《滚雪球》（2025年5月 Fintwit 读书会）

You're about to listen to the yet another value podcast. Today's podcast is my monthly book club with Byrne Hobart from the diff. We talk about the snowball, the Warren Buffett biography released by released in 2008. It was a fascinating reread for both of us. We just discuss all sorts of stuff. Buffett's personal life, financial markets today, Buffett's impact, everything. I mean, just everything you think about when you're going to talk about uh Buffett and the snowball. So, it's a really interesting read, especially if you've been following Warren Buffett for a long time. Uh, I hope you enjoy it. We're going to get to that, but first a word from our sponsors. Today's podcast is sponsored by DUPA. Are you still manually updating your financial models after earnings? Ask yourself why. Every quarter, analysts lose hours copying numbers from filings, adjusting templates, and double-checking for errors. It's tedious, it's timeconuming, and it's a terrible use of your time. Dupa changes that. They automate your model updates with near real-time precision using AI that's been trained on thousands of companies filings across every sector. The result, you get a fully updated model in your format with your logic faster than ever before. Every KPI, every footnote, every guidance figure exactly where you need it with source links built in. So stop wasting times on data entry and start focusing on what really matters, analysis, insights, and alpha generation. DUPA doesn't just save your time, it gives you time back where it matters most. Book a demo with the DUPA team today at dupa.com/demo. That's dupa d a l o p a.comdemo. All right. Hello and welcome to the yet another value podcast. I'm your host Andrew Walker.

It's our binge book club. Today I've got my co-host from The Diff, Byrne Hobart. Byrne, how's it going?

Great.

Byrne, I'm so excited. I've been looking forward to this conversation all month. Warren Buffett retired from Berkshire Hathaway at the beginning of this month. We're recording in May 2025, so I pinged you and said, "We've got to reread The Snowball." I had so much fun rereading it. There were so many interesting thoughts and so much to talk about.

Obviously, we're doing this because he's retired, but there's lots to talk about. I'll just turn it over to you. Rereading The Snowball—I believe we'd both read it before—what jumped out at you overall? Then we can go into the specific discussion points.

Yeah. This is something that I think you had talked about publicly, and it was definitely something I was thinking about, too. When I read it, it was 2008. I was in my early 20s and really interested in the market, so to me, The Snowball was this really fascinating story of a bunch of really good, really clever trades. Periodically, there'd be some boring stuff about him having a wife and kids and their relationship, but it was all an interruption—noise and fluff between reading cool stuff about 10-Ks, warrants, and all that.

Reading it today as a parent, and as someone who's had more life experience, was actually kind of jarring. If you look at a chart of Warren Buffett's net worth, it is this mostly smooth upward curve. If you think of a chart of his personal happiness and life satisfaction, and that of the people around him, I get the impression that it bounced around a lot more.

One of the other things, as you go through the book, is that a lot of people kill themselves. There's a surprising amount of suicide and a surprising amount of personal tragedy of many different kinds. You can't get to your 90s without having witnessed a lot of unfortunate stuff, but I almost read it now as Buffett being partly just one-of-a-kind brilliant and partly a really fortunate survivor of a pretty difficult upbringing. He was also part of a family that had, I think, more than its share of mental health issues.

Maybe you read it differently in retrospect. If you read it in your early 20s—or, like me, read the Lowenstein biography of Buffett in your teens—that's what really got you interested in finance. You read it and want to be compounding your money at a high rate for a long time, owning cool stuff, doing interesting deals, and so on. It feels like what you're actually reading about is just the world making tens of billions of dollars, which is this coping mechanism.

That's a weird way to look at it because you can still respect a lot of the details of what he did. But putting it in that context, it's a darker, sadder story than I thought it would be.

Look, I had a lot of people respond to a note I published a week or so ago getting ready for this, because I was so excited to put my thoughts down. It struck me, and I was surprised by how much the personal stuff affected me. In some ways, I almost felt sad for him. I think in his later years he got a lot better with friendships and stuff, but I had a lot of people respond to that and say, "Look, I'm in finance, and the one thing I've always told myself is that I would happily give away legendary returns like Warren Buffett's. But I've told myself I do not want to be Warren Buffett. I don't want to have that family life. Never be Warren Buffett."

I got that from multiple emails. I was really surprised by it, but I'm sure people don't want to hear us say that we're spot-on about that.

I want to go through lots of different things. One of the first things is that there's so much about him as a kid. You read it and think, "Okay, this guy was a prodigy from the beginning." I don't know if this was a product of the 1950s, or if everyone did this, but when he's 13, he moves to Washington, D.C., with his dad and his family. A businessman in Omaha calls him up and says, "I've got a warehouse full of stuff in D.C. I don't know anyone else but you who can get rid of it. I need you to go down to the warehouse and sell all this stuff."

I might be slightly misremembering the story, but he was 13, and a businessman called him up and said, "Sell everything." Was that a feature of the 1950s, or was Warren Buffett that special? Throughout the book, it's clear that he's super-special from the beginning, but was he that special? I was just shocked by that. Do you have any thoughts on that?

Yeah, I can't tell how much of that is a combination of things. He definitely seems like the 13-year-old you would trust with something like that. It's not crazy to hire a high-school-aged student to run your yard sale. If you have other things to do, then maybe you do that.

I think it also helped that his dad was a congressman. It helped that that's the reason he was going to Washington, D.C., and so his dad had these connections. I think that definitely accelerated things. But the way I look at that is that it probably had a lot to do with the fact that he was able to raise as much money as he did in his mid-20s. I don't think it had a lot to do with what he did with that money or how fast he was able to compound it.

I think there's a version of the Buffett story where he is equally smart and equally driven, and his dad is not a congressman—his dad just remains a stockbroker and is a really right-wing guy who works in finance in a medium-big city in the Midwest. In that story, Buffett probably ends up with a slightly lower net worth but is just as legendary. You just have a slightly different beginning to the story.

That's my guess. I think what that probably speaks to, going back to the family stuff, is that Buffett may have felt some level of guilt about that. He has this very insistent view that he's doing this because he wants to be measured accurately. One of the things that can drive you crazy if you want to be measured accurately for the results of what you did is having something out of your control that's actually really good for you and makes your life better, but that you had nothing to do with.

You could really dig into the psychology and ask, "Would Buffett be more of a centrist or a moderate Republican had he not been reacting to his dad?" I don't think that's necessarily true, but it is interesting to think about the fact that, to some extent, he had this unearned legacy early on, but he was obsessed with actually earning it.

His relationship with his kids was very different. He was actively trying not to help them out with connections and things. There are bits in some of the later chapters where, if Buffett was going to be generous to his kids, he had to launder it through his wife, Katharine Graham, or some other mutual connection. He was incredibly reluctant to write the check directly to the family member who would benefit.

But I think he also just didn't want to be this eccentric rich guy whose eccentricities included having children who lived in poverty while he wasn't helping them even though he could.

He does compromise. We have so much to talk about here. One thing that jumped out at me—and I know it jumped out at you, too—is that Buffett and Munger are both famous for saying, "A string of numbers times 0 is 0."

And they talk about never going to zero. But when I read this—and Buffett’s not the only person whose book I’ve read who does this—I was struck by how close they came to zeroing out a few times in the early days. Obviously, not by the 2000s, really, but in the early days, I was struck by how close they came to zeroing out.

