I'd Be Kicking Myself if This Happened to Me

Here's an NPR story about Warren Buffett's son Peter who inherited $90,000 in Berkshire Hathaway stock when he turned 19. It's been long documented and discussed that Buffett has decided not to leave his great wealth to his kids. Besides, the $90k is from Peter's grandfather, not his father. The grandfather left the family a farm upon his death. Warren sold the farm and invested it into Berkshire stock for his kids.

Peter Buffett took his $90k out and spent it on "college and to buy some recording equipment." Now here's the killer -- get this:

Had Buffett left the $90,000 in stock alone, it would be worth more than $70 million today — but he insists he has no regrets.

I hope that was some REALLY nice recording equipment!!!!!!

So while he has "no regrets", I'd be poking my eyes out since I had just let $70 million slip from my grasp. How about you? Would this be "no big deal" (and what could you do about it anyway?) or would you regret not keeping the money in stock and earning a cool $70M?

Comments

[Jenn in Michigan]

I don't know that I would be kicking myself, except for the recording equipment. He had college paid for, which is what I owe most of my debt to. Although, I don't know what Peter does for a living, is he now a music producer? If so, it was money well spent.

[DIY Investor]

I'd probably be poking my eyes out to but I understand his view. The tradeoff is between getting a bigger slice of the pie (It probably would not have grown to $70 million by the way - mansions and stuff would have started around $2 million I would think) and accomplishing goals on one's own. He struggled but in the end he had the satisfaction of his own accomplishments - something money can't buy.
My question is whether there is something in a person's genetic makeup pushing him one way or the other. I know the philosophy of his father played a big role but still if it had been Paris Hilton I doubt the father's influence would have made a difference. Paris is a partier(sp?) and $70 million is a lot of partying.:)

[KH]

This kind of simplistic thinking is usually always wrong.

What was he supposed to live on in the meantime? Was he supposed to not attend college and just try to exist in a state of suspended animation until now?

It's like me adding up my salary the past 30 years and then "poking my eyes out" because of "all" that money I spent living, raising my kids, etc. And yes, I also paid money way back then to go to college, money that if I hadn't spent it would have grown into a large nest egg. But of course I'd rather have my education and career.

I'm impressed his college education cost < $100K. It's not like he was eligible for need-based financial aid, he'd have had to pay the full cost.

[Stephen M]

That's the point of the whole thing. Warren didnt want his kids spoiled by $70 million dollars. His son has a wonderful music career and made a name for himself. Would you want Paris Hilton as an offspring?? I'd give up $70 million dollars to make sure my kids didnt turn out like that.

[Eugene Krabs]

Haha, well, a couple of behavioral investment concepts come to mind....

First, I don't think there was any way back then for a nineteen year old Peter to have known that his Berkshire stocks would become so wildly successful. I mean, who in their right minds would sell those stocks IF they knew what will happen?

Even today, if someone gave me that, well to be honest, I'd probably sell it too because we all know it's not safe to hold on to a large amount in any single stock, no matter to good it is. At the very least, I'd diversify some of it. Yes. Even Berkshires. Don't forget the downside risk that neither Buffett nor Munger will live forever, and much of their stock is driven by the "brand" of these two personalities, and not just company fundamentals.

Having said that, my second point is that it seems those who have had great fortunes somehow slip through their fingers would always come back and rationalize it as "having no regrets". I remember reading another article elsewhere with an ex-Microsoft co-founder whose money would have been worth billions, and he too said the exact same thing.

That's funny, partly because they're right. The reality is that, no matter how they look at this, they know they've missed that boat, and there's nothing they can do about it. As such, the only thing they CAN do is about it is in how they choose to perceive and cope with it.

No matter what happens, I "have no regrets" about making this comment. :D

[Laura in Atlanta]

And . . . had he left it alone, the Berkshire stock might have crashed into nothing.

It's always easy to look back and say, wow, I should have done something differently . . . but at the time, he probably felt that college and recording equiptment was the way to go.

[billyjobob]

I agree with Eugene. Its easy to look back and see what we should have done. When I was 19 I bought a VW for 1100 dollars. Now today I wish I had put that money in Apple or Microsoft or Berkshire Hathaway. But back then, I needed a car. If Warren came on TV today and said that he was sure Berkshire would do as well over the next 30 years as it had in the past 30. I would probably be very doubtful and still not sink a ton of money in Berkshire. Also, just imagine the other way things could have gone. If Berkshire had gone the way of Enron or one of those fun stocks. He would have been very unhappy to lose 90,000 because Dad said it would be a good investment. Don't we all wish we had a crystal ball.

