Warren Buffett
No one would have thought that a boy from Nebraska who delivered newspaper in his neighborhood and collected lost golf balls would turn out to be the “World’s #1 Billionaire” today (Forbes. com, 2009), surpassing the very popular Bill Gates of Microsoft. Warren Buffett, 77 years old, is the CEO of Berkshire Hathaway and currently with a net worth of $62 billion (Forbes. com, 2009). This paper studies Warren Buffett from the bibliography written by Alice Schroeder, “The Snowball: Warren Buffett: The Business of Life” (2008), revealing his character and personality.
It also reveals his relations to family, friends, mentors and business associates, and his experiences that made him who he is today. He was given the name “The Oracle of Omaha” (Schroeder, 2008) in respect and admiration for his life accomplishments and for serving as role model to his community in Omaha, Nebraska. Buffett’s life, character and behaviors are explained deeper using theories by well known psychologists, Erik Erikson and Alfred Adler. A Glimpse of Warren Buffett’s Life “Life is like a snowball. The important thing is finding wet snow and a really long hill.
” (Schroeder, 2008) That was his secret for his life’s worth and successes. Events and descriptions in Warren Buffett’s life were mostly taken from the book by Alice Schroeder. Warren Buffett, an American, was born August 30, 1930 in Omaha, Nebraska, USA. His father was Howard Buffett, a four-term US Congressman, banker and investment broker. His mother was Leila Star, a housewife. Warren grew up showing potentials to be a successful businessman. He made brief but successful trades even at a young age of six. He was earning thousands of dollars while his peers were playing jacks and kids games.
Warren entered the Wharton School of Business at the University of Pennsylvania in 1947 but after two years he returned home after realizing that he was not learning anything new from his professors. He finished his undergraduate course in University of Nebraska with a bachelor’s degree in Arts and Science. He then applied in Harvard Business School but was rejected allegedly because he was too young. So he pursued his Master of Science in Columbia University where he was honed by his mentor, Benjamin Graham. Warren married his sister’s friend, Susan Thompson in 1952 and had three children: Susie, Howard and Peter.
Warren and Susan lived separately after 1977 and Susan pursued her singing career. They remained married and good friends until Susan’s death in 2004. Warren married his caretaker Astrid Menks later. They continued to live in the grey stucco house in Farnam Street that Warren bought for $35,000 in 1961. All his life, Warren has persistently succeeded as a businessman. At age 11 Warren has set a goal and announced that he would be a millionaire at age 35. He did become a millionaire; and it was realized earlier than he planned. He worked hard and was determined to make money grow.
Sometime 1956 he put up the Buffett Partnership from capitalization of members of his family. Investments grew at remarkable compound annual rate of 29. 5%, much higher than the peak experienced by Dow Jones (7%) (Schroeder, 2008) He was focused on making money and used his skills in mathematics to make an edge in the money market and in business management. He purchased the Berkshire Hathaway group of companies and turned it into the most traded stock which started at $2 per share at its ebb in the 70’s and reached a soaring $80,000 per share in the 90’s.
Warren is an avid player of the card game bridge and regularly plays with his close friends and fellow billionaires Bill Gates and Paul Allen. Warren does not carry a cell phone; does not have a computer on his desk; and drives his own car. His regular diet includes cheeseburgers burgers and cherry coke taken from their community pastry shop. His only luxury is his corporate jet he called “The Indefensible“(Schroeder, 2008), his means to efficient mobility. Warren has given to charity almost throughout his life.
He even devised a strategy of earmarking $2 for every share of Berkshire Hathaway and this increased marketability of the holdings even more. He put up Buffett Foundation and gave to charitable organizations. At age 77 he has already announced to give away most of his fortune to charity, specifically to Bill and Melinda Gates Foundation. Warren’s Life analyzed in Erikson Theories Erik Erikson’s Theory of Psychosocial Development is one of the most popular theories developed in psychology. His theory was influenced by Freudian concept because it shows that personality develops in series of stages.
