The Snowball

Chapter 1: 1: The Less Flattering Version

Overview

Omaha, June 2003, inside Berkshire Hathaway’s modest headquarters. Warren Buffett sits in his father's old chair, looking slightly rumpled despite his expensive suit—a man whose personal style has barely evolved since his youth. The office is a museum of a singular life: Coca-Cola bottles, a Dale Carnegie certificate, a Pulitzer Prize, mementos from a soap opera cameo, and the rejected offer to buy Long-Term Capital Management. The television is on, sound muted, feeding him a constant stream of news—much of it, to his quiet satisfaction, about himself.

Alice has known Buffett for six years, starting as a financial analyst covering Berkshire stock before their relationship turned friendly. Now she is there because, as Buffett insists repeatedly, he will not write a book. “You’ll do a better job than I would,” he says, a line that will take on deeper meaning as the story unfolds.

When asked where his relentless drive to make money came from, Buffett’s eyes go distant, then he quotes Balzac—“behind every great fortune lies a crime”—and quickly adds, “That’s not true at Berkshire.” He springs from his chair to land on a gold armchair, talking about the story with the enthusiasm of a teenager recalling a first romance, not a seventy-two-year-old financier. Then he offers Alice a rule to live by: whenever his version of events differs from someone else’s, she should use the less flattering version. Humility, he shows, disarms.

The chapter closes with a quiet acknowledgment: that instruction will prove necessary more than once, not because memory fails, but because human nature nudges the story. One of those times will happen at Sun Valley in 1999.

Key Takeaways

• Buffett’s office and appearance reflect a man uninterested in pretense, surrounded by evidence of a long, intentional life.
• He actively refuses to write his own story, deferring to Alice—a move that both disarms and grants him some control over his legacy.
• The “less flattering version” rule is a strategic humility, one that will later reveal where vanity or self-interest colored his own recollections.
• The seeds of tension between memory and truth are planted early, with Sun Valley 1999 already foreshadowed as a pivotal example.

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Chapter 2: 2: Sun Valley

Overview

The contrast was unmistakable from the start: Warren Buffett, the world’s second-richest man, pulling his own suitcase from the trunk of his car and hoisting it aboard a gleaming Gulfstream IV. The jet wasn’t even his in the traditional sense—it was a fractional share in NetJets, a company he owned through Berkshire Hathaway—but the scene captured everything about the man who would soon deliver the most consequential speech of the 1999 Allen & Co. conference. His family settled in around him while he buried himself in a newspaper for the entire two-hour flight, as if the breathtaking approach through the Sawtooth Mountains was just another commute.

Sun Valley in July was a meticulously orchestrated ritual of wealth and influence, where Herbert Allen played host to a guest list that read like a fantasy roster of media royalty. The boutique investment banker’s annual gathering had become the ultimate elephant-bumping event, a place where big shots came to reassure themselves they were still big shots. The conference’s carefully calibrated hierarchies dictated everything—who stayed in which condominium, who sat where at meals, who got invited and, more thrillingly, who got disinvited. Buffett, despite his $30 billion fortune, seemed to appreciate the free SV99 polo shirts almost as much as the chance to reunite with his closest friends: Kay Graham, Bill and Melinda Gates, the Keoughs, Barry Diller. For him, Sun Valley was above all a family vacation, a rare week when his wife Susan flew in from San Francisco and his scattered children and grandchildren all gathered in one place. He had no interest in the mountain biking or white-water rafting that the impossibly seamless machinery of Allen & Co. arranged; he thought of water as “a prison of sorts” and would rather go handcuffed than ride a raft. Instead, he played golf with Jack Valenti for a dollar bet, disappeared into his condo to read by the fireplace, and barely noticed the view of Baldy Mountain.

But the 1999 gathering was different. A new breed of technology executives had arrived with unusual swagger, speaking in a barely comprehensible language of B2B, banner ads, and bandwidth. They strutted through presentations about how the Internet would reshape everything, their stocks trading at infinite multiples of nonexistent earnings while real companies that made real things declined in value. The new paradigm rhetoric hung over the week like a fog, and the recently enriched could not believe that Annie Leibovitz had chosen to include Buffett in her Vanity Fair photo shoot of the Media All-Star Team. Why would she include him? He was old media. The Internet moguls had been invited as people of the moment, and they acted like it.

