Warren Buffett

Warren Buffett (also known as the 'Oracle of Omaha') is an American business magnate, investor, and philanthropist. He is the chairman and CEO of Berkshire Hathaway, a multinational conglomerate holding company. Widely regarded as the most successful investor of the 20th century, Buffett is the world's most famous proponent of value investing, an investment paradigm he learned from his mentor, Benjamin Graham. However, Buffett evolved Graham's “cigar-butt” approach of buying mediocre companies at dirt-cheap prices. Influenced by his partner Charlie Munger, Buffett's strategy shifted towards buying wonderful companies at a fair price rather than fair companies at a wonderful price. His legendary success has been built on a foundation of long-term thinking, disciplined patience, and a deep understanding of business fundamentals, making him a folk hero to millions of ordinary investors who follow his every word.

Buffett's fascination with business and investing started in his childhood. From selling chewing gum door-to-door to delivering newspapers, he was a born entrepreneur. His life took a decisive turn when he read Graham's seminal book, The Intelligent Investor, which he later described as “by far the best book about investing ever written.” This led him to study under Graham at Columbia Business School, where he honed his quantitative skills for valuing businesses. After working for Graham's firm, he returned to Omaha, Nebraska, to start his own investment partnerships. In 1965, he took control of a failing textile company called Berkshire Hathaway, and over the next five decades, he transformed it into a colossal holding company with stakes in insurance, railroads, utilities, and iconic consumer brands like Coca-Cola and Apple.

At its heart, Buffett's investment philosophy is deceptively simple. It's not about complex algorithms or chasing hot trends. It's about thinking of stocks not as blinking ticker symbols, but as partial ownership in a real business.

Buffett's checklist for a potential investment can be boiled down to four key principles:

1. Pillar 1: Understand the Business. Buffett famously preaches staying within your “circle of competence.” This means you should only invest in companies whose business models you can easily understand. As he puts it, “If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes.” If you can't explain what a company does and how it makes money to a ten-year-old, it's probably outside your circle.
2. Pillar 2: Look for a Durable Competitive Advantage. Buffett seeks businesses protected by an “economic moat.” This is a sustainable competitive advantage that protects a company from rivals, much like a real moat protects a castle. Moats come in various forms, such as a powerful brand (like Apple), a low-cost production model (like GEICO), patents, or a network effect (like American Express). A wide moat ensures the company can generate high returns on capital for many years to come.
3. Pillar 3: Insist on Able and Trustworthy Management. A great business can be ruined by poor leadership. Buffett places enormous emphasis on the quality and integrity of a company's management team. He looks for managers who are rational, honest with shareholders, and think like owners, not just hired hands. He often jokes that he tries to buy businesses that are “so wonderful that an idiot can run them. Because sooner or later, one will.”
4. Pillar 4: Buy at a Sensible Price. This is the cornerstone of value investing. A wonderful company can be a terrible investment if you overpay. Buffett insists on a “margin of safety,” a concept from Graham meaning there must be a significant discount between the price you pay for a stock and its calculated intrinsic value. This buffer protects you from bad luck or analytical errors. It's the ultimate defense against permanent loss of capital.

To teach investors about market psychology, Buffett popularized Graham's allegory of Mr. Market. Imagine you have a business partner, Mr. Market, who is manic-depressive. Every day, he offers to either buy your shares or sell you his. Some days he's euphoric and offers a ridiculously high price. Other days he's despondent and offers to sell his shares for pennies on the dollar. You are free to ignore him. For a wise investor, Mr. Market's mood swings are an opportunity, not a guide. You should happily sell to him when he's euphoric and buy from him when he's panicking—but never let his irrationality influence your own judgment.

While you can't replicate Buffett's scale or access, you can absolutely adopt his mindset and principles to improve your own investment results.

• Think Long-Term: Don't get caught up in daily market noise. Your favorite holding period should be “forever.”
• Do Your Homework: Read annual reports. Understand the businesses you own. Stay within your circle of competence.
• Embrace Simplicity: You don't need to own dozens of stocks. A few wonderful, well-understood businesses are all you need.
• Be Patient: Great investment opportunities are rare. As Buffett says, “The stock market is a no-called-strike game. You don't have to swing at everything—you can wait for your pitch.”
• Read the Berkshire Letters: Buffett's annual letters to shareholders are a masterclass in business and investing, written in clear, witty prose. They are available for free on the Berkshire Hathaway website.

Despite his immense wealth (often ranking among the top 10 richest people in the world), Warren Buffett is famously frugal. He has lived in the same house in Omaha since 1958, which he originally purchased for $31,500. He's also known for his simple breakfast from McDonald's and his love of Cherry Coke.