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Warren Buffet shares his advice on investing, making money, how to make it, and the market as it changes. Non Fiction.
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Author Alice Schroeder was a noted insurance industry analyst and writer who was a managing director at Morgan Stanley. She first met Warren Buffett when she published research on Berkshire Hathaway; her grasp of the subject and insight so impressed him that he offered her access to his files and to himself. Their friendship and mutual respect make her ideally positioned to write the The Snowball.
Ms. Schroeder was born in Texas, and she earned an undergraduate degree and her MBA at the University of Texas at Austin before moving east to work in finance. She is a former CPA and lives in Connecticut with her husband.
The Less Flattering Version
Omaha, June 2003
Warren Buffett rocks back in his chair, long legs crossed at the knee behind his father Howard’s 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 Carnegie’s 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 Buffett’s 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 Warren’s office because he is not going to write a book. The unruly eyebrows punctuate his words as he says repeatedly, “You’ll do a better job than I would, Alice. I’m glad you’re 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.  That’s 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 memory’s frailty, then says, “Whenever my version is different from somebody else’s, 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 won’t be too many reasons to choose the less flattering version–but when I do, human nature, not memory’s frailty, is usually why. One of those occasions happened at Sun Valley in 1999.
Idaho, July 1999
Warren Buffett stepped out of his car and pulled his suitcase from the trunk. He walked through the chain-link gate onto the airport’s tarmac, where a gleaming white Gulfstream IV jet–the size of a regional commercial airliner and the largest private aircraft in the world in 1999–waited 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 attendant–somebody new–and 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 café 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 family’s 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 bird’s-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.
They were flying in a $30 million airborne palace called a “fractional” jet. As many as eight owners shared it, but it served as part of a fleet, so all the owners could fly at once if they wished. The pilots in the cockpit, the crew that maintained it, the schedulers who got it to the gate on six hours’ notice, and the flight attendant who served their lunch all worked for NetJets, which belonged to Warren Buffett’s company, Berkshire Hathaway.
Sometime later, the G-IV crossed the Snake River Plain and approached the Sawtooth Mountains, a vast Cretaceous upheaval of dark and ancient granite mounds baking in the summer sun. It sailed through the bright clear air into the Wood River Valley, descending to eight thousand feet, where it started to buck on the mountain wave of turbulence thrown into the sky by the brown foothills beneath. Buffett read on, unperturbed, as the plane rocked and his family jerked about in their seats. Brush dotted higher altitudes of a second ridge of hills and rows of pines began their march up the ridges between ravines on the leeward side. The family grinned with anticipation. As the aircraft descended through the narrowing slot between the rising mountain peaks ahead, the midday sun cast the plane’s lengthening shadow over the old mining town of Hailey, Idaho.
A few seconds later, the wheels touched down on the Friedman Memorial Airport runway. By the time the Buffetts had bounded down the stairs onto the tarmac, squinting in the July sunshine, two SUVs had driven through the gate and pulled up alongside the jet, driven by men and women from Hertz. They all wore the company’s gold-and-black shirts. Instead of Hertz, however, the logo said “Allen & Co.”
The grandchildren bounced on their heels as the pilots unloaded the luggage, tennis rackets, and Buffett’s red-and-white Coca-Cola golf bag into the SUVs. Then he and the others shook hands with the pilots, said good-bye to the flight attendant, and climbed into the SUVs. Bypassing Sun Valley Aviation– a pocket-size trailer at the runway’s southern end–they swung through the chain-link gate onto the road that led to the peaks beyond. About two minutes had elapsed since the plane’s wheels first touched the runway.
Right on schedule, eight minutes later, another jet followed theirs, headed to its own runway parking spot.
Throughout the golden afternoon, jet after jet cruised into Idaho from the south and east or swung around the peaks from the west and descended into Hailey: workhorse Cessna Citations; glamorous, close-quartered Learjets; speedy Hawkers; luxurious Falcons; but mostly the awe-inspiring G-IVs. As the afternoon waned, dozens of huge, gleaming white aircraft lined the runway like a shop window full of tycoons’ toys.
The Buffetts followed the trail blazed by earlier SUVs a few miles onward from the airport to the tiny town of Ketchum on the edge of the Sawtooth National Forest, near the turnoff to the Elkhorn Pass. A few miles later, they rounded Dollar Mountain, where a green oasis appeared, nestled among the brown slopes. Here amid the lacy pines and shimmering aspens lay Sun Valley, the mountains’ most fabled resort, where Ernest Hemingway began writing For Whom the Bell Tolls, where Olympic skiers and skaters had long made their second home.
