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.

What does it take to achieve the American Dream?

There's a reason I listen to right-wing talk radio, even though I'm supposedly a liberal. It tends to be MUCH more entertaining that the boring left-wing drivel.

And sometimes, it can be enlightening.

Like yesterday, when I heard conservative host Andrew Wilkow complain that us liberals 'didn't get it.'

According to him, conservatives railed against tax increases and government takeovers because they redistributed the wealth - their wealth - and liberals didn't mind, because liberals tended not to be the generators of wealth in the first place.

"They're redistributing your money."

Conservatives, according to Wilkow, were the entrepreneurs in America. The small business owners and the driving force behind generating profit. Liberals, according to him, only ever succeeded in the fields of academics and the government - areas in which they used abstract philosophy to solve problems, or other people's hard earned money.

It's all bullshit, of course. If you want to look for the people who generate wealth in America, look no further than Warren Buffett, the richest man in the world in 2008.

This is Warren Buffett. Warren Buffett is awesome.

Entrepreneur, businessman and financial genius, Buffett remains an unrepentant liberal who enraged the right-wing when he argued that people such as himself should pay MORE in tax, not less.

"If you're in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent."

Andrew Wilkow is completely shy of the mark when he claims that conservatives are the only successful or entrepreneurial Americans.

Nevertheless, what he said struck me like an epiphany. For all Wilkow's rubbish, he did highlight an important point. Whether liberal or conservative, the successful people in America got that way from generating wealth.

It reminded me of something I read in the wonderful book Career Warfare by David D'Alessandro. He was quite unequivocal about it - the most important members of any tribe are the ones who bring home the bacon.

It might seem enormously obvious to the rest of you, but it actually came as quite a surprise to me - simply because I'm not necessarily a 'money generating' kind of guy.

I did have a long, moderately successful career in sales, but materialism has never been the overriding motivation in my life. At one crossroads in my career, I even turned down a job paying double what I was earning at the time to finally become a writer full time - and never regretted it.

But I do aspire to greater things, and yesterday I wrote about how America was a land of opportunity - and those opportunities were just out there, waiting for me. I realize now that it takes a certain aggressiveness to seize them.

And, as Sun Tzu advised in The Art of War: "Opportunities multiply as you seize them."

My freelance writing career is a perfect example. I was explaining the process of getting published to a family member the other day - explaining the concept of contacting editors, pitching articles, building relationships and 'delivering the goods' and she remarked that it all sounded a lot more businesslike than she'd imagined.

And she was right. I'd never realized it before, but I'd actually built my fledgling writing career not on my ability with words, but by using all the skills and knowledge I'd gathered working in sales. I wasn't selling advertising - I was selling myself.

And it worked.

As a writer, I think the only thing more satisfying than seeing your work in print is actually receiving a cheque for it. It means your writing has value - and while ALL writing has value, a cheque actually means somebody else thinks it has value, not just you.

That got me thinking further. I feel like I'm on the cusp of working out how to 'bring home the bacon' using the skills that I've developed. I just don't know how to right at this moment.

Not yet.

But I'm working on it.

America

Today was the first day Autumn really hit me.

It was cold - cold enough to hang up my 'summer' coat (the Indiana Jones leather bomber jacket) and switch to the 'winter' coat (an ankle length Spike coat) and the whiff of creaking leather was enough to send me reminiscing about arriving in America again for the first time in October of 2006.

Nostalgia's a good thing because it reminds you of all the things you love about a place, even when months and years have made you complacent about those advantages.

Today was a rare, but welcome occasion in which I remembered why I loved moving here so much.

For example, I started my day by clambering behind the wheel of a big, old car. Wooden dashboard, leather steering wheel and six-feet of long, sleek bonnet stretching out in front of me. Old cars are a passion for me - and it wasn't until America that I got to drive one again.

As I filled up with petrol, I realised that a tank of 'gas' cost the same number of dollars as it did pounds in Britain - about $35. So many things here in America are cheaper. It's honestly like every dollar buys you what a quid does in the UK. For that reason, we're in the black - whereas in the UK, we always scrimped, saved and hovered one paycheque from oblivion.

