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The Snowball
The subtitle is Warren Buffett and the Business of Life. Is it massive? Yes. Does it contain numerous revelations about his childhood, his "slight obsession" with trains, his love of collecting, and his sex life? Yes. Is it well written and well researched? Yes. Does it cover many financial episodes (most of all Salomon Brothers) and famous characters? Yes. Is it number one on Amazon? Yes. Does it contain analytic depth? No. Did I like it? Yes, but for a return which is mostly biographical in nature, it's a lot of detail to wade through.
Posted by Tyler Cowen on October 1, 2008 at 07:51 AM in Books | Permalink
Comments
Does it give you a sense of esprit de corps between you and another who seems to be a reader by vocation?
As an aside, I just got The Science of Success audiobook and one great line: "The key is to recognize when you are experimenting, and limit the bet accordingly."
This is basically a different phrasing of Buffett's greatest lesson, and inexplicably one that many highly educated people still ignore. So far in my listening, Koch has referenced Mises, Harper, and Schumpeter in describing his quest to understand human progress. I sometimes wonder what other people could possibly be reading.
Posted by: Andrew at Oct 1, 2008 9:20:28 AM
How did you already finish it? I pre-ordered it from Amazon and only got it yesterday. I read about 100 pages, but couldn't get through the whole thing in one night! It's a very different read than Lowenstein's book. Less analytical, but huge amounts of Buffett's own thoughts and insights. That's the true value add of the book.
Posted by: joe at Oct 1, 2008 9:50:13 AM
This post should have been entitled: Tyler Cowen Interviews Himself
Posted by: Dave at Oct 1, 2008 10:51:47 AM
Unfortunately, I wouldn't buy any book that includes details of someone's sex life that has "Snowball" in the title.
(Yes, I had to go there. I'm sorry.)
Posted by: Xmas at Oct 1, 2008 11:23:32 AM
does he talk about how he pretends to be a altruistic agent of goodwill when selfishly promoting complicated estate taxes that enrich his slimy insurance companies?
picture used car salesman:"have you thought about the tax benefits of buying this crapaola annuity"
does he talk about how he decided that mortgage securities are crudy investment right now so instead of using his 5 billion to buy them he would just buy goldman stock and then do infomercials promoting the use of goverment agents stealign the money from taxpayers?
Posted by: Gabe at Oct 1, 2008 11:38:03 AM
Gabe,
Buffett is certainly very altruistic in leaving nearly all of his personal fortune to charity (Bill Gates' foundation). When it comes to investing, he is not at all altruistic, nor should he be; however, few people other than you question his integrity. Regarding the bailout, you may wish to read Why Main Street should support this rescue.
Posted by: at Oct 1, 2008 11:50:37 AM
I do think Buffett has some blind spots. For example, if he believes it is wrong that he pays a lower tax rate than his secretary I don't understand why he concludes his rate should go up.
On the estate tax, I don't understand why he believes the solution is to funnel capital to an entity that is inefficient. I do think it is possible that his privileged position affords him the luxury of cognitive dissonance on some things. It's not about integrity. He runs a special business that will barely blink when some of the capital goes into tax sheltered foundations. Other businesses are not so fungible.
Posted by: Andrew at Oct 1, 2008 12:10:30 PM
Alright Accrued Interest. I read your clearly written article. Please be patient and answer a few of my ignorant questions.
Maybe you'll be able to convince be I am wrong.
"Lenders don't want to use deposits to make loans right now, because there is serious risk of depositors suddenly demanding their cash. Remember that banks don't ever actually have enough cash to give all their depositors their money on any given day. So when depositors are nervous, banks are nervous."
It seems you are accurately decribing the inherit problems of fractional reserve banking. You are now admitting that one of the problems with fractional reserve banking is that sometimes it can only be saved by forcing the people of a country to pay huge amounts of money to banks that irresponsibly bet on bad investments?
why would the inhereit stability of the fractional reserve banking system make me supportive of plundering the incomes of my fellow man?
Your also arguing that housing prices can't go down or else "wealthy landords will own the whole country"...however there are plenty of poor people renting or even homeowners like myself now who would love to see house prices drop as this would make homes more affordable without having to mortgage away 30 years of labor. I'd pay cash for a house in my neighborhood if prices drop another 60%. then I'd have an extra income from rents and extra safety for a place to live in case I lose my job. Why is it the solution you propose is always to enable poor people to borrow even more easily? If this is your goal then why not consider massive payments to the poor? then they'd be able to more easily buy the things you want them to have without sticking them with long tem burdens? It seems that this solution is not satisfying to some because it would not allow Buffet and Bill Gross to profit very much. and sense you are so confident in the altruism of the rich wrren buffet then why are you fearmongering about "Wealthy land lords would own all the housing in America, and would reap all the profits from rentals". I don't consider myself wealthy...but givent he low price scenario I may become a landlord eventually...given the higher price scenario you are advocating I can see how all my income will get sucked up by interest, rising taxes and inflation over the next 20 years...leaving little room to ever achieve small time landlord status.
Posted by: Gabe at Oct 1, 2008 12:33:54 PM
I liked Lowensteins book, I'm not saying this book won't be fun to read either.
I just don't know how you can admire the deceptive nature of a guy making a 5 billion dollar bet on Goldman*(who he admitted on CNBC last tuesday morning) was going to be a big beneficiary of the bailout....who then tells americans it could be a good investment to buy 700 billion dolalrs worth of toxic securities that various firms are trying to dump.
He then uses this lie to try and convince people to vote to steal my kids future income! If the guy really though their was a good investment their wouldn't he buy it for himself? or this jsut more of the altruism you so admire in him giving to the gates foundation. Afterall, the UN and World bank programs the Gates foundation is supporting have done such a bang up job of helping Africa make economic progress the last few decades. Maybe he will help uncover the next Mugabe for the UN to prop up.
