Warren Buffett The Early Years — Part One: The First Partnership

Warren Buffett The Early Years — Part One: The First Partnership

Following the my last ten part series on the life and career of Charlie Munger, Vice-Chairman of Berkshire Hathaway Corporation and Warren Buffett’s right hand man, in this series I’m taking a look at Warren Buffett’s early career.

Before Warren Buffett became well-known, and before he acquired Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B), he ran a number of partnerships, investing the money of family, friends and outside investors. It’s these partnerships that helped build his reputation and provided the funds for him to ultimately acquire Berkshire Hathaway.

This is the story of Warren Buffett’s early career, the years that laid the foundations for him to become the world’s greatest investor.

Warren Buffett — Part one: The First Partnership

In 1952, Warren Buffett went to work with the godfather of value investing, Benjamin Graham at the Graham-Newman partnership. Here, Warren Buffett put his education from the Columbia University to work and learnt his trade as a value investor.

Unfortunately, Graham-Newman partnership closed its doors during 1956 so Buffett, took his savings (around $174,000) and started the first Buffett Partnership Ltd in Omaha.

When he first set out to invest money for others, Warren Buffett knew that he wouldn’t be able to stand criticism from his partners if stocks he selected started to fall. As Buffett was going to be the sole manager of the partnerships run by Buffett Partnership Ltd., there was nowhere to hide if he failed. With this being the case, Buffett only invited family and friends to invest in his first partnership — Buffett Associates, Ltd.

In total, six other partners, plus Warren Buffett invested in Buffett Associates, Ltd. raising $105,100 in capital.

Two more partnerships were set up in the months after Buffett Associates, Ltd. started trading bringing the total number of partnerships controlled by Buffett to three by the end of 1956.

  • On September 1st, 1956, he raised $120,000 from Homer Dodge, a physics professor who had attended Harvard University. With it, Buffett setup Buffett Fund, Ltd.
  • Then, on October 1, 1956, Warren founded another partnership for a friend of his, John Cleary, who was his father’s secretary in Congress. (Buffett’s father served in the House of Representatives.) It had $55,000 in capital.

Read the rest of the article at ValueWalk.com

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