Buffett The Making Of An American Capitalist Epublibre
In this episode, Preston and Stig review the best selling book, Buffett: The Making of an American Capitalist, by Roger Lowenstein. Drivers camera samsung digital 1200 x charger.
In this episode, Preston and Stig discusses the best-selling biography,. The episode is packed with funny anecdotes from Warren Buffett’s early career as a paper boy to his most successful investments and achievements. If you want to read our five page executive summary of, this book, instead. Podcast Transcript and Summary Preston: 00:00:00 We study billionaires and this is Episode 64 of The Investor’s Podcast. We’re broadcasting from Bel Air, Maryland.
- Book Review: Buffett The Making of An American Capitalist Roger Lowenstein This book was written back in 1995, so it is severely dated. It does, however.
- Buy Buffett: The Making of an American Capitalist Reprint by Roger Lowenstein (ISBN: 275) from Amazon's Book Store. Everyday low prices and free delivery on.
This is The Investor’s Podcast. We read the books and summarize the lessons. We test the waters and tell you the best actionable investing strategies. How’s everybody doing out there? This is Preston Pysh. I’m your host for The Investor’s Podcast and as usual, I’m accompanied by my co-host, Stig Brodersen, out in Denmark. We’ve got a really good book as usual that we’re going to be talking about today and the name of that book is Buffett the making of an American capitalist.
And this is really one of two major biographies that I would recommend. I’m sure there’s a bunch of biographies out there that we haven’t even touched. But really, the two main ones that are out there are this book here and this one is written by Roger Lowenstein. The name of it again is “Buffett: The Making of an American Capitalist.” And then the other book is called “The Snowball” which I’ve also read instead. You’ve also read The Snowball as well.
I love that book. So that’s another good one of the two. I would say I might be biased because I just read this one but I think I like this one maybe a little bit more. What’re your thoughts? Which one did you enjoy more of the two?
Stig: 00:01:26 I think they’re very similar. Like you don’t necessarily need to read both of them.
So like it’s about your writing there’s only so much you can say about Warren Buffett and his ventures and where these are today. I might be slightly biased as well because I just read this one. Preston: 00:01:42 Yeah. So both of them are pretty good and both of them cover a lot of the same areas to be quite honest with you. I think that there was a lot of rehashing of kind of the same stories.
There were a few newer things in this one that I hadn’t heard before, which I really enjoyed. And it’s funny because people on the forum on our Warren Buffett form dotcom have brought up some of these points that I had never heard. And it really kind of came out of this book because I hadn’t read this book yet. Really interesting read. Really fun read. What we’re going to do today is not really go chapter by chapter through the book but just kind of highlight some of the things that we felt were really good stories that we could tell the audience and also things that we felt were kind of important to highlight in order for you to capture a better idea of what the essence of Warren Buffett is. So I’m going to start off with the first story they’re going to throw it over to a stick and then he can tell one of the stories or one of the highlights from the book so the first thing that I wanted to talk about was Warren Buffett as a kid and I think anybody out there whenever you’re talking about when a person becomes something it’s often so heavily influenced their childhood has such a huge influence on that.
And so when you look at Warren Buffett from a very very young age I want to say he was like 12 or 13 or something like that whenever he started doing his paper route. That’s how he started making money as a kid he had his own paper route and it wasn’t just like a normal kid who was delivering just a couple of papers in the book.
I believe it the number and correct me if I’m wrong but I think the number was 500,000 newspapers is what Buffett had delivered as a kid that correcter somewhere around in that ballpark. Stig: 00:03:18 Yeah I think you’re right.
I was really impressed because I delivered papers too when I was that age. Well, this is where I am today. Preston: 00:03:25 Not as good as we’re both because for so Stig probably delivered 500 total though so that’s I mean that’s totally crazy I don’t know.
I could even imagine what a stack of 500,000 newspapers would look like. But they talk about it at such a young age for a kid to be that motivated to get up to deliver that quantity of newspapers. And it said in the book I want to say he was getting up at 4:00 3:30 something crazy in order to deliver all these newspapers so he was highly motivated. Just a ball of energy at a very young age and it wasn’t like he just did it for a year I think he did this for until he was maybe like 17 16 something like that.
He did it for quite a few years where he was getting up every single morning. And what they talk about in the book is it wasn’t like he was just doing it just to do it. He was doing it with vigor and absolutely like there was nothing more important to him than his paper route. And so this was the part that I felt was really the key nugget from this story that they were talking about him as a young kid delivering these newspapers.
