Book SummaryThe Snowball, by Alice Schroeder

1-Page Summary1-Page Book Summary of The Snowball

In the field of high finance, Warren Buffett stands alone as a man not driven by appearances, ego, or the quest for the quick, easy dollar. Instead, Buffett embodies the old saying that “slow and steady wins the race.” He made his first millions in Omaha, Nebraska, far from the bustle of Wall Street, and he systematically put his money to work in a process that became a wealth-building machine.

Much has been written about Buffett’s methods, but The Snowball sets its sights on Buffett himself. How did the person who in 2008 was declared the richest man in the world come to be defined not by his wealth, but by his reputation for honesty and wisdom? Was the so-called Oracle of Omaha as genuine as his public persona? What drove his relentless pursuit of making money while seemingly holding onto his integrity and values?

Alice Schroeder was commissioned by Buffett himself to answer these questions....

The Snowball Summary Buffett’s Beginnings

Unlike other giants in the field of business, Warren Buffett would never claim to be a “self-made man.” In fact, he would often gladly admit that his life was shaped by his family, his teachers, and the era into which he was born. Schroeder explains how Buffett was molded by the example of his parents, his fascination with numbers, the economics of the Depression, and the ideas he was exposed to in school.

The Buffetts were a long-established family of grocers in Omaha, Nebraska, but were never wealthy or members of the elite. Warren’s father Howard became a stockbroker shortly before the crash of 1929. While the rest of the economy dwindled, though, Howard Buffett succeeded by dealing in stable securities and bonds. Schroeder says he prized integrity over all, a trait that got him elected to Congress in 1942. Of all his father’s characteristics, it was how he stuck to his principles and expounded on his beliefs that Warren Buffett would emulate throughout his life.

(Shortform note: Like Buffett’s father, there were others who found success during the Great Depression. Joseph Kennedy Sr., patriarch of...

The Snowball Summary Accumulating Wealth: The Road to Independence

Unlike the stereotypical Wall Street tycoon, Buffett’s dogged pursuit of wealth can’t be written off as simple greed. Money lay at the intersection of his childhood love of collecting, his fascination with numbers, and his drive for independence. Like an athletic or musical prodigy, Buffett had talents that created in him the ability and the calling to make money better than anyone else. Schroeder charts Buffett’s early endeavors through grade school, college, and his first investments as his dedication and intelligence led to an ever-growing snowball of wealth.

Buffett’s money-making started at the age of six when he went door-to-door selling chewing gum, before moving up to magazines and Coca-Cola and eventually delivering newspapers in his teens. But Buffett wasn’t a spender, says Schroeder. He collected money like he collected bottle caps. He filed his first tax return at the age of 14, and before long he’d saved up $2,000. While combing racetrack bleachers for lost tickets, he learned the math to calculate a horse’s odds of winning, a skill he’d later use to judge stocks. His most lucrative venture was a refurbished pinball machine, from which he used the proceeds to pay...

The Snowball Summary Accumulating Businesses: Stewardship in Action

As the 1960s came to an end, Buffett began to change the way he made money while the market itself entered a period of transition. However, Buffett’s core value of acting as a responsible steward of wealth never budged. Through the downturn of the ’70s and the fiscal heyday of the ’80s, Buffett shifted his focus from buying cheap stocks to buying great businesses, protecting them from corporate raiders.

Just as Buffett was dissolving his partnerships, the financial world entered a period of turmoil. The bull market of the ’60s went into a downturn, which created an opportunity for Buffett to expand his portfolio. However, the beginning of the ’70s saw the creation of the NASDAQ, the first computerized stock exchange, which did away with the paper-trail trading that had been Buffett’s bread and butter. Technology stocks also took off, but Schroeder writes that Buffett wanted no part, setting a personal rule not to invest in tech he didn’t understand.

(Shortform note: Launched in 1971, the NASDAQ allowed brokers to trade stocks electronically and eliminated much of the inefficiency of the older, in-person trading system. The...

The Snowball Summary Accumulating People: Finding a Family

Despite Buffett’s longing for independence, he spent his life accumulating friends as much as he spent it making money. Schroeder hints that because of Buffett’s lack of emotional connections in childhood, he spent his adult life forging intense relationships with others. Of the many people drawn to Buffett, several stand out in particular: his wife, Susie Thompson Buffett; his business partner Charles Munger; his close companion Katharine Graham; and tech giant Bill Gates.

