Alice Schroeder - The Snowball: Warren Buffett and the Business of Life

Contents

To David

I t is the winter of Warrens ninth year. Outside in the yard, he and his little sister, Bertie, are playing in the snow.

Warren is catching snowflakes. One at a time at first. Then he is scooping them up by handfuls. He starts to pack them into a ball. As the snowball grows bigger, he places it on the ground. Slowly it begins to roll. He gives it a push, and it picks up more snow. He pushes the snowball across the lawn, piling snow on snow. Soon he reaches the edge of the yard. After a moment of hesitation, he heads off, rolling the snowball through the neighborhood.

And from there, Warren continues onward, casting his eye on a whole world full of snow.

PART ONE

The Bubble

The Less Flattering Version

Omaha June 2003

W arren Buffett rocks back in his chair, long legs crossed at the knee behind his father Howards plain wooden desk. His expensive Zegna suit jacket bunches around his shoulders like an untailored version bought off the rack. The jacket stays on all day, every day, no matter how casually the other fifteen employees at Berkshire Hathaway headquarters are dressed. His predictable white shirt sits low on the neck, its undersize collar bulging away from his tie, looking left over from his days as a young businessman, as if he had forgotten to check his neck size for the last forty years.

His hands lace behind his head through strands of whitening hair. One particularly large and messy finger-combed chunk takes off over his skull like a ski jump, lofting upward at the knoll of his right ear. His shaggy right eyebrow wanders toward it above the tortoiseshell glasses. At various times this eyebrow gives him a skeptical, knowing, or beguiling look. Right now he wears a subtle smile, which lends the wayward eyebrow a captivating air. Nonetheless, his pale-blue eyes are focused and intent.

He sits surrounded by icons and mementos of fifty years. In the hallways outside his office, Nebraska Cornhuskers football photographs, his paycheck from an appearance on a soap opera, the offer letter (never accepted) to buy a hedge fund called Long-Term Capital Management, and Coca-Cola memorabilia everywhere. On the coffee table inside the office, a classic Coca-Cola bottle. A baseball glove encased in Lucite. Over the sofa, a certificate that he completed Dale Carnegies public-speaking course in January 1952. The Wells Fargo stagecoach, westbound atop a bookcase. A Pulitzer Prize, won in 1973 by the Sun Newspapers of Omaha, which his investment partnership owned. Scattered about the room are books and newspapers. Photographs of his family and friends cover the credenza and a side table, and sit under the hutch beside his desk in place of a computer. A large portrait of his father hangs above Buffetts head on the wall behind his desk. It faces every visitor who enters the room.

Although a late-spring Omaha morning beckons outside the windows, the brown wooden shutters are closed to block the view. The television beaming toward his desk is tuned to CNBC. The sound is muted, but the crawl at the bottom of the screen feeds him news all day long. Over the years, to his pleasure, the news has often been about him.

Only a few people, however, actually know him well. I have been acquainted with him for six years, originally as a financial analyst covering Berkshire Hathaway stock. Over time our relationship has turned friendly, and now I will get to know him better still. We are sitting in Warrens office because he is not going to write a book. The unruly eyebrows punctuate his words as he says repeatedly, Youll do a better job than I would, Alice. Im glad youre writing this book, not me. Why he would say that is something that will eventually become clear. In the meantime, we start with the matter closest to his heart.

Where did it come from, Warren? Caring so much about making money?

His eyes go distant for a few seconds, thoughts traveling inward: flip flip flip through the mental files. Warren begins to tell his story: Balzac said that behind every great fortune lies a crime.1 Thats not true at Berkshire.

He leaps out of his chair to bring home the thought, crossing the room in a couple of strides. Landing on a mustardy-gold brocade armchair, he leans forward, more like a teenager bragging about his first romance than a seventy-two-year-old financier. How to interpret the story, who else to interview, what to write: The book is up to me. He talks at length about human nature and memorys frailty, then says, Whenever my version is different from somebody elses, Alice, use the less flattering version.

Among the many lessons, some of the best come simply from observing him. Here is the first: Humility disarms.

In the end, there wont be too many reasons to choose the less flattering versionbut when I do, human nature, not memorys frailty, is usually why. One of those occasions happened at Sun Valley in 1999.

Sun Valley

Idaho July 1999

W arren Buffett stepped out of his car and pulled his suitcase from the trunk. He walked through the chain-link gate onto the airports tarmac, where a gleaming white Gulfstream IV jetthe size of a regional commercial airliner and the largest private aircraft in the world in 1999waited for him and his family. One of the pilots grabbed the suitcase from him to stow in the cargo hold. Every new pilot who flew with Buffett was shocked to see him carrying his own luggage from a car he drove himself. Now, as he climbed the boarding stairs, he said hello to the flight attendantsomebody newand headed to a seat next to a window, which he would not glance out of at any time during the flight. His mood was buoyant; he had been anticipating this trip for weeks.

His son Peter and daughter-in-law Jennifer, his daughter Susan and her boyfriend, and two of his grandchildren all settled into their own caf au lait leather club chairs set around the forty-five-foot-long cabin. They swiveled their seats away from the curved wall panels to give themselves more space as the flight attendant brought drinks from the galley, which was stocked with the familys favorite snacks and beverages. A pile of magazines lay nearby on the sofa: Vanity Fair, the New Yorker, Fortune, Yachting, the Robb Report, the Atlantic Monthly, the Economist, Vogue, Yoga Journal. She brought Buffett an armload of newspapers instead, along with a basket of potato chips and a Cherry Coke that matched his red Nebraska sweater. He complimented her, chatted for a few minutes to ease her nervousness at flying for the first time with her boss, and told her that she could let the copilot know that they were ready to take off. Then he buried his head in a newspaper as the plane rolled down the runway and ascended to forty thousand feet. For the next two hours, six people hummed around him, watching videos, talking, and making phone calls, while the flight attendant set out linens and bud vases filled with orchids on the birds-eye maple dining tables before returning to the galley to prepare lunch. Buffett never moved. He sat reading, hidden behind his newspapers, as if he were alone in his study at home.