WARREN BUFFETT AND THE BUSINESS OF LIFE
Bantam Books, $35, 960 pages
PILGRIMAGE TO WARREN BUFFETT’S OMAHA: A HEDGE FUND MANAGER’S DISPATCHES FROM INSIDE THE BERKSHIRE HATHAWAY ANNUAL MEETING
By Jeff Matthews
McGraw Hill, $24.95, 295 pages
REVIEWED BY JAMES SRODES
Exactly 79 years ago this weekend Wall Street took up a familiar tactic to halt a financial market crisis that had begun in September 1929 when the Dow Jones Industrial Index of 30 key stocks began to slide from its high of 381.17. By “Black Thursday,” Oct. 24, 1929, shares had lost 17 percent of their value and the panic was on.
Live chat with Alice Schroeder: Monday, Oct. 27, at 3 p.m. Click here to participate.
In response, Wall Street’s financial giants deputized the New York Stock Exchange’s vice president, Richard Whitney, to walk onto the floor and start making major purchases of shares in U.S. Steel at a price well above the market. After a one-day pause for breath, a frenzied sell-off continued. At that point, William C. Durant, the colorful Detroit founder of General Motors stepped to the fore. With dramatic flair, he bought large blocks of shares for his own account — a clear affirmation of this wizard’s faith in the American economy’s soundness. The 1929 panic continued — despite periods of recovery — in a steady downward decline until the Dow index closed on July 8, 1932 at its crash low of 41.22 — a loss of 89 percent of the value of the shares of American corporations.
For that act of public heroism, Billy Durant went broke and ended his days running a bowling alley in Flint, Mich. The NYSE’s Whitney did a stretch in Sing-Sing for his own investing malfeasances.
So what then does Warren Buffett think he’s doing? The author of “The Snowball,” by far the better of the two books under review here, tells us that Mr. Buffett is doing what he is constantly doing — making money. The $5 billion investment in Goldman Sachs is estimated by some to carry a locked-in yield of 17 percent. The $3 billion poured into General Electric carries a locked-in 10 percent dividend. His announcement in last week’s New York Times that he is buying American stocks for his personal account merely means he will own most of the same shares that have made his Berkshire Hathaway the mythical Golconda for thousands of individual investors. He even repeated his mantra, “Be fearful when others are greedy, and be greedy when others are fearful,” in both the newspaper piece and in the book.
What makes this book so interesting is that Mr. Buffett, by the author’s account, insisted that the darker side of his life be part of the story. The truth is that despite his openly genial public persona, the Warren Buffett who emerges is a somewhat sad, introverted and compulsive parser of corporate earnings statements, data sheets, industry journals and the like in a constant search for undervalued investments. That and not much else is what makes Buffett Buffett it seems. The book’s title, “The Snowball,” reflects his own metaphor that the compounding effect has on rolling a ball of snow along the ground; it just gets bigger the more one pushes.
According to Alice Schroeder, the Morgan Stanley manager chosen to produce this biography, the man comes by this arid personality because his own parents were bizarre beyond belief. Warren’s mother had a number of relatives confined to mental institutions and she herself was in a constant state of rage during which she convinced the boy and his older sister that they were worthless human beings. The father was equally hard work. Diffident with his children to the point of almost becoming a nonperson, Howard Buffett was a Nebraska congressman who was obsessed with his hatred of Franklin Roosevelt. Not surprisingly, the son developed into a conflicted, self-doubter whose only solace was an early interest in mathematics and in calculating the odds on everything from bottle caps to horse racing. He also was determined to become as rich as possible as soon as possible and who can blame him?
As a result, it should not be surprising that Warren was as distant with his own children and his first wife Susan, who put up with his self-absorbed fixation on business as long as she could. Then she moved to San Francisco, where she continued to be the public Mrs. Buffett, but Warren was left behind in Omaha with his companion Astrid Menks, whose principal function appears to have been that of a valet, cook and fetcher of Cherry Cokes on evenings whenever he plays bridge on the computer with a friend. On Susan’s death some years ago, Astrid became the next Mrs. Buffett, although not much else appears to have changed in her life.
Washington readers of the book will find several interesting local episodes in Mr. Buffett’s early life growing up here during his father’s stint in Congress. He delivered the old Washington Star in Spring Valley and attended Alice Deal and then Wilson High School. Young Warren appears to be one of those teenage losers who coupled a general scruffiness with a wiseacre mouth. Oh, yes, and young Buffett was an inveterate thief, pilfering vast quantities of golf balls and other goods out of the old Sears Roebuck store on upper Wisconsin Avenue, when he was not hustling pinball machine rental schemes in the seedier parts of the District.
While Mr. Buffett may be happy enough to portray himself as a single-focus seeker of wealth, he did fall into one extra-Omaha emotional affair when he was 46 and was introduced to no less than Katharine Graham, the publisher of The Washington Post. The affair could never have and did not remain secret for long. It is telling that Susan Buffett’s response was to write Mrs. Graham a letter permitting the relationship. There is no indication of what Astrid thought of it.
Ms. Schroeder does a good job of pulling all these volunteered disclosures out of Mr. Buffett but her real contribution is her own investment expertise which enables her to make the convoluted financing schemes over the last 50 years understandable to lay readers and truly instructive to the business information junkie.
Whatever one concludes about Warren Buffett, the husband, father, friend and human being, this book is a valuable tool to understanding how he has gotten where he is today.
“Pilgrimage to Omaha” is not about Warren Buffett at all. Rather it is a series of blog reports that the author, a hedge-fund manager, has put out on his Web site and is more about his disdainful reactions when he attended the annual Berkshire Hathaway shareholders meeting in Omaha in 2007 and last spring. At the end of the book he allows, “I never tried,” to speak to Buffett about the man, the company or the culture that has sprung up around both.
The shareholder meeting, then, comes across as sort of a Branson, Mo., show business museum where white-bread Americans embarrass themselves and Mr. Matthews with their open enthusiasm. He wonders several times at the paucity of black Americans at the meeting without realizing that shareholder meetings never reflect the vast majority of investors holding the stock, and that most black Americans, like most white Americans, have better things to do than sit for hours while others pepper Mr. Buffett with often lunatic questions.
The writing style is snarky — that is snotty and sarcastic — and sometimes he simply misses the point altogether. Noting the recent Buffett investment commitments that have grabbed headlines, he asks, “How is it that Warren Buffett can cut a better deal with the best-run financial company in America than the U.S. Treasury can ask from the worst-run financial companies in America?” Mr. Matthews never gets a hint that, aside from comparing Mr. Buffett’s oranges with Hank Paulson’s lemons, Mr. Buffett is not responsible for bailing out a nation’s financial system; he exists to make money, for himself and those wise enough to trust his judgment.
• James Srodes is a former Washington bureau chief for both Forbes and Financial World magazines.
Alice Schroeder will be online tomorrow morning at 11 a.m., for a live chat with readers and will answer your questions about “The Snowball” and the life of Warren Buffett. Go to www.washingtontimes.com to participate.
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