Part 4: SimoleonSense Interviews Warren Buffett's Biographer, Alice Schroeder.
Copyright 2010 Alice Schroeder & Miguel Barbosa
Please do not repost without asking for permission.
Miguel: Alice, tell me about the process of getting to know Warren Buffett.
Alice: I would ask him questions, and he was able to pull elaborate modules out of his memory bank. He has thought about so many things over the years that there are polished nuggets prepared to respond to almost any question. At times, it was hard to get him to give spontaneous answers –- or to give on-point answers to questions he hadn't been asked before.
As you get to know someone over time by spending days on end with them sitting in their office watching them, you begin to see the real person. I got to know him and understand his mind in business and investing by writing The Snowball. I saw him interacting with his family, his friends, managers, his office staff, and of course, myself. I saw him in all kinds of moods.
It was eye-opening to watch Warren dealing with celebrities. He's expert at it, yet occasionally some weird thing happens. There was one funny episode, for example, when he invited Sophia Loren to the shareholder meeting as a celebrity guest. He was surprised, and a little insulted, when she wanted to be paid to attend. I mean, in his mind, who wouldn't want to attend his shareholder meeting? So throughout all of these interactions I saw the different aspects of his personality emerge.
Miguel: Could you shed some light on Buffett's daily life? What is his daily routine? Maybe you could comment on his interactions with the management teams.
Alice: Sure. He comes in the morning and his routine is to switch on CNBC with the sound muted and start reading while glancing at the crawl from time to time. The wooden shutters on the windows are always closed. You get no sense that a world exists outside, which is what he wants, no distractions. As far as I can tell, he doesn't need sunlight.
He is already pretty well versed on the news by the time he gets in, through the Internet and television. But he still prefers newspapers. He reads the WSJ, NYT, Financial Times, Washington Post, the Omaha World-Herald. He reads some offbeat things like the NY Observer. He reads all sorts of trade press relating to the different businesses that Berkshire runs. American Banker, Oil & Gas Journal, A.M. Best, Furniture Today. There are stacks of reports from the different BRK subsidiary companies on his desk. Throughout his day he grazes through the reading pile.
Meanwhile he talks on the phone. He doesn't make a lot of outgoing calls; people call him. That's his day … most of the time.
People do come to visit him and he'll sit and spend an hour with someone or have lunch or dinner. A lot of days he doesn't have anything on his schedule. His interaction with managers is minimal. Some of them call him regularly, but he's not kidding when he says that others, he speaks to maybe a couple of times a year, or they communicate in writing. He responds if they call him. He almost never calls them. If they call him he'll be very agreeable and talk but he keeps the conversation quite short. When they do call, he acts as a sounding board. The one thing he controls is capital decisions. But anything else, it's pretty much up to them.
He is a very good listener who gives excellent advice, and he's also pretty firm about not giving unasked advice. The managers vary in their desire (for asking for advice). The ones that do ask use words like "invaluable" to describe his advice.
Within headquarters he has low interaction with his staff other than with Debbie and the other secretaries. He talks to Marc Hamburg (the CFO) regularly, although not necessarily daily. He talks with his the bond trader. These conversations are very brief. You'll notice this is a running theme… while he does have long conversations, it's only with a few friends and only on occasions of his choosing.
In the office, he knows everyone's name and occasionally walks down the hall and says hello to people. He is the furthest thing from a walk-around manager, though. He stays in his office (he is at one end of the hall) and everyone else sticks to their end.
Miguel: Obviously he is a voracious reader and gets through things pretty quickly. How much time is spent on new ideas besides following the subsidiaries and general business press?
Alice: You mean investment ideas?
Miguel: Sure, whether it's a new investment idea or not. He talks about enjoying books…I'm curious where he finds the time to do those kinds of activities (in addition to investing).
Alice: Yes, he's mostly updating himself. Books and entertainment would be at home.
Miguel: Is there anything that surprised you about his daily routine or communications?
Alice: While I was an analyst, he would always say, "Call me anytime," but I rarely did. I had this false notion that he was busy all day and it would be an imposition to call him. Later I learned some of his closest friends feel the same way, and meanwhile Warren is sitting there in Omaha wishing more people would call him.
Only certain people, though, that should be stressed. Essentially, only people who he is certain have no expectations of talking to him get to talk to him.
You know his saying about potential acquisitions, "If the phone don't ring, you'll know it's me." That's not coming out of a vacuum. If you want to connect with Warren Buffett, do it in writing.
Something to keep in mind is that Warren is extremely precise and literal in what he writes and says. You can tell this from reading his writings closely, but it was even more interesting to watch him create them in real time. It's unwise to read more into his words than is there. It's equally unwise to assume that everything you might want to know has been said.
