Friday, December 04, 2009

Buffett: The Making of an American Capitalist

If you wanted to find an individual who best represented the 'American Dream', you'd be hard pressed to pick a better candidate than Warren Buffett.

His story goes from delivering papers in his native Omaha, to sitting on an empire as the richest man in America - proof that anybody can make it in this great country of ours.

In Buffett: The Making of an American Capitalist, biographer Roger Lowenstein does more than just follow Warren's astonishing financial accomplishments.

He's dissects Buffet's motivations and mentality as well - illustrating not just what he did to build the quintessential American empire, but also why.

It highlights the astonishing duality of Buffett's career:

On one hand, it's clear that Warren Buffett always was a financial prodigy - memorising stock prices before the age of ten, and building a thousand-dollar newspaper delivery empire before he was in his teens.

An elephantine memory, prodigious capacity for mental arithmetic and an innate sense of 'self' helped Buffett seize opportunity after opportunity as he grew up. For over forty years, he's been an investor who's seemingly done no wrong. He's even beaten his own pessimistic predictions (in annual letters to investors, he constantly warned that his uncanny successes could never be sustained year after year - and yet they always were.)

But what's perhaps more astonishing is the fact that there was never any 'secret' to Buffett's success. No magical formula, or insider deals. He worked on a simple premise (expanded from that of his financial mentor, Ben Graham) that said some stocks were sold at below their true value - and if you bought them the market would always elevate them to their true value at some point in the future.

It's such a ridiculously simple premise - and Roger Lowenstein does such a brilliant job explaining it - that it seems almost impossible that nobody else twigged on this almost 'guaranteed' way to make money.

That's where Buffet: The Making of an American Capitalist becomes even more fascinating.

Lowenstein explains how there's always been a sort of pandemic madness running through Wall Street - and each period has seen the meteoric rise (and then dismal plummet) of countless false financial 'prophets.' Theories like 'diversification' and the 'Efficient Market Theory' made a few people rich, a lot of people poor and then sunk under the waves when a new 'hot' system came along to start the ride all over again.

Only Warren Buffett stuck to his own proven 'theory' - and earned billions as a result. Not because he's a financial genius (although he is) but simply because he dealt with facts, figures and measurable results - not whatever was the wild financial theory du jour.

And in that respect, the final benefit of Lowenstein's brilliantly written biography is that it serves as a 'how to' for investment virgins such as myself. Whether you're playing with stocks on eTrade, or starting a business for yourself, there are various mantras of Warren Buffett that will never fail to steer you in the right direction.

Buffett: The Making of an American Capitalist
ultimately satisfies on a whole slew of different levels. As a biography, it's warm, compelling and easy to read. As a story about the modern history of investment - through the eyes of the man who arguably knows it best - it's incredibly insightful. Finally (although I doubt Roger Lowenstein ever intended it to be) Buffett serves as a 'self help' guide to using 'Buffetisms' to improve your own financial future.

It's one of the most compelling and entertaining biographies I've ever read - and offered a singular insight into the life of one of America's most fascinating men.

Buffett: The Making of an American Capitalist is available for $19.00 from all good booksellers.

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