The Snowball

The Snowball

Alice Schroeder

📚 GENRE: Biographies & Memoirs

📃 PAGES: 715

✅ COMPLETED: April 29, 2025

🧐 RATING: ⭐⭐⭐⭐

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Short Summary

Warren Buffett is the most successful investor ever. How did he build such extraordinary wealth? What were the thoughts and principles that led to his success? In The Snowball, Alice Schroeder explores the man behind the billions, offering a look at Buffett’s mindset, habits, and the life philosophy that shaped his legendary career. 

Key Takeaways

1️⃣ Be Greedy When Others Are Fearful — This is one of Warren’s most famous investing principles. Throughout his career, Warren was opportunistic and made a lot of money by buying stocks and companies when they were deeply undervalued. When the stock market is tanking, that’s the time to get excited. Quality companies are essentially on sale, and you have an opportunity to buy them at discount prices. Adopting this mindset during downturns is easier said than done — fear is contagious — but those who can remain calm and collected are usually rewarded handsomely. On the flip side, Warren warned people to be wary when the stock market is thriving. When things are going well, stock prices are usually overvalued. 

2️⃣ Singular Focus — From a young age, Warren was almost exclusively focused on finance and business. He spent hours every day reading books, newspapers, and annual reports — all with the intention of mastering the stock market. The lesson here is to find something you’re passionate about and go all in on that field. The vast majority of your reading and studies should be focused on the area you’ve chosen. While having broad knowledge is valuable, huge success often comes from becoming exceptional in one area. Specialization, paired with relentless curiosity, is what sets high achievers apart. Pick something you really enjoy and focus on becoming an expert in it. 

3️⃣ Gratitude: The ‘Ovarian Lottery’ — Warren often referred to what he called the ‘ovarian lottery’ when discussing his life and career. The phrase was a reference to the gratitude he felt for being born during this time period, for being born in the United States, and for being born into a supportive family that gave him opportunities to thrive. As he got older, he began to realize what a privilege and blessing it is to be born into such favorable circumstances. There are people around the world who have incredible talent but are born into countries, societies, and familial situations that make it nearly impossible for them to succeed. This includes the U.S. — some people are simply doomed from the start and are faced with incredible disadvantages. They’ve drawn terrible luck. This idea really resonates with me. It’s exactly how I feel, and it’s one of the biggest sources of the gratitude I feel every day. I’m so grateful to have been born into the family and life situation I was born into. As I like to say: “I hit the jackpot in life.” 

Favorite Quote

“During meals and parties at home, he [Warren] often fled small talk by leaving the table to go upstairs. But unlike Ben Graham, he was not upstairs reading Proust; he was working. All Warren's recreations remained repetitive, competitive, or, better yet, both. He found playing bridge with Susie unendurable because she wanted the other side to win, and soon sought other partners. His mind was like a restless monkey; to relax, he needed an active form of concentration that could keep the monkey occupied. Ping-Pong, bridge, poker, golf all absorbed him and took his mind off money temporarily. But he never lazed around a swimming pool, stargazed, or simply went for a walk in the woods. A stargazing Warren would have looked at the Big Dipper and seen a dollar sign."

