The Snowball: Warren Buffett and the Business of Life
Jan 19th, 2009 by Carlos
So I finally read the “new” biography on Warren Buffett—The Snowball—all 838 pages of it. Why would I wade through that many pages to read about some guy that picks stocks? Well, because he’s probably the greatest investor any of us has ever seen.
That and another book: Buffett: The Making of an American Capitalist. That book was my “intro” to Buffett—it’s a fantastic book that gives you a great idea of what the man is like and how his mind works.
But if Buffett is the appetizer, The Snowball is the main course. Not only because it’s the first authorized biography on the Oracle of Omaha, but because it goes into great detail on all of the topics that the first book touched on.
A LOT of detail. Like all the crazy, Tom Sawyer schemes Buffett and his friends had to make money when they were young. It’s a fun read, though there were topics that I thought were just “kind of interesting,” and the details on those kind of slowed the read down a little.
I already gave a preview of the book and discussed Buffett’s opinion on the estate tax (or death tax).
So instead of going chapter for chapter, which would take a few thousand words, I’m just going to highlight some of the most interesting parts of the book. As Ramit would say, “things you would talk about at a cocktail party.”
So if you can’t make your way through this tome of all things Buffett, here are some good nuggets, as per my opinion:
- After staying away from foreign stocks for pretty much his whole life, Buffett discovers Korean stocks in 2004. Since they have a totally different accounting system over there, he had to teach himself that new system. Which he did. And then he mastered it and started scooping up cheap companies.
- When he announced he would be leaving all of his money without leaving behind a Warren Buffett foundation or a hospital/university wing named after him, it not only made history, but he set a precedent for other philanthropists about how to give their money away.
- He was famously anti-computers and anti-Internet because he couldn’t understand them. Yet he still continued to beat the market without having minute-by-minute information about the market. Why? Because Buffett invests for the long term, he doesn’t care what the market does from one day to the next, so he doesn’t need to know. But his obsession for bridge eventually got him plugged into the net: he would play online for hours at a time.
- Big pimpin’. I know, it’s weird, but Warren Buffett is/was not a traditional one-woman man. He’s got his quirks, and one of them is that he needs more than one woman in his life. The way he grew up and the way his mother treated her kids may have had something to do with it, but the end result is that he lived a life of a rapper for a little while there. Except without the excessive spending and the drugs. And the rap—there was no rap.
- The Long Term Capital Management debacle—Buffett wanted to make that deal. It’s just that no one could get a hold of him because he was trying to use a satellite phone in Yellowstone park that wasn’t working properly. So he missed the deal.
- Buffett is NOT a fan of stock options. He wants to reward those that get good results, but boards are notorious for rewarding the most mediocre performances. He also went on a crusade to change the way stock options were accounted for—they didn’t “cost” anything right away, which made the books look that much better. This cost him some relationships, since all his friends were filthy rich, and this hit them right in the gut. But he still stuck to his guns.
- In one sentence, the essence of Buffett’s success: “Buffett’s real brilliance was not just to spot bargains (though he certainly had done plenty of that) but in having created, over many years, a company that made bargains out of fairly priced businesses.”
- Check out what his buddy Charlie Munger said in 2003: “I’ll be amazed if we don’t have some kind of significant blowup in the next five to ten years.” Boom. He called it.
- He’s a man of routine: there’s a part in there where they explain how he eats the same lunch every day, day in and day out. When I read that part I was like “Me too!” Sad, but true.
- It’s happened many times over the course of his life: people start to question his ability to make money because “times have changed” or because “Buffett hasn’t adapted.” But every time he’s come through and his reputation has grown more and more because of it.
- He was pretty much set to retire way before he was an investing rock star, but he couldn’t stay away. An obsessive person like this? No way he could just walk away.
- The Ovarian Lottery: VERY big deal to Warren. He repeats this a lot: he was incredibly lucky to be born in the USA with the skill-set he was born with. When he was in China he was watching these men pulling tugboats and he realized that any one of them might be “smarter” or “savvier” than him, but it wouldn’t matter because they were born in a poor town with no prospects. Buffett feels incredible lucky and he hates it when people claim that they “did it on their own.” Luck is always a factor, right from the moment we come out of the womb.
