Warren Buffett. Robert G. Hagstrom

If it is a good business at a good price, Warren takes action.

Along with her advice, Minaker also delivers compelling inspiration. “Leaving the harbor [with your new business] is like the captain of a ship at sea; you rely on your own judgment and ability,” she writes. She calls it the most satisfying part of a business life.⁶

      It's easy to imagine the young Warren recognizing the truth of that. From the time he started selling candy and soda pop at age six, Warren was his own boss. He was steadfastly confident and loved his independence. By the time he graduated high school he was already the richest 16‐year‐old in Omaha. He may very well have been the world's richest self‐made teenager. But he was not yet the millionaire he had once bragged about becoming. That required him to stay in school.

      In 1947, Warren enrolled at the Wharton School of Finance and Commerce at the University of Pennsylvania. Despite his father urging him toward higher education, Warren was not easily motivated. He figured he was already doing well and that college would be a waste of time. Anyway, he had already read over a hundred books on business and investing. What could college teach him?

Warren was right. After two unrewarding years at Wharton it was clear he knew more than his professors about accounting and business. Warren was spending more time at Philadelphia brokerages studying the stock market than studying for class. When the fall semester began in 1949, Warren was nowhere to be found.

Back in Omaha, Warren enrolled at the University of Nebraska, and earned a bachelor's degree in one year taking 14 courses over two semesters. All that year, and even after graduating, most days Warren could be found in the library absorbing every book he could find on business and investing.⁷

      Sometime in that summer of 1950 he found a copy of a newly published book by Benjamin Graham—The Intelligent Investor. More than any of the hundreds of books he had read, he regards this one as the book that changed his life.

It led him to start researching business schools, and later that same summer he discovered that Benjamin Graham and David Dodd, coauthors of the seminal work Security Analysis, were listed as professors at Columbia University. “I figured they were long since dead,” he said.⁸ So he quickly submitted an application to Columbia and was accepted. By September 1950 he was 1,200 miles away from Omaha, walking onto the New York City campus.

Warren's first class was Finance 111‐112, Investment Management and Security Analysis, taught by David Dodd.⁹ Before heading to New York, Warren had grabbed a copy of Security Analysis; by the time he got to Columbia, he had practically memorized it. “The truth was that I knew the book. At that time, literally, almost in those seven or eight hundred pages, I knew every example. I just sopped it up,” he said.¹⁰

      When the spring semester began in 1951, Warren could hardly contain himself. His next class was taught by Benjamin Graham, a seminar that combined the teachings in Security Analysis and the lessons from The Intelligent Investor linked to actual stocks that were then trading in the market.

Graham's message was simple to understand but revolutionary in practice. Before Security Analysis, the common Wall Street approach to picking stocks was to begin with some overall opinion about a stock—do you like it or not—then to try to figure what other people might do with that stock—buy or sell it. The financial facts were largely overlooked. Ben Graham backed up the train. Before you throw money at a stock based upon nothing more than prevailing opinions, he argued, why not first figure out what it might be worth.

      In the beginning, Graham's method was simple: Add up the company's current assets (account receivables, cash and securities), then subtract all its liabilities. That gives you the company's net worth. Then, and only then, look at the stock price. If the price was below the net assets, it was a worthwhile and potentially profitable purchase. But if the stock price was higher than the company's net worth, it wasn't worth investing. This approach fit comfortably into Warren's sense of numbers. Ben Graham had given him what he had been seeking for years—a systematic approach for investing: buy a dollar's worth of securities for 50 cents.

It has been said that for Warren, attending Columbia University was very much like the experience of someone emerging from a cave where he had lived all his life, stepping outside, blinking at the sunlight, perceiving truth and reality for the first time.¹¹ Warren relished every moment of the experience. When not in class, he could be found in the Columbia library reading old newspapers about the stock market going back 20 years. He never stopped, seven days a week from early in the morning to late in the evening. Most wondered if he ever slept. At the end of the semester, Warren received an A+, the first time Graham had ever awarded that grade in his 22 years at Columbia University.

      When school was over, Warren asked Graham about working at Graham‐Newman, the investment partnership Graham managed while teaching at Columbia. Graham turned him down. Warren offered to work for free. Again, a polite no thank you. So Warren returned to Omaha, determined to see what he could do on his own.

      He was just turning 21 years old.

It Begins

When Warren arrived in Omaha the summer of 1951, his mind and energy were singularly focused on investing. He was no longer interested in part‐time jobs to make extra money. First Graham then Warren's father cautioned him that now was not the time to invest in the stock market. A correction was long overdue, both men warned. Warren heard only Minaker: “The way to begin making money is to begin.”

Warren was offered a job at the Omaha National Bank but he turned it down, preferring the familiarity of his father's firm, Buffett‐Falk & Company. A friend of Howard Buffett's asked if the name would soon become Buffett & Son; Warren replied, “Maybe Buffett & Father.”¹²

      Warren threw his heart and soul into Buffett‐Falk & Company. He enrolled in the Dale Carnegie course for public speaking and was soon teaching “Investment Principles” at the University of Omaha; the lectures were based on Graham's book The Intelligent Investor. He wrote a column for The Commercial and Financial Chronicle under the headline “The Security I Like Best.” In it he touted one of Graham's favorite investments, a little‐known insurance company called Government Employees Insurance Co. (GEICO). Throughout this period, Warren maintained his relationship with Ben Graham and sent him stock ideas from time to time.

      Then one day, in 1954, Graham called his former student with a job offer. Warren was on the next plane back to New York.

      The two years Warren spent at Graham‐Newman were exhilarating but also frustrating. One of six employees, Warren shared an office with the legendary investors Walter Schloss and Tom Knapp. They spent their days pouring over the Standard & Poor's Stock Guide and pitching ideas for the Graham‐Newman mutual fund.

      Graham and his partner Jerry Newman batted down most of their recommendations. When the Dow Jones Industrial Average hit 420 in 1955, the Graham Mutual Fund was sitting on $4 million in cash. No matter how compelling were Warren's stock picks, the door for investing at Graham‐Newman was closed. The only place for Warren's ideas was his own portfolio. The following year, 1956, Graham had enough. He retired and moved to Beverly Hills, California, where he continued to write and teach, this time at UCLA, until his death at the age of 82.

So Warren returned to Omaha for the second