Part One: The Bubble

  • About the Book — This book is a biography covering the life of Warren Buffett, the most famous investor to ever live. The book reveals the mindset, values, and principles that guided him in business and in life. 
  • About the Author — As a financial analyst covering Berkshire Hathaway stock for more than six years, Alice Schroeder knew Buffett fairly well before writing this book. She had complete access to Buffett, his family and friends, and his business partners. 
  • Buffett Arrives — Warren Buffett was born on August 30, 1930 in Omaha, Nebraska to Howard and Leila Buffett. He had an older sister (Doris) and a younger sister (Bertie). Interestingly, Warren was born just 10 months after the stock market crash of 1929. 
  • Stock Market: Voting Machine & Weighing Machine — At a prestigious annual conference called ‘Sun Valley’ in 1999, Warren Buffett made a famous speech about the dot-com bubble and the stock market. In part, he quoted his mentor Ben Graham by saying, “In the short run, the market is a voting machine. In the long run, it’s a weighing machine. Weight counts eventually. But votes count in the short term.” These comments are widely referenced when people try to teach others about the stock market. In short, Buffett was saying that the short-term movement of stocks is mostly reflective of people’s emotions and feelings. But over the long term, if the fundamentals, leadership, and execution of a company are strong, its stock price will steadily grow. You have to do your best to ignore the short-term chaos of stock prices. Invest in solid companies with solid fundamentals; these will win out in the end. 
  • Leadership Tip: Praise by Name, Criticize by Category — Buffett had a leadership rule that he always followed: praise by name, criticize by category. This means, as a leader, you should always call out the person specifically when they do something right. Heap praise upon them publicly. When they mess up, criticize more generally and in private. Say something like: “we as a team need to improve our communication on deadlines.”
  • Two Women in Buffett’s Life — Interestingly, Warren was married to his wife, Susie, in 1952 but began living with another woman, Astrid Menks, in 1978. In fact, Susie arranged for this unusual triangular relationship. It seems that there was no romantic connection between Warren and Astrid; the relationship was mostly professional. Astrid helped him with things and almost acted as a secretary. Two years after Susie died in 2008, Warren married Astrid. 
  • Inner Scorecard vs. Outer Scorecard — One of the lessons Warren learned early in his life was to live with an Inner Scorecard, not an Outer Scorecard. Living with an Inner Scorecard means doing what you feel is right and aligns with your values, no matter what anybody else thinks of you or the decisions you’re making. Living with an Outer Scorecard, on the other hand, involves doing things just to “appear” a certain way to others. When you live with an Outer Scorecard, the things you do and decisions you make are completely based on what others will think of you. Instead, you should try to live with an Inner Scorecard where you do things and behave in a way that is true to who you are. Below is a quote from Warren about this.
    • Quote (P. 32): “[From Warren] The big question about how people behave is whether they’ve got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard. I always pose it this way. I say: ‘Lookit. Would you rather be the world’s greatest lover, but have everyone think you’re the world’s worst lover? Or would you rather be the world’s worst lover but have everyone think you’re the world’s greatest lover?’ Now, that’s an interesting question. Here’s another one. If the world couldn’t see your results, would you rather be thought of as the world’s greatest investor but in reality have the world’s worst record? Or be thought of as the world’s worst investor when you were actually the best? In teaching your kids, I think the lesson they’re learning at a very, very early age is what their parents put the emphasis on. If all the emphasis is on what the world’s going to think about you, forgetting about how you really behave, you’ll wind up with an Outer Scorecard. Now, my dad: He was a hundred percent Inner Scorecard guy.”

