Warren Buffett and the Business of Life
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Alice Schroeder’s Perspective
Alice Schroeder is an American author and former insurance analyst. She received a BBA in finance and an MBA from the University of Texas in 1978 and 1980. Since 2008, Schroeder has worked as a columnist for Bloomberg News.
The Snowball is a biography of one of the most respected men in the financial world. Warren Buffett has been financially successful for over 70 years but is yet to write a memoir. This book is the first book to have unprecedented access to Buffett’s life stories and lessons. The outcome is a book that provides financial advice and shows how finance can give people life advice.
StoryShot #1: Buffett Benefited From a Simple Life Image
Buffett benefited from the media being intrigued by his simple life. His public image was that of a simple man who seemed genuine and trustworthy. The reality was quite different, though. Buffett has always lived a complicated life. The reason he was seen as genuine was that he used simple words and spoke passionately. He also had a loyal group of friends that made him seem more like your average man.
The reality is that Buffett was also a highly effective businessman. This meant he couldn’t be friends with everyone and earned a business reputation as being tough and hard-nosed. This ability to appeal to the media while also being financially successful made him one of the most reported businesspeople.
That said, Buffett did enjoy prioritizing the simple things in life. He would often be invited to the Sun Valley Conference, a conference for the economic elite. Many got carried away in the gossip of noticing who had been disinvited since the last year’s conference. Buffett was more interested in the beauty of the Sun Valley. He saw it as the perfect family vacation spot. He used this time to reunite with his whole family during one of the family’s rare times.
StoryShot #2: Buffett’s Inner Confidence Helped Him Succeed
Buffett’s growing wealth meant that others listened to his financial advice. Roughly 99% of his wealth was invested in the stock of Berkshire Hathaway. Because he was so heavily invested in this stock, it meant the stock price was a clear measure of his success. Near the end of 1999, many longtime value investors following Buffett’s style decided to invest heavily in technology stocks. Many of these investors did very well, but many invested in the wrong stocks. Buffett had an inner confidence that allowed him to avoid investing in these stocks and stick to what he knew. He is richer than all of those other investors, so his inner confidence paid off.
StoryShot #3: Buffett Followed in His Family’s Footsteps
Warren has a family history of working their way up the ladder. The first known Buffett in the New World was John. He was a weaver believed to be of French Huguenot descent. In the seventeenth century, John fled to America to escape religious persecution. He settled in Huntington, Long Island, as a farmer. All Buffetts after him were tradespeople. They were not merchants and they were not part of the professional class. Warren’s father was born in 1903. Howard would major in journalism at the University of Nebraska and work his way up in society through his fascination with politics. Howard then married Leila Stahl, Warren’s future mother.
Leila and Howard brought Warren up in an inquisitive family. He benefited from the advantage of having interesting topics at the dinner table. Both his parents were intelligent and Warren was encouraged to go to reputable schools. Warren did not have a financial advantage, but he was born into the right environment and at the right time to make lots of money.
Buffett accepts that his lineage is filled with people who grafted their way up in society. He also believes he couldn’t have been raised with a better set of parents. But he still believes he created some of his own reality.
StoryShot #4: The Lack of Warmth from Buffett’s Parents Pushed Him Toward Numbers
The reason Warren believes his parents helped propel him toward financial success is not due to love and care. Warren felt pushed toward numbers because of the way his parents treated him. Instead of talking about love and pride, the only acceptable topics at Buffett’s dinner table were politics, money and philosophy. Warren and his siblings were never tucked into bed with a kiss.
Leila was particularly cold to her children. After Howard left for work in the morning, she would become even more hostile. Warren and his sister could be playing or getting dressed and their mother would suddenly explode at them. She wouldn’t physically abuse them but would call them worthless, ungrateful and selfish. Warren admits that he feels emotionally scarred by the way his mother treated him and his sister. His father was like a protector. He wouldn’t argue with Leila, but she wouldn’t be as aggressive when he was around.
The abuse at the hands of his mother pushed Warren toward numbers. By the age of six, he was already fascinated by the precision of measuring time in seconds. He was also obsessed with watches.