Growing up, Buffett was awkward with women, but in 1950 he fell for Susie Thompson. Buffett studied public speaking in the hope of overcoming his awkwardness with women, and when that didn’t work he wooed her parents instead. Schroeder claims that it was Buffett’s vulnerability that finally won Susie over. She had an urge to take care of others, and she wanted to give him the love and support he’d never received as a child. They married in 1952 and had three children: Susan, Howard, and Peter. Buffett and Susie made it a point to raise their children to not take money for granted. Buffett promised to pay for their education, but not to give them the easy trust fund life that other children of the wealthy...

The Snowball Summary Accumulating Influence: Leading by Example

Just as Buffett’s wealth grew throughout his life, so did his reputation. And just like his wealth, his reputation was built through slow perseverance and integrity. Buffett’s growing influence gave him a path to push for change through political activism and his role as a publisher, and (once people saw him as a titan of the Market) to advocate for equitable fiscal policies.

By the ’60s, Buffetts’ net worth had risen so high that Susie suggested that he should shift his focus from making money and start giving back to the community. In particular, Susie was a civil rights proponent, while Buffett (like his father before him) was intent on preventing another World War. However, Schroeder argues that Buffett saw himself as an “idea man,” rather than an active philanthropist. Making money was his gift, and his intent was to do so, earning as much as he could in his life before giving it all away at the end.

(Shortform note: Susie Buffett’s philanthropic activism is a trait she’d pass on to her daughter, Susan Alice Buffett, founder of the Sherwood Foundation, which funds social justice programs in Nebraska. Susan recalls [going with...

The Snowball Summary Buffett In Crisis: The Strength of Integrity

More than any other financial giant, Buffett was characterized by his simple honesty. While his integrity wasn’t a shield against every storm in life, it often provided a guiding star for himself and those around him. Buffett’s integrity enabled him to salvage the Salomon Brothers investment firm and let him speak out as a voice of reason during the 2008 financial crisis.

In 1991, Buffett’s integrity went on the line when Salomon Brothers (which Buffett had rescued in 1986) was caught violating regulations on bidding for government bonds. When it came out that Salomon’s CEO hadn’t reported the misdealings to the Federal Reserve or to the company’s board, the government threatened to cut off Salomon completely, effectively killing the business. Salomon’s management resigned as nearly $150 billion in short-term debt came due. Schroeder recounts that as the most respected investor, Buffett found himself thrust into the role of temporary chairman of the board.

By taking charge of a firm mired in scandal, Buffett risked his hard-won reputation. However, he feared that if Salomon defaulted on its debts, a global financial crisis would ensue. Schroeder says that Buffett begged...

The Snowball Summary Buffett the Teacher: Paying Wisdom Forward

Though Buffett grew to be a public figure later in life, he’d always been eager to speak out on issues close to his heart. When it came to business in particular, Buffett relished the role of educator and would expound at length to anyone who would listen. As his experience and influence grew, so did his platforms to teach other people, the ideas about business and life he could offer, and the financial power he was able to wield in order to lead by example.

His primary venue for teaching was his annual Berkshire Hathaway shareholder meeting, at which he would lecture and answer questions about why he made investments and how he viewed the market. According to Schroeder, by the end of the ’90s, over 10,000 people would attend to hear him speak. His favorite audience was college students, who he saw as being more flexible and receptive. What he wanted most was for people to learn and put into practice the principles and ideals he believed in.

(Shortform note: Video highlights of Berkshire Hathaway’s shareholder meetings are now freely available online. [Attendance is limited to shareholders...

Shortform Exercise: What’s Your Attitude Toward Investment?

Warren Buffett has always warned against letting emotion cloud investment decisions, whether it be anxiety about a downturn in the market or unwarranted optimism in times when riches come easy. He also teaches to value money not for what it can buy in the present, but for what it might grow into in the future. Think about how these principles relate to the way you’ve thought about money in your own life.

Do you regularly put money away for the future? If you don’t, is there a way you could save even a small amount from every paycheck? If you’re already doing so, is there a way you could save more?

Shortform Exercise: How Can You Invest in Yourself?

Warren Buffett has said that the best investment you can make is to invest in your personal development—mentally, physically, and financially. For example, Buffett recognized his awkwardness with others and studied public speaking as a way to grow out of it. Consider any areas in your life where you may have opportunities for growth.

Do you have personal interests or ambitions you’ve never followed? What avenues might be available that would let you explore them (for instance, local clubs or continuing education classes)?