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The Snowball: Warren Buffett and the Business of Life Paperback – 1 Sep 2009
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Alice Schroeder’s The Snowball: Warren Buffett and the Business of Life might well be one of the most important books you will ever read -- particularly in a period when the world's various economies appear to be entering freefall. This arm-straining (at nearly a thousand pages) but utterly fascinating book has already -- against all the odds -- achieved an astonishing level of success, given its initially daunting appearance. But it will only take a chapter or so for most readers to see just why this book is enjoying such an unprecedented level of acclaim.
The subject is the life and career of one of the most revered men in the western hemisphere, Warren Buffett (an advisor to new US President Barack Obama) – despite the fact that his name may not be known to most of the general public. Buffett’s story is one that currently has resonances for all of us: a remarkable financial success story. The name of this investor from Omaha is spoken of with admiration by all who know him, despite the fact that he has never written a book on his career or the secrets of his business success. However, he has been persuaded to allow Alice Schroeder to spend time with him and those with whom he works to investigate his business triumphs, his opinions, his mistakes (Buffett is rather winning in admitting to several of the latter – how common is that in his profession?) -- and what emerges is a totally comprehensive biography of the man known throughout the world as ‘The Oracle of Omaha’.
What is most revealing about the picture of the man that emerges from these pages (and Schroeder had access not just to her subject and his business associates but also his wife, children and friends) is that we meet a man of intellect – of course – but also of humanity and understanding, with a philosphy and worldview that is both judicious and principled. In an era in which those in Buffet’s profession are more prone to excoriation than praise, the man we encounter here has a sane and clear-eyed philosophy of life and an attitude to business success that is generously instructive -- and inspiring. --Barry Forshaw --This text refers to an out of print or unavailable edition of this title.
`A reliable and perceptive account of stock market history through the prism of the world's most successful investor, Warren Buffett' --The Times
`As well as the minutiae of his deals, what emerges is a sympathetic yet realistic portrait of a single-minded man. ****' --Sunday Telegraph
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As others have said a bit hung up on tiny details and could easily be halved in size getting rid of waffle that should have been edited out already. OK book if cheap.
For me, it showed Buffet practiced what he preached: steady, consistent gains made with sound judgement: the snowball metaphor is apt.
People in financial markets often have the reputation of being greedy, predatory or incompetent. In its review of Alice Schroeder’s The Snowball: Warren Buffett and the Business of Life, the Houston Chronicle says that Buffett is an exception. He is entirely rational. The book gives us a glimpse of how Buffett made his fortune, and describes how Buffett operates through his Berkshire Hathaway investment vehicle. He rigorously analyses a company's fundamentals, and once he determines a company’s intrinsic value and understands exactly how it makes money, he develops a view on the business's future prospects. He looks for companies that have a "moat" that creates high barriers to entry for would-be competition.
We shouldn’t put our eggs in many baskets.
We shouldn’t place small amounts in each basket.
We shouldn’t switch holdings frequently.
We shouldn’t avoid holding cash.
We shouldn’t rely on outside analysis.
We shouldn’t follow the crowd.
We shouldn’t watch the market obsessively.
We should adhere to fixed investment principles.
We should invest in no more than five or 10 shares.
We should only buy if we’re prepared to put at least 10 per cent of our net worth into the stock.
We should expect to hold our investments for ever.
We should only invest our cash when we find something worth buying.
We should do our own research - and do it thoroughly.
We should always have sound, well-argued, well-researched reasons for our investments.
We should ignore the market, the crowd, and its fashions.
Buffett believes that the most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd. Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.
Some choice Buffett quotes:
• If you are in the investment business and have an IQ of 150, sell 30 points to someone else.
• It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.
• Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.
One of the most revealing parts of the book is where the author traces the formation of Buffett’s operating principles from early childhood. Having more information than the other guy, and analysing that information and using it rationally, became a key principle for Buffett. He held very clear views about the benefits of being an entrepreneur over being an employee. “If you go to work every morning with your stomach churning, you’re in the wrong business.” Buffett always knew that he had to work for himself. “I didn’t want other people directing me. The idea of doing what I wanted to do every day was important to me.”
In the heyday of his activity, John D. Rockefeller said that "the ability to deal with people is as purchasable a commodity as sugar or coffee." "And I will pay more for that ability," said John D., "than for any other under the sun." Buffett’s biographer tells us that all his life, Buffett’s role model was Dale Carnegie. Buffett has read and reread How to Make Friends and Influence People every year since the age of eight. Buffett decided to test the statistical validity of Carnegie’s admonitions. Once he had proved them to his satisfaction, he adopted them as cast-iron life principles. Buffett was greatly impressed by such admonitions as:
• Flaming enthusiasm, backed up by horse sense and persistence, is the quality that most frequently makes for success.
• Let the winds of enthusiasm sweep through you.
• Live today with gusto.
• Remember that a person's name is to that person the sweetest and most important sound in any language.
• Talk in terms of the other person's interests. Make the other person feel important - and do it sincerely.
• Financial success is 85 percent due to the ability to express ideas, to assume leadership, and to arouse enthusiasm among people.
That's not a criticism - he describes his success as being the result of a few simple investment ideas and doing what he enjoys, but almost nobody has been able to replicate what he does. What he says is what he knows is best for who he's reaching out to (or teaching) - it can't be what he does, or it would be easy to replicate.
Alice Schroeder's authorised autobiography gives you a much, much better look at what he does than any previous Buffett book has (and there are literally dozens) in chronicling the complicated personal and business career of a giant.
He was a businessman from the start, selling chewing gum at 6, before moving up to cans of Coke, newspapers and weighing machines. He also learnt very young to get someone else to do the work for him, and for his capital and the allocation of it to be his leverage. By 15, he'd invested with his father in a hardware store.
He was a broker for a time until Benjamin Graham retired - but didn't like the fact you got paid for activity, not success. He was one of the very first hedge funders - taking 25% of the profits and reinvesting them in his own funds until the share market opportunities became harder to find, and buying companies outright was more lucrative.
The book details the "worst deal he ever made" - buying Berkshire Hathaway. It also runs through plenty of other bumps and bruises along the way that everyone has, his just being public, including a stint as the head of Salomon Brothers, strikes at the Buffalo News, and a series of insurance company mishaps.
All the great stories are in there: Charlie Munger, cocoa arbitrage, Blue Chip Stamps, American Express, Sees Candy, GEICO, the newspapers, Nebraska Furniture Mart, the insurance float, LCTM.
But, as the title alludes, nothing stopped the snowball rolling down the hill gathering money. A depression baby, he never overpaid a penny for anything. He never used any debt to leverage a purchase. Partly because of the price paid and the equity level, he never had a big loser. The other key to the snowball? In all the buying - it was always about money for him, not ego. That essence clarified all the decision making down to one thing: would he make money from it?
The story throughout is an amazing one if you've got an interest in business or investing. It's your best chance of seeing what he does - all the other Buffett books except American Capitalist are about what he says. It's long, but 5 stars.
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