At work, I got an email from the editor of a magazine I write for. The fact that I've been able to launch a modest freelance writing career in America - and earn money for it - reveals that opportunities exist here that simply don't back in England.

I'm not sure exactly why. Perhaps it's because Americans appreciate people who do things, rather than people who are qualified to do things. Or maybe it's because I had an opportunity to redefine myself in America - whereas British society defines you - by your accent, your school, where you live and even the color of your hair.

At work, I argued (good naturedly) with somebody who was offended by the adverts being posted across New York for the new Tucker Max movie I Hope They Serve Beer in Hell. It made me grateful for the fact that we live in a country in which freedom of expression is a constitutional right and the politically correct mafia can't ban things indiscriminately like they seem to in England.

During my lunchbreak, I discovered a great new blog by a Colorado librarian called Jamie LaRue - who made a particularly noteworthy comment that I enjoyed because it tied into my reading on the American War of Independence (yes, I'm still wading through The Glorious Cause: The American Revolution, 1763-1789)

"...our whole system of government was based on the idea that the purpose of the state was to preserve individual liberties, not to dictate them."

It reinforced my belief that Stephen King's 'The Stand' is coming true and all the awesome people gravitate towards Colorado (Sasha, Sarah and Coffee Bean, for example) and it reminded me that America was a nation founded on secular freedoms, not religious restrictions (as some people would have you believe.)

As I drove home, I noticed that the Halloween Store on US1 opened today - reminding me that we're one step closer to my favorite holiday of the year (and an excuse to dress up in silly costume.) We've already got Mini Militant's. Watch for pictures soon!

And finally, I came home to my lovely wife and my adorable son and I realised that everything in my life has blossomed in unexpected ways since coming to the United States.

Sure, I grow frustrated with life here sometimes. I'm adopting an almost libertarian distrust of the federal government, even while I argue that we need public involvement in the private health care industry.

[Hey, conservatives argue that the government can't run anything right, and then claim that public health care will so so efficient it'll put private insurers out of business. That's no less retarded! - Editorial Bear]

But America is an opportunity. I realise that your destiny here is largely of your own creation and I never felt like that in Britain.

I look at my brother in law, who started a million-dollar business without ever going to college. I see the example of Warren Buffett and Michael Bloomberg, who built their fortunes gambling with pennies. I even look at Barack Obama, who was an undistinguished kid from a modest background who made history when he strode into the White House.

Sometimes I feel deflated, living in our tiny rented house and living our modest little lives. But then I remember that all my hopes and dreams are out here, in America. At least, they are if I can just summon the power to seize them. Maybe I never will, but for some reason, I still feel like I'm inching my way closer and closer to them each day that I spend here.

Is now a good time to buy gold?

"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

Warren Buffett

When it comes to the gleaming glimmer of gold, there are two schools of thought: It's the safest place to invest your money, or it's a startlingly wasteful investment.

I've always tended to lean towards the latter - although today's newspaper headlines revealed that gold has rocketed through the 'psychological ceiling' to top $1,000 an ounce for the first time this year. Some investors who boarded that train at the right moment last year will presumably be very happy.

But is now a good time to buy gold?

"We are unconvinced that all the ingredients are in place for a sustained surge higher in gold,"said John Reade, from USB - although investors from COMEX are of a different opinion. They estimate gold will hit $1,600 an ounce by December.

There are two ways to invest in gold. There's dabbling in the market - buy bullion as part of your 401k or portfolio. When you buy gold bullion like that, you're at the mercy of brokers and the market, but it has the potential to net you fast rewards (and equally fast losses.)

But another option is to take a leaf out of Auric Goldfinger's book and buy gold coin instead. When you physically possess your gold, it takes on a much more visceral value. Although Warren Buffett might argue that gold really has no practical value, there are generations of gypsies, Jews, pirates and spies who've lived or died as a result of carrying their wealth on them.

In the James Bond novel 'From Russia With Love' it was a handful of shiny gold sovereigns that saved his life in his climactic battle with SMERSH's 'Red Grant.' A pirate's golden earring was traditionally of just enough value to pay for his funeral when he died. It's traditional for gypsies and Indian women to openly wear their gold, so if they are separated from their families they have something of value to barter with.

