Warren Buffet is the 2nd richest man in the world next to Bill Gates. His net worth as reported by Forbes is $52 billion. He is the CEO of Berkshire Hathaway, a holding company out of Omaha, Nebraska that oversees and manages a number of subsidiary companies.

Born in 1930 in Omaha, Nebraska, Buffet is said to have started on the road to fame and fortune as early as age six when he reportedly purchased a 6-pack of coca-cola from his grandfather for a quarter and then sold each for a nickel. Reports have him making his first stock investment at the age of eleven, purchasing three shares of Cities Service Preferred at $38 per share. As the story goes, shortly after buying the stock, it fell to just over $27 per share. Buffet held his shares until they rebounded to $40 then promptly sold them. He would come to regret this after Cities Service shot up to $200; but the experience taught him one of the basic lessons of investing: patience is a virtue." [About.com]

Buffett attended the prestigious Wharton School at the University of Pennsylvania for three years, then transferred to the University of Nebraska. There he began his interest in investing after reading Benjamin Graham’s The Intelligent Investor.

He obtained a Master’s degree in economics in 1951 at Columbia Business School, studying under Benjamin Graham, alongside other future value investors including Walter Schloss and Irving Kahn. Another influence on Buffett’s investment philosophy was the well known investor and writer Philip Fisher. After receiving the only A+ Benjamin Graham ever handed out to a student in his security analysis class, Buffett wanted to work at Graham-Newman but was initially turned down. He went to work at his father’s brokerage as a salesman until Graham offered him a position in 1954. Buffett returned to Omaha two years later, when Graham retired.

Buffett established Buffett Associates, Ltd., his first investment partnership, in 1956. It was financed by $100 from Buffett, the general partner, and $105,000 from seven limited partners consisting of Buffett’s family and friends.

Buffett created several additional partnerships which were later consolidated as Buffett Partnership Limited. He ran the partnerships out of his bedroom, adhering closely to Graham’s investment approach and compensation structure. These investments made in excess of 30% compounded annually between 1956 to 1969, in a market where 7% to 11% was the norm.

Buffett employed a three-pronged approach:

1. Generals: undervalued securities that possess margin of safety and meet expected return-to-risk characteristics[8]

2. Arbitrages: company events that are not related to broader market changes, such as mergers and acquisitions, liquidation, etc.

3. Controls: build sizeable holdings, ally with other shareholders or employ proxies to effect changes in companies

In 1962 Buffett Partnerships began purchasing shares of Berkshire Hathaway, a large manufacturing company in the declining textile industry that was selling for less than its working capital. In 1969, Buffett would dissolve all his partnerships to focus on running Berkshire Hathaway. At the time, Charlie Munger, Berkshire’s current Vice Chairman, remarked that purchasing the company was a mistake, due to the failure of the textile industry. Berkshire, however, became one of the largest holding companies in the world, as Buffett redirected the company’s excess cash to acquire private businesses and stocks of public companies. At the core of his strategy were insurance companies, due to the large cash reserves they must keep on hand to pay out future claims. Essentially, the insurer does not own the reserve, but may invest it and keep any proceeds.

Under Munger’s influence, Buffett’s investment approach moved away from a strict adherence to Graham’s principles, and he began to focus on high-quality businesses with enduring competitive advantages. He described such advantages as a "moat" that kept rivals at a safe distance, as opposed to commodity businesses, which sell undifferentiated products and face direct competition. A classic example of a wide-moat company is Coca-Cola, because consumers are willing to pay more for a Coke than for a generic beverage with a similar taste. On the other hand, salt is considered a commodity product because consumers generally have no preferences for one brand of salt over another.

Investment in wide-moat businesses has become a hallmark of Berkshire Hathaway, particularly when buying whole companies rather than public stocks. As a result, it now owns a large number of businesses which are dominant players in their respective industries, specialize in various niche markets, or possess other unique characteristics to separate them from their competitors. [ text is available under the terms of the GNU Free Documentation License. (See Copyrights for details ]