Part Two: The Inner Scorecard

  • Early Fascination With Money — Buffett was unusually interested in money from a young age. His dad, Howard, was a Congressman and also ran a stockbrokerage firm, which contributed to his early interest in finance. At age 10, Buffett traveled to New York to see the New York Stock Exchange. This was an important event that helped solidify Buffett’s lifelong fascination with the stock market. At age 12, he made his first stock market purchase, buying three shares of Cities Service Preferred. The stock was very volatile, and Buffett eventually sold his shares for a $5 profit. 
  • Childhood Businesses — At age 12, Buffett set a goal of becoming a millionaire by age 35. To help him do this, he always kept his eye out for opportunities to make money. He had several small businesses where he made money by selling used good balls, setting up pinball machines in barber shops, and more. He was also a committed paperboy, delivering thousands of newspapers throughout his time in middle school and high school. 
  • Bad Student & Troublemaker — Interestingly, Buffett was not a very good student in high school and found himself in trouble quite a bit. He got bad grades, exaggerated on his tax returns for his businesses, and at one point ran away from home. He and his friends even stole merchandise from Sears. Buffett later attributed his bad behavior to being unhappy, uninterested, and running with the wrong crowd. 
  • Interesting Fact — There weren’t always limits on the number of terms a U.S. President could serve. In 1945, for example, Franklin D. Roosevelt won a fourth term in office but died suddenly a few months later. Harry Truman succeeded him as President and promptly dropped two nukes on Japan, ending World War II. 
  • College Years — Buffett first attended the Wharton School of Business at the University of Pennsylvania before later transferring to the University of Nebraska, which was closer to his hometown of Omaha. After earning a bachelor’s degree at age 19, he tried to attend Harvard as a graduate student but was rejected. Instead, he attended Columbia University, mostly because he wanted to learn from his idol, Benjamin Graham, who was a professor of finance there. 
  • Learning From Benjamin Graham — Benjamin Graham was Buffett’s idol. Graham was a professor of finance at Columbia University and also taught seminars throughout the year. Buffett became a student of Graham and read all of his books, including The Intelligent Investor and Security Analysis. These books and Graham’s teachings at Columbia completely reshaped Buffett’s approach to the stock market. Graham taught students how to analyze companies and determine their “intrinsic value” while developing a “margin of safety.” Buffett was hooked and couldn’t get enough. One of Buffett’s first major stock purchases was GEICO, where Graham was once a chairman. The stock eventually made him a huge sum of money and was a launching pad for his investing career. It also became a major holding for Buffett at Berkshire Hathaway. 
  • Buffett & Personal Development — Buffett was always focused on his personal development. He was a voracious reader who devoured books and newspapers (he said he read 5-6 hours per day). An introverted person, one of his major weaknesses was public speaking. He was terrified of it and admitted that he often structured his life in a way that allowed him to avoid any form of public speaking. But he also knew he had to overcome this weakness. In 1952, he enrolled in a Dale Carnegie public speaking class and began giving speeches weekly. After completing it, he started teaching an evening investing class at the University of Nebraska — pushing himself to speak regularly and gain confidence. Attacking this fear completely changed his life. Below is a quote from Buffett about his experience in the class and how it helped him overcome his fear of public speaking.
    • Quote (P. 143): “[From Warren] They [Carnegie’s class] gave us this book of speeches — keynote speech, election speech, lieutenant governor’s speech — and we were supposed to deliver these things every week. The way it works is that you learn to get out of yourself. I mean, why should you be able to talk alone with somebody five minutes before and then freeze in front of a group? So they teach you the psychological tricks to overcome this. Some of it is just practice just doing it and practicing. We really helped each other through. And it worked. That’s the most important degree that I have.”
  • First Job After College & Marriage — Buffett’s first job after finishing grad school at Columbia University was as a stockbroker at his father’s stockbrokerage company in Omaha, Buffett-Falk. He didn’t really enjoy the job because he found that there were many conflicts of interest between him and his clients. At the time, stockbrokers were only paid by commission, so he essentially made his living by selling stocks. The more transactions his clients made, the more money he earned. As somebody who encouraged buying high-quality companies and holding for 20-30 years, the commission payout structure made it difficult for him to give good advice and make a decent living. He was also very uncomfortable when clients lost money on stocks he told them to buy. While he was at this job, he married his wife, Susie, in April 1952.

