World’s fourth richest does not spoil children

American tycoon Warren Buffett, the world’s fourth richest man according to Forbes Magazine, is considered by many analysts as the most astute investor ever.

The chair and CEO of Berkshire Hathaway, Buffett invests for the long term.  He avoids initial public offerings – saying they are usually hyped – and new media stock, like Google and Facebook, saying future values are difficult to estimate.

Buffett’s various accolades include the US Presidential Medal of Freedom.  But for me, his most remarkable achievement is raising well-grounded kids who contribute to society.

Thrift and other values

At age six, Buffett started his first venture.  He bought a six-pack of Coke for 25 cents and sold the cans for 5 cents each.  In high school, he and a friend placed a used pinball machine in one barbershop; months after, they had several machines in many shops.  At age 11, Buffett bought his first shares of stock: three for himself, three for his sister.  Through hard work, frugality, and astuteness, Buffett steadily made his wealth grow.

Buffett owns a house in California, but still lives in the same Omaha, Nebraska house he bought in 1958 for $31,500 (now $700,000).

“Our kids had a very normal growing-up,” Buffett tells Forbes. “They did not see us moving into progressively fancier houses; they did not ride in private planes.  They went to school on the bus…They went to the same [public] school that their mother had gone to… they never really thought that we were economically different.”

“It didn’t matter how big our house was; it mattered that there was love in it,” says Buffett’s son, Peter, in his book “Life Is What You Make It.”  “It didn’t matter if our neighborhood was wealthy or otherwise; it mattered that neighbors talked to each other, looked out for one another. The kindnesses that allowed me to trust in people and in the basic goodness of the world could not be measured in dollars; they were paid for, rather, in hugs and ice cream cones and help with homework.”

For years, Buffett worked at home, with no secretary or accountant.  His present salary is $100,000, a pittance compared to what other CEOs get.

When Peter, an Emmy-winning musician, did a song for an Oscar-winning movie, agents told him to move to Hollywood.  But he decided to stay put.

“I thought about my dad and how he could have moved to New York to be closer to Wall Street. But…I learned you don’t do things just because they looked sexier over there,” he said.

Let kids fail and succeed on their own

Buffett talked business over the dinner table, taking the time to coach his children.

“He would ask some question about a product,” Peter tells Daily Finance.  “He would try to determine the demographic interest in something like a newspaper. He’d ask questions like ‘how often do you read it.’  We [kids] knew we were being tested.”

Buffett was a hands-on father, but he did not rescue his kids from mistakes or buffer them from failure. When the children got in trouble, they had to learn things by experience. Once, Peter asked his father for a loan. His father refused. Peter was angry then, but now believes it was the right move.

“I learned more in those [difficult] times about myself and my resiliency than I ever would have if I’d had a pile of money and I could have glided through life.  I honestly feel that it is an act of love to say, ‘I believe in you as my child, and you don’t need my help.’”

Allocate to useful causes

Many rich kids go astray because they feel entitled. Not Buffett’s children.

“My dad didn’t believe in misallocated capital and he didn’t believe in inherited wealth,” says Peter. “It was kicked in my head that [$90,000 worth of Berkshire Hathaway stock, given in 1979, after the sale of a farm] would be all I would get. People wrongly assume we get piles of money from our dad.”

Buffett allocates his money to useful causes, not just generating jobs for its own sake.  “If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GDP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing,” he said.

More than 20 years ago, Buffett famously said, “A rich person should leave his kids enough to do anything, but not enough to do nothing.”

Peter says that his father transferred values, not wealth.

Buffett gave his children $1 billion for their own foundations, but in 2007, he pledged 99 percent of his wealth to the Bill and Melinda Gates Foundation, not to his kids, upon his death.

Next Friday: Why Equal Is Not Always Fair Queena N. Lee-Chua is on the Board of Directors of Ateneo de Manila University’s Family Business Development Center.  Get her book “Successful Family Businesses” at the University Press (tel. 4266001 loc 4613, email [email protected].)  Email the author at [email protected].