In this article I will summarize the book The Snowball: Warren Buffett and the Business of Life by Alice Schroeder and give you a detailed chapter-by-chapter breakdown of every chapter, highlighting important events, themes, and Buffett’s life journey. It will be bit long article, but I’ll give you a chapter-by-chapter, structured analysis. Hang on!
Part One: The Bubble
1.The Less Flattering Version
The book begins in June 2003 at Warren Buffett’s Berkshire Hathaway headquarters in Omaha, where he sits behind his father’s old wooden desk, surrounded by memorabilia of his long life. The surroundings suit his paradoxical nature—although one of the wealthiest men in the world, he is still frugal and humble.
The chapter sets Buffett’s humility and integrity, especially in the way he wishes his biography to be written. He instructs author Alice Schroeder to always select the “less flattering version” of things whenever there is a difference between his version and others. This instruction reflects his commitment to truth rather than image and serves as the tone for the biography.
Schroeder, who worked as a financial analyst covering the stock of Berkshire Hathaway, captures Buffett’s eccentricities—his unfitted suits, covered office shutters on this brilliant Omaha morning, and his muted CNBC screen dispensing him news all day long. They characterise him as a creature of habit who derives comfort from routines.
Buffett then proceeds to tell us the story of his life, induced by the following question:
“Where did it come from, Warren? Caring so much about making money?“
He denies the popular notion that “behind every great fortune lies a crime”, and claims that Berkshire Hathaway’s success is founded on integrity. He gesticulates forcefully and talks with boyish enthusiasm, even at 72, demonstrating his life-long love of business and investing.
The chapter ends by noting an important lesson from Buffett’s attitude:
“Humility disarms.” With all his wealth and power, his humble nature makes him accessible and interesting.
This preface positions the biography as an honest, intelligent look at Buffett’s life, showing both his virtues and his contradictions.
2.Sun Valley, 1999
Warren Buffett speaks at the 1999 Sun Valley Conference in this chapter, a private yearly meeting of the globe’s most influential business leaders, media barons, and tech moguls, sponsored by Allen & Co. The conference, located in the beauty of the Idaho mountains, is a networking camp where giant business transactions and industry pivots often emerge.
The dot-com bubble was peaking at the time. The conference is charged with an electric and ecstatic atmosphere as tech CEOs gloat over the “New Economy,” convinced that web companies will keep on skyrocketing forever. Most of the attendees, even moguls like Bill Gates, Michael Dell, and Jeff Bezos, are completely caught up in this frame of mind, convinced old-style business models are obsolete.
Yet, Buffett, an adherent to value investing principles, has another take. Taking the stage as the keynote speaker, he provides a stark threat about the non-sustainable boom of internet shares. Using historic comparisons, he talks about other economic bubbles such as the auto and airline business, where cutting-edge technologies reshaped the globe but did not yield sustainable earnings for investors.
Buffett employs his classic voting machine vs. weighing machine analogy to describe the irrationality of the market:
In the short run, the market is a voting machine where companies are rewarded based on popularity rather than fundamentals.
In the long run, it is a weighing machine, and only companies with genuine earnings will be left standing.
His words are greeted skeptically, as most in the crowd feel that he has “missed the boat” on tech investing. Even some of the top tech executives privately ridicule him for being behind the times. But a year later, the dot-com bubble bursts, making Buffett’s predictions come true and cementing his position as being one of the greatest financial minds of his generation.
3.Creatures of Habit
This chapter explores the contrasting personalities of Warren Buffett and Charlie Munger, his longtime business partner and vice chairman of Berkshire Hathaway. While both men share a deep passion for rational thinking, investing, and lifelong learning, their approaches to life and business are fundamentally different.
The Buffett-Munger Dynamic
Buffett and Munger are often described as “Siamese twins” in thought, with similar values and investment philosophies.
However, their personalities differ significantly:
- Buffett is friendly, affable, and likes being popular. He is a born teacher, always expounding his concepts to others in simple language.
- Munger is direct, formidable, and doesn’t give a hoot about being popular. He cares about respect more than popularity and has no tolerance for small talk or ineptitude.
The Power of Rational Thinking
Both men stress the importance of logic, discipline, and sound thinking as the key to success.
- Munger, in particular, is a firm believer in “inversion thinking”—solving problems by reversing the process. Example: Instead of wondering how to be successful, wonder what causes one to fail and steer clear of it.
- Buffett’s strength is his “Inner Scorecard”—his ability to make his own decisions regardless of public opinion or outside approval.
Buffett’s and Munger’s Daily Habits
- Charlie Munger’s Routine:
- Very systematic, using the same routine every day for decades.
- Gobbles books and devotes time to philanthropy.
- Chooses exclusivity, interacting only with people he admires.
- Warren Buffett’s Routine:
- Leads an astonishingly straightforward and monotonous life as a billionaire.
- Spends much of his time reading newspapers, financial statements, and thinking.
- Shuns extraneous business meetings, considering that thinking time is more precious.
