Book Review: The Snowball, Part Two

According to the book, his wife Susie approached Astrid Menks to care for Warren with food, and other aspects of personal care.  But for a man to have his wife abandon him, with no prospect of return, a pretty 30-year old woman with few requirements would test most men in terms of their fidelity.  According to the book, Susie was surprised that Astrid moved in with Warren.  I think that was naive on her part.  If you want to be a wife, be a wife.  Make up your own mind on what you want, and fault yourself for bad decisions.  Adultery is a bad thing, but Susie is the most to blame by leaving Warren.

Warren is/was a simple guy.  If Susie never left, he would have been happy.  Indeed, he was depressed when she left.  But she got tired of the neglect, and abandoned her marriage vows to him.  She should have borne the neglect, and stayed with him — marriage vows are permanent.  Marry in haste, repent at leisure.  We have no idea of how much Susie may have pleaded with Warren to be connected to her and the family, but the eventual result was a virtual divorce from Susie, which led to another relationship, even though the legal fiction was maintained.

Buffett also had many friends and mentors in the value investing community, most of whom learned from Ben Graham.  In the early years, there was a “Graham Group” that would get together to discuss the principles of Ben Graham.  Bit-by-bit, the group slowly became the “Buffett Group,” because Warren was Graham’s most apt disciple.

But there was one peer who got him thinking more broadly, Charlie Munger.  There were a number of people who thought they would benefit from knowing each other.  They were right; at the very first meeting they hit it off, and found it hard to end the conversation.

Warren received a lot of respect from men in his early years.  They looked at the returns and said, “Wow.”  But his abilities suffered a bit in the late sixties, as “cigar butt” investments disappeared, there was some uncertainty, as to whether Warren would continue to invest.  Fortunately for him, Charlie Munger had given him a new paradigm, which I call “growth at a reasonable price.”

Buffett became very good at estimating opportunities, particularly opportunities that will last.  It is only under such conditions that growth investments will work.

But there are two more entities that shaped him — The Sun Valley Conferences and Bill Gates.  Gates is the more important influence, because his knowledge of the tech sector helped to refine Buffett’s view of moats, because an attractive technology that gets a large market share is its own moat.

The Sun Valley conferences had two aspects.  Buffett presented at a number of them, and during the tech bubble, he drew quiet derision from attendees.  That said, he was a sponge for information, and he understood tech.  What he did not understand was how you could get reliable free cash flow from tech businesses, where obsolescence was such a threat.

Part 3 will come tomorrow.  Stay tuned.

3 Comments

  • Allan says:

    You mention the marriage relationship, but what of the estrangement from his daughter? I’ve heard virtually none of the details except that he treated her pretty shabby. If true, I think that is unconscionable.

    • It’s not his daughter, it’s his granddaughter, and one that is adopted, not biological. She said a number of things that offended him pretty deeply, and Buffett disowned her. If his first wife were still alive, she probably would have convinced Warren not to do it. Personally, if Buffett predeceases his son Peter, Peter will inherit some amount, and she will likely inherit from him, so the economics is this could be moot.

      I’m neutral on this one — I can understand why Buffett was upset. The reaction was harsh.

      https://www.google.com/search?q=buffett+estranged

      • Allan says:

        Ah, thanks for the clarification. Slightly more conscionable than I had thought. I thought she was the daughter of his wife, and that he had spent very little time with her growing up.

        It does go to show one of the under-tones of the Johnson movie, but maybe not the one she was in. I’ve seen one of them, forget which, but I think he has made two or three. A clear under-tone was that scions of wealth live in terrible fear of being disowned and forced to make their own way in life, for which they are very ill prepared, and fully know it. I think it makes for a sad and miserable existence.

        Yet Buffet’s sons, to their and his credit, seem to be doing well. I saw some puff-piece in the paper just last week or so about one of them eco-farming in Illinois. Not sure how scalable or applicable it is to non-billionaires, but he was happy trying to do some good and make a difference by not being beholden to near-term market forces. There are worse things.