Posted by: Gabe at Oct 1, 2008 12:44:04 PM
ever here Buffet complain about how poor people have to pay the full SS/FICA taxes on the first dollar they earn...while rich guys like him get exemptions on everything 99.9% of his earnings from these regressive payroll taxes?
Nope he seems to like that one. His complaints about low taxes for the rich seem to be reerve for those in the rising/working upper middle...people making between 70 and 500k a year.
he likes to keep these paying MUCH HIGHER tax rates than him. He wants us in debt and paying the money to his buddies while he hides his money in foundations, tax shelters. He spends his money on lobbying for special sections of tax code jsut for him and his buddies to take advantage of.
Posted by: Gabe at Oct 1, 2008 12:52:37 PM
I wish Bill Gates would work on his products. I consider buying MSFT stock until I think about Vista. I'm not sure if he has enough money to give to the poor to absolve his soul of that one. The truly amazing thing is that the Zune is worse.
Posted by: Andrew at Oct 1, 2008 2:01:43 PM
The Slate crib notes are sufficient enough for me.
The American super-rich sure are a boring lot. I think I like that.
Posted by: Jason Malloy at Oct 1, 2008 5:37:31 PM
I just realized that in addition to having a more tax efficient structure than his upstart rivals, one of his major business lines (or possible business lines) is selling annuities which are only a good investment because of the risk of high taxes.
I've never understood why the media considers him a fount of economic and business policy wisdom. He is though, an exceedingly shrewd operator.
Posted by: nelsonal at Oct 1, 2008 7:45:35 PM
I've not read the book but my son and I were talking about Buffett over the weekend.
I first heard about him in the 70's when I was in grad school and read "Adam Smith"/Charles Goodman's 1973 book "Supermoney"
It has a whole chapter on Buffett before anyone had ever heard of him. Before he bought Berkshire Hathaway but after he had made a boatload of money for his family.
I had reread it 4-5 years ago and remember it as being well written.
I had actually pulled the book off the shelf last week and was going to reread it because it has a section on the Wall Street failures of 1971, specifically Dupont Glore Forgan and how Ross Perot saved the street. I seem to remember a lot of similarities between that situation and todays.
Unfortunately, my son took the book with him before I could reread it.
John Henry
Posted by: John Henry at Oct 1, 2008 7:50:00 PM
Ah, Buffett. He pontificates about the social value of estate taxes in breaking up and leveling great fortunes, and then he leaves his vast wealth to the personal control of the richest man in the world. If he's preaching that the bailout is a public duty while enriching himself from it with both hands, it would be entirely in character.
Posted by: Tom T. at Oct 1, 2008 11:34:04 PM
His complaints about low taxes for the rich seem to be reerve for those in the rising/working upper middle...people making between 70 and 500k a year.
Um, no. Here's a Buffett quote, "The 400 of us [here] pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter." The context of the quote is that he was speaking to a group of wealthy people who can classify much of their earnings as capital gains rather than as income. In other words, his quote is aimed squarely at the super-rich (and is obviously self-referential), not at people making between $70 thousand and $500 thousand per year.
Indeed, anyone who is drawing a salary in this range who is paying a lower percentage of income tax than receptionists or cleaning ladies is almost certainly guilty of income tax evasion. If you run a hedge fund or private equity fund, on the other hand, it is possible to pay only capital gains taxes on earnings.
Posted by: Ricardo at Oct 2, 2008 3:14:01 AM
So, I haven't read the Snowball, but I've read a good bit of Buffett and Munger.
I just got done listening to Charles Koch's The Science of Success. I think that his lessons are very similar to Buffet and Munger's. It seems to me that Buffett and Munger started out with the goal of business and ended up with principles whereas Koch started out with principles and ended up with business success. But, they both ended up at pretty much the same place. For example, they have similar compensation philosophies for managers.
I think this explains Buffett's philosophical lapses and the media's love affair with him. Anything that sounds wishy-washy and unideological sounds truthy to media types. It's fine for Buffett to believe that the government should enforce a meritocracy on him and his estate. It's not fine for him to say it should go for all businesses and then himself dodge it through foundations. In fact, I often wonder why these guys think non-profits are more beneficial to society than their successful value-added propositions. Buffett is a 7 sigma event, and it is quite unlikely that his progeny would have anything like his ability. It, however is equally unlikely that money taken from family businesses in estate taxes will be funneled more efficiently by the government than it could be effectively used by heirs that may have spent decades learning the operations. We should listen to folks like Buffett, then politely ask them to close the door behind them while we make the right decision.
Posted by: Andrew at Oct 2, 2008 6:00:03 AM
"In other words, his quote is aimed squarely at the super-rich (and is obviously self-referential), not at people making between $70 thousand and $500 thousand per year."
I disagree, the payroll taxes are definitely some of the the most regressive taxes out there and thee cause mcdonald workers making 35k a year to pay a higher percentage than some clever super rich. The tax-free foundation rules and the thousands of loopholes available to CEO's or or board members are another aspect that work in a very regressive manner. I have never once heard Warren Buffet argue against the regessive nature of the payroll taxes. The only time he gets on TV or mentions it in the lowenstein book is when he is arguing for higher estate taxes on families with 800 thousand dolalar estates. These higher taxes for this group happens to be a major driver for his gimmicky insurance products. Eliminating the double taxation would destroy some of his companies and that is why he promotes it. If he gave a crap about poor people he would do his little infomercials on how minimum wage workers are stuck with ~15% lower wages(depending on your assumptions of how the employer matching requirements affect wages) due to regressive payroll taxes.
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