The one that both you and I picked up on was the newspapers, right? If the war at the Buffalo News had gone on for another year instead of ending, you could be looking at something very, very different. There are a few legal rulings that go their way instead of the other way. It’s just really interesting.

Buffett’s not the only one. I remember—it was, I believe, The Cable Cowboy, when you read John Malone’s book. They’re so levered at one point that I think they’re about to miss an interest payment, and then they discover warrants in a company that they had gotten in a merger but didn’t know they had, sitting in a drawer. The company’s stock had gone up 10×, and they’re like, “You know, the day before, we were saying, ‘Oh my God,’ and then we’re saved. There’s a million dollars lying around.”

Every time I reread this, I think Alice Schroeder sensationalized some aspect, so I don’t know how much of it is, “Oh, you know, if the war had dragged on for another year, they just would have raised a little debt.” But I was really surprised by how close it seemed to come to the edge. I’d love to hear your thoughts on that.

Buffett’s career is just insane returns in the early 1950s. He does fudge things a little bit. There’s this part where he’s arguing with his sister about borrowing money, and he says he’d never borrowed more than 25%. But there’s a balance sheet that floats around online from 1951 or something, where he has $15,000 in stocks and, I think, a $5,000 bank loan.

Now, it could be that it’s an incomplete balance sheet, because he might have still had the gas station or the farm or something like that. But it seemed like he was using a little leverage early on. There are bits in the 1970s where Berkshire borrowed money, so there’s some holding-company-level leverage. He had some tough returns in the 1970s, but I don’t think that looked like a threat to the business.

When he bought the Buffalo News, it was a newspaper in a 2-paper town. They had really terrible labor relations. It’s Buffalo, so it was a pretty union town. The newspaper was just bleeding money, and he was tied up in lawsuits.

I don’t have the full progression of the profit and loss statement, but I think the newspaper was close to break-even when they bought it. Then it was losing $1 million a year, then $2 million, then $5 million, and I forget—the losses actually get to $10 million or something. There’s a while where it looks like it’s just a money pit. Then you look at Berkshire’s annual letters from the late 1980s, and the Buffalo News is doing $40 million or $50 million pre-tax. It did work out.

Insurance was another one. If you ask me what industry Warren Buffett is most associated with, and by extension what industry he’s best at, it’s insurance. He did make money on insurance in the aggregate, and certainly Berkshire’s insurance holdings today are great companies.

It looks like the National Indemnity acquisition was this masterful capital-allocation move. Berkshire wasn’t just a textile mill; it was a textile mill with an insurance subsidiary, and that was generating capital. That’s where he bootstrapped the rest of his returns.

But there was also this period where there was a big fraud—the Omni fraud or something—that was costing the insurance company about $10 million right after they bought it, if I remember correctly. Then California workers’ compensation was losing money, and their combined ratio actually looked pretty bad in the mid-1980s. It kind of looks like he liked insurance and was good at picking insurance stocks—GEICO did amazingly well—but the actual insurance operations took a while to get straightened out.

What it really reminded me of was Soros in, I think, The Alchemy of Finance, where he has the trading journal. He talks about his legendary dollar-short trade, but at some point he makes an offhand remark—because he’s writing this in real time and doesn’t know what he’ll be famous for later—that his lifetime P&L in foreign-exchange trading is negative.

He was making these massive bets that he’s now synonymous with in a place where he had actually lost money over time. So I thought it was interesting that if you’d looked at Buffett in maybe the early 1980s, you could have said, “Really good stock trader, also an insurance hobbyist, and we’ll see how that last one goes.”

No, look, they even make a joke because he buys General Re in the late 1990s or early 2000s, and it’s instantly a disaster. Alice Schroeder says that every insurance company he’s ever owned falls off into the ditch as soon as he buys it. Then he buys General Re, and they’re like, “Get the tow truck ready.” So he jokes about that.

It’s just funny again in hindsight: a brilliant move, an association with insurance, the float, and everything. But in the moment, in the 1970s with the Omni fraud, he buys it, and you’re like, “Could National Indemnity be the thing that ends up saving Berkshire?” Maybe she’s sensationalizing, but it could have brought them down at the time.

Let me ask a few questions here. Buffett starts the partnership, I believe famously, with 7 partners, around $250,000 plus $100 from him, and he keeps a personal account on the side, right? There are 2 interesting things about that. First, he’s not eating his own cooking, right? With the benefit of hindsight, people say, “Oh, he knew he was going to be so successful. His fees were going to be growing so much. He never wants to withdraw from the partnership, so all of his personal accounts are outside it so he can earn.”

But he’s trading his personal account and the partnership. The other interesting thing is that, at the time, there wasn’t a hedge-fund structure, right? He’s setting up dozens of different partnerships. When he rolls them all together, the book makes an offhand comment that he brings his personal account into the partnership. I thought that was very interesting.

The way he started goes against the eat-your-own-cooking rule. It’s a little shady to me. I always find it a little suspicious when someone says, “Oh, yeah, I trade my own personal account alongside the fund manager.” It’s like, “Why don’t you just have your money in the fund?” But it goes against the image. I have lots of thoughts on that, but I’d love to hear what you think.

The usual optimal path that a lot of people who are managing money are going for is, “I’m going to manage money. I’m going to get performance fees as well as management fees. Over time, since I can control how much capital is in that fund, more of it will be mine. I’ll figure out what things can scale massively, and those go in the fund. Maybe when I have my own pool of capital, I’ll find the things that don’t scale but do produce higher returns, and I’ll do those on my own.”

Over time, if you do this really well, you can end up with your fund—your internal capital—kind of swallowing the outside capital. RenTech is the classic example. They were running outside money, but by the early 2000s, they were at capacity and were just cashing everyone out continuously. Then they were managing their own money.

We’ll talk about Long-Term Capital Management later, but in the book, Long-Term Capital Management has the RenTech thing. They’re almost the same. I think RenTech comes along alongside them, but they’re like RenTech: their returns are so good that they’re saying, “Hey, outside partner, here’s all your money back.”

Then, 2 months later, they’re like, “Oh, that was a mistake. We wish we hadn’t.” So, I think the charitable read on this is that when Buffett raised the very first fund—it was $100,000—he had put in his $100, and he personally had $170,000 or something at that time. He had already achieved the dream of having more of his personal money than outside money.

He starts with that and is able to raise money pretty fast. This is another thing where, rereading it and thinking from the perspective of having talked to people who raised money—and having raised money for things—he has a strategy. He’s trying to gather assets, and he’s still able to put up monster returns, but he is gathering assets.

Can I just jump in? The book, when you’re rereading it, shows that he is driven to raise money. It mentions that he goes over to one of his neighbors so much that his neighbors pretend not to be home. He ends up having a joke where he has somebody onstage and mentions that that might have been the night they were born or something.

He is going to people and showing them what he can do. He is hustling; he is burning leather to sell to people and raise money.

I think what he could have thought was, “Okay, I’m going to raise money, and I should do the larger, more liquid things in that vehicle.”

And then there’s other stuff that will be fun, but it’s definitely not going to scale. It’s the kind of thing where, if you’re making 50% a year in your personal account—which seems like the number he was doing at that time—you need to increase the capacity of your strategy by 50% a year in order to keep up with things. But if you have $100,000 in outside capital, and the next year it’s $500,000, and then the next year it’s $2 million, you can’t have your strategy completely change every time you get a new LP check.

