Book Review: ‘The Snowball: Warren Buffett and the Business of Life – Alice Shroeder’
The Snowball: Warren Buffett and the Business of Life – Alice Shroeder
Alice Shroeder is an American author and former insurance analyst. She is a business major from the University of Texas, Austin and has worked across Ernst & Young, Paine Webber, FASB, Morgan Stanley and Bloomberg.
Warren Buffett is one of the world’s most influential and richest people (#3 on Forbes 2011), and widely considered the most successful investor in the world. Known as ‘the Oracle of Omaha’, Buffett is the Chairman and CEO of Berkshire Hathaway, but is noted for his extreme frugality inspite of having immense wealth. He is also a notable philanthropist having pledged to give away 99% of his fortune, and coaxing other billionaires to sign the ‘Giving Pledge’.
Reviewing a biography is a task cut out in itself. It can get even more complicated when the subject of the biography is someone whom you truly admire, almost worship – because it is difficult to restrict your remarks to the book, and not extend to its subject. Perhaps, Alice faced a similarly daunting task in profiling a man of Buffett’s stature – to bring out the man behind the ‘Oracle’. To add to her difficulty, Buffett has been an essentially private man, although he speaks frequently about his investing philosophy, his views on business and most recently, on fiscal and economic policy of the United States.
Yet, it is in this challenge that the book surpasses its expectations, when we are given insight into the human side of a man who has been anointed God by the virtue of his business and investing success and whose life has been defined by it, while others who have tried to make a similar attempt on contemporary tycoons (for instance, David Carey and John E. Morris: ‘The King of Capital: The Remarkable Rise, Fall and Rise Again of Steve Schwarzman and Blackstone) have miserably fallen short –
“….’Wanting a change’ and ‘not totally leaving’ were the kind of ambiguous Buffettesque statements they both tended to make to avoid feeling as though they were disappointing anyone….”
It does help that Alice spent almost 5 years writing this book, interviewing several people including Buffett for thousands of hours. She talks in-depth about Warren’s complex relationship with his wife, Susie, including how Susie ‘wanting a change’ had moved out of Omaha, but remained a constant supporter, friend and a public wife, and how this effected Buffett’s own outlook –
“….But Warren had not previously thought of himself and Susie as living virtually separate lives. In his mind, Susie lived for him. She certainly acted as if she did when they were together. So it was a hard concept to grasp, that Susie wanted her own life and would not be there for him all the time…”
and how he finally ‘stood up’ to take care of his dying (albeit separated) wife, when she was undergoing radical radiation treatments –
“The man who had always been on the receiving end was now learning to give. Rather than being taken care of by his wife, he was taking care of her…….”
Alice carefully broaches the tough choices that a lot of successful men face in dividing their attention between his life’s work and his family, and how their separation had divided Buffett from within –
“…..But he had been shocked into realising the truth of Susie’s insistence that sitting in a room making money was no way to spend a life……….While he was friendly enough with his kids, he hadn’t really gotten to know them. …….At age forty-seven, he was just beginning to take stock of his losses.”
The book is not just about his personal life, it discusses in depth his various business feats and the highlights some of his most challenging moments as an investor and businessman. When he saved Saloman Brothers as a white knight in a hostile takeover deal, he got more than a handful in the process, when instances of fraud and the freewheeling culture of traders threatened to bring the once-stored bank to the ground. For Buffett, the investment was going against his own philosophy, having written extensively about ‘Wall Street as a gang of con men, sharpies and cheats’……
….yet his wisdom would be questioned during the 1999-2000 Internet stock bubble, when the new economy Internet stocks shot to the stratosphere while old businesses’ including Buffett’s Berkshire’s prices languished. It is at this time that he responded true to his nature – by sticking to his ‘old fashioned’ school of thought of ‘value investing’, which he learnt from his mentor, Ben Graham at Columbia (He went to Columbia after having been rejected by Harvard Business School and found a teacher whose thoughts would become the hallmark of his investment philosophy) –
“His life was fascinating, his business accomplishments important, the principles through which he had succeeded worth of study……His kaleidoscope personality perpetually revealed new facets, yet remained faithful at its core to his Inner Scorecard. The one thing that he would always be the best at was being himself.”
In those years of trial by fire, he did not seek to defend himself, or duel his philosophy in the press, despite being ‘so sensitive to public criticism that he ran from anything that would expose him to it’. Only in a private conference at Sun Valley, as a warning and method of teaching, he said that the market ‘would fall far short of investors’ hopes for two decades’-
“…But to show such restraint, then commit himself to such a forecast in the face of years of criticism and ridicule, took a different kind of courage, making the Internet bubble one of the greatest personal challenges of his career.”
The book places special emphasis on Warren’s fascination with money as a young boy and showcases how he was very driven and focused from the very beginning to accumulate great wealth. Buffett also comes across as a man who is greatly interested in teaching, and being a well-known personality helps him in that respect –
“I packed my little snowball very early, and if I had packed it ten years later, it would have been way different than where it stands on the hill right now. So I recommended to students that if you start out a little ahead of the game……And credit cards really get you behind the game.”
In fact, the book’s title, ‘The Snowball’ is based on Buffett’s philosophy of starting out early and ‘compounding’ the gains, like a snowball rolled through the whole world of fresh, wet snow.
Yet, the book’s ‘coup de grace’ moment is its final chapter: a time when life comes a full circle for Warren Buffett, a man who as a young boy had not let his family touch the chifforobe where he kept his painstakingly hoarded coins, who admonished his wife for having gotten a rotten deal on a magazine subscription to a man who evolves to write away checks worth billions of dollars to other peoples’ charities, including the ~$37 billion gift to one of his closest friend’s effort, the Bill and Melinda Gates Foundation –
“…He was giving away all his money without leaving a trace of himself behind……he would establish no Warren Buffett Foundation, no Buffett hospital wing, no college or university endowment or building with his name on it. To donate the money …without controlling how it would be spent ….upended every convention of giving.”
When he talks about his work, he is like ‘a teenager bragging about his first romance rather than a seventy-two year old financier.’ and yet, he is the same man who says, “Whenever my version is different from somebody else’s, Alice, use the less flattering version.” displaying an unheard of trait of humility in the financial community.
This is a story told of a remarkable man, and the deep layers of thoughts and experiences that make the character of an apparently simple guy from small-town America who cracks complex billion-dollar deals over the phone with the likes of Ivy League bred Goldman Sachs bankers, relishes talking about the accounting nuances of ‘finite risk insurance’, travels in a Gulfstream IV corporate jet, but at the end of the day, prefers McDonalds hamburgers and fries over a 7 course Michelin star chef cooked meal and carries his own bags from his self-driven car to his plane!
(Released Sep 29,2008, Rs 995 on Flipkart, Bantam Books)
If you’ve read the book and would like to discuss it, I can be reached at @aniket_nikumb via twitter or firstname.lastname@example.org via email