Part Three: The Racetrack

  • Buffett Joins Graham-Newman — In 1954, Warren got his wish: his idol and mentor Ben Graham asked him to come work at Graham-Newman as a junior analyst. This meant leaving his father’s firm in Omaha, Buffett-Falk, to relocate to New York. At Graham-Newman, Warren was responsible for researching and analyzing stocks. He became very good at picking underpriced stocks and helped the firm and its clients make a lot of money. Among the highlights, he swapped his holdings in GEICO for Western Insurance, which turned out to be a great move. Overall, he excelled at Graham-Newman before Graham retired in 1956 and the firm disbanded. 
  • Fatherhood — The Buffett’s welcomed their first child, Susan, in July of 1953. They welcomed their second child, Howard, in December of 1954. They welcomed their third child, Peter, in 1958. Warren was not the best father; he spent much of his time at work, traveling, or in his home office reading reports, newspapers, and books. He was hyper-focused on his career and making money. His wife, Susie, was mostly responsible for raising the kids. 
  • Obsession With Money — Since childhood, Warren was obsessed with making, saving, and investing money. He was known to be extremely frugal and protective of his growing wealth. Money was what drove him, and sometimes he went a little too far when it came to preserving it. His idol, Ben Graham, was brilliant but he did not share the same obsession with money.
    • Quote (P. 167): “Warren was in awe of Ben Graham, but nonetheless he was preoccupied with money. He wanted to amass a lot of it, and saw it as a competitive game. If asked to give up some of his money, Warren responded like a dog fiercely guarding its bone, or even as though he had been attacked. His struggle to let go of the smallest amounts of money was so apparent that it was as if the money possessed him, rather than the other way around.”
  • Establishing Investing Partnerships — In May 1956, after Ben Graham retired and Graham-Newman disbanded, Warren relocated from New York to Omaha to start his own firm, Buffett Associates, Ltd. He loved Omaha and was happy to come home. He put $100 of his own money into this first partnership, with another $105,000 coming from friends and family. Because he had great success with this partnership, other people wanted to join the action and have him manage their money. By the early 1960s, he was managing seven different partnerships. 
  • Consolidating to Buffett Partnership Ltd. — Warren was having huge success with his empire of partnerships, which had grown in number to 11 by 1962. Collectively, his partnerships had grown to almost $4 million dollars in assets, and he had more than 100 investors involved in them. Thanks to his investing strategies, Warren’s partnerships had produced a 46% return in 1961 compared to the Dow’s 22%. He finally decided to consolidate the 11 partnerships into one, which he called Buffett Partnership Ltd. — or BPL. After contributing $450,000 of his own money and gathering additional funds from other investors, BPL started 1962 with $7.2 million of assets — meaning in just six years of work, Warren’s partnership had grown bigger than Graham-Newman ever was. Warren personally owned 14% of BPL at this time, which accounted for more than $1 million dollars. This meant he was a millionaire at the age of 30. By 1965, BPL had $37 million in assets, and Warren’s personal stake in the partnership sat at $6.8 million at age 35. In 1966, with assets at $50 million, he became more selective about who could enter the partnership — investing the assets at great returns became difficult with that much capital. 
  • Buffett’s Early Investing Strategy — Why was Warren so good at investing? What was he doing differently than everyone else? Believe it or not, he was a fairly aggressive investor early in his career. One of Warren’s go-to strategies came from Benjamin Graham, who taught him to look for stocks that were trading significantly below their “book value.” Book value is the value of the company’s assets less what it owes (e.g. debt). You can find assets and debt listed on a company’s balance sheet. Once you have the company’s book value, divide it by the number of shares outstanding to get a book value per share. If the stock was trading well under that number, Warren would buy it aggressively. If the stock then increased in price over time, he could sell it for a nice profit. If it didn’t grow much, he could fall back on the fact that the underlying assets were worth more than the market realized. In some situations, like with Sandcorp Mapping Company and Dempster Mill Manufacturing, he bought enough shares to gain control of the company. He then worked to unlock value — sometimes by improving operations or, if necessary, liquidating assets (e.g. selling the company). 
  • Always Focused — Warren was as focused and driven as it gets. His mind was restless, always looking for ways to improve himself and his businesses. In addition to being very frugal with his money, he was not somebody who lounged around very often. Every waking minute of his days were spent working and trying to improve. This was evident in his investment research, his business practices, and his quest to improve his public speaking. The takeaway here is that success requires discipline and an attitude where you’re constantly working to get 1% better every day. It requires sacrifice and an unending appetite for growth.
    • Quote (P. 183): “During meals and parties at home, he [Warren] often fled small talk by leaving the table to go upstairs. But unlike Ben Graham, he was not upstairs reading Proust; he was working. All Warren’s recreations remained repetitive, competitive, or, better yet, both. He found playing bridge with Susie unendurable because she wanted the other side to win, and soon sought other partners. His mind was like a restless monkey; to relax, he needed an active form of concentration that could keep the monkey occupied. Ping-Pong, bridge, poker, golf all absorbed him and took his mind off money temporarily. But he never lazed around a swimming pool, stargazed, or simply went for a walk in the woods. A stargazing Warren would have looked at the Big Dipper and seen a dollar sign.”