But unlike Freudian theory of psychosexual stages, Erikson’s theories are developed though social interactions in the course of a person’s life. A person experiences conflicts in eight stages of his life and these conflicts become turning points which are crucial in the development of character (Chapman, 2008). To be able to understand the personality of the person we are to analyze, in this case, Warren Buffett, it is worthwhile to give a brief discussion of each stage followed by the analysis of Warren’s personality. Stage 1 – Trust vs Mistrust . This stage occurs between birth and one year of age.
Because the child is unable to fend for himself and is dependent on his caregiver, the quality of care given to him will either develop his trust or mistrust for his caregiver. If the child is not given the right care he needs, there are serious repercussions of mistrust, which may be carried by the child as he grows and becomes an adult (Chapman, 2008). Although Schroeder’s book did not contain discussion on specific stage of Warren’s infancy, it could be assumed that Warren had a good infancy foundation having been raised by an educated father and a full time housewife mother.
Like many normally raised children, Warren, including his brothers and sisters, lived with the parents in Omaha, Nebraska. There seemed to have been some omissions on the experiences of Warren with his mother. It is noted that although his mother was a full-time housewife, there were some drawbacks in the relationship of Warren and his mother. Whatever deficiencies there were in the relationship did not affect Warren’s personality so that it could be assumed that the relationship with the mother went sour only on the later stages of Warren’s life and not on the infancy stage.
Warren continued to manifest obedience and trust for his parents especially his father. These are more evidences that Warren could have had a successful infancy development stage. When Warren’s father noticed the unusual accumulation of golf balls and accessories in his room, Warren was given an ultimatum and he followed. Warren showed his trust and respect for his father. When his father wanted him to go to college, although he was already making money in his small businesses and did not feel the need for college education, he obeyed his father.
Warren was aware that his father wanted the best for him and his brothers and sisters that he gave his full trust to him. Stage 2 – Autonomy vs Shame and Doubt This stage takes place in the early childhood years and where the child develops a sense of personal control. The child’s learning to control his body functions like toilet functions and eating, lead to develop a sense of independence. If he is successful, he develops confidence on himself but if he fails, he feels inadequate and insecure of his capabilities (Chapman, 2008). Stage 3 – Initiative vs Guilt.
This stage takes place during preschool years when the child starts to assert power and control in his interaction with other people. The child who is successful in this stage develops the feeling of capability and is able to lead. The child who fails to acquire power and control develop guilt and doubt and grow up with a lack of initiative (Chapman, 2008). Likewise, Warren’s biography did not provide details of these stages (2-3) The 77 years of Warren Buffett’s life experiences did not reveal problems that could be traced from unsuccessful psychosocial development during early childhood.
Considering that Warren was manifesting strength in mathematical skills and leadership, it would be assumed that he passed his second and third stage successfully and was able to achieve autonomy and initiative at a timely pace. It is worthy to mention that Warren’s mother, Leila Star went through psychological problems during Warren’s early childhood years. Leila Star was known to be a model housewife considering that the political career of Warren’s father needed a good family background. But it was told that Warren received “verbal lashes”, or could be interpreted, nagging, or hurting words from his mother, until all of the children wept.
Warren cried when his mother died, but according to the biography, not because he was sad, but because of what his mother’s life has turned out, “because of the waste. She had her good parts, but the bad parts kept me from having a relationship with her. ” (Schroeder, 2008) Stage 4 – Industry vs Inferiority This stage takes place during the early school years probably between ages 5-11. At this stage the child is exposed to activities in school and develops either a sense of pride in them if they make accomplishments. They receive recognition from teachers, parents and friends.
If they do not accomplish, they develop the feeling of insecurity and doubt in their abilities (Chapman, 2008). This was the stage where Warren ascended and showed his strong potentials to be a businessman. While he was normally socializing with children his age, he had an urge to accomplish something. The industry was clearly manifested in various events of his life between ages 5-11. He played marbles like all the rest, but he uses a stopwatch to race them. As a child, he was fascinated with the concept of risk and probability that he put up his first business at the age of six.
