7 Personal Finance Tips From Warren Buffett

Warren Buffett is generally considered to be the best long-term investor of all time, so it’s no wonder many people like to listen closely to Buffett’s words of wisdom, in order to apply them to their own lives. With that in mind, here are seven of the best personal finance lessons I’ve learned from Warren Buffett over the years.

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1. “Someone’s sitting in the shade today because someone planted a tree a long time ago”

The lesson here is to be a forward thinker when it comes to personal finance, whether you’re talking about investing, saving, or spending. When you’re deciding whether to put some more money aside for emergencies, think of a financial emergency actually happening and how much easier your life will be if you have enough money set aside.

Similarly, few people get rich quick by investing, and most people who try end up going broke. The most certain path to wealth (and the one Buffett took) is to build your portfolio one step at a time, and keep your focus on the long run.

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2. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years”

In addition to this, one of my all-time favorite Warren Buffett quotes is “our favorite holding period is forever,” which is also one of the most misunderstood things he says. The point isn’t that Buffett only invests in stocks he’s going to buy and forget about — after all, Buffett’s company Berkshire Hathaway sells stocks regularly, and for a variety of reasons. Rather, what Buffett is saying is to invest in stable, established businesses that have durable competitive advantages. That is, approach your investments with the long term in mind, but keep an eye on them to make sure your original reasons for buying still apply.

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3. “Price is what you pay; value is what you get”

When you’re buying an investment (or anything else for that matter), the price you pay and the value you receive are often two very different things. In other words, you should buy a stock if you believe its share price is less than the intrinsic value of the business — not simply because you think the price is low.

For example, if a market correction hit tomorrow and a certain stock were to fall by 10% along with the overall market, would the business inherently be worth 10% less than it is today? Probably not. Similarly, if a stock rose rapidly, it wouldn’t necessarily mean that the value of the underlying business had risen as well. Be sure you consider value and price separately when making investing decisions.

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4. “Cash … is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent”

One of the reasons Berkshire Hathaway not only survives recessions and crashes, but tends to come out of them even better than it went in, is that Warren Buffett understands the value of keeping an “emergency fund.” In fact, when the market was crashing in 2008, Berkshire had enough cash on hand to make several lucrative investments, such as its purchase of Goldman Sachs warrants.

Granted, Berkshire Hathaway’s rainy-day fund is probably a bit bigger than yours; Buffett insists on keeping a minimum of $20 billion in cash at all times, and the current total is around $85 billion. However, the same applies to your own financial health. If you have a decent stockpile of cash on the sidelines, you’ll be much better equipped to deal with whatever financial challenges and opportunities life throws at you.

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5. “Risk comes from not knowing what you’re doing”

In Buffett’s mind, one of the best investments you can make is in yourself and the knowledge you have. This is why Buffett spends hours of every day reading, and has done so for most of his life. The better educated you are on a topic, whether it’s investing or anything else, the better equipped you’ll be to make wise decisions and avoid unnecessary risks. As Buffett’s partner Charlie Munger has advised: “Go to bed smarter than when you woke up.”

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6. Most people should avoid individual stocks

This may seem like strange advice coming from Warren Buffett, since he’s widely regarded as one of the best stock-pickers of all time.

However, Buffett has said on several occasions that the best investment for most people is a basic, low-cost S&P 500 index fund, like the one he is using in a bet to outperform a basket of hedge funds. The idea is that investing in the S&P 500 is simply a bet on American business as a whole, which is almost certain to be a winner over time.

To be clear, Buffett isn’t against buying individual stocks if you have the time, knowledge, and desire to do it right. He’s said that if you have six to eight hours per week to dedicate to investing, individual stocks can be a smart idea. If not, you should probably stick with low-cost index funds.

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7. Remember to give back

Warren Buffett is a co-founder of and participant in The Giving Pledge, which encourages billionaires to give their fortunes away. Buffett plans to give virtually all of his money to charity, and since he signed the pledge, he has given away billions of dollars’ worth of his Berkshire shares to benefit various charitable organizations.

Buffett once said, “If you’re in the luckiest one percent of humanity, you owe it to the rest of humanity to think about the other 99 percent.” And even if you’re not a member of the 1%, it’s still important to find ways to give back.

 

 

 

Written By: Matthew Frankel
Source: The Motley Fool

Is Warren Buffett Predicting a Bottom for Oil?

