on December 31, 2001
"Investment is most intelligent when it is most businesslike", Warren Buffett's teacher, Benjamin Graham, once wrote.
This book is a fantastic biography of Warren Buffett. I think anyone who wants to learn about Warren Buffett or his investment techniques etc should first read this book before anything else (including his essays).
This book is written time-chronogically, from the time around the early 1930s (Buffett was born in August 1930) to around 1994. Here we can observe how Buffett had a great desire to be rich since he was young, but in his teen years, after being involved in several business ventures, he longed for a method which is more consistent in making money.
Meeting Benjamin Graham when he was 19/20 years old solved this longing for Buffett. He became a devoted investor in businesses since then. After working under Graham for several years, Buffett began a partnership (noticed how confident he was, despite his young age, to be successful) when he was 26 years old (in 1956) and achieved a 29.4% compounded annual return in the fund (he dissolved the partnership in 1969). During these 14 years, Buffett learnt which businesses (like those possessing customer franchise - Buffett called these with "Deep moats around the castles") were better than others. He dissolved his partnership in 1969 as he deemed the market to be very overvalued then.
From then on, he used the lessons he had learnt to purchase great businesses at reasonable (or cheap) prices, such as Nebraska Furniture Mart, Washington Post, Cap Cities, etc.
To fully enjoy this book, the reader should stop at certain chapters, and read other - yes, other - related books. For instance, around after I had finished reading chapter 3, 'Graham', I read Ben Graham's 'Intelligent Investor'. Also, when Phil Fisher was mentioned as one of the strongest influencers in Buffett's life, I read his book 'Common Stocks and Uncommon Profits'. The readers can get more insights from reading it this way.
Mr. Lowenstein also took excursions when discussing Buffett to go through discussions about certain business characteristics, to ensure that the readers can fully appreciate Mr. Lowenstein's perceived motivation behind a certain Buffett action etc. Mr. Lowenstein also helped the reader to be more knowledgable about key points about US stockmarket history through interesting dissertations. I found these excursions extremely enlightening.
Mr. Lowenstein's writing style is also very 'flowing' - he changed from one topic to another in a very smooth way. You've got to read it to understand what I'm saying.
Lastly, I just want to say that the readers should have at least a moderate-to-strong knowledge and interest in business (and investing; but business = investing and investing = business) to fully appreciate this book. Enjoy!
on March 9, 2003
For me this was the best of about 6 stock market investment books I bought after selecting from a list of books touted by Morningstar.com as good reading. I read this book straight after reading Ban Grahams book, The Intelligent Investor.
The latter is regarded as essential reading for security analysts, money managers, etc. but I found it relatively heavy going. Seeing Ben Graham was Warren Buffett's inspiration I thought it better to read this first before moving onto Roger Lowenstein's book about Buffett.
Here, I saved the best until last because this book is mind blowing, even though all the principles espoused by the great Ben Graham are detailed in Roger Lowenstein's book. Therein lies the difference - this book is easy to read & Ben's principles, which Warren Buffett endorses, are put in a perspective, which hit you immediately between the eyes-just like a revelation.
The first few chapters I found a bit tedious but once I had past these, the book was riveting. Whilst a biography, it has plenty of "how to" investment information & will certainly make you into a bettor stock market investor. It is the best book one can read if you have not done any investing in stocks yet-merely to avoid the mistakes & bad habits other stock investors have made & I speak for myself.
One understands how Buffet avoided the Dot.com crash & why. Possibly the most interesting thing for me is that Buffet believes that NO ONE can call the market. He says its silly to rely on investment strategies like buying shares on a Monday is better than a Friday & that investing in small caps in December will likely reap you a fortune. And you should watch out for October. Whilst the latter comments are trite, there are huge numbers of books written exclusively about investment cycles & when to make calls - this book puts that technical stuff into perspective & for me this was tremendously thought provoking.