  • Meeting Charlie Munger — Warren first met his longtime business partner, Charlie Munger, at The Omaha Club in 1959. The two immediately hit it off. Warren talked about his various partnerships and how well they were performing. Munger, a lawyer from Los Angeles who was in town to settle his father’s estate, wanted to be rich badly and became very interested in replicating what Warren was doing in California. More than the money, Munger wanted the independence to live how he wanted to live. Warren did as well; it’s what drove both of their obsessions with money. After that initial meeting, the two continued to keep in touch with phone calls and meetups. In 1963, Munger ditched his job as a lawyer to become a money manager. He followed in Warren’s footsteps by starting a partnership of his own. 
  • Buffett and Munger: Different Investing Styles — Warren and Munger eventually became business partners and achieved enormous success at Berkshire Hathaway, but their investing styles weren’t always aligned. Warren was shaped early by Benjamin Graham’s approach, which emphasized quantitative analysis (e.g. the numbers). He looked for stocks trading significantly below their book value and focused heavily on balance sheets and hard numbers. Qualitative factors — like the strength of a company’s management team, brand reputation, or customer loyalty — weren’t his main concern at the time. Munger, on the other hand, placed much greater emphasis on those qualitative traits. He believed it was better to buy a great business at a fair price than a mediocre one at a bargain. While Warren was extremely cautious and prioritized not losing money, Munger was more willing to invest in businesses with higher upfront valuations if he believed in their long-term potential. Over time, Warren adopted much of Munger’s thinking and the two balanced each other out very well.
    • Quote (P. 222): “The differences in their philosophies [Warren and Munger] made for long conversations. Buffett would forgo the chance of profits any day to avoid too much risk, and viewed preserving his capital as an almost holy imperative. Munger had the attitude that if you weren’t already rich, you could afford to take some risk — if the odds were right — to get rich.”
    • Quote (P. 223): “Yet his [Warren] investing style still reflected Graham’s doom-laden habits of looking at businesses based on what they were worth dead, not alive. Munger wanted Buffett to define the margin of safety in other than purely statistical terms.”
  • Buying American Express — One of the major events that defined Warren’s early career was when he aggressively bought American Express stock. The company had just endured a major scandal that — combined with the news of JFK’s assassination around the same time — drove its stock price into the gutter. Warren investigated the stock for weeks and determined it was a good buy. His partnership, Buffett Partnership Ltd., had a ton of cash on hand, and he used it to gobble up American Express stock. By 1965, BPL owned more than $4.3 million of American Express stock, good for nearly one third of the partnership’s entire portfolio. By 1966, it owned $13 million of American Express stock. Warren was swinging big on the company, and, as it turns out, he hit a home run. He continued to build his position in American Express throughout his career and still holds it today. 
  • Buying Berkshire Hathaway — The story of how Warren acquired Berkshire Hathaway is an interesting one. Berkshire was a textile company in Massachusetts that first got Warren’s attention in 1962 because it was trading well below “book value.” Its book value was about $19 per share, but it was trading at $7.50. Warren began buying it aggressively through his BPL partnership. He initially saw it as a short-term value play, expecting to profit when management bought back stock. But, after a falling-out with Berkshire’s CEO over a lowball tender offer, Warren decided to take control of the company instead of selling his shares. He kept acquiring shares until he had majority control. Ironically, it turned out to be one of Warren’s worst investments on paper, but he used Berkshire as a holding company for much better businesses later on, transforming it into the investment powerhouse it is today.
  • Investing Tip: Greedy vs. Fearful — One of the things Warren learned early on from Benjamin Graham was: “Be fearful when others are greedy, and greedy when others are fearful.” This was a famous saying of Graham’s that he repeated often. The message here is to buy stocks aggressively when the market, or the stock itself, is down. When the market is way up, be cautious. All of this is easier said than done.  When the market is tanking, it’s human nature to want to sell and stop the bleeding. But in reality, this is the best time to buy, if the fundamentals of the company look good and you believe in its long-term potential. When the market is way up, be careful. 
  • Closing the Partnership — In 1970, Warren finally shut down his BPL partnership. He had, for the most part, closed it off to new investors in 1966 because it was becoming difficult to invest the partnership’s enormous capital at the stellar rate of return he was known for producing. At the time of closing in 1970, the partnership had assets of $100 million. Over the course of its lifetime, it had produced an annual compound rate of return of 31% without a single losing year. Warren’s net worth had ballooned to nearly $30 million. 

