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Warren Buffett's Net Worth by Age
- victorology 10y agoIt's interesting to read about his career to see what he did to build his wealth. https://en.wikipedia.org/wiki/Warren_Buffett#Business_career https://en.wikipedia.org/wiki/Warren_Buffett#Business_career
- jballanc 10y agoMy favorite part of his history in business is how the company whose name he eventually adopted for his whole operation (Berkshire Hathaway) was actually one of his self-admitted stupidest acquisitions, one based on vengeance rather than strategy. Seems like an unspoken bit of advice from him: name your company after your biggest fuck up, so you'll never forget you're only human.
- svantana 10y agoWow, that's an average 26% per year increase (for the non-inflation-adjusted data) over a 70 year timespan. That's definitely not a random walk down wall street [1]. For reference, Dow Jones seems to have about 7% per year for the same time period. [1] https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street
- yodsanklai 10y agoThanks for the link. Actually, I've been watching a finance class given by the infamous Martin Shkreli (I came across it in an other HN comment recently). https://www.youtube.com/watch?v=ARrNYyJEnFI https://www.youtube.com/watch?v=ARrNYyJEnFI and I've been pondering this efficiency hypothesis. Basically, he explains how to pick stocks by fundamental analysis. Very entertaining to watch how this type of investors works. However, I can't help thinking that despite the rather sophisticated analysis, it just amounts to throwing random guesses. He always has to guesstimate some percentages (business future income over a decade and various other parameters) that can't be known precisely and little variation in them totally change the decision. What he says it that 20% of stocks are badly priced by the market, it's just a matter of working hard enough to find them. Could it be that the market is only mostly efficient? or those successful investors are just the lucky ones and they are biased to interpret their success on great skills when it really is luck? (Nicholas Taleb's "fooled by randomness" is all about this idea). I also watched a finance class on coursera (from Prof. Shiller) where this was discussed. A guest speaker (Andrew Redleaf) explained that the efficiency hypothesis was a thing of the past, essentially popular in academia, and he gave several reasons why it couldn't be true (you can find the video if you're interested) and it was convincing.
- svantana 10y agoIt's inevitable that the market will have some inefficiencies, the question is: how can you tell whether you found one? Mark Cuban claims he got rich because he found stock price anomalies in a business he was knowledgeable about, namely network equipment [1]. But he also warns that every stock trade has a sucker involved, and how do you know that you're not the sucker (i.e. the other party knows the stock is going to go down and that's why they're selling)? 1. http://blogmaverick.com/2013/01/10/the-stock-market-2/ http://blogmaverick.com/2013/01/10/the-stock-market-2/
- freyr 10y agoHe might have made some money picking stocks, but he got rich by selling an overvalued company at the peak of the dotcom bubble. I suppose this is an example of a market inefficiency as well.
- Marazan 10y agoThe market is irrational but it can stay irrational longer than you can stay solvent.
- enibundo 10y agoYou misspelled that asshole's name. Find another teacher.
- Shanea93 10y agoI'm not really sure you understand the situation. A pharmaceutical company makes a drug which they priced when they acquired it a long time ago, they're the only company which makes a drug for that specific condition. The drug is priced at $13.50 per pill, which is sold in bottles of 80 pills and is covered by insurance, with a co-pay of $20. Most bottles actually cost only $1, which is a federally mandated amount for a prescription for those on medicaid. The company (which only has margins of 8%, which is a very low amount) realises that the costs of their only successful drug are going to put them out of business and that they need to raise the price of the drug or stop selling it. This would mean no longer selling the only cure to toxoplasmosis. They decide that raising the cost by 50x would allow them to continue R&D in to other rare diseases, so they could make other pills. When they raise the costs to $750 per pill, everyone can still get their pills. The insurance co-pay of $20 per bottle is still exactly the same. The medicaid prescription cost of $1 per bottle is still exactly the same. Nothing changes for the end user, it costs the exact same, the insurance company picks up the extra tab for the pills and the 2,000 people yearly who need this drug are able to survive. You should really investigate the situation fully before blindly believing the story the media has sold to you.
- scrrr 10y agoWell, how many trades did he do? Is that number high enough to statistically determine if he is really more skilled than the average investor?
- soVeryTired 10y agoEven running a statistical test won't cut it. How could a statistical test account for the fact that an internet celebrity trader might be less likely to discuss his losing trades?
- sfifs 10y agoActually, if I remember right, he said he bought ONLY when stock was under priced as per his analysis. A few big transactions a year vs. "trader" type frequent transactions.
- xyzzy4 10y agoIf UPRO (s&p 500 leveraged 3x) had existed since the early 50s, it would've averaged about 20%-25% gains per year up until now. Warren Buffett also used leverage to invest.