I first read this book in December of 2001 when the tech. stock boom was on the wane. I was a committed "growth" investor until I read this book. I am now unashamedly a "value" investor. This book has completely changed the way I have thought about stock market investments & I am intensely relieved to have come across it before making more baseless investment decisions.
I have read this book three times. I have since read about four other books on Warren Buffett's investment "styles" & this one is still the best.
on December 12, 1999
Although few readers probably come to this book because it is well-crafted, Roger Lowenstein's prose is superb. This is a great biography. But readers will likely be disappointed if they expect a glimpse of Buffett's investment secrets by perusing Lowenstein's book. Lowenstein never makes the claim that you'll learn to be a better investor by reading BUFFETT. In fact, it appears to be Lowenstein's essential thesis that it is Buffett's firmness of character, as much as his intellectual acumen, which makes him such a fine investor. Whatever one might think of Buffett, it is a rare pleasure to find so well-written and thoughtful a book as Lowenstein's biography amongst the sensationalized and poorly edited biographies of late.
Note: The review that follows is of the Second Edition.
I recently re-read this Buffett biography (first published in 1995 and now re-issued with a new Afterword, dated January 2008) and then read Alice Schroeder's The Snowball: Warren Buffett and the Business of Life. Both are first-rate. Which to select if reading only one? That depends on how much you wish to know about Buffett's personal life, including his relations with various family members, and how curious you are about his personal hang-ups, peculiarities, eccentricities, fetishes, etc. If you can do without any of that, Roger Lowenstein's biography is the one to read. I also highly recommend the recently published Second Edition of The Essays of Warren Buffet: Lessons for Corporate America, with content selected, arranged, and introduced by Lawrence Cunningham.
In fact, I'd now like to provide a brief excerpt from Cunningham's Introduction: "The central theme uniting Buffett's lucid essays is that the principles of fundamental business analysis, first formulated by his teachers Ben Graham and David Dodd, should guide investment practice. Linked to that theme are management principles that define the proper role of corporate managers as the stewards of invested capital, and the proper role of shareholders as the suppliers and owners of capital. Radiating from these main themes are practical and sensible lessons on the entire range of business issues, from accounting to mergers to evaluation." Lowenstein does a skill job of examining the context in which various lessons were learned, both by Buffett and by those with whom he was associated. In fact, one approach to his life and career is to examine in terms of student-teacher relationships such as Buffett's with Graham and Dodd as well as others' with Buffett, notably Katherine Graham and those who comprised the "Graham Group": Jack Alexander, Ed Anderson, Henry Brandt, Robert Brustein, Buddy Fox, David ("Sandy") Gottesman, Tom Knapp, Charlie Munger, Bill Ruane, Walter Schloss, Roy Tolles, and Marshall Weinberg. Munger is probably the most important of these associates for reasons best revealed in the narrative. It is worth noting that when Lowenstein was about to begin what proved to be three years of research and then the writing of this book, Buffett informed him that he would do nothing to block his efforts nor would he do anything to assist them. In the Afterword, Lowenstein recalls his first post-publication encounter with Buffett at Berkshire Hathaway's annual meeting in1996. Despite everything that had happened in Buffett's life and career during the previous 45-50 years, Lowenstein observes that "Very little in the portrait, and nothing in the investment profile, has changed." His consistency "may be his least appreciated trait."
As does Schroeder but in somewhat greater detail, Lowenstein rigorously examines subjects that include:
1. The development of Buffett's business philosophy
2. His most important business relationships over the years
3. His most important personal relationships over the years
4. His non-negotiable values
5. What Berkshire Hathaway accomplished under his leadership as CEO
6. Buffett's insecurities
7. His views on philanthropy
8. His social awareness
9. His relationship with Melinda and Bill Gates
10. Why no one else has achieved comparable results by following Buffett's advice
Joe Nocera shares his own thoughts in response to the last point in a profile of Buffett that reprinted in Nocera's book, Good Guys and Bad Guys: Behind the Scenes with the Saints and Scoundrels of American Business. "I think the answer is twofold. First, truly great investing requires a temperament that very few people have. For most of us, it is difficult not to panic when the market tanks, for instance. It is hard not to want to jump on the hot stock, even if we know nothing about the business. The ups and downs of the market are stomach-churning events. The fundamental equanimity required to be a great investor is an extremely rare thing.
