With financial markets worldwide teetering on the brink, it's worth noting that even as most investors — their confidence shaken to the core — head for the doors, one man is still inside looking for bargains. Earlier this fall, as Wall Street seemed to crumble under the weight of trillions of dollars in risky derivatives bets, Warren Buffett invested $8 billion of his own money into Goldman Sachs, the storied Wall Street investment bank, and General Electric, the giant technology and financial services company, acting again on one of the principles that has made him the world's most successful investor: the key to investing is to find undervalued companies and invest in them for the long haul.
It's that kind of fearlessness and focus that has transformed a modest, plainspoken Nebraska boy into the Oracle of Omaha and a global cultural icon. From the investment community that hangs on his every word, to the ordinary American who sees his homespun Midwestern charm as a sign of honesty in a dishonest age, Buffett has become something of a rumpled colossus. And like the pronouncements delivered by his ancient Greek forerunner, Buffett's belief in the value of investing for the long term belies a far more complex understanding of human nature. Indeed, it is his keenly honed intuition and focused intelligence that has prompted so much to be written about him.
Enter Alice Schroeder, whose new biography, The Snowball: Warren Buffett and the Business of Life, may be the only authorized examination of a man who describes himself as "a not simple man with simple tastes." At more than 800 pages, the book is a sprawling mix of history, reminiscence, and anecdote. In it, we learn about Buffett's first job, as a paper boy, and about the many curios and keepsakes in his office (one of them a letter inviting him to invest in Long-Term Capital Management, a quant hedge fund that went belly up in 1998, causing Buffett to call it the best investment he never made). But even though Schroeder had unprecedented access to Buffett and his papers, the book is more chatty than it is analytical, and less critical than it is allegorical. As Schroeder would have it, Buffett's life has been like a snowball rolling downhill; given exactly the right conditions of snow and slope, a snowball inevitably will become bigger and roll faster. An apt metaphor for a man who during the depths of the last major recession in this country (1980-82) parlayed a personal fortune of $69 million into just under $1 billion and today has an estimated net worth of $54 billion, making him one of the richest men in the world.
Buffett, of course, is equally famous for his 2006 announcement that he planned to give the bulk of his fortune (some $37 billion) to the Bill & Melinda Gates Foundation. We learn from Schroeder that while Buffett had long anticipated dedicating a significant portion of his fortune to philanthropy, he never really concerned himself with how that money would be used once he was gone. Yes, he and his wife, Susie, had established the Susan Thompson Buffett Foundation back in the 1960s. But while its funding interests were aligned with a variety of progressive causes — nuclear nonproliferation (a cause in which Buffet remains engaged through his support of Ted Turner's Nuclear Threat Initiative), overpopulation, and women's reproductive health and rights — the foundation's giving seldom exceeded half a million dollars annually, limited in large part by Buffett's insistence that wealth was for accumulating and not for throwing around. (As late as 2005 the foundation had only $500 million in assets.)
Alas, Schroeder's account spends little time on Buffett's philanthropy, and those looking for the inside scoop on the decision to go all in with Bill and Melinda Gates are likely to be disappointed. But Schroeder, who spent years as an analyst at Morgan Stanley reporting on Buffett's every move as chairman of Berkshire Hathaway, has a keen understanding of the main character in her story, and woven into that narrative are bits and pieces that, when put together, reveal why and how Buffett came to his philanthropic epiphany.
Certainly the death of his wife in 2004 prompted a sea change in Buffett's attitude toward his own wealth. Philanthropy had always been Susie Buffett's domain, and while Buffett himself had charitable interests, he never developed a plan of action as to how to allocate his wealth effectively. (Like many successful businessmen, he was more concerned with growing it.) Buffett had also always been cautious about giving his children a free ride on the Berkshire gravy train; wealth was to be earned, not lived off of, and Buffett was — and, in many respects, remains — determined to avoid spoiling his children and grandchildren.
Buffett's relationship with Bill Gates, one forged by an intense mutual appreciation, is another piece of the puzzle. While their relationship will no doubt be the subject of speculation for years to come they once traveled half way around world to sit on a boat on a river in China to play bridge together no moment in that relationship may be more telling than the 1995 gathering of Buffett's oldest friends and investors at the posh Kildare Club in Dublin, Ireland, which Gates attended as Buffett's guest.
As described by Schroeder, at one point during the evening Buffett handed out copies of Andrew Carnegie's famous essay "The Gospel of Wealth," implored his guests to read it, and then prompted them to share their thoughts on what they planned to do with their own fortunes. The ideas that emerged ran the gamut from the expected (funding hospitals and university chairs) to the unexpected (one guest was actively giving away most of his money as quickly as he could make it). Then it was Gates' turn, and in short order the Microsoft co-founder laid out the basic premise that has informed much of his philanthropy since the mid-1990s: "Shouldn't the measure of accomplishment be how many lives you can save with a given amount of money?" For Gates, and soon for Buffett, philanthropy would be about giving while living to solve problems and save lives in the present.
However noble an idea that might be, it still took Buffett more than a decade to figure out what to do with his vast fortune. That wealth — and Buffett's marriage to Astrid Menks, with whom he had been living since the late 1970s — as well as Bill Gates' decision to step down from his day-to-day responsibilities at Microsoft to devote himself full time to philanthropy, finally provided Buffett with his Carnegian moment. Indeed, his June 2006 announcement was anything but an impulsive act; for Buffett, it was the culmination of years of thinking about the best way to give it all away.
Buffett knew he was good at making money — in fact, better than almost anybody else. It was a large part of the reason he had been able to convince his original investors to sign off on the purchase of Berkshire Hathaway in 1957. But giving money away was never his strength or a particular interest, and his wife's death made that even more apparent. So, Buffett did what any good investor would do: He found two people — Bill and Melinda — with the knowledge, skills, and passion for philanthropy to not only do it for him, but to do it better than he could ever hope to. According to Schroeder, the decision was not only unconventional, it was "a gesture against philanthropic waste and grandiosity."
Still, let us not forget, that however unexpected his gift to the Gates Foundation, or how generous he was in giving some $6 billion to his children's foundations, Warren Buffett remains one of the world's wealthiest individuals and, in some ways, a predictable guy. No sooner, for example, had he announced his gift to the Gates Foundation than he was flooded by thousands of requests from individuals for financial assistance. What to do? As Schroeder tells it, he packed up the whole lot and sent it to his sister along with a check for $5 million and instructions for her to sift through the requests and distribute the money as she saw fit.
It remains to be seen, of course, what Buffett will do next. He is still worth tens of billions of dollars, and he could live another decade or two, doing what he does best, which is making money. Certainly, that's his intention. But whatever he decides to do, people will be talking about Warren Buffett and the excellent adventure that has been his life for as long as people care about hard work, investing, and the American dream.