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Paying homage to the Snowball

By Brendan John Worrell (chinadaily.com.cn)
Updated: 2009-03-02 16:51

In her exhaustive 5 year study titled, The Snowball, Warren Buffett and the Business of Life, author Alice Schroeder takes us into a world of restraint and persistence that in the present climate should be made compulsory reading.

Nicknamed the Oracle of Omaha for his investing genius, it’s not until the reader gets to the last 800 pages of Schroeder’s tome that we start to acquire a sense for the attributes that enabled Buffet to become one of the world’s wealthiest and wisest individuals.

In many respects the traits underlying Buffet’s success appear to be the same basic principles which are programmed into Chinese school children today, work hard, don’t waste your time, do your homework, value thrift, be focused and don’t – whatever you do - take too much risk!

Buffet himself has spent the last few years espousing this philosophy to an ever eager audience across the globe. In lectures and interviews he speaks of compounding capital so your money makes more money though he emphasizes to adopt ‘long term greed’ over a speculative short term lust for lucre.

If anything it is such patience and consistency that enabled him and his team, in particular his trusty sidekick Charlie Munger, to surf the ups and downs of the economy for almost 6 decades. They kept a steady and modest gaze where reputation and ethics remained at the core compass of their enterprise. He tried to keep watch on his ‘inner scorecard’ a belief handed down to him via his father, referring to his conscience and what it meant to be considered successful, regardless of whether or not others thought so at the time.

Growing up around the last Great Depression, Buffet as a lad delivered newspapers in the early hours of the morning before he went to school. Later he let out pinball machines to barbershops pulling in dimes which would enable him to buy more machines thus beginning the snowball of wealth accumulation.

More importantly as Schroeder reveals Buffet had passion. This was a fascination for numbers and exuberance for inquiry that saw him do the extra hours in libraries and company annual reports. Apparently as a young man on his honeymoon he even packed Moody’s Manuals, information and statistics on stocks and bonds, into the trunk of his car - much to his bride’s dismay.

Perhaps one of the key Buffet commandments is choose your role models carefully and get close to those you admire and can learn from. For him it was a securities analyst Benjamin Graham and although as a young man he was rejected from Harvard Business School he persevered and was later accepted at Columbia Business School where the latter taught.

The analogy used to describe Buffet in his early career days was of an investor who liked to look for undervalued companies much like a beggar looks for discarded half smoked cigarettes on the pavement. Like the tramp Buffet knew that one could also get a few more puffs from that which was often discarded and it was to see value in this resource that enabled him to slowly build his wealth.

Equally instructive is the fact that Buffet has kept and lived in the same modest house that he first bought 51 years ago, in what was then less than fashionable Omaha, Nebraska, ever while becoming a millionaire then multi billionaire and at times the world’s richest or second richest man.

So appreciating the announcement over the weekend that the last quarter was less than pleasant for his insurance and investment company Berkshire Hathaway, fails to take the shine of a business and life ethic that was questioning the boom in internet stocks way before the dotcom bubble burst in the late 90’s, or whose cautious nature was condemning derivatives years earlier when the economy was still bouncing along before the present global financial crisis.

And while many less wealthy and enviously resentful are only happy to rejoice to see Buffet too has lost some money in this last financial quarter, it is a fool’s joy because these days the majority of profits he makes are divvied out to charity. Since June 2006 when he gave almost USD 31 billion to the Bill & Melinda Gates Foundation, Buffet’s success has been to the benefit of those less fortunate.

Of note as he went through life his understanding of success also became more refined. To him it was to be surrounded and loved by those people whom you would wish to love you. In addition, particularly after a visit to China in 1995 with Bill Gates and his father he developed a gratitude for fortuitous circumstance and a humility that compelled him to try and reach out more to create wealth and opportunity for those still struggling.

Glancing through the Wall St Journal’ online reader’s comments this morning in response to Berkshire’s Annual Report and the desperation and pessimism evident among many, a revisit to the core values and ethos that made Buffet the man he is today could do us all no harm in our search for a formula to tread this wayward current.