Part Four: Susie Sings

  • Winning a Pulitzer Prize — At some point in time, Warren became transfixed with owning some form of media, particularly a newspaper or magazine. By the 1970s, he owned a small group of weekly newspapers in Nebraska, including the Omaha Sun. During his ownership, the Sun published an in-depth investigative series exposing financial mismanagement and questionable practices at Boys Town, a well-known charitable institution. The reporting raised concerns about how Boys Town was handling its large donations, sparking national attention and public scrutiny. The coverage was so impactful that it earned the Omaha Sun the Pulitzer Prize for Local Investigative Specialized Reporting in 1973. Warren didn’t write the articles himself, but as the paper’s owner, he supported strong local journalism and gave the editorial team the independence to pursue the story. The Pulitzer is one of the major notable achievements in his career. 
  • Acquiring The Washington Post — Warren’s obsession with owning media outlets wasn’t satisfied with the Omaha Sun. He continued to pursue newspapers and magazines. In 1973, during a period of financial uncertainty for The Washington Post, Warren quietly began buying shares, ultimately acquiring a significant stake — about 10% of the company. At the time, the Post was bravely reporting the Watergate scandal involving Richard Nixon, and the legal threats that it faced caused the stock price to drop. That’s when Buffett began to buy shares. Publisher Katharine Graham was initially cautious about his involvement, but the two developed a deep mutual respect. Warren joined the board of directors and became a trusted advisor to Graham, helping guide the company through complex financial decisions. His investment turned out to be incredibly lucrative, and The Washington Post became one of his most well-known and successful media holdings.
  • Using “Float” — In the 1970s, Warren began refining a powerful investing strategy centered around acquiring insurance companies. This strategy had not really been used before. He realized that insurance companies collect premiums upfront and pay out claims later, giving them access to large pools of money — known as “float” — that could be invested in the meantime. Warren saw float as essentially interest-free capital, which he could use to buy undervalued businesses and stocks. During this time, he used several of the entities he owned — including Berkshire Hathaway and Blue Chip Stamps — as holding companies to acquire and manage these insurance companies. The strategy gave him a lot of financial flexibility and compounding power without relying on debt or outside investors. It became a cornerstone of his long-term approach and helped turn Berkshire into a powerhouse.
  • Astrid Menks & Susie Buffett — By age 47, Warren was worth $72 million and ran a company (Berkshire Hathaway) that was worth $135 million. But the single-minded focus required to build that kind of wealth came at the expense of his family. For the most part, he neglected his wife, Susie, and his kids. He was always working and traveling. Finally, Susie decided to leave him, although they never formally divorced. She bought an apartment in San Francisco and moved away. Warren and Susie had an interesting relationship; Warren was terrible at taking care of himself and relied on Susie to basically be his caretaker. When she left, Warren was in shambles. Susie reached out to Astrid Menks, who worked at a cafe in Omaha, and asked her to watch over Warren. Astrid began cooking him meals and doing anything else he needed. Astrid eventually moved in with Warren in 1978 and remained by his side for decades. The arrangement was unusual but amicable — Susie, Astrid, and Warren even signed Christmas cards together as “Warren, Susie, and Astrid.”