- Consumes fast food, drinks Coca-Cola, and plays computer bridge for unwinding.
Steer clear of the “Shoe Button Complex”
Munger cautions against exaggerating one’s knowledge in domains other than one’s own (which he refers to as the “Shoe Button Complex”).
He and Buffett remain firmly within their “Circle of Competence”, investing only in sectors they know intimately.
The Strength of Habit in Success
Both men are convinced that habits determine an individual’s fate.
- Buffett’s ability to stick with a rigorous, disciplined strategy in investing—and in life—has been the key to his success over the long haul.
- Munger, while more blunt in his demeanor, adheres to similar principles, applying reason and order to his choices.
4.Warren, What’s Wrong?
By 1999, Warren Buffett was at odds with the world of finance. As the stock market soared—fueled by an unprecedented technology boom—Berkshire Hathaway’s shares were lagging behind. The dot-com bubble was at its peak, with speculators flooding the “new economy” companies, many of which had no or negligible earnings. Buffett, a traditional value investor, would not invest in these companies because they did not have the strong fundamentals he demanded.
While the NASDAQ was skyrocketing, Berkshire Hathaway’s stock fell. Financial writers and analysts, who had once been his fans, were questioning his investment philosophy. The press openly criticized him, with Barron’s publishing a cover story called “Warren, What’s Wrong?” Some were saying that Buffett had lost his magic—that he had passed up the greatest investment opportunity of a generation.
In spite of the pressure, Buffett held his ground. His adherence to the Inner Scorecard (self-judgment by internal standards, not public opinion) prevented him from following short-term fads. He compared his strategy to painting the Sistine Chapel—concerned with long-term quality, not market chatter. While others wrote off his skepticism of the tech bubble, history later vindicated him when the dot-com crash of 2000 erased billions in speculative riches, affirming Buffett’s disciplined investment strategy.
Part Two: The Inner Scorecard
5.The Urge to Preach
This chapter delves into Warren Buffett’s early childhood, his profound interest in numbers and money, and his inborn desire to teach and impart knowledge. It also shines the spotlight on major influences that formed his personality, namely his family, early schooling, and personal experience.
Early Signs of a Teacher
Right from childhood, Buffett possessed an inborn ability to explain things to people.
He enjoyed studying and teaching people about numbers, business, and investing.
He broke down things into easy lessons that became characteristic.
Influence of His Father, Howard Buffett
Howard Buffett, a congressman and former stockbroker, placed strong moral character in Warren.
He was principled, well-disciplined, and fanned Warren’s interest in money.
Howard’s uncompromising honesty and sense of ethics reflected in Warren’s subsequent business deals.
An Obsession with Numbers
Buffett showed a remarkable memory and mathematical skill at a young age.
He was able to memorize baseball statistics, stock prices, and business numbers easily.
This talent formed the basis of his investment strategy.
Building a Moral Compass
Warren was exposed to the dichotomy between his father’s idealism and the unforgiving nature of politics and business.
He soon realized that success wasn’t necessarily about getting rich—about making money—but also about honor and reputation.
Business Experiments Begin
Buffett’s entrepreneurial spirit started early, starting from selling chewing gum and soft drinks to following the stock market.
His curiosity about money transcended making profit—instead of learning how one gets wealthy.
This chapter lays the groundwork for Buffett’s life-long function as a teacher—not only of finance, but of ethics and business philosophy. His father’s values, together with his preoccupation with numbers, formed the basis for the investor and thinker he would grow up to be.
6.The Bathtub Steeplechase
This chapter explores Warren Buffett’s early business endeavors and his dogged quest for earning money, even during childhood. It showcases his inherent ability in mathematics, business, and amassing wealth, laying the ground for his future achievements.
Early Business Ventures:
Buffett tries various methods of earning money, such as selling chewing gum, Coca-Cola bottles, and magazines door-to-door.
He soon catches on to the potential of buying in bulk and selling for profit, an early indication of his investment savvy.
The Power of Compounding:
Buffett’s first major moneymaking business is a paper route.
Rather than merely delivering papers, he strategically lengthens his route, maximizing return with minimal effort.
He puts his profits into pinball machines, which produce passive income—his first substantial lesson in compounding wealth.
Stock Market Fascination:
Warren becomes an early numbers and stock price enthusiast, reading financial reports and investment literature.
He makes his initial stock buy at 11 years old, purchasing three shares of Cities Service Preferred.
He learns the first of several important lessons when he sells prematurely, losing greater profits—a misstep that defines his future approach to investing.
Gambling & Risk Taking:.
He loses money at first but eventually gains an appreciation for understanding risk and probability, something that serves him later on while investing.
The Influence of Family:
His father, Howard Buffett, is the person who guides his work ethic and investment style.
His mother, Leila, is emotionally farther away from Warren, encouraging him to be more independent and reliant on himself.
