The Snowball

The Snowball, Warren Buffett and the Business of Life by Alice Schroeder
Published by Allen and Unwin, $59.99


Family and friends, many linked to Berkshire Hathaway gather at Sun Valley, Idaho in 1999. Chairman, Warren Buffet speaks of his success, as being based on a few simple investing ideas and gives his first stock market forecast in thirty years. “Ultimately the value of the stock market could only reflect the output of the economy” he says.

Despite changes in Wall Street’s ways, in the nearly sixty years of his career, Buffett’s thinking about value and risk have not changed.

The story behind the world’s richest man and Fortune Magazine’s 2003 most powerful person in business, is told by Alice Schroeder, using information from unlimited interviews with family and friends and Buffet’s file room.

Schroeder’s narrative style and thirty-two pages of photos, deliver extraordinary insight into the Nebraskan, behind the conglomerate holding company.

In a whopping 960 pages, which includes an excellent index and notes, Schroeder shows what makes Buffett tick. Six parts describe the influence of parents, siblings, wife, children, friends and business associates, alongside the ups and downs of the American economy.

The title refers to money and relationships, how you plan your life and spend your time and comes from one of Warren’s favourite sayings, says Schroeder. “Life is like a snowball. All you need is wet snow and a really long hill”.

Schroeder quotes a Forbes columnist, who said, “Buffet is not a simple person, but he has simple tastes”. Buffet drinks Coca Cola and prefers hamburgers, but seems to remember every fact and figure he ever read. He throws himself obsessively into each new opportunity, devoting time to studying newspapers, magazines, manuals and analysing economic statistics.

Schroeder describes a man who shied away from confrontation but to whom reputation was everything.

He was greatly influenced by Dale Carnegie’s “How to win friends and influence people”, especially rule number one, don’t criticise, condemn or complain.

Buffett credits Ben Graham, Chairman of Government Employees Insurance Company (GEICO), who taught him at Columbia Business School and later employed him, as being the most influential person in his life after his father.

In Buffet’s world there are terms like ‘being buffetted’ (way of inducing someone to do something), ‘bathtub memory’ (letting bad memories go down the plug hole) and ‘cigar butt’ companies (unloved stocks worth buying).

When a shareholder asked, what is the ideal business, Buffett said, “It is one that earns very high returns on capital and keeps using lots of capital at those high returns. That becomes a compounding machine”.

It’s an absorbing read, packed with dates, events and business data. Schroeder combines an accountant’s eye for detail with the art of the story teller.

Usefulness 7/10
(NB. Although not specifically useful to the business reader, this is a powerful and stirring read 9.5/10)

© L Donald
all rights reserved
Appeared NZ Business December 2008