In the previous article, we learned that even though the Graham Newman Corporation was dissolved, Warren Buffett still worked hard on his investment profession and company financial analysis.

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Let's continue to learn about his $100 billion entrepreneurial and investment path in today’s Warren Buffett story.

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After careful consideration, Buffett returned to his beloved Omaha with his wife and moved into an apartment near Buffett's Grocery Store. He had decided to establish his own investment company, where he could apply the investment principles and insights he had accumulated over the years through actual investments. Buffett had already learned the art of fundraising through his speech skills, and now he was ready to put them to use!

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In 1956, Buffett formed a company composed of numerous partners. Most of these partners were his family members and friends. The initial group of partners consisted of seven individuals: his sister, brother-in-law, father-in-law, aunts, classmates, and close friends. They formed Buffett Partnership Ltd. The partners contributed a minimum of $5,000 and a maximum of $35,000 each, totaling $105,000. Buffett himself invested $100 and became a limited partner.

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The partnership had only one operating principle. Buffett said, "I will treat your funds as mine. Therefore, I will not disclose what I invest during the process." Buffett only allowed the partners to ask questions during the annual settlement.

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Buffett and the partners agreed that at least 6% of the contributed capital would be distributed as dividends to all partners each year. Out of the annual company earnings, 75% went to the partners, and 25% remained with Warren Buffett. In other words, if Buffett achieved only a 6% return on investment in a year, he would not receive any money.

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Under these conditions, every partner had complete trust in Buffett. They believed that Buffett would lead them to a prosperous investment future. The company was established, the business continued to grow, and new partners and funds poured in.

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The company quickly scaled up. However, in reality, Buffett had no significant achievements to prove his abilities (he had yet to operate investments with large amounts of money). Surprisingly, the initial and later-added partners had complete faith in his decision-making. Buffett stated that any income he received through the partnership alliance would be 100% reinvested in the alliance. So if Buffett's investment performance were poor, he would bear the losses himself. This rule was why the partners believed in Buffett's caution.

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Initially, the operating costs of this partnership alliance were almost zero. Buffett used his bedroom as an office and his car as the company vehicle. He didn't hire a secretary. Thus, Buffett's company operated as a "one-man company" because he wanted to safeguard every dollar invested.

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However, Buffett was unsatisfied with the initial $105,000 of available capital. He continuously sought additional investors to join the partnership alliance. Due to the network, he had built while working at Graham-Newman Corporation, Buffett found fundraising to be very smooth.

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There was one exception, though, and it was his good neighbor, Cona Chiou (who later became the CEO of The Coca-Cola Company). Because Chiou had a close relationship with Buffett, he initially discussed the $5,000 investment with his wife, as it was a large sum for them. 

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Ultimately, his wife voted against it because she didn't understand Buffett's investment prowess. It is easy to imagine that Chiou and his wife deeply regretted their decision because they had missed a great opportunity to accumulate wealth alongside Buffett.

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Buffett's partnership alliance continued to move forward!

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It’s been great to learn about Buffett’s progress and the full support of all shareholders in Buffett's partnership alliance. He had a solid foundation from the beginning and continuously attracted more investors. In the next article, let's continue learning about how his $110 billion snowball kept rolling.

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