“The Snowball” is an enjoyable peregrination through the life and times of Warren Buffett, the man whom Schroeder dubbed the “all American, Pepsi quaffing, investing fundamentalist, one who plied his trade in glorious solitude, far from the Lucifer’s of Wall Street”. Buffett was a class apart from the greedy Wall Street crew. A principled man, who stuck to his rules for life. He constantly espoused the value of what his father had called the “inner scorecard” and always stayed within his “circle of competence”. Schroeder’s 2008 biography mainly focused on how Buffett made his fortune, his interest in politics and was a behind the scenes look at the greatest investor the world has ever seen although, doubtless, he would be too humble to accept that description of himself. Having initially set out to emulate his mentor Ben Graham, author of the excellent “The Intelligent Investor”, Buffett was a natural right from the get-go:
- Aged 12: Bought his first stock. 12. Despite making a profit on it, he was disappointed that he did not sell at a later date for a higher value.
- Aged 14: Filled out his first year-end tax return. He had saved $1,000 at this point from doing his local paper run. In the run-up to the 2016 presidential election campaign, he released every tax return he had ever completed when Trump indirectly accused him of lying about them.
- Aged 15: Buys a farm and has acquired $2,000.
- Aged 16: $5,000 saved. This is equivalent to approx. $55k by 2016 numbers.
- Aged 21: He has almost $19k saved.
- Aged 26: $126k saved and considered retiring.
- Aged 34: $1.8m.
- Aged 39: $24m.
- Aged 47: $77m.
- Aged 55: Became a billionaire.
- Aged 63: $8.5 billion.
- Aged 78: Became the richest man in the world.
Buffett’s ethics were critical to understanding him. He warned about the dangers of selling equities as far back as 1982 when he wrote to Congress to highlight how risky they were. No regulation or action was taken.
He foresaw the 2007 financial crisis and spoke to numerous senators about the risks the markets were taking by not regulating the sales of derivatives. Buffett referred to them as “financial weapons of mass destruction”. Again, nobody heeded his advice.
Schroeder detailed Buffett’s legendary frugality. He used to purchase second-hand magazines just before they went out of date in order to save money on subscription fees! When he began turning around the corrupt Salomon company, he set about changing the culture, primarily through leading by example. Buffett replaced the exorbitant culture of stretched limousines and expensive restaurants and replaced it with one he was more accustomed to – coca cola and hamburgers for dinner and taking the subway to work.
Buffett’s morality was displayed when he told his traders, “lose money for the firm and I will be understanding. Lose a shred of reputation for the firm and I will be ruthless”.
His wife Susie did lots of important charity work and always pushed him to be more philanthropic. However, Buffett realised that if he kept increasing his snowball, he would be able to bequeath a much larger fortune and help more people. His 2006 announcement that he would give most of his fortune to the Bill And Melinda Gates Foundation was wonderful news for the world.
His work ethic was inspirational, with 80% of his working day spent reading. Newspapers, science journals, novels, sales information. He would toil in libraries to learn as much as he could about a certain company and ensured that he had more information, more of an edge, before making an investment. He constantly tried to better himself.
Buffett’s zeal for doing the right thing in life and in business meant that he took a deep interest in politics. Not that he got into that sphere because of his burgeoning wealth. His father Howard was a Republican Senator who firmly believed that communism was the root of all evil and Warren was captain of the Young Republicans. So Republican was his father, that Warren was afraid to tell him that when he switched allegiances and became a Democrat. Buffett avoided conflict at any cost. The Civil Rights movement made Warren’s mind up as he could not abide by the racism that the Republicans had done little to address. He shunned Reaganomics because it was based on borrowing and increasing debt, anathema to Buffett.
He was a believer in a progressive tax system where the highest earners paid more, warning of the dangers of neoliberalist economics. In 2001, he went to the Hill and spoke to 38 senators about what he saw as the increasing economic policy of “government by the wealthy for the wealthy”. He recognised plainly that capitalism did not work for all and tried to offset its effect as best he could.
Buffett was spurned by Harvard Business School because they did not see him as a “leader”. Buffett duly went and graduated from Columbia and, typically, the connections that he made there became more valuable in the long term.
He made it his mission to learn from his lecturer and mentor Ben Graham, as considered him the best in the business. He was so determined to work for him that he offered to do so unpaid. He was turned down multiple times before Graham finally relented. Buffett’s perseverance was a credit to his character. Similarly, his first wife Susie did not see him as suitable at first. Intuitively knowing how brilliant she was, he wooed her until they became a couple.
Some sage Buffett sayings:
- “Quickened pulses and self-delusion are the major causes of mistakes”.
- Have a “circle of competence”. Do not try to be an expert in more than three areas. Master them and success will come.
- Save your credit. It says a lot about you.
- “Be content with moderate gains” when doing business.
- “Spend less than you make and don’t get into debt”.
- Learn to float upwards with intelligent people to better yourself. “It just works this way” he advised.
- Buffett and Gates both said their number one rule for being successful was “focus”.
- Look after yourself mentally and physically. Buffett gave a great analogy: you are 16 and must choose one car for the rest of your life. You don’t know which one it will be but you can never get a new one. How would you look after it? With great care. Same with us as people. So many do not look after ourselves though.
- Always have two income streams.
Warren Buffett is a hardworking, intelligent, meticulous, moral, compassionate and loyal person and not someone who “spent his whole life at the withdrawal bank”. Wrote Schroeder, “he’s the master of the win-win but never does anything that isn’t win for him”. When he released those tax returns, it was impossible not to contrast his integrity and candour with the dishonesty of the current President. Reading about his life made me reevaluate my own. Am I being smart with my money? What can I do better? Should I read more widely? Like all truly great people, there is a lot to learn…