So I think he was putting the stuff that he knew would scale into that vehicle and then doing the non-scalable stuff, because he talks about things like these uranium penny stocks. I’m actually kind of curious about what the value was like. What was the residual value? Why was it like shooting fish in a barrel when he bought these former promotions? Was it just that these companies had raised a bunch of money to do uranium mining? They traded for less than net cash, but he knew that the cash would be returned somehow. Were they liquidating? Who knows?

Anyway, he’s doing non-scalable, weird stuff. And then the scalable stuff—or, as you mentioned in your newsletter, the things that actually require scale—he’s doing in the partnership. You had mentioned this, which I thought was interesting: a lot of his early stuff was actually pretty activist-flavored.

So, yes, he finds Sanborn Map. It has some cash flow, but it’s a dying business, and they have financial assets that are more valuable than their stock price. The stock trades at $45, and they have $65 a share in bonds and other securities. So he gets on the board and basically forces them to liquidate. He has Dempster Mill, where he then takes over the whole company and brings in someone to basically partially liquidate it.

For those kinds of things, you wouldn’t want to find yourself in a position—especially if you’re somewhat risk-conscious or risk-averse—where you realize you put two-thirds of your personal account into some company, enough to get a board seat, but you realize that one board seat is not going to get you what you want. Now you have most of your net worth in a company that is just driving you insane but also isn’t going to perform. So maybe it does make sense that he’d do that kind of thing in a vehicle where he knows he can raise enough capital to have the influence he wants.

I’m also curious because the book doesn’t talk a lot about bread-and-butter trades. You have these great case studies, but we don’t have just the ordinary examples. It mentions that he had a couple million dollars’ worth of Pure Oil or a steel company, but it doesn’t say, “He bought this company, the stock went up 50%, and he sold.” I’ve heard that the distribution of returns for a lot of the deep-value stuff he was doing was that most of the stocks wouldn’t move for years, but in any given year, one of them would go up 5× because someone finally bought it and it was just absurdly cheap.

There is that book Buffett’s Early Investments, which I think actually has case studies. It has full income statements and balance sheets for a decade-plus for the companies he invested in. It does give some details on things like that, but I wish we had more.

One takeaway I had reading this—and I mentioned it in the newsletter, so you saw it, but I very much picked up on this—was that the investments they focus on in The Snowball tend to be his big winners. I think this is because they’re also his big winners, but they tend to be before the 1980s, when he obviously has much more capital: either control situations, like Sanborn Map and Dempster Mill, where he goes and buys a cigar butt and generally takes control, or maybe activism that gets them to liquidate.

The big winners for Buffett are either cigar butt plus control or distress. All of the big winners they mention in the book involve distress. Famously, there’s AmEx and the salad-oil scandal, but when he does GEICO in the 1970s, GEICO is literally on death’s door. When he does WPO—I forgot about this—WPO stock gets cut by two-thirds because of Watergate and the market’s in a big drawdown. They do the Watergate papers, and then their Florida broadcast-station licenses are getting threatened.

The union stuff, too. There’s union trouble, strikes, things like that. He’s buying, and Katharine Graham, I think, is seeing him, and she’s just come off a 24-hour shift of publishing the paper. Even Coke in the 1980s, when he finally makes the investment, is having issues with its bottlers, if I remember correctly. So they’re kind of getting hit because of bottlers.

There’s obviously lots of other stuff, but the 2 through-lines I was taking away—and I’m thinking about writing a post saying, “Hey, if you’re looking at early Buffett, everybody thinks of the super-deep-value stuff that you mentioned, and he has great returns there, I’m sure. But where the needle really moves, if you believe this book—and I think if you read his previous letters around that time—is in the control situations, like Sanborn Map, where he puts big positions in, and in the super-distressed stuff, where he knows he can serve as his own catalyst.”

That’s one takeaway I’m really thinking about in my personal life: Why am I following the Buffett of the 2000s, like compounders—even the big tech stuff? Shouldn’t it be much more cigar butts plus control, corporate-governance moves, or waiting around for super-distress in a company, not the market overall? I’ll pause there and let you say anything.

Yeah, no, I think that’s exactly right. It is funny you mentioned the question of whether you should just be investing today like Buffett does today or like Buffett did in the 1950s. I had just noticed last night that there was a company in which I had actually owned shares because it was a classic Ben Graham net-net. It was literally trading at less than net cash, but it was profitable. The reason it was trading at less than net cash was that it had dual-class stock, and the management team was obviously just not interested in returning capital to shareholders.

I looked last night, and the stock was up 300% from where I owned it and up 200% from where I sold it. I missed out on a lot of those gains. It turns out they did do a buyback at some point.

But I think when he started doing that kind of investing, you actually had a really good case for why a ton of companies would be massively undervalued. Nobody went to Wall Street from roughly 1930 to 1950. It was either the Great Depression, so they were getting a government job or working at a big corporation that was safe; or it was 1940 to 1945, and they were fighting a war; or it was immediately after that, when a lot of the most ambitious people were going to college because the GI Bill meant they could actually afford it.

So it’s only in the late 1940s and early 1950s that you actually have some organic reason that young people would be working in finance. Every company is being run and evaluated by people who got the job in 1930 or earlier and held on and survived. What those people know is that the Dow can basically never go above 380. You never want to buy growth, and you always want companies to have tons of cash on hand. You don’t want them to run out of money. Bonds typically do great. I guess they’d had some inflationary episodes, like during the Second World War, so maybe they weren’t just in love with bonds.

A lot of people were totally shell-shocked by this long experience of not making any money, and valuations just get really dislocated, especially if a company is growing and the stock price is not growing with it. You can get a lot of multiple compression if you’ve got 20 years of growth and no market movement, however overpriced it was when that period started. There were a lot of reasons you would expect pretty normal, well-run companies to be trading at deeply discounted valuations.

I think today, when you find those companies, there’s always a good reason. The reason is either some combination of management being terrible, some big legal off-balance-sheet liability, or the fact that it’s in Japan. Japan actually has the same dynamic: Why would you go into finance? There’s a long period where it just doesn’t make sense for anyone who’s ambitious in Japan to select into the financial industry, and things end up getting weirdly cheap and somewhat dislocated.

So if you’re doing classic Buffett-style stuff—classic 1950s Buffett-style stuff—you’re probably not doing it in U.S. markets. I’m sure you can find some really weird stuff in emerging or frontier markets, too, and you’re taking some risks that I think 20-something Warren Buffett would not have taken. On the other hand, maybe you actually do have more room for massive upside in a scenario like that.

Just following up on one thing that strikes me when you read this: Buffett doesn’t invest internationally, right? He buys Guinness in the 1980s and 1990s, but he doesn’t invest internationally until PetroChina in the mid-2000s. He sells it in 2008, and by the way, go look at a chart of PetroChina from 2008 to today. I mean, he almost top-ticked the sale. It’s been a disaster since then, if I remember. But I’m with you; it is interesting. I’ve thought a lot before: Would a young Warren Buffett focus only on foreign stocks because there’s a lot of inefficiency?

You obviously widen your net quite a bit. You can find a lot of weird things, and a lot of them might have quirky exchanges where you can do some of the things from the ’50s and ’60s that you forget about. He was burning down the phones, doing pink-sheet stocks and stuff, to the extent that we don't have that anymore.

