Alice Schroeder Q&A Transcript || Value Investing Conference (2008)
"So much of Warren’s success has come from training himself into good habits," said Schroeder. "Warren is a creature of habit. He is the ultimate creature of habit."
Back in 2008, Alice Schroeder took the stage on the opening night of that year’s Value Investing Conference at the University of Virginia — and delivered a glimpse into the captivating mind of Warren Buffett.
Drawing on her 2,000+ hours spent with Buffett while researching and writing The Snowball, she also unveiled insights into the legendary investor that go far beyond the pages of her acclaimed biography. Enjoy!
John Macfarlane: As Alice [Schroeder] and I were walking into the theater this afternoon, we looked at it and said, “You know, that looks an awful lot like the Orpheum Theater in Omaha.” For those of you who have been to the Berkshire Hathaway meetings over ten years ago, you know exactly what that is.
We used to go to the meetings when shareholders could fit into that theater, which was probably about this size [or] maybe a little bit larger. Of course, that was before the B shares. So we’ve been going back for years and watched it migrate to Ak-Sar-Ben and then ultimately the Qwest Center.
Before I get to my comments about Alice, most of you guys probably know more than I’ll say about her. That is, those of you who are under 30 because she has a Facebook fan page — which I can’t view because my kids won’t let me or my wife be on Facebook.
So you guys already know more than I do about Alice — and I’ll attempt to fill in for those of us who are over 30, 40, 50, [or] 60. (Laughs)
Rarely do practitioners have the opportunity to watch the undisputed master of their discipline in real-time. We are truly fortunate to live in the age of Warren Buffett. As rare is to have the work of a master chronicled in exacting detail during their lifetime. Alice Schroeder accomplished just that with The Snowball. In 838 pages, she provides unique insight into the individual who has largely shaped the field of value investing over the past three to four decades — and for that, Alice, we’re deeply indebted to you for your work.
Alice’s career began in accounting. While working for [the Financial Accounting Standards Board], she drafted some of the most important accounting standards affecting the insurance industry. She subsequently moved onto investment banking and ultimately, as many of you know, to research at Morgan Stanley where she became Institutional Investor’s top-ranked property and casualty insurance industry analyst. It was in that capacity that she met Warren and, as a result of a strong mutual respect, he granted her full access to his papers [and] to his family and friends to write his biography.
What makes The Snowball so special in my opinion are, in combination, four distinguishing characteristics: First of all, Alice’s very deep understanding of finance and the insurance industry. Secondly, the unprecedented access that she had to Warren and his work. Thirdly, her persistence and attention to detail. And fourthly — and most importantly — the integrity with which she undertook the task.
Based upon our countless conversations over the past several years, I can assure you that she was relentless in her verification of fact. For those of you who have read the book — or at least flipped through it — the footnotes are certainly testimony to that.
Not surprisingly, after a little more than a month on the shelves, The Snowball is now ranked by Amazon as the #1 business book of 2008. So it’s getting the recognition that it deserves. Those of you who have read it, you know why.
So, without further ado, it’s my pleasure to introduce to you Alice Schroeder.
Alice Schroeder: John, thank you so much for that wonderful introduction — and thank you all for having me here at the University of Virginia and all of the people who were so welcoming. It’s really terrific.
I especially want to say thank you to John because he was very modest in not playing up his role. He was one of my important sources in writing The Snowball because of his role at Salomon Brothers as the treasurer.1
I found that one of the things that occurs when you write a biography is that you do get a lot of conflicting information and John was my sounding board. I would call him and say, “These two people have said this and that. Which one should I believe?” And he would tell me — and I trusted him. He was an invaluable resource and also gave me a lot of great facts and information.
It’s a real privilege to come before you tonight to talk about Warren Buffett, especially at this time of financial turmoil and crisis. As you all know, Warren Buffett is the only person of our time who’s managed to accomplish his wish of becoming so rich that when he writes a check, it’s the bank that bounces. (Laughs)
These days, it doesn’t take quite so large a check to make the bank bounce — but it’s interesting to see that, when it does happen, it’s Warren Buffett that they run to to cover the overdraft. He is really a singular figure in these times.
When I started working on The Snowball, of course, things were very different. The internet bubble had just imploded and it was just after the aftermath of Enron. I never anticipated anything like this occurring — but I knew what he was like and, of course, much of the importance of him is that his ideas and principles haven’t really changed in fifty years.
I thought that writing a book about him would actually be a fairly simple matter. When you ask Warren a question, he always had the answer. When I would present him with a business problem, he always would have the solution. So the job was just to write it down.
What I didn’t realize was how quickly I would encounter something called Sevareid’s Law, which is that the cause of problems is solutions.2 So, having asked all my questions and having listened to his stories and having gotten all of his solutions, very quickly I was presented with a problem, which was that I had far more “solutions” material — questions answered — than I knew what to do with.
I began casting about for a way to construct a narrative, to come up with how to put together a book about this man’s life that would be meaningful and present a set of ideas. I had a few attempts that failed, but I thought you might like to hear about them. Here’s my first shot at it: “The story began with a journey through the life of a 78-year-old man. It traveled back through the decades, tracing and uncovering a common truth that lies at the core of the most powerful investment philosophies, teachings, and models in the world. What you will learn today is the single, secret, underlying law of The Snowball, a set of principles based on the most powerful law in the universe. All that Warren Buffett ever accomplished or tamed in the business of life was done in full accordance with this most powerful law. Using this simple, universal law, The Snowball offers the knowledge of how to create — intentionally and effortlessly — a joyful life. This is the secret. The secret to everything. The secret to unlimited happiness, love, health, and prosperity. This is the Law of Attraction, the secret of Warren Buffett.”
Okay, well, I passed on that idea. I thought it was not too good, but somebody else went there.3
My next attempt: “The Snowball’s action kicks off in modern-day New York where a bloodstained copy of The Intelligent Investor is found symbolically laid at the foot of the New York Stock Exchange. The quest for the Holy Grail of investing led to a search that spanned the globe from London to Los Angeles, leaving a gruesome trail of interview subjects behind as evidence. The result was an exhaustively researched page-turner about a secret investing cult, coverups of ancient mistakes, and savage vengeance against those who tried to capture the Holy Grail for themselves. In the end, I found the Grail guarded by an ancient 78-year-old heretic, buried deep in a maze of files under a pyramid in Kiewit Plaza.”
I loved that idea, but then there was this guy named Dan Brown who went ahead and used it before I got there.4 (Laughs)
I was sure, however, that somewhere hiding in Kiewit Plaza there was a Holy Grail — because I spent 2,000 hours with Warren Buffett. I did get to go through all of his files and I got to ask him all of the questions and business problems that I wanted to.
I thought there had to be a Holy Grail because I had heard from so many investors a little bit of — irritation might not be the right word — but Warren always says that [investing is] very simple. There are a few simple principles. And if you were only working with a smaller amount of money, he could earn 50% returns a year.
Well, I’ve had a lot of people say to me, “I am working with a smaller amount of money. If it is really that simple, why am I not earning 50% returns a year?” (Laughs) So the question is: Is it just that Warren Buffett is a genius? Is it just that we’re all dumb? Or is the truth somewhere in between?
And I think the truth is somewhere in between.