One thing I found surprising initially, but with hindsight not, is that Warren relies on those people who do call him as his window on the world. He needs eyes and ears.
You know, if you're Warren Buffett, you can't walk into a Dairy Queen to check things out. People are always putting on a show for him. He appreciates candid information and seeks it out.
Through this vast network of connections that he's built, he's created a sort of database of information about business and the economy that's probably irreplaceable.
Miguel: Is he the type to call a "buddy" at a large corporation?
Alice: I don't want to say he never makes outgoing calls. But, more often than not, people call him.
Miguel: So jumping back to the book how did it progress (as you got to know him more intimately). Was there a change in focus over the first couple of years? What were the changes in how you wanted to organize his life?
One of the very interesting things about Buffett is the dichotomy between his character and experiences. By that I mean he was 30 years old and a millionaire and very confident in a business sense—and at the same time he seems to be the shy nice guy (who can barely ask a girl on a date). So maybe you can comment on the young Buffett and how the book progresses from there.
Alice: As he gave me more biographical information, I discovered more sources to interview, many suggested by him. So, as I got to know him better, I tended to reorganize and restructure the book to mesh with his personality and my advancing knowledge of him. You have to understand that I did most of the writing in the last 2 years. I was doing mostly research the first 2 years.
There was a critical path that very much influenced the process, of course. He was obviously the scarcest resource. So I interviewed him as much as I could and as quickly as I could for a year and half.
The second-scarcest resource was access to his files — so I went to that right away simultaneously while interviewing him.
The third was people in his life who were very elderly. In a sense I used the actuarial tables for guidance on when to interview people. I started with people over age 95, 90…and I worked my way down – but I still missed some people.
It was too bad because there were people who were already deceased or in dementia, and I didn't get to talk to them and missed getting to know them. One of the joys of this book was getting to know so many amazing people, and especially, spending time with wise elderly people. But I managed to get most of the key sources, and I felt it was appropriate to focus on them first, because, today, many of them are no longer around or aren't in a position, physically, to provide the kind of insight into Warren Buffet that they so generously did when I was writing the book.
I was still doing bits of research until right before the book was published, which is standard in journalism. As the emphasis switches from initial digging to fine-tuning, it goes from 80-20 research versus writing to 20-80. It's not unlike researching a stock, really.
Miguel: Please comment on the highlights of Buffett's life through the view of his closest friends, family, etc. That is, the people you interviewed. Are there any milestones that people don't know about or overlook in his character development?
Alice:This was some of the "new news" in The Snowball. For example, his relationship with his parents and the role of mental illness in his family shaped his character and his whole career.
He's cautious and non-confrontational. He's wary of extremes in all forms. He's insistently reluctant to criticize anyone and hypersensitive to criticism himself. He needs to be liked and needs approval, but paradoxically is not a people-pleaser. He's demanding of himself and has very high standards. He's very oriented toward security … hyper-aware of risk. He's got a keenly honed sense of justice, but isn't one to fight for it in an overt way; he can be timid when called upon for moral courage. He's uncommonly clever at finding pragmatic, indirect solutions to problems, usually multiple problems taken care of by one solution. You can take those traits and look at his career and find strands of them everywhere.
His relationships with women provide the most important window on his character. Susie had a very strong impact on his business career because she enabled him socially to overcome his shyness and get around in the business world. He has credited Dale Carnegie, but to fully understand the magnitude of her influence you have to carefully read the formative events in his life that involved her, something I went through in some detail in The Snowball. Warren's relationship with Susie is as clear a window into who he is, his traits and temperament, as any other.
His hard work in the social area to overcome his natural awkwardness is what enabled him to get past the front door with Katharine Graham. If you look back on his career and think of all the things that happened to him that wouldn't have had Kay Graham not entered his life, it's immense.
You can never know what the other path would have been, because he is obviously brilliant, and other good things would have happened. But his Washington connections, media connections, all of these different things led to many of his investments, and his pleasures in life, and they originated from Katherine Graham. Given his strategic way of thinking, it's not surprising that he arranged to get exposure to her.
Even the GEICO investment was influenced by Katherine Graham. She introduced him to Jack Byrne. He made his decision to invest in GEICO partly because he thought Jack Byrne was the right person to be the CEO.
Miguel: Earlier I asked you from the point of view of an analyst but now I would like to as you as an author, did you get an "Aha!" feeling that Warren wasn't a typical human being? When did that hit you and how did it hit you?
Alice: That was obvious when I met him as an analyst in the first 5 minutes into the conversation. When he opens his mouth it just comes through. His way of articulating ideas is very original. He is a great synthesizer and especially strong at pattern recognition. He's also able to follow what I would call it decision trees and figure out probabilities in his head at an astonishing pace.
