For the most compelling account of an investing career since Edwin Lefèvre's Reminiscences of a Stock Operator, published in 1923, I would direct you to The Snowball, an authorised biography of Warren Buffett by Alice Schroeder. And, for its most gripping 80 pages, I would direct you to its coverage of Mr Buffett's involvement with the Salomon Brothers investment bank – a giant of its day.
In 1987, Mr Buffett bought a $700m interest on very attractive terms. For the first four years of the investment, both Buffett and his partner in arms, Charlie Munger, although both directors, were largely ignored by Salomon. But, in 1991, inexcusable shenanigans got the bank into serious trouble, and Mr Buffett was called in from Omaha – virtually over the weekend – to be chairman. The day this was due to be confirmed, the US Treasury announced that it would no longer do any business with Salomon – in effect, closing the firm down in what would have been a Lehmanesque episode. Five sweaty hours later, Mr Buffett achieved the reversal of this decision.
How Mr Buffett accumulated the reputation on which this turnaround was based is arguably more interesting than how his perspicacious investments turned $100 into $60bn.
"Try to be punctual in all your dealings. You will find it difficult to get along with some men, deal as little as possible with such… Save your credit, for that is better than money. If you go into business, be content with moderate gains. Don't be too hasty to get too rich… I want you to live so as be fit to live and fit to die."
This advice was given by Zebulon Buffett to his grandson Sidney Buffett in about 1870. Sidney had recently quit as his grandfather's employee on the basis that the pay was insultingly low.
Sidney Buffett prospered modestly, as Omaha's first greengrocer. His son, Ernest, also a greengrocer, paid low wages and dispensed much commentary on the business of life, including this observation to his son: "The Buffetts have always saved part of what they made, and it has all worked out pretty well."
And so it did for that son, Howard Buffett, US congressman and independent thinker. All elements of the creed are present in Warren Buffett's story, including frugality, valuing credit (as in reputation) more highly than money and saving part of what he made (about 99.999 per cent in his case, and throughout his career).
Even that "moderate gains" element is there, for what Zebulon surely meant was "take only moderate risks" – after all, he did not say don't get too rich, he just said don't be too hasty about it. Warren Buffett has been one of the lowest-risk investors in history.
But it is the conclusion of Zebulon's homily which reverberates most strongly in Warren Buffett's career: "Live so as to be fit to live and fit to die." 140 years later it sounds pompous. But we all know what it means and that its meaning is very important to everyone. There is something more striking than Warren Buffett's fortune. And that is the character of the man who made it.
Self-made billionaires have a reputation for putting their own interest far ahead of all others. Warren Buffett, however, is a saint. He serves his shareholders well not only by making them rich, but by drawing just $100,000 a year in salary. He serves society well by donating 70 per cent of his Berkshire shareholding to a charity that does not even bear his name. And he serves every investor in the world well by his permanent commentaries on the highs and lows of investing and corporate governance. Warren Buffett saves us from utter cynicism.
"Save your credit, for that is better than money" would probably not have been the prime philosophy identifiable in young Warren Buffett, who set up what became Berkshire Hathaway at the age of 26. Quite a few small companies considered themselves shaken down by Mr Buffett, who was an activist investor 30 years before the term was coined. He loved penny stocks, and stock-pickers will salivate at the bargains he snaps up in the book's early pages.
But billionaires don't buy penny stocks and Mr Buffett's desire to be liked undid his inclination to shake down the unworthy, except by words. The subsequent journey, including the mistakes and the unparalleled commitment are wonderfully described in The Snowball.
I suggest you put it on your Christmas present list, with the advice that it's available at the IC Bookshop on 0800 435060 for £16.25 including postage, or visit the IC Bookstore online.
Source: Alistair Blair
In 1987, Mr Buffett bought a $700m interest on very attractive terms. For the first four years of the investment, both Buffett and his partner in arms, Charlie Munger, although both directors, were largely ignored by Salomon. But, in 1991, inexcusable shenanigans got the bank into serious trouble, and Mr Buffett was called in from Omaha – virtually over the weekend – to be chairman. The day this was due to be confirmed, the US Treasury announced that it would no longer do any business with Salomon – in effect, closing the firm down in what would have been a Lehmanesque episode. Five sweaty hours later, Mr Buffett achieved the reversal of this decision.
How Mr Buffett accumulated the reputation on which this turnaround was based is arguably more interesting than how his perspicacious investments turned $100 into $60bn.
"Try to be punctual in all your dealings. You will find it difficult to get along with some men, deal as little as possible with such… Save your credit, for that is better than money. If you go into business, be content with moderate gains. Don't be too hasty to get too rich… I want you to live so as be fit to live and fit to die."
This advice was given by Zebulon Buffett to his grandson Sidney Buffett in about 1870. Sidney had recently quit as his grandfather's employee on the basis that the pay was insultingly low.
Sidney Buffett prospered modestly, as Omaha's first greengrocer. His son, Ernest, also a greengrocer, paid low wages and dispensed much commentary on the business of life, including this observation to his son: "The Buffetts have always saved part of what they made, and it has all worked out pretty well."
And so it did for that son, Howard Buffett, US congressman and independent thinker. All elements of the creed are present in Warren Buffett's story, including frugality, valuing credit (as in reputation) more highly than money and saving part of what he made (about 99.999 per cent in his case, and throughout his career).
Even that "moderate gains" element is there, for what Zebulon surely meant was "take only moderate risks" – after all, he did not say don't get too rich, he just said don't be too hasty about it. Warren Buffett has been one of the lowest-risk investors in history.
But it is the conclusion of Zebulon's homily which reverberates most strongly in Warren Buffett's career: "Live so as to be fit to live and fit to die." 140 years later it sounds pompous. But we all know what it means and that its meaning is very important to everyone. There is something more striking than Warren Buffett's fortune. And that is the character of the man who made it.
Self-made billionaires have a reputation for putting their own interest far ahead of all others. Warren Buffett, however, is a saint. He serves his shareholders well not only by making them rich, but by drawing just $100,000 a year in salary. He serves society well by donating 70 per cent of his Berkshire shareholding to a charity that does not even bear his name. And he serves every investor in the world well by his permanent commentaries on the highs and lows of investing and corporate governance. Warren Buffett saves us from utter cynicism.
"Save your credit, for that is better than money" would probably not have been the prime philosophy identifiable in young Warren Buffett, who set up what became Berkshire Hathaway at the age of 26. Quite a few small companies considered themselves shaken down by Mr Buffett, who was an activist investor 30 years before the term was coined. He loved penny stocks, and stock-pickers will salivate at the bargains he snaps up in the book's early pages.
But billionaires don't buy penny stocks and Mr Buffett's desire to be liked undid his inclination to shake down the unworthy, except by words. The subsequent journey, including the mistakes and the unparalleled commitment are wonderfully described in The Snowball.
I suggest you put it on your Christmas present list, with the advice that it's available at the IC Bookshop on 0800 435060 for £16.25 including postage, or visit the IC Bookstore online.
Source: Alistair Blair
