Alice Schroeder on Warren Buffett: interview and review

Alice Schroeder is the author of Snowball: Warren Buffett and the Business of Life. A MBA graduate of University of Texas at Austin, she had conducted research on Berkshire Hathaway in her capacity as a stock analyst at Morgan Stanley. Receiving an invitation from Warren Buffett, she gave up working in the Wall Street and became a full-time writer as she worked on an official biography of Warren Buffet.

Jonathan Mok: In your eyes, what makes Warren Buffett different from other investors?

Alice Schroeder: I know of no other investor who has applied, with such singular focus and intensity, a set of clearly defined principles with unwavering consistency. Others read and understood Buffett’s rules, and try to follow them, but all lack his backbone, his single-mindedness, his almost preternatural energy, and his clear-eyed vision in applying these rules throughout every daily variation of the mutable weather of popular opinion.

Jonathan: Politically, it is known that Buffett endorsed Obama. How had Buffett’s Opinion toward the Republican Party changed through the years? Was it fiscal irresponsibility and the disagreement over the abolition of the estate tax? Or issues such as the Iraqi War, gay marriage, abortion, etc.?

Alice: Buffett grew up in a family of devoted Republicans – at a time when Republicanism stood for anti-Communism, isolationist foreign policy, balanced budgets and a small but pro-business federal government. In the late 1950s, he and his wife Susie became involved in the civil rights movement – Warren after encountering anti-Semitism in graduate school, Susie as a lifelong champion of the underdog. It was natural, therefore, that as the American civil rights era progressed and the leadership of Presidents Kennedy and Johnson made the Democratic Party the party of civil rights, the Buffetts’ allegiance shifted away from Republicanism.

Warren changed his voter registration after his father died in 1964. Even though his political views on social issues are liberal and egalitarian, however, he is fiscally conservative, and has on occasion voted for members of both parties.

Jonathan: What has drawn Warren Buffett and Bill Gates together?

Alice: Bill and Warren connect emotionally. Bill is like Warren’s third son. He relates to Warren somewhat the way he does to his own father, Bill Gates Sr., in a warm, mutually protective and supportive relationship. Bill and Warren also share a similar intellectual curiosity and a love of business as a fascinating puzzle to solve. They both value honesty and have an egalitarian way of looking at the world.

Jonathan: Does Buffett believe in meritocracy? How have his beliefs affected his career?

Alice: Philosophically, Buffett is egalitarian, but at work, he is meritocratic and judges people based less on their potential than on their demonstrated skill at the job involved. Moreover, Buffett does not intervene in the decisions made by the managers of the companies that Berkshire owns; and those managers are typically self-made male entrepreneurs.

In practice this has created a sort of self-perpetuating cycle in which women or minorities are rarely promoted to the most senior positions at Berkshire subsidiaries. Buffett understands that there is a paternalistic aspect to this system, but his goal as CEO is to increase shareholders’ wealth rather than achieve diversity at Berkshire. It is also true, however, that Berkshire has acquired several companies headed by women, and Buffett has added two women to the Berkshire board.

Jonathan: How will history, both global and economic, judge Warren Buffett?

Alice: Most important public figures are best placed in context some time after their death. But Buffett, clearly, is the greatest investor of the past century, perhaps longer. He may also come to be regarded as one of history’s great financiers. He thinks of himself as a teacher, and his writings on business will probably be studied long after his death.

Jonathan: What is the future of Berkshire Hathaway?

Alice: Warren has designed Berkshire to outlast him by many years. How well that is executed depends on the choice of a successor, but the structure of Berkshire was designed to be both flexible and durable. It has the least embedded risk and the greatest capital strength of any company of which I am aware. So the future of Berkshire Hathaway looks sound. I don’t expect the company to grow at any astonishing pace, but its shareholders should have peace of mind that they can make reasonable returns safely.
***************************

The Snowball: Warren Buffett and the Business of Life

Alice Schroeder

Bloomsbury, 2008.

Warren Buffett is a certainly a history maker when it comes to finance. Readers are especially interested in exploring why Buffett has been very successful in generating a higher rate of return for his investors. Books about “ why Buffett has become a billionaire” have been on the market due to the mankind’s thirst for a formula on how to get rick quickly .

However, Alice Schroeder’s book, the official autobiography of Warren Buffett, is special. Not only has it the blessing of Warren Buffett, but it also illustrates the entire life of Warren Buffett tracking back to his grandfather’s generation.

At the outset, the narrative of Warren Buffett appears too segmented. But Buffett’s family history in particular is interesting: the Buffett family’s mentality originally involved little trust for the government, an emphasis on self-reliance, and a certain mistrust for the outside world.

The book discusses the difference of perception between public views on Buffett and how he views himself. One gets the distinct impression that Buffett’s family travails, such as the failure of his first marriage, have made his successes elsewhere bittersweet. The discussion of Buffett’s first marriage and relationship with Katherine Graham raises new questions about how we must treat the private lives of public people.

Schroeder does a particularly great job illustrating Buffett’s frustration with the low quality of corporate governance of American companies, the widening income between the rich and the poor and the irresponsible fiscal policy initiated by Republicans and Democrats alike. In these times of financial crisis, the subjects carry particular relevance.

The beginning of the book is the one truly frustrating part. The biography literally starts from the immigration of Warren Buffett’s grandfather to Nebraska in 1869, which is, overall, unnecessary.

Schroeder provides a warm-hearted, touching, and yet frank portrait of Buffett. Though it will surely captivate aspiring entrepreneurs everywhere, the narrative itself is so readable as to appeal to anyone who values a fascinating and timely story of a prominent life.