For a long time, I’ve viewed Warren Buffett as a flawed man. A supreme investor, but a flawed man.
It was a view primarily based on Alice Schroeder’s biography of Buffett, The Snowball, in 2008. It painted a picture of Buffett’s private life that wasn’t pretty. That his investing obsession and work ethic took a toll on family life. That he was very often an absent father and husband. And it may have contributed to the separation from his wife, Susan, in the 1970s.
The biography hit a nerve as though Buffett cooperated extensively during the writing of the book, he broke off all contact with Schroeder after the biography was released.
Because of this, I’ve never idolised Buffett. Admired his investing prowess, sure, but never wanted to follow in the footsteps of the man. I’ve never understood those who’ve lionised Buffett as a man as well as an investor.
It came down to values. I saw being a good husband and father as being my number one priority, and most other things a distant second. In my eyes, Buffett didn’t live up to that same credo and therefore fell short.
In recent years, I’ve realised that I’ve been way too harsh on him. Yes, Buffett has flaws, yet so does everyone else. And his virtues far outweigh the flaws.
Those virtues were on full display in Buffett’s last letter to shareholders as Berkshire Hathaway CEO, released this week. He’s due to step down as CEO at year-end though will stay on as Chairman.
An ode to his hometown
The final letter is a beauty, his best in some time.
He first pays tribute to his hometown, Omaha. He reminisces about how many business partners and friends he met have come from Omaha.
There was his lifelong sidekick, Charlie Munger, of course. He laments how their paths didn’t cross until Buffett was 28 and Munger was 35 years old. That was even though Munger spent his childhood living a block away from Buffett. Also, Munger later worked at Buffett grandfather’s grocery store a year before Buffett did. Munger eventually became his “best pal for 64 years.”
There was Stan Lipsey, who sold the Omaha Sun newspapers to Berkshire in 1968 and came back to launch a Sunday edition of the Buffalo Evening News – owned by a Berkshire affiliate.
There was Don Keogh and his young family who moved in across the street from Buffett’s home. Keogh would end up as the president of Coca-Cola and a long-time director at Berkshire.
Even Greg Abel, the CEO in waiting, lived a few blocks away in Omaha in the 1990s, though he and Buffett didn’t meet at the time.
Buffett suggests there must be something in the water in Omaha:
“Looking back I feel that both Berkshire and I did better because of our base in Omaha than if I had resided anywhere else. The center of the United States was a very good place to be born, to raise a family, and to build a business. Through dumb luck, I drew a ridiculously long straw at birth.”
On getting old
Buffett then comes back to a theme that he’s oft mentioned: how he won the ‘ovarian lottery’. That is, how lucky he was to have been “born in 1930 healthy, reasonably intelligent, white, male and in America.”
He chides leaders and the rich who don’t recognize how much luck has played in their good fortune.
“In many heavily-populated parts of the world, I would likely have had a miserable life and my sisters would have had one even worse,” he says.
Though admitting that age has caught up with him, Buffett still seems in decent shape:
“To my surprise, I generally feel good. Though I move slowly and read with increasing difficulty, I am at the office five days a week where I work with wonderful people. Occasionally, I get a useful idea or am approached with an offer we might not otherwise have received. Because of Berkshire’s size and because of market levels, ideas are few – but not zero.”
On giving away his fortune
In the letter, Buffett details how he’ll accelerate the pace of giving away his US$149 billion estate to his children’s foundations. That’s because of his three children’s own advanced ages and because it will “improve the probability that they will dispose of what will essentially be my entire estate before alternate trustees replace them.”
Buffett says he’ll allow a short period to let Berkshire Hathaway shareholders gain confidence in incoming CEO, Greg Abel. He expects that won’t take long as his children are “100% behind Greg as are the Berkshire directors.”
Buffett emphasises that the acceleration of gifts to his children’s foundations doesn’t reflect on Berkshire’s prospects.
Buffett owns about US$149 billion worth of Berkshire, making him the largest company shareholder. Most of his wealth is in the firm’s A shares.
On Berkshire’s future
On the company he’s led for 60 years, Buffett remains optimistic. He says Berkshire’s businesses have better-than-average prospects. However, as he’d done before, he tempers that expectation by suggesting that the size of the company will limit future returns; there are many other firms that will outperform Berkshire.
That said, Buffett says Berkshire has less chance of a disaster than any company he knows due to its eclectic set of businesses and shareholder-conscious management and board.
On living the best life
Buffett finishes the letter with five pearls of life wisdom:
- “Don’t beat yourself up over past mistakes – learn at least a little from them and move on. It is never too late to improve.”
- “Get the right heroes and copy them.”
- “Decide what you would like your obituary to say and live the life to deserve it.”
- “Greatness does not come about through accumulating great amounts of money, great amounts of publicity or great power in government. When you help someone in any of thousands of ways, you help the world. Kindness is costless but also priceless.”
- “Keep in mind that the cleaning lady is as much a human being as the Chairman.”
Buffett’s legacy
Buffett’s last shareholder letter displays all his virtues: humility, gratitude, optimism, praise for colleagues and friends, generosity, eschewing of wealth’s trappings, and humour.
In Snowball, Schroeder writes that Buffett as a child knew he’d become very wealthy and he was already grappling then with issues of what he’d do with his riches. This wasn’t a dream or bragging. Buffett knew he had a gift that was going to make him a lot of money.
In some ways, that realisation must have been difficult. Wrestling with the recognition of being ‘special’ or a genius while trying to live a normal life.
And that may be Buffett’s ultimate legacy: though he hasn’t always got it right, he’s a genius who’s remained grounded and a good human being. And he’s been able to pass on lessons about investing and life in a way that the average person can understand – because Buffett himself has always felt more comfortable among the masses than the rich and famous.
James Gruber is Editor of Firstlinks.