Warren Buffett: insights into his character, obsession with OPM

Buffett’s house in Omaha, Nebraska. He bought it in 1957 and still lives in it today.

I tend to idolize Warren Buffett a little, something rekindled after recently reading Making of An American Capitalist.

He’s brilliant, humble, focused, self-confident, and frugal. He started his own “golf ball” business as a kid, employing an army of friends to fish out golf balls from ponds in local golf courses,  and then to clean, organize, and resell them. During his short time at Penn, Buffett joined a fraternity. He would spend parties at his frat house sitting on the ledge by a window, expounding on investing, the gold standard, and other economic concepts–a throng of guys and gals would always gather on the floor in front of him, hanging on his every word. In the early days of running his first fund, Buffett was insanely secretive about his investments, working from his home like a hermit, only wearing t-shirts and underwear, and refused to compromise on his fund’s 6 month lock-up period and $50,000 minimum investment (a lot at the time), even for celebrity investors. Those are just some of the captivating insights into Buffett’s character.

Buffett’s vast amount of wealth does not necessarily intrigue me that much–it is about how he build it: with self-reliance, focus, discipline, and authenticity.

He is also obsessed with “other people’s money”, or OPM, and OPM is essentially how he was able to build such a great fortune. One of Buffett’s first outright purchases of a company was an insurance company–he owns the well known GEICO today–and he used the float to fund his investments. That early purchase is said to be worth half of Berkshire Hathaway’s value today–this insightful post by Noh-Joon on Quora explains that, as well as how Buffett is able to essentially turn a 5% increase in actual investment appreciation into a 15% return (hint: leverage and effectively negative interest rates from insurance underwriting discipline). Not to mention, he’s a great stock picker.