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September 29, 2008
Books of The Times

The Richest Man and How He Grew (and Grew His Company, Too)

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Warren Buffett and the Business of Life

By Alice Schroeder

Illustrated. 960 pages. Bantam. $35.

In 1940, 10-year-old Warren Buffett was taken to New York as a birthday gift from his father. Some kids yearn to see the circus and the zoo. Little Warren wanted to visit Wall Street.

While at the New York Stock Exchange he managed to meet Sidney Weinberg, senior partner of the investment bank Goldman Sachs, and engage him in conversation. At the end of their talk, Weinberg put his arm around the boy and asked, "What stock do you like, Warren?" People have been asking that question ever since.

Sixty-eight years later Mr. Buffett is said by Forbes to be the richest man in the world. He just announced a $5 billion investment in Goldman Sachs that should keep the company afloat and boost his own net worth. And his opinions are so hotly sought that "The Snowball," a biography with which he has enthusiastically cooperated, would be of interest even if it answered only softball questions. It approaches him seriously, covers vast terrain and tells a fascinating story.

Mr. Buffett made a smart choice when he chose Alice Schroeder as his Boswell. Yes, he found an appreciative biographer with whom he seems to have a warm rapport. But he also found a writer able to keep pace with the wild swerves in the Buffett story and the intricacies of Mr. Buffett's Berkshire Hathaway business empire. Ms. Schroeder is as insightful about her subject's precise anticipation of current financial crises as she is about his quirky personal story. And she is a clear explicator of fiscal issues. This sprawling, colorful biography will mesmerize anyone interested in who Mr. Buffett is or how he got that way.

A photo of Mr. Buffett at age 2 shows him grinning cryptically while clutching a toy tightly to his chest. It goes without saying that he was an unusual child. He was obsessed with numerical calculation and arcane research. In church in Omaha, he would calculate and compare the life spans of those who composed hymns. In a Roman Catholic hospital after a bout of appendicitis, he collected the nuns' fingerprints to save in case one ever committed a crime.

He began dreaming up money-making endeavors from the time he was 6, and he hoarded his earnings. He would look at a dollar, but see the $10 it would eventually become when compounded. (He held off on major philanthropy until late in his life, ostensibly for that reason.) At 14, he made enough money delivering newspapers to file a $7 tax return. He deducted his watch and bicycle as business expenses.

Surely Mr. Buffett was the only student at his high school to own a tenant farm and earn more money than his teachers did. After that, "college was only going to slow me down," he recalls. Nevertheless he attended Wharton business school at the University of Pennsylvania and was as notable for goofy pranks and slovenly habits as for precocity.

A turning point came when he was rejected by Harvard Business School and decided to attend Columbia. One professor there was Benjamin Graham, author of "The Intelligent Investor." Graham became his mentor and role model. Exposed to Graham's idea of security analysis, "Warren's reaction was that of a man emerging from the cave in which he had been living all his life, blinking in the sunlight as he perceived reality for the first time."

The superhuman tenacity that he brought to sniffing out undervalued companies also served him well in his personal life. Unable to win the interest of Susan Thompson, he chased her father instead; eventually, she became Susie Buffett. They had three children, to whom a distant yet manipulative Dad was "the disengaged, silent presence, feet up in his stringy bathrobe, eyes fixed on The Wall Street Journal at the breakfast table." But Dad was putting his research to amazingly lucrative use. Only when Susie accidentally put dividend checks down an incinerator and scurried to retrieve them did she realize how much money her husband was making.

"The Snowball" (with a title that refers to Mr. Buffet's way of making things get bigger and bigger) tracks his financial coups without becoming a string of "and then he bought ..." stories. Part of the book's liveliness comes from the feisty, penny-pinching characters with whom Mr. Buffett liked to lock horns. The story of Mr. Buffett's business rise is also a social climb of sorts, despite his cultivated folksy air. The book details his eyebrow-raising friendship with Katharine Graham of The Washington Post, an anomalous liaison since he claims that Daisy Mae of the "Li'l Abner" comics was his feminine ideal. In any case, Mr. Buffett required a constant supply of hamburgers and motherly care. He surrounded himself with Susie, a surrogate wife (Astrid Menks, whom he later married) and a close circle of other women.

One of many priceless anecdotes here involves another Buffett female friend who happened to stay in Ms. Graham's guest room. When this friend called, shocked, to tell Mr. Buffett that there was a real Picasso in the bathroom, he replied that he had stayed in that guest room for years and never noticed it. What he noticed was that the bathroom contained free shampoo.

"The Snowball" features equally good stories about power players, including Akio Morita, a co-founder of Sony, and Bill Gates, whom Mr. Buffett instantly recognized as a soul mate. There are many tales of triumph, like the one about how The Omaha Sun, while controlled by Mr. Buffett, blew the lid off fiscal improprieties at Father Flanagan's pious Boys Town. Then there are the business stories that make it shockingly timely. Ms. Schroeder reports in depth on Mr. Buffett's reluctant involvement in the 1991 near-meltdown of Salomon Brothers with lessons on the risks of deregulation, the precariousness of derivatives and the dangers of involving government in bailing out financial institutions.

In shaping its definitive portrait of Mr. Buffett, "The Snowball" need not make excessive claims of his importance. With story after story, Ms. Schroeder makes that self-evident. "No group of shareholders in history," she writes, with one eye on her subject's life history and the other on his legacy, "had ever missed their C.E.O. as much as Berkshire's shareholders would miss Buffett when he was finally gone."

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