Warren Buffett, often called the “Oracle of Omaha,” has become one of history’s most successful investors, with a net worth exceeding $161 billion. While many study his current investment strategies, the foundation of his success was built during his formative years.
His childhood and young adult lessons shaped his approach to business, investing, and life. Understanding these early influences provides valuable insights for anyone looking to build wealth or develop a sound financial philosophy.
Here are the five lessons Warren Buffett learned early in life:
1. The Power of Compound Interest
“My wealth has come from a combination of living in America, some lucky genes, and compound interest.” – Warren Buffett.
Warren Buffett’s fascination with compound interest began at an extraordinarily young age. At just 11 years old, Buffett purchased his first stock—three shares of Cities Service Preferred for $38 per share. Though this initial investment saw volatility, the experience taught him about the potential of money growing over time.
His understanding of compounding deepened when he read “One Thousand Ways to Make $1,000” from the Omaha Public Library. The book explained how money could multiply through the power of interest and reinvestment. This concept became foundational to his investment philosophy.
By age 15, Buffett had saved approximately $2,000 from various entrepreneurial ventures—a substantial sum in the 1940s. Rather than spending this money on immediate pleasures, he reinvested it, allowing his capital to grow exponentially over decades.
This early lesson in patience and compounding became the cornerstone of his investment strategy at Berkshire Hathaway, where he has held some investments for decades, watching them multiply manifold in value. His purchase of See’s Candies in 1972 for $25 million has generated over $2 billion in profits—a testament to his understanding of compound returns.
For everyday investors, Buffett’s early discovery highlights the importance of starting to invest as soon as possible and resisting the urge to buy and sell constantly. Time in the market, not timing it, creates the conditions for compound growth to work magic.
2. Value Reading and Learning
“Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.” – Warren Buffett.
Young Warren Buffett had an insatiable appetite for knowledge. As a child, he spent countless hours at the Omaha Public Library, consuming books on business, investing, and entrepreneurship. This self-directed education gave him a competitive advantage that would serve him throughout his career.
This ties into where he learned about compounding gains. Remember, at age 11, Buffett borrowed “One Thousand Ways to Make $1,000,” which taught him about cash flow and business and sparked his entrepreneurial imagination. The book detailed various business ventures ordinary people could undertake to generate wealth—ideas that the young Buffett eagerly implemented.
This early commitment to reading evolved into a lifelong habit. Today, Buffett dedicates 80% of his workday to reading—newspapers, annual reports, financial statements, and books. He considers knowledge cumulative and believes consistent learning creates a significant edge in business and investing.
Buffett’s educational journey took a critical turn when he discovered Benjamin Graham’s “The Intelligent Investor” at age 19. The book’s value investing principles resonated deeply with him, eventually leading him to study under Graham at Columbia University. This mentor-student relationship profoundly shaped Buffett’s investment approach.
For aspiring investors, Buffett’s experience highlights the importance of continuous self-education. His success wasn’t built on innate genius but an unwavering commitment to learning and applying knowledge. He once said, “The more you learn, the more you earn.”
Warren Buffett said that by age 10, he had read every book about investing in the Omaha public library, some of them multiple times.
3. Focus on Long-Term Thinking
Buffett has repeatedly emphasized this principle throughout his career, famously stating, “Someone’s sitting in the shade today because someone planted a tree a long time ago.” He understood that wealth accumulation isn’t about making quick profits but allowing investments to compound over extended periods.
At just 15 years old, Buffett and his friend Don Danly invested $25 to purchase a used pinball machine. They placed it in a local barber shop, and within months, the profits allowed them to buy several more machines. Rather than pocketing the earnings, Buffett reinvested them to expand their operation, demonstrating his early grasp of long-term thinking.
This patience and long-view perspective became hallmarks of his investment strategy. While many investors chase quarterly profits or react to market fluctuations, Buffett developed the discipline to look years or decades ahead. He famously said his favorite holding period is “forever” when investing in quality businesses.