He bought a 6-pack coca cola and at 25 cents and sold it to his classmates for 5 cents a bottle. In the end he made a profit of 5 cents. He pursued his business selling packs of chewing gums, worked as a newspaper delivery boy, took every chance to make money. Because his father was a stock broker, he had the opportunity to learn the secrets of stocks. At age 10 he was chalking stock market prices at the local stock broker’s office. There he mastered his skill of computing in his mind, and assessing values of companies.
At age 11, he announced at the local stock broker’s office that he was going to be a millionaire at age 35. It was a conservative ambition considering that he achieved his million earlier than he planned. There was a strong achievement of the industry stage, so strong that Warren could be considered “gifted” if he was a child in today’s generation. He had hunger for accomplishment and he was determined enough to fill in the gaps to achieve what he wanted. Erikson mentioned the opposite of industry, which is inferiority and a possible seclusion of the self because the child is unable to meet his own standards.
Evidences of Warren’s childhood showed that Warren has set high standards for him to reach, but that standard motivated him to work even harder to reach it. At age 11, he did his initial entry to the stock market. He purchased 3 shares of Cities Service at $38 for him and his sister. The stocks fell into $27 which frightened them until it rebounded to $40. At that point, Warren sold the stocks and made some money out of it. But later, Cities Service shot up to $200 and Warren regretted selling the stock so fast. He learned his lessons in those experiences, one of those is patience.
Stage 5 – Identity vs Confusion This stage occurs during adolescence when a person develops a clearer understanding of his strengths and weaknesses; a sense of self. Those who are unable, continue to be unsure of themselves and develop insecurity and confusion in the future (Chapman, 2008). The story of Warren’s education most exemplifies this stage in his life. He was making money in his small businesses but his father, who was then a US Congressman, wanted him to take up college education. He went into two schools; the first one did not suit him because he felt that he knew more than his professors.
He was widely read and experienced in stock market and investing. From the Wharton School of Business of the University of Pennsylvania, he transferred back home, at the University of Nebraska where he finished his college education with a Bachelor of Arts and Sciences. Warren knew he had so much to learn. He tried applying for a graduate school education at the Harvard School of Business. He was denied because he was too young. The administration asked him to get more experience so he may qualify to enroll in their program.
It turned out to be one of the worst decisions the Harvard School of Business has made. Like Erikson’s theory, the person seeks identity, finds out where he fits. Warren could have given up studying because he was denied in Harvard. Other young adults who were in the same situation could have lost the drive to take post graduate course, with the shame, the lost confidence and motivation. Instead, Warren pursued, and did not get discouraged. Warren had a strength deeply rooted in his system that no amount of failure and rejection made him give up.
It could have been a built-in character, or possibly a strong motivation to make millions. At this stage of his early adulthood, Warren manifested a sense of independence. He used to be a “yes sir” to his daddy, fully trusting him in his decisions for Warren. But at the early adulthood stage, Warren sought his own identity. His father was a long time supporter of the Republican Party, in fact, he is a member of the John Birch Society. This time, Warren broke away from his father’s political party and decided to strongly support the Democratic Party.
This move is a clear indication that Warren has successfully developed his own identity, knowing that this decision would benefit him based on his needs and he risked family troubles that would normally go with decisions like that. Stage 6 – Intimacy vs Isolation This stage takes place during the early adulthood years when the person experience personal relationships. Those who are successful in this stage develop relationships that are committed and secure. Those who fail are more likely to suffer and are either unable to commit or feel sense of isolation and loneliness (Chapman, 2008).
Most appropriate to discuss in this stage of intimacy vs isolation is Warren’s love life. Unlike other popular men, Warren did not feel the need to have a lot of women in his life. He was monogamous. He was even a “homey” because he married his wife who was his sister’s good friend from the university. Warren wanted to start a family and he married Susan Thompson. At that time, Warren put his money in his investments. He had little to spend and was very frugal. He bought a 3-bedroom house, for $35,000. It was unkempt and they had difficulty because their funds were limited.
