The Snowball: Chapters 60, 61 & 62

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

Under the microscope in the mid-2000's, Buffett was forced to deal with a number of adversities. His ex-wife, Susie, passed away. Schroeder details the effects her illness and death had on Buffett and the rest of the family.

For most of Buffett's life, he had felt it made more sense for him to accumulate wealth, for this way, when he passed away there would be more of it to give away. But at this point, Buffett starts to change his behaviour. He starts giving money more liberally to his kids and grandkids, and announces early donations to charities and foundations (including the Bill and Melinda Gates Foundation).

During this period, Buffett also dealt with severe problems at Coke. Management had lost control. Profits were down, the stock was down, and scores of protesters were taking over the annual meeting, from unions who felt unfairly treated to environmental rights activists. Even Jesse Jackson attended to accuse the company of racism. Buffett has always looked for companies that were so strong that they could be managed by a ham sandwich. He mused after this latest episode at Coke that the company may no longer be around had it not been one such company.

Finally, the book ends with a description of Buffett's actions as the recession of 2007 onwards was taking place. A few years earlier, Buffett had warned about the potential perils of derivatives. Now, those derivatives were wreaking havoc on the global economy. Buffett was granted an opportunity to buy stocks that he had not seen for a long time.

The Snowball: Chapters 57, 58 & 59

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

Throughout his career to this point, Buffett's reputation had been helpful for his investments. With increased fame and success, however, his reputation began to work against him in some ways. If he offered a price for a company, there was a perception that the sellers were getting ripped off, since Buffett only buys undervalued companies. Schroeder describes one case in particular with respect to Clayton Homes where nobody wanted the stock - until Buffett made an offer for the company. At that point, shareholders, the media, legal firms and other groups argued that the deal was unfair and that Buffett was trying to rip people off.

In other cases, Buffett's prominence made otherwise small companies big targets of special interest groups. For example, anti-abortionists boycotted a small company which Berkshire owned, because Berkshire was making donations to pro-choice groups. (The company being boycotted had nothing to do with abortions; it sold kitchen-ware.) Buffett caved to the pressure and stopped Berkshire's charity program.

These chapters also deal extensively with the health issues now experienced (circa 2003) by Buffett's ex-wife, who was diagnosed with cancer. Susie remained a big part of Buffett's life even though they had split up, so her battle with illness caused great strain on the entire family.

The Snowball: Chapters 53, 54, 55 & 56

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

Buffett had lost a lot of credibility during the technology bubble in the year 2000. Because he didn't have technology stocks, he didn't have the returns; for the first time, he had been outperformed by the market index over a five-year period! One media pundit even suggested that Buffett should apologize to shareholders. He was called a "has been", and attendance at his annual meeting dropped by 40%.

After the bursting of the bubble, people jumped back on the Buffett bandwagon. Crowds to the Berkshire annual meeting came back even stronger than before, as investors sought Buffett's wisdom. As he became more trusted as not just a wise investor but also as a wise person, his opinion was asked on a number of issues that were not related to investing. In response, Buffett did take up a couple of causes where his credibility could bring about actual change.

For example, Buffett fought for higher estate taxes, arguing that wealth passed down over several generations subtracted from the health of society. Buffett was also instrumental in the fight against those who opposed the expensing of stock options. Coke was one of the first large companies to start expensing stock option hand-outs, and eventually they became an accounting requirement.

In the years leading up to the 9/11 terrorist attacks, Buffett actually advised his insurance companies to avoid taking on terrorism risk, likely because such business was under-priced. Following the attacks, Berkshire made a lot of money selling insurance against future attacks, as customers were now willing to overpay (from an odds point of view) for protection.

The Snowball: Chapters 49, 50, 51 & 52

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

The Salomon debacle added stress to Buffett's life like no other business situation. He was sleepless at night, as he wondered how the billions of dollars of expiring debt would be paid as customers withdrew their funds and cancelled deals. But Buffett guided Salomon through the mess, and came out of it looking like an honest genius. From the start, he focused on turning the firm into an ethical powerhouse, which likely enabled it to avoid an indictment that would have finished the firm.

