[Insight & Opinion] Warren Buffett's Luck

The Wealth and Success Achieved by Warren Buffett
Talent and Effort Alone Are Not Enough
Era and Country?Luck Plays a Decisive Role

How important is luck to success? To what extent do talent, diligence, and hard work contribute to human achievement? When comparing innate talent and hard-earned effort to luck, which plays a greater role in achieving success?

Warren Buffett has announced his retirement at the end of the year. As his retirement approaches, he is being showered with praise. Some have described him as a figure who embodies all the positive aspects of American capitalism. In 1964, Buffett acquired Berkshire Hathaway, which was then a struggling textile company, and used it as a foundation to invest intensively in many promising companies across energy, banking, aviation, and food industries, becoming a billionaire in the process.

Berkshire Hathaway is now a holding company with annual revenue of $400 billion and 180 subsidiaries. Over the 61 years since the acquisition, Berkshire Hathaway’s stock price has risen by approximately 5,500,000%, more than 140 times the return of the S&P 500 index over the same period. Its average annual return has been 20%. Today, Warren Buffett has assets totaling $168.2 billion, yet he leads a modest life. He still lives in the house in Omaha, Nebraska that he bought for $30,000 in 1958, and visits McDonald’s more than three times a week to enjoy French fries. Despite this, he has pledged to donate 99% of his wealth. The sight of Buffett, who has accumulated immense wealth yet lives simply and says that true success in life is to be loved by those you love, is why he is called The Oracle.

Buffett’s remarkable investment performance is, of course, the result of exceptional talent and relentless learning. It is said that he spends 80% of his waking hours reading books, newspapers, and financial statements. He is known for sitting on a bench reading financial statements even when accompanying his children to amusement parks. However, the role of luck in Buffett’s success is enormous. Buffett himself acknowledges that most of his success was due to luck.

This begins with the era he was born in. He was born in 1930. Had he been born just ten years earlier, he would have had to serve in World War II, and if he had been born another ten years before that, he would have faced the Great Depression in his twenties. Furthermore, Buffett began his career in the 1960s, just before large institutional capital began to flow into the market?when the stock market was still inefficient. Buffett’s health and longevity, which enabled his long career, were also key to his success. It is said that if Buffett had retired or died at age 65, thirty years ago, 90% of his wealth would have disappeared.

In other words, 90% of Buffett’s wealth was accumulated after the age of 65, when most people have already retired. Peter Lynch, who managed the Magellan Fund for 13 years and achieved an average annual return of 29%, retired at the young age of 46. Had Buffett also retired at 46, he would have lost about 95% of his wealth.

Buffett’s investment principle of choosing stocks based on intrinsic value and holding them for the long term will continue to provide valuable lessons for many investors. However, there is no denying that luck played a significant role in his success.

The greatest stroke of luck was being born in the United States, the wealthiest country in the world. The Nikkei 225 index of the Japanese stock market has only just now, after 36 years, returned to its 1989 level. During the same period, the Dow Jones index in the United States has increased fifteenfold. Would Warren Buffett have achieved such success if he had not been American? Even if one invests globally, it would have been difficult for someone from another country to invest so actively in the U.S. stock market and achieve what he has. Since we cannot choose the time or place of our birth, perhaps one lesson we can learn from Warren Buffett’s life as he approaches retirement is that, above all, we should hope for the prosperity of our own country.

Kim Sangcheol, Economic Commentator