7.The Tornado
This chapter examines a critical juncture in Warren Buffett’s childhood when his father, Howard Buffett, is elected to Congress, requiring the family to relocate from Omaha to Washington, D.C. The relocation is a significant disruption for young Warren, who finds it difficult to adapt to his new surroundings. Yet instead of becoming discouraged, he retreats, intensifying his passion for numbers, business, and money-making activities.
The Move to Washington, D.C.:
Howard Buffett, a conservative and staunchly principled politician, wins a seat in Congress.
The family moves from their comfortable existence in Omaha to Washington.
Warren is uncomfortable in the new city and has trouble making friends.
Social Struggles:
Warren is shy and ill at ease in social situations, particularly in Washington’s political scene.
He makes up for it by immersing himself in his love: learning about numbers and business.
Early Fascination with Money:
Buffett extends his childhood obsession with wealth.
He reads financial statements, commits numbers to memory, and tries his hand at money-making ventures.
This phase confirms his conviction that financial freedom is the essence of personal liberty.
The Tornado as a Metaphor:
The chapter title, “The Tornado,” represents both the whirlwind upheaval in Buffett’s life and the intensifying power of his preoccupation with money and investing.
Where others view instability, Buffett views opportunity, paving the way for his success to come.
This chapter illustrates how adversity and change influenced Buffett’s attitude. Far from fighting the move, he directed his energies toward what he loved most—studying finance and investing. His capacity for adaptation, concentration, and converting difficulties into possibilities would become a hallmark of his professional career.
8.A Thousand Ways
Here in this chapter, Warren Buffett’s entrepreneurial drive persists as he repeatedly looks for novel means of earning money. Even as a young boy, he is interested in numbers, trends, and opportunities for business. He does not merely fantasize about riches—he actually tests different schemes for earning it.
Early Business Ventures:
Buffett attempts numerous methods of earning money, exemplifying his unstoppable drive.
He gathers used golf balls, cleans them, and resells them for a profit.
He establishes a route for delivering newspapers, which he operates effectively in addition to reviewing the profitability of every route.
He purchases pinball machines and sells them to barber shops, leveraging passive income.
Creating an Investment Mindset
Even as a kid, Buffett invests his profits, demonstrating an early appreciation for compounding—a concept that will guide his future investment success.
He learns the value of diversification, experimenting with various money-making schemes instead of using only one.
Influence of Books & Self-Learning:
Buffett gobbles up books on business and investing, continually honing his skills.
He reads about successful business people and financial titans, shaping his perception that wealth creation is a learnable skill.
Understanding Human Behavior & Markets:
With his different businesses, Buffett starts studying consumer behavior and profit trends.
He understands that certain businesses give stable cash flow, while others are unstable.
9.The Biggest Thing I Ever Saw
In this chapter, Warren Buffett has a turning point in his youth that significantly influences his investment philosophy. He starts to understand the raw power of financial markets, business cycles, and the irrationality of investors.
Seeing the Stock Market in Action
Buffett sees wild market action and understands that stocks do not always act rationally.
He becomes intrigued by financial bubbles and crashes, discovering how greed and fear govern market behavior.
Early Lessons in Investing
He learns from previous financial booms, including the Florida land bubble and the Great Depression.
Buffett learns that speculation tends to result in financial destruction, whereas real investing is all about long-term value.
The Power of Compounding
Buffett becomes fixated on compounding wealth.
He figures out how little investments can snowball into huge returns over the years, which reinforces his trust in patience and long-term profit.
Education & Reading
He reads books on investing, specifically Benjamin Graham’s value investing principles.
Starts to hone his own investment tactics, targeting underpriced businesses instead of speculation.
Part Three: The King of Wall Street
10.The Bathtub Steeplechase
this chapter delves into Warren Buffett’s experience at Columbia Business School, where he learned from Benjamin Graham, the father of value investing.
Buffett’s reason for going to Columbia was purely motivated by the fact that he wanted to learn from Graham, whose book “The Intelligent Investor” significantly impacted him.
The name “Bathtub Steeplechase” is a metaphor for Buffett’s journey of overcoming hurdles and challenges to achieve his objectives.
The chapter highlights Buffett’s obsession with investing and his willingness to go to great lengths to achieve knowledge in the field.
It also speaks of his initial difficulties in securing employment on Wall Street, getting rejected but never giving up.
Later, Buffett persuades Graham to employ him at the Graham-Newman Corporation, which is where he starts his official career in investing.
11.Strike One
Warren Buffett is given his initial significant career downturn in this chapter when he does not succeed immediately in getting employment with his hero, Benjamin Graham.
Buffett’s Respect for Graham:
Upon the conclusion of studying at Columbia Business School, Buffett has been enormously affected by Benjamin Graham’s concept of investing, and he firmly decides to serve with Graham-Newman Corp., the investment house run by Graham.
He regards Graham as the supreme expert on value investing and wishes to learn from him directly.
Job Rejection & Setback:
Buffett applies for a job at Graham-Newman with great enthusiasm, but Graham turns him down even though he has a good academic record and is well-versed in investing.
