It’s a Good Thing Warren Buffett Didn’t Retire Early Like He Planned
If you had invested $10,000 in Berkshire Hathaway in 1965, you’d have around $80 million (and probably more) today, according to a 2010 Wall Street Journal report. That kind of return, of course, was powered by Warren Buffett — the Oracle of Omaha and one of the richest people in the world. Buffett’s story is unique, but because he’s relied on discipline and careful planning to build his fortune, he commands respect and attention.
When the man has something to say, ears perk up. Pencils hit the desk. Facebook feeds are ignored. Buffett’s insights have helped throngs of other people build their own fortunes — or at least make more informed and less impulsive decisions with their investments.
Did you know, though, Buffett’s original plan was to retire at the young age of 25? Having enough to live off of, he seriously considered spending a quiet life in Nebraska with his young family. Obviously, he took a different path, and a lot has changed over the past 50 years. But what if he had stuck to his original plan? The financial world would be a different place. A fateful decision, however, changed all of that.
“The thing is, when I got out of college, I had $9,800, but by the end of 1955, I was up to $127,000. I thought, I’ll go back to Omaha, take some college classes, and read a lot — I was going to retire!” Buffett said in a 2012 Forbes article. “I figured we could live on $12,000 a year, and off my $127,000 asset base, I could easily make that. I told my wife, ‘Compound interest guarantees I’m going to get rich.'”
Instead, he ended up investing and eventually taking over Berkshire Hathaway, a company which is now among the most valuable in the world. So what would the world look like without Warren Buffett as we know him — if he were merely some retiree who’d been living quietly in Omaha for the past 50 years?
First and foremost, we’d lack of one of the world’s most valuable and important companies.
1. Berkshire Hathaway’s fate
Without Buffett, what would have become of Berkshire Hathaway? Nothing, in all likelihood. At least it wouldn’t look like it does today.
The company, prior to Buffett’s entrance, was a failing textile business. After he jumped into the fray, it’s grown to become one of the most valuable companies in the world. Its current market cap is around $410 billion. But when Buffett took over in 1965, the company’s balance sheet showed it was struggling. Its assets were equal to its liabilities. Now, 52 years later, it has $80 billion in cash.
What if Buffett had not taken over the company decades ago? It’s probably a safe assumption to think the company would have slowly sunk beneath the waves.
Next: Shareholders would have missed remarkable returns.
2. Shareholders would have missed out
If Buffett had hung up the cleats early, it would’ve cost him a lot of potential earnings. But many other investors — the investors who would end up jumping onto the Berkshire Hathaway bandwagon — would’ve missed out, too. And it would’ve been hard to find a better investment. Just look at how the company’s stock has fared against the S&P 500, for example.
Compounded annually between the years 1965 and 2016, Berkshire’s stock gained 20.8% versus S&P 500’s 9.7%. That has earned a lot of people (Buffett included) an absurd amount of money.
Next: They don’t call him the Oracle for nothing.
3. Investors would be scrambling for advice
Not only would investors have been unable to ride the Hathaway train to rich town if Buffett had decided to retire early, but he also wouldn’t have earned his most famous moniker: the Oracle of Omaha. Buffett has become one of the few people investors turn to for advice. When he speaks people listen. And he shares his thoughts and ideas in his annual letters for free. In fact, you can read through each one — dating all the way back to 1977.
Next: Charities are much better off, by the billions.
4. Charities would suffer
Perhaps one of the biggest opportunity costs had Buffett retired at 25 would be the amount of money he funnels to charities. He’s famously pledged to give away just about all of his fortune and has recruited other billionaires, including Bill Gates, to join him.
Speaking of Gates, Buffett has also gifted his foundation — the Bill and Melinda Gates Foundation — more than $30 billion to continue its charitable work around the world. That money has been put to work, with the Gates Foundation working to eradicate the world of diseases, such as polio and malaria.
Next: He gives the best advice.
5. We wouldn’t have these awesome quotes
As mentioned, when Buffett talks people listen. And over the years, he’s said some profound (and sometimes controversial) things that resonate with a lot of people. Here are some examples:
- “Someone is sitting in the shade today because someone planted a tree a long time ago.”
