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The One Buffett Book Every Investor Should Read

By William Patalon III
Managing Editor
Money Morning

There are scads of books on the market purporting to tell the story of super-investor Warren E. Buffett. I know, because during my days as a business journalist, I read – or at least perused – almost all of them. And, as my lovely wife Robin will attest, most still adorn my office shelves at home.

But let me save you some time. If you really want to learn about Buffett, the man, and Buffett, the investor, there’s really only one biography worth reading: Buffett: The Making of an American Capitalist, by Roger Lowenstein, was first published in 1995, meaning it’s been on the market for more than a decade. And, yet, it remains the best Buffett biography out there.

[Please note that when I’m referring to the “best” Buffett book, I’m excluding such Buffett-penned works as The Essays of Warren Buffett: Lessons for Corporate America. I’m looking at biographies that others have written, endeavoring to capture the personal life, the personality, and the investment wisdom of the man folks refer to as the “Oracle of Omaha.” Indeed, many consider Buffett to be the single-greatest investor of our times. Indeed, for a news report on the latest investing forays by Berkshire Hathaway Inc.  (BRK.A, BRK.B)please click here].

Strong From the Outset

So many biographies – especially those of business luminaries – highlight their achievements, but go no further, never breaching the façade to show us just what it is that makes the person we’re reading about “tick.” It’s here, I think, that Lowenstein succeeds so well, setting his book apart from all the others.

For instance, the book talks about Buffett’s youth, and his introduction to business in the form of his grandfather’s old-fashioned neighborhood grocery store, with its interesting smells, board floors, and the wheeled ladder that clerks could slide along the shelves to reach items stored high above the floor. And the author also writes about Buffett’s terrible homesickness for his Omaha hometown when his father Howard – Warren’s self-proclaimed “best friend” – is elected to Congress, forcing the family to leave Nebraska for a new home Inside the Beltway.

Both of those experiences influenced Buffett in a profound way, and continue to manifest themselves even today. That grocery store experience imbued Buffett with a lifelong affinity for companies with easy to understand business models – particularly businesses that make or sell something tangible. And that bout of homesickness helped create in Buffett a deep-seated aversion to change.

A “Partner” Investor

Together, Lowenstein opines, those two qualities may well be a key reason that Buffett likes to invest in the businesses that he does, and to do so as a “partner,” a kind of long-term owner – but one who doesn’t interfere with the existing management team, so long as the corporate officers achieve their established objectives in terms of such objectives as return on invested capital. It’s an approach that’s generated impressive financial results, and that confidence and independence instilled tremendous loyalty in the top managers of the companies he’s invested in or bought outright – and that was true even before Buffett made a lot of those folks rich.

Indeed, Lowenstein jokes that only once did the former-proprietor/now-manager of a Buffet-acquired company subsequently turn on the Sage of Omaha. That was Rose Blumkin – known around Omaha as “Mrs. B.” – the semi-tyrannical owner-operator of Nebraska Furniture Mart, which Buffett bought for an estimated $60 million in 1983. The business was a huge moneymaker for Berkshire. But in 1989, after a tiff with several of her grandsons over management of the business, she quit in a huff and started a rivaling company – next door. At the time, Mrs. B. was 95.

Lowenstein’s research into how the Berkshire Hathaway investment vehicle came by its name – with an investment in, and the ultimate purchase of, a Massachusetts textiles firm – is particularly interesting and illustrative of Buffett’s personal makeup as well as his business acumen. He bought the company as a typical “Graham-and-Dodd” bargain stock, and then milked it for cash flow, which he then used to diversify into insurance, retailing and other businesses. He ran the mill as long as possible, and with some sadness, eventually had to shut it down and have its milling machinery sold off or scrapped.

But when he first bought the business, and found that old directors minutes and old annual reports were available, he had them shipped back to Omaha, where he read and reviewed them with reverence.

The rest is essentially history, but I guarantee that you’ll discover many new and interesting things about America’s greatest investor by reading this book. And you’ll pick up some fascinating and highly useful investing insights at the same time. This book is well worth your time to read. And face it, now you won’t have to read any of the others.

[Editor’s Note: Because of the length of time that’s elapsed since it was published, if your local bookseller can’t find it for you, just ask your local library to get you a copy. With their agreements, if they don’t have a book in their collection, they can often borrow it from another library system that has it. It will be well worth the effort].

 

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About the Author

Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.

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Trackbacks

  1. […] Berkshire Hathaway, once a New England textile mill, became the holding company and financing vehicle for all of Buffett’s other investments: GEICO Insurance, newspapers, furniture, jewelry and chocolate-candy companies; and major holdings in such firms as Wells Fargo & Co. (WFC), and Coca-Cola Co. (KO). [Indeed, for a book review of the very best Warren Buffett biography out of the many published, please click here]. […]