Things change a lot, but I have wondered: would Warren Buffett do that? One of the reasons I always worry about foreign stocks—you don't have to worry about this so much with Japan, but, man, you go start buying African stocks or Kazakhstan stocks, or wherever you want to say, and there is a real go-to-zero risk because the policy changes. You are an American who owns a sheet of paper, and someone with a gun says, “Hey, come over here and try and claim it if you want.”

I don't know if Buffett takes that risk. He so favors the rule of law. It's just a thought that I've had.

Yeah, I don't know. It's interesting to think of the counterfactuals, because maybe he just decides—maybe Buffett, born in the mid-’80s, decides he's going to take that risk. He's going to run with more diversification, and if the geopolitical situation gets bad in every single country all at once, then the last thing you're thinking about is your portfolio. Maybe you take that kind of attitude toward it.

But I think the other possibility is that a more modern Buffett is just more of a classic Wall Street guy. This is something that I found funny reading the book: Buffett is this sort of all-American stock picker—read the Journal, talk to smart people, read the 10-K kind of guy—in the text of the book. Then, in the footnotes, he's a little bit sharper.

He's doing things like selling options on his positions—these continuously rolling covered calls on some of his positions—or calling up pension funds and endowment funds and trying to borrow directly from them instead of borrowing through his broker in order to get a cheaper borrow.

There's this weird anecdote where there's the famous story of the cocoa futures arbitrage. There's a chocolate company that owns a bunch of cocoa, and the value of the cocoa exceeds its share price. It's controlled by Jay Pritzker, and he realizes that there's this tax-code loophole—just a feature of the tax code—where, if you're liquidating a company, the shareholders don't pay taxes.

He liquidates the company by buying back shares in exchange for warehouse receipts. There's this famous two-sided anecdote of what Buffett was doing for Graham at the time. What he does for Graham is buy the shares, redeem them for warehouse receipts, repeat. They sell the warehouse receipts, repeat.

What he does for himself is just buy the stock, because every time more cocoa warehouse receipts get exchanged for shares, the cocoa per share actually goes up. You actually just want to be long the underlying. I don't know if he shorted cocoa futures or not, but in the footnotes it says that he actually ended up with his position because Graham-Newman had put in an order. They had gotten the stock, and they had DK'd it, so they had told their broker they did not actually intend to buy this. Then Buffett bought it for himself, I think from the firm or something.

Yeah, they—I mean, I think their risk management was partly around not putting themselves in a position where they had to say that this was actually an accidental, erroneous order from them. But anyway, at that time, there were literally messengers on bicycles bringing the stock certificates from one office to another office.

I think it's entirely possible that, in that case, you might put in the order, someone didn't write it down somewhere, and they do the order a second time. Then they get both that afternoon and realize, “Oops, we accidentally bought more than we intended,” and Buffett comes in and says, “Okay, I'll take it.” So, yeah, that seems fine, right? That seems fine.

Yeah. No, it seemed funny, but it also just—if you were talking to someone today and they had this great story about the money they made that started with a paperwork or administrative mistake at the firm they worked for, where they took the other side of the trade from the firm they worked for, you don't think, “Okay, this person is completely unethical,” but I think—

No, you'd be like, “You're ready to go spend 6 months in jail.”

No. Yeah, you'd be like, “I think you're extremely aggressive,” and I'm not just impressed with the capital gain on this one. I'm impressed that you even considered doing that.

But there are these other anecdotes in the book where it's clearly a very different time. There's that scene where he owns shares of a streetcar company—or a streetcar or bus company, I think—and it's trading at less than net cash. He talks to the CEO, and the CEO basically tells him, “We are going to do a special dividend, and it's going to be for more than the current share price.” At the time, it was totally normal and accepted that you would trade on things like that.

Now, of course, one of the reasons he keeps Berkshire is that he goes and negotiates. I think it's Seabury Stanton, the CEO. Buffett says, “Hey, you've got to buy back shares,” and Stanton's like, “Yep, $11.50. We'll do the tender; put it in the Journal tomorrow.” Then he does $11⅜.

Buffett is so incensed that a CEO would lie to him about material nonpublic information that he holds on to his shares.

Yes, yes, yes.

No, you know, it is funny. I do think, rereading this, Alice is very much in Buffett's pocket, but she gives him a very favorable read. Every time a regulator comes after him, it's a corrupt regulator or a bad regulator. He comes off looking very scot-free on some things where I think an impartial observer might be less forgiving.

The cocoa trade is one. She's like, “Oh, Graham makes his arbitrage profits, but Buffett makes 5× in the stock.” Look, good trade, good call backing Pritzker. But I will tell you, I have done a lot of tender offers, and every time a company does a, “Hey, we're buying back 25% of our stock. None of our directors and insiders are tendering,” I'm always like, “Oh, they want to be greedy. Let's be alongside them.”

The history is a lot more fraught with, “Hey, they did the tender, and 5 years later the stock is down 90% and all the directors are fired.” You're taking risk that wasn't there in the arbitrage.

There's an observation—I think it might be Peter Thiel— that if you listed the biggest U.S. investment banks and ranked them by employee equity ownership, Bear Stearns had the highest insider ownership. They died first. Then it was Lehman Brothers; they died next. I forget what the ordering is for Goldman Sachs versus Morgan Stanley. I would assume Goldman was higher because they had been a partnership until 1999, but I don't know for sure. They both survived.

What you were actually looking at was not just management being aligned with your interests. It was also that these companies promoted people who were really good at making a ton of money, and they did not promote people who were really, really good at managing risk quite as aggressively.

All it takes is a little bit more selection for risk-taking versus risk management, and you end up with companies where they do have high employee equity ownership. The company's massively levered. The employees who own that stock are also massively personally levered. You are aligned with them, except that you're aligned with someone who's a little bit crazy.

If you are in the car with someone and they are drunk and also speeding, your incentives and theirs are perfectly aligned. You are both equally dead in the event the car crashes, but also you're in a car that is probably going to crash.

Speaking of crazy driving, the 3 through lines of the book to me are, A, Buffett's unique genius. There's no denying that right off the bat; it's coming through. B, his relationship to women. There's a lot of stuff about his wife, Astrid, and a lot of others. He's got a pretty complex relationship to women.

The third one that surprised me—and it's surprising for such a cautious risk-taker throughout the book—is that Buffett is a really crazy driver. You get in there and kind of take your life in your own hands, and it cracked me up consistently. Buffett owns GEICO, he's cautious in all aspects of his life, and people are like, “You get in the car”—even though he's never been in a wreck, you're just holding on, thinking, “Oh, my God.”

Buffett even says, “I drive so slow that even if I get in a wreck, things will probably be okay.”

Yeah, yeah. It's weird. Sometimes you look at someone's behavior—their professional behavior—and it's this perfect reflection of their personal life, and sometimes you realize people compartmentalize.

If someone is just inwardly torn between being a cautious, very actuarial kind of risk underwriter—yes, they'll take risks, but only when paid well, and they won't take existential risks—

Maybe if you don't naturally have that attitude, it drives you a little bit crazy, and you have no choice but to go a little bit more above the speed limit.

Let me switch. One of the biggest later sections in the book is his investment and then entanglement with—is it Salomon?

Yeah, I always hear Salomon.

Yeah. For those who don't know, he makes an investment in preferred stock. A consistent theme in Warren Buffett's career is getting off-market deals and kind of getting into a little bit of trouble where he thinks, “Oh, the preferred protects you.” Everyone falls for it, but he makes the preferred deal.

