Why is Warren Buffett a billionaire while you and I are not?
Is it luck? Skill? A combination of the two?
I’ve thought about this question a lot, not entirely out of envy, but rather out of curiosity.
What follows, in turn, are the 10 most salient features of Buffett’s life that I believe have contributed to his unprecedented success as the greatest investor of all time.
1. Born at the right time
Buffett would have probably excelled regardless of when he was born, but not unlike the industrial titans of the Gilded Age, it didn’t hurt that he came into the world on the eve of an unprecedented industrial expansion following a great war.
Born in 1930, he narrowly escaped the psychological trauma of the Great Depression and was able to hit the ground running just as the greatest bull market of all time took flight. For an investor with a long time horizon, he couldn’t have wished for a better birthday.
2. Instinctively good with numbers
Business and numbers were ingrained in Buffett’s soul from day one.
On a family vacation when he was six, he bought a six-pack of Cokes for $0.25 and then sold each one for $0.05, making a nickel profit. A year later, following an operation at the hospital, he told a nurse, “I don’t have much money now, but someday I will, and I’ll have my picture in the paper.” He purchased his first stock at age 11. And he went on to make money selling used golf balls, renting out pinball machines, and delivering newspapers, to name only his most noteworthy pursuits.
The point is that, not unlike the prodigies discussed by Malcolm Gladwell in Outliers: The Story of Success, Buffett was imbued with a special talent and given the opportunity to cultivate it.
3. He’s a bookworm
Buffett’s reading habits are legendary.
According to Roger Lowenstein’s biography of the Oracle of Omaha, Buffett: The Making of an American Capitalist, as a child, Buffett would “bury himself in a favorite book, One Thousand Ways to Make $1,000, an exhortation to further Rockefellers with stories such as ‘Building a Business on Homemade Fudge’ and ‘Mrs. MacDougall Turned $38 into a Million.’”
It should come as no surprise, in turn, that when asked later in life how to get smarter, the blog Farnam Street recounts, Buffett once held up stacks of paper and said “read 500 pages like this every day. That’s how knowledge builds up, like compound interest.”
4. He got rejected from Harvard
In 1950, Buffett applied to Harvard Business School and was rejected. “They decided 19 was too young to get admitted and advised me to wait a year or two,” he wrote to a good friend at the time.
It was without doubt one of the best things that ever happened to him.
His second choice was Columbia University, the home of Benjamin Graham, the father of securities analysis. “It was almost as if [Buffett] had found a god,” a housemate observed.
5. He’s a contrarian by nature
Buffett doesn’t just say, “be fearful when others are greedy and greedy when others are fearful” — he lives it.
He dissolved his first investment partnership at the height of the 1960′s Go-Go Years, only to then reenter the market following the “truly epochal” market collapse of 1973-1974. While headlines like “Whistling Past the Graveyard” and “Why Buy Stocks?” were gracing the covers of financial publications, Buffett is reported to have said, “Now is the time to get rich.”
This contrarian pattern has repeated itself time and again throughout Buffett’s life, most recently at the nadir of the financial crisis, during which he staked large, and exceptionally lucrative, positions in Bank of America Corp (NYSE:BAC) and Goldman Sachs Group, Inc. (NYSE:GS), among others.