nevertheless, that year, he enrolled as a freshman at the Wharton School of the University of Pennsylvania.

1949: (19 years old)

• Buffett transferred to the University of Nebraska. He was offered a job at J.C. Penney after college, but turned it down. He graduated from college in only three years by taking his last three credits over the summer. His savings had reached $9,800 by then.

1950: (20 years old)

• Buffett applied for admission to Harvard Business School and was turned down. He eventually enrolled at Columbia after learning that Benjamin Graham and David Dodd, two well-known securities analysts, were professors at Columbia.

1951: (21 years old)

• Buffett discovered Ben Graham was on the Board of GEICO insurance at the time. He took a train to Washington, D.C., and knocked on the door of its headquarters until a janitor allowed him in. After asking if anyone was working, he found a man on the sixth floor, who turned out to be the Financial Vice President of the company. They talked for hours while Buffett questioned him on the business and insurance in general. Buffett graduated and wanted to go to work on Wall Street. Both his father and Ben Graham urged him not to. Warren offered to work for Graham for free but Graham refused. Buffett returned home and began dating Susan Thompson. Buffett purchased a Texaco gas station as a side investment, but that venture did not work out as well as he had hoped. Meanwhile, he worked as a stockbroker. During that time, Buffett also took a Dale Carnegie public speaking course. Using what he learned, he felt confident enough to teach a night class at the University of Nebraska, "Investment Principles". The average age of the students he taught was more than twice his own (he was only 21 at the time).

1952: (22 years old)

• Buffett married Susan Thompson in April of 1952. They rented an apartment for $65 a month, and had their first child, named Susie.

1954: (24 years old)

• Benjamin Graham called Buffett and offered him a job at his partnership. His starting salary was $12,000 a year. Warren and Susan Buffett had their second child, Howard Graham Buffett.

1956: (26 years old)

• Graham retired and folded up his partnership. Since leaving college six years earlier, Buffett's personal savings grew from $9,800 to over $140,000. The Buffett family returned home to Omaha. On May 1st, Warren Buffett created Buffett Associates, Ltd. Seven family members and friends put in a total of $105,000. Buffett himself invested only $100. Over the course of the year, Buffett created two additional partnerships, eventually bringing the number under his management to three.

1957: (27 years old)

• Buffett added two more partnerships to his collection. He was then managing five investment partnerships from his home. With his wife about to have her third child, Peter, Buffett purchased a five-bedroom, stucco house on Farnam Street for $31,500. He has lived there ever since.

1958: (28 years old)

• His original partnership in its third year, the partners' money had doubled.

1959: (29 years old)

• Buffett was introduced to Charlie Munger, the man who would eventually become the Vice Chairman of Berkshire Hathaway, and an integral part of the company's success. The two got along immediately.

1960: (30 years old)

• Buffett asked one of his partners, a doctor, to find 10 other doctors who will be willing to invest $10,000 each into his partnership. Eventually, 11 doctors agreed to invest.

1961: (31 years old)

• With the partnerships worth millions, Buffett made his first $1 million investment in a windmill-manufacturing company.

1962: (32 years old)

• Buffett returned to New York with his wife Susan for a few weeks to raise capital from his old acquaintances. During the trip, he picked up a few partners and several hundred thousand dollars. The Buffett Partnership, which had begun with $105,000, by this time was worth $7.2 million. Warren and Susan Buffett personally held over $1 million of the assets. Buffett merged all of the partnerships into one entity known simply as Buffett Partnerships, Ltd. The operations were moved to Kiewit Plaza, a functional but less-than-grand office where they remain to this day. The minimum investment in the partnership was raised from $25,000 to $100,000. Buffett consulted Munger on Dempster, the windmill company. Munger recommended Harry Bottle, a move that turned out to be very profitable. Bottle cut costs, laid off workers, and caused the company to generate cash. Buffett discovered a textile manufacturing firm, Berkshire Hathaway, that was selling for under $8 per share. He began to buy the stock.

1963: (33 years old)

• Buffett sold Dempster for three times the amount he invested. The almost worthless company had built a portfolio of stocks worth more than $2 million alone during the time of Buffett's investment. The Buffett partnerships became the largest shareholder of Berkshire Hathaway.

1964: (34 years old)

• Due to a fraud scandal, American Express shares fell to $35. While the world was selling the stock, Buffett began to buy shares en masse.

1965: (35 years old)

• Buffett's father, Howard Buffett, died. Buffett began to purchase shares in the Walt Disney Company after meeting with Walt Disney. He invested $4 million [which was equal to around 5% of the company]. The American Express shares were selling for more than double the price Buffett paid for them. Buffett arranged a business coup - taking control of Berkshire Hathaway at the board meeting and naming a new President, Ken Chace, to run the company.

1966: (36 years old)

• Buffett's net worth reached $6,849,936.

1967: (37 years old)

• Berkshire paid out its first and only dividend of 10 cents. In October, Buffett wrote to his partners and told them he found no bargains in the roaring stock market of the '60s. His partnership was worth $65 million. He briefly considered leaving investing and pursuing other interests. American Express hit over $180 per share, making the partnership $20 million in profit on a $13 million investment.
• Berkshire Hathaway acquired National Indemnity Insurance at Buffett's direction. It paid $8.6 million.
• Buffett's net worth was now more than $10 million.

1968: (38 years old)

• The Buffett Partnership earned more than $40 million, bringing the total value to $104 million. Buffett became a trustee of Grinnell College, a prestigious liberal arts college in Iowa. He remains a trustee to this date, and is credited for guiding the college's immense endowment through the seventies and eighties; Grinnell College now has the highest endowment of any liberal arts college in the United States.