So when you are in a conversation with him, he has worked out many of the directions in which the conversation can go, the likelihood of each, and how he wants to manage his end of it. He's reading you emotionally too. You recognize that right away in a conversation with him. You realize he's many moves ahead of you on the chess board. It is eerie, but also fascinating.
You also can see how unusual he is because he's a great teacher. If you ask him questions he loves to convey the things he's learned.
Miguel: What makes him such a wonderful teacher?
Alice: Well, first, it is that he enjoys teaching and, second, that he has worked hard at learning communication skills and specifically learning to communicate as a teacher. So he knows how to order material, how to tell stories, he knows how people process information. It's also, I think, a valuable insight that teaching is one of his preferred modes of talking to people much of the time. You could almost call it his default mode. And that the value, influence, and trust he built by being such a memorable teacher of investing, business, and life in his public communications was, from a relatively early period, a very important ingredient for his tangible business success. This began as early as high school, but was crucial to running the Buffett partnerships and later Berkshire Hathaway. I think this point is actually still quite underappreciated among even his most obsessive followers.
Miguel: Give us advice to becoming better communicators.
Alice: Well…this is not anything profound. But you see that he uses very short parables, stories, and analogies. He chooses key words that resonate with people —that will stick in their heads, like Aesop's fables, and fairytale imagery. He's good at conjuring up pictures in people's minds that trigger archetypal thinking. It enables him to very quickly make a point … without having to expend a lot of verbiage.
He's also conscientious about weaving humor into his material. He's naturally witty, but he's aware that humor is enjoyable and disarming if you're trying to teach something.
Miguel: What is your favorite part of the book?
Alice: Okay, well I won't say favorite because that is similar to picking your favorite child. There are parts of the book that I love for all kinds of different reasons. There is one intellectually challenging and interesting part to me tha tI think is intriguing and has been paid less attention.
I was able to put together how he created BRK out of Blue Chip and Diversified. I was also able to put together how he created his partnership. That was nearly all new information.
I found it fascinating to see brick by brick how he did this. It deserved study because it ran to the question of what is a great business. These are the businesses that he created for himself.
Miguel: This section is portrayed along with a diagram of Berkshire and the subsidiaries…
Alice: Yes, although the story begins at the point in which he closes the partnership, and it ends with the Buffalo News, which runs through multiple chapters.
The creation of the partnership is primarily in the chapter called Hidden Splendor. But there are bits of it before that chapter.
Miguel: I see. I want to return to your interviews with Buffett's inner circle. As you are interviewing these people what are the similarities in what they reveal about Warren?
Alice: Yes, in fact, it was so repetitive that I could tell that some of these people had been interviewed so many times before and spent enough time talking to each other that it had a sometimes rehearsed quality.
Wit, loyalty, & honesty were the 3 qualities that were cited over and over.
He's extremely witty. He can knock out a one-liner every few seconds. One of the nicer aspects of being around him is the easy humor of the conversations. I tried to include as many quotes as I could in The Snowball so that readers could get a sense of what a terrific conversationalist he is. When Michael Lewis reviewed The Snowball in The New Republic magazine, his conclusion from reading these quotes was that "Buffett is incapable of being dull," which is so true.
In terms of loyalty, Buffett cherishes relationships and has gone to a lot of effort to maintain contact with old friends. Far more so than the average person does. He told me once that his mother got more than 65 birthday cards on her 65th birthday. This was a real point of pride. There's an element of the collector that comes to the forefront in his loyalty about people. It's not dissimilar to the way he views the companies Berkshire owns as paintings in a museum.
He's almost painfully honest at times. Yet some people I interviewed belabored his honesty beyond the point that made sense. They would belabor it to such a degree that you began to realize they held some specific concerns in this area. Eventually it became clearer that this had to do with the incidents in his life where he has been ruthless. I included some representative examples in The Snowball, but space allowed only a fraction to make it into the book.
Look, he's allowed to be human. He's a decent, honest, admirable person of integrity who's accomplished magnificent achievements. That should be enough. Surely people realize that he didn't get where he is by running a philanthropic institution. But some who are loyal to Warren equate loyalty with portraying him as infallible. Those two things are not the same. It's not necessary at all to pretend that someone is infallible in order to be loyal and admire them. I found in the case of Warren Buffett that there were people who genuinely believed that if they admitted any imperfections in him, it would make them disloyal.
Miguel: They were turning him into a saint, so to speak?
Alice: They were, and, the more you saw it, the sillier it became. I will never forget a few people insisting to me that Warren is really not that interested in money.
Tune-in Tomorrow for Part 5: Buffett- The Investor & Businessman
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