Warren Buffett
Provided by TheStreet

So far, 2016 has been a tough ride for the markets. In just the first two weeksof trading, the Dow Jones Industrial Average has fallen 4.8%, and the S&P 500 has fallen 8%. For stocks, this has been the worst start to a year on record.

But crude oil has been hit even harder. So far this year, the price of oil has dropped by more than 20%, to less than $30 per barrel. It was the worst two-week decline since the financial crisis of 2008. And crude oil hasn’t been this cheap in 12 years. It’s looking like black mold instead of black gold.

Warren Buffett’s Berkshire Hathaway is quickly adding to its holdings of one oil company, Phillips 66. So do the Oracle of Omaha’s purchases indicate oil has reached — or is close to reaching — a bottom?

The answer: not quite.

Phillips 66, headquartered in Houston, was spun off from energy behemoth ConocoPhillips in 2012. Buffett, who already held shares of the parent company, was handed Phillips 66 stock at that time. He quickly added to his position, grabbing 27.2 million shares shortly after the spinoff. In 2014, Buffett bailed on ConocoPhillips, selling his remaining shares, along with a huge portion of Berkshire’s Exxon Mobil holdings.

PSX Chart
Provided by TheStreet

Not only did Buffett stay invested in Phillips 66, but he has added to his position over time. In September he purchased more shares after revealing that Berkshire owned more than a $4.5 billion stake in the company in August.

But this week, Berkshire spent more than $450 million on the company, adding another 5.1 million shares to its portfolio, according to filings with the Securities and Exchange Commission. After seven straight days of trading, Buffett now owns 13% of outstanding Phillips 66 shares, valued at nearly $5.3 billion.

Shares of Phillips 66 surged on the news. The stock closed last week at $78.47, following a jump to $79.28 on Thursday.

This isn’t necessarily an aberration: Phillips 66 has been outperforming most other oil companies despite record lows for the price of crude. Third-quarter 2015 earnings were $1.56 million, compared with $1.01 million for the previous quarter.

That’s because, within the company’s portfolio of mid- and downstream oil and national gas operations, Phillips 66 owns 15 refineries in the U.S., U.K., Ireland, Malaysia and Germany. Together, these refineries have a net crude oil capacity of 2.2 million barrels per day. And this is key to Phillips 66’s survival despite an abysmal oil market.

Although low crude prices signal a decline for upstream producers, they actually benefit refiners. They’re able to take the cheaper crude and turn it into refined products, including gasoline. In turn, lower prices at the pump — and an improved economy — have resulted in increased demand. In addition, increasing global energy use gives an extra push.

“Cheaper feedstock costs will support refining margins,” according to BMI Research’s oil and gas analyst Peter Lee. “Regional demand for oil products at the higher end of the barrel, notably gasoline and naphtha, remains strong, providing opportunities for refiners to capitalize on higher margin products.”

So while Buffett’s purchase might indicate he believes Phillips 66 is at a low, that doesn’t necessarily mean he believes oil won’t fall any further. In fact, it could indicate the opposite.

Oil prices are not expected to recover anytime soon. In fact, analysts at Germany’s Commerzbank are forecasting the possibility of $25 per barrel. Despite this continuing downturn, follow Buffett’s lead and look for energy companies with strong refinery businesses, such as Phillips 66, to profit.

Warren Buffett is Having an Unusually Bad Year

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It hasn’t been a banner year for the Oracle of Omaha.

Warren Buffett has seen shares of his Berkshire Hathaway  (BRK.A) fall more than 11 percent this year. Even worse, Berkshire shares have underperformed the S&P 500  (.SPX) by more than 10 percent.

What makes this highly unusual is that Berkshire famously tends to underperform when the S&P skyrockets and outperform when the stocks as a whole do less well, which makes sense given Buffett’s long-term time frame. Indeed, Buffett is well known for instructing investors: “Be fearful when others are greedy and be greedy when others are fearful.”

This year, however, the S&P is slightly lower, with a 0.4 percent decline. And while there is still a month and a half left in 2015, it is notable that this would mark the first year that Berkshire A shares have underperformed in a down year for the S&P 500 since 1990. (Readers might note that this excludes 2011, when the S&P fell by less than 0.05 percent.)

The most striking year of underperformance came in 1999, when Berkshire shares fell 20 percent while the S&P 500 rose by nearly the same amount.