Buffett had been privately critical of the promoter-driven market all year, and when Herbert Allen asked him to be the closing speaker, he agreed to do something unprecedented: make a public prediction about the stock market. He had spent weeks preparing, pulling from an exhaustive mental file of business history. On Saturday morning, he wove a personal story about his long-ago attempts to persuade his Omaha neighbor Don Keough to invest in his partnership—a story that ended with Keough’s house going dark and the birth of his son Clarke nine months later. The audience laughed, charmed, but the story served to soften what came next.

Buffett showed a devastating slide: the Dow stood at 874 in 1964 and at 875 in 1981—seventeen years of zero net gain despite fivefold growth in the economy. Valuing is not the same as predicting, he said. In the short run, the market is a voting machine; in the long run, a weighing machine. He explained that interest rates are the gravity of finance, and that for stocks to keep rising at 10% annually, investors would need to believe in wishful thinking. Then he took his audience through the graveyard of innovation: 2,000 auto companies, only three survivors; airlines that had generated zero aggregate profit since Kitty Hawk. He quipped that he should have shot Orville Wright down for the sake of future capitalists. The message was devastating: innovation and investor returns are often inversely correlated. New industries are easy to promote because they lack quantitative guidelines, making them ripe for speculation.

The room went silent. No laughter, no applause. Some Silicon Valley wives in the ladies’ room dismissed the speech as the last roar of an old lion who had missed the tech boat. Others, like Bill Gates, found it revelatory. Buffett ended with a rhetorical question—Is there anyone I haven’t insulted?—and a final plea to remember that good ideas have limits. The standing ovation was polite. The mutterings were not. But he had said what needed to be said: that the party could not last, that the crowd was chasing rumors down to hell, and that anyone buying Internet stocks on the promise of a new paradigm was about to get a brutal education in how markets actually work.

Key Takeaways

• Buffett’s arrival at Sun Valley underscores his personal frugality (carrying his own suitcase) contrasting with the massive wealth he commands (NetJets, the G-IV).
• The Allen & Co. conference is a meticulously orchestrated “elephant-bump” for media and tech elite, with Herbert Allen as the firm’s eccentric, unsayable-saying host.
• The 1999 gathering is marked by rising tension between old-media stalwarts like Buffett and the newly minted Internet moguls, whose hubris and “new paradigm” rhetoric dominate the week.
• Buffett’s upcoming closing speech is set up as unprecedented: he never made market predictions publicly, but he feels compelled to preach about the stock market’s folly.
• Valuation is not prediction: Short-term markets are a voting machine; long-term, a weighing machine. Don’t confuse volatility with insight.
• Interest rates are fundamental: They act as gravity on all financial assets. Low rates inflated the 1990s market, but that doesn’t make high prices sustainable.
• Innovation and investment returns often diverge: Transformative industries like autos and airlines destroyed capital for most investors. New technologies are easy to promote, hard to profit from.
• Past performance is dangerous to extrapolate: Buffett’s slide showing 17 flat years for the Dow, despite massive economic growth, is a powerful reminder that markets can disappoint for decades.
• Be wary of crowds and rumors: The oil prospector story captures the herd mentality that leads investors to chase stories into hell. Independent thinking is rare and valuable.

Chapter 3: 3: Creatures of Habit

Overview

Warren Buffett and Charlie Munger have deeply ingrained habits that shape their lives. This is less about investment philosophy and more about the rhythms, quirks, and routines that make these two men tick—and how those patterns both bind them together and set them apart. Through vivid portraits of their daily lives in Omaha and Pasadena, we see how their intellect, their marriage of minds, and their almost ritualized behaviors created the foundation for Berkshire Hathaway’s success.

