#182 Warren Buffett (The Making of an American Capitalist)

**David Senra** (0:00)
In the annals of investing, Warren Buffett stands alone. Starting from scratch simply by picking stocks and companies for investment, Buffett amassed one of the greatest fortunes of the 20th century. Over decades, Buffett outperformed the stock market by a stunning margin and without taking undue risks of suffering a single losing year. This is a feat long proclaimed to be impossible.
By virtue of the steady superior compounding, Buffett acquired a net worth of billions.
Buffett's career unfolded as a sort of public tutorial on investing and on American business. Buffett was aware of his role from the very beginning and he nurtured a curious habit of chronicling his escapades even as he lived them.
Where finance was so forbiddingly complex, Buffett could explain it like a general store clerk discussing the weather.
His talent sprang from his unrivaled independence of mind and ability to focus on his work and shut out the world. Yet those same qualities exacted a toll.
Like other prodigies, he paid a price.
Having been raised in a home with more than its share of demons, he lived within an emotional fortress. The few people who shared his office had no knowledge of the inner man, even after decades. Even his children could scarcely recall a time when he broke through his surface calm and showed some feeling.
His consuming passion and pleasure is his work, or as he calls it, his canvas.
It is there that he revealed the secrets of his trade and left a self-portrait.
That is an excerpt from the introduction of the book that I'm going to talk to you about today, which is Buffett, The Making of an American Capitalist, and it was written by Roger Lowenstein. Okay, so I want to jump right into Warren's early life. Jeff Paisley says this great quote where he says, you don't choose your passions, they choose you. And we see that this is the case in the life of Warren Buffett as well. First, his family, there's like a tragedy that happens to his family. They went up losing all their money. And it says, on August 13th, 1931, two weeks shy of Warren's first birthday, his father returned from work with the news that his bank had closed. It was the defining, faith-shattering scene of the Great Depression. His job was gone and his savings were lost. And the author talks about what effect this had on Warren. He says, this seemed to deeply affect Warren. He emerged from those first hard years with an absolute drive to become very, very rich. He thought about it before he was five years old. And from that time on, he scarcely stopped thinking about it. So it talks about even when he was seven, he had some kind of mysterious illness. They removed his appendix, thinking maybe that was the source of the problem. But he was still sick for a while afterwards. They weren't sure if he's going to make it. So he's in the hospital. And this is a seven-year-old Warren Buffett. And he says, he took a pencil and filled a page with numbers. These, he told his nurse, represented his future capital. I don't have much money now, Warren said cheerfully, but someday I will, and I'll have my picture in the paper.
And one of the main assets that I would say that Buffett had in his earlier life is the fact that he had a really good father. He considered his father his best friend. And the author talks a little bit about their relationship here. It says Howard Buffett was determined that Warren would never repeat his own experience of hardship. He resolved that as a parent, he would never follow the example of Ernest and demean his son. So let me pause right in the middle of this paragraph. Ernest is Warren's grandfather. He's the one that ran the Buffett grocery store. Charlie Munger, not only did Warren work there when he was younger, so did Charlie Munger. Charlie Munger compared working for Ernest Buffett as like, I think something like an indentured servitude or almost like slavery. He was such a hard-nosed boss and obviously fathers is why his own son Howard is like, okay, I'm learning what not to do for my father. And he says, he unfailing, now back to Howard and Warren, he unfailingly expressed confidence in Warren and supported him in whatever he did.
Howard also stressed a principle that was more enduring than any of his political opinions, the habit of developing independent thought. With his children at his side, Howard would recite a favorite maxim from Emerson, and this is a quote from Emerson here. The great man is he who in the middle of the crowd keeps with perfect sweetness the independence of solitude. And Howard Buffett also conveyed one of the greatest ideas I've come across. I learned this idea when I read another biography on Buffett called The Snowball. It's all the way back on Founders 100 It's about the idea between an inner scorecard and outer scorecard. I've never forgotten it since I've heard him describe it. I'll get to that more in a minute. First, I wanna tell you about the first time Warren starts investing in the stock market. He's 11 years old at the time. And it says he took the plunge and bought three shares of Citi Services.