January 22, 2021

Gen Z Conservative

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the snowball: warren buffett and the business of life

Review of “The Snowball: Warren Buffett and the Business of Life” by Alice Schroeder

Introduction

Warren Buffet is one of the most famous businessmen and investors in America. Maybe Jeff Bezos is better known. Bill Gates also could be. But, other than those two, Warren Buffet is one of the richest men, most successful businessmen, and most successful investor in the world and is, as a result, one of the images that comes to mind when you think of corporate America or investing.

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The Snowball: Warren Buffett and the Business of Life is, in part, about why that is. Schroeder covers Buffett’s many, many business ventures, his investment strategy, and what made him so successful and wealthy. But The Snowball is about more than that. It’s also about the man behind all those legends: the humble, sloppily dressed, famously frugal man that Warren Buffett actually is. More than that, it’s his life story told in full and why he is the way he is.

In this review, I will give my summary and opinion of The Snowball by Alice Schroeder. If you are about to quit reading because you know Buffett’s political leanings, please don’t. Yes, he is to the left. But he’s not a socialist and there is more to the story than you might think. Furthermore, he is one of the most successful people in the world, so there are undeniably lessons from his life that we can all learn from.


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Summary of The Snowball: Warren Buffett and the Business of Life by Alice Schroeder

The Snowball is a long, in-depth look at the complete life of Warren Buffett. From his family’s humble history of grocery store ownership in Omaha, Nebraska to his now huge fame and influence, Schroeder writes about everything that is relevant or interesting.

Buffett’s Father and Early Life

I was shocked to learn that, in his youth, Warren Buffett was a strong Republican. His father, a stockbroker in Omaha, ran for Congress and won in the 1940s. He then became known as one of the staunchest opponents of FDR and Truman, voting against almost every Big Government bill that came across his desk and pushing for stronger defenses against the communists and less American intervention abroad and libertarian policies at home. Buffett, a young man living with his family in D.C., went along with it all and supported his father’s political aspirations.

Buffett’s Business History

But, more importantly to his life, he showed himself to be excellent at business from an early age. He worked larger and larger newspaper routes in the morning and used the money to invest in other businesses; pinball machines, selling used golfballs, owning a tenant farm out West, and other businesses helped a young Buffett build up a small fortune before he even graduated high school.

His love of business and money-making continued through college and graduate school, where he met his most important mentor, Benjamin Graham, the famed value investor and author of The Intelligent Investor. While at Columbia Business School and studying under the tutelage of Graham, Buffet developed his investing theory.

Afterward, he worked in Omaha and New York in investment roles, including a job with Benjamin Graham’s firm, before starting an investment partnership in Omaha that became the basis for Berkshire Hathaway.

That investment partnership had steady returns that were far over the market’s returns because Buffett used his impressive intelligence and laser-like focus to find the most undervalued “cigar-butt” companies in America to invest in.

As that partnership grew larger and larger, Buffett began buying businesses outright, one of the first of which was Berkshire Hathaway. Another early purchase was See’s Candies.

Despite occasional legal troubles, Berkshire grew steadily with Buffett and his business partner, Charlie Munger, at the helm. The Snowball chronicles it’s history in deep detail, but what stuck out to me was the steady progress. Despite having ever larger amounts to invest, Buffett was able to find companies to invest in that would deliver steady returns. From GEICO, a famous purchase of his, to the BNSF railroad, he was able to deliver steady investment returns by always finding investments that met his criteria.

Even more impressively, he was able to swim against the tide despite hating criticism. When technology stocks were booming in the 90s, for example, Buffett refused to invest in them because he didn’t understand them. Instead, he just kept investing in companies he understood and delivered steady returns and was, as a result, able to avoid major losses when the market crashed and the tech bubble popped. I was impressed by his ability to stick by his guns and do what he thought was right, which almost always also turned out to be the right decision. It is because of that character trait, along with his investment strategy, that Berkshire has delivered such large returns to investors for so long.

One final aspect of Buffett’s business career from The Snowball that stuck with me was the story from which the title comes:

“It is the winter of Warren’s ninth year. Outside in the yard, he and his little sister, Bertie, are playing in the snow.

Warren is catching snowflakes. One at a time at first. Then he is scooping them up by handfuls. He starts to pack them nto a ball. As the snowball grows bigger, he places it on the ground. Slowly it begins to roll. He gives it a push, and it picks up more snow. He pushes the snowball across the lawn, piling snow on snow. Soon he reaches the edge of the yard. After a moment of hesitation, he heads off, rolling the snowball through the neighborhood.

And from there, Warren continues onward, casting his eye on a whole world full of snow.

That story is probably apocryphal. Who knows if it’s true. But it does, I think, show Buffett’s business philosophy: accumulation and putting your money to work because it earns more money. In other words, Buffett is one of the few people who understood the value of compounding from an early age, and his ability to compound wealth is what made him so wealthy and successful. That’s why the title is “The Snowball.” His business empire is so large because it is like the snowball in the story; it grew constantly and that growth led to ever more growth. So, if you want to understand Berkshire Hathaway and Buffett’s success, just remember that story about the snowball.

the snowball: warren buffett and the business of life

Buffett’s Personal Life and Views

But The Snowball isn’t just about Buffett’s business career. It’s also about his personal life and how he developed from an incredibly awkward and sometimes thieving young man into a well-spoken and honorable adult.

