At first this seems an inflated book. Over 900 pages about a man who loves
money so much that he has no interest in religion, the arts, literature,
science, travel, partisan politics, his surroundings or fine living. Before
the global recession (which reduced his fortune by around $16.5 billion),
Warren Buffett was said to be the richest man on earth, with an estimated
net worth of $62.3 billion in March 2008. But he lives in a house in Omaha,
Nebraska, which he bought in 1958 for $31,500, subsists on a diet of
hamburgers, cherry Cola and potato chips and spends his days in a repetitive
routine which most people would find mortifyingly banal. At first, too, The
Snowball seems risibly overwritten, full of purplish prose and absurd
details about the chicken-fried steak Buffett once ate at the Wigwam Café in
Wahoo, the fudge sundae he once served to Peter Jay, the café au lait
leather chairs on an aircraft that flew him to Idaho, and the angle at which
he combed his hair before meeting Bill Gates’s mother. And yet Alice
Schroeder’s accumulation of detail, her vivid, artless descriptions of
people and places, and the resulting narrative fluidity make this a
compelling book. It has the bouncing vitality of an early Sinclair Lewis
novel, and reading about his ancestor Zebulon Buffett, a housekeeper named
Ethel Crump and an heiress called Oveta Culp Hobby, one feels projected into
the irrepressible provincialism of Babbitt. Indeed, the homely, sententious
speeches that Buffett and his California-based business partner Charlie
Munger enjoy making are George F. Babbitt’s “Boosterism” in
twenty-first-century accents.
Buffett is known as the “Oracle of Omaha”. Every month student groups make the
pilgrimage to Omaha from campuses all over the United States, Asia and Latin
America. They want to be told how to become rich, the meaning of life, the
secrets of a good marriage, and Ethics 101 in four minutes. Buffett feeds
them hash browns and T-bone steaks the size of baseball mitts at the scuffed
formica tables of his favourite diner, and they return home clutching
photographs of themselves with the folksy, super-rich seer. The annual
shareholders’ meeting of his company, Berkshire Hathaway, brings 20,000
visitors to town. A Chinese businessman recently paid over $2 million at a
charity auction for the privilege of dining with Buffett in a New York
steakhouse. “One of the shortcomings of American society”, another
billionaire financier, George Soros, has written, is “an excessive
admiration of success – measured in monetary terms – to the detriment of
more intrinsic values.” The Buffett cult epitomizes that shortcoming.
Warren Buffett was born in 1930. His father was an Omaha stockbroker who was
elected in 1942 as a Republican Congressman after promising electors to “buy
one-way tickets out of Washington for all of the screwballs, stuffed shirts,
stool pigeons, sleepwalkers and society snobs”. His mother, whose family had
a history of insanity, subjected her children to sadistic verbal lashings
and psychological cruelty. As a boy Buffett collected data, counted and
memorized numbers, assessed odds. He watched the traffic for hours, and
calculated the frequency of letters and numbers in the number plates of
passing cars. He amassed and hoarded hundreds of root-beer and Coca-Cola
bottle-tops, and spent his evenings counting and sorting them. Highly
competitive but physically timid, he was captivated by money: at six he
started out as a street vendor of chewing-gum, and in 1940 asked his father
to take him on a visit to the New York Stock Exchange, where Sydney
Weinberg, “the most famous man on Wall Street”, spent half an hour talking
to the odd little ten-year-old. Buffett laid the basis for his fortune by
working an immense, tightly organized paper round, and filed his first
income tax return at the age of fourteen, deducting his wristwatch and
bicycle as business expenses.
In adolescence he was “a four-star delinquent” who habitually shoplifted, but
in manhood became a stockbroker with his own investment business. By 1962 he
was a millionaire. He took control of the Berkshire Hathaway company in
1966, and his fortune has been accumulating ever since. Schroeder pictures
him in Berkshire’s understaffed, overworked headquarters reading the reports
sent to him daily, telling him how many auto policies GEICO (Government
Employees Insurance Company) had sold last week and how many claims it had
paid; how many pounds of See’s Candies had sold yesterday; how many
prison-guard uniforms had been ordered from Fechheimers; how many jet
time-shares Netjets were selling in Europe and the United States; and all
the rest – awnings, battery chargers, kilowatt hours, air compressors,
engagement rings, leased trucks, encyclopedias, pilot training, home
furnishings, cardiopulmonary equipment, pig stalls, boat loans, real-estate
listings, ice cream sundaes, winches and windlasses, cubic feet of gas, sump
pumps, vacuum cleaners, newspaper advertising, egg counters, knives,
furniture rentals, nurses’ shoes, electromechanical components. All the
numbers on their costs and sales poured into his office, and he knew many of
them from memory.