Berkshire stock is the victim of a rough patch for the transportation and industrial businesses Berkshire owns, as well as some unfortunate stock picks. Out of Buffett’s biggest stock holdings, IBM  (IBM) and American Express (AXP) have gotten licked this year, while Wells Fargo  (WFC) and Coca-Cola (KO) are roughly flat.

In addition, the decline in energy prices has hit Buffett hard.

“Berkshire is one of the largest operators of train portfolios, and those trains move oil and coal. As commodity prices have come down, clearly big trains have been impacted,” said Macrae Sykes, who follows the stock for Gabelli & Co.

Meanwhile, since valuations are not “depressed,” Berkshire has not been able to find particularly exciting things to do with all of the capital its businesses generate, Sykes added.

Buffett has managed to keep himself busy this year, announcing the $37.2 billion acquisition of aerospace supplier Precision Castparts  (PCP) in August. But to Sykes’ point, he told CNBC at the time that the deal was expensive by his standards, with a “very high multiple.”

Still, Buffett and his Berkshire Hathaway have generated massive outperformance over any long period of time.

Written by Alex Rosenberg of CNBC

(Source: CNBC)

Not all ETFs are Created Equal

© (Getty Images)
© (Getty Images)

When investors think about the risk in their 401(k) or other brokerage accounts, they often frame it in terms of volatility. Most often, they are concerned about sharp declines in the U.S. stock market. With memories of the 2008 market plunge fresh in people’s minds, it’s understandable that many view volatility and risk as one and the same.

But that’s not necessarily the best way to think about portfolio risk. In his most recent annual letter to Berkshire Hathaway shareholders, Warren Buffett addressed that topic, writing, “Volatility is far from synonymous with risk. Popular formulas that equate the two terms lead students, investors and CEOs astray.”

Buffett was making the point that over the past 50 years, the return of stocks far outpaced the purchasing power of the dollar, which declined over that time. The “riskier” investment in stocks is actually the way to stay ahead of inflation and maintain purchasing power. That’s a key premise behind a carefully crafted retirement investment plan.

Exchange-traded funds provide a window into an understanding of portfolio risk. Historically, ETFs tracked basic market-capitalization-weighted indexes such as the Standard & Poor’s 500 index of large U.S. stocks. On the fixed-income side, a number of ETFs track the Barclays U.S. Aggregate Bond Index (formerly the Lehman Aggregate Bond Index) of investment-grade, dollar-denominated bonds.

A broadly diversified portfolio, constructed with ETFs representing several stock and bond asset classes, has its own distinct risk-and-return profile. For example, a portfolio containing 70 percent stocks has more risk than a portfolio with 40 percent stocks. Stocks are riskier than bonds, because in a bankruptcy, debt holders are repaid before equity holders. Investors demand to be paid more for taking that risk; hence, stocks have higher returns relative to bonds.

With the information at investors’ fingertips today, it’s not particularly difficult to design a portfolio with the right asset mix to achieve an expected return over time, while dampening the volatility of stocks.

But when investors veer into more esoteric ETF products, such as those concentrated in a single sector or that use complex strategies, the risk-and-return trade-off changes.

Ron DeLegge, U.S. News blogger, founder of ETFGuide.com and host of the Index Investing Show, a weekly podcast, says the more specialized, niche ETFs should be considered as noncore parts of a portfolio.

“The core portfolio is the foundation. That’s where the bulk of the assets will be allocated,” says DeLegge, who is based in San Diego. “The core is always broadly diversified and invested across the five major asset classes: stocks, bonds, commodities, real estate and cash.”

DeLegge says in this area of the portfolio, investors should use low-cost ETFs that track broad-market indexes.

“The noncore portion of a portfolio is complementary. This is where you have things that are narrowly focused, concentrated, higher risk, maybe leveraged,” he says.

Individual stocks, he adds, are outside the core because they represent concentrated positions in one very specific asset. Likewise, sector funds, regional funds, hedge funds and actively managed funds are noncore because none track a broad asset class.

Although risk and volatility are not the same, investors are familiar with the nail-biting experience of volatility, even when their portfolio is taking a level of risk appropriate for the desired outcome. Understanding what he or she owns, and why, can help smooth an investor’s ride.

Elisabeth Kashner, a chartered financial analyst and director of ETF research at FactSet in San Francisco, says investors should be realistic in their expectations of niche or esoteric ETFs. “By and large, you’ll find that these products are not magic. Usually, if a fund has greater returns than a comparable vanilla, market-cap-weighted benchmark, it’s because it has taken on more risk to get there. If the returns are lower, it’s generally because the fund has taken less risk,” she says.