Salomon has—basically, we can dive into it. Basically, they rig some Treasury auctions. Let's call it that; that's a simplification. They're about to get sanctioned by the Treasury. Buffett steps in as chairman, and his reputation, his pleading, his politicking saves the bank, right? That's the story.

Now, what's interesting to me is, when you read the book, the way I've always framed it is, “Oh my God, they were on the brink, and he came in and his reputation saved them.” But when you read the story, it's like, hey, Salomon's stock goes from 38 at the peak to 22 at the lows. I thought that was interesting for 2 reasons.

Number 1, that doesn't quite scream distress to me, right? I will point you to the regional banking crisis of 2003. A lot of banks go from 80 to 8, and their stocks are back to 80 now, right? Drexel completely blew up in that period.

I think there are good reasons that Buffett would not have said, “Yeah, I'm going to buy a massive slug of Drexel preferred, and I stand by everything this firm does.” Drexel is—I like, if you go back and read about Drexel, Drexel is sort of like, I don't know, if B. Riley or someone of that tier became the 3rd-biggest investment bank in the U.S.

I'm picking on B. Riley in part because I'm more familiar with them and have looked at a bunch of the deals they've done on the long and short side of various things in their extended portfolio. But it's like the companies where they are extremely high-agency. They think of themselves as principals rather than agents. They're doing pretty much any deal they look at; they can find a way to be involved in that deal.

Salomon was not that. Salomon was this classic bond house. They're getting into investment banking and equities, and that's part of what—there's that weird line where it talks about how Buffett liked the trading and market-making business. He did not like the investment-banking business.

Yeah, he likes the stuff where they're actually putting risk on the books and trading and turning their counterparties' portfolios, I guess. He doesn't like the part that is actually infinite ROE, basically, because you don't have any real capital costs; you just have personnel and a purely reputation-based business.

No one—you know, Salomon is not—they had some advantages in market-making, where they probably get the first call if there's a big trade to be done, but reputation matters a lot more in investment banking.

I would have thought, just based on stereotypes, that Buffett would be excited about the asset-light business with the very flexible cost structure, where if there's not a lot of investment banking that year, a lot of managing directors don't get very good bonuses. That means you're still probably able to earn a profit.

Then, with the trading business, I would have thought this would be the most anti-Buffett thing imaginable: a bunch of guys doing weird on-the-run/off-the-run arbitrages. But then you find out that, yeah, he's actually aware of that trade. When he does the LTCM bailout, or when he thinks about doing it, he knows what a lot of those trades are and actually has a pretty good understanding of how they would work.

I want to come to LTCM in a second, but let me finish my point on Salomon. I was surprised because it takes up such a big piece of the book. My story with them, again, is that the stock goes from 38 to 22.

A lot of stocks in the GFC go from 38 to 22, and then they open over a weekend and open at 0 on Monday. But the book portrays it as Salomon is on death's door. They're not going to be able to roll their funding, all this sort of stuff.

The stock price and some of the other stuff—when I'm reading it, it wasn't feeling like that. Do you think this was a case where the legend has grown? In the moment, do you think there was actually a risk of 0 here?

I think it's really hard to say. It's possible—entirely possible—that the stock should have been at 2, and people should have been pricing it as, “This company needs a rescue, or it's going to die.” But Salomon, as a trading firm run by traders, it's not like John Gutfreund is going to call up someone at Goldman and say, “Hey, we're actually about to die, and I'd like to do a trade with you. Can you make me a market in X?” Of course, you're not going to get a very good quote there.

There is that anecdote—I forget if it's in the book—where Charlie Munger at one point mentioned that the Salomon balance sheet did not actually balance. There was a plug.

No, I did not—or maybe it's a footnote I didn't read.

I've seen some reference to this somewhere, where Salomon was not actually able to balance the books. They were not actually able to get the numbers on the balance sheet to sum up correctly, and they just had some variable—some plug—for, “We're not sure what this is, but we can't account for the gap.”

I mean, that feels like FTX-style stuff. Could you imagine that at an investment bank today?

I can't imagine it at an investment bank today. On the other hand, given how many people work in the back office, you would think it's clearly not just this trivial thing. You don't just hit F9 and know exactly what Goldman's P&L for the day was.

There's got to be a process. There's got to be things that roll up to whatever the final answer is. When a lot of your process is still paper-driven, where people are making phone calls and then jotting down on a notepad what it is that they said they bought, it is entirely possible for there to be discrepancies that just get missed at some point. Then you can't rewind, and you don't know what the missing number is.

Putting all of that together, it's possible that part of the reason Buffett needed to be there was that Salomon actually needed to admit to shareholders that things were a lot worse than they had been letting on, and they weren't able to do that if just admitting it would mean they couldn't actually roll over their funding and were going to die.

They needed Buffett to be in the room, staking his reputation and implicitly staking some of his balance sheet—or more of his balance sheet—in order to say that, yeah, they had worse problems than people thought. On the other hand, they were addressing them, and they thought they were going to survive.

The problems were worse, and I think I ultimately come to where you are: I think the market was sleeping at the wheel versus the internal panic and turmoil. The bank probably would shut down, but it was just surprising when I looked at that and they said, “Oh, it was a rough night. People didn't know if the bank was going to open its branches on Monday or not.” The stock started at 38 at the beginning of the year, and at this time it was trading at 22. I'm like, one of these 2 is not like the other. If you said 220, I'd be like, “Okay, that makes sense.”

LTCM—I thought the LTCM story was interesting. Again, it's another one. Obviously, now LTCM was a huge crisis. It paves the way for lots of bailouts later in the future.

Did I just lose your video? There we go. It paves the way for lots of bailouts in the future and everything. I thought Buffett's role in this was interesting. For those who don't know, Buffett is about to do a private bailout of LTCM.

Basically, he's out of phone range. They draft the bailout incorrectly, and because they can't get back in touch with him, his bailout can't go through in time for the markets to open. So they have to go with the Fed bailout.

Buffett later says that it was the greatest missed opportunity of his career, right? That was surprising to me. Am I missing something? In my mind, it was a bunch of depressed stocks. Yes, lots of leverage and stuff, but basically he was buying them at a little bit of a discount.

I mean, versus buying, I'll throw one out, Walmart in the 1970s—this was the biggest missed opportunity. Was that hyperbole, or did I just kind of miss something there?

My understanding is—and I don't know if I have all the numbers handy—but LTCM, right before they fell apart, had something like 4 billion in equity supporting 100 billion-plus in assets. That gets wiped out to something like 200 million in equity.

I think they say something like it was 500 million, and Buffett would have bought it for 250 million, or something like that was kind of where it—

Yeah.

A lot of the trades they had on were on-the-run versus off-the-run Treasuries. They did have some stuff that was just a straight bet on equity vol, but actually, I feel like if there's any balance sheet on which you'd be willing to carry a position that was just, “I'm going to be massively short VIX because VIX is at 70,” it would be theirs. I don't think they really had VIX at the time, or they had a different calculation.

If you’re going to ask who has the balance sheet to go massively directionally short VIX when the VIX is insanely, unsustainably high—when markets cannot be that volatile—I think every 17 points on the VIX implies the S&P moves plus or minus 1% on the day. About right. Yes, if you’re at a 60–70 VIX, you’re saying the average daily volatility of U.S. large-cap equities is 4%. Yeah, which is just—of course you should bet against that.

But of course, any time you have the opportunity to take a very juicy, direct short position in the VIX, you’ve got to ask yourself: Would I have shorted the VIX at 45 right ahead of Lehman weekend and then gotten blown out when it hit 80?