Two Sides of the Same Coin

Buffett and Munger are often seen as interchangeable—same awkward gait, same glasses, same comb-over, same fascination with business as a puzzle. Yet their personalities diverge sharply. Munger values respect above all, and doesn’t care who thinks he’s a son of a bitch. Buffett, by contrast, loves to be liked, even as he needles his audience. They share a mutual admiration for rationality and honesty, and both believe that self-delusion is the root of most mistakes. But their methods of preaching are different: Munger delivers dense, self-intoxicated speeches on the art of living, while Buffett turns everything into a teaching moment—his letters, his meetings, even his parties. For Buffett, Berkshire Hathaway is his Sistine Chapel, a living textbook of his beliefs.

Charlie Munger’s Ordered World

Munger’s day is a masterclass in routine. He wakes at the same time, drives the same route (counting cars in his rearview mirror to change lanes), and breakfasts at the California Club, tearing through newspapers like Christmas presents. His left eye, ruined in a failed cataract operation, gives him a permanent half-gaze of disdain. His office, cluttered with books and busts of Benjamin Franklin, is his sanctuary. He admires Franklin for preaching bourgeois values while living as he pleased—a model Munger himself follows. His charity is generous but controlling: he’ll pay for dorms, but only if the rooms are exactly so many feet wide. He avoids the “Shoe Button Complex”—the trap of pontificating beyond one’s expertise—by staying within his Circle of Competence. Yet he can’t help lecturing everyone he helps, because, after all, he knows best.

Warren Buffett’s Streamlined Existence

Buffett’s life is even simpler, despite a more complex personality. He drives 1.5 miles to the same office he’s occupied for decades, sits behind his father’s desk by 8:30, and reads a staggering pile of trade publications while half-watching muted CNBC. Numbers from every Berkshire subsidiary pour in: auto policies, candy pounds, jet time-shares, kilowatt hours. He knows many from memory. In his spare time, he pores over reports from companies he hasn’t bought yet—“just in case.” He answers his own phone, picks up dignitaries at the airport in his Lincoln Town Car (driving distractedly, barely noticing traffic lights), and gives tours of his office totems. The phone rings constantly; his trader gets instant “yello” responses. By 5:30 he heads home.

The Unconventional Home Life

The woman waiting at home is not his wife Susie, but Astrid Menks—a triangular arrangement Susie herself orchestrated in 1978. Buffett is perfectly open about it but offers no explanation beyond “If you knew everybody well, you’d understand.” Astrid and Susie are friends. Most nights, Buffett eats a simple dinner (hamburger or pork chop) with Astrid, then turns to twelve hours a week of online bridge, occasionally calling out “Astrid, get me a Coke!” Afterward, he talks bridge with Sharon Osberg, then has a nightly conference call with reinsurance chief Ajit Jain. Astrid picks up the early newspaper; he reads it while she goes to bed. That’s the ordinary life of a megabillionaire.

Key Takeaways

• Routine as a foundation for genius: Both men’s habits are not quirks but deliberate structures that free mental energy for deep thinking.
• Complementary temperaments: Munger’s bluntness and Buffett’s charm create a powerful dynamic—one focused on respect, the other on being liked.
• The didactic impulse: Both feel compelled to teach, but in different registers. Buffett’s medium is Berkshire itself; Munger’s is his speeches and controlling generosity.
• Simplicity at scale: Despite vast wealth, their daily lives are remarkably modest and predictable—a lesson in avoiding complexity for its own sake.
• The Circle of Competence: Both stay within areas they truly understand, wary of the Shoe Button Complex of pretending to know everything.

Chapter 4: 4: Warren, What’s Wrong?

Overview

In the late summer and fall of 1999, Warren Buffett found himself in unfamiliar territory—not just underperforming the market, but being publicly mocked for it. Nearly all of his $30 billion-plus fortune was tied up in Berkshire Hathaway stock, and that stock was sinking fast. After peaking at $80,900 per share in June 1998, BRK had slumped to $56,100 by December 1999, while the NASDAQ skyrocketed 86% in a single year. The very metric that had once validated Buffett's genius—his stock price—now became the target of ridicule. Barron's put him on its cover with the headline "Warren, What's Wrong?" and the financial press painted him as a has-been who had stumbled badly. This chapter captures a pivotal moment when the Oracle of Omaha faced his most intense public skepticism, and it reveals what kept him from abandoning his principles.