The reason behind this: Graham has his own criteria of recruitment strictly on objective merit and not on personal favors. Then he mainly recruits Jewish candidates since they are discriminated against elsewhere in Wall Street. Buffett is not Jewish, and thus he is excluded from the criteria.
The rejection greatly saddens Buffett because he had wished to begin his investment career with his idol.
Learning & Persistence:
Rather than quitting, Buffett keeps on working as a stockbroker again in Omaha and continues to learn from the market.
He improves his investment knowledge and accumulates his own wealth, demonstrating his skills in reality.
The Turning Point – Finding Employment:
After some time, in 1954, Graham has a change of heart and offers Buffett employment at Graham-Newman Corp.
Buffett eagerly accepts and relocates to New York, where he finally has the opportunity to work with Graham and hone his value investing technique.
12.The Side to Play
This chapter is dedicated to Warren Buffett’s experience working for Benjamin Graham at Graham-Newman, the investment company where he developed his value investing skills. It emphasizes the most important lessons Buffett learned from Graham and how these experiences influenced his subsequent investment philosophy.
Getting the Dream Job
Buffett was rejected once before he continued to pursue a job at Graham-Newman, eventually getting a job.
Graham, whose strict and methodical investment style was Buffett’s idol and mentor.
Buffett was keen to implement Graham’s value investing philosophy, which was based on looking for undervalued stocks with solid financials.
Learning the Art of Investing
Buffett worked with Graham and learned about his “cigar butt” investment strategy—purchasing companies at a discount, even if they had minimal long-term potential, and extracting the last ounce of value from them.
He was taught to look at intrinsic value instead of stock price movement.
Graham’s approach depended more on numbers and equations than on management talent or brand power—something Buffett would eventually change in his own strategy.
Conflict Between Reason and Instinct
Buffett liked Graham’s system but did not think that it took qualitative aspects such as leadership of a company and brand sustainability into account.
This chapter represents the start of Buffett’s move away from Graham’s strictly statistical methodology towards a more integrated “quality investing” approach.
The Turning Point
Buffett came to understand that although Graham’s approach was effective, it tended to result in investments in struggling companies with little hope of long-term growth.
This epiphany sowed the seed for his subsequent collaboration with Charlie Munger, who assisted in further honing his strategy of acquiring wonderful businesses at reasonable prices instead of cheap stocks.
13.Buying a Snowball
This chapter represents a milestone in Warren Buffett’s career as he transitions from an investor in others’ companies to buying a firm of his own—Berkshire Hathaway.
Return to Omaha & Beginning His Own Investment Partnership
Following the experience gained in working for Benjamin Graham at Graham-Newman, Buffett returns to Omaha and embarks on building his own investment partnership.
He raises funds from family and friends, along with a couple of high-net-worth investors, and forms the Buffett Partnership Ltd. in 1956.
Buffett uses Graham’s value investing methodology, seeking significantly undervalued stocks with excellent business fundamentals.
Berkshire Hathaway – A Struggling Textile Mill
Buffett comes across Berkshire Hathaway, a struggling textile manufacturing firm.
At first, he views it as a quintessential Graham-style investment—underpriced based on its asset value rather than its earnings prospects.
The stock of the company is undervalued, and he starts purchasing shares, thinking that there can be a turnaround.
The Turning Point – A Conflict with Management
Buffett negotiates with Berkshire Hathaway CEO Seabury Stanton regarding a stock buyback.
Stanton makes a proposal to purchase Buffett’s shares at $11.50 per share but then reduces the offer to $11.375 at the eleventh hour.
Feeling cheated, Buffett acts on emotion and chooses to acquire Berkshire Hathaway rather than sell.
A Lesson in Investment Blunders
Buffett eventually comes to understand that the purchase of Berkshire was an emotional investment mistake.
The textile industry is declining, and he cannot make it profitable.
He gradually diverts the company’s attention from textiles to insurance and other quality businesses.
The Snowball Begins Rolling
Despite it beginning as a blunder, Berkshire Hathaway turns out to be the catalyst for Buffett’s empire.
The firm serves him as a means of buying up companies, more specifically insurance companies, that can produce cash flows for other investment purposes.
Part Four: The Empire Builder
14.The Omaha Club
This chapter explores Warren Buffett’s shift from being a successful investor overseeing partnerships to becoming a full-blown businessman when he assumes leadership of Berkshire Hathaway. It explains how Buffett’s financial empire started to form and how he used his vast knowledge of business and capital allocation to turn an old textile mill into a mighty investment machine.
Buffett’s Increasing Influence in Omaha
By the early 1960s, Buffett was already known as a master investor.
Even with his increasing wealth, he kept a simple lifestyle and continued to be deeply rooted in his Omaha origins.
He was well known within local business communities, but he still preferred to conduct himself quietly instead of craving public prominence.
Berkshire Hathaway: A Troubled Textile Mill
Buffett initially had dealings with Berkshire Hathaway when he saw that its stock was undervalued.
At first, Berkshire was a struggling textile operation that could not compete with cheaper producers.