Preston: 00:04:25 And it was that he was like almost obsessed with the money that he was receiving from this paper route when he would receive the cash. He wouldn’t let anybody touch the cash. Sat in this drawer and in this jar. But more importantly what he would do is he had an accounting that he was doing on this money where he was keeping track of all of it and he was in effect doing his own financial statements as a young kid in order to annotate the money that was received on certain days and basically tracking it and he was a numbers whiz talks a lot about that where he was just memorizing dates and times and long numbers and then he could just spout these numbers off. He was almost like he was obsessed with just spouting off numbers. One of my own personal experiences with this. So Stig and I were out at the shareholders meeting and what was it 13 Stig I think it’s 2014 but I’m losing count.
You know you might be right. Stig: 00:05:20 So that shows you how good our memory is and with numbers. Preston: 00:05:24 So we were at the shareholders meeting and Buffett he’s up there talking about one of these deals and I would say that the deal had happened months ago six seven nine months ago or something like that. And he’s talking about you know one of the people would ask him this question about the company and he just goes and that’s whenever we took nine hundred six hundred or nine million six hundred thousand four hundred in it and he just spouted off this number down to the share. And I was sitting there like holy.
He wasn’t booking anything and he was just he was just spouting off these numbers down to like the dollar or the share count the individual share it was totally mind blowing. I was just I was kind of floored and I stick and I were sitting next to each other we just looked at it like oh my gosh that is crazy. Books and resources mentioned in this episode Roger Lowenstein’s book, Alice Schroeder’s book, Discuss stocks with Preston and Stig at the Google’s Free VIDEOS THAT SUPPORT THIS PODCAST Warren Buffett’s Testimony to Congress on Solomon Brothers Our Summary of Buffett: The Making of an American Capitalist If you would like to download the below summary of format, follow the link. Chapter 1: Omaha In this chapter, Lowenstein talks about Buffett’s early age where he possessed an impeccable memory.
His love for numbers was obvious to his friend, Bob Russel, who grew up with him Omaha. At a very tender age, Buffett believed in working hard and embraced every business opportunity that came his way. Interestingly, he’d get ticker tapes from his father – who was a stock broker – and try to understand the symbols using Standard & Poor’s manual.
Understandably, Buffett found it extremely fascinating to make money and then watch it grow and proclaimed that he would be a millionaire by the age of 30. After his father was elected as the Congressman, Buffet began working at the Family’s grocery store. Chapter 2: Runaway Once the Buffett family moved to Washington, Warren Buffett worked as a newspaper carrier, and although he was only 13, he had the unusual habit (for kids his age) of maintaining a record of what he earned.
Not only did he immerse himself in business books, but he also made a bit of money by selling magazine subscriptions. Needless to say, he also filed a tax return and refused his dad’s help. However, Buffett was unhappy and ran away from his home. His parents were quite shocked, but didn’t rebuke him after he returned home. Buffett enrolled at the Wharton, and later, he graduated from the prestigious University of Nebraska.
He also enrolled at the Columbia Business School. Chapter 3: Graham As Buffett was already smitten with the stock market, Benjamin Graham just gave him the push he needed and opened a wide new world to the stock market. Although he was already trading and studying the stocks, he hadn’t made a lot of progress, but Graham changed it all. He offered several tools that helped Buffett explore several opportunities in the market and also helped him adapt to an approach that suited his demeanor. After honing his natural talent under Graham’s tutelage, Buffett went back to Omaha and married a woman named Susie in 1952. At this point, Buffett had also begun investing in companies. Later, he began working for Graham-Newman that was located on Wall Street.
Chapter 4: Beginnings By 1957, Buffett was already managing about $300,000 for his friends and family. He had no track record but even when he got a call from Edwin Davis, a reputed neurologist in Omaha, he stuck to his own terms. He made his message clear that he would be open to conduct business only one day in the year and that they wouldn’t even know where he would invest their money.
Of course, getting a deal with Davis would assure that he could make an entry as a professional, but Buffett stuck to his terms. He also followed the same principles with other clients, and although they couldn’t question him about the whereabouts of the money, they still made profits. Chapter 5: Partners Slowly, Buffet began investing by buying small stakes. By 1962, Buffett partnership bought a small stake at Newford that was priced at $7.60 per share. As a manufacturer of suit liners, it seemed like Berkshire was a great bargain since it had $16.50 per share with a working capital that was at least two times the share price. Warren Buffett followed Graham’s principles, but he also developed some of his own. He didn’t look at stocks like mere assets, but they were live businesses with amazing potential for him.
Although American Express was involved in the fraud regarding Salad Oil, he bought stocks in the company and also invested in Disney. By now, Buffett was a multi-millionaire, but he didn’t change his lifestyle. Chapter 6: Go-Go Gradually, new stocks including electronics were being traded.
Although they needed people to be trustful and invest in it, people still did it and stocks went up. This didn’t bother Buffett much when his fund was still very small, but as the capital grew, he began to get antsy.
