In the previous article, we learned that Warren Buffett's partnership alliance, with the full support of all shareholders, provided a solid foundation for his entrepreneurship and continued to attract investors. We’ll continue learning how he paved the way to achieve his $100 billion net worth.

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During the summer of the year, Berkshire Hathaway, Buffett's partnership alliance company, was established, and he met his admired mentor Benjamin Graham in Omaha. The two had a long and in-depth conversation. 

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Graham took action that deeply moved Buffett. Graham decided to invest $120,000 in Buffett's company. The time has come that the knowledgeable teacher acknowledged the newcomer. 

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It's important to note that Buffett didn't even have an office space at that time. He had converted his living room into an office. Everything was in its infancy and had the feel of a sole proprietorship owned entirely by the family.

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Buffett decided not to take risks or show off. He focused on thoroughly studying each company's financial statements, analyzing stocks and bonds individually, and memorizing them. Through careful investigation and comparison, he aimed to find undervalued stocks in the market and discover investment opportunities.

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Buffett's company gained a good reputation in the first five years, and his strength gradually became known. Because Buffett did not waste any time, his partnership alliance company's early annual performance was as follows:

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Year 1: 10.4%

Year 2: 40.9%

Year 3: 25.9%

Year 4: 22.8%

Year 5: 45.9%

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In the initial five years, such impressive operational performance exceeded the Dow Jones Industrial Average. The five-year average annual growth rate of return was 29%, and the cumulative return over five years reached an astonishing 351%. In comparison, the five-year growth rate of the Dow Jones Industrial Average was only 75%. Due to this high efficiency, Buffett's company's capital expanded.

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By 1961, Buffett's partnership alliance had grown to ten! The total investable capital reached over $7 million. However, simultaneously managing the costs of ten companies was too high. 

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That same year, Buffett integrated all ten partnerships into one company, "Berkshire Hathaway." The capital in the company had grown from $100 to $1 million. 

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At 31, within just six years, he became a millionaire.

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In 1962, Buffett decided to find an office. He found an office in one of the fourteen-story buildings in the Kiewit Plaza in Omaha. By 1966, Buffett's partnership company achieved an annual average growth rate of 29%. 

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The company's total assets had skyrocketed to $44 million, and the partners' investment had risen by 704%. It was six times the average profit of all stocks in the Dow Jones Index. 

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In other words, if someone had initially invested $100,000 with Buffett, after five years, it would have grown to $8 million after five years. He, indeed, was a unique stock god!

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1964 during these five years, Buffett's father, Howard, passed away. At that time, Buffett didn't inherit any wealth; it was left to his mother, sister, and younger sister. Perhaps influenced by the storms and experiences during his father's tenure as a member of Congress, Buffett consistently reported all his income truthfully to the government, regardless of how much wealth he accumulated. He disliked engaging in illegal transactions privately and always acted legally and morally.

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By 1969, his wealth reached $25 million, while the Dow Jones Index had an annual growth rate of 7.4%. However, Buffett's investment portfolio had a return rate over ten times the Dow's. For example, if we invested $10,000 in the Dow Jones Index, after 12 years, the total profit would be $15,000. But if you had invested in Buffett's partnership company, deducting his share of dividends, you could have gained a profit of $150,000. It was indeed an outstanding investment miracle.

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How did Buffett explain his investment strategy to his partners? We’ll look into this in the following article, so stay tuned!

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