Warren Edward Buffett is a quiet, unassuming man with a quirky sense of humor and a small house in a suburb in Omaha. He is well-known for his love of hamburgers, likes to eat at a local steakhouse, plays bridge, and drives a Lincoln Town Car. He is also the second-richest man in the world. Warren Buffett has made a name for himself in investment circles as the most successful investor of all time. His business, Berkshire Hathaway, has made him have a net worth in excess of forty-five billion dollars, currently making him the second-richest person in the world, perpetually in a neck-and-neck race with Bill Gates and Carlos Slim Helu. Buffett has long been known as an extremely wealthy man – but recently he made worldwide headlines with the announcement of the donation of more than thirty-seven billion dollars to charity. Previous to this, little was known about his charitable works.

Warren Buffett was born in Omaha, Nebraska on August 30th 1930 to Leila and Howard Buffett. He was the second of three children – his older sister, Doris, is known for being the founder of the Sunshine Lady Foundation, and his younger sister was named Roberta. Howard Buffett was a stockbroker and became a Congressman late in life. Warren credits much of his early interest in figures and numbers to his father’s encouragements.

Warren first started working at his father’s brokerage at the age of eleven. He used money he had earned (by buying soda at his grandfather’s store and reselling it for a nickel profit) and borrowed from his older sister to buy three shares of Cities Service, an energy company now best known for CITGO gasoline, for $38 per share, only to promptly see it fall to $27. He held the shares when they rebounded to $40 and learned what he still claims is one of the most important lessons in investing – patience is vital; within two years Cities Service was trading at over $200. He filed his first income tax return at 13 years old, claiming his bicycle as a business expense. When he was 14, he spent $1,200 saved from paper routes to buy 40 acres of farmland, which he then rented out to several tenant farmers.

Buffett graduated from high school in 1947 at seventeen and had never intended to go to college. Working throughout school, he managed to save up roughly $5,000 (over $45,000 in 2006 dollars) and had planned to continue working and earning his own money. However, at his father’s urging he enrolled at the Wharton School of Finance at the University of Pennsylvania. He transferred to the University of Nebraska, then went to study at the Colombia Business School under the reknowned Benjamin Graham for his Master’s degree in economics, graduating in 1951. He initially applied to Harvard Business School – but was rejected for being ‘too young.’ While there, he received the only A+ that Graham ever gave in his securities analysis class. Buffett wanted to work for Graham upon his graduation, but was turned down, despite having offered to work for free. Graham preferred to hold positions for Jews, who were for the most part not being hired at brokerage firms at the time.

For the next few years, Buffett went to work at his father’s brokerage as a salesman until he was offered a position in Graham’s partnership in 1954. During these years he was married to Susie Thompson, a singer, in April of 1952 and lived in a dilapidated three-room apartment. His investments during these years were small – a Texaco gas station which he lost money on and some minor real estate. He also taught a few night classes at the University of Omaha.

Warren and Susie Buffett moved to a suburb of New York when Graham finally accepted Buffett. It was while working for and studying under Benjamin Graham that Buffett developed many of his investment and analysis skills. Graham had developed a method (now widely known as value investing) whereby investors could determine an essential value of a company and thereby make decisions by comparing the stock price to this value. Graham’s influence led Buffett to begin making his own early investment decisions. One of the first major investments that Buffett made was in a small, relatively unknown insurance company called GEICO. Having learned that Graham was Chairman of the company, Buffett traveled by train to Washington, D.C. on Saturday morning to talk to someone at the headquarters. When he arrived, he pounded on the doors of the closed building until a janitor let him in and he asked if there was anyone in the building. Warren was led to Lorimer Davidson, the then-Vice President of Finance. Warren made his first purchase on GEICO stock within weeks, and eventually acquired the entire company in 1996 through his company, Berkshire Hathaway.

Warren became interested in aspects of a company beyond the finances which Graham focused on. While Graham was almost solely interested in the income and balance statements, Buffett wanted to know about a company’s management and leadership as a major factor regarding investment. However, Graham retired only two years later, after which the Buffetts returned to Omaha.

