Warren Buffett Reveals the Ugly Truth Behind Gambling

Gambling may have shaped Buffett's drive to get rich in the stock market.

Feb 22, 2014 at 1:34PM


Source: Aaron Friedman.

Some say the stock market and investing are just like gambling, but the best investor in the world, Warren Buffett, doesn't think so.

Over the years, he's shared some very interesting quotes on gambling and investing, equating gambling to a simple "ignorance tax."

Here's some of his best rants and one-liners alike:

1. Gambling is "socially revolting."
At the 2007 Berkshire Hathaway shareholders meeting, Warren Buffett delivered his most critical opinion of casinos and gambling companies, stating:

"I'm not a prude about it, but to quite an extent, gambling is a tax on ignorance. You just put it in and guys like me don't pay the taxes -- it relieves taxes on those who don't gamble. I find it socially revolting when a government preys on its citizens rather than serving them. A government shouldn't make it easy for people to take their social security checks and [waste them pulling] a handle."

His position is simple: Gambling creates tax revenue, allowing governments to collect on the poor choices of others. And unlike other taxes, these taxes are borne by very few people -- those who choose to gamble. Countless studies reveal it is the lowest-income households that spend the greatest percentage of their income in casinos and lotteries, people who can least afford to lose money.

2. Teaching his kids a lesson
Buffett knows gambling is a zero-sum game, and profits -- for the casino, gambler, or wages for the worker -- only come from gamblers who lose money.

To teach his children a lesson, Buffett had a unique idea. He set up a casino in his own home.

I bought a slot machine a long time ago and put it on the 3rd floor of my house. I could then give my children any allowance they wanted, as long as it was in dimes, and I'd have it all back by nightfall. I wanted to teach them a good lesson. My slot machine had a terrible payout ratio, by the way.

3. When he knew he could get rich
Gambling taught Buffett a lesson -- getting rich wasn't as hard as it might seem to be. In a speech to MBA students, he revealed one event that changed his perspective forever:

On my honeymoon I traveled out west. When I visited the casino and saw all these smart well-dressed people participating in a game with the odds against them, it was then that I realized I won't have a problem getting rich!

This may have been a defining moment for Buffett. At the time, he was picking his own stocks, playing "stupid" by buying the cheapest possible companies he could buy. He'd search for companies selling for less than three times their annual earnings and special situations where he could acquire a company for less than the cash it had on hand. He wanted no-brainer investments that would make him rich.


Meanwhile, others were placing money on bets guaranteed to lose. These weren't dumb people -- they had money to blow in Las Vegas, after all -- but they weren't playing to win. They were playing games of chance where they were almost guaranteed to lose.

If smart people spent their time gambling, a smart, young Buffett could very easily get rich spending his time in the stock market. 

Let Buffett help you get rich
Warren Buffett didn't make his billions through gambling, but investing! And he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Jordan Wathen has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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