“Most of the time, the index and fund construction process has not delivered more return for less risk,” she adds. “You have to be careful. I’m not saying these products are underperforming, I’m saying they are performing in line, that their performance is driven by risk.”

Alex Bryan, an analyst with Morningstar’s manager research team in Chicago, says the category of “strategic beta” – also known as “smart beta” – has been growing rapidly. Strategic beta funds use methods like tracking indexes not constructed using traditional market-capitalization weightings. Strategic beta funds, which do have strict methodologies, differ from most active funds, which rely heavily on stock picking and generally don’t have ironclad investment rules.

Bryan says part of the growth in the category is due to fund companies marketing the products heavily. “There’s been a push on the fund company side. They can charge higher fees for creating products that look different from other people’s, whereas if you are offering vanilla, broad-based exposure, you are competing on cost,” he says.

He cautions investors to understand what they are buying if they decide to put money into an ETF that doesn’t track a broad index. “There are some where the methodology is not transparent. We at Morningstar are more skeptical if you don’t know exactly what’s going on under the hood. You want to know what are the drivers of performance,” he says.

Kashner offers similar advice for retail investors. “There are reasons to go into a complex strategy, but there are usually more compelling reasons to keep it simple,” she says. “Or, if you are going to take something simple and make it more complex, you should understand exactly why you are doing that and what you hope to get out of it. If you don’t understand that, you are probably best off keeping it simple.”

Copyright 2015 U.S. News & World Report

Written by Kate Stalter of U.S. News & World Report

(Source: U.S. News & World Report)

7 Stock-Picking Mistakes Even Savvy Investors Make

© peepo/Getty Images
© peepo/Getty Images

Everybody loves a winner.

That explains why America seems to be obsessed with stories of amazing stock pickers, such as the New Jersey teen wonder who allegedly turned $10,000 into $300,000 by trading penny stocks from his smartphone.

However, even some of the smartest (and luckiest!) investors make mistakes sometimes. Here are seven dumb mistakes to watch out for the next time you’re picking investment options.

1. HAVING NO INVESTMENT GOALS

If you don’t know where you’re going, you’ll never know when you get there.

However deeply people may agree with this statement, there are still those who lack clear investment goals. Your first step in investing is defining these goals.

Here are three examples of good ones:

— In order to avoid the extra cost of private mortgage insurance, you would like to save for a down payment that is at least 20% of a $300,000 apartment in your city within the next 10 years.

— You first child is just born and you would like to have $35,000 available for his or her college tuition by their 18th birthday.

— Planning to retire 33 years from today, you and your spouse calculated you’d need $3,000 every month to cover your expenses during retirement.

Notice the two things that these goals have in common: a specific dollar amount and a target date. These two elements are the starting point for any discussion about investing. They allow you to establish a timeline and select benchmarks to evaluate your performance.

Before you even think about stock picking, establish your investment goals.

2. IGNORING YOUR RISK TOLERANCE

There are two key elements to determining your risk tolerance.

First, there is your time horizon. A rule of thumb is that the longer your time horizon, the riskier your investments may be. Since you don’t need the funds for quite a while, you can better sustain the ups and downs of the market and chase higher returns. On the other hand, if you need the funds a year from now, you’re better off taking more conservative investments.

Second is your available “play money.” A person with a net worth of $1 million is more likely to better stomach the price fluctuations of a $25,000 investment than a person with a net worth of $75,000. Also, don’t forget about potential liquidity issues. The second individual would be in a really tough situation if he were to suddenly need those $25,000 to pay damages from a lawsuit or meet another type of big financial obligation.

Pick investments according to your time horizon and bankroll.

3. SPENDING INSTEAD OF INVESTING

While some people are very eager to start stock picking, others think they can’t even afford it.

Or it could be that those others may be listening to their “lizard brain” a bit too much. The idea of the “lizard brain” refers to the instincts that helped our ancestors to survive back in the stone age. Given scarce resources and the ever-present possibility of death, our ancestors prefered to enjoy things right away instead of waiting.

Old habits die hard. Given the choice of enjoying $500 right now or receiving $3,000 in five years, most of us would chose the first option. However, this is a bad idea.

4. PAYING TOO MUCH IN FEES

This is one of Warren Buffett’s top three investing mistaketo avoid.