In 1991, Buffett meets Bill Gates for the first time. Neither had expected to have much in common with the other (other than the fact that they were #1 and #2 in the world's richest man rankings), but they hit it off immediately. They were so enthralled in private conversation that they left others at the party miffed. Gates, who understood the notion of competitive advantage very well himself, advised Buffett to buy Intel and Microsoft in 1991. Buffett only bought a token amount, 100 shares, of the latter. Gates also told Buffett that Kodak would go bust because of the digital age; at the time, Kodak was prosperous and saw no threat.

The author also describes Buffett's attempt to buy Long-Term Capital Management (LTCM) before it was bailed out. Because Buffett had been touring remote areas with the Gates', he was unable to consummate a deal that he believes would have been very lucrative. LTCM had equity of $500 million for which Buffett offered $250 million. The problem for LTCM was that it needed a capital injection to stave off default (due to leverage); Buffett was willing to make a capital injection of several billion dollars. However, for a couple of potential reasons (one being that LTCM was run by a man Buffett had fired for ethical violations at Salomon), Buffett believed that LTCM downplayed the likelihood of a private transaction and thereby forced the government to bail it out (in order to avoid panic in the capital markets).

As the year 2000 approached, Buffett had fallen to #4 in the world's richest man rankings, as the technology boom took center stage. People called him a has-been and a dinosaur as he would not invest in technology stocks, which were the hot investments of the day.

The Snowball: Chapters 45, 46, 47 & 48

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

In the 1980's, leveraged buyouts were all the rage. Interest rates had fallen as inflation had been brought under control, and so private firms were looking for bloated public firms that they could buy, make more efficient, and sell for a profit. Buffett is wary of the debt (including debt of 'junk' status) that is used to finance these purchases, and so he does not participate.

However, as his fortune and fame have risen, he is called upon by corporate managers as a white knight, to save them from hostile buyouts. Since Buffett does not micromanage, corporate managers are happy to have him take stakes in their firms, even if it means a lower price; private equity firms, on the other hand, are likely to fire the existing managers.

During this time, Buffett was also facing losses in his insurance businesses. The book details some of the management changes that took place, and how Buffett has dealt with poorly performing businesses. He will often single out managers who have done a good job in his annual letter to shareholders, but will omit praise when it is not due. Often, he will take the blame himself in his letters, but behind the scenes he will make management changes.

The author also goes into excruciating detail with the Salomon debacle that Buffett was involved in that almost bankrupted the firm. Ethical violations by top managers at the firm resulted in the government shutting the firm out from debt auctions. This would likely have sent financial markets on a downward spiral, as Salomon's bankruptcy would likely have spread to other firms, its counter-parties, who would go unpaid in the event of a bankruptcy. Drawing on the reputation Buffett had earned by this point, Buffett is able to get concessions from the government that allow the firm to stay solvent enough time to survive a run on the firm's paper.

The Snowball: Chapters 41, 42, 43 & 44

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

As Buffett spent most of his time working, whereas his wife Susie tended to their children, community affairs, and a singing career, they began to grow apart. Buffett spent much of his time in Washington and New York with the female CEO of the Washington Post in which he owned a large stake, while Susie was spending time with other men. Once the kids were grown up, Susie moved to San Francisco while Buffett remained in Omaha.

According to the author, Buffett was a wreck after Susie left. They would talk for hours on the phone with Buffett weeping, wishing her to return. Susie enlisted Astrid Menks to look in on her husband and bring him hot meals every now and then. Buffett and Menks would soon lean on each other, and eventually move in together. This was not what Susie intended, but Astrid was willing to defer to Susie, who was the public wife, while Astrid was the private mistress.