They even used a cabinet drawer, converted it to a crib for their first-born girl, Susie. It is welcoming to know that our personality, Warren Buffett also experienced difficulties in his lifetime. But in terms of love and intimacy, he was complete and satisfied with the love of his wife and his three children. Warren was too busy for the businesses and had very little time for the relationship. His wife decided to pursue her own life and career as a singer in San Francisco. She separated with him in 1977 and he regretted agreeing. It devastated Warren and could not adjust living without his wife.
As they say, “behind every man’s success is a woman”. Although Warren possessed all the knowledge, skills and the power to be successful in business, he needed his wife, a woman to complement his life; something that business achievement, money or power cannot replace. The separation with Susan could have broken down Warren and affected his career. Susan decided to send a caretaker, Astrid Menks, also a friend of Susan, to act as her substitute; satisfy the intimacy needs of Warren. Warren was so easy to satisfy. He trusted his wife’s choice. Astrid became his mistress and became happy living with her in their home.
Stage 7 – Generativity vs. Stagnation This stage takes place during adulthood and this is where a person focuses on building his career and family. Those who are successful are able to blend in the home and community and feel that they contribute to the world. Those who fail feel unproductive and separated from the world (Chapman, 2008). Erikson’s focus on this stage refers particularly to parenting. This is the end of self interest for the person his interest now focuses on nurturing his children. Warren’s children, Susie, Howard and Peter, had normal lives and were provided enough for their growing up.
There was no question of Warren’s ability to provide for his children, he had a good relationship with his wife and they together brought their children up in a good community with the proper values. In this sense, stage 7 of Erikson’s psychosocial development was successfully passed by Warren. This stage may also refer to Warren’s business ventures; in this case, his purchase of Berkshire Hathaway which many commented had been a big mistake. But Warren had developed patience, and he was not like other investors who do not make personal connection with the companies they buy. Warren considered Berkshire Hathaway, his child.
He nurtured it like he nurtured his children. He did not give it up even in times when the company was in deep trouble. As CEO, from a small textile company, he made the company big, invested in insurance (Geico, General Re), jewelry (Borsheim’s), utilities (Mid American Energy), food (Dairy Queen, See’s Candies). Warren also purchased minority stocks in Anheuser-Busch, Coca-Cola, Wells Fargo (Schroeder, 2008). At the time he purchased Geico and General Re, Warren knew that it was the best time for insurance boom, but it would not be for long. He projected a big fall in 2008 but still would not let go of his stocks.
Stage 8 – Integrity vs. Despair This stage happens during late adulthood, during old age and it focuses on evaluation of life. The person reflects on his experiences. If he is successful, he will feel satisfied with the meaning of his life. He will feel proud of his accomplishments and a sense of integrity. If he is unsuccessful, he will feel that his entire life is wasted and experience regrets, feelings of bitterness and despair (Chapman, 2008). The sun is setting on Warren Buffett, he is now 77 years old, on the late adulthood stage, the last of Erikson’s stages in a person’s lifespan.
Although there seems to be no stopping for Warren, he is now ranked number 1 in the list of richest billionaires in the world (Forbes. com, 2009). Warren’s move to contract Alice Schroeder to make his biography is a signal that Warren is preparing for the inevitable end. He experienced that, losing Susan in 2004, and had difficulty taking it even if at that time he was having Astrid Menks as his mistress. Despite billions in assets, Warren was not lured by money. He did not change his ways. He still frequented his favorite dairy shop to eat his favorite cheeseburger.
He did not surround himself with women in plush hotels, but stays home with Astrid to watch their favorite DVD’s. He does not have high tech computers, cell phones or anything his billions can buy, to change his lifestyle. Warren continued to bring inspiration to the people of Omaha and to the world. He made many remarks in his biography just to make the world know how he feels and what he has learned in his lifetime. Snowball was his representation of what a man could be. “Life is like a snowball. The important thing is finding wet snow and a really long hill.
” (Schroeder, 2008). Warren has developed strong values that made him succeed in the various stages of his life. He found his identity and enough reason to keep it in his lifetime. The wet snow and really long hill he was talking about could have been his family, Berkshire Hathaway, Bill Gates’ friendship. He was able to develop strong relationships, bring about good results and still felt the wholeness of his manhood. “I do know that when I am sixty, I should be attempting to achieve different personals goals than those which had priority at twenty. ” (Schroeder, 2008).
