Summary
Buffett: The making of an American Capitalist gives details of Buffett’s personal and financial life. The book shades light on every detail about the Oracle of Omaha. It is interesting to study the life of Buffett because many people consider him as one of the greatest investors of all time. More so, investment knowledge is availed through this book.
The book provides an avenue for Investors and businessmen to learn a lot from the thoughts of Warren Buffett on issues pertaining to business and the methods he applies when making investments. Buffett: The making of an American Capitalist outlines the steps taken by Buffett that resulted to his greatness. The times and conditions within which Buffett achieved his success have been outlined in the book.
Never the less, reading this excellent biography does not guarantee outstanding success in one’s business endeavors. At a very tender age, Buffett was devoted to the study of money and making wealth. Unlike many other entrepreneurs, the entire life of Buffett was inseparable from investments. As a child, he collected golf balls for resale, placed pinball machines in barber shops and carried two newspaper routes. He was a natural businessperson.
Main Contentious issues of the author
Buffett embraced the spirit of teamwork in his early life. He employed complementary talent and maximally used it for the benefit of his businesses. One of his first ventures was a barber shop but he was clever enough to limit it to small scale to evade suspicion from large barbershop operators who had absolute control over the market.
Regardless of investment being part of his child-play, Buffett s desire to build wealth was prominent in him. This was evident in his dreams. He also spent most of his time talking about building wealth. As an ambitious young man, Buffett hated spending a dollar. To him, one dollar represented many dollars. His line of thought was that if that money was invested, it would compound to become of greater value in future. Therefore, money at the disposal of Buffett had greater than the face value.
According to Lowenstein, Buffett had a great interest in mathematics. Lowenstein shows the readers how Buffett and his friend analyzed odds and possibilities of some events. For instance, Lowenstein highlights how Buffet and his friend tried to approximate the number of people with the same year of birth in a room full of people.
By the year 1950, he had $9,800 to his name from the enterprises he ventured in. He became a disciple of Ben Graham in Columbia after failing to join Harvard. Graham taught him how to make sound investments at the stock market. Graham instilled in him the knowledge of ignoring the market and focus on the worth of stock. To monitor the current price at the market was an important part of Grahams education. He preferred purchase of stock below book value with a reasonable safety margin. The pillar of Buffetts philosophy to only invest in stock with little risk was also derived from Graham.
Graham himself as a living proof had invested in the Northern Pipeline Company Line in 1926. One share of the company was worth $65 with a book value of the company was $95 for every share (Lowenstein 170). Graham advocated for the bond money to be directly given to investors. Graham began a proxy fight when the company refused to give in to his demands. Thereafter the bonds were sold and a share dividend of $70 was given. This was profit gained therefore he derived his strategy of buying stocks from companies below their book value. Buffett got a lot of information from Graham and created a foundation to which he build his Business Empire.
Assessment of strong points and shortcomings of the book
From the book, it is evident that Buffett exceeded Grahams wisdom in business. He realized that average businesses had fewer advantages as opposed to franchise business. He ended up investing in companies like Disney and GEICO. Grahams ideas were against such investments explaining why he could never have invested in