[DesertCat]

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Warren Buffett took $100,000 and turned it into $50 billion buying stocks.

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No he didn't. He built a company, and only part of that involved buying stocks.

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This is the kind of mythology that some traders have promoted to explain away Buffett's results, because they reject the idea you can build so much wealth through buy and hold investing in the stock market. I thought you were more open-minded than to buy into this.

Buffett ran an investment partnership from 1956-1969 with annualized returns of around 30% per year. He took control of a few minor companies during that span but virtually all of the partnership's assets were invested in liquid public stocks (or bonds). One he took control of was Berkshire Hathaway which was a business that turned out to be a dog and a drag on results. When he closed the partnership and he put the bulk of his life savings in BRK, so he could invest it's net capital (and that of an insurance subsidiary) in the stock market. Once again, it was his stock market acumen that drove the entire increase in Berkshire's value during most of it's life.

Eventually over time he added more wholly owned businesses as Berkshire grew larger. In 1975 BRK had $159 per share in investments, and earned $4 per share from subs. In 1985 BRK had $2,400 in investments per share, and earned $52 per share from subs. In 1995 it had $21,800 in investments per share, and earned $175 per share from subs. Now it has $80,000 per share in investments, and earns $3,600 per share from subs.

And if you understand his philosophy, you'll understand there is little difference between buying some shares of a company's stock in the market, or purchasing all of a company's stock in a negotiation. Both involve buying investments at large discounts to value, typically with the intention to hold them for very long periods. He is forced to buy more companies now because Berkshire is too large, and he no longer has the same opportunities in the stock market that you and I have.