
Warren Buffett's Net Worth by Age - tiffani
http://microcapclub.com/2015/08/warren-buffetts-net-worth-by-age/
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slazaro
Just a warning: The X-axis in the graph is not regularly spaced: some labels
on the bars are separated by 3 years, some by up to 13.

~~~
markild
It looks like a logarithmic axis.

A nice way to think of it is that a linear line on a logarithmic axis would
look exponential on a linear axis.

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ethanbond
But it's not a logarithmic axis, so...

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svantana
Wow, that's an average 26% per year increase (for the non-inflation-adjusted
data) over a 70 year timespan. That's definitely not a random walk down wall
street [1]. For reference, Dow Jones seems to have about 7% per year for the
same time period.

[1]
[https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street](https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street)

~~~
yodsanklai
Thanks for the link. Actually, I've been watching a finance class given by the
infamous Martin Shkreli (I came across it in an other HN comment recently).
[https://www.youtube.com/watch?v=ARrNYyJEnFI](https://www.youtube.com/watch?v=ARrNYyJEnFI)
and I've been pondering this efficiency hypothesis.

Basically, he explains how to pick stocks by fundamental analysis. Very
entertaining to watch how this type of investors works. However, I can't help
thinking that despite the rather sophisticated analysis, it just amounts to
throwing random guesses. He always has to guesstimate some percentages
(business future income over a decade and various other parameters) that can't
be known precisely and little variation in them totally change the decision.

What he says it that 20% of stocks are badly priced by the market, it's just a
matter of working hard enough to find them. Could it be that the market is
only _mostly_ efficient? or those successful investors are just the lucky ones
and they are biased to interpret their success on great skills when it really
is luck? (Nicholas Taleb's "fooled by randomness" is all about this idea).

I also watched a finance class on coursera (from Prof. Shiller) where this was
discussed. A guest speaker (Andrew Redleaf) explained that the efficiency
hypothesis was a thing of the past, essentially popular in academia, and he
gave several reasons why it couldn't be true (you can find the video if you're
interested) and it was convincing.

~~~
svantana
It's inevitable that the market will have _some_ inefficiencies, the question
is: how can you tell whether you found one? Mark Cuban claims he got rich
because he found stock price anomalies in a business he was knowledgeable
about, namely network equipment [1]. But he also warns that every stock trade
has a sucker involved, and how do you know that you're not the sucker (i.e.
the other party knows the stock is going to go down and that's why they're
selling)?

1\. [http://blogmaverick.com/2013/01/10/the-stock-
market-2/](http://blogmaverick.com/2013/01/10/the-stock-market-2/)

~~~
freyr
He might have made some money picking stocks, but he got rich by selling an
overvalued company at the peak of the dotcom bubble. I suppose this is an
example of a market inefficiency as well.

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modeless
To me the biggest anomaly here is the four year period from 1956 to 1960, 26
to 30, when Buffet _octupled_ his net worth from $1M to $8M. Plenty of silicon
valley engineers will have a net worth of $1M, but I think few make it to $8M.
What was Buffet doing during those magical 4 years?

~~~
bisRepetita
Leverage is one big thing. Buffet is a money manager, so he takes outside
money, and make money off of that. Most of Silicon Valley engineers won't do
that. 1956 is when he started taking serious outside money.

Then there is early luck and talent.

[http://www.valuewalk.com/2015/05/warren-buffett-
partnership/](http://www.valuewalk.com/2015/05/warren-buffett-partnership/)

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icantdrive55
I remember going through some of my refrence books. I was deciding which one's
to toss. I opened Encyclopedia of Psychiatry (vol. 1 and 2).

The first page I flipped to said, "A man of 50 will not make anymore money
than he is currently making in his life." It was just so specific, or I I got
the quote wrong? I recall looking at it a few times. It was personally
depressing because I was broke, and hitting 50.

To this day, I think about that sentance, supposedly extrapolated from years
of statistics.

Well, even though most of the wealthy people I have pesonally interacted with
had the likability factor of a boat anchor; Warren Buffet seems like one of
the wealthy the others should try to emulate. He is one of the guys I secretly
root for.

~~~
tim333
The man of 50 thing sounds like nonsense. Buffett himself is a counter
example.

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efaref
Buffett's net worth at 14 was $5k. I just checked my old childhood savings
account, and after my 14th birthday it had around £50 in it.

At 34, his net worth was $7M, so relatively speaking, I only need £70k to be
doing about as well as he was.

I think I'm actually doing better. :-)

~~~
elsurudo
You need to adjust for inflation, though.

~~~
efaref
We both experienced inflation, but sure, let's work it out:

£50 when I was 14 was worth £90 in today's money. Buffett's $5k was $68k.

Buffett's age-35 7M was worth 53M in today's money. So I'd need £70k in
today's money to match his net worth growth.

