Review – The Snowball (#investing, #books, #business, #review)

Review – The Snowball (#investing, #books, #business, #review)

The Snowball: Warren Buffett and the Business of Life

by Alice Schroeder, published 2008, 2009 (condensed and updated)

This is my second reading of The Snowball. I enjoyed it almost as much as the first, five years ago, and definitely took away different things from this reading than I did last time. At that time, I was just finishing my “personal MBA”  deep-dive into value investing and was interested in Schroeder’s Buffett bio mainly for the information and insight it would yield into Buffett’s approach and track record as an investor. I was surprised to come away from that reading realizing that the book was a moral parable in the form of a man’s life (an incredibly successful, well-known and near-worshipped man) and my second journey through the book was more focused on the question “How should I think about living my life?” than the question “How should I think about investing?”

I found the book most exciting to read and most interesting personally in the exploration of Buffett’s origins and the detailed narrative about the first twenty years of the partnerships that proceeded his investment in Berkshire Hathaway. As the story wore on and it became more about managing what he had and dealing with the consequences of choices wrought long ago, I found myself losing interest, particularly as the Salomon and Long-Term Capital Management sagas carried on for a mind-numbing fifty-plus pages in total.

Buffett’s childhood was far more unusual than I cared to notice in my first reading. He was obsessed with business, investing and the impact of statistics in life not just from a young age, but in ways that were extraordinary even for someone to be described as “doing X from a young age” would imply by itself. Obsessed is not a word I use lightly here. The young Buffett was probably an odd creature to be around, even for people who loved him or found him interesting or were of unusual talent and ability themselves. This seems confirmed in later years when so many people familiar with him describe feeling exhausted after spending just a few hours with him. It helped me to realize how unfair and pointless trying to compare yourself to a person like Buffett is.

When asked by Bill Gates, Sr., at a dinner what single word they’d use to describe the outcome of their life and their success, Buffett said, “Focus.” As Schroeder describes in many places in the book, and especially at length in the final chapter, “focus” means something completely different when Buffett says it versus anyone of lesser ability and different personality. When Buffett says “focus” he means “to the exclusion of all else, with relentless, all-consuming energy, without tiring or being distracted.” There is no balance working behind the scenes. He gave up a lot of “normal” things most other people would insist on or desire in distinction to that which they were focused on, not as a sacrifice but as an inevitability of his personality.

The most obvious and tragic is his relationship with his family and his relationship with himself. Most other people who are driven towards success in their field and the monetary rewards that typically come with it offer up the excuse of their family as their motivation, honestly or not. This wasn’t the case for Buffett, and achieving supremacy in his profession and in his personal net worth really didn’t do anything to enhance his relationship with his family or the way he cared for them. It is indicated on numerous occasions what kind of tradeoff he would’ve had to make to be more involved with his family, and he never did it. It’s an excellent reminder for someone who sees themselves as driven to achieve that these tradeoffs are real and accepting a “lower rate of return” in one’s efforts is a necessary (and happy?) price to pay to maintain a relationship with one’s family, which itself is valuable.

Buffett’s relationship with himself is also instructive in this regard. Many people wonder how money can’t solve most problems, and why people who are super wealthy continue to eat poorly, exercise infrequently and maintain the same limited psychological state and insecurities they possessed before they achieved glory. The answer again is simple– in the drive toward massive wealth, things get set aside and often it is the improvement of the self as a holistic unit that is set aside first in order to claim excess in one aspect.

Of course, we can’t expect Buffett to be perfect. Nobody is, and the point of mentioning this isn’t to point out the man’s flaws, but to explain them. You can’t have Buffett and have these issues resolved to everyone’s satisfaction. They come with the territory. If you want to be “focused” like Buffett, plan on neglecting your family and yourself, quite a bit. That’s only a judgment if you think those things are objectively more important than wealth or self-actualization in the area of generating wealth. That’s not really a judgment I want to make here and I think it misses the point.

Yet, Buffett’s flaws make for a fascinating lesson in a different way. Though Buffett was unusual, and exceptional, and completely driven toward a single-minded purpose from a young age, the path was far from certain that he would need to tread to get to wherever it was that he would end up going. It’s easy to sit here today reading a book published almost ten years ago, recounting events that unfolded over the past eighty, and see what was inevitable as inevitable. But Buffett made mistakes. Many of them, along the way. That’s what’s truly remarkable, that he made mistakes and still arrived where he did. It’s a good salve for a person carrying around the perfectionist fallacy. Give it a rest and get going, you can make some mistakes and still end up alright if Buffett is any example.

I love reading stories like this, stories of flawed people of unusual ability who managed to achieve something heroic even if their life wasn’t truly ideal. I love knowing it can be done. I love knowing what the pitfalls and the tradeoffs are, so I can be mindful of them myself. I love the way I can give myself permission to not achieve what they achieved (in kind or in magnitude) having the benefit of hindsight to see what it truly took that I can’t give, or won’t.

But most of all, I just love watching someone create something from nothing. That creative energy is uniquely human and what I admire most about our species and this little project called “civilization” that we’re all tinkering away on. The Snowball is not as great an investment manual as I originally thought it was (for that, I’d recommend Buffett’s BRK shareholder letters, along with or after reading Graham’s Security Analysis and The Intelligent Investor), but it is an epic moral profile and a captivating read overall because of it.

4/5

5 thoughts on “Review – The Snowball (#investing, #books, #business, #review)

  1. Nice review. I’ve been thinking about that excerpt about “focus” for a little while and I like your assessment.

    I think Charlie Munger also exhibits this kind of focus. While at the DJCO meeting this year, I noticed how Charlie never seemed to get tired from answering questions (for 5 hours), and he never got distracted, even when distractions occurred.