But Buffett could have done it. He knew what the size of the trade was, and he knew a lot of these other trades. I’m sure he had been aware of things like the Royal Dutch versus Shell arbitrage, which also got blown way out because a lot of relative-value funds were all in that trade, as well as other trades.

So I think what he probably assumed was that maybe $1 billion of LTCM’s mark-to-market loss came from actually making some bad trades. They should have run with less risk, and they would still have had decent overall returns, but not quite shoot-the-lights-out returns. But the next $2.5 or $3 billion in losses came from every counterparty knowing that LTCM was going under.

Everyone who has a relative-value desk tells them, “Look, you and I know these are good trades. They’re going to be much better trades in a week. Let’s take them off and put them back on when LTCM actually blows up.” So he could have been betting on just this instantaneous snapback.

And as far as I know, wasn’t it an incredibly profitable bailout, now that you say it? Again, these are publicly traded securities, right? In my mind, I was thinking $250 million, but you’re probably right: It was $2.5 billion that had come down to $500 million. He was going to buy it for $250 million, and then just the snapback.

As LTCM kept telling people, these would work in the long run. Most of these are real relative-value trades, so that $250 million, as you say—the math was like $160 billion of assets probably turns into $5 billion over 1 to 2 years. So, yeah, it does make sense.

Yeah. As far as I know, there aren’t really LTCM trades that were simply the wrong side to bet on. There are LTCM trades—at least at the time that they collapsed—where you wouldn’t have wanted to do them in that size, and where it makes sense that you could get margin-called, especially if you’re this huge participant and you’ve been pushing around your counterparties for a long time.

But a lot of that convergence stuff—the convergence actually happened. Italian rates did converge more with German rates. And of course, if you hold an on-the-run versus off-the-run arbitrage until the next auction, then you have an off-the-run versus on-the-run arbitrage. As long as you don’t get completely destroyed on slippage and other transaction costs, you’re going to be fine on that trade.

So I think he could have looked at that and just said, “Okay, what is the actual maximum that Berkshire could lose? And how fast does this bounce back if that doesn’t happen?” There’s a possible world where Berkshire just gets an instant, roughly $3 billion markup, and then 2 years later they have liquidated all the LTCM strategies and realized another couple billion because the strategies actually did work pretty well.

So The Snowball ends. It’s released in late 2008, I want to say. The book basically ends as the financial crisis is starting, right? Even in the book, they say, “Hey, this is much more reporting than actual storytelling. What we’re telling you here—we’re just reporting the facts.” Buffett is making a lot of preferred investments, and the book just ends.

One thing I was thinking about while reading about LTCM, and particularly the Salomon Brothers episode—you know, at Salomon Brothers, when he’s there, he’s literally in the room overnight, where he’s like, “If Japan opens, we might not have funding, and this bank might go under.” And he does not cover himself. He does very well in the crisis.

But I wonder if one of the reasons he does very well, while a lot of his peers are imploding spectacularly, is because he was in the room for both Salomon and, when he was advising governments, he was in the room for LTCM. So he kind of knows how to get that done, too. I wonder if those previous experiences were actually really formative in helping him guide through that, when plenty of people blow up in the global financial crisis.

Do you have any thoughts on that? Is that just mystifying the man too much, or do you think that experience actually helped?

No, I think it absolutely does. As a rule of thumb, in a financial hierarchy—in a financial institution’s hierarchy—you probably want the org chart to have some kind of seniority-based mechanism. You want to make sure that people are reporting to someone who has seen 1 more crisis than they have. The pace at which you can promote people is partly a function of how many near-death experiences the financial system has.

You want people who remember 2008. Most of us remember spring 2020, but that will be increasingly untrue with the passage of time. You want people to remember the crisis, but you also want people to remember what it was like talking to a subprime CDO bull in mid-2007, where you’re pointing out all the bad things that are going on, the fundamentals seem really deteriorating, and they say, “Well, look at my model. These are all uncorrelated; they can’t really default all at once,” which I think also turned out to be largely true.

Part of what you are getting from that is thinking about the dimensionality—thinking about how it is actually a pretty safe asset for a reason. However, you can get margin calls, and if everyone who owns this is levered 30-to-1 and it’s all overnight funding, you can still lose money on that very, very correct directional trade.

I think part of the reason that Buffett was in a really good position was that he seems to get pretty nervous when markets are doing well, when volatility is low, and when the macro situation is benign. He doesn’t feel like that is just full steam ahead; he feels like that is when problems start brewing. So he does come to crises with a lot of cash.

People love to talk about Buffett’s history of market timing. And even when Buffett retired this month, you heard a lot of uber-bears saying, “The greatest market timer in the world is retiring. If that’s not a sign this is a top, I don’t know what is.” I was kind of like, “Okay, guys, come on. The man is approaching his mid-90s. I think this might be more health- and everything-related.”

But when you read this book, you do think, “Oh, he is very good at the market-timing thing.” It’s not like he’s the best in history, though. When you were reading this book, were you thinking, “Man, this guy is really good at timing market cycles,” versus, “Man, this guy is great at picking stocks”?

There are some bad market-cycle-timing calls, too. I’ll follow up with a question after that, but I’d be interested.

Yeah. He gets some of the timing and macro stuff really, really right. I think shutting down your equities-focused investment vehicle in 1969 is just a masterpiece of market timing. But then he does have a pretty substantial net-worth drawdown in the 1970s because he started buying a little bit earlier than maybe the optimal time to buy.

But he also kept buying, and I think if you read some of his early-1980s letters, he’s more worried about inflation than turned out to be prudent. He’s still talking about inflation and how it eats your returns, and how this is why you want to own capital-light businesses that generate lots of cash flow.

He talks about inflation in the context of insurance, where you write a policy and, when you’re actually paying to fix someone’s car, you’re paying—CPI is at 15% since then—you’re paying a lot more. You can easily go from a profitable combined ratio to spending a lot of money to get this capital.

I think there are 2 pieces to the market timing. One is that if you are selective, buy stuff when it’s cheap, and also sell things when they get rich, you are going to be—if you do that well—just naturally timing the market somewhat. There are way more stocks you can buy at an 8× P/E that are good companies when it’s March 2009 than when it’s the end of 2019 or 3 months ago. So in that sense, you get some natural market timing.

But I also get the impression that he thinks about market dynamics more than maybe a lot of value purists would like to think. You had alluded to this earlier in talking about exchange-traded versus pink-sheets-traded things.

I love the anecdote, just because one of the questions I always ask myself when I’m reading a biography of someone really successful is: What does their day actually look like? The book actually has a nice day in the life of Warren Buffett.

And so you actually get that. But I had wondered: What was it like in the Buffett partnership days? How much of his time was he spending reading? How much was he spending talking to experts? What I had assumed from the Lowenstein biography was that every so often he called up his broker and said, “I’d like you to start accumulating stock X.” Then it turns out that, no, he was actually calling up market makers and saying, “I want to buy it, but I’m not paying any more than $4.50.”

And then they call back, and I knew exactly what was happening. In one sense, he calls them—he calls up the market makers. These are pink sheets, so they trade very thinly, and he says, “I want to buy at $4.50 per share.” They say, “We’ll call you back,” and they call their guy. The guy says, “I don’t know,” and then a week later they say, “We got him. He’s going to do $4.50.” Buffett says, “Nope, $4.25 now.” Buffett keeps walking people down.