Warren has developed the wisdom and knew what were most important in a man to be happy. Warren’s Life Analyzed through Adler’s Theory Alfred Adler was one of those renowned psychologists who started out teaming with Sigmund Freud and Carl Jung developing theories of psychoanalysis. Like Eric Erikson, Adler broke away from Freud’s “Vienna Circle” (Oberst & Stewart, 2003) because he argued with Freud’s belief that sexual conflicts cause mental illnesses. He then formed his own school of individual psychology which tried to minimize the role of the unconscious in the development of human personality.
Here he influenced his followers about his belief that idealistic plans for adulthood are formed in the early stages of life. There are results of powerful positive and negative experiences. Two of Adler’s personality theories seem fitting for discussion in the analysis of Warren Buffetts personality. These are: Inferiority and Style of Life. Inferiority “The feeling of inferiority rules the mental life and can be clearly recognized in the sense of incompleteness and unfulfillment, and in the uninterrupted struggle both of individuals and humanity” (Oberst & Stewart, 2003).
According to Adler, a person will always have the tendency to infer, or feel a need to be better that what he is. That is why he continues to strive and train himself. Inferiority complex is an abnormality and it is different from inferiority feeling. It is a personality problem when a person is unable to handle the emotional inabilities to cope with the incompleteness. In contrast to inferiority complex, inferiority in itself is a motivating factor for a person to try to achieve something better in his life, in terms of career, love, family, relationships, power and influence.
Warren Buffett must have experienced inferiority in his childhood. He was a silent boy, more of a nerd who read books like “One Thousand Ways to make $1,000”, but normally played with his peers. There were instances in Warren’s childhood when he did some immoral acts. The biography mentioned about his escapades. “We’d steal stuff for which we had no use”. (Schroeder, 2008). They stole golf bags, golf clubs and golf balls. They were not caught but Warren’s father became suspicious. Warren had to make up crazy stories about his friend’s father, but stayed guilty and worried every night thinking what his parents were talking at night.
These behaviors could be results of some need to be completed in Warren. Possibly he wanted to test his cleverness or that he has the abilities to make clean robberies. The purpose was not explained in the biography but it may be assumed that these were teenage escapades that were overcome normally as they grew up. Warren would have thought that it was not worth making a career out of illegal activities. That was why at age 14 he started to pay and file his tax having earned $1,000 and determined to continue to make all his activities in abeyance with the laws of the land.
Schroeder’s book also mentioned Warren’s persistence to work with Benjamin Graham, his professor, as an apprentice while he was studying his masters at the Columbia University. At that time, there were many who aspire to get the slot and since Benjamin Graham was a Jew, he would prioritize Jews in his line up of apprentices for his business firm. When Warren was rejected, he went back home again and taught at the University of Nebraska. But before he did that, he had himself trained in public speaking at the Dale Carnegie, to overcome his inferiority in public speaking.
In 1954, Benjamin Graham relented and later decided to hire Warren. Warren learned Graham’s trade and established his place in the investment circle. He eventually bought Graham’s company when Graham retired. Warren experienced much inferiority all his life from childhood to adulthood. These were caused by conflicting forces; from the goals he has set for himself, and his ability to achieve it. As a businessman, there are risks one takes. But Warren did not take too much risk. He made calculated risks like smart businessmen do that is why he is so successful.
He was very good with mathematics and analysis, he studied the companies he would put his money into, and never risked all that he had. “I’ve never believed in risking what my family and friends have and need in order to pursue what they don’t have and don’t need” (Schroeder, 2008). He valued his family much that he made sure they had enough in store and never took away from that security fund. Style of Life. Adler asserts that personality is formed in the first 5-6 years of life. A child’s personality develops from direct response to family situations.