    I’ve been wondering how they’re capable of doing this. I think it’s one part genetic, but another part must be learned behavior. I suspect that a good portion of their energy and focus comes from the way they approach questions or puzzles. I don’t think they feel stress or anxiety from trying to answer such things. Which is a big advantage because stress and anxiety can weigh on one’s focus, energy, and motivation.

    1. Just found this quote from Buffett on stress:
      I have no stress whatsoever – zero. I get to do what I love to do every day. I’m surrounded by people that are terrific.

      1. Richard,

        Thanks for the reply. I will try to cover both your comments here at once.

        During the Salomon episode, there was a mini-crisis when John Gutfreund was let go and Buffett and the compensation committee decided against his proposed compensation package. This led to arbitration, during which Munger was interviewed by Gutfreund’s lawyers about the “agreement” G thought he had made regarding compensation. In it, Munger shares about his habit of tuning out selectively. The entire episode, as related, is a bit comic and hard to believe as Munger puts on this performance of “tuning out” in the middle of being asked about tuning out, asking for questions to be repeated three times before he finally pays attention.

        The other anecdote that seems relevant is the recounting of Munger’s behavior during his 80th birthday, where he gives himself a speech that amounts to a massive humblebrag and is eventually dragged off the “stage” by his wife because he won’t shut up.

        Putting these items together, it seems like Munger (and Buffett?) are possessed by both unique abilities to tune out inconsequential information or things they don’t consider important to the task at had, and such self-absorption when “preaching” that they achieve a state of focus unlike any of us have personally experienced. But that’s really some trivia and speculation. Regardless of how it’s achieved, what I wanted to highlight is that it doesn’t seem like something one can learn and adapt to themselves and their process. It is a unique aspect of their personality and extremes thereof. It is more an outgrowth of how they experience their own existence than it seems to be some conscious effort to choose to focus, almost like they can’t help but behave any other way in this regard. It’s descriptive of how they’ve achieved without being prescriptive of how others might do the same, in my mind!

        Your comment about stress was also interesting. I think I agree with you that stress is not a part of their problem-solving process. When it comes to their approach to work, as you say, they seem pretty stress free. But that is a different thing altogether from saying they don’t experience stress. Munger’s early bout with depression when he lost his first marriage and his son was clearly an extremely stressful event for him. And the description of Buffett’s reaction to the loss of Kay Graham, his wife Susie, his friend Bill and other deeply affected friends is hard for me to read– he completely loses it and it’s so clear in those moments what a heavy heart he bears on certain matters, all while being able to “tap dance to work” stress free.

        The thing I thought about as I was reading some of that stuff and I meant to mention it in my post, is that even billionaires can’t avoid the simple, inevitable unhappiness of life at times. Being rich, successful, focused, etc., doesn’t make it any easier to lose loved ones, nor does it insulate you from the very risks of such things happening. Even as much as Buffett had trouble facing these episodes and tried to avoid being an active participant in them, the pain found him and overwhelmed him completely.

        It’s a humbling message about how to set one’s expectations in life and for me put a lot of his personal, financial achievements into a different perspective!

        Btw, I forget if I had shared this with you before but you may be interested in my reading notes from my first pass through The Snowball, available here: http://www.ahouserises.com/books/notes-the-snowball-by-alice-schroeder-part-i-chap-1-4-buffett-valueinvesting/

        1. I love that story about Charlie tuning out as well as his 80th birthday shtick. I’ve never heard those before.

          I find that this ability to “tune things out” is something which most great people possess. For example, I was reading Alexander Hamilton’s biography the other day and was shocked how he could remain productive even when serious events were weighing on his mind. At one point he was be blackmailed over an affair he was having, and yet he was able to remain incredibly productive all the while.

          Napoleon Bonaparte also possessed this ability. He once claimed: “Different subjects and different affairs are arranged in my head as in a cupboard. When I wish to interrupt one train of thought, I shut that drawer and open another. Do I wish to sleep, I simply close all the drawers and then I am – asleep.”

          So I think people like Buffett and Munger process tasks in this “cupboard-based” system. So even when they’re experiencing hardships or stressful periods (like Buffett with the loss of his wife or Kay Graham) they’re able to open and close those drawers much more easily than most people.

          It does seem like great people were born with a innate ability to function in this “cupboard-based” system of focus. They all seemed to do it naturally from a very early age.

          But I do think we can learn from their examples and endeavor to behave similarly. One such example would be recognize the ineffectiveness of multi-tasking and focus on the task at hand.

          Charlie Munger: “Multi-tasking will not give you the highest quality of thought that man is capable of doing. Juggling two or three balls at once where people come at you on their schedule, not yours, is not an ideal thinking environment.”

          Teddy Roosevelt: “When you play, play hard; when you work, don’t play at all.”

          1. Richard,

            “Cupboarding” is a fascinating productivity technique/capability/quirk.

            It’s also a problematic personality paradigm when it occurs in the moral part of one’s brain.

            I don’t think I need to provide any trite historical cliches for you to think of your own examples of people who, say, would never steal from the shopkeeper, but would be willing to foist a massive entitlement program on society that essentially just redistributed wealth, or a politician who would never harm another person or even animal himself, but who could send millions to a violent war to die.

            Actually… Napoleon might be a good example of that!

            Anyway, just like Buffett’s focus, these things often involve tradeoffs. You might “cupboard” your way into selectively paying attention to details and improving your productivity, but that same part of your personality or psychology or whatever also leads you to commit grievous moral errors in selectively applying moral principles to your social behavior and decision-making.

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