- His advice to college students: “The purpose of life is to be loved by as many people as possible among those you want to have love you.” Pretty deep from a man considered to have the emotions of a robot. A robot with no emotions, that is.
- On corporate misbehaving: Buffett feels strongly about doing “the right thing” and not cheating anyone, to the point that it almost got him in trouble with a couple deals he made because the SEC couldn’t understand why he overpaid for certain deals. He claimed it was “the right thing to do,” and they wouldn’t believe that. Anyway, his philosophy on the “right” thing is to make decisions as if they were going to be plastered all over the front page the next day—everyone will find out about them. If it wouldn’t bother you to have your moves published like that, then go for it. I like that…
If you have the slightest bit of interest in knowing more about Warren Buffett, you have two choices: you read Buffett: The Making of an American Capitalist or you read The Snowball. If you want the Cliff Notes version, read the former, if you want every little detail and more of the recent stuff he’s done, go for the latter. Either way, you won’t be disappointed.
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It seems like buffet has a new book every year. Between him and trump I’d say the real secret to success is to become a media favorite and then do books.
Needless to say though, this is going on my reading list.
Here’s the thing about this book though: it’s the first one that he’s actually actively cooperated with. That’s what makes it unique—I should’ve stressed that a bit more. This means more access and more direct comments from him: there’s a TON of stuff in italics where it’s just him talking and talking and talking on whatever Schroeder is covering at any given time.
But yeah, I know what you mean about all the books. Trump especially.
If Buffett truly believes in wealth by merit, I fail to see how the government robbing someone of a piece of their inheritance will work towards that aim. I wish that I had been born into a wealthy family just as much as the next guy, but I don’t think we need legislation to try and destroy “dynasties.” Buffett does operate from the faulty assumption that the more money the government is able to acquire through taxes, the better off we’ll all be. That might be true if politicians weren’t “working just hard enough to not get fired” so to speak. Bridges to Nowhere which cost hundred of millions of dollars are an illustration to us all as to what the legislators do with our money when they feel like they have a surplus. Whereas, if that money wasn’t awarded to the government through taxes, individuals would have it to spend as they wished, re-investing that money into their communities. It’s hard enough to even get your hands on an inheritance nowadays, when everyone seems to have an Anna Nicole Smith in the family who thinks they should have gotten a bigger piece of the estate pie and are willing to drag their relatives through numerous court battles. But on top of that to have to put up with the government taking a share of assets that have already been taxed is just ludicrous.
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I got this book initially to just skim through and take some quick pointers. I read a few pages and then kept going backwards to learn what had already happened. I finally gave up on the skimming and started reading from page 1. This is a really good book. It is well written and the author takes you back in time to Warren’s youth and early adulthood. It continues with his early partnership and then of course Berkshire Hathaway. Intertwined with his business stories are the personal stories. They make you laugh, think and learn. Just his eating and diet alone is a funny story throughout the book.
I learned more in this book than I thought I would and it was a great read (although not a quick read.)
Shopping Queen, I totally agree about the length—it took me a long while to get through it. The stuff about his diet was even funnier to me because it turns out him and I are pretty similar in that respect. Hopefully that makes me more of a genius than an eccentric….
I am on my second read of “The Snowball”. It is a great book. Great in the sense that I learned much about the fundamental principles of economics and the market. Not the conventional wisdom, the crap, which everyone repeats; but the real inner workings of the mechanism itself. There are some good life lessons too, if you’re receptive to them.
Thank you, Warren.
P.S.
a. Buffett was not ‘pimp’. Re-read the book, you weren’t paying attention to the “how’s” and “why’s”.
b. This is not a pulpit for us to cry about perceived injustices, and how ‘the man is holding us down’. Pay a therapist, or keep a journal; and try 4 oz of Scotch per hour, over ice, then repeat.
Rick
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