StoryShot #5: Buffett Learned How to Overcome Adversity From a Young Age
Buffett loved school. He used his time at Rosehill School as an opportunity to spend time away from the adversity he experienced at the hands of his mother. He immediately made friends and he enjoyed learning. This enjoyment was accompanied by a passion for competitiveness and unmistakable intelligence. That said, he didn’t like sports and was extremely sensitive. For example, he would cry if people were mean to him, which meant he always searched for ways to be liked.
As well as adversity in his home life, Warren also struggled with health risks while he was at school. One evening he felt a pain in his stomach. After a visit from a doctor, Buffett was told he needed surgery later that night. He had a ruptured appendix. If the doctor hadn’t decided to fast-track the surgery, Warren wouldn’t be here today.
Warren used his adversity as an opportunity to learn. He recalls when he was playing the cornet at a school performance and had to echo a trumpet player. His duo played the wrong note. At this time, Warren froze as he didn’t know whether he should mimic the wrong note or play the correct one. On that day, he learned a lesson that he has remembered his whole life. The lesson is:
It might seem easier to go through life echoing others, but this is only until the person you’re echoing plays a wrong note.
StoryShot #6: Chewing Gum Laid the Foundation For Buffett’s Money-Making
Buffett was an entrepreneur from a very young age. The first few cents he made were by buying and selling packs of chewing gum at school. He started at six years old. He also read The Trader column in Barron’s and all of Howard’s finance books.
A visit to Wall Street in 1940 ignited his passion for finance. The market was reviving after a crash, but the men of Wall Street were still busy and competitive. That said, Warren had a unique experience when meeting Sidney Weinberg. One of the most famous men on Wall Street was willing to take time out of his day to ask a young Buffett what stock he liked. He was so surprised that Weinberg was willing to pay attention to this young child and actually seemed interested in his opinion. This experience only encouraged him to delve deeper into finance.
After this, he would visit the Benson Library to read as much financial material as he could. A book called One Thousand Ways to Make $1,000 captivated Warren. This was when he first learned about the power of compound interest. Learning he could make large amounts of money from a small sum gave Buffett new confidence that he could become rich. Soon after, he announced to his friend, Stu Erickson, that he would be a millionaire before 35.
StoryShot #7: Warren Disappointed His Father and This Was a Turning Point
Warren had always been a well-mannered child who excelled at school. But during junior high, he started to rebel. He and his antisocial friends used to visit Sears and steal random items. This wasn’t because they had no money. It was simply because of the buzz they got from it. Buffett’s parents had to remove the source of his money to force him away from delinquency. Warren was devastated to hear from his father that he was disappointed in him. Hearing these words kicked Warren into gear and he stopped mucking around.
StoryShot #8: Buffett Always Found Ways to Make Money
After mucking about, Warren’s parents were carefully watching how he was behaving. They were determined to see him straightened out. He did this by delving into the financial world again. Soon after, Roosevelt died and the country was mourning. Warren just saw this as another opportunity to make money. Newspapers were putting out special editions. He managed to hustle his way to being one of the salespeople on the street corner. While others sat at home mourning, Warren was out on the streets making money by distributing papers. He managed to make a small fortune from this endeavor. He delivered more than five hundred thousand newspapers, making him $5000. This was a lot of money back in the 40s and helped kickstart the snowball effect. This money made up more than his snowball.
StoryShot #9: Warren Had “Future Stockbroker” Under His Yearbook Picture
Warren knew what he wanted to do by the time he was in high school. He performed well, ranking 16th out of the 350 graduating students. Notably, he had the phrase “future stockbroker” under his picture in the yearbook.
Although Warren knew what he wanted to do, his parents forced him to go to the University of Pennsylvania’s Wharton School. They also made him live with a roommate to get accustomed to a more college-like, mature lifestyle. His roommate, Chuck, quickly grew tired of his sloppiness and immaturity, yet just as quickly grew fond of him and took care of him. Chuck thought Warren was immature but a brilliant prodigy, as he could memorize information from lectures rather than revise from textbooks. The proctors had not even finished passing out the exams in an accounting course when Warren, showing off, stood up and turned in his paper.
Although Warren isn’t a huge fan of formal education, he became enticed by the idea of attending Harvard Business School while he was in his final year at Wharton School. He saw Harvard as an excellent opportunity to develop prestige and obtain a network of influential future connections. That said, Warren wasn’t successful. He had misunderstood that Harvard was looking for leaders rather than stock experts. Harvard rejected him, but he learned from this failure and was then accepted to Columbia.