Because the child is young, his initial social group is the family, the mother and father. There is an internal motivation for the child to please the parents to avoid inferiority, but other children to not behave this way. When a child gets his way by doing favorable actions, he develops sociable style of life. The style in life is a habitual social orientation developed from childhood through experiences with family and those within his social group. When a child learns to manipulate his caregiver, by whining and complaining and get his way, repeated until it becomes a style of life, then the result is a “spoiled child”.
A spoiled child who carries his style of life into adulthood without being reformed becomes a hard core manipulator, accomplishes things at the expense of others. Other neurotic styles are also identified in Adler’s theory, including, Redeemer Complex, which is an abnormal tendency for a person to improve somebody else; No Complex, which is an abnormal need to always disagree, and others (Oberst & Stewart, 2003). Warren definitely did not manifest any of the neurotic personalities such as No Complex or Redeemer Complex, nor did he show evidence that he manipulated others just to get what he wanted.
Warren was not a spoiled child. In his biography, he expressed his deep love for his father and his father’s love for him. His father must have known that his son is gifted with talents that surpass adult businessmen. He had the intelligence and the attitude to become successful when he grows. He brought him to the local stock broker’s office and chalked prices. Warren must have thought that it was just incidental because his father was a stock broker, but it could have been his father’s intention to prepare him to become a stock broker someday.
So that, at one time when Warren visited the New York Stock Exchange, he was asked for a tip by Goldman Sachs partner Sidney Weinberg. It was a big privilege and boost to Warren’s ego, and an experience he never forgot. Warren did not develop any abnormal tendencies in his personality. Instead, he developed a style of life that was unique among children. He was practicing the habit of making money. His mini successes in his ventures as a child gave were evidences that he could make more and much more in the future.
That was why he ventured in all kinds of businesses, to include installing pinball machines in the local barbershops and taking over newspaper routes in the neighborhood and those that have been mentioned earlier. His habits developed his style of life. Part of which, he shared in his speech at the Wharton School of Business in 1999. According to him, there are four rules in investing : one, understand the business you are investing, two, look for sound fundamental economics, three, find competent leadership and four, buy at the right price. Warren’s wise words were valuable to beginners.
These are examples of styles of life that have been developed through years of hard work, training and discipline. Conclusion Both Erik Erikson’s theories on the eight stages of psychosocial development and Alfred Adler’s individual psychology theories were very useful in analyzing the personality of Warren Buffett. Erik Erikson’s theories were more thoroughly discussed since the theories were arranged in stages that represented stages in Warren’s lifespan. His personality was discussed from infancy to late adulthood and coincidentally, Warren Buffett is now in his late adulthood but he is not even thinking of retiring.
At age 77 he is still “World’s #1 Billionaire” today (Forbes. com, 2009). Erikson’s theories set in eight stages were organized and comprehensive. Warren’s character was revealed in various incidents in his life. Alfred Adler’s theories also enhanced what had been discussed in Erikson’s theories. It emphasized the concept that people develop personalities through social relations with family, friends, business associates and the community. Warren did not manifest any abnormal or neurotic tendencies. He instead showed inner strength, power, discipline, confidence and focus.
These characteristics brought him to where he is now. “I get to do what I like to do every single day of the year,” he says. “I get to do it with people I like, and I don’t have to associate with anybody who causes my stomach to churn. I tap dance to work, and when I get there I think I’m supposed to lie on my back and paint the ceiling. It’s tremendous fun. ” Warren has been successful, a true oracle for the global business world, an American icon and a happy man. Works Cited Chapman, Alan. Erikson’s Psychosocial Development Theory.
Bussinessballs. com. 2008. Retrieved 14 April 2009 from <http://www. businessballs. com/erik_erikson_psychosocial_theory. htm> Forbes. com. The World’s Billionaires: #1 Warren Buffet. 2009. Retrieved 15 April 2009 from <http://www. forbes. com/lists/2008/10/billionaires08_Warren-Buffett_C0R3. html> Oberst, U. and Stewart A. Alderian Psychotherapy: An Advanced Approach to Individual Psychology. New York: Brunner-Routledge. 2003. Schroeder, Alice. The Snowball: Warren Buffett and the Business of Life. Bantam Dell Publishing Group, Inc. , USA. 2008.
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