When people talk about the greatest investors of all time, one name consistently rises to the top: Warren Buffett. Known as “The Oracle of Omaha,” Buffett is revered not just for the size of his over $100 billion dollar fortune but for how he built it: with patience, wisdom, and restraint.
But how exactly did Warren Buffett make his money? How did a kid from Nebraska turn a paper route into one of the most legendary investment empires the world has ever seen? Grab a cup of coffee (or a Cherry Coke, Buffett’s favorite), and let’s dive into the remarkable story of how Warren Buffett became one of the wealthiest men to ever live.
Who Is Warren Buffett? A Quick Background
Warren Edward Buffett was born on August 30, 1930, in Omaha, Nebraska. His father, Howard Buffett, was a stockbroker and later a U.S. congressman. Young Warren showed an early interest in numbers, business, and, notably, making money.
By age 11, he had already bought his first stock – three shares of Cities Service Preferred at $38 each. When the stock dipped to $27, he held tight until it inevitably rose again and sold at $40. The original diamond hands. It was a small profit, sure but also a big lesson for the young Buffett: patience is often rewarded.
Buffett attended the University of Nebraska and later earned a master’s degree in economics from Columbia Business School, where he studied under the legendary investor Benjamin Graham, author of The Intelligent Investor and the father of value investing. This education would lay the foundation for Buffett’s lifelong investing strategy: buying undervalued companies and holding them for the long haul.
How Did Warren Buffett Make His Money?
The short answer: He became one of the world’s richest people by investing wisely, remaining disciplined, and thinking long-term. The long answer? Let’s break it down.
1. Starting Small, But Smart
Buffett’s first serious business was Buffett Partnership Ltd., launched in 1956 with merely $100 of his own money and funds from family and friends. Over the next 13 years, Buffett grew it with consistent, market-beating returns. His investment strategy was based on Graham’s value-investing principles of buying stocks trading below their intrinsic value.
Buffett focused on small, undervalued companies with strong fundamentals. He once bought shares of a windmill company, Dempster Mill Manufacturing, turned it around, and made a tidy profit.
By the late 1960s Buffett dissolved the partnerships, but not before achieving average annual returns of over 25%. This was more than double the S&P 500 during the same time. This would be one of the first of many times that Buffett proved himself to be one of the few men in the world capable of consistently beating the market.
2. The Birth of Berkshire Hathaway – A Trillion Dollar Company
Here’s where it gets interesting.
In 1962, Buffett started buying shares of a failing textile company called Berkshire Hathaway. He originally planned to flip it, but a management dispute led him to buy controlling interest. It wasn’t the best business move at the time, and Buffett later called it a mistake.
But Berkshire would soon become his investment holding company – the vehicle through which he built his empire.
Rather than run a textile business, Buffett began using Berkshire as a platform to buy other businesses, starting with insurance companies like National Indemnity. Insurance, with its steady cash flow (“float”), gave him the capital to make even more investments.
And that’s when things really took off.
Over the next few decades Berkshire Hathaway continued to grow into the behemoth it is today through the shrewd investing decisions of CEO Warren Buffett and Vice President Charlie Munger. Time after time Buffett and Berkshire Hathaway have beaten the market and made prescient predictions about the future of innumerable companies they’ve been a part of. This empire truly began in 1972 with the purchase of now confectionary superpower See’s Candy and continued with incredibly intelligent investments in major companies as diverse as Burlington, TSMC, HP, and Ulta Beauty. On August 28th, 2024, Berkshire Hathaway passed the $1 Trillion dollar mark to become one of only seven companies to be valued at over a trillion dollars. These other trillion dollar companies include: Apple, Microsoft, Nvidia, Amazon, Alphabet, and Meta; not bad company to be in. Even more impressive is the fact that Berkshire Hathaway is the only non-tech company to make the list. Truly impressive!
Why Is He Called “The Oracle of Omaha”?
Warren Buffett earned the nickname “The Oracle of Omaha” because of his uncanny ability to predict market trends, spot undervalued assets, and generate massive returns, all while operating out of the relatively quiet city of Omaha, Nebraska.
