Warren Buffett is known as a legend among stock investors.
For decades, he has beaten the market by selecting undervalued stocks.
He has invested with courage when others have feared the future, and he has exercised caution when others have been greedy.
But Warren Buffett has learned the hard way. He has learned by making mistakes in life. He has stumbled, gambled, lost money, failed, felt shy, been rejected, and even been lied to.
He has tried things and figured it out. Most importantly, he has learned from his mistakes and made them into investing rules.
You don’t often hear about his early battles and the mistakes he has learned from.
Here are ten of them.
1. He Began His Career with Chewing Gum and Newspapers
He has worked on building a fortune since he was a child.
He started selling chewing gum for a nickel in his neighborhood, and later he also delivered newspapers.
He also ran a slot machine business.
He bought old slot machines, repaired them, and made an agreement with the barber shops that they would get half of the money that came through the machines.
He told the barbers that he was just the errand boy even though he himself owned the machines, so he didn’t have to negotiate with them. He could just tell them that the owner said no to installing more machines. He felt it was hard to stand up to the barbers.
By the time he turned 16, he had earned $ 53,000.
2. He Bought His First Shares at 11 Years Old – But Failed
When he was 11 years old, he bought his first share. He bought three shares in Cities Services for $38 a share in 1942.
That company had terrific success. A few years later, the amount had quadrupled. By 1945, the company’s shares had risen to about $160.
But Warren Buffett didn’t get to enjoy that ride. He sold the shares a few months after purchasing them at $40.
He made $5.25 on them – and was annoyed.
It was an experience – and an early mistake – that has shaped him as an investor. He used it once as an anecdote at Berkshire Hathaway’s annual meeting as an example of how important it is to hold on.
3. He Experienced the Pain of Being a Gambler
At 16 he began betting on horses.
One day, he went alone to the racetrack and started losing. He became so keen on getting the money back that he had a hard time stopping himself.
In one day, he lost $ 175 dollars, which was a lot of money back then.
Afterwards, he had a huge ice cream and pondered the day’s events. He decided never to behave like that again.
He mentioned the incident in the biography The Snowball:
“I’d committed the worst sin, which is that you get behind and you think you’ve got to break even that day. The first rule is that nobody goes home after the first race, and the second rule is that you don’t have to make it back the way you lost it. That is so fundamental, you know.”
He says he made an emotional decision.
“Oh, I was sick. It was the last time I ever did anything like that.”
4. He Was Rejected by Harvard
It was his dream to go to Harvard Business School, but his application was rejected – and that was one of the most important events of his life.
It was a blessing in disguise, though it certainly felt like a defeat at the moment.
If he hadn’t been rejected, he wouldn’t have become an investment legend.
He ended up going to Columbia where Benjamin Graham – the author of the investing bible The Intelligent Investor – taught.
If he had not gone to Columbia, he probably wouldn’t have become a value investor.
5. Berkshire Hathaway Was a Ruin
Today, everyone thinks of his company, Berkshire Hathaway, as a success.
But originally Berkshire Hathaway was an old American textile company that he acquired. When textile production was outsourced to Asia, Berkshire Hathaway had no future.
Instead of shutting down the company as the gigantic investing mistake it really was, Warren Buffett used the shell of it to continue his investing business.
6. He Had Two Wives
His first wife, Susan Buffett, left him but stayed married to him.
Susan Buffett had grown tired of life in Omaha when she moved to California to try out a life as a professional singer.
They had been married for many years, and their three children were adults and had moved away from home.
She introduced him to her friend Astrid Menks, who worked at a local cafe, and asked Astrid to look after him and make sure he got something to eat.
The girlfriend, who is Buffett’s second wife, moved in, and they lived for many years as husband and wife while he was still married to Susan.
He was unaware that Susan had also settled with her tennis instructor in California. He only discovered it when she died in 2004. He has expressed regret about not marrying Astrid earlier.
Astrid had lived with him since 1977, when Susan flew to California. They were married in 2006, a few years after Susan’s death.
7. He Earned 99 percent of His Money After Turning 50
There is no doubt that Warren Buffett was successful as a young man, but he really became ridiculously wealthy in his older years.
This is due to the effect of compounding. The exponential growth took off during the second half of his life.
His net worth was $357 million when he was 52 years old. It is more than $110 billion today (2021).
8. His Father-in-Law Told Him He Would Fail
When he proposed to his first wife Susan, his father-in-law wanted a man-to-man conversation with him.
Warren Buffett had at this point already made a small fortune, but his father-in-law didn’t care much about that.
He told Buffett he would fail.
According to an interview with CNBC, Warren Buffett has quoted him as saying:
“You’re going to fail. And the reason you’re going to fail — my daughter may starve to death and you’re going to fail, but I’m not going to blame you because it’s because the Democrats are in and they’re all Communists.”
9. He Still Lives In His First $31,500 House
He still lives in the house he moved into as a newlywed with Susan Buffett.
First they lived there as tenants, and later they bought it for $31,500 in 1958.
It’s a house with five bedrooms, two and half bathrooms.
This isn’t really a mistake, but more a testimony to how peculiar he is and how little he cares about material things.
Money for him is like an intellectual game.
10. He Was a Young Man Who Couldn’t Say His Name
Every year, Warren Buffett speaks to millions of people at Berkshire Hathaway Annual Meeting.
About 40,000 are present in the hall, and many more are watching live, as it’s being broadcast and streamed on Yahoo Finance.
Initially, however, he was so shy that he had a hard time saying his own name in public.
He couldn’t bring himself to speak in front of assemblies at all.
As a young student, he took a Dale Carnegie course in public speaking, and he has referred to that course as the best investment he has made in his life.
But he almost didn’t take it.
First he signed up, and then he cancelled because he got nervous.
Then he decided to sign up again, this time paying cash upfront so there was no going back.
That did the trick.
“The best investment you can make is an investment in yourself,” Warren Buffett has later said, and he often refers to that course.
Your first step towards learning more about investing could be downloading my free e-book Free Yourself. You can get it right here.