The Warren Buffett Way, + Website, 3rd Edition

Chapter 2

The Education of Warren Buffett

Even a five-sigma phenomenon with a stunningly powerful intellect must rely on the teachings of those who came before him, for not even he can skip the process of learning his trade. Warren Buffett’s education is, as we shall see, a synthesis of three distinct investment philosophies from the minds of three powerful figures: Benjamin Graham, Philip Fisher, and Charlie Munger.

The Graham influence on Buffett is well known; in fact, some consider it all-encompassing. This is not altogether surprising, considering the entwined histories of the two men. Buffett was first an interested reader of Graham, then a student, an employee, a collaborator, and, finally, Graham’s peer. Graham molded Buffett’s untrained mind. However, those who consider Buffett to be the singular product of Graham’s teachings are ignoring the influence of two other towering financial thinkers: Philip Fisher and Charlie Munger. We will study both of them in this chapter.

Benjamin Graham

Graham is considered the dean of financial analysis. As Adam Smith notes, “Before him there was no [financial analysis] profession and after him they call it that.”1 Today he is best known for two celebrated works: Security Analysis, coauthored with David Dodd and originally published in 1934, and The Intelligent Investor, originally published in 1949. Part of the enduring significance of Security Analysis is its timing: This seminal book appeared just a few years after the 1929 stock market ...