While you can’t be 100% sure about the return of your stock picks, you can be 100% sure of how much money you’re paying in management and trade fees. For example, if you were to invest $10,000 in the average actively managed U.S. mutual fund, you would pay $132 in fees. On the other, you would pay just $17 by investing the same $10,000 in the Vanguard Total Stock Market Index, the largest index mutual fund.

5. TRYING TO BEAT THE MARKET

Here’s another reason to choose index mutual funds.

Most actively managed funds fail to achieve returns above their respective benchmark. Only about 20%–35% of fund managers are able to “beat the market.” These are the pros that do this for a living. Are you sure that you can do better than them on your spare time while juggling your job and family life?

Over the long-term, index funds are typically top performers and do better than 65%–75% of actively managed funds. And index funds cost you less than a fund manager, too.

6. BETTING ON A SINGLE STOCK

There are too many stories about people getting filthy rich by putting all their money on Apple stock.

Before you decide to put all your eggs in one basket, consider the performances of these two other past media darlings.

Groupon

Launched in November 2008, Groupon quickly became the leader of the deal-of-the-day movement. Groupon became one of the fastest companies to reach a $1 billion valuation. Heck, Groupon was doing so well that it turned down a $6 billion buyout offer from Google. However, an original investment of $10,000 in Groupon on November 7, 2011 would only be worth about $2,554.66 today.

Enron

It’s hard to believe that Enron was once a media darling. Back in 2001, Enron’s stock was priced at 70 times earnings and 6 times book value. Out of the 22 analysts covering Enron, 19 of them rated the stock a “buy.” The maximum stock price of $90 in August 2000 convinced several people to put all their nest eggs on Enron. A little over two years later, the stock was trading below $1.

The lesson is that history tends to repeat itself, so don’t bet all your money on a single stock.

7. NOT REBALANCING YOUR PORTFOLIO

Last but not least, remember that asset prices vary over time.

Your investment plan sets a target allocation of your monies in different types of investments. For example, you may have 50% in domestic stocks, 30% in foreign stocks, 20% in bonds, and 10% in T-bills.

Let’s imagine that your foreign stock holdings had a nice upward ride for the last five years. So, now they represent 50% of your total investment portfolio’s value. It’s a good idea to rebalance your portfolio to set back your allocation of funds to the target 30% so that you’re not taking more risk than you’re comfortable with.

It’s shocking how simple it can be to avoid these seven investing mistakes. There’s no secret to stock picking — it just requires planning and sticking to that plan. It may not sound exciting, but it’s more likely to make you a profit. And isn’t that why you really invest?

Written by Damian Davila of Money

(Source: Time)

Berkshire Hathaway’s Profit Drops 37%

PHOTO: REUTERS
PHOTO: REUTERS

Warren Buffett-led Berkshire Hathaway Inc.’s second-quarter profit slumped 37% due to a decline in investment gains and an underwriting loss attributable to higher claims costs at auto insurer Geico.

Berkshire’s operating profit, which excludes the impact of some investment results, fell 10% to $3.89 billion, or $2,367 per share from $4.33 billion, or $2,634 a share a year ago, missing analysts’ estimates.

For the second quarter, Berkshire reported a net $123 million gain from investments and derivatives, down from $2.06 billion a year ago when it recorded a one-time gain tied to a stock-swap deal with Graham Holding Co., former publisher of the Washington Post newspaper.

Berkshire is a gigantic holding company that owns both operating companies and stocks. It swung to an underwriting loss of $38 million in its core insurance business during the second quarter, compared with a $411 million gain in the year-ago quarter. At Geico, the country’s second-largest auto insurer, pretax underwriting gains shrank to $53 million from $393 million from a year ago, mainly because it paid out higher claims more frequently – a trend the company also referred to during the first quarter.

Berkshire’s Geico seemed buffeted by the same economic and car-industry trends that hit Allstate Corp. and American International Group Inc. during the second quarter: a rising number of claims and a higher cost per claim. Industry executives and analysts cite an improving economy and lower gas prices, and more-complicated cars, loaded with electronics.

Berkshire Hathaway Reinsurance Group, another of Berkshire’s large insurance operations that insures against large disasters, saw an underwriting loss of $411 million stemming from a storm loss in Australia as well as foreign currency transaction losses. Berkshire has said it faces increasing competition in the market for property and casualty coverage.