During this time, Buffett purchased the Buffalo Evening News through Blue Chip Stamps. This was his largest purchase to date, at $35 million, and it was almost a complete failure. Buffett had stated publicly that most cities would end up with only one daily paper, and so he quickly went after the competition in Buffalo. While his paper led on weekdays, the competition had the Sunday paper market cornered. Buffett got his paper to print a Sunday edition, and offered it free and/or with heavy discounts in order to undercut the competition. This, along with his comments about him seeing only one daily paper in US cities would land him in hot water with anti-competitive laws. The competition asserted that Buffett had aimed to shut them down from the start, and they were winning in court. Legal restrictions that were subsequently placed on Buffett's paper were causing massive losses.

Buffett was ready to give up and liquidiate, but Munger (another owner of Blue Chip Stamps) wanted to fight on. With new management, the paper's fortunes improved, and court decisions were reversed on appeal after much legal wrangling. Five years, later, the Buffalo Evening News started generating huge profits relative to the purchase price.

In 1983, Buffett and Munger also agree on a price for Blue Chip Stamps, and Berkshire acquired the entire company. Thus, Munger and Buffett now officially became partners in Berkshire Hathaway.

Finally, the author details the incredible life story of Rose Blumkin, who started the Nebraska Furniture Mart that Buffett purchased in the 1980's. Blumkin was dirt poor in Russia, and traveled to the US to live out the American dream. Through hard work and perseverance, she and her husband started and grew their store to become the largest furniture retail store in North America.

When they first started, no suppliers would sell to them because the competition was complaining that they undercut on price. (She would only mark up inventory by 10%!) Undeterred, Blumkin was forced to travel around neighbouring states by train looking for overstock in order to stock her store. Her customers came to appreciate the value they were getting, and the competition was wiped out or crippled in the process. Buffett somehow purchased 90% of the company for $55 million, though its inventory at the time of purchase was $85 million. Blumkin turned away investors offering more money because managerial control going forward was important to her.

The Snowball: Chapters 37, 38, 39 & 40

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

In the early 1970's the market began to fall, and by a substantial amount. In 1973, Buffett and his friends saw their portfolios fall by significant margins. Munger's portfolio had halved, and Buffett's was down a third.

Of course, Buffett took advantage of the situation by buying even more stocks, and there were many bargains to be had. Buffett was able to buy many newspapers including a stake in the Washington Post. Shares in Berkshire had also fallen, causing some of Buffett's former partners to sell their shares. Buffett took advantage of the opportunity and snapped the shares up himself. It wasn't that the textile business at Berkshire was any good; Buffett was making a bet that he would be able to to deliver returns by buying other businesses through Berkshire.

At the same time as their portfolios were taking a hit, Buffett and Munger were also dealing with lawsuits from one of their businesses, and an SEC investigation into their operations. The SEC felt that Buffett and Munger's actions on a bank deal were illegal. (Buffett and Munger had convinced a bank's controlling shareholders to rebuff an offer and to instead sell to them.) The SEC also felt that the complicated ownership structure (which had Buffett, his family, and some of his friends and their families own shares of several companies, many of which had cross-holdings of the other companies!) was meant to hide and mislead. Eventually, the SEC relented, mainly on the favourable (towards Buffett) opinion of a lawyer whom the SEC investigator respected.

Shortly thereafter, GEICO shares drop from the 40's to $2 per share, as the company was on the verge of bankruptcy. Buffett had recognized that the previous management was poor, and set out to meet the new manager assigned with the task of bringing the company back to life. Buffett meets with John Byrne for two hours, asking him his plan for saving the company and for growing it thereafter. Buffett likes what he hears; he goes on to once again buy shares of this company he had followed ever since he bought and sold its shares decades ago. The author describes the business decisions Byrne undertook in order to right the ship, making Buffett a ton of money in the process.

The Snowball: Chapters 33, 34, 35 & 36

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

With the market high, Buffett would wind down his fund in 1969 and "retire". In so doing, he returned a lot more money to his partners than they had invested with him over the years. To partners who sought Buffett's opinion on who should manage their funds, Buffett suggested Munger and two others of whom he had high opinions.

Buffett did not convert all of the partnerships' holdings to cash. Partners also received their interest in stock of Berkshire Hathaway and a couple of other companies. Buffett did offer cash or notes in return for these shares, though he added that he would likely continue to buy shares of these companies. To their future economic detriment, many partners sold out.