When he was a young man in D.C., Buffett was so shy he couldn’t speak to most people. He dressed badly, was socially awkward, didn’t do well in school, and couldn’t talk to girls. Even worse, he and his friends would occasionally steal from the local department store.

But that changed as Buffett matured. Although he remained shy and awkward, he did become noted for his honesty and that reputation has stuck with him throughout his career.

Also, as he got older and learned the value of public speaking, he got to work on being able to speak well in front of others. He read books like How to Win Friends and Influence People and took its lessons to heart. He started teaching classes at local colleges to work on his public speaking ability and to learn how to explain his investment philosophy. And, once he married his first wife, she helped turn him into someone who could handle social situations, even if he wasn’t graceful.

Thanks to her, he was able to attend the cocktail parties in D.C. with new friends that made him as famous and influential as he is. By then, the 70s, he was already noted for his business success. But, outside of the investment world, he wasn’t well known. Thanks to his new social graces, he was able to meet more and more people and develop an ever larger and more influential set of friends.

All the while, he was focused on his businesses and accumulation, which left little time for his children. That was, in my opinion, the saddest part of The Snowball. Despite his many career and personal successes, he did not really succeed as a parent or spouse. His children barely knew him and his wife and he separated later in life. Eventually, once he got older in age, his stance on accumulation softened somewhat and he gave away more and more of his wealth. He also got to know his children better.

However, not everything about Buffett changed. He still only eats food like hamburgers and french fries. He doesn’t drink. He loves ice cream and Coca-cola, specifically cherry Coke. When at parties with food he’s unsure of, he either only eats the rolls or doesn’t eat. At heart, he’s still Warren from Omaha, Nebraska, which I found to be a very interesting aspect of The Snowball.

My Take on The Snowball: Warren Buffett and the Business of life by Alice Schroeder

Overall, The Snowball does a great job of telling the reader who Warren Buffett really is. From his investment strategy to his extramarital relationships, from his childhood to his legal troubles with a newspaper in New York, Schroeder does an excellent job of covering anything and everything of note.

She does a particularly good job in The Snowball of discussing changes in Buffett’s life and why they happened. She discusses why his stance on spending softened somewhat, why he made the investment decisions he did and how his standards for a “good” investment changed over time, how he rose from a nobody to our mental image of American investing and business, and how he built new friendships and relationships.

Additionally, Schroeder does a terrific job in The Snowball of getting inside Buffett’s head and showing the reader why he thinks about things the way he does. From the snowball story that is at the beginning of the book that describes his investment philosophy to what he was thinking when he couldn’t eat any of the food at a swanky sushi-themed dinner, Schroeder uses story after story in The Snowball to teach the reader about Buffett’s thought process.

One of the most interesting examples of that from The Snowball is why Buffett leans to the left politically. His father was one of the strongest Republicans in the country and a member of the John Birch Society, which was a radically anti-communist organization. But Buffett, despite growing up a Republican, turned to the left as he got wealthier. Why? Because he thought that as Americans we have a responsibility to pay higher taxes and try to bring the world up to our standard of living. I disagree with him on that, but it’s a fair point and doesn’t make him a radical.

There were some aspects of The Snowball that I didn’t particularly like. While I generally enjoyed Schroeder’s use of both anecdotes an long-stories to set the stage for critical moments, those stories were, at times, a bit too long and distracted me from the main subject: Warren Buffett. The book could have been edited down a bit to be a biography of only Buffett, rather than Buffett and people he knew at various stages in life. Additionally, Schroeder is loth to criticize Buffett in any way. Even when he was clearly in the wrong, she gives him the benefit of the doubt. That made The Snowball a bit over complimentary, in my opinion.

Overall, however, I thought The Snowball was excellent. It reminded me of the importance of investing, which is also well-discussed in The Richest Man in Babylon and The Automatic Millionaire. It shows how to take advantage of compounding. Buffett, although he made many personal mistakes, is an exemplary pillar of honor and keeping one’s word and, because of that alone would be worth emulating. And, most interestingly to me, The Snowball demystifies Berkshire Hathaway. Many of us have heard of it and Warren Buffett, but don’t really know how it started or how it became such a large and sprawling conglomerate. The Snowball shows how that happened and why, making it an excellent book for aspiring titans of industry.

Conclusion

The Snowball is a long book. Although it is generally very interesting, some of it is dense or not relevant to those who only want to read it to learn about business and investing. But it is also a very good book and one that is worth reading. I disagree with Buffett politically. If you are on this website, I suspect that you do too. But remember that he is also one of the most successful people in America and is known for his personal honor and humble nature. Surely that is worth emulating in some respects.

So, if you have time, read The Snowball. I think you’ll enjoy it and find it interesting, especially if you liked Principles by Ray Dalio.

By: Gen Z Conservative


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