Day 345: Thoughts on Alice Schroeder’s Buffett biography

On Friday I finished the Buffett biography “The Snowball: Warren Buffett and the Business of Life” by Alice Schroeder. In all, it took me just over two months, at the pace of roughly 100 pages a week. As I alluded to before, this may not be fastest pace, but it worked for me!

Even more important than finishing the book is the fact that I truly enjoyed reading it. Last year I got a bit burnt out on reading books just to finish them. Fortunately, this was not an issue at all with “The Snowball.” I found the book to be perceptive, thorough, and well-written with a well-measured objectivity that didn’t overly aggrandize “The Oracle of Omaha.” I also thought Schroeder did a great job of creating a portrait not just of Buffett’s business endeavors, but a wholistic view of his life, including his relationships with family, friends, and business partners. For example, much time was spent discussing his relationship with his wife, Susie, as well as her life and choices, and their children, each unique in their own ways (and strikingly different than their financial unicorn of a father).

I also enjoyed how the biography discussed and paralleled many of the economic developments of the last seventy years. After all, Buffett has been in the public eye for about fifty years. He played a major role in many big economic players, including the Washington Post, Solomon Brothers, and Coca Cola to name just a few. His prosperity corresponds with the overall prosperity of the United States during the same time. In many ways, he epitomizes that prosperity (FYI, I also felt this way about the McDonald’s biography I read a few years ago)

To keep things simple, I will just share a few moments from the book that meant something to me:

1.Warren Buffett’s Inner Scorecard. This statement summarizes Buffett’s personal philosophy, which is “think for yourself:”

The big question about how people behave is whether they’ve got an inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard. I always pose it this way. I say: ‘Lookit. Would you rather be the world’s greatest lover, but have everyone think you’re the world’s worst lover? Or would you rather be the world’s worst lover but have everyone think you’re the world’s greatest lover?’ Now tha’s an interesting question.

Here’s another one. If the world couldn’t see your results, would rather be thought of as the world’s greatest investor but in reality have the world’s worst record? Or be thought of as the world’s worst investor when you were actually the best?”

“The Snowball,” p33

2. An eleven-year old Buffett determines to become a millionaire. Schroeder describes how as a boy, Buffett could see the immense magic of compounding... and determined to start building his snowball. I find this delightfully awe-inspiring:

This concept–compounding–struck him as critically important… If he started with a thousand dollars and grew it at ten percent a year:

In five years, $1,000 became more than $1,600

In ten years, it became almost $2,600.

In twenty-five years, it became more than $10,800.

The way that numbers exploded as they grew at a constant rate over time was how a small sum could turn into a fortune. He could picture the numbers compounding as vividly as the way a snowball grew when he rolled it across the lawn. Warren began to think about time in a different way. Compounding married the present to the future. If a dollar today was going to be worth ten some years from now, then in his mind the two were the same.

Sitting on the stoop at this friend Stu Erickson’s, Warren announced that he would be a millionaire by the time he reached age thirty-five. That was an audacious, almost silly-sounding statement for a child to make in the depressed world of 1941.”

“The Snowball,” pp64-5

3. A not-quite teenaged Buffett invests in his first stocks, for him and his sister, Doris. This passage shows not only Buffett’s nascent financial acumen, but his potential to take great care of other people’s money. Atta boy, Warren:

So when the stock finally recovered, he sold at $40, netting a $5 profit for the two of them. “That’s when I knew that he knew what he was doing,” Doris recalls. But Cities Service quickly soared to $202 a share. Warren learned…not to overly fixate on what he had paid for a stock…not to rush unthinkingly to grab a small profit. He learned these two lessons by brooding over the $492 he would have made had he been more patient. It had taken five years of work, since he was six years old, to save the $120 to buy this stock…he realized that it could take years to earn back the profit he had “lost.” He would never, never, never forget this mistake.

And there was a third lesson, which was about investing other people’s money. If he made a mistake, it might get somebody upset at him. So he didn’t want to have responsibility for anyone else’s money unless he was sure he could succeed.

“The Snowball,” p65

4. The No-Asshole Rule: Warren Buffett and Charlie Munger (his long-time business partner) are incredible businessmen, but they are not assholes. After reading this, I knew I liked them even more :

[Charlie Munger discussing a business deal that he and Warren Buffett conducted with a company called Source Capital] “We bought it at a discount from its asset value,” says Munger. ” And there were two assholes who were the sellers. We had a no-asshole rule very early. Our basic rule has always been that we won’t deal with assholes…” … Munger went on the board of Source Capital with a new set of talented managers who were not assholes.”

“The Snowball,” pp388-9

5. Buffett’s “Twenty Punches” approach to investing. This is a great alternative way of describing buy-and-hold investing, and all the more powerful because it comes from Buffett:

[Buffett is giving a talk to college students at the University of Georgia] To the students, he explained his “Twenty Punches” approach to investing. “You’d get very rich,” he said, “if you thought of yourself as having a card with only twenty punches in a lifetime, and every financial decision used up on punch. “You’d resist the temptation to dabble. You’d make more good decisions and you’d make more big decisions.”

He ran his life on Twenty Punches, too, with as little flitting as he could arrange. Same house, same wife for fifty years, same Astrid* on Farnam Street; no desire to buy and sell real estate, art, cars, tokens of wealth; no jumping from city to city or career to career. Some of that was easy for a man so certain of himself; some of it came with being a creature of habit; some of it was a natural tendency to let things compound; and some of it was the wisdom of inertia.

“The Snowball,” pp708-9

There were so many things to enjoy and admire about this book. I think most of all, I felt included. I got a first-hand peak into a magical world of business growth and success that became Berkshire Hathaway. Not only that, I got a personal look at the family members and friends and business partners that made up that community (of which Buffett was but the business leader, but not the only person).

In the end, their humanity shines through.

*Astrid Menks is first described in Schroeder’s book as Buffett’s “mistress,” though in 2006 they married, several years after Buffett’s first wife, Susie, passed away. In fact, Susie introduced Warren to Astrid, and asked Astrid to personally take care of Buffett after Susie moved out. For more on this fascinating and unorthodox relationship scenario, read the book šŸ˜‰

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