Buffett saw potential not in the textile operation, but in the assets and the capital structure of the company.
The Takeover and a Bitter Lesson
Buffett started acquiring stocks aggressively, believing the firm was undervalued.
He had a handshake deal with Berkshire’s CEO, Seabury Stanton, to purchase his shares at a particular price.
But Stanton attempted to negotiate the price downward, which made Buffett angry and prompted him to acquire the company outright.
The decision was based on emotion rather than planning, something Buffett subsequently acknowledged as a mistake.
Berkshire As an Investment Vehicle
Once he acquired control, Buffett soon discovered the textile business was unprofitable.
Rather than concentrating on textiles, he started employing Berkshire as a holding company to make more profitable acquisitions.
The initial major step was to invest in insurance, beginning with National Indemnity, which generated consistent cash flow that Buffett could reinvest in other places.
The Start of the Buffett Playbook
Buffett’s strategy at Berkshire laid the groundwork for how he would run businesses later on:
- Identify undervalued assets or businesses.
- Employ excess capital from successful businesses (such as insurance) to finance future ventures.
- Prioritize long-term value over short-term profit.
15.The Scouring Pad for the System
In this chapter, The Scouring Pad for the System, Alice Schroeder chronicles Warren Buffett’s evolution from a modest investment partnership to constructing Berkshire Hathaway into corporate giant. This chapter marks how Buffett converted a failing textile firm into a diversified holding conglomerate, a real turning point in his career.
The Struggle of Berkshire Hathaway
At first, Berkshire Hathaway was a loss-making textile operation, and Buffett’s initial holding was a business blunder.
In spite of his ingrained values of never selling an investment at a loss, Buffett was aware that textiles was a losing industry.
Switch to Insurance and Financial Fortitude
Buffett understood that the textile business on its own would not bring lasting long-term profitability.
He started buying insurance companies (like National Indemnity), which gave consistent cash flow.
The insurance float—prepaid premiums, before they’re paid out as claims—provided him with a stable source of capital to invest elsewhere.
Capital Allocation Lessons
Buffett’s main epiphany was that capital allocation, not the day-to-day running of the business, was the key to creating wealth.
Instead of re-investing in losing textiles, he began to invest Berkshire’s capital into better businesses such as media, insurance, and consumer goods.
The Metaphor of the “Scouring Pad”
Schroeder employs the analogy of a “scouring pad” to explain how Buffett was polishing his business approach.
He removed inefficiencies, found companies with solid fundamentals, and acquired businesses strategically.
Buying Businesses with Moats
Buffett’s strategy shifted to investing in companies with competitive moats (or “moats”), including:
- See’s Candies – A high-end brand with pricing power.
- The Washington Post – A solid media company.
- He shifted away from low-margin businesses and highly competitive ones.
16.Margin of Safety
This chapter explores Warren Buffett’s fundamental investment concept: the “Margin of Safety.” The term, first coined by Benjamin Graham, is focused on investing in holdings that are considerably undervalued compared to their intrinsic value, providing a cushion against losses.
The Margin of Safety Concept
Buffett insists that investors should only purchase stocks when they are significantly cheaper than their intrinsic value.
This strategy insulates against economic down cycles and market volatility.
He likens it to engineering: Bridges are constructed so they can support heavier loads than they are predicted to bear; similarly, investments ought to have a buffer against the unforeseen.
Berkshire Hathaway’s Investment Philosophy
Buffett diverges from speculative investing and invests in businesses that have solid fundamentals.
He steers clear of “hot stocks” and purchases companies with sustainable competitive strengths (economic moats).
Berkshire Hathaway’s holdings in insurance companies are important because their underwriting profits and “float” (premium payments received ahead of claims paid) act as a surety safety net.
Risk vs. Volatility
Buffett makes a distinction between risk (permanent loss of money) and volatility (short-term price movements).
While most investors are fearful of short-term price fluctuations, Buffett views them as chances to purchase undervalued stocks at a discount.
Case Studies: Smart Investments
Buffett’s purchase of See’s Candies is an ideal illustration of the purchase of a high-quality business at a fair price.
The firm enjoyed brand loyalty, price power, and minimal capital requirements—guaranteeing profitability in the long term.
Patience and Discipline
Buffett points out that investors must wait for the proper opportunity instead of seeking quick gains.
“The stock market is a device for transferring money from the impatient to the patient.”
17.The Inner Scorecard
This chapter delves into Warren Buffett’s own philosophy, specifically his framework of the Inner Scorecard, used as a guiding principle in life and business decisions. Contrary to many individuals who look for external validation, Buffett stresses adhering to one’s personal values and judgment, and not to public opinion or cultural expectations.
Inner vs. Outer Scorecard:
Buffett distinguishes two measures that people use to gauge success:
- The Inner Scorecard: Deciding on the basis of core values, integrity, and long-term values, irrespective of outside validation.
- The Outer Scorecard: Based on what others perceive, on validation through wealth, prestige, or popularity.