Investment income, which includes dividends and interest on investments made by Berkshire’s insurance operations, fell by 11% from 2014 due to declines in dividends earned from Berkshire’s stock holdings and interest on other investments.

Revenue at its BNSF railroad fell 6% to $5.4 billion partly because freight volumes fell as the demand for moving energy products fell, but pretax earnings rose 4% to $1.5 billion as the unit improved operational performance.

Berkshire’s book value, a measure of net worth, rose 2.4% to $149,735 per Class A share for the first six months of the year. Meanwhile, Berkshire’s “float,” the money Mr. Buffett and his deputies get to invest from the company’s insurance operations, rose to about $85.1 billion as of June 30.

Berkshire’s net profit was $4.01 billion, or $2,442 Class A share, compared with $6.4 billion, or $3,889 a share, a year earlier.

Written by Anupreeta Das of The Wall Street Journal

(Source: The Wall Street Journal)

10 Small and Unlikely Businesses Created by Big Tech Execs Before They Got Famous

Provided by Business Insider
Provided by Business Insider

Entrepreneurship comes with both high ambitions and risks. After all, 9 out of 10 of them fail.

Before these big name self-starters created a household name for their companies, many of them faced failure with their first startups.

Some were young and wanted to make some extra money on the side. Some knew when it was time to say goodbye and move on to their next dream project.

And, in many ways, these early bumps should be viewed in a positive light. After all, if Google co-founder Larry Page had continued to pursue his saxophone music career, your current home page might not exist.

These are the strange successes and bittersweet failures of some of the biggest names in tech.

1. Elon Musk attempted to convert a frat house into an underground nightclub.

© Provided by Business Insider

When the magnate of Tesla Motors and SpaceX wasn’t studying up for his business or physics degrees, he threw ragers at a multi-bedroom apartment that he managed to turn into a nightclub.

Musk, along with his friend Adeo Ressi, did this to earn extra cash and become more acquainted with the University of Pennsylvania scene as they were transfer students. They even hired bouncers and people to be in charge of clean-up.

On Sundays, Musk would wind down and watch The Simpsons on his run-down TV.

2. College-aged Larry Page of Google created business plans for a company that made software music synthesizers.

© Provided by Business Insider

While growing up, Page loved music and would play the saxophone and study music composition. When the Google founder was still attending the University of Michigan, he created a business plan for a company that would use electronic music synthesizers built from software. The difficulties he encountered with the software while trying to get it to operate in real-time irked him, however.

Page told Fortune , “It’s amazing to the extent I think that modern operating systems are terrible at being real-time. If you think about it from a music point of view, if you’re a percussionist, you hit something, it’s got to happen in milliseconds, fractions of a second.”

Page’s obsession for speed was a key element of the Google platform, as he pushed for his engineers to cut down every millisecond of lag in search results.

3. Before Travis Kalanick created Uber, his search engine was sued by the Motion Picture Association of America.

© Provided by Business Insider

Kalanick, along with five other students from UCLA’s computer science department, founded a multimedia search engine called Scour in 1997. It was successful at first, even attracting the investment of former Disney president Michael Ovitz.

To compete with Napster, a former peer to peer music service, Kalanick and his friends jump started a company called Scour Exchange. The file exchange service allowed users to trade videos and video files, rustling the MPAA’s feathers, which then alleged copyright infringement.

Scour died soon after because it failed to raise enough funds to continue its operations. The whopping $250 billion lawsuit charge forced Kalanick and his buddies to file for bankruptcy .

4. Elizabeth Holmes, the CEO of Theranos, sold C++ packages to Chinese universities.

© Provided by Business Insider

Homes was concerned with how Chinese universities often lacked information technology, as she lived in China at the time due to her father’s frequent business trips.

So before the youngest self-made female billionaire even flew over to California to start her Stanford education, Holmes sold C++ compilers to Chinese universities . At this point, Holmes had already been dipping her toes with a variety of programming languages, and wanted to amp up the tech used by Chinese education.

Thanks to her fluency in Mandarin, Holmes worked in a lab at the Genome Institute in Singapore. From there, she was inspired to draft up a patent that would eventually lead to Theranos, a health tech company that develops solutions for laboratory diagnostic tests that are mainly blood-related.

5. Walt Disney and his brother created an animation series that was forced to shut down.

© Bettmann/CORBIS

In 1923, the Disney brothers created the “Alice Comedies,” which were spin-offs of the Alice in Wonderland story, in their uncle’s garage.