- deleted 10y ago[deleted]
- Nanite 10y agoAlso note his net worth increased even during recession times ,of which there were twelve during his lifetime so far, except for the 1974-1975 recession.
- JumpCrisscross 10y ago"We find that [Buffett's] alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett’s leverage is about 1.6-to-1 on average. Buffett’s returns appear to be neither luck nor magic, but, rather, reward for the use of leverage combined with a focus on cheap, safe, quality stocks. Decomposing Berkshires’ portfolio into ownership in publicly traded stocks versus wholly-owned private companies, we find that the former performs the best, suggesting that Buffett’s returns are more due to stock selection than to his effect on management." http://www.econ.yale.edu/~af227/pdf/Buffett's%20Alpha%20-%20Frazzini,%20Kabiller%20and%20Pedersen.pdf http://www.econ.yale.edu/~af227/pdf/Buffett's%20Alpha%20-%20...
- tim333 10y agoIt can be easy with hindsight to say oh you should have just done Betting-Against-Beta and Quality-Minus-Junk. It doesn't mean those strategies are going to win over the next decades.
- ethanbond 10y agoOh so all you've gotta do is pick cheap, safe, quality stocks. Got it.
- oli5679 10y agoLow beta just means low historic correlation with market returns. It can be computed mechanically with no subjective judgement needed https://en.m.wikipedia.org/wiki/Capital_asset_pricing_model https://en.m.wikipedia.org/wiki/Capital_asset_pricing_model If you had invested in low beta stocks, leveraged at the same level as Buffett you would not have performed much worse.
- slazaro 10y agoJust a warning: The X-axis in the graph is not regularly spaced: some labels on the bars are separated by 3 years, some by up to 13.
- nxzero 10y agoAnyone that doesn't believe luck played a huge role in Buffet's success is a fool, even Buffet says so.
- freyr 10y agoHow do you accumulate $67k by age 14? I'm doing something wrong.
- sdrothrock 10y agoIt's $67k after being adjusted for inflation. If you click through to the original article[1] linked by the blog post, they explain that > Warren Buffett became a player in the investment game at the wee age of 11, eventually using cash he earned from his paper route to buy some farmland in his home state. As a high school sophomore, he also reaped the rewards of a booming pinball machine business. 1. http://www.marketwatch.com/story/from-6000-to-67-billion-warren-buffetts-wealth-through-the-ages-2015-08-17 http://www.marketwatch.com/story/from-6000-to-67-billion-war...
- freyr 10y agoYeah, I know it's adjusted for inflation. I guess they explain it? I can't imagine a paperboy earning nearly $60k (adjusted) in a couple years, so his investment returns must have been phenomenal right off the bat. A high school sophomore would be 15-16, so he would have already made the $67k (adjusted) before he got into the pinball business.
- zxoq 10y agoThat figure seems slightly exaggerated, Wikipedia states he had $9800 saved when he was 20. And that he made $175 a month from his postal route. If he started his paper route at 15 he would have made over $10,000 from just the paper route during those 5 years. And the article lists several more business ventures he was active in. Few people start working as early as 13-14, but if we extrapolate the $175 a month (which would be almost $2500 in today's dollars), and you had no expenses you could save $150,000 by the time you were 20, today. Must surprising here is how well paid that paper route was. Average salary was $200 a month in 1944. Today the average salary is $2500 a month, but you can't earn as much from such a simple job today.
- dejv 10y agoHe did quite a lot of stuff: fish for (and resell) golf balls, did paper route, have pinball business and he also shoplift at Sears.
- deleted 10y ago[deleted]
- known 10y agoInsider trading is not illegal http://cnbc.com/id/43471561 http://cnbc.com/id/43471561
- sokoloff 10y agoWhat's the relevance of that to Warren Buffett?
- sunstone 10y agoThese days doesn't he transfer quite a bit (5%ish ?) into Gates' trust every year? Does that still count as 'his' for the purposes of this graph or is it deducted?
- modeless 10y agoTo me the biggest anomaly here is the four year period from 1956 to 1960, 26 to 30, when Buffet octupled his net worth from $1M to $8M. Plenty of silicon valley engineers will have a net worth of $1M, but I think few make it to $8M. What was Buffet doing during those magical 4 years?