On May 1, 1965, Warren established Buffett Associates, Ltd., his first investment partnership. This included himself (the general partner) and seven limited partners, found among his family and friends. Buffett himself only put in $100, but the total initial assets were $105,000. Before the end of the first year he was managing over $300,000 in assets. Over the next five years, the Buffett partnerships pulled in over 250% profit, while the Dow rose only 74.3%. He purchased a small house in his hometown for $31,500 (which he whimsically nicknamed “Buffett’s Folly”) and still lives there today. All of the company business was managed from his bedroom.

By 1962, Warren had built the capital assets of his partnership to over $7,200,000, of which about $1,000,000 was his personal stake, and had grown to more than 90 limited partners spread across the country. His partnership had an unusual setup, in that rather than charging a fee for the partnership, he was entitled to 25% of all profits above 4%. Had he performed at the industry average of between seven and eleven percent per year, this would have been only a very modest income. In August of that year he combined the partnerships into a single entity: Buffett Partnerships Ltd., and increased the minimum investment from $10,000 to $100,000. He also opened his first and only office downtown. At the end of ten years, the Buffett Partnership’s assets were over $44 million, having grown more that 1,156% (compared to the Dow’s 123%). At this time, Warren closed the partnership to new members and accounts. The next year, the partnership recorded its largest-ever gain in one year: 59%.

The year after this, Buffett did something which surprised many of the partners: he liquidated the partnership. In May 1969 he wrote a letter to all of the partners in which he said he was “unable to find any bargains in the current market.” Buffett sold all but two companies – Bershire Hathaway, a small textile firm, and Diversified Retailing. The shares of these stocks were split among the partners, with Warren retaining 29% of the stock in the company, but no longer under any obligation to the partners.

Thus began the story of Berkshire Hathaway and Warren Buffett, possibly the greatest investment saga in history. Warren took control of the company, buying out several other partners and stockholders until his share reached 49%. He then waged a hostile takeover via proxy war and named himself Director. He believed that by finding better management for the company he could save it and make a profit. Buffett made Ken Chace the new President and gave him carte blanche over the corporation. Two years later Warren used those profits to make his first major investment using Berkshire Hathaway as his company’s name: he paid $50 per share ($17 more than the current trading price) to buy National Indemnity, an insurance company from Jack Ringwalt, its founder, for a total of $8.6 million.

In 1970, Buffett named himself to be Chairman of the Board of Directors of Berkshire. He closed down the textile operations, which had only brought in about $45,000, and focused on the other profit-makers the company controlled – insurance and banking, bringing in $4.7 million that year; Buffett was now controlling a rapidly-growing holding company. Buffett continued to reinvest those earnings, using them to buy one great company after another – See’s Candy was next, a small gourmet chocolate maker he bought for $25 million, his largest investment yet. Ironically, Buffett does little investing for himself – most of his personal wealth was tied up in Berkshire Hathaway. His annual salary is $100,000 – everything else he has is in stocks of his company – and he has never sold a share. What little investing he did, however, is said to have been much more speculative, but just as successful. One thing Warren has never gone back to is real estate, which was one of his first investments as a child. When asked why, he responded: “Why should I buy real estate when the stock market is so easy?”

Buffett’s strategy is simple – buy great companies with competitive advantages for less than they are truly worth in the long term. He considers himself an ‘allocator of capital.’ His main responsibility is “to allocate capital to businesses with good economics and keep their existing management to lead the company.” Buffett utilizes what is known as ‘float’ – money that insurance companies hold as cash reserves to pay out claims, but do not own – to invest in and outright buy companies. This is one reason that Buffett like GEICO and its peers so much – owning them gave him money with which to buy other companies. Warren focused on companies that had a competitive advantage over their rivals, what he called a ‘moat.’ His favorite example of a moat is Coca-Cola, which he bought in 1988. Consumers are willing to pay more for a Coke than for a similar product with a similar taste. Other investments of his would include The Washington Post, ABC, Gillette, Helzberg Diamonds, The Pampered Chef, and American Express.

Susan Buffett left her husband in 1977, saying that she wanted freedom to pursue her singing career. She moved to California, but the two were never divorced; the Buffetts remained on good terms and often traveled together. In fact, Susan set Warren up on several dates with friends of hers from around Omaha and within a year Astrid Menks, a local waitress, had moved in with Warren with Susan’s blessings. Astrid still lives with Warren, and the two were married shortly after Susan’s death from a stroke in 2004.