In a world obsessed with flashy Wall Street offices and high-frequency trading, Buffett did things differently. He:
- Shunned speculation
- Emphasized fundamentals
- Read voraciously (reportedly 500+ pages per day)
- Avoided herd mentality
His calm, rational, Midwestern demeanor only added to his mystique. He rejected a flashy lifestyle for what was familiar and comfortable. Investors began hanging on his every word, especially during Berkshire’s annual shareholder meetings, dubbed the “Woodstock of Capitalism.”
Warren Buffett’s Best Investments
Let’s take a look at some of Buffett’s most legendary investments and how they made him billions.
1. Coca-Cola
In 1988, Buffett bought $1 billion worth of Coca-Cola stock, giving him a 6.2% stake in the company. Why? Because he believed in the brand’s staying power, distribution network, and customer loyalty.
Today, it’s still one of Berkshire’s most valuable holdings. Perhaps single-handedly keeping the stock up, Buffett claims he drinks an average of five cans of Coke a day.
2. American Express
After the 1963 “salad oil scandal,” American Express shares plummeted. Buffett saw an opportunity. He bought 5% of the company for $20 million. Decades later, that investment has grown exponentially.
3. Apple
Despite his tech skepticism, Buffett took a huge position in Apple starting in 2016. It’s now Berkshire Hathaway’s largest single stock holding, worth over $150 billion.
He didn’t view Apple as a tech company but as a consumer products company with unmatched customer loyalty.
4. Geico
Buffett first invested in Geico in the 1950s and eventually bought the company outright in the 1990s. It became a key part of Berkshire’s insurance group and a consistent profit engine.
Frugality: The Billionaire Who Still Lives in Omaha
Warren Buffett’s wealth is legendary, but so is his frugality.
He still lives in the same house he bought in Omaha in 1958 for $31,500. He drives modest cars, has owns no private jet, and eats breakfast at McDonald’s most days, often paying in exact change.
When asked why he doesn’t live more lavishly, Buffett says, “I’m not interested in cars and my goal isn’t to make people envious.”
This mindset – focusing on value, not superficiality – mirrors his investing strategy. While others chase the next big thing, Buffett looks for predictable, profitable, boringly reliable businesses.
Warren Buffett’s Wealth Today
As of 2024, Warren Buffett’s net worth is estimated to be over $120 billion, placing him as one of the five richest people in the world. He is a co-founder of “The Giving Pledge” which encourages wealthy individuals to donate the majority of their wealth to charitable causes before their death. He plans to give away 99% of his fortune to philanthropy, primarily through the Bill & Melinda Gates Foundation and the foundations of his children.
Buffett once said: “I want to give my kids enough so that they can do anything, but not so much that they can do nothing.”
Key Lessons from Buffett’s Success
Here are a few timeless principles we can all learn from the Oracle of Omaha:
1. Think Long Term
Buffett’s favorite holding period? “Forever.” Time in the market always beats timing the market.
2. Buy Businesses, Not Stocks
Invest in companies you understand, with strong fundamentals. You’re not buying a ticker, you’re buying part of a business.
3. Be Fearful When Others Are Greedy (and Vice Versa)
One of his most famous quotes. When markets panic, opportunities abound.
4. Avoid Debt
Buffett avoids personal debt like the plague. He’s even said, “If you’re smart, you’re going to make a lot of money without borrowing.”
5. Live Below Your Means
You don’t have to look rich to be rich. Buffett proves that true wealth is freedom, not stuff.
The Legacy of Warren Buffett
So, how did Warren Buffett make his money?
Not through luck, inheritance, or flashy deals, but through a lifetime of discipline, rationality, and integrity. He stuck to his principles, even when they were unpopular. He focused on fundamentals, not fads, and above all, he stayed patient. In a world chasing the next meme stock or crypto coin, Buffett’s success reminds us of a timeless truth: wealth is built, not won.
Whether you’re a new investor or a seasoned pro, Warren Buffett’s story is more than inspiring – it’s a masterclass in personal finance, investment strategy, and life. As he says, “The stock market is a device for transferring money from the impatient to the patient.”
Be patient. Be wise. Be a little more like Warren.