StoryShot #10: Warren Challenged the Views of His Professors
Studying at Columbia allowed Buffett to meet one of his idols: Benjamin Graham. Buffett had read the Northern Pipeline several times when he was ten years old. He did this before he even knew Graham was involved in the investing world. His admiration continued to grow for Graham as he read more of his work. Buffett was hoping to bond with and learn from his new teacher. The reality is that Buffett found himself challenging some of his teacher’s views.
Graham’s module was a crash course on the stock market. Graham argued that the actual worth of a company is found by stripping apart the fine print and viewing the rights of shareholders. He made this point because he insisted on the students buying stocks at less than liquidation value. Buffett completely disagreed with this approach as he wanted to invest in companies with growth potential rather than companies that were about to go bankrupt.
StoryShot #11: Grief in the Early 1960s
By 1960s, Buffett had become a household name. He could alter the course of even a stubborn and unwilling company to make them successful. Buffett had become famous for making his partners rich and famous, not just himself. He had managed to overachieve massively on his target of becoming a millionaire by 35. He was already a millionaire at age thirty.
Despite his success during this period, the early 1960s was marred by grief. In 1963, US President John F. Kennedy was assassinated. This was difficult for the country, but it also resulted in a massive loss for the stock market. Howard Buffett’s passing away worsened the situation. Warren was shocked, but he kept himself motivated to keep pushing forward.
StoryShot #12: Joining the Business Hall of Fame
Three decades later, Buffett was known worldwide. In 1993 he was inducted into the inaugural class of the Business Hall of Fame of the Greater Omaha Chamber of Commerce. This pinnacle didn’t stop him from working hard, though. He joked he would continue working after he died. He hated the idea of retiring. This obsession with hard work did take its toll on his marriage.
As well as recognition through prizes, the 90s also turned Buffett from a wealthy investor into a hero. In 1991, an investment bank called Salomon Inc. was in big trouble. Berkshire Hathaway, Buffett’s company, had acquired a 12 percent stake in this bank. The US Treasury had learned that one of Salomon’s traders had been submitting false bids so they could purchase more treasury bonds than permitted. The result was Salomon being fined $190 million. Instead of defending Salomon and shunning the Treasury, Buffett took over as chairman of Salomon and liaised with the Treasury. He gave testimony in Congress and was subsequently described as a hero. Society looked fondly upon him as he embraced regulators and law enforcers instead of evading the scandal he wasn’t even directly involved in. Buffett showed that honesty and accepting mistakes are rewarded.
After this incident, Berkshire stock rose considerably, bursting past $10,000 a share. He was now worth $4.4 billion.
StoryShot #13: Buffett Learned to Let Go of His Money
Buffett’s marriage to Susie was never particularly close. She felt that Buffett was more married to his work than he was to her. That said, when she was diagnosed with stage three oral cancer, he spent as much time as he could with her. He took time away from work to take care of her. This experience taught him that giving was such an important skill. Although Susie passed away from complications after surviving cancer, Buffett’s lessons from his marriage lived on.
Buffett learned how to deal with mortality and connect better with his children. He also accepted that compounding money to give away at a later stage might not always be the best option. Sometimes it is better just to let go of some money to help others right now. Buffett became more generous, gifted his family members more money, and started making large donations to charities in memory of Susie. On June 26, 2006, Buffett announced that he would give away 85 percent of his Berkshire Hathaway stock. This was worth a staggering $37 billion and was given away to multiple foundations. No gift of this size had ever been made in the history of philanthropy.
Buffett had learned that rolling up a snowball will help make you wealthy, but you must be willing to give some of that snowball away to those that matter.
Final Summary and Review of The Snowball by Alice Schroeder
The Snowball is an exploration into the life of one of the wealthiest men in the world: Warren Buffett. It tells the story of a man pushed toward numbers and finance from a young age because of a difficult upbringing. Buffett used self-belief and commitment to financial foundations to snowball his wealth. He has also learned several important life lessons. In the end, he learned that the best thing about snowballing your wealth is giving this wealth to those who need it most.
The Snowball Book Rating
We rate this book 4.3/5.
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