#100 Warren Buffett The Snowball

In "The Snowball: Warren Buffett and the Business of Life," Alice Schroeder delves into the paradoxical world of Warren Buffett, a man whose ambition and lack of a life plan led to the accidental creation of Berkshire Hathaway. Buffett's investment genius, rooted in a "seamless web of deserved trust" and the strategic use of "float," reflects his personality and unyielding passion for business—a passion that began in his youth as he ambitiously delivered newspapers. Despite his financial focus, Buffett's personal life suffered, leading to his biggest regret: not giving enough attention to his wife, Susie. His belief in the importance of being lovable over wealthy is a poignant takeaway from his life's journey. Buffett's story is a complex tapestry of professional triumphs and personal shortcomings, emphasizing the significance of love and relationships over material success.

• Warren Buffett's life lessons emerged organically from his personal experiences.
• He lacked a grand plan but created Berkshire Hathaway, a model of partnership and trust with shareholders.
• His investment strategies and business operations were a reflection of his personality.
• Despite his success, Buffett desired that people study his business model rather than fixate on his wealth.
• His childhood interests and habits laid the foundation for his future in investment and business.

"What he was teaching were the lessons that had emerged from the unfolding of his own life." The quote emphasizes that Buffett's teachings are a direct result of his life experiences, highlighting the organic development of his business philosophy.

• From a young age, Buffett showed a strong passion for business and investment.
• His dedication to studying businesses and markets was intense and focused.
• He ignored other pursuits to concentrate on his passion for business.
• Buffett's circle of competence and aversion to debt were key to his investment strategy.
• His unique perspective and continuous thought about business were crucial to his success.

"That passion led him to study a universe of a thousand stocks." This quote underlines Buffett's deep passion for investment, which drove him to extensive research and study, a cornerstone of his success.

• Publicly, Buffett is seen as a simple man with a complicated life.
• He maintains a low-profile lifestyle but is involved in high-profile activities.
• Buffett's public image contrasts with his reputation as a tough deal maker.
• He prefers simplicity but cannot escape the complexities of his life and work.

"His public image was that of a simple man, and he seemed genuine, yet he lived a complicated life." The quote captures the contrast between Buffett's public persona and the complexity of his actual life, highlighting the dichotomy present in his character.

• Buffett's personality deeply influences his business ideas.
• He differentiates between industries that are impactful but not necessarily profitable.
• His insights into good and bad businesses are tied to his personality traits.

"One of the ideas he has is that just like the intro you, he spent a lot of time thinking about what makes a good business, what makes a bad business." This quote reflects Buffett's focus on understanding the fundamentals of what makes businesses succeed or fail, a key aspect of his investment philosophy.

• Buffett and Munger share a fascination with business as a puzzle.
• They value rationality and honesty and learn from failures.
• Their partnership is based on a shared approach to problem-solving and success.

"They both regarded rationality and honesty as the highest virtues." This quote highlights the shared values that underpin the successful partnership between Buffett and Munger, emphasizing their focus on rationality and honesty.

• Buffett sees himself primarily as a teacher.
• He uses various platforms to share his knowledge and lessons.
• Teaching is central to Buffett's life, and he dedicates significant time to it.
• His annual shareholder letters are a culmination of months of work and reflect his teaching ethos.

"Berkshire Hathaway was his Sistine Chapel." The quote metaphorically compares Buffett's creation of Berkshire Hathaway to a work of art, emphasizing his dedication to teaching and sharing his business philosophy.

• Buffett emphasizes the importance of having an inner scorecard.
• He values personal satisfaction over public opinion.
• This philosophy was influenced by his father, Howard Buffett, who lived by an inner scorecard.

"The big question about how people behave is whether they've got an inner scorecard or an outer scorecard." This quote introduces the concept of inner versus outer scorecards, which is central to Buffett's philosophy on personal integrity and satisfaction.

• Howard Buffett made unconventional decisions, such as starting a stockbrokerage during the Great Depression.
• Warren learned from his father's maverick spirit and inner scorecard mentality.
• Howard's actions demonstrated resilience and independence, qualities Warren admired and emulated.

"It was a maverick decision to open a stockbroking business at a time when no one wanted to buy stocks." The quote illustrates Howard Buffett's unconventional decision-making, which influenced Warren's approach to business and life.

• Leela Buffett, Warren's mother, was demanding and focused on external validation.
• Her behavior exemplified an outer scorecard mentality, which Warren sought to avoid.
• Warren learned from his mother's behavior the importance of focusing on inner values.