Buffett maintains that individuals who use an Outer Scorecard tend to make terrible long-term choices, as they are more interested in temporary approval rather than actual achievement.
Application in Investing:
Buffett’s investing philosophy lies in his Inner Scorecard—he only invests in businesses according to their underlying worth, and not according to fashion or buzz.
He famously remained aloof to the dot-com bubble as he did not see the business models, although others criticized him along with the media.
His resolve to stick with his own view resulted in the long-term prosperity of Berkshire Hathaway.
Personal Life & Relationships:
Buffett’s own life decisions are also an indicator of his Inner Scorecard. He prioritizes long-term relationships, loyalty, and trust more than displays of wealth.
Although he is exceedingly wealthy, he lives simply and emphasizes intellectual efforts over extravagance.
Lessons from His Father:
Howard Buffett, Warren’s father, contributed significantly to influencing his Inner Scorecard.
Howard was a man of principle who would stand alone in Congress when he disagreed with the popular sentiment if it was the right thing to do.
Buffett appreciated this and took to heart the lesson that it is preferable to be right by your own values rather than being popular.
Part Five: The Oracle of Omaha
18.The Last Available Seat
This chapter delves into Warren Buffett’s increasing prominence as an investment sage and his capacity to attract the attention of the financial community. By then, Buffett’s shareholder letters at Berkshire Hathaway had become legendary, full of wisdom, wit, and profound financial observations. Investors, businesspeople, and analysts looked forward to his commentary, appreciating his capacity to make complicated financial concepts simple and to spot long-term investment potential.
The Shareholders Meeting Turns into a Circus
Berkshire Hathaway meetings, which take place annually in Omaha, Nebraska, started attracting more and more people, becoming informally known as the “Woodstock for Capitalists.”
Once a small annual meeting for shareholders, it evolved into a full-fledged event that saw thousands of visitors from across the globe.
Visitors came for Buffett’s insights, hoping to know his views on investing, business strategy, and even the tenets of life.
Buffett’s Public Persona Expands
With increasing fame, Buffett was no longer an excellent investor; he was an icon of financial acumen and value investing over the long term.
His straightforward and witty approachable him, and he was regarded by many as the voice of sanity in a highly speculative financial environment.
Teaching and Sharing Knowledge
Buffett loved to teach people, frequently relying on simple metaphors to illustrate involved investment ideas.
He thought that good investing principles must be understood by all, and his shareholder letters attested to this philosophy.
Contrarian Thinking & Steer Clear of Market Hype
The chapter emphasizes how Buffett’s philosophy was distinct from the conventional financial community.
Whereas most investors followed short-term trends, Buffett was committed to long-term fundamentals.
His ability to stand alone reinforced his image as a disciplined and logical investor.
19.Go-Go
This chapter examines the reckless and speculative 1960s stock market, commonly known as the “Go-Go Era”, which was characterized by aggressive investments, fast turnover of stocks, and overvalued stocks. Investment companies and mutual funds during this time adopted high-risk methods, pursuing growth stocks without much concern for the underlying business realities.
Buffett’s Prudent Approach
Whereas most other investors were swept up in the frenzy of speculation, Warren Buffett stuck to his principles of value investing and was not swayed by hype.
He saw through theunsustainable dynamics of the Go-Go market, where business fundamentals were overlooked in favor of momentum and speculation.
Unlike others in his time, Buffett did not overpay for growth stocks but invested in undervalued companies with excellent long-term opportunities.
Closing the Partnership
By the late 1960s, Buffett perceived that the market conditions became too speculative for his taste.
Instead of compromising his rigorous investment approach, he did a shocking thing—he dissolved his investment partnerships in 1969 by returning funds to his investors.
He told his partners that he could no longer locate good investment ideas at reasonable prices.
Transition to Berkshire Hathaway
Following the dissolution of his partnerships, Buffett concentrated his efforts on Berkshire Hathaway, which he had been slowly converting from a failing textile business into an investment giant.
With Berkshire, he began acquiring quality businesses such as insurance firms, consumer goods businesses, and media businesses.
20.It’s the Reputation, Stupid
This chapter examines Warren Buffett’s strong commitment to ethics, integrity, and reputation in business. Buffett is strongly convinced that reputation is a business’s greatest asset, and once lost, it is almost impossible to regain. His investment and management style manifests this conviction because he focuses on companies and executives with solid ethical foundations.
Buffett’s Focus on Reputation
He frequently states, “It takes 20 years to build a reputation and five minutes to ruin it.”
Buffett views reputation as a type of capital that is more valuable than money.
When he buys companies, he seeks managers with high moral standards instead of merely financial acumen.
Case Studies of Reputation in Business
The chapter covers previous corporate scandals that destroyed shareholder trust.
Buffett compares businesses that kept their integrity intact with businesses that lost people’s trust.
He emphasizes the importance of ethical leadership as part of successful business in the long run.
His Management Philosophy
Buffett gives freedom to his managers but asks them to adhere to high ethics.
He cautions CEOs: “If you lose money for the firm, I will be understanding. If you lose reputation, I will be ruthless.”