It is around this time that Buffett came across See's Candy, one of his more famous investments. The offering price for the company was a whopping 5 to 6 times its book value, which almost resulted in Buffett not making the purchase. But Munger, who Buffett brought in as a partner on the deal, absolutely loved the business. The company generated extraordinary returns on capital, and Buffett saw the potential for price increases that would result in even stronger profits. Buffett and Munger were able to buy it at about 11 times earnings, and it has been an extremely profitable purchase for them.

Throughout this period, Buffett also sought media companies. The author remarks that had he not gone into investing, Buffett would likely have gone into journalism, such was his interest in the field. Buffett would buy a couple of small newspaper outfits, but found the top-tier companies too pricey at first. For one of the papers he owned, Buffett would apply his skills to help the paper win a Pulitzer Prize, as the story uncovered a $200 million+ portfolio for a charity that claimed to be in the red. More on that here.

The Snowball: Chapters 29, 30, 31 & 32

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

Market sentiment was high in the mid-to-late 1960's, and so at times Buffett had difficulty investing. He made a couple of investments in retail which were out of his circle of competence to some extent.

One of them did not work out at all; it was a department store in Baltimore. The problem was that there were three other department stores right nearby, and so they all competed with each other. If one got an elevator, the others would have to as well etc. Buffett saw this as akin to "standing on tip toe at a parade": as soon as one person does it, everyone has to, resulting in everyone being uncomfortable.

Berkshire Hathaway continued to perform poorly through this period. But Buffett did not want to be unpopular, according to the author, so he sometimes made decisions that were in conflict with making money. Instead of shutting them down, he would keep divisions open longer than they should have been.

From his other investments, however, including American Express, Buffett was flush with cash. As such, he was willing to buy National Indemnity for more than he thought it was worth because of the economics of the business. Insurance requires capital to grow, and capital was something Buffett wasn't short of. Insurance also provided a float (money in advance, which only had to be paid back later), which Buffett was an expert at handling.

Finally, Buffett starts to take an interest in something other than investing. He helps finance an anti-war candidate during the Vietnam War, and even volunteers his time as the politician's treasurer. Buffett also shows a preference for something other than collecting money; he announces to his partners that he will make decisions that may reduce returns in return for more enjoyable investing. That is, rather than buy cheap and sell quickly opportunistically, he may keep holding businesses where he likes the nature of the business and the people who run it.

The Snowball: Chapters 25, 26, 27 & 28

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

The author describes one of Buffett's investments in the early 1960's by the name of Dempster Mill. The business was badly managed and the banks were closing in when Buffett bought it on the cheap and put a manager in place (recommended by Munger) to turn things around. The business was saved, but not before the manager had instituted layoffs to cut expenses. The people of the town that relied on the mill were furious that an "outsider" like Buffett was able to profit while many lost their jobs. Buffett was puzzled, wondering if the townspeople knew that he had saved the business. As someone who prefers to please people, Buffett learns from this experience; in the future, he would be better at avoiding the anger of the public.

While Buffett was busy generating returns for his own fund, Charlie Munger was starting a fund of his own. He and Buffett continued to stay in touch, and both learned from each other. Munger did purchase some "Ben Graham"-type stocks, but he preferred quality businesses with competitive advantages. Buffett was influenced by Munger and Philip Fisher (whose book is summarized here) as he transitioned from being a "Ben Graham" investor to one that also looks for companies with intangible assets that generate wealth. This new outlook, in combination with the Salad Oil Scandal that halved the shares of American Express, would lead to Buffett's lucrative purchase of American Express.

As Buffett's fund was an extraordinary success, investors were now flocking to him; he no longer had to pitch. But not everyone can come to terms with the idea of value investing, as per the following quote from Buffett:

“With some, the idea of buying dollar bills for forty cents takes, and with some it doesn’t take. It’s like an inoculation. It’s extraordinary to me. If it doesn’t grab them right away, I find that you can talk to them for years and show them records—you can do everything—and it just doesn’t make any difference. I’ve never seen anyone who became a convert over a ten-year period with this approach. It’s always instant recognition or nothing."