Hundreds of pages of The Snowball describe Buffett’s investment strategies and
acquisitions over half a century. These chapters will be a fertile source
for business historians, and the great sales of the book suggest that many
avid readers are scouring these sections for tips or the transmission to
them by sympathetic magic of Buffett’s skills. Buffett has always believed
in keeping a margin of safety, avoiding businesses where high technology is
crucial, and investing in brands that he thinks will endure, such as
Coca-Cola or the Washington Post. In Schroeder’s mass of information about
his business interests, the short-term and long-term performance of
Buffett’s investments from the 1960s to the 1980s, the distribution of his
holdings during his mid-career and his direction of the investment power of
his great insurance interests remain opaque.
The Snowball opens with Buffett’s accurate warnings in 1999 about the false
dot-com boom, which were resented by Wall Street at the time. He opposed the
accounting legerdemain behind stock options (Steve Jobs of Apple received
$872 million in 2000) and what he called “bonus-pimping”, and forcefully
advocated disclosure and oversight during this time of excess. As early as
2002 Buffett publicly denounced derivatives as “toxic” and as “time-bombs”,
while at a shareholder meeting Charlie Munger decried the accounting
incentives to exaggerate profits on derivatives: “to say derivative
accounting in America is a sewer is an insult to sewage”. (Buffett and
Munger are the US equivalent of Britain’s Lords Hanson and White, but the
dynamics of their relationship are vague in The Snowball.) Buffett described
the Bush administration’s tax plans as “class welfare for the rich” and
endorsed Barack Obama’s presidential candidature. Some readers of this book
will be surprised by the comradely affection they ultimately feel for this
scruffy, frugal billionaire.
The status in American culture of the “Oracle of Omaha”, however, raises
questions about the role of the public intellectual in the US. Why does the
nation with the richest and most esteemed universities in the world so often
seem to flatter the ignorant and reward stupidity? How do angry men,
fuelling inarticulate rage, like Rush Limbaugh and Sean Hannity, pass as
intelligent opinion-formers among the millions who listen to their
broadcasts? Isn’t it sad when intellectuals such as Alan Dershowitz
compromise their thinking by aggressive activism? And isn’t it cheapening
when a man like Buffett – brilliant at his technical speciality, impressive
as a market analyst, clear-headed and outspoken about business – is revered
as a sage for his corny general philosophy? (“The purpose of life”, he
gravely opines, “is to be loved by as many people as possible among those
you want to love you.”)
As a child Buffett memorized the text of Dale Carnegie’s How To Win Friends
and Influence People, and his status as a seer derives from his lifelong
adherence to Carnegie’s precepts for avoiding confrontation or offence.
There is a nasty story buried in The Snowball about the destruction of a
generous scheme, whereby Berkshire shareholders could allocate money to
charities of their choice, by the blackmail of religious fundamentalists.
“Even if only $1 went to Planned Parenthood and $1 billion was donated to
pro-life organizations, the former gift would still land Berkshire Hathaway
on The Boycott List”, Buffett was told by boycott organizers. He swiftly
capitulated to their threats, for all his instincts are opposed to
controversy. Similarly Buffett, and his biographer, criticize the “market
fundamentalism” of the US in the age of Greenspan, but skirt the other
forces behind what George Soros has called the “religious nationalism” of
Bush’s America: religious fundamentalism and neo-conservative strategies to
entrench the US as the world’s one unrivalled, unassailable superpower. Yet
as Soros argues, the pursuit of US world supremacy, exemplified by the
Project for the New American Century which provided the heart and sinews of
the Bush doctrine, was indivisible from the corrupt and delusional mentality
that produced the boom-bust pattern of the stock market. In The Snowball,
however, there is no mention of the Iraq invasion or of Donald Rumsfeld, and
just three glancing references to George W. Bush – and the Iago of the past
eight years, Dick Cheney, is only mentioned as attending a funeral. Alice
Schroeder is a frank and fair writer, and her book is a suggestive
contribution to a history of the American Way; but the people and ideas that
she has excluded from her narrative are more significant even than her
description of the Wigwam Café in Wahoo.
Alice Schroeder
THE SNOWBALL
Warren Buffett and the business of life
960pp. Bloomsbury. £25 (US $35).
978 0 7475 9191 7
Richard Davenport-Hines’s biography, Ettie: The intimate life and
dauntless spirit of Lady Desborough, was published last year. His Proustian
study, A Night at the Majestic, appeared in 2006.
I am a big fan of Warren Buffet but frankly I could not finish this book. His personal, non-financial life is not that interesting and you don't learn anything new about what makes him tick as an investor.
srini anumolu, bangalore,