The possession of gold has always had a value beyond it's worth. As Auric Goldfinger himself explained:

"All my life I have been in love with gold. I love its colour, its brilliance, its divine heaviness. I love the texture of gold, and the warm tang it exudes when I melt it down into a true golden syrup. But, above all, I love the power that gold alone gives to its owner. I have worked all my life for gold and, in return, gold has worked for me and for those enterprises that I have espoused. I ask you, is there any other substance on earth that so rewards its owner?"

So by all means, buy gold or buy gold coins. It may be a risky investment for short-term gain, but it's a commodity that's always held some intrinsic value. Although I might agree with Warren Buffett that gold is an impractical investment - thousands of years of history has shown it to always be one that's heavily in demand.

Sorry, Nicole. The Buffett's closed.

"The perfect amount of money to leave to your children is enough so they feel they could do anything, but not so much that they feel they could do nothing."

Warren Buffet, 29 September 1986.

I've been learning a lot about Warren Buffett recently.

The second richest man in America is a bit of an oddity. Despite having a personal fortune worth over $60 billion, he makes an intense effort to live 'normally.'

The 78 year old still lives in the same modest Nebraska home he bought in 1958 and is vocal about his opposition to the 'ovarian lottery' which creates 'dynastic wealth.'

Buffett had to earn his money, and accuses those who grow up in wealthy circumstances of being merely "members of the lucky sperm club." His contempt for the likes of heiress Paris Hilton is palpable!

But it turns out that you can't be incredibly wealthy without finding a Paris Hilton somewhere within your own family - and in Buffett's case, her name is Nicole - his youngest son's adopted daughter.

This 32 year-old 'abstract painter' lives in the liberal community of Berkeley, California and if this article in Marie Claire is anything to go by, a more ungrateful, undeserving brat you'd be hard pressed to find.

Marie Claire tells a tale of woe:

"What's it like when your grandpa is the richest man in the world? For Nicole Buffett, it means forgoing cable TV and health insurance and making do on $40,000 a year."

Excuse me while I spurt my coffee across my keyboard.

According to the 2006 Census figures (and household incomes have declined since then) the average income in America is $35,499 dollars. The vast majority of those people can afford cable TV and health insurance - in fact, they don't have any choice!

Nicole's 'making do' on five grand more than the average American, so perhaps she shouldn't be complaining about it!

But poor old Nicole has a different story to that of the average American. While they go to work for minimum wage, struggling to pay bills and make ends meet, she lives in an artistic colony in a California college-town - struggling to make it as an artist (instead of just struggling to 'make it' like regular folk.)


She is able to sell her paintings for as much as $8,000 apiece (arguably only thanks to her famous name) and therefore doesn't feel compelled to go out and get a real job like the rest of us (hence why she doesn't have health insurance, even though she could afford it.)

"I've been very blessed to have my education taken care of, and I have had my living expenses taken care of while I'm in school," she boasted in the documentary "The One Percent," an examination of the lives of rich families.

However, following that expensive education, she clearly felt entitled to continue to be supported by her wealthy grandfather:

"It would be nice to be involved with creating things with all that money," she said on the Oprah Winfrey show. "But I feel completely excluded from it."

Ironically, Nicole Buffett's done wonderfully thanks to her adopted grandfather's money. She enjoyed a top-notch liberal arts education most Americans would be unable to afford. Then, instead of joining the 'real world,' she's managed to make an arguably comfortable living as an artist.

Living in New York, I know plenty of struggling creative people who'd think their dreams had come true if they got to earn $40,000 a year painting pictures!

But instead, Nicole Buffett demonstrates - and Marie Claire advocates - this curiously American phenomenon of pretty girls developing a totally undeserved sense of entitlement.

Nicole Buffett lives well - better than the majority of Americans. Yet because of the family name her mother married into (however briefly - she divorced Peter Buffett in 1993) Nicole feels she deserves to live the millionaire's lifestyle, without doing anything to deserve it.

Somewhat ironically, the Marie Claire article ends with a defiant statement that's in complete contradiction to everything she said previously:

"I will always be self-reliant," she says, curled up on her couch, her dreadlocks draping her body like a quilt. "Grandpa taught me that, and it has set the tone for my life."

You can see her art at Nicole's website, HERE.