The Sinking Platform of BRK

Throughout the 1990s, Berkshire Hathaway had been a reliable outperformer. From 1993 to 1998, BRK posted annual gains of 39%, 25%, 57%, 6%, 35%, and 52%—consistently beating the S&P 500. But in 1999, the script flipped. The market's "voting machine" had fallen in love with tech and telecom stocks—the "T&T" sector—while Buffett's value-oriented holdings were left behind. The absurdity of the moment was captured in a single comparison: Toys "R" Us, with $11 billion in sales and $400 million in profits, was valued at roughly $3.9 billion. Meanwhile, eToys, losing $123 million on $100 million in sales, was worth $4.9 billion. The market was betting that eToys would crush its brick-and-mortar rival through the Internet, and investors were paying a premium for that fantasy. Buffett, who had always bought businesses for what they could earn today, watched the party from the sidelines.

The Y2K Afterburner

One peculiar factor amplified the market's frenzy: fear of the Y2K bug. Experts predicted that computers worldwide might crash at midnight on December 31, 1999, unable to process dates beginning with "2." To prevent cash shortages and frozen ATMs, the Federal Reserve rapidly increased the money supply. This flood of liquidity turbocharged the stock market. If you invested a dollar in the NASDAQ at the start of 1999, it was worth $1.25 by December. The same dollar in BRK was worth only eighty cents. The Dow finished the year up 25%, the NASDAQ blasted through 4,000 points (an 86% gain), and Berkshire's stock fell to $56,100. In just a few months, the lead that BRK had built over five years was wiped out.

"Warren, What's Wrong?"

The media had been circling for over a year, but the Barron's cover article in late 1999 marked the peak of the public humiliation. Headlined "Warren, What's Wrong?", the piece declared that Berkshire had "stumbled" badly. Buffett found himself in a "Pamplona of negative press"—a running of the bulls where journalists and pundits alike took turns goring him. His internal pressure was immense; his nerves were shrilling, urging him to fight back. But he did nothing. He didn't respond.

The Inner Scorecard

What kept Buffett from lashing out or, worse, abandoning his approach? He called it his Inner Scorecard—a toughness about financial decisions that had infused him for as long as anyone could remember. It wasn't about what the world thought; it was about his own sense of rightness. He described it like painting the Sistine Chapel while lying on his back. "I like it when people say, 'Gee, that's a pretty good-looking painting.' But it's my painting, and when somebody says, 'Why don't you use more red instead of blue?' Good-bye. It's my painting. And I don't care what they sell it for."

He posed a question to illustrate the concept: Would you rather be the world's greatest lover but have everyone think you're the worst? Or be the worst lover but have everyone think you're the greatest? Apply that to investing: Would you rather be the world's greatest investor with the worst record in the eyes of others? Or the world's worst investor with the best record? For Buffett, the answer was clear. He credited his father, who was "a hundred percent Inner Scorecard guy"—a maverick not for the sake of being one, but because he genuinely didn't care what other people thought. "My dad taught me how life should be lived. I've never seen anybody quite like him."

Buffett repeated a quiet mantra to himself during those dark months: "I know it's going to change. I just don't know when." He didn't buy a single tech stock. He didn't write an op-ed defending his approach. He kept painting his Sistine Chapel, refusing to switch to red when he believed the painting needed blue.

Key Takeaways

• In 1999, Buffett's public reputation collided with a market euphoria he refused to join, and he absorbed a barrage of criticism as BRK stock plummeted 31% from its peak.
• The market's irrational valuation of loss-making eToys over profitable Toys "R" Us illustrated why Buffett stayed on the sidelines—he wouldn't pay fantasy prices for businesses with no earnings.
• Buffett's Inner Scorecard—the ability to evaluate himself by his own standards rather than public opinion—kept him from abandoning his principles under relentless pressure.
• His father's example of being a "hundred percent Inner Scorecard guy" shaped Buffett's lifelong attitude toward criticism: he cared about the quality of the painting, not what others said about it.