Greatest of All Time
An ode to Warren Buffett.
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In case you missed it over the weekend, Warren Buffett announced at the Berkshire Hathaway annual meeting that he will be retiring at the end of the year. At 94 years old, we knew this day was coming soon, one way or another. The fact that Buffett gets to go out on his own terms is a well-deserved gift.
I am not unique in my appreciation for the Oracle of Omaha. I am one of a legion of people who read about Buffett in high school or college and immediately became enthralled with the man and his work.
Both Warren and his long-time business partner Charlie Munger have consistently harped on the idea that “value investing” and “compound interest” were things people either understood immediately, intuitively, or not at all. You’re either hooked by the ideas and obsessed with them, or, alternatively, no amount of teaching and coaching can make you understand or care.
Buffett’s investing track record is incredible. Words don’t do it justice. The human brain isn’t built to comprehend this kind of compound growth.
Your brain sees a 9% outperformance and thinks, “oh, that’s nice, he’s really good!” Let’s put it in dollar terms:
If you invested $1,000 in 1965, by the end of 2024 it would have grown to approximately $53.1 million in Berkshire Hathaway, or about $375,000 in the S&P 500, using the historical average growth rates.
Stealing this stat from Chris Bloomstran for more context: From 1965 to today, Berkshire stock could drop 99% and still be outperforming the S&P 500.
The outperformance is staggering. The total investment return is stupendous. If those numbers were all you knew about Warren Buffett, you’d certainly be impressed.
However, for me, the investment track record is not what makes Buffett a hero.
Buffett and Berkshire Hathaway stand out in the investment world for not charging any management fees to shareholders. Buffett himself has taken an annual salary of just $100,000 for over four decades — a stark contrast to the multimillion-dollar compensation packages typical of other CEOs and fund managers.
Unlike traditional hedge funds, which often impose a "2 and 20" fee structure (2% of assets under management plus 20% of any profits), Berkshire Hathaway investors pay no such fees. This means that nearly all the gains generated by Berkshire's investments accrue directly to shareholders, rather than being siphoned off by high management or performance fees.
Last year, Jason Zweig wrote a great column in the Wall Street Journal detailing how Berkshire investors would have fared had Buffett followed the fee structure of the typical hedge fund/investment manager:
If, on the other hand, Buffett had charged hedge-fund fees, you’d have under $5 million—still far more than the market, but about 90% less than Berkshire’s actual results.
Put another way, if Buffett had charged conventional hedge-fund fees, his investors would have earned only about 10% of the wealth they have enjoyed—and he could have been even wealthier than he is today.
Buffett’s investment record is outstanding — but his unselfishness is truly radical.
Zweig, again, made this point better than I can in a column posted yesterday:
So long as most fund managers can earn a lavish living for underperforming the market, the real risk for them will be trying anything different. Pigs will sprout feathers before anybody has the daring to try truly emulating Warren Buffett.
Buffett’s net worth stands at roughly $170 billion today, so I won’t argue his motives have been totally selfless. He has benefitted from his own performance - and Berkshire’s unusual corporate structure - more than anyone else.
However, in 2010, Buffett teamed up with his close friend Bill Gates to create “The Giving Pledge” — a charitable campaign founded to encourage the world’s wealthiest individuals and families to commit at least half of their wealth to philanthropic causes, either during their lifetimes or upon their death
Since signing the Giving Pledge in 2010, Warren Buffett has donated more than $56 billion to charity as of June 2024. His largest beneficiaries have been the Bill & Melinda Gates Foundation (now the Gates Foundation), which has received over $43 billion, as well as the Susan Thompson Buffett Foundation and the foundations run by his three children.
Buffett announced an update to his will in 2024 mandating that his wealth be transferred into a charitable trust operated by his three children, with express instructions to donate the entirety to charity within 10 years. When all funds are distributed, it will likely be the largest philanthropic outlay from one individual in history.
I have written in the past about how dangerous I think it can be for investors to try and emulate Buffett. His intellectual rigor and superhuman memory make him specially designed to perform well at the “game” of investing — advantages we mere mortals can’t claim.
There is plenty we can emulate from Buffett, the man, however:
We can prioritize our clients’, customers’, friends’, and families’ financial interests over our own — the true meaning of a fiduciary duty.
We can be patient and provide stability by making decisions with a long-term perspective, whether in investing, career, or relationships, rather than chasing quick wins.
We can work our hardest to build our personal net worth, feel the pride that comes with it, and then turn around and give it all away.
There will never be another Warren Buffett, given his unique blend of investment genius, ethical leadership, and humility; however, we can all strive to emulate his principles by practicing patience, integrity, continuous learning, and a long-term mindset in our own lives and decisions.
Thank you for reading,
Tyler