His method is trust-based, assuming that his managers will act ethically.
Berkshire Hathaway’s Focus on Ethics
Berkshire does not suffer from too much bureaucracy and rules compliance like most other companies.
Buffett holds the view that if you must have a huge compliance department, you’ve hired the wrong folks.
21.The Power of No
This chapter brings out Warren Buffett’s value investing discipline, especially his power of saying no to opportunities, trends, and deals that don’t fit his prime principles. It brings out how self-restraint, patience, and a rigid commitment to value investing enabled Buffett to stay clear of great financial mishaps and build long-term wealth.
Discipline in Investing:
Buffett’s achievement is not merely about finding excellent investments but also refusing to take bad ones.
He will not be influenced by emotion, hype, or short-term fads.
Avoiding Speculation:
Throughout his life, Buffett has dismissed speculative bubbles such as the late 1990s dot-com bubble.
According to him, investors should invest in businesses that they know and have sound fundamentals.
Patience as a Strength:
Buffett is famous for holding cash for extended periods instead of making spur-of-the-moment investments.
He holds out for the proper opportunity, frequently going against the market when required.
Simplicity & Focus:
Buffett adheres to the principle of remaining in his “Circle of Competence”—investing only in businesses he knows about.
This concentration keeps him from making bad choices in areas he is not well-versed in.
Opportunity Cost & Saying No:
He instructs that each investment choice has an opportunity cost—saying yes to one thing equates to saying no to something else.
Buffett is convinced that rejecting unexceptional offers opens up opportunities for genuinely remarkable ones.
22.The American Express Salad Oil Scandal
In this chapter, Alice Schroeder explores one of Warren Buffett’s most celebrated investment moves—his gamble on American Express in the Salad Oil Scandal of 1963. This story exemplifies Buffett’s vision past near-term fears of the market and appreciation of a business’s underlying value, cementing his reputation as a great contrarian investor.
The Crisis: The Salad Oil Scandal
In 1963, Allied Crude Vegetable Oil Refining Company, operated by Anthony “Tino” De Angelis, masterminded a huge fraud.
Allied Crude stored salad oil (employed in food processing), in tankers and warehouses, and used it as collateral for loans.
The company claimed to have millions of gallons of salad oil in storage, which it used to secure loans from banks and financial institutions—including American Express, which was heavily involved in financing commodity storage.
When inspectors eventually checked the tanks, they found that most of them contained water with just a thin layer of oil on top to deceive examiners.
The scam was uncovered, and the company went out of business overnight, sending the financial markets into a panic.
Effect on American Express
American Express had issued warehouse receipts (a form of guarantee) for the phantom salad oil.
Investors lost faith in American Express when the scam was discovered, believing that it would have to absorb the huge losses.
The stock of the company fell by over 50%, and it was widely thought that it was heading towards bankruptcy.
The scandal resulted in lawsuits and a public relations debacle, with consumers doubting the integrity of American Express.
Buffett’s Contrarian Stance
As Wall Street panicked, Buffett noticed a chance.
He did some fieldwork by seeing people use American Express travelers’ checks and credit cards at stores and restaurants.
He noticed that, even in the wake of the scandal, consumers continued to use American Express every day, so its brand and customer loyalty were still intact.
Buffett believed the long-term value of American Express was preserved and that the scandal was only temporary.
He spent $13 million, representing 40% of his partnership capital at the time, buying stock in American Express.
The Result
Years later, American Express bounced back from the scandal since the core business was resilient.
Buffett’s investment multiplied by three within a few years and earned him millions in returns.
This transaction sealed his image as a master of value investing and contrarian thinking—purchasing quality companies when other investors were scared.
Part Six: The Giving Pledge
23.The Reluctant Billionaire
In this chapter, Alice Schroeder delves into Warren Buffett’s contradictory relationship with wealth. Even though he is among the wealthiest men in the world, Buffett never adopted the lavish lifestyle of billionaires. His stinginess and austere ways never changed even when his wealth increased to the tens of billions.
Frugality Despite Extreme Wealth
Buffett remained in the same humble house in Omaha that he purchased in 1958 for $31,500.
He was fond of plain delights—hamburgers, Cherry Coke, and Dairy Queen, not fine cuisine.
Instead of yachts or luxury vehicles, he drove himself around in a Lincoln Town Car.
Disgust for Ostentatious Spending
Contrary to many billionaires who publicly display their affluence, Buffett did not view extravagant expenses as redundant or even absurd.
He condemned excessive wealth accumulation when it resulted in wasteful, unproductive consumption.
Money as a Scorecard, Not a Luxury Ticket
Buffett did not see money as a ticket to indulge but as a scorecard of success in investing.
He was fixated on compounding wealth but did not have a personal interest in spending it on luxuries.
His Complex Relationship with Philanthropy
While most assumed Buffett would be a large philanthropist during his earlier years, he hesitated to give away significant amounts for decades.
He viewed philanthropy as one field where he had no edge, unlike with investing.