The honorable person in me and the trader in me—when I make a bid to someone, I have to stand firm by that. I was thinking, I don’t know if the Warren Buffett of the 2010s is going around retrading on people like this. So I was surprised by both sides of it—both surprised and not surprised.

Yeah, I wonder about that. I don’t think we get any blow-by-blow descriptions of the preferred deal. I think there is this sort of social contract where, when a financially threatened company does get a bailout, it’s sometimes impolite to talk about how close things were and how aggressively the rescue package was able to be priced. I do wonder if Buffett had negotiated his deal with GE, they were all ready to go and ready for the signature, and he was looking at the final version and said, “Oh, by the way, I want my stock to convert at a 20% cheaper price,” or something. I could imagine something like that happening. Or, “Hey guys, you put 6% interest there. It was 9%. You got the number upside down.”

If you do that kind of thing, you can only get away with it under certain circumstances. That was something I was thinking when I was reading that anecdote about how he’s constantly lowering his bid. How did he get people to keep answering his calls? When the market makers got the call and heard on the other end of the line, “Hey, it’s Warren,” were they immediately rolling their eyes and saying, “Okay, I’m about to spend hours of work to get zero commission”? Or were they saying, “Hey, it’s my buddy Warren. I want to trade with this guy”? I don’t know which it was, but I felt like I couldn’t get away with constantly chiseling people on every single transaction and still get them to trade with me.

Some of that is unrealistic, but some of that is just temperamentally—I’m not really willing to constantly walk back things that I said. But if you do that and actually know that you can get it—if you’re highly confident that holding out for $3.78 instead of paying $4.50 will work—that means you actually have some sense of the really granular psychology of how someone who does want to sell, who did answer the market maker and did say they wanted to sell, will react as the price keeps ticking down. At what point do they puke? At what point do they give up and decide to hold?

If you’re good at that kind of thing and if that’s how you generate some of your alpha, then I assume that you’re also reasonably good at looking—it’s probably not looking at a chart of the S&P, but probably reading the front page of the Wall Street Journal and just getting the vibe: people are overpaying, they’re getting sloppy, they’re not thinking right; I’m going to be more in cash. Then you read the Wall Street Journal a year later and you’re like, “Everyone thinks that the financial system is ending, but I can do the math and see that these companies are not going to get wiped out.” Or, “I have enough friends in Washington, and I know how Washington works. I know that we’re not going to allow our banking system to be totally insolvent, wipe every bank out, and zero the shareholders.”

On the pink-sheet stuff, I do think one interesting thing is that we think about it in modern terms. In the ’60s, I think Buffett understood that a lot of these shares had been held by families for 20, 30, 40 years. They make clear with some of them—I think it was Dempster Mill; I can’t remember the specific one—that people had bought these things and held them for 50 years with no return. If you just offered to get them out—even the people who were getting out—I think Buffett was also very familiar with the psychology: “Hey, if I lob in a $4.50 bid and then, after a week, they come back and say, ‘Okay, we’ll hit it,’ these people have mentally decided to sell this position, so I can keep chiseling them down, chiseling them down.”

One last thing I wanted to mention: you actually mentioned it in the ’80s. He’s bearish on the dollar. One of the through lines of the book is that his father is bearish on America leaving the gold standard. His uncle is literally building shelters and saying, “Hey, I’m going to have everything in gold so that, when the dollar’s worthless, my family can get out of it.” They had to change the will so that they could get out of gold. Graham’s bearish, and Buffett manages to overcome that. He launches a partnership despite both Graham and his father telling him not to.

But he is consistently bearish on inflation and the dollar throughout the book. He’s bearish in the ’80s. The book ends right before the financial crisis, with the Sun Valley stuff, and Buffett is telling people the dollar is going down and that the trade deficits are the issue. That’s in the early 2000s, and guess what? The dollar actually goes down a little bit over the next few years, but today it’s higher than it was in the early 2000s. The deficit obviously ballooned. So maybe he’s 20 years early, but he’s been bearish on these things for 40 years, and it’s just interesting to see this.

I just thought it was interesting that he could invest successfully despite that. I’ve got plenty of friends who’ve been bearish since 2008. This is an economy that lives on cotton candy. Buffett manages to separate the two. I thought those were interesting. I’d love to get your last thoughts on that.

Yeah. I think in one sense, if you’ve got a market with however many thousand listed companies and you’re usually long 5 to 10 of them, then in one sense you are basically bearish on almost everything, and then you’ve found this handful of exceptions. A lot of the exceptions do make sense in light of that bearishness. So I guess GEICO does have just general exposure to inflation, but it also had a better cost structure. He assumed that insurance isn’t going away, but inflation could be pretty bad. You just want to own the insurance company with the structurally lowest cost you can.

Coca-Cola obviously is very much an inflation bet, or it’s very much a bet that makes sense for someone who’s worried about inflation: You’ll continue to get the markup on your corn syrup regardless of what the dollar does, and it’s also a globally diversified business. So in some ways he was taking—this goes back to the debate we’ve had throughout this call—is he actually a riverboat gambler who will bet his last chip and actually win, or is he someone who’s just really good at underwriting risks? Sometimes the Kelly-optimal thing to do is to say, “I would rather risk a 50% drawdown than risk not owning Ogilvie Flour Mills at these insanely low valuations and not being able to buy newspapers at low-single-digit P/Es.” He clearly did that, and it clearly worked out for him.

So I do feel like part of that kind of natural macro bearishness does mean that you just put a really strict filter on the things that you buy. And then if you buy something—if you’re essentially saying, “My expected return for the S&P over the next 10 years is 0%, but there’s going to be a lot of volatility along the way,” and you still find something you’d like to own under that circumstance—you’re implicitly saying this is going to generate enough alpha to offset it, and it’s going to hedge out whatever other risks I have.

Now, I’m applying pod-shop vocabulary to what Buffett is doing, but I feel like that’s actually justifiable because he was doing things like funding-cost arbitrage—funding-cost-related bets—in the 1960s, and he was doing options trades in the ’70s. I think the book does not mention this, but Lowenstein’s book does mention this; this one doesn’t. There’s the incident with Capital Cities/ABC, where they’re negotiating the terms of the deal and the ABC team wants warrants. The ABC bankers all take out their calculators and start calculating the value of the warrants, and Warren Buffett just thinks for a minute and tells his side what the value of a warrant is. He’s clearly able to do, if not Black-Scholes in his head, Black-Scholes heuristics that get to roughly the right answer.

There’s smaller stuff in this book. Obviously, when he’s young, they talk about it. And even when he meets Bill Gates, if I remember correctly, Bill’s like, “Hey, let me get you a computer.”

He can do your taxes and everything. Warren says, “I can do my taxes in my head. Why do I need a computer to do that for me?”

Quick thoughts. I have to get your thoughts on this. When I was reading particularly about young Buffett, but even old Buffett, he’s so good at paying attention, reading the room, and everything. He’s very shy, but when you get him on a stage, he’s very outgoing.

I couldn’t help thinking: if Buffett at 15 had had the internet, this man would have put MrBeast to shame. I think he would have been the world’s greatest social media influencer because of his obsession with data and numbers. They mention that he’s always running systems. The reason he latched on to Dale Carnegie is that he basically runs systems and says, “This will get me the most friends.”