Fewer bargains made him feel trapped and after a lot of forethought, he stopped accepting any new partners in the year 1966. Since he was unable to find stocks that agreed with his principles, he had to lower his own goals. He also met Graham and his other disciples and finally decided to dissolve the partnership. Chapter 7: Berkshire Hathaway In this chapter, Lowenstein discusses the history of the famous Berkshire Hathaway and how Buffett took charge of it. Berkshire and Hathaway merged together in 1955 and was named Berkshire Hathaway Inc.
The company didn’t seem to do too well, and although Buffett had bought stocks in it, he didn’t have any intentions of taking over the company. However, he did take charge later with Ken Chace to manage the company. Through Berkshire, Buffett also bought the National Indemnity Company and several other properties. By 1970, he was made the chairman of Berkshire. Chapter 8: Return of the Native Since the partnership had dissolved, Buffett had a lot of time on his hands. Of course, he did oversee Ken Chace’s work and the Hathaway mill, but it still gave him time to do other things.
He also declared that he was declining requests since he was no longer involved in the investment business. At this point, Buffett took his time and got busy with other projects. Among other things, one can’t ignore the philanthropist in him.
As his wife Susie was already involved, she also encouraged him to take a step ahead. As a result, he helped provide scholarships to about 50 black students. However, he couldn’t keep away from the investment business and was back in action when he bought stocks in 1972 for the insurance company that belonged to Berkshire. Chapter 9: Alter Ego The friendship and camaraderie between Charlie Munger and Buffett is described in this chapter. There were known as two people who resembled each other to a great extent.
Both of them invested and bought stocks separately. Within no time, Buffett was the largest shareholder and Munger was a close second in a company called Blue Chip Stamps. There was an opportunity to make loads of money, but somewhere along the way, the game became dangerous since Buffett was now investing and working on behalf of Blue Chip, Diversified and Berkshire. Lowenstein has also shown a chart for the reader to understand how Buffett managed it all. Later, the SEC kick-started an investigation that continued until 1976, but Buffett was just slapped on his wrist. Chapter 10: Washington Redux In this section, Lowenstein talks about how Buffett became an advisor to Katherine Graham who managed the Washington Post. When Buffett met her, Katherine, who was working as a reporter initially, had no expectations that she would be running the company.
It was a rough phase for her, but Buffett changed that. By 1974, he became a board member. He was 57 years old and also became her friend and adviser. In his tutelage, the Washington Post made a few other investments. Incredibly, the return on the equity was doubled and as time passed by, it simply kept increasing. Chapter 11: Press Lord In this section, Lowenstein talks about Buffett’s experiences with the Evening News, a newspaper in Buffalo. Buffett was mainly interested in it because of the stable population.
Despite its negatives, including the fact that the newspaper didn’t publish on Sunday, Buffett even wanted Graham to know that he was interested in acquiring it. Buffett’s wish was not to become an advisor to a newspaper company, but he wanted to own one. In 1974, Buffett and Munger bought the Evening News.
Their plans to publish a Sunday edition was met with some protest and they also were embroiled in an anti-trust suit from the rival company. Due to an injunction, the paper began to suffer from losses, but it was reversed after two years.
Chapter 12: Partners, Redux This chapter talks about how Buffett and his wife were living separate lives. Buffett was completely involved in his businesses, but Susie was beginning to get more interested in her career. She wanted to become a singer and was also auditioning at the time. The couple began to grow separate from each other as they had completely opposite interests. As Susie turned 45, she performed at the Orpheum, but separated from Buffett the same day. She also stated that she wasn’t doing it legally, but just wanted to live alone. For Buffett, it felt like the support he had received to continue with his work without worrying about emotional matters was suddenly gone.
He was stunned. However, he had Astrid Menks move into his house after a year. Buffet began buying more stocks by the late 1970s again. Chapter 13: The Carpet Woman This section is about Mrs. B, aka Rose Blumkin, a woman who sold her business to Buffett for $60 M.
When appraising a business, Buffett always thought about how he’d feel if he had to compete against it. When he watched Mrs. B, he felt that she was someone who was born out of the letters he wrote. She was tenacious, hardworking and strong. One by one, she made her competitors go out of business and that’s exactly what Buffett admired in her the most.
Buffett The Making Of An American Capitalist
She worked until the age of 103, and this simply proves that it’s not age, but it’s the will that matters when in business. Chapter 14: The Eighties The 1980s was more like an era where there were too many mergers and acquisitions to be seen. The mergers were hostile and there were too many dramatic changes taking place. Everything was taking place at a furious pace, and Wall Street had made about $12 billion through a few deals. It shot up to $122 billion by 1984 and this made others resent the investment bankers. After a long time, Wall Street was seen to be taking initiatives.