Part Five: The King of Wall Street

  • “Mrs. B” & Nebraska Furniture Mart — Warren had a long-standing friendship with Rose Blumkin, the legendary founder of Nebraska Furniture Mart in Omaha. Known as “Mrs. B,” she was a tough, no-nonsense businesswoman who built her store from the ground up after immigrating from Russia with virtually nothing. Warren admired her work ethic, frugality, and overall approach to retail. In 1983, he bought a majority stake in Nebraska Furniture Mart for $60 million, making it part of Berkshire Hathaway — but he left the business entirely in Mrs. B’s hands. The two shared a mutual respect. Even into her 90s, Rose continued working in the store almost daily.
  • Buying Coca-Cola — Although Warren drank tons of Pepsi, ironically, it was Coca-Cola that became one of his most iconic investments. After the huge 1987 stock market crash, he saw an opportunity to buy Coca-Cola stock at a good price. He bought more than $1 billion of the company’s stock, eventually owning more than 6% of it through Berkshire Hathaway. The investment turned out to be one of the most successful of his career, delivering massive long-term returns. Coca-Cola’s global brand, pricing power, and consistent earnings made it a textbook example of the kind of durable business Warren came to favor. It also marked a shift in his investing approach — from focusing strictly on undervalued companies to including high-quality businesses with strong brand loyalty (i.e. goodwill). One of the takeaways here — look to buy good businesses when the market is down! 
  • The Salomon Scandal — The Salomon Brothers scandal in the early 1990s was a major moment in Warren career. After the firm was caught submitting false bids in U.S. Treasury auctions, Warren, who was already a major shareholder at the time, stepped in as interim chairman to stabilize the company and restore trust. He publicly demanded full transparency and accountability, famously telling employees, “Lose money for the firm, and I will be understanding. Lose a shred of reputation, and I will be ruthless.” The episode showcased Warren’s integrity and leadership under pressure. By 1997, Salomon was sold to Travelers Group (which later became part of Citigroup) for over $9 billion. Warren and Berkshire Hathaway exited the investment with a decent gain, but the financial return was far less important than the reputational leadership he demonstrated during the crisis.
  • Becoming “World’s Richest Man” — Warren’s wealth grew steadily over the decades. By age 30, in 1960, he was already a millionaire thanks to his early partnership. His net worth rose to about $72 million by age 47, and by the early 1980s, it surpassed $620 million. In 1986, he officially became a billionaire when Berkshire Hathaway’s stock hit $3,100 per share. His wealth exploded in the 1990s and 2000s, as Berkshire’s investments soared in value and he briefly became “the world’s richest man” in 2008. As of the 2020s, Warren’s net worth has consistently ranked among the highest in the world, often fluctuating around $100 billion, though he’s pledged to give away nearly all of it through philanthropy. When he dies, most of his money will go to his childrens’ charitable foundations. 