Disney and his brother, Roy, made their first films for four years, and then created a new character called Oswald the Lucky Rabbit. After making 26 episodes, the Disney brothers found out that their distributor had gone behind their backs and asked animators to make the Oswald cartoon without consulting Disney.

Upon reviewing his contract, Disney realized that the distributor owned the rights to the cartoon — a painful lesson for the entrepreneur. But he had the last laugh— Disney World is currently valued at $35 billion.

6. Mark Zuckerberg created the notorious Facemash, the pre-Tinder app of today

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The Facebook founder ran the site by putting photos of two people of the same gender side by side. The user would then vote on the “hotter” person and then Facemash would present a final ranking . In just one day, 450 people had already visited the site and voted on people’s faces over 22,000 times.

Immediately, criticism ensued. The Harvard student newspaper deemed his site improper, and Zuckerberg was accused of breaching security, violating copyrights, and violating individual privacy by Harvard’s administrative board.

Zuckerberg took the website down, admitting that “issues about violating people’s privacy don’t seem to be surmountable. I’m not willing to risk insulting anyone.”

On a less controversial note, high-school Zuckerberg built the Synapse Media Player, a machine that adapted to a music-lover’s listening habits, which was ranked 3 stars out of 5 in PC Magazine. It generated songs in a playlist according to someone’s taste, much like the discovery function of Spotify.

7. LinkedIn’s Reid Hoffman founded an ‘overeager’ dating site

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Before LinkedIn, Hoffman tried his hand at building another type of networking site in 1997: the “overeager” dating site called SocialNet. The ambitious concept included professional networking along with finding you a date, someone to room with, or even tennis partners.

In a previous interview with Business Insider, Hoffman talked about the learning experience of it all, saying, “if you’re not embarrassed by your version one release, you released it too late”.

Even though Hoffman creates products which connect people, he was a self-described “loner” in high school with three to five friends in his circle.

He left SocialNet after tensions in the strategy board and then joined the PayPal Mafia, the alumni of the online payment service who started their own tech companies. This was when Hoffman’s passion project became LinkedIn. SocialNet no longer exists.

8. Alexis Ohanian and Steve Huffman of Reddit made a geeky company called “bread pig.”

Alexis Ohanian.

© Andy Kropa/Invision/AP Alexis Ohanian

Right after he graduated from the University of Virginia, Alexis Ohanian and Steve Huffman co-founded the online news forum Reddit.

Their other lesser-known project was “born at an unknown point in 2005” before reddit exploded online. While Huffman and Ohanian searched for a domain for Reddit, they came across breadpig.com and impulsively purchased it. Huffman envisioned the flying animal with two loaves of bread for wings, and the mythical beast became the beloved symbol of their business.

Ohanian and Huffman waited for breadpig.com to stop being treated as a spam page for pig supplies and bread makers for a year.

Breadpig “sidekick-for-hire” continues to sell an assortment of eccentric objects, and is still up and running, with Ohanian as the Founder and Chief Swine Defender.

9. Richard Branson quit school when he was 16 to start a magazine that was doomed for failure.

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Before Branson founded the multinational VC conglomerate that is the Virgin Group, he tried to start a magazine simply called “Student”. Branson hoped that the pages would be filled with opinions of activists and inspire young people everywhere.

He snagged some interviews with big names like French philosopher Jean-Paul Sartre and poet Robert Graves, but the magazine wasn’t profitable.

Branson went along with a passing idea to mail records to people at discounted prices. He used Student to advertise for his new business, and then renovated a shoe shop to a discount record store. Everyone Branson hired to work at his store was inexperienced — a “virgin at business” — hence the title which eventually spawned a $5 billion enterprise.

10. Investor and philanthropist Warren Buffet used to place pinball machines in barber shops.

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While other children were frolicking at a playground, Buffett was already a young entrepreneur — he sold golf balls, stamps, and delivered newspapers. He put $1,200 from this business towards 40 acres of farmland.

Buffett then shopped around for pinball machines with his friend Donald Danly during his high school years, buying one for $25 and placing it in a nearby barber’s shop. The profit-minded teen invested in more machines and eventually owned them in three different locations. The young duo made $50 a week.

He eventually sold his business, called Wilson Coin Operated Machines, to a war veteran for $1200.

Written by Celena Chong of Business Insider

(Source: Business Insider)