"What mattered most to Leela was the esteem of others." This quote encapsulates Leela Buffett's preoccupation with external perception, contrasting with the inner scorecard philosophy that Warren would later adopt.

• Warren observed his uncles' one-sided market views and learned the importance of objective analysis.
• A trip to the New York Stock Exchange at age ten inspired Buffett's vision of a future in investing.
• Early experiences shaped Buffett's understanding of the stock market and the nature of wealth.

"Each man was enslaved by his long-standing habit of thinking only in one direction." This quote captures the lesson Buffett learned about the dangers of one-sided thinking in investment, influencing his approach to market analysis.

• Both Buffett and Ferrari were obsessives who knew early in life what they wanted to do.
• Their obsessive natures contributed to their success but also complicated their personal lives.
• The comparison highlights the trade-offs between professional success and personal happiness.

"They're both obsessives." This quote draws a parallel between Buffett and Ferrari, emphasizing the intensity of their dedication to their respective fields and the impact on their lives.

• Speaker A discusses the importance of aligning business pursuits with personal priorities.
• They note that successful entrepreneurs like Ed Thorpe prioritize their time, even turning down profitable opportunities for the sake of personal well-being and relationships.
• Speaker A admires Thorpe's physical health, mental sharpness, and family relationships, contrasting this with Warren Buffett and Enzo Ferrari, who sacrificed personal relationships for their work.

"But then he stopped. Not that he stopped, but he would deliberately not pursue businesses and investment opportunities that he knew were going to be successful if they would take away time from other things that were important to him."

The quote emphasizes the conscious decision to prioritize personal values over potential business success.

• Speaker A explores Warren Buffett's early life, highlighting his desire for independence and self-direction.
• Buffett's negative experiences working in his grandfather's grocery store and his desire to avoid hard work influenced his career choices.
• Speaker A discusses Buffett's ability to solve problems with calm, level-headed thinking from a young age, as illustrated by his handling of a business problem involving stale cornflakes and dog biscuits.

"He wanted money. It could make me independent. Then I could do what I wanted to do with my life. And the biggest thing I wanted to do was work for myself. I didn't want other people directing me."

The quote reveals Buffett's primary motivation for pursuing wealth: independence and self-employment.

• Speaker A details Buffett's innate business sense and his ability to create opportunities for himself, including buying a farm during high school.
• Buffett's early fascination with biographies of business leaders is noted, as well as his disinterest in formal education, seeing it as a potential hindrance to his goals.
• The speaker reflects on Buffett's understanding of business fundamentals, such as low costs and the use of float in insurance.

"A company was much like a person. It had to go out and find a way to keep its roof over its employees and shareholders' heads."

The quote summarizes Buffett's early grasp of the essence of business operations.

• Speaker A discusses Buffett's rejection from Harvard and subsequent enrollment at Columbia, where he studied under Benjamin Graham and David Dodd.
• Buffett's appreciation for Graham's book "The Intelligent Investor" is highlighted, along with his strategic approach to gaining admission to Columbia.
• The speaker notes Buffett's frugality and understanding of compounding interest, which he applied throughout his life.

"I had just read Graham's book, but I had no idea he was teaching at Columbia."

The quote indicates the serendipitous discovery that led Buffett to study under his idols.

• Speaker A explains Buffett's investment philosophy, including his focus on businesses with strategic advantages like low costs.
• The speaker discusses Buffett's ability to think independently and not mimic others, a trait that gave him an edge in investing.
• Buffett's interest in history and its impact on his investment approach is mentioned.

"I would get these newspapers from 1929. I couldn't get enough of it. I read everything, not just the business and stock market stories."

The quote illustrates Buffett's deep interest in historical context as a means to inform his investment decisions.

• Speaker A reveals that despite his later fame as a public speaker, a young Warren Buffett was terrified of public speaking.
• Buffett's use of Dale Carnegie's methods to overcome his fear and improve his interpersonal skills is discussed.

"I was terrified of public speaking. You can't believe what I was like. If I had to give a talk, I was so terrified that I just couldn't do it."

This quote highlights Buffett's initial fear of public speaking and his efforts to conquer it.

• Warren Buffett experienced severe public speaking anxiety early in his life.
• He repeatedly took a public speaking course to overcome his fear of speaking to even small groups.
• Buffett's early life challenges illustrate human adaptability and the ability to learn new skills.