Buffett is also well-known for his frugal lifestyle. He still lives in the same house he bought more than half a century ago. He lives off of his personal investments and his relatively meager salary from Berkshire. He believe that one goal of his companies is to spend as little as possible and earn as much as possible, and considers the accumulation of wealth a game. In 1986, due to his inability to travel any longer without being recognized and hounded, he purchased a corporate jet – a used one – for $850,000. Buffett nicknamed it “The Indefensible” due to his previous criticisms of similar purchases by CEOs of other companies. He has said:

“I don’t have a problem with guilt about money. The way I see it is … an enormous number of claim checks on society. It’s like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life…. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don’t do that though. I don’t use very many of those claim checks… And I’m going to give virtually all of those claim checks to charity when my wife and I die.”

The entire Buffett family has been known for years for their charitable work. Buffett’s mother served as a volunteer and she and his father gave a significant portion of their earnings to charity. His older sister Doris is founder and director of the Sunshine Lady Foundation. His children have worked for and founded several charitable institutions throughout the years. His daughter Susie still lives in Omaha and continues the Susan A. Buffett Memorial Foundation.

In 1981 Buffett started his first major charitable campaign. He did so in an unusual way; most major companies of the time were simply donating lump sums to a charity or combination of charities of the company’s choice. Berkshire Hathaway, however, proposed and implemented something unique: Buffett would donate $2 for every share of Berkshire that the holder owned to a charity of the holder’s choice. The program was a huge success and as the years went on the amount was increased until shareholders were donating tens of millions of dollars a year to charities of their own choice – unheard of in that corporate climate. He has also been giving about $12 million a year to the assorted Buffett family foundations, supporting a wide array of causes from battered women to AIDS research to abortion rights.

These early efforts of his were eclipsed, however, in June of 2006. Buffett had originally intended to leave his fortune to his wife Susan and to allow her to give the funds to charity. He had said that it had always been their intention to give away his vast wealth. He always believed that the best thing to do with money – or any asset – was to let someone who could use it or do something with it better than he could to do so. However, due to her passing before him, this was obviously not possible. For this reason, Buffett announced that he was giving away some 80% of his fortune (currently valued at roughly $38 billion) to an assortment of charities.

The Gates family has long been running the Bill and Melinda Gates Foundation, which focuses on medical research, eliminating poverty, and helping develop education. Warren Buffett is giving ten million shares of Berkshire Hathaway Class A stock to this foundation in the form of non-voting Class B stock (sold at a fixed price of 1/20th the price of Class A stock), making it the largest charitable donation in history, and one not likely to soon be surpassed. The 75 year old Buffett said:

“What can be more logical, in whatever you want done, than finding someone better equipped than you are to do it? Who wouldn’t select Tiger Woods to take his place in a high-stakes golf game? That’s how I feel about this decision about my money.”

The Gates Foundation will be receiving five percent of this amount annually, or about $1.5 billion, approximately doubling the foundation’s current working budget. Buffett will also be joining the board of directors. The Gates Foundation is not the only recipient of Buffett’s billions; four other groups also received major donations. Buffett made the same arrangement with each; that is, each will receive 5% of the funds each year until he dies or until he charity no longer meets the requirements set forth to receive the funds. The Susan Thompson Buffett Foundation is to receive 1 million shares, the Susan A. Buffett Foundation is to receive 350,000 shares, the Howard G. Buffett Foundation is to receive 350,000 shares, and the NoVo Foundation (run by his son, Peter A. Buffett) will also receive 350,000 shares.

Buffett had never intended to leave his wealth to his children. He “wanted to give {his} kids enough so that they could feel that they could do anything, but not so much that they could do nothing.” He is a strong believer in inheritance taxes, believing that they help to level the playing field and saying that repealing it would be “choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics.”

Warren Buffett started out as a kid in Omaha, making a few nickels selling soda pop to neighborhood children and enjoying life. He is living out his life in much the same way – he lives down the street from his childhood home, making a few billion nickels selling soda, and diamonds, and furniture, and insurance, and candy, and a few dozen other things and enjoying his life, and doing his best to ensure that others can enjoy theirs. His few billion nickels will probably go a long way.