Monday, December 20, 2010

Book Review: Snowball

Book Review: The Snowball - Warren Buffet and the Business of Life by Alice Schroeder

I'm zeroing in on my goal of reading a book a week for the year and knew that picking up this 1000 page tome was not wise . . . but I couldn't resist. The autobiography of one of the world's smartest and richest men? I gave in to temptation and picked up it's huge heft from the library. In case you don't know who Warren Buffet is (aka "The Oracle of Omaha"), he is arguably this century's greatest investor. He is he is the primary shareholder, chairman and CEO of Berkshire Hathaway which is currently trading at over $120,000 per share! He was ranked as the world's second wealthiest person in 2009 and is currently the third wealthiest person in the world as of 2010. Buffett is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth (he still lives in the moderately sized house he bought decades ago for $30,000). In case you are thinking he's just another greedy rich guy, know that Buffet is also a notable philanthropist, having pledged to give away 99 percent of his fortune to philanthropic causes, primarily via the Gates Foundation.

What kind of person does it take to become a billionaire? Someone with a special gift. Buffet as a boy had a favorite toy - a moneychanger. What kind of kid picks a moneychanger for a toy? Probably one who was extremely gifted in mathematics and would later ask his Dad to let him visit the New York Stock Exchange as his coming of age gift. Even at an early age he became a businessman and investor, buying stocks and starting businesses before he was 12 years old. Like many genius children, he was not always understood and was socially awkward yet he eventually rose above it. Later in life he was lucky enough to study the great investors of his time, learning their systems and then improving them. Warren's true genius was his ability to see and buy great stocks or companies that were undervalued and then hold onto them as long as he could. He spent his life learning and acquiring - not just investments but people as well. To Buffet, everything was about the power of compounding returns, yet he only risked wisely. Another great thing about Buffet was his moral compass. Unlike many in business, he refused to sacrifice his morals to make money, believing that while it takes a lifetime to build a reputation, it only takes five minutes to destroy it. Buffet's reputation for honesty and integrity is unparalleled in an industry known for it's deceit.

Because he was so super focused this allowed him to become truly great, but it did have bad effects on his family. To me, the sacrifices he made with his family would not have been worth it, yet this is often true of geniuses in other fields as well (I think of Einstein and Gandhi who were also geniuses yet caused great pain to those close to them). I really enjoyed this book, being at times inspired and then later feeling sorry for him (yes, you can feel sorry for multi-billionare). His wisdom with money and his philosophy of investing is the best I've ever read. Highly recommended. 4.3 ninja stars out of 5.

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