"Sometimes the agony was such that just to get rid of the pain, I signed up for the course again." This quote highlights Buffett's determination to overcome his fear of public speaking by repeatedly facing it head-on.

• Reading biographies can be inspiring as they show the potential for personal improvement.
• Buffett felt socially inept and struggled with personal relationships, relying heavily on talking about investing.

"I was a wreck. He recalls he was dreading on the brink of a nervous breakdown. I felt OD, I was socially inept." Buffett expressed his social struggles and discomfort during his early years, emphasizing the challenges he faced.

• The transition from childhood to adulthood is often awkward, but improvement and adaptation are possible.
• Despite business acumen, Buffett had not found his "cruising speed" in life, signifying a search for balance and fulfillment.

• Buffett learned about customer loyalty the hard way through a failed gas station business.
• His initial job as a stockbroker was unfulfilling due to conflicts of interest between broker and client interests.

"That's when I learned the power of customer loyalty." Buffett's quote reflects his realization of the importance of customer loyalty after his gas station was outperformed by a competitor.

• Buffett recognized the inherent conflict in the stockbroker profession, preferring long-term investment recommendations over frequent transactions for commission.

"The system puts your interest against that of your clients." This quote captures Buffett's discomfort with the misaligned incentives in the stockbroker business.

• Susie Buffett played a crucial role in Warren's life, helping him overcome self-doubt and providing unconditional love.
• Warren's mother had instilled a sense of worthlessness in him and his sister, except in business matters.

"I needed her in my life like crazy, he says. I was happy my work, but I wasn't happy with myself. She literally saved my life." This quote emphasizes Susie's profound impact on Warren's personal well-being and self-perception.

• Despite personal self-doubt, Warren had unwavering belief in his business judgment.
• Warren differed from his mentor, Ben Graham, in terms of investment strategy, particularly on diversification.

"Warren, who had such confidence in his own judgment, saw no reason to hedge his bets that way." The quote illustrates Buffett's confidence in his investment choices, leading him to eschew excessive diversification.

• Warren learned the art of capital allocation from Graham, a key to his future success with Berkshire Hathaway.

"What Warren was learning about keeping his ears open was the art of capital allocation." This quote highlights the importance of strategic investment decisions in Buffett's education under Graham.

• Buffett declined a junior partnership with Graham to start his own investment partnership in Omaha.
• He established unique ground rules for his partnership, demanding control and secrecy to avoid the pitfalls Graham faced.

"He wanted absolute control over the money and would tell his partners nothing about how it was invested." Buffett's ground rules for his partnership were designed to maintain investment autonomy and prevent dilution of his strategies.

• The meeting with the Davises led to a significant investment and an introduction to Charlie Munger, who would become a key figure in Buffett's life.

"Eddie said, let's give him $100,000." This quote marks a pivotal moment where Buffett secures a substantial investment based on a favorable impression, leading to his partnership with Munger.

• Charlie Munger's approach to self-investment and the pursuit of independence resonated with Buffett.
• Munger's respect for authentic achievement and lack of interest in competition complemented Buffett's values.

"I had a considerable passion to get rich, Munger said. Not because I wanted Ferraris. I wanted the independence." Munger's quote reflects a shared value with Buffett: the desire for financial independence, not material excess.

• Warren Buffett practiced a disciplined approach to life, ensuring that new commitments did not overextend his time and energy.
• He valued money and friendships, recognizing their importance in his life.

"Warren never overextended himself. When something new came into his life, something else went out." This quote conveys Buffett's strategy for maintaining focus and balance, prioritizing what mattered most to him.

• Buffett's acquisition of Berkshire Hathaway was initially viewed as a mistake, reflective of his early investment strategy.
• He missed opportunities to invest in great businesses like Disney and Intel due to a lack of understanding or confidence in their potential.

"I bought my own cigar butt, and I tried to smoke it." Buffett uses the metaphor of a "cigar butt" to describe his investment in Berkshire Hathaway, which he later regarded as a poor decision.

• Buffett's obsessive nature and inability to slow down led to a rift in his marriage with Susie.
• Despite recognizing the need for personal goals beyond making money, Buffett struggled to achieve balance in his life.

"I do know that when I'm 60, I should be attempting to achieve different personal goals than those of which had a priority, age 20." Buffett acknowledged the importance of evolving personal goals, yet his continued focus on wealth accumulation suggested a difficulty in changing his life's direction.