- thr0waway1239 10y agoOn the chart, the preceding few years have a very similar slope. One possible explanation is that he entered his 20s after all, and you might imagine that he started being taken more seriously in his business ventures when compared to the preceding period (i.e. it is possible the growth looks really huge when starting from a small base)
- bisRepetita 10y agoLeverage is one big thing. Buffet is a money manager, so he takes outside money, and make money off of that. Most of Silicon Valley engineers won't do that. 1956 is when he started taking serious outside money. Then there is early luck and talent. http://www.valuewalk.com/2015/05/warren-buffett-partnership/ http://www.valuewalk.com/2015/05/warren-buffett-partnership/
- icantdrive55 10y agoI remember going through some of my refrence books. I was deciding which one's to toss. I opened Encyclopedia of Psychiatry (vol. 1 and 2). The first page I flipped to said, "A man of 50 will not make anymore money than he is currently making in his life." It was just so specific, or I I got the quote wrong? I recall looking at it a few times. It was personally depressing because I was broke, and hitting 50. To this day, I think about that sentance, supposedly extrapolated from years of statistics. Well, even though most of the wealthy people I have pesonally interacted with had the likability factor of a boat anchor; Warren Buffet seems like one of the wealthy the others should try to emulate. He is one of the guys I secretly root for.
- tim333 10y agoThe man of 50 thing sounds like nonsense. Buffett himself is a counter example.
- oli5679 10y agoBuffet's approach of combining high leverage with low growth 'value' equities is a large part of his great performance. This is not to say there isn't a skill in noticing the benefits of this approach and convincing creditors and investors to let you take on all the debt, but a surprisingly small proportion of these gains are due to stock picking. http://xqdoc.imedao.com/150c22613c69373fe2602a80.pdf http://xqdoc.imedao.com/150c22613c69373fe2602a80.pdf
- kale 10y agoCan anyone really know what the root of his great performance is? If anyone did, wouldn't they be as successful?
- oli5679 10y agoYes, the disaggregation used in the linked paper is robust. You're welcome to critique it if you find a specific error. There are often leverage restrictions for financial products sold to individuals and even beyond this people are often wary of them. He is incredibly skillful in gaining the trust of investors and running an efficient mortgage operation as well as having a moderately good stock picking record.
- tim333 10y agoBuffett actually has very little debt. Most of the leverage comes from insurance float - when you buy insurance with GEICO Buffett invests the money until you crash.
- oli5679 10y agoTrue, should have written leverage rather than debt but the risk profile is the same for investors.
- efaref 10y agoBuffett's net worth at 14 was $5k. I just checked my old childhood savings account, and after my 14th birthday it had around £50 in it. At 34, his net worth was $7M, so relatively speaking, I only need £70k to be doing about as well as he was. I think I'm actually doing better. :-)
- elsurudo 10y agoYou need to adjust for inflation, though.
- efaref 10y agoWe both experienced inflation, but sure, let's work it out: £50 when I was 14 was worth £90 in today's money. Buffett's $5k was $68k. Buffett's age-35 7M was worth 53M in today's money. So I'd need £70k in today's money to match his net worth growth. That's exactly the same. I'm actually surprised by this, as it suggests both Buffett and I experienced the same level of compound inflation over the 20 years of our lives from age 14, despite being at different times and on different continents. (This is all tongue-in-cheek, of course).
- pcrh 10y agoWow! Tell me your secrets! :-)
- sytelus 10y agoThe most interesting thing is that y-axis is exponential. iIts humbling that Buffet didn't even crossed 100M mark when he was 40! While wealth accumulation seems to be exponential, it's sure a long winding road.
- mountaineer22 10y agoHow does a 14-year-old get $67k?
- nxzero 10y agoHustling: http://www.businessinsider.com/how-a-young-warren-buffett-made-money-2014-11 http://www.businessinsider.com/how-a-young-warren-buffett-ma...
- mountaineer22 10y agoDid this take place in Omaha, or where exactly?
- nxzero 10y agoPer the link above, DC.
- chhib 10y agoEverything thoroughly documented here: https://www.amazon.com/Snowball-Warren-Buffett-Business-Life/dp/0553384619 https://www.amazon.com/Snowball-Warren-Buffett-Business-Life... It is a great book which really explains how extreme an investor Buffett is. Few would be able to stay fully invested for a lifetime like he has.
- chestervonwinch 10y ago> Comparing yourself to others and especially to the best performer ever in your skill/expertise is unhealthy. Don’t compare yourself to others. And yet here I am anyway, nearing almost 30, still in graduate school, wondering if I'll ever know what it's like to have a reasonable amount in savings, let alone a "net worth" :)
- oneloop 10y agoI've only started caring about money a couple of years ago, so no point comparing 14-year old me with anyone in terms of money. What gets me is how much more creative successful people were when they were young. Fishing and re-selling golf balls? Pinball business?? When I was 14 I was too busy with computer games.