Part Six: Claim Checks

  • Making the Most of Opportunity — Perhaps nobody has capitalized on opportunity better than Warren Buffett. Today’s stock market is nothing like the one Warren spent most of his career dominating. Even by Warren’s own admission, today’s stock market is much more competitive, and it’s very difficult to find the kind of value he was capitalizing on early in his career as data has become more widely available and institutional investors have become more involved. In the early 2000s, Warren even spent time studying, and investing in, foreign stocks because it was very difficult to find value. He worked his ass off to learn finance and business at a young age, and it paid off handsomely. When great opportunities presented themselves during his career, he was able to spot them and execute. It’s one of the reasons he is one of the richest men in the world. 
  • Don’t Try to Beat the Market — As the bullet above touches on, today’s markets are much more difficult to navigate than the ones Warren dominated for most of his career. Today, it’s very difficult to find great value and “beat the market.” Professional fund managers struggle to beat the market. To combat this issue and make steady gains without incurring a lot of risk, the average person is better off buying an ETF that tracks certain indexes (e.g. the S&P 500) and “dollar cost averaging” into the ETF at regular, consistent intervals. Warren himself advocates for this approach. See his quote below:
    • Quote (P. 685): “[From Warren] Stocks are the things to own over time. Productivity will increase and stocks will increase with it. There are only a few things you can do wrong. One is to buy or sell at the wrong time. Paying high fees is the other way to get killed. The best way to avoid both of these is to buy a low-cost index fund, and buy it over time. Be greedy when others are fearful, and fearful when others are greedy, but don’t think you can outsmart the market. If a cross-section of American industry is going to do well over time, then why try to pick the little beauties and think you can do better? Very few people should be active investors.”
  • Famous Buffett-Isms — Throughout his career, Warren dropped little nuggets of wisdom to help guide investors as they navigate the stock market and manage their own wealth. Below are a few of the best ones. Refer to these often and keep them top of mind, especially when the stock market is performing poorly. 
    • “Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.” 
      • This is a reminder to prioritize preservation of capital and avoid unnecessary risk
    • “Be fearful when others are greedy, and greedy when others are fearful.
      • This is a reminder to not lose your mind when the market is falling. This is the time to buy! When stocks are down, things are on sale. That’s the time to buy. On the other hand, be a little weary when the market is high. Focus on building your cash position. 
    • “The stock market is designed to transfer money from the Active to the Patient.”
      • Patience and long-term thinking often outperform constant trading
    • “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
      • Focus on business quality (e.g. balance sheet fundamentals, leadership, consumer loyalty, etc.) over just chasing cheap valuations
    • “Our favorite holding period is forever.”
      • Long-term commitment to great businesses is Warren’s core approach
    • “Diversification is protection against ignorance. It makes little sense if you know what you are doing.”
      • Diversification is fine, but it’s not bad to focus most of your capital into a handful of investments you really believe in. Pouring a lot of money into a small collection of businesses — rather than making small investments in hundreds of businesses — is how Warren made a ton of money. 
  • Gratitude: The ‘Ovarian Lottery’ — Warren often referred to what he called the ‘ovarian lottery’ when discussing his life and career. The phrase was a reference to the gratitude he felt for being born during this time period, for being born in the United States, and for being born into a supportive family that gave him opportunities to thrive. As he got older, he began to realize what a privilege and blessing it is to be born into such favorable circumstances. There are people around the world who have incredible talent but are born into countries, societies, and familial situations that make it nearly impossible for them to succeed. This includes the U.S. — some people are simply doomed from the start and are faced with incredible disadvantages. They’ve drawn terrible luck. This idea really resonates with me. It’s exactly how I feel, and it’s one of the biggest sources of the gratitude I feel every day. I’m so grateful to have been born into the situation I was born into. As I like to say: “I hit the jackpot in life.”
    • Quote: “[From Warren] Life today is better in almost every way. You’ve got to figure that you started at a pretty lucky spot just by being born when you were. Imagine staying in some cosmic waiting room for hundreds of thousands of years and then getting dropped into the present — not bad timing. So I would focus on what’s been good in your life, rather than what’s gone wrong. Yes, bad things happen — sometimes very bad things. But life can still be wonderful.”