• Warren Buffett is described as relentless and unstoppable in his pursuit of business success.
• Buffett's dedication to his work came at the expense of personal relationships, which Speaker A does not wish to replicate.
• The drive to be an "implacable acquirer" can lead to significant wealth but also personal sacrifices.

"I don't want to ruin my personal relationships with my family and my friends because of my obsessive nature with work."

This quote highlights the potential negative impact of an excessive work ethic on personal relationships, indicating a desire to find balance between professional ambition and personal life.

• Warren Buffett's reputation allowed him to manage a pension fund with the understanding that it would not be his top priority.
• His friend trusted Buffett's commitment to quality despite the pension fund being a lower priority.
• Speaker A aspires to have a reputation like Buffett's, where his commitment to quality is trusted implicitly.

"And if you can have such a good reputation with your colleagues, with your friends, with people you associate with, that they know that you're going to do something with them or for them, that you would say no if you wouldn't be able to do it."

This quote reflects the value of a strong reputation where others trust in one's ability to deliver quality work, even if it isn't the primary focus.

• Buffett invested heavily in Berkshire Hathaway, at one point becoming cash poor despite being very wealthy on paper.
• His approach to investment is characterized by a lack of diversification and a willingness to invest all-in on good decisions.
• Buffett's strategy during a market downturn was to buy more shares, demonstrating his confidence in his investments.

"I'd run out of gas. I'd use all the $16 million of cash that I got out of the partnership to buy stock in Berkshire and blue chip."

This quote illustrates Buffett's all-in investment approach, where he would invest significant personal funds into his business ventures, highlighting his confidence and commitment to his decisions.

• Buffett's investment in the Washington Post was one of his successful financial ventures.
• He developed a close relationship with the company's head, Kay Graham, and provided her with business advice.
• Buffett's guidance included the importance of patience, avoiding overpaying, and the strategic value of buying back stock when it's undervalued.

"He helped her understand it was always a mistake to pay too much for something you wanted. Impatience was the enemy."

Buffett's advice to Kay Graham encapsulates his investment philosophy, emphasizing patience and avoiding overpayment, which are key principles in his approach to business.

• Buffett's wife, Susie, left him to live a separate life, which he later recognized as his biggest mistake.
• Buffett acknowledges that his focus on work led to neglecting his family, resulting in his wife feeling unfulfilled.
• Despite their unconventional relationship, Buffett and Susie remained married until her death.

"Whatever he did to make Susie leave was his biggest mistake... It shouldn't have happened, and it's totally my fault."

This quote reveals Buffett's introspection and regret regarding the imbalance between his work and personal life, acknowledging his responsibility for the deterioration of his marriage.

• Buffett did not explicitly teach his children about personal finance despite his expertise.
• He believed that smart people, including his children, could figure out financial management on their own.
• Buffett's children sold some of their Berkshire stock, which would have been extremely valuable if held onto.

"Buffett tried to control his children with money, yet never spent any time teaching them about money."

This quote highlights a discrepancy in Buffett's approach to teaching: while he was a dedicated teacher to others, he did not impart financial wisdom to his own children in a direct manner.

• Buffett admired local businessman Peter Keywit and aspired to be remembered for similar values.
• He believed in accumulating "claim checks" for future use rather than consuming profits for personal opulence.
• Buffett's advice to young people is to work for those they admire and to avoid taking jobs solely for resume building.

"He built one of the great construction companies in the world... Keywit was overwhelmingly a producer, not a consumer."

This quote reflects Buffett's admiration for Keywit's focus on building a productive business rather than consuming wealth, aligning with Buffett's own values of reinvestment and efficiency.

• Buffett emphasizes the importance of being prepared for the worst-case scenario and not depending on others for financial help.
• He practiced a conservative approach to investing, maintaining a margin of safety and capping downside risks.
• During the 2007-2008 financial crisis, Buffett's cautious approach allowed him to avoid the pitfalls that ensnared many others.

"You absolutely never want to be in a position where tomorrow morning you have to depend on the kindness of strangers."

This quote encapsulates Buffett's philosophy of financial independence and preparedness, highlighting the importance of having a safety net and not being at the mercy of external factors.

• Buffett believes that true success is measured by the love and respect of others, not by wealth.
• He argues that love cannot be bought and must be earned by being a lovable person.
• Buffett's reflections offer a perspective on the importance of relationships and personal character over financial success.

"The only way to get love is to be lovable... The more you give love away, the more you get."

This quote conveys Buffett's view that personal relationships and love are the ultimate measures of a successful life, which cannot be attained through financial means but through genuine personal connections.