"The second reason we don't invest like Buffett is that his methods are far more complicated than they sound. Think about it: When Buffett talks about the `economic prospects' of a potential investment, what he means is that he wants to be able to see where the business will be 10 years from now. If he can see the business remaining dominant for the next decade, he'll consider buying the stock."
"One of the most important reasons for difference [i.e. being able to determine whether or not a business will remain dominant for the next decade] goes almost entirely unacknowledged among those who hope to find in Buffett an easily reproducible investing style. He is a genius when it comes to numbers. `Accounting,' he likes to say,' is the language of business.' It is a language in which his own fluency is unsurpassed, and which gives him an enormous competitive advantage. Usually, all he needs is a quick glance at a balance sheet to know whether he's interested in buying a company or not - because he finds meaning in numbers that the rest of us don't."
Warren Buffett is among the most effective CEOs in recent business history (at least since the conclusion of World War II) and there is certainly a great deal of value to be learned from his performance as both a leader and a manager. Although a business icon, he is also an exceptionally human being because of a unique combination of insecurities, hang-ups, fetishes, neuroses, etc. that various loved ones (notably wife Susie, daughter Susie, and companion Astrid) were able to manage with exquisite sensitivity. Like so many others, he cares more and more deeply than he is (generally) able to express. That said, one close associate and dear friend, Bill Ruane, suggested to Lowenstein after his book was published, "I'm not sure if you captured how [begin italics] tough [end italics] Warren is." Perhaps no one can but credit Roger Lowenstein with providing in this volume a thorough, balanced, multi-dimensional , and insightful explanation of how an ordinary man in almost every other respect accomplished greater success in business than almost anyone else ever has...or ever will.
on July 19, 2006
Buffett is a fantastic biography on one of the 20th century's most well-known investors. Far from being just a financial volume or a how-to-invest-like-Buffett, Lowenstein's work is a genuine biography, and a very well-written one at that. That's not to say one cannot learn something about Buffett's investing style by reading this book; in fact, I believe I learned more about how the man has been so successful from this book than from any other source on Buffett.
The great strength in Lowenstein's biography is that he highlights just what Buffett is-an anomaly. His success on Wall Street is unique, and not merely because that success happened from a couple thousand miles away in Omaha. No, Lowenstein recognizes Buffett for the remarkable man that he is, and analyzes Buffett's character in a way that, if you pay attention, actually explains how to "win" like Buffett has. Lowenstein highlights various attributes in Buffett's personality-his honesty, his amazing ability to keep things simple and find the "inherent value" in companies he analyzes, and his old-fashioned value finding approach to name a few-and examines them both in the context of Buffett's personal life and in his business life. The result is very intriguing, and the resulting impression is that Buffett succeeded on the Street because of who he was, both on and off. While this book may not spell out for you the criteria to invest like Buffett, it certainly shows, with great clarity, what kind of man it takes to be Warren Buffett. The fact that it's a very interesting read and an excellent biography only add to its appeal.
on February 22, 2006
That's the return an investor would have if they invested with Buffett at the beginning of his career in 1956 and held until the end of 1995. In 2006 it would be more like $250 million +. Buffett is a patient, disciplined and extremely rational investor who says his favorite holding period is "forever" and once wrote that he would no more take an investment banker's opinion on whether to do a deal than he would ask a barber whether he needed a haircut.
Warren made the comment while still young that he would be a millionaire by the age of thirty or he would jump off the tallest building in Omaha. Throughout his career, even though he had a burning desire to be extremely wealthy he never forgot concepts that were instilled in him from his father and grandfather, such as the belief that your credit and your word is far better than money.
