In a recent televised interview with Piers Morgan, investor and Berkshire Hathaway (NYSE: BRK-B) Chairman Warren Buffett – also known as the Oracle from Omaha – was asked to show viewers the contents of his wallet. Mr Buffett happily obliged.
After noting that the wallet was around 20 years old, Mr Buffett produced his original American Express card from 1964. What's particularly interesting about the age of his Amex is 1964 was the year of the infamous 'Salad Oil Scandal'. The scandal was in fact a fraud that caused the price of American Express shares to fall to $35; Buffett bought heavily as the rest of the market sold. By 1965 the investment had doubled in value!
Buffett's investment in American Express holds a number of lessons for investors, including the importance of not following the crowd and the value of a powerful brand. The fact Buffett is still using the same card nearly 50 years later reinforces this brand power and is a central tenant of a number of other canny investments over the years including purchases of Walt Disney and The Coca-Cola Company stock.
Buffett also shared with viewers that his wallet contained a picture of his family and (unsurprisingly) a wad of $100 bills.
However while the question was of course light-hearted and for a laugh, for investors it is not what is in Mr Buffett's wallet but rather how Mr Buffett has accumulated such a vast fortune that is so interesting.
No doubt Mr Buffett would share this sentiment too. There is an often-told story about Mr Buffett that describes how many years ago he was touring a grand mansion in California that had once belonged to a wealthy newspaper tycoon. As the tour guide showed Mr Buffett around, the guide pointed out all of the luxuries that the tycoon had spent vast amounts of money on. Buffett is said to have responded: "Don't tell us how he spent the money; tell us how he made it!"
Thankfully due to Mr Buffett's detailed letters and public interviews, investors have many insights into just how he has made his fortune. One question Australian investors must often ponder however is how Mr Buffett would have made his money if he had been born in Australia? Would he have purchased Commonwealth Bank (ASX: CBA) or one of the other major banks, Coca-Cola Amatil (ASX: CCL) or Woolworths (ASX: WOW)? Possibly, but we will never know.
Foolish takeaway
What we do know it there is a philosophy and approach that Mr Buffett uses to identify opportunities. This approach is reasonably easy to understand but hard to perform, which is why not everyone investor enjoys a fat wallet like Mr Buffett.