During the early 1960's, Buffett's father also died. Only after his father's death does Warren feel comfortable enough to own up to being a Democrat (Buffett's father was a Republican congressman). Buffett's main reason for defecting was the Democrats' "pro" stance on civil rights.

It is during this period that Buffett also begins to purchase Berkshire Hathaway. It traded at a large discount to its assets and Buffett had no intentions of owning the thing for long, but Buffett felt that the company's manager/controller had reneged on a sale agreement (Buffett had agreed to sell at $11.50, but when it came time to tender the shares, the offer came in at $11.375.) In anger, Buffett decided to buy up more shares (rather than sell) and fire the manager. This would prove to be a mistake, as Buffett reflects later:

“I would have been better off if I’d never heard of Berkshire Hathaway.”

Nevertheless, by 1965, Buffett's net worth is close to $10 million while he manages much more through his investors/partners. Investments are hard to come by, and so Buffett closes the fund to new money.

The Snowball: Chapters 21, 22, 23 & 24

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

Buffett became a star at Graham-Newman. Eventually, Ben Graham's other hobbies took over his time; he was ready to retire. (Buffett was able to tell that all was not right when Graham made some questionable portfolio decisions. For example, Graham made a curious investment in the large, well-followed, fairly-valued AT&T, which was a very abnormal choice for the firm.) Buffett was offered a partnership position at the firm, but Buffett had only been there to work with Graham; without Graham there, Buffett would prefer to strike out on his own. As a result, Graham-Newman was shut down.

The author then details the formations of all of the Buffett partnerships of the 1950s and early 1960s. As Buffett's results were strong, he was drawing more and more capital to his funds. But at this point in his career, he always had more ideas/opportunities for investment than he had funds. So when he wasn't studying potential or actual investments, he was out raising money. This left him little family time for his wife and now three children, according to the author.

Most of Buffett's investments were cigar-butt type companies: companies with not a lot of potential (maybe one last puff of smoke left in them) but trading at bargain prices. But then Buffett met Charlie Munger through one of his partners/investors. Buffett and Munger hit it off right away, and ended up speaking by phone several days a week, sometimes for hours at a time.

Though Buffett's net worth grew substantially during this period, there were many who felt he was running a ponzi scheme. People were wary of how successful he had become. But those who knew him continued to invest because they believed him to be honest. They would be rewarded with stellar returns.

The Snowball: Chapters 17, 18, 19 & 20

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

Buffett finally has the honour of meeting Ben Graham, which was a huge thrill. Graham was an avid reader, and often preferred the company of books to people. As such, it took a lot of persistence on the part of Buffett to get to know Graham outside of his classes and seminars. Buffett was the only student to achieve an A+ in Graham's class, but that wasn't good enough to land a job at Graham-Newman - yet. Graham turned Buffett down because at the time he would only hire Jews, due to the antisemitism he saw prevalent at other firms, even though Buffett offered to work for free.

Buffett returned to Omaha and instead put his persistence to work towards Susan Thompson, who would end up being his wife. Susan wasn't interested at first, preferring the company of a man her father despised because of his Russian-Jewish heritage. But Buffett spent a lot of time with her family, and in the end his persistence won out.

During this time, Buffett and a partner purchased a gas station, but even though they spent time working there themselves, they could not beat the Texaco station from across the street. It was here that Buffett learnt the value of customer loyalty, as no matter what they did they could not capture customers from the popular owner of the gas bar just a few feet away.

Buffett also spent some time as a broker. But he had problems with the business, due to the conflicts of interest between brokers and clients. Brokers made money off of transactions, whereas Buffett would want to recommend long-term stocks to his clients. He would sell them GEICO and advise them to hold it for twenty years, but it would do nothing for his broker business. He was uncomfortable with the conflicts, and preferred a line of business where he could invest with, rather than against, his clients.

Finally, he gets accepted at Graham-Newman. Buffett moves his family (which now includes a daughter, Susie, and another one on the way) to New York and begins working for Benjamin Graham.