That's exactly the same. I'm actually surprised by this, as it suggests both
Buffett and I experienced the same level of compound inflation over the 20
years of our lives from age 14, despite being at different times and on
different continents.

(This is all tongue-in-cheek, of course).

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pcrh
Wow! Tell me your secrets! :-)

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freyr
How do you accumulate $67k by age 14? I'm doing something wrong.

~~~
sdrothrock
It's $67k after being adjusted for inflation.

If you click through to the original article[1] linked by the blog post, they
explain that

> Warren Buffett became a player in the investment game at the wee age of 11,
> eventually using cash he earned from his paper route to buy some farmland in
> his home state. As a high school sophomore, he also reaped the rewards of a
> booming pinball machine business.

1\. [http://www.marketwatch.com/story/from-6000-to-67-billion-
war...](http://www.marketwatch.com/story/from-6000-to-67-billion-warren-
buffetts-wealth-through-the-ages-2015-08-17)

~~~
freyr
Yeah, I know it's adjusted for inflation. I guess they explain it? I can't
imagine a paperboy earning nearly $60k (adjusted) in a couple years, so his
investment returns must have been phenomenal right off the bat.

A high school sophomore would be 15-16, so he would have already made the $67k
(adjusted) before he got into the pinball business.

~~~
zxoq
That figure seems slightly exaggerated, Wikipedia states he had $9800 saved
when he was 20. And that he made $175 a month from his postal route. If he
started his paper route at 15 he would have made over $10,000 from just the
paper route during those 5 years. And the article lists several more business
ventures he was active in.

Few people start working as early as 13-14, but if we extrapolate the $175 a
month (which would be almost $2500 in today's dollars), and you had no
expenses you could save $150,000 by the time you were 20, today.

Must surprising here is how well paid that paper route was. Average salary was
$200 a month in 1944. Today the average salary is $2500 a month, but you can't
earn as much from such a simple job today.

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oli5679
Buffet's approach of combining high leverage with low growth 'value' equities
is a large part of his great performance. This is not to say there isn't a
skill in noticing the benefits of this approach and convincing creditors and
investors to let you take on all the debt, but a surprisingly small proportion
of these gains are due to stock picking.

[http://xqdoc.imedao.com/150c22613c69373fe2602a80.pdf](http://xqdoc.imedao.com/150c22613c69373fe2602a80.pdf)

~~~
tim333
Buffett actually has very little debt. Most of the leverage comes from
insurance float - when you buy insurance with GEICO Buffett invests the money
until you crash.

~~~
oli5679
True, should have written leverage rather than debt but the risk profile is
the same for investors.

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chestervonwinch
> Comparing yourself to others and especially to the best performer ever in
> your skill/expertise is unhealthy. Don’t compare yourself to others.

And yet here I am anyway, nearing almost 30, still in graduate school,
wondering if I'll ever know what it's like to have a reasonable amount in
savings, let alone a "net worth" :)

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oneloop
I've only started caring about money a couple of years ago, so no point
comparing 14-year old me with anyone in terms of money.

What gets me is how much more creative successful people were when they were
young. Fishing and re-selling golf balls? Pinball business?? When I was 14 I
was too busy with computer games.

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nxzero
Anyone that doesn't believe luck played a huge role in Buffet's success is a
fool, even Buffet says so.

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victorology
It's interesting to read about his career to see what he did to build his
wealth.
[https://en.wikipedia.org/wiki/Warren_Buffett#Business_career](https://en.wikipedia.org/wiki/Warren_Buffett#Business_career)

~~~
jballanc
My favorite part of his history in business is how the company whose name he
eventually adopted for his whole operation (Berkshire Hathaway) was actually
one of his self-admitted stupidest acquisitions, one based on vengeance rather
than strategy. Seems like an unspoken bit of advice from him: name your
company after your biggest fuck up, so you'll never forget you're only human.

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sytelus
The most interesting thing is that y-axis is exponential. iIts humbling that
Buffet didn't even crossed 100M mark when he was 40! While wealth accumulation
seems to be exponential, it's sure a long winding road.

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sunstone
These days doesn't he transfer quite a bit (5%ish ?) into Gates' trust every
year? Does that still count as 'his' for the purposes of this graph or is it
deducted?

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mountaineer22
How does a 14-year-old get $67k?

~~~
nxzero
Hustling:

[http://www.businessinsider.com/how-a-young-warren-buffett-
ma...](http://www.businessinsider.com/how-a-young-warren-buffett-made-
money-2014-11)

~~~
mountaineer22
Did this take place in Omaha, or where exactly?

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nxzero
Per the link above, DC.

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known
Insider trading is not illegal
[http://cnbc.com/id/43471561](http://cnbc.com/id/43471561)

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sokoloff
What's the relevance of that to Warren Buffett?