[Scott]

He was given the money – he didn’t work and save it. That probably had something to do with it. And I’m sure he was thinking there’s more where that came from. Do you really think his old man would turn him down if he was short and needed a ‘g’ to cover rent?

[Josh]

Hindsight is 20-20. I'd also be a millionaire if invested in Microsoft's IPO, but I didn't. Should I be poking my eyes out too?

[j]

hind sight is 20/20 dumbass.

[Eugene Krabs]

Woah there. No need to be rude about it.

[Tyler]

He has won a Grammy and been very successful in his own profession. (In part, because he sold his BRK stock to invest in his own career.)

He was also given $1mm at 30 and benefits from other perks that exist from being the son of Buffet.

Based on a utility curve, difference between 5-10mm million (I am guessing Peter's worth) and 90mm is pretty low.

[Tyler]

Emmy not Grammy sorry. I read an article about him a few weeks ago and didnt click through to the NPR article.

Id rather be successful in my own right and have less money than have 1B given to me. Good for him.

[Everyday Tips]

Heck, I am angry well I sell a stock too soon and lose a thousand bucks in 'opportunity cost'. So yes, my eyes would be poked out.

So he used it for college? Warren didn't plan on paying for his son's college? (Or did I read it wrong?)

[MattJ]

I would like to think that, in a similar situation, I wouldn't be too hard on myself.

Having a billionaire father probably opens a lot of doors. Besides that, the best gift his father ever gave him is probably raising him to be well-adjusted.

Still, musically he's not so great compared to his uncle Jimmy.

[Josh]

@j - my 20-20 hindsight tells me you are moran.

[Old Limey]

If you think this story is a big deal then just read the story on the link below. The story was in our local paper, the San Jose Mercury because Apple is a local company.

http://www.omaha.com/article/20100610/MONEY/706109901

It's about Ron Wayne. He co-founded Apple computer. He had a 10% stake, Jobs and Wozniak each had 45%.
Wayne helped them form the company but quickly realized that these two kids were never going to make it so he sold his 10% stake in Apple Computer for $2,300.
If he had held on that 10% would today be worth $22 Billion.
Instead he now lives in a dilapidated trailer park in Pahrump, Nevada and spends his days playing the slots.

[Mike Hunt]

Old Limey,

What a tough story. Somebody give Ron Wayne an IPOD & an IPhone for Pete's sake. If I see him in Nevada I'll give him $100 worth of chips...

-Mike

[Budgeting in the Fun Stuff]

If I had the life I wanted anyway (he worked in music like he wanted and made his own name), then I too would have no regrets. Now, if he started a dog walking business and hated dogs, I bet he'd be poking his eyes out...

[steve]

I saw that interview and we all know...you can't look back! He truly seems at peace with himself. Interestingly, his father did give his charitable organization money and Peter seems content to find a good home for it!

[j]

@Josh You are 100% correct Josh. I'm a "moran".

[Eric]

Wow tough crowd...

I get where you're coming from FMF. :)

[mysticaltyger]

@Josh. Maybe you learn to spell before you call people nasty names.

[Joe]

I would probably be kicking myself. That's a huge return on that investment.

[Money Reasons]

While Peter won't inherit billions from his dad when Warren passes, Peter will still inherit millions.

So for him, he knows he's getting something...

Still, you have to wonder if he knew that he would have 70 million today, if he'd still have used the money like he did.

It's easy to judge things that happened in the past, but not so easy in the present :)

[MattJ]

For those criticizing Josh for using the term 'morans' - it's an internet meme. It comes from someone who did exactly what you think Josh has done... the only difference is that Josh used the wrong word on purpose.

[Chuckles McGee]

He spent $90,000 to get a Stanford education and the equipment which would be the start of his lifelong career in the music industry. Seems like money well spent. He's going to be comfortably wealthy no matter what, so I feel like it's perfectly reasonably to pursue your dreams even if requires a bit of a monetary sacrifice.

[Todd]

MattJ - Thanks for pointing out the Internet meme for Morans. I was not aware of this.

Josh - I like your post even more.

[Nashvilliean]

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