The Snowball: Warren Buffett and the Business of Life (Repost)

Alice Schroeder's biography of Warren Buffett, anointed as the world's richest man (but actually probably is second richest next to Bill Gates), is must reading for anyone who wants to gain an appreciation of the world of finance and, specifically, our current economic crisis. Buffett was one of the first to see the dangers of derivatives and their impact on the big banks of America and the world. The book ends in 2004 and so you won't get advice on working through the current crisis but you will get a solid understanding of how we've gotten where we are.

Schroeder, a former Wall Street analyst, does a nice job of revealing the rational side of Warren Buffett, how he thinks, and what makes him tick. As an analyst with Morgan Stanley, Schroeder was assigned to track Buffett's company, Berkshire Hathaway, as an analyst. She points out that Buffett is more in love with acquiring new properties and ventures than in investing himself personally in growing his vast empire through entrepreneurial leadership. The author points out that one of Buffett's early lessons was learning about compounding at age 11. Another early lesson learned from his Quaker parents was to avoid confrontation and a desire to be liked. Schroeder does a wonderful job following the development of Buffett's business knowledge, the success of his many investment partnerships, and how he overcome countless problems after acquiring Berkshire Hathaway.

Some of the lessons shared by Buffett include: Grandstanding never gets anything done;

Customer loyalty is priceless; Commitments are so sacred that they should be rare; Good managers maintain sales growth; Investment diversity is not good if it produces a low probability of drastic change; Avoid investing in complex technology; and, Allies are important so choose them carefully.

Things I have come to appreciate about Buffett after reading Snowball is that he relied a great deal on his network of friends, that Buffett is a great simplifier, that he is brilliant enough that he recorded perfect scores on both SATs, and that as a college student Buffett would read all his textbooks through before the first day of class and at exam time have almost perfect recollection of detail. The author achieved her experience in revealing how Buffett has grown from a tiny snowball to a gigantic snowball that will shake and move the world beyond his lifetime.