The Snowball: Chapters 13, 14, 15 & 16

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

In high school, Buffett was attracted to sports betting on race horses. He would drag whichever adult who would be willing to take him to the track. At first, he would pick up all the discarded betting tickets from the ground and look through them for winners (for example, some bettors didn't know that there was a payout for 2nd or 3rd place, and sometimes races would be disputed, unbeknownst to the bettor).

Eventually, he began to use data to calculate his own odds of which horses would win. He would compare them to the odds offered by the bookies, and bet through the adult he had dragged to the track with him. One time, Buffett lost his bet on the first race, and bet on every subsequent race trying to recoup his losses. He went home having lost almost $200, a week's earnings on his paper route. At sixteeen, he had learned an important lesson: you don't have to bet on every race. He would not make that mistake again.

Because of his mental abilities, Buffett breezed through university without much effort, while his roommates and classmates struggled with long hours of study. Buffett spent a lot of time on various small business ventures, as he had always done.

Buffett also appears to have been an avid reader. When interested in a subject, he would take out large numbers of books from the library, and often re-read some of his favourites. One topic on which he often read was the stock market. Eventually, he came across Graham's Intelligent Investor, and found out that Graham was teaching at Columbia's business school.

The school accepted Buffett's late application, and new world of security analysis was opened to him. It was during this time that Buffett attended his first annual meeting, where Buffett witnessed a defensive management team forced to field questions from Walter Schloss. Buffett liked Schloss' questions and perspective so much that he introduced himself following the meeting.

It was also during this period that Buffett came to know GEICO. After spending the day at the company learning about how it works, he invested 75% of his net worth in the company, something his teacher, Graham, would have never approved. Needless to say, the investment worked out very well.

The Snowball: Chapters 9, 10, 11 & 12

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

These chapters cover Buffett's late childhood and early teenage years. Throughout this period, Buffett held a multitude of jobs, some entrepreneurial and some as employee. Buffett worked in his grandfather's grocery store, in a couple of hard-labour warehouse/delivery jobs, as a golf caddy and in a bakery. He learned early that hard labour was not for him.

The job that earned him the most money was that of a newspaper delivery boy. He had accumulated earnings of $1000 by age 14, mostly by delivering papers. He would find ways to be more efficient on his route (for example, by folding the papers a certain way, he could roll them downhill to the customers' front doors by just tossing them from the street). Delivering papers in this manner brought him a higher salary than that of his schoolteachers!

One of his most successful entrepreneurial ventures involved pinball machines. He would buy these used machines for $25, get them repaired up by his friend, and then convince a barber (with a 50-50 revenue split) to let him keep it in the shop. This was the kind of high ROIC business that Buffett loves, for the profits from one machine provided the capital for a multitude of future machines.

While Buffett was setting himself up as a terrific businessman, the author paints a different picture of his personal life. After his father was elected to Congress, Buffett had to move from Omaha to Washington, which displeased him greatly. He lost many of his friends and hobbies, and as a shy child that wasn't a great athlete and that put no effort into how he dressed, it was a difficult adjustment.

His grades started to suffer, and he fell in with the wrong crowd. For a while, he stole regularly from the local Sears, and played pranks on his teachers and others. At one point, he even shorted the stock of a company in which the teachers' retirement savings were invested, just to show them the stock slips.

At one point, his father had a talk with him about his unruly behaviour and expressed disappointment that his bright child was not living up to potential. He threatened to take away Buffett's paper route, but more than anything it was Buffett's fathers disappointment that got to Buffett.

The Snowball: Chapters 5, 6, 7 & 8

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

These chapters examine the lives of Buffett's ancestors. The author has identified some common traits of the Buffett families through the generations. They are hard-working, love to preach/educate, and avoid debt wherever possible.

Warren's father, Howard, became a stock broker in 1927 as the market marched upward and optimism reigned. After the crash in 1929, commissions were hard to come by, as were other jobs, and he worried about how to feed his family. His father (Warren's grandfather) owned a grocery store, and while he couldn't afford to hire Howard, Howard's family was able to run up a tab while money was tight. Howard then started his own broker firm and made it a success despite the economic depression that ensued.

