The Snowball: Warren Buffett and the Business of Life

Alice Schroeder's biography of Warren Buffett, written with his extensive cooperation, traces the investor's life from a Depression-era childhood in Omaha, Nebraska, to his emergence as one of the wealthiest and most influential figures in American business. The title refers to Buffett's metaphor for compounding: a snowball that grows larger as it rolls, accumulating not just money but knowledge, relationships, and influence over a lifetime.

The book opens in June 2003, with Buffett, then seventy-two, agreeing to cooperate on one condition: whenever his version of events differed from someone else's, Schroeder should use the less flattering version. The narrative shifts to the July 1999 Allen & Co. conference at Sun Valley, Idaho, where Buffett delivered a speech predicting that the stock market would disappoint investors for as long as seventeen years. His audience of technology moguls sat in silence as he argued that revolutionary technologies like the automobile and the airplane had enriched the world but ruined most of their investors, and that the Internet would prove no different.

Schroeder traces the Buffett family's origins from colonial America to Nebraska. Warren's great-grandfather opened Omaha's first grocery store in 1869, and generations of Buffetts shared traits of frugality and tightfistedness. Warren's father, Howard, became a stockbroker and later a Republican congressman. Warren's mother, Leila Stahl, came from a family affected by mental illness. Energetic in public, she erupted in sustained verbal rages against her children in private, inflicting lasting emotional damage on Warren and his older sister, Doris. This wound shaped Warren's lifelong craving for affection and approval.

Born August 30, 1930, Warren displayed an obsessive fascination with numbers and money from early childhood. He discovered the concept of compounding in One Thousand Ways to Make $1,000 and announced he would be a millionaire by thirty-five. He sold chewing gum, Coca-Cola, and magazines door-to-door, and his first stock purchase at age eleven taught him lessons about patience and the burden of managing other people's money. He later developed what he called his "Inner Scorecard," a personal standard of self-judgment based on internal principles rather than others' opinions.

The family's move to Washington, D.C., after Howard's election to Congress in 1942 triggered Warren's unhappiest years. Socially awkward and furious at being uprooted, he shoplifted and earned mostly poor grades. His salvation came through newspaper routes and Dale Carnegie's How to Win Friends and Influence People, whose principles he tested statistically and practiced with unusual persistence. By high school graduation, he had accumulated over five thousand dollars.

After transferring from the University of Pennsylvania's Wharton School to the University of Nebraska, Buffett discovered Benjamin Graham's The Intelligent Investor. When Harvard Business School rejected him, he applied to Columbia University, where Graham and collaborator David Dodd taught. At Columbia, Buffett became Graham's star student. Graham taught that a stock is a piece of a business, that investors should buy with a margin of safety—purchasing stocks at a significant discount to their true underlying worth—and that the market's moody fluctuations should be treated as opportunities rather than commands. A Saturday visit to Government Employees Insurance Company (GEICO) convinced Buffett to invest three-quarters of his portfolio in the company's stock.

Buffett returned to Omaha, where he courted and married Susan Thompson in April 1952. Susie, a warm and emotionally intuitive woman, recognized the damage Buffett's mother had done and became central to his emotional stability. After working as a stockbroker and then at Graham-Newman Corporation in New York, Buffett returned to Omaha in 1956 to launch his own investment partnerships, starting with seven partners and $105,100. He generated extraordinary returns by buying undervalued stocks and reinvesting his fees. In 1959, he met Charlie Munger, a Los Angeles lawyer, and the two began a decades-long intellectual partnership built on a shared reverence for rationality.

Through the 1960s, Buffett transitioned from Graham's "cigar butt" method of buying cheap, unloved stocks toward high-quality businesses, a shift influenced by Munger. His investment in American Express during the 1963 salad-oil scandal marked the turning point: Rather than buying at a statistical discount, he recognized that the company's brand would survive the crisis. He acquired control of Berkshire Hathaway, a failing textile mill, in 1965 after its president reneged on an agreed price, a purchase he later called his greatest business mistake. He bought National Indemnity, an Omaha insurer, and discovered the power of insurance "float," the cash collected as premiums before claims are paid, which became the engine of Berkshire's growth. In 1969, he shut down the partnership, warning that the overheated market was beyond his comprehension.

Buffett distributed Berkshire stock to departing partners, then bought back shares to increase his personal ownership. He and Munger used Blue Chip Stamps, a trading-stamp company, to buy See's Candies for $25 million, forcing Buffett for the first time to pay more than book value based on the strength of a brand. His friendship with Katharine Graham, publisher of the Washington Post, began in the early 1970s when he bought Post stock during the Watergate era, joined the board, and became Graham's informal business tutor and personal adviser. In late 1977, Susie told Warren she was moving to San Francisco. Devastated, he fell into grief until Astrid Menks, whom Susie encouraged to look after him, moved in. Susie remained legally married to Warren while Astrid became his daily companion.

Through the 1970s and 1980s, Buffett built a "homeostatic" business model, using insurance float to fund a diversified holding company. His wealth accelerated: He acquired the Nebraska Furniture Mart from Rose Blumkin, a ninety-year-old Russian immigrant, on a handshake for $55 million. He financed Capital Cities Communications' acquisition of the ABC television network. His 1987 investment of $700 million in Salomon Brothers, a Wall Street investment bank, brought him board seats at an institution whose culture of excess he privately deplored.

The Salomon Treasury bond scandal of 1991 became the defining crisis of Buffett's career. When trader Paul Mozer's illegal bidding in government bond auctions was exposed and management's failure to report the violations came to light, Salomon's funding collapsed. Buffett reluctantly became interim chairman and pursued total cooperation with prosecutors, waiving the firm's attorney-client privilege. The government accepted a settlement without indicting Salomon, and Buffett's handling of the crisis transformed him from a famous investor into a national symbol of business ethics.

The 1990s also brought Buffett's massive investment in Coca-Cola, which multiplied fourteenfold, and his deepening friendship with Bill Gates, whom he met at a 1991 gathering hosted by Graham. Through the late 1990s Internet bubble, Buffett endured ridicule for refusing to buy technology stocks, but he maintained his Inner Scorecard. In October 2003, Susie was diagnosed with stage-three oral cancer. She underwent surgery and radiation, and Warren visited every weekend, learning for the first time to be a caregiver. On July 29, 2004, Susie collapsed from a cerebral hemorrhage and died the following morning. Her death triggered profound changes: Buffett became more emotionally open with his children and more willing to confront the question of his fortune's future.

On June 26, 2006, Buffett announced he would give away eighty-five percent of his Berkshire stock, then worth $37 billion, to five foundations, with five-sixths going to the Bill and Melinda Gates Foundation, making it the largest charitable gift in history. On his seventy-sixth birthday, he married Astrid, formalizing a twenty-eight-year relationship. The 2008 financial crisis vindicated his warnings about leverage and derivatives—complex financial contracts whose values depend on underlying assets—while exposing some of his own errors. Berkshire lost its triple-A credit rating but remained financially sound, and Buffett invested on extraordinary terms during the panic, buying preferred stock in Goldman Sachs and General Electric.

The book closes with the snowball metaphor. Compounding works not just for money, Buffett explains, but for understanding the world and accumulating friends. The key is to be "your own wet snow," to be the kind of person others want to attach themselves to, because there is no going back to the top of the hill to start again.