At this juncture, Buffett acquired many media companies and Cap Cities that later merged with ABC. However, he seldom participated in hostile mergers. Chapter 15: Public and Private This section describes Buffett’s public and private life in more detail. One would expect a billionaire to lead a lavish life, but Buffett didn’t believe in that.
Although he was in the public spotlight, thanks to the millionaires he’d made in the USA, he rarely behaved like a billionaire. He had too many people asking him to help them make money. The media was understandably every interested in his private and public life and this raised a lot of speculation. Susie lived separately, but she always accompanied him in public, but his private life had Astrid Menks give him company.
Long story short, Buffett wasn’t like the average CEO who has no time for other things in life. Warren Buffett, a billionaire, had only 11 people in the corporate headquarters.
Chapter 16: Crash Buffett was also involved in businesses that revolved around the insurance market. At the time, every other company had their own strategy. In other words, while the other businesses cut back their prices to cling to the market shares, Buffett steadfastly refused to give in because he felt that he would be betting against odds. He perceived the insurance business as playing poker and his mathematical calculations helped him to make profit no matter what business he invested in. He also made it clear that he would wait for the prices to rise once the businesses pulled back. The market experienced heavy losses in 1985. However, Berkshire made profits.
Later, Buffett sold all of his stocks, except GEICO, Washington Post and Cap Cities. Chapter 17: A Brief Introduction to Darts In this chapter, it’s obvious to understand Buffett’s dislike for the Efficient Market Theory.
After the crash, Buffett had expressed his displeasure that people were bothered about efficient markets, rather than worrying about the value and price. Basically, the theory stated that the price of a stock reflected all the information of any company that was publicly available. Whenever stocks became public, traders sold or bought until the price was stable.
This gave birth to the assumption that since the price displayed all the information required, it was futile to delve into security analysis. Chapter 18: Secrets of the Temple This chapter talks about how Buffett became the biggest shareholder for Coca-Cola in 1988. Lowenstein also shares the principles of Buffett, when it comes to determining the ‘value’ of stocks. Simply put, Buffett primarily tries to pick stocks when the value is significantly more than the price. The rules can be quickly summarized as follows:.
Don’t pay any attention to forecasts and trends, but pay close attention to the value of the business in the long term. It’s best to stick to stocks within your area of competence because if you can’t understand the business, there’s no point in investing in it. Pick managers that treat the shareholder or investor’s money as their own Chapter 19: Howie Buffett’s Corn This chapter describes Buffett’s relationship with his children and how his views about sharing his fortune with his children were beginning to change. As mentioned earlier, Buffett rarely threw his weight around as a billionaire.
He also criticized wealthy people when they left behind their fortunes to the respective heirs. Buffett rarely coached his family and friends about their financial matters because he felt that their relationship would be cleaner if money wasn’t involved. Although his attitude stunned his friends, Buffett cut his children from financial support since he didn’t want to spoil them. Chapter 20: Rhinophobia After Black Monday, people witnessed the stocks soaring high.
During late 1980s, greed had overshadowed fear and this also gave Munger and Buffett the opportunity to make more profits. Teamed with each other, both Munger and Buffett were known to question companies and tear presentations apart.
In the meanwhile, Buffett also purchased RJR Nabisco and also arbitraged on different types of stocks. Interestingly, he bought companies to prevent them from being acquired and was also criticized for it. While some deals were good, others weren’t so profitable. Chapter 21: The King This chapter describes the history between John Gutfreund and Salomon. Buffett admired Gutfreund since he played a major role in helping GEICO becoming stable, but even Buffett was appalled at the problems that went on in Salomon’s firm. He rarely interfered in the company’s problems but he stepped in and asked them to cut back. However, it seemed to be too late as the Justice Department and SEC had already begun an investigation.
Gutfreund had to resign and Buffett was made the CEO. Chapter 22: Salomon’s Court This chapter is a continuation of the previous chapter where the problems encountered in Salomon’s firm are briefly described. As the investigation continued, Buffett met the top officials in the firm to assess and salvage what was left of the situation.
He also selected Deryck Maughan to manage the firm. Needless to say, Buffett cooperated with the Justice Department during the investigation and made several changes in the management. Eventually, the cases were settled, and with time, the firm that was struggling, made record profits. Chapter 23: Buffett’s Trolley This chapter takes a look at Buffett’s holdings in early 1990s.
Alabama The Making Of An American State
Lowenstein talks about how Buffett increased the stakes in Wells Fargo. While the banks recovered after a bad recession, Buffett’s earnings increased considerably. By 1994, Buffett had amassed about $9.7 billion and continued to dazzle people with his personality and intuitive nature. Even today, Buffett searches for stocks that hold intrinsic value and doesn’t intend to change his methods.