His approach to Berkshire Hathaway’s acquisition of GEICO illustrates this principle. Buffett began purchasing GEICO shares in 1951, gradually increasing his position until Berkshire acquired the entire company in 1996. This 45-year investment journey reflects his extraordinary patience and long-term orientation.
Buffett’s early lessons in delayed gratification helped him avoid the pitfalls that trap many investors—panic selling during downturns, overtrading, or chasing trendy investments. Instead, he developed conviction in his analysis and the fortitude to wait for his investments to reach their potential.
For individual investors, Buffett’s example teaches that successful investing isn’t about quick wins but identifying quality businesses and having the patience to let them compound value over time. This approach requires emotional discipline and conviction—traits Buffett developed in his youth.
4. The Importance of Integrity
Howard Buffett, Warren’s father, was a stockbroker and later a U.S. congressman known for his unwavering integrity. Growing up in this environment, young Warren learned about the value of reputation and ethical conduct that would guide his career.
His father’s principled approach to business and public service taught Buffett that trust is the foundation of sustainable success. This lesson crystallized into one of his most famous quotes: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
This early emphasis on integrity influenced how Buffett selected businesses and partners throughout his career. He prioritizes management teams with demonstrated honesty and ethical behavior when evaluating potential acquisitions. Buffett told his managers: “We can afford to lose money—even a lot of money. But we cannot afford to lose reputation—even a shred of reputation.”
Buffett’s commitment to integrity was evident in 1991 when he stepped in as interim chairman of Salomon Brothers during a treasury bond scandal. He testified before Congress, promising that all employees would be directed to report anything questionable and that impropriety would not be tolerated. His straightforward handling of the crisis helped save the company’s reputation.
For aspiring business leaders and investors, Buffett’s experience demonstrates that ethical behavior isn’t just morally right—it’s also good business. Trust creates opportunities, attracts quality partners, and builds resilient organizations that can weather challenges.
5. Start Small, But Start Now
One of the most accessible lessons from Buffett’s early life is the importance of beginning your financial journey immediately, regardless of how modest your resources might be. At age six, Buffett bought six packs of Coca-Cola for 25 cents and resold each bottle for 5 cents, making a small profit on each package. This humble venture was his first experience with entrepreneurship.
By age 13, he had a paper route delivering The Washington Post, waking before dawn to ensure papers reached subscribers on time. The discipline and work ethic developed during these years stayed with him throughout his career. More importantly, these small ventures generated capital that he could invest.
At 14, Buffett used $1,200 of his savings to purchase 40 acres of farmland in Nebraska, which he leased to farmers. This early real estate investment demonstrated his willingness to deploy capital into productive assets, however small the beginning.
These modest starts built both his financial resources and his confidence. Each success, however minor, reinforced his belief in allocating capital effectively. By the time he graduated high school, Buffett had accumulated approximately $5,000 (equivalent to about $60,000 today)—a remarkable sum for a teenager in the 1940s.
Buffett’s early ventures illustrate that building wealth doesn’t require a large initial sum or a revolutionary idea. It requires taking the first step, however small, and consistently building upon it. For today’s investors, this might mean starting a retirement account with just a few dollars per month or beginning a side business with minimal capital.
Conclusion
The lessons Warren Buffett learned in his formative years laid the groundwork for his extraordinary success. From understanding the power of compound interest to valuing continuous learning, thinking long-term, maintaining integrity, and starting small but starting now—these principles have guided his journey from a curious child in Omaha to one of the world’s wealthiest individuals.
What makes these lessons particularly valuable is their accessibility. They don’t require exceptional intelligence or privileged circumstances—just discipline, patience, and a willingness to learn. The financial habits and mindsets Buffett developed as a young man are available to anyone seeking to build wealth and achieve financial success.
In an investment landscape often characterized by complexity and noise, Buffett’s early lessons remind us that the fundamentals of successful investing remain remarkably simple. By applying these timeless principles with consistency and conviction, investors at any stage of life can work toward building their financial legacy.