Warren was born soon after. As a child, he enjoyed games that involved numbers, counting or odds. He was also into collecting things like stamps, bottle caps and coins. At school, Warren was bored by many subjects but enjoyed and excelled at math. It wasn't long before he entered the business world; at age six, Warren sold gum at a profit of 2 cents per pack. Over the next few years, he would sell gum and newspapers door-to-door, packs of Coke at the beach, and used golf balls at a nearby course (until the owners ran him off with the help of the police).

He bought his first stock at age 12, but knew very little about what he had purchased. All he knew was that his father had sold this issue to a lot of clients. The stock fell significantly, then rose (following which Warren sold it) and then rose by a huge margin. Warren learned a couple of lessons he would never forget:

1) Don't fixate on what you paid for a stock
2) Don't rush to grab a small profit

The Snowball: Chapters 1, 2, 3 & 4

Warren Buffett chose Alice Schroeder to be his biographer, granting her access to his personal life like no outsider has ever been granted. In The Snowball, she is rather frank and is not always complimentary of the investing legend, which has apparently led to a rift between the two. Here follows a summary of the book.

Some of Buffett's and Munger's personality traits are discussed and contrasted in the initial chapters. Buffett cares much more about how he comes across than does Munger, as Schroeder argues that Buffett has a need to be liked. Munger, on the other hand, has no such need and is therefore much more likely to speak his mind.

Schroeder takes the reader through a business conference/vacation attended by many of the world's rich and famous. Despite his riches, Buffett is excited over the free swag he receives (t-shirts etc.). While many of the guests take part in several outdoor activities, Buffett spends a lot of time in his room, focused on the financial news (CNBC on mute) and his newspapers.

At this particular conference, held in 1999, Buffett is the keynote speaker. While he has often said he does not predict stock returns, he makes an exception in this case. The market has gotten way ahead of itself in relation to the economy, which tells Buffett that future prices cannot continue to appreciate the way they have in the last few years. While he recognized that the internet is a great invention, he speaks of other great inventions in the 20th century where investors made little to no money on average. For example, though everyone knew the automobile would take over the world, there were 2000 car companies at one time, but few were successful. The airline industry has also grown enormously from its birth, but again investors in the aggregate have not been able to make a profit.

As a result, he argues that the price estimates of all of these internet companies are far too high compared to what they are actually worth. Because of the run up in stock prices, Buffett argues that future returns are likely to be closer to 6% than the 10+% everybody is expecting. Many in the crowd believe "Old Man Buffett" to have missed the technology boat, and therefore some put little credence in what he says.

Shares of Buffett's company, Berkshire Hathaway, fell from $80,000 to less than $60,000 as technology stocks rose through 1999 and 2000. Many value investors closed shop and switched to internet stocks, but Buffett didn't waver. When asked about how he was able to do that, he talks about having an inner scorecard. Rather than judge himself by how others see him (outer scorecard), he has an inner scorecard. He asks "If the world couldn't see your results, would you rather be thought of as the world's greatest investor but in reality have the world's worst record, or be thought of as the world's worst investor when you were actually the best?" Buffett would choose the latter, but many would prefer the former.

The Snowball: Warren Buffett And The Business Of Life

If you've enjoyed some of the value investing book summaries we have featured on this site, you may also enjoy a summary of The Snowball: Warren Buffett And The Business Of Life, the only biography of Buffett that he has authorized himself.

The book describes Buffett's principles and the type of thinking that has made him the investor he is known for today. It was written by Alice Schroeder in 2008 with the co-operation of Buffett, whose advice to Schroeder as he provided information for the book was: "Whenever my version is different from somebody else's...use the less flattering version."

The summary of this book is available for free to our readers, but in the interest of disclosure, it should be noted that we receive a fee for each reader we send who reads the summary. Therefore, your learning from Warren Buffett will hopefully make us both rich! ;)