My year end reading: The Snowball

There are quite a number of books being written on Warren Buffett but nothing like this one written by Alice Schroeder. The writing of his life is astonishingly detailed, no one comes this close to her depth - not even his former daughter-in-law. He must have a very high confidence in her letting her to access to his materials, friends, family, personal time and etc. He picks the right person to do the right job, as always. She writes with facts, simplicity, clarity, balanced and grounded with a lot of research. She spent 5 years writing the book, for RM 96.95 weight over a few pounds, 960 pages and 2.3 inch thick, it's definitely good value for money. But the lessons are priceless.

Reading the book like traveling back to past through a time machine: all the way back to the Great Depression, World War II, McCarthyism, color TV, JFK, Vietnam War, 1974 Bear market, Gulf war, Internet, etc....... Those periods have been full of turbulence and hypes - yet Warren Buffett survives and makes billions.

It has been giving me a sense of Deja Vu like what the Bible says.

What has been will be again,
what has been done will be done again;
there is nothing new under the sun.
Ecclesiastes

Every time you run into big bear market especially like 1973/1974, people will keep drawing analogy of the return of the Great Depression. So is this cycle of 2007/2008 bear market.

During the period of FDR spending, most reacted the same way. They rather buy hard assets rather than stocks. His father, a congressman, was one of the hardcore gold bugs.

“The Gold standard acted as a silent watchdog to prevent unlimited public spending…I can find no evidence to support a hope that our fiat paper money venture will fare better ultimately than such experiments in other lands. Because of our economic strength the paper money disease here may take many years to run its course…but we can be approaching the critical stage. When that day arrives, our political rulers will probably find that foreign war and ruthless regimentation is the cunning alternative to domestic strife.”

-Congressman Howard Buffet

During inflationary period of 70s, Bill Ruanne a student of Ben Graham and his good buddy pulled out a chart showing the price of gold surpassed Berkshire's for five year. He jokingly asked the rest whether he should buy some gold.

During the expansionary periods by the government, many believe they should own farm so they can grow their vegetables in case of government collapses. We are having the same feeling now too!

Behind every successful man there is a woman. This is quite true, his wife big Susie was that woman. Buffett is hopeless when coming to take care of himself and a bit awkward when come to socializing, kind of a geek. It was Susie that turned him around. Susie has been a care giver for her whole life. It has many touching stories that the author detailed Susie's sacrifices. She was serving the rejected and outcast of society, which is an extremely unusual.

He practices what his teacher taught him "Investing is most intelligent when it
is most businesslike." Many of the companies he bought got into trouble, he stood behind those companies to ensure they rode out of troubles. He bets heavily on the people he admires and strong franchise. A few businesses he bought like The Washington Post, Blue Stamps, Buffalo News and Solomon got into troubles as soon as he has a staked in it, but it worked out quite profitably over a long period of time.

The story of his strong believes of corporate governance and aligning the the management with the interest of shareholders in Solomon was well told. His unconventional way of tackling the excessive management compensations, lavish lifestyle investment bankers, etc. He cuts their bonuses and let people go. He lets regulators go after their wrong doings. He has no interests to defend them, he continue to stay very critical of his organization. He instills his employees to be their own compliance officers. His words struck me deeply.

Lose money for the firm, and I will be understanding. Lose a shed of reputation for the firm, I will be ruthless.

Are billionaires born or made? He was pretty much being left alone by his parents during his childhood. What struck me the most was his ambition to be rich at the age of 6 by starting a business of selling Coca Cola and chewing gums. He filed his income tax at the age of 14. He will want to improve himself at the young age reading Dale Carnegie. His father was a stockbroker, that gives him the early exposure to stock market. He was naughty, irritating his teacher by shorting AT&T stock. His father was his hero and instilling the idealist values in him like fight what you believe, inner scorecard, honesty and etc. He was born with the ambition to be rich but without the right environments and values, he could have been just another average Joe.

His children were less successful if we use the traditional yardsticks to measure them. The dropped out from university, the did not get into Harvard, Yale or Stanford. Marriages fell apart. Did he spoilt them? No, he has been pretty tough on them. He however let them have the freedom to discover who they are and pursue what they care the most passionately - charity, agriculture and music. At the end of the day, your children will pick up your values if you walk the talk. Charity begins at home. The root of many uninspiring of new graduate and new work force ? Parents!