He liked effective allocation of capital as opposed to indiscriminately donating.
Shift in Attitude toward Giving
In time, Buffett came to acknowledge the duty associated with his wealth.
He would ultimately pledge to give nearly all of his fortune, largely through the Bill & Melinda Gates Foundation.
24.The Bill & Melinda Gates Foundation
This chapter discusses Warren Buffett’s choice of giving most of his wealth to the Bill & Melinda Gates Foundation, representing a dramatic turnabout from his lifetime position regarding charitable giving.
Buffett’s Position on Charity
Throughout the majority of his life, Buffett thought that growing rich in an efficient manner and allowing society to profit through financial development was preferable to direct giving.
He was a great fan of the philosophy of Andrew Carnegie that an individual should earn money early in life and leave it behind while dying but did not tread in his footsteps himself.
Unlike other billionaires who formed their own charities, Buffett didn’t want to run a giant philanthropic establishment.
The Turning Point
Being close friends with Bill and Melinda Gates became the turning point.
Observing how effectively the Gates Foundation functioned and its commitment to addressing worldwide health and education problems made Buffett believe that it was the proper vehicle for his fortune.
At age 75 in 2006, Buffett made a landmark announcement:
- He committed to donating more than 85% of his wealth.
- Most of his fortune would go to the Gates Foundation, with lesser amounts to foundations controlled by his children and late wife, Susie Buffett.
The Donation Framework
Instead of a single payment, Buffett designed the donations in terms of yearly installments to make him and the institutions accountable and keep them running efficiently.
The Gates Foundation was already a giant among giants in world philanthropy, concentrating on ending diseases such as malaria, enhancing education, and financing scientific studies.
Buffett’s donation doubled the assets of the foundation, which became the world’s biggest.
Buffett’s Legacy in Philanthropy
His philanthropy spurred The Giving Pledge, where billionaires pledge to give away most of their money.
Even with his enormous charitable donations, Buffett was still thrifty and chose to stay in his simple Omaha house, affirming his commitment to using wealth for the collective benefit.
25.The Final Snowball
This chapter is the culmination of Warren Buffett’s remarkable odyssey, discussing his legacy, personal life, values, and enduring legacy. Alice Schroeder looks at how Buffett’s principles on investing, business, and giving have informed his life and the world in general.
Buffett’s Personal and Professional Growth
By now, Buffett is not only an investment mastermind but a profoundly influential business, ethical, and wealth thinker.
Though he has amassed tremendous wealth, he is humble and disciplined, still fueled by the same values that propelled him early in his investment life.
His Unconventional Personal Relationships
Buffett’s unorthodox marriage to Susie Buffett is discussed further. Though they lived apart for many years, emotionally, they were close together.
His affair with Astrid Menks, a woman Susie had urged him to date, is also explored.
His children and home life—although he has been a loving father, he was too preoccupied with business to devote himself to hands-on parenting on a daily basis.
Lessons in Wealth and Happiness
Buffett never measured success in terms of how much money he accumulated but by those who loved and admired him.
He prioritizes integrity, honesty, and patience over short-term profit.
His philosophy of money: a means, not an end—never mind that he’s one of the wealthiest individuals in the world, he still takes pleasure in ordinary things like burgers, Coke, and bridge.
His Charitable Legacy
Buffett makes one of the largest philanthropic gifts in history, donating the lion’s share of his wealth to the Bill & Melinda Gates Foundation and other charities.
He firmly believes that money must be returned to society and not stored or handed down in excess to heirs.
His belief is that money is spent where it can do the most good, and not held in personal comforts.
Buffett’s View on Mortality and Legacy
Whereas most billionaires worry about creating a dynasty, Buffett doesn’t mind leaving behind no money empire but wisdom and legacy instead.
He views Berkshire Hathaway as a institution that should live longer than him, yet he also admits that succession planning is tricky.
He looks back at his own mortality and how he has lived his life on purpose and with compassion.
Final Thoughts
Warren Buffett’s life, as it is lived in The Snowball, is a demonstration of the strength of discipline, long-term vision, and unshakeable principles. From his early years as an inquisitive boy with a love for numbers to becoming one of the most admired investors of all time, his life illustrates the compounding power of knowledge, integrity, and persistence—like a snowball rolling down a hill, picking up speed with each passing moment.
At its essence, Buffett’s tale is less about business or money; it’s about values, people, and the difference one can make in the world. He has proved that success lies not in the billions one earns but in the wisdom imparted, the lives touched, and the lasting legacy created. His choice to donate the vast majority of his wealth speaks to his idea that wealth should be for greater good and not for himself alone.
Maybe the most valuable lesson from Buffett’s life is the value of being oneself. During market manias and panics, during personal successes and failures, Buffett has stayed consistent in his values, demonstrating that character, patience, and integrity are the best investments. As he is fond of saying, the true measure of success is not money—it’s whether the people you love and respect you in the end.
The Snowball is more than a biography of a financial legend—it is a blueprint for well-lived life.