Warren Buffett resigned on Friday from chairing Berkshire Hathaway, the giant holding company that he has controlled since 1965.

The so-called ‘Sage of Omaha’ had already stepped down as chief executive, passing that job to Greg Abel, a long-standing director, at the end of last year.

Abel will carry on running the company, while Warren’s son, Howard Buffett, takes the chair.

In a letter, he told shareholders: ‘Greg runs the company; Howard will guard its culture and values – both worth more than anything on our balance sheet.’

Since Buffett senior is arguably the world’s greatest living investor – he’s 96 – and since these are uncertain times for global asset markets, it’s worth looking at how over more than 60 years he turned a struggling textile company into a conglomerate valued at $1.1trillion (£750billion). 

It’s the greatest ‘get-rich-slow’ story of all and he’s long liked to wrap up his investment messages in folksy aphorisms, such as: ‘It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.’ 

And: ‘Be fearful when others are greedy, and be greedy when others are fearful.’ Maybe most famously of all: ‘Only when the tide goes out do you discover who’s been swimming naked.’

That goes down well with the loyal band of shareholders who have stuck with him for decades.

He has turned tens of thousands, maybe hundreds of thousands, of them into millionaires.

But if you step back from the clever quotes and look at what he has done, it’s straightforward. There are two parts to the business. One is the investment portfolio of quoted companies, which attracts most of the attention.

And there is a separate group of companies that it owns outright, mostly in insurance and energy, but also a freight railway. These provide a steady stream of profits for the combined enterprise.

For the investment portfolio, the rules are, first, only buy businesses you understand – where you can see how the company makes its money and where there will be continuing demand for its goods and services.

Second, identify how easy it might be for a competitor to challenge it. He uses the idea that there should be a ‘moat’ around its business, which could be a brand name, or an enduring cost or technical advantage. 

His three biggest public-equity holdings – Apple, American Express and Coca-Cola – all exemplify that.

Third, there obviously has to be competent management.

Finally, you have to buy in at a price that gives a margin of safety: It has to be a fair price, not one that requires everything to go right to justify it.

Then, beyond investment strategy, there are two other factors. One is time, the other timing.

Berkshire Hathaway does not pay dividends, or rather it did so once, back in 1967. All earnings are funnelled back into the business, or occasionally used to buy back some shares, thereby increasing their value.

This gets the maths of compound interest working in the company’s favour, and over a very long period vastly increases the value of the stock. 

As for timing – the tide going out – Buffett has always been prepared to play the cycle. He has sought to build up cash in times when there doesn’t seem to be value and wait until prices come down.

Of late Buffett has been breaking the golden rule of wealth management, to stay invested as it’s too difficult to time the cycle, so not to hold more than 5 or 10 per cent in cash. 

Well, Berkshire Hathaway has $365billion in cash or Treasury bills – short-term US government debt. That works out at a third of its total market value.

To have a third of your wealth in cash and bonds says something about Buffett’s view of the tide.

He is, so to speak, being fearful when others are being greedy.

Unsurprisingly, he has been much criticised for building up this cash pile, for his investors have missed out on what is still a huge bull market. 

But now, with the global interest rate cycle turning upwards, maybe the tide is turning. If so, we will soon see who has been swimming naked.