In 1945 while only 14 he was earning $175 a month from his paper route (just under $2000 in today's dollars) and took the profit and bought 40 acres of Nebraska farmland. By the time he graduated high school he was involved in three businesses and had read over 100 books on business.
By 1956 he had turned his $9,800 savings into $140,000. He left his mentor / idol, Ben Graham and his White Plains NY apartment and headed back to Omaha. By 1957 he set up shop and was running $300,000. By 1964 he was managing $22 million and his personal net worth was approaching $4 million and by the time he was 35 years old in 1966 he managed $44 million and was worth $6.8 million.
In 1967 he was 37 years old, worth $10 million and managing $65 million. In 1968 the Buffett partnership had a gain of $40 million or 59% and he was managing $104 million. By 1970 when he wound up the partnership because he felt the market was nuts (extremely overvalued) an investor that started with him in 1957 would have had a compounded annual return of 29.5% compared with 7.4% for the Dow. For those investors that were wise or lucky enough to stay with him by taking their shares in Berkshire Hathaway instead of cashing out the ride was just getting started.
For a more complete timeline and chronicle of events see my blog: [...] I cut it a bit short here for courtesy's sake.
The wisdom packed into this book is priceless, event though its not earth shattering or revolutionary. The ideas are things we have all probably heard before, its just that Warren lived them. Maybe its best describes by Warren's partner Charlie Munger in his recent book, Poor Charlie's Almanak where he describes his decision making process as running an idea through a hundred or so mental disciplines or beliefs before deciding whether to act on it. For example Buffett tells his son one day, "It takes 20 years to build a reputation and 5 minutes to ruin it. If you think about that, you'll do things differently."
A few great quotes worth remembering:
"With enough inside information and a million dollars you can go broke in a year"
When asked how he does it, Buffett replies, "By reading a couple thousand financial statements a year"
What counted to Buffett was, "Profit as a percentage of capital invested" he said, "I'd rather have a $10 million business making 15% than a $100 million business making 5%, I have other places I can put the money"
In 1970 with the dissolution of Buffett Partnership, Buffett personally became the owner of 29% of Berkshire's stock and for the first time composed the letters to shareholders. Which I highly recommend reading, as this was Buffett's stage throughout the years to preach his view on investing.
During a Q&A for GEICO executives Buffett said, "An investor should approach the stock market as if he had a lifetime punch card. Every time he bought a stock he punched a hole. When the card had 20 holes he was done-no more investing for life. Obviously the investor would filter out every idea but the best."
In an essay for Forbes in 1979 after a prolonged bear market, and after Business Week ran the celebrated cover story, "The Death of Equities" Buffett said, "The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long term values."
Interestingly when a friend suggested that Buffett try his hand at real estate, Buffett grinned. "Why should I buy real estate when the stock market is so easy?"
Probably the most memorable and important quote, especially for business owners is on page 245:
"Regardless of price, we have no interest at all in selling any good businesses that Berkshire owns, and are very reluctant to sell sub-par businesses as long as we expect them to generate at least some cash..."
I think I'm going to hang that up in my office under a printout of Berkshire's annual performance.
Again, for a more complete listing of the Buffett Pearls see my Blog :
[...] I cut it a bit short here for courtesy's sake. I also have a list of Buffett's and Munger's recommended reading.
By Kevin Kingston, author of, A 20,000% Gain in Real Estate: A True Story About the Ups And Downs from Wall Street to Real Estate Leading Up to Phenomenal Returns
on June 27, 2002
Let me start by saying that anyone interested in understanding Warren Buffett needs to read this book before anything else. The reason is simple. This is a pure biography - it doesnt try to influence you to think one way or another - it simply tells you the whole story about Warren Buffett and leaves you to draw your own conclusions.
