Warren Buffett's $50 Billion Decision

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Frank Voisin
Mar 28, 2012
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Warren Buffett recently contributed to Forbes When I Was 25 series and as usual he does not disappoint. He discusses the decision he made at 25 between a comfortable (very early) retirement versus continuing to invest money for others.

Benjamin Graham had been my idol ever since I read his book The Intelligent Investor. I had wanted to go to Columbia Business School because he was a professor there, and after I got out of Columbia, returned to Omaha, and started selling securities, I didnt forget about him. Between 1951 and 1954, I made a pest of myself, sending him frequent securities ideas. Then I got a letter back: Next time youre in New York, come and see me.

So there I went, and he offered me a job at Graham-Newman Corp., which he ran with Jerry Newman. Everyone says that A.W. Jones started the hedge fund industry, but Graham-Newmans sister partnership, Newman and Graham, was actually an earlier fund. I moved to White Plains, New York, with my wife, Susie, who was four months pregnant, and my daughter. Every morning, I got on a train to Grand Central and went to work.

It was a short-lived position: The next year, when I was 25, Mr. Grahamthats what I called him thengave me a heads-up that he was going to retire. Actually, he did more than that: He offered me the chance to replace him, with Jerrys son Mickey as the new senior partner and me as the new junior partner. It was a very tiny fund$6 million or $7 millionbut it was a famousfund.

This was a traumatic decision. Here was my chance to step into the shoes of my heroI even named my first son Howard Graham Buffett. (Howard was for my father.) But I also wanted to come back to Omaha. I probably went to work for a month thinking every morning that I would tell Mr. Graham I was going to leave. But it was hard to do.

The thing is, when I got out of college, I had $9,800, but by the end of 1955, I was up to $127,000. I thought, Ill go back to Omaha, take some college classes, and read a lotI was going to retire! I figured we could live on $12,000 a year, and off my $127,000 asset base, I could easily make that. I told my wife, Compound interest guarantees Im going to get rich.
For some context, I used this website to find the current value of Buffetts $127,000 asset base in 1955. We see he had just slightly over $1 million in present dollars, and had planned to live off expected gains of about $100,000 per year.

My favourite quote:

In Omaha, I rented a house at 5202 Underwood for $175 a month. I told my wife, Id be glad to buy a house, but thats like a carpenter selling his toolkit. I didnt want to use up my capital.
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