After the second presidential debate, we went back to Alice Schroeder to ask what she thought about something the candidates said... see the first question below...
Alice Schroeder is the author of the new Warren Buffett biography, The Snowball: Warren Buffett and the Business of Life. Schroeder was a Wall Street analyst and a managing director at Morgan Stanley prior to writing the book with unprecedented access to the chairman of Berkshire Hathaway. She kindly took the time to answer a few questions about the book and her experiences with Buffett.
Senators McCain and Obama mentioned during Tuesday's debate that Warren Buffett might be a good candidate to run the US Treasury. Do you think he would take the job?
Not a snowball's chance that Warren would do it. He hates meetings and would never tie up his schedule that way. It would take him away from his #1 interest, which is Berkshire. He prefers to leverage his time by giving advice.
Having spent so much time with Mr. Buffett during the research for this book, surely you've seen him at highs and lows. What does a typical day look like for him during a volatile time like the one we're in now?
Warren is in his element right now. He's built Berkshire Hathaway into a financial fortress. His phone is ringing all the time with people asking him for money -- on his terms -- and advice. He loves being in the flow of information, and probably knows as much about what is going on as anyone, including Hank Paulsen. One of his greatest skills is thinking forward, asking the question, "and then what?" Right now this is the question of the hour.
The book is huge, coming in at 960 pages. Admittedly, I haven't yet read the whole thing. Can you recommend any chapters for people looking for insights from Mr. Buffett as they might relate to the current credit crisis?
The book traces Warren's life from his Depression childhood -- when the Buffett family attitude, like most families', was "spend less than you make" and "don't go into debt" -- and how the American way of deferred gratification and thrift gradually reversed over the decades into a culture of borrowing and consumption. The link between the overwhelming leverage that brought Wall Street to its knees and the unaffordable mortgages that so many Americans took on is a country that has come to view heavy indebtedness as a financial tool of success rather than a risky burden.
What do you make of Mr. Buffett's Goldman Sachs move? Was it, as he said on CNBC, a vote of confidence in Congress to pass a rescue deal?
Warren is a handicapper. He grew up betting on horses at the racetrack and thinks of nearly everything in terms of handicapping and odds. He was betting that Congress would pass the rescue bill, because the circumstances were such that it almost inevitably must. And he was right.
How do you think Mr. Buffett's past with Salomon Brothers influenced his actions here?
Investing in Salomon was one of Warren's mistakes. The terms of this deal were so rich that Warren overcame his aversion to Wall Street. In the end Berkshire did make its money, but only after the most miserable business experience of Warren's life when Salomon nearly went bankrupt and he had to take over as interim Chairman to save it. With Goldman, once again the terms of the deal are so lucrative that Berkshire has taken a stake in an investment bank. There is a chance he will regret it. But there are a couple of differences from Salomon. Goldman has agreed to become a federally chartered commercial bank. Warren has always liked investing in commercial banks. He also has a longstanding relationship with Goldman and its management which gives him more confidence in Goldman than Salomon.
Your Warren Buffett biography is a tome with unprecedented access to a man whose mind is of great interest to a lot of folks, especially Huffington Post business readers. Why did Mr. Buffett open up to you when he did -- and why to you specifically?
I was the only Wall Street analyst following the stock. He chose to work with me as an analyst because, he said at the time, he likes the way I think and write. It probably helped that I was one of the less conventional analysts following insurance stocks -- Warren is pretty unconventional, and he tends to gravitate towards nonconformists. Five years later, we had developed a comfortable business relationship. I met with him about once a year and we talked on the phone periodically. In 2003 a writer approached me to collaborate on another book, on a narrow topic that struck me as not right. However, it prompted the idea for The Snowball to pop into my head. I suggested to Warren that he write it. He liked the idea but said that he didn't want to write a book. It's just not how he wants to spend his time. I ended up volunteering, and he offered to cooperate with me.
What one most valuable lesson did you take away from your time with Mr. Buffett?
It was personal. Warren makes a point of never -- literally never, as far as I could tell -- saying anything critical of anyone he likes. He's not a critic of people in general; he's unusually tolerant of the foibles of human nature. He just accepts people for who they are. This may sound simple, or simplistic, but it isn't. In practice, it's a very relaxed, and relaxing, attitude. He has some very eccentric friends. He has friends who disagree violently with him about politics, philanthropy, all kinds of things. It doesn't matter. People feel safe with him.