Though once you have established a knowledgeable unbiased view of WB and if you are interested in knowing more about WB's investment methods and their analyses - you should go on to read other texts by Ben Grapham Phil Fisher among others.
Another important point is that the book is becoming a bit dated (ends in 1994). I think another edition is sorely needed as many important events have taken place in the last 8 years, not to mention the dotcom bubble - a time when WB was said to have lost his art.
Also if the author does come out with another edition he would do well to include some analyses in it. Nothing much but simple charts etc giving a factual account of WB's investments like PE, BV and other ratios and sales, profits etc of companies in which WB invested at and near the time of investment.
Overall I was greatly impressed with the work and recommend it to everyone interested in investing and WB.
on April 17, 2003
Lowenstein presents us with a book about Warren Buffett, the greatest investor of the 20th century. The book takes us on a trek through Buffett's life, from his childhood interest in money, to his successful investing and business ventures in college, to his partnership, and then to his days at Berkshire.
Through this look at how the 2nd richest man in the world acquired his fortune, we as investors stand to gain a lot. The book is a great look at how prudently selecting stocks and sticking to fundamentals can help us choose the right companies to invest in.
And for those finance nerds like myself out there, this book will prove to be a very fascinating read about Buffett's life and the companies he has invested in (and subsequently made successful). Great book!
on April 30, 2003
It Couldn't Have Happened to a Nicer Guy
Lowenstein achieves a rare feat in business biography: I came away from this book with a warm glow and a deep respect for one of the leading lights in American business: Warren Buffet. Quite rightly, the author likens Buffett to a combination of J.P. Morgan and Will Rogers - someone who has a sharp mind for business, who banks on character rather than glamour and who can spin an instructive and entertaining yarn on how the world works. Buffett is truly a national treasure.
Indeed, Buffett's upbringing, the story of his youth and his approach to life and business brought back memories of the values, character and hardwork of my grandparent's generation - values that seemed to have been eclipsed in the past 40 years. Buffett's story serves to remind us that those values still work and can serve as the basis of solid success in business and life.
But the book is actually much more than the story of Warren Buffett. Within its covers the reader finds the central biography, three smaller biographies and a discourse on value investing. The three short biographies are of Ben Graham, Kay Graham and John Gutfreund: each a very sympathetic and humanizing portrait.
The sections on value investing presented the most cogent arguments against Modern Portfolio Theory and the Efficient Market Hypothesis that I have read yet. I knew there was some dissension as to the merits of EMH - but nowhere had I encountered this convincing an argument against it. Somehow Graham, Buffett and Lowenstein - but mainly Buffett - distilled the argument to a point where I "got it."
Naturally, the first thing I did after finishing this book was to rush out and get Graham's "The Intelligent Investor" which I devoured in three days. Highly recommended!
Lowenstein gets in close to his subject, yet respects his privacy. I'm still wondering why Mrs. Buffett moved out - but of course it's none of my business.
As with any paradise, there are snakes in The Garden: Dwayne Andreas of Archer Daniel Midland (ADM) and Larry King of the Franklin Savings & Loan of Omaha. Lowenstein names the first as Howie Buffett's employer and the second as a phony that Buffett rebuffed. For more on these nefarious characters I refer the reader to Kurt Eichenwald's "The Informant" and to John Decamp's "The Franklin Cover-Up." The first is the inside story on ADM price fixing; the latter a somewhat purple-prose, true crime and hard to believe story of a really sick individual.
Indeed, I wondered why Lowenstein bothered to bring up King at all.
All in all, though, this is a really wonderful book. Not only will you learn that character still counts in business, but that intrinsic value almost always rises to the top. Highly recommended.
on October 8, 2003
Thorough, thoughtful, well-written biography of the greatest investor in last 50 years. Educational, thought-provoking and entertaining. My only criticism is that it is a little slow. That may be an unfair comment in that I had just finished Liar's Poker and The New New Thing by Michael Lewis. This is more of a traditional biography with deep detail.