- “There comes a time when you ought to start doing what you want. Take a job that you love. You will jump out of bed in the morning. I think you are out of your mind if you keep taking jobs that you don’t like because you think it will look good on your resume. Isn’t that a little like saving up sex for your old age?”
- “Indeed, who has ever benefited during the past 238 years by betting against America? If you compare our country’s present condition to that existing in 1776, you have to rub your eyes in wonder. In my lifetime alone, real per-capita U.S. output has sextupled. My parents could not have dreamed in 1930 of the world their son would see. Though the preachers of pessimism prattle endlessly about America’s problems, I’ve never seen one who wishes to emigrate (though I can think of a few for whom I would happily buy a one-way ticket).”
- “Price is what you pay. Value is what you get.”
- “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
Next: Where would capitalists hang out?
6. No Woodstock for Capitalists
Can you imagine the world without the annual Berkshire Hathaway shareholder’s meeting? If Buffett had quietly slunk away to retirement in his 20s, we certainly wouldn’t have the Woodstock for Capitalists. And we sure as hell wouldn’t have it in Omaha.
Every year, 40,000 people make the trip to Omaha to attend the meeting, listen to Buffett speak, and buy some of his famous peanut brittle. It’s not quite Coachella. But where else can you hang out with Warren Buffett and the Kool-Aid man and eat a Dilly Bar from Dairy Queen?
Next: Imagine a world without Coca-Cola as a powerhouse.
7. Corporate America would have a different look
People pay attention to everything Buffett says and does. For that reason, every investment he and his company make creates a ripple effect. When Buffett buys, sells, or makes a move on a particular stock or company, he’s transmitting his faith (or lack thereof) in the company. Some of those companies might not be what they are today had Buffett not invested or held onto an investment, while inspiring others to do the same.
Let’s look at Coca-Cola, for example. Coke’s been around for a long time, and over the years, it has made some mistakes. More recently, investors might be getting spooked about America’s declining love for soda. But Berkshire Hathaway has held a stake in Coke since 1988 and owns more than 400 million shares. Although some investors might have been willing to jump ship on Coke at some point in the past, Buffett has remained an assuring presence.
Next: Ever heard of “The Intelligent Investor”?
8. The Intelligent Investor might have become lost in time
If you’re familiar with The Intelligent Investor, one of the most popular books about investing ever written, you probably have Buffett to thank. The book, written by Benjamin Graham and published in 1949, preaches “value investing” — a concept Buffett picked up and ran with.
Buffett has said this book changed his life. He said he found it at a Lincoln, Nebraska, bookstore at age 19 and embodied the principles contained within. Although Graham’s tome would still have been popular, to some degree Buffett’s reliance and subsequent praise have made it a must-have for investors.
Next: We’d be all about fads.
9. Chasing financial fads might have become the norm
Regarding value investing, the philosophy Buffett picked up from his favorite book — it’s unclear whether the principle would’ve caught on without Buffett’s influence. The whole idea behind value investing is to buy stocks that trade for less than what they’re worth. Essentially, a value investor would buy positions they feel are undervalued, rather than speculating and chasing the market left and right.
Just take a look at the dot-com boom, the housing crisis, and the budding student loan or auto loan crises. These are, to some extent, built on financial fads. Certain products get hyped and overvalued, and eventually they burst. But value investing? It’s the idea of taking the slow, steady road to building wealth.
Next: The little guy would lose.
10. A rich man sticking up for the little guy
Buffett is unique for a number of reasons. But primarily, he’s unique for finding a way to become one of the richest people in the world while coming from a modest background in Nebraska. He’s living proof you can be a nobody from nowhere and end up making it big. That’s one of the reasons he’s been outspoken against dynastic wealth and has pledged to give his fortunes away.
The man’s support for stronger estate taxes and higher taxes overall on the rich are seemingly counterintuitive. But Buffett’s a man who’s been on the other side of the economic spectrum and is using his influential position to speak up for America’s little guys. Others, such as the Gates, have backed him to some extent. But it’s worth wondering whether these opinions — particularly from wealthy individuals — would be as popular without Buffett leading the charge.