I think he would have slayed on the internet. I would point to the pranks that are over the top in the early days. When he gets his friend naked with a gas mask on at the bottom of a freezing pond, the pranks are over the top.

They also mention that he’s obsessed with marble racing when he’s younger. I know there are some very popular YouTubers who basically put marbles at the front of a treadmill and watch them race. I think he would have been awesome at it. I don’t know. Do you have any disagreements or agreements? What do you think?

No, I think so. I think one of the funny footnotes on the influencer side of things is that, at some point in the early 1950s, he was selling copies of a report that he wrote on some closed-end fund or holding company or something. That is the definitive answer when you ask, “Why would someone pay to read someone’s thoughts if they could just trade for themselves and make more money?” One of the answers is: Warren did it.

He seems to—I think he did a lot of media investing eventually. I don’t recall any real media investments that the book talks about until the 1970s. But he was clearly interested in media as an industry and in this question of perception: How does it get shaped, and how do we come to know things and believe things?

Talking about brands is partly a way to talk about that. It’s partly a way to talk about how ideas get in our heads. If you are someone like Buffett who actually has maybe a hard time having a deep emotional connection with people one-on-one, but you can at least give a good talk, learn these sorts of canned lines and responses, and be extroverted in your presentation even if you’re quite introverted, I think those questions are really interesting to someone like that.

Being able to say, “I don’t know that I could convince someone to do something one-on-one, but I know that the front page of The Boston Globe every day convinces hundreds of thousands of people what the important news stories of that day are. What does everyone need to care about?” The ads convince them to buy things. I think that is probably just naturally interesting to someone with those traits.

If you transport that person to the present and tell them they can create an online persona, and it doesn’t have to be them—it can be an exaggerated version of some things that they are, or an inversion of other things that they are—and they can write long-form or short-form, do short-form or long-form videos, and do podcasts, I think there’s a possibility that whoever the most Buffett-like person today is does not actually have a very substantial portfolio. Maybe they have a science-focused YouTube channel or something like that, because that is the present-day expression of that bundle of traits.

I’ll mention one more thing. He gets obsessed with ping-pong and becomes a great ping-pong player when he’s young. He gets obsessed with bridge in his older age. The book, especially when he gets older and gets a computer, mentions him playing a game called Helicopter a lot on the computer, which I believe is like Flappy Bird. I’m not sure; I’ve never played it, but I looked at it, and it’s like Flappy Bird.

I think he would have gotten really into video games, and I wouldn’t be surprised if he were a huge video game streamer or something, though I don’t know if he was quite personable enough for that. But I think he would have been focused enough. I think that would have been his thing.

I think the Pink Sheets trading story reminds me of, if you’ve ever watched a stream of a really, really good strategy-game player playing in real time at maximum speed, just looking at the pace at which they make decisions and how many of those decisions are not right. But if you make enough positive expected-value decisions really, really fast, you just inevitably have a really good outcome.

It is weird to imagine a Buffett trading livestream, but I think something adjacent to that is entirely plausible.

Last question, and then we’re running way long because, again, I’m not even through half my notes. I was really enjoying rereading this, thinking about it, and preparing.

When I was reading this, there are 2 sides of Buffett. There’s his “I want to buy deep value” side, and then there’s also the hobnobbing side. He obviously understands media very well, and Bill Gates gives a masterclass on media. People ask him about newspapers, and Gates says newspapers are dead. People ask about TV stations, and he says, “Look, it’s going to be tougher, but because of their distribution, because they own that, there’s a place for them.”

That’s obviously proved right so far. Maybe now TV stations are in trouble. But I was struck by the fact that Buffett loves sports as well, yet he never buys a sports team. I think that’s very interesting because when he buys a plane, he names it the Indefensible.

Sports teams are a trophy-property buy, but they’re a trophy-property buy where, pretty much regardless of what sports team you bought 30 years ago, you’re up 15×, 20×, or 30×, with a lot of cash flow along the way. There were a lot of dynamics that suggested that’s where the world was going. Are you surprised Buffett never bought a sports team?

Now that you mention it, yeah. I don’t know. I guess one possibility is that every time a sports team is up for sale, he gets the call, and every time he bids a little bit less than it would actually take to get the team, and he’s been doing this over and over.

Maybe the economics are so dependent on broadcasting rights, and that becomes partly a technology question: Where do we think people will watch the Super Bowl 10 years from now, and how much do we think Amazon would bid over Netflix to get this? Those questions may be harder.

In the 1990s, he was on the Capital Cities board and the ABC board, which meant he knew ESPN, and I think he could have seen where the puck was going there.

Yeah, that’s an interesting question. I think if there was a team in Omaha, he would have bought one for sure. Maybe the answer is that he didn’t want to buy outside Omaha. But I’m really surprised—he loves football. I could have seen him buying one. Maybe he didn’t want to get into the politics of that.

But again, you get a lot of sway when you buy a football team. Buffett loved big-game hunting. He loved hobnobbing with athletes. There are a lot of athlete anecdotes toward the end of the book. With the benefit of hindsight, I probably am a little surprised he didn’t.

Look, we’re way over time. We went through a ton. Any last thoughts or anything here?

No, I think whenever I read a story like that, there are always 2 questions I’m asking. In a biography like this, I’m always asking, “What would I have done had I been born in 1930 and had I been similarly interested in stocks?” I’m sure my track record would have been worse, but what are the things I would have done the same or differently?

The other question is, “What if Warren Buffett had been born in 1986? What would he have done differently?” I feel like when you try to ask both of those questions at once, you are trying to get at what underlying things make this person really unique and unusual.

On my second reading, a lot of it was more circumstantial and more about family and relationships than I thought. Not just that the part of the story makes more sense, but the context of where he’s coming from, how he relates to people, and why it is that he chose a job where you actually have the opportunity to opt out.

This is an interesting thing about investing as a career: You can just opt out. You can choose to, especially if you’re doing a concentrated long-only or long-mostly strategy, say, “There isn’t anything good to buy right now, so I’m not buying. I’m going to hold cash.”

Maybe that is a kind of avoidant-personality-trait-compatible thing, where it was very stressful for him growing up that, when his mom was furious with him for inscrutable reasons, he still had to be there and had to respond and so on.

And so a job where you can just opt out and pause and wait seems kind of ideal for that. So that was part of what I got from it: it is more of a psychological profile of someone who is unusual in many enviable ways. Many times in the book, I would think, “I would not actually trade places with him. I would not take the couple billion dollars in exchange for going through that.” He was very well-spoken.

I agree with everything you say. It’s very interesting. Yeah, it’s super interesting. You know what I’m excited for? I read it in 2008, I believe, as you did. We’ll read it again—let’s just round the year up and say it’s 2028—so we’ll read it about 20 years later.

I’m excited for you and me, as we’re approaching 60, to reread it and come on and be like, “Man, Buffett in his 50s—when he hits 50 and 60, he’s starting to get a lot of mortality thoughts, and those are really what’s jumping out at us now.” So I’m excited for that.

Byrne, this has been great. We’re going to have to pick a book for June and get our June book club going. Thanks for making time. I was just looking forward to this all month.

Oh yeah, absolutely. It was fun. It’s so fun to revisit this stuff. So many of these stories I knew. I remembered them. I remembered a lot of the details of the story. So I feel like I remember it, but then you read the context and it changes, especially now that you and I have more business experience under us, too. But yeah, the context changes.

Yeah. Cool. All right, buddy. We’ll talk soon.