1969: (39 years old)

• Following his most successful year, Buffett closed the partnership and liquidated its assets to his partners. Among the assets paid out were shares of Berkshire Hathaway.
• Buffett's personal net worth reached $25 million.

1970: (40 years old)

• The Buffett Partnership was completely dissolved and divested of its assets. Buffett owned 29% of the stock outstanding in Berkshire Hathaway. He named himself chairman and began writing the annual letter to shareholders.
• Berkshire Hathaway made $45,000 from textile operations, and $4.7 million in insurance, banking and investments (Buffett's side investments made more than the company's primary business).

1971: (41 years old)

• At his wife's request, Buffett purchased a $150,000 summer home at Laguna Beach.

1973: (43 years old)

• Stock prices began to drop. At Buffett's direction, Berkshire borrowed money by issuing notes at 8%.
• Berkshire began to acquire stock in the Washington Post Company. Buffett became close friends with Katharine Graham, who controlled the company and its flagship newspaper, and became a member of its board of directors. Graham, in her autobiography, credited him with giving her the equivalent of a business degree through his personal tutoring and frequent advice, and said that she often called him several times a day in the early years of their friendship.

1974: (44 years old)

• Due to falling stock prices, the value of Berkshire's stock portfolio began to fall. Buffet's personal wealth was cut by more than 50%. The U.S. Securities and Exchange Commission opened a formal investigation into Warren GH Buffett and one of Berkshire's mergers. Nothing ever came of the investigation.

1977: (47 years old)

• Berkshire indirectly purchased the Buffalo Evening News for $32.5 million. Buffet would later be brought up on antitrust charges by a competing paper. Susan leaves Buffet, although not officially divorcing him. This caused considerable emotional distress for Buffett.

1978: (48 years old)

• Susan introduced Warren to Astrid Menks, who eventually moved in with him.

1979: (49 years old)

• Berkshire began to acquire stock in ABC. Trading at $290 per share, Buffet's net worth neared $140 million. However, he lived solely on his salary of $50,000 per year.

1981: (51 years old)

• Munger and Buffett created the Berkshire Charitable Contribution plan, allowing each shareholder to donate some of the company's profits to his or her personal charities.

1983: (53 years old)

• Buffett purchased Nebraska Furniture Mart for $60 million and ended the year with $1.3 billion in corporate stock portfolio.
• Berkshire began the year trading at $775 per share, and ended at $1,310. Buffet's net worth reached $620 million, placing him on the Forbes 400 for the first time.

1985: (55 years old)

• Buffett shut down the Berkshire textile mills after years of operation. He refused to allocate additional capital to it.
• For $315 million, Buffett purchased Scott & Fetzer, which produced commercial products such as Kirby vacuums and the World Book Encyclopedia. Buffet helped orchestrate the merger between ABC and Capital Cities. He was forced to leave the Board of the Washington Post because federal legislation prohibited him from sitting on the Boards of both Capital Cities and Kay Graham's Washington Post.

1986: (56 years old)

• Berkshire share price reached $3,000.

1987: (57 years old)

• In the aftermath of the stock market crash of October 1987, Berkshire lost 25% of its value, dropping from $4,230 per share to around $3,170.

1988: (58 years old)

• Buffett began buying stock in Coca-Cola Company, eventually purchasing up to 7 percent of the company for $1.02 billion. It would turn out to be one of Berkshire's most lucrative investments.

1989: (59 years old)

• Berkshire rose from $4,800 per share to over $8,000. Buffet's net worth rose with it to $3.8 billion.

1996: (66 years old)

• Buffett participated in a conference sponsored by Cardozo Law School (New York) and organized by Lawrence A. Cunningham, which resulted in Cunningham editing and publishing a thematically-arranged collection of Buffett's famous letters to shareholders called The Essays of Warren Buffett. This is among the best ways to gain in-depth knowledge of Buffett's ideas and experience.

1997: (67 years old)

• Buffett purchased nearly 130 million ounces of silver as an investment at about $6 per ounce. In 2006, he disclosed having sold the precious metal.

2002: (72 years old)

• Buffett entered in $11 billion worth of forward contracts to deliver US dollars against other currencies. By April 2006, his total gain on these contract was over $2 billion.

2003: (73 years old)

• By December 31 his gain on the contracts from last year was over $600 million dollars.
• Buffett also placed second to Ralph Nader in an online web poll, conducted by iswitched.org, of possible candidates for the Green Party nominee for President in 2004.

2004: (74 years old)

• Buffett is criticized for the position he held on the board of Coca-Cola Company, since some institutional investors saw this as a conflict of interest with Berkshire's ownership of Dairy Queen and McLane, heavy buyers of many Coca-Cola products. Buffett's reply: "Do they want us to favor Pepsi?"

2005: (75 years old)

• The gains from the 2002 contract were reduced in 2005 when the US dollar strengthened. Hurricane Katrina caused losses to Berkshire's reinsurance divisions.

2006: (76 years old)

• Buffett and Berkshire Hathaway faced difficulties over their General Re Insurance unit, which was accused of questionable dealings with American International Group.
• Buffett makes many acquisitions during the year, including Business Wire, Russell Corporation, PacifiCorp, ISCAR Metalworking and Agro-Logic, a small agricultural manufacturing company. Iscar and Agro-Logic are both Israeli companies that Buffet purchased within a week of each other. "We are investing $4 billion in an amazing band of people from Israel", Buffet said of Iscar, which is the largest purchase he has ever made outside of the United States.
• In March, Berkshire's board unanimously agreed on who would succeed Buffett as CEO if he dies or is removed. The identity of his successor is not publicly known.
• Buffett announced in June that he will give away more than 80% or about $37 billion of his $44 billion fortune to five foundations in annual gifts of stock starting in July 2006. The largest contribution will go to the Bill and Melinda Gates Foundation.