The tide of families they were joining this Tuesday afternoon all had some connection to Allen & Co., a boutique investment bank that specialized in the media and communications industries. Allen & Co. had put together some of the biggest mergers in Hollywood, and for more than a decade had been hosting an annual series of discussions and seminars mingled with outdoor recreation at Sun Valley for its clients and friends. Herbert Allen, the firm’s CEO, invited only people he liked, or those with whom he was at least willing to do business.
Thus the conference was always filled with faces both famous and rich: Hollywood producers and stars like Candice Bergen, Tom Hanks, Ron Howard, and Sydney Pollack; entertainment moguls like Barry Diller, Rupert Murdoch, Robert Iger, and Michael Eisner; socially pedigreed journalists like Tom Brokaw, Diane Sawyer, and Charlie Rose; and technology titans like Bill Gates, Steve Jobs, and Andy Grove. A pack of reporters lay in wait for them every year outside the Sun Valley Lodge.
The reporters had traveled a day earlier to the Newark, New Jersey, airport or some similar embarkation point to board a commercial flight to Salt Lake City, then raced to Concourse E’s bullpen to sit amid a crush of people waiting for flights to places like Casper, Wyoming, and Sioux City, Iowa, until it was time to cram themselves into a prop plane for the one-hour bronco ride to Sun Valley. On arrival their plane was directed to the opposite end of the airport next to the tennis-court-size terminal, where they witnessed a crew of tanned young Allen & Co. employees dressed in pastel “SV99” polo shirts and white shorts welcoming the handful of Allen & Co. guests who were arriving early on commercial flights. These were instantly recognizable among the other passengers: men in Western boots and Paul Stuart shirts with jeans, women wearing goatskin-suede jackets and marble-size turquoise beads. The Allen staff had memorized the newcomers’ faces from photographs supplied in advance. They hugged people they had gotten to know in years past as if they were old friends, whisked away all the guests’ bags, and led their charges off to the SUVs lined up steps away in the parking lot.
The reporters went to the rental-car desk, then drove to the Lodge, by now acutely conscious of their lowly status. For the next few days, many areas of Sun Valley would be marked as “private,” blocked from prying eyes by closed doors, omnipresent security, hanging flower baskets, and large potted plants. The reporters would lurk around the fringes, excluded from the interesting things going on inside, noses pressed against the bushes.  Ever since Disney’s Michael Eisner and Capital Cities/ABC’s Tom Murphy had dreamed up a deal to merge their companies at Sun Valley ’95 (the way the conference was often referred to–as if it had engulfed the entire resort, which, in a way, it had), the press coverage had grown until it took on the artificially giddy atmosphere of a business version of Cannes. The mergers that splintered off from Sun Valley, however, were only occasional calves from an iceberg. Sun Valley was about more than making deals, though the deals garnered most of the press. Every year the rumors sizzled that this company or that was working on a deal at the mysterious conclave in the Idaho mountains. Thus, as the SUVs rolled one by one into the porte cochere, the reporters peered through the front windows to see who was inside. When someone newsworthy arrived, they chased their prey into the lodge, brandishing cameras and microphones.
The press quickly recognized Warren Buffett as he stepped out of his SUV. “The DNA of the conference had him built into it,” said his friend Don Keough, chairman of Allen & Co.  Most of the press people liked Buffett, who went out of his way not to be disliked by anyone. He also intrigued them. His public image was that of a simple man, and he seemed genuine. Yet he lived a complicated life. He owned five homes but occupied only two of them. Somehow he had wound up having, in effect, two wives. He spoke in homely aphorisms with a kindly twinkle in his eye and had a notably loyal group of friends, yet along the way he had earned a reputation as a tough, even icy dealmaker. He seemed to shun publicity yet managed to attract more of it than almost any other businessman on earth.  He jetted around the country in a G-IV, often attended celebrity events, and had many famous friends, yet said that he preferred Omaha, hamburgers, and thrift. He spoke of his success as being based on a few simple investing ideas and tap-dancing to work with enthusiasm every day, but if that was so, why had nobody else been able to replicate it?
Buffett, as always, gave the photographers a willing wave and a grandfatherly smile as he walked by. They captured him on film, then began peering at the next car.
The Buffetts drove around to their French-country-style condominium, one of the coveted Wildflower group next to the pool and tennis courts, where Herbert Allen housed his VIPs. Inside, the usual loot awaited them: a pile of Allen & Co. SV99 logo jackets, baseball caps, zip fleeces, polo shirts–every year a different color–and a zippered notebook. Despite his fortune of more than $30 billion–enough to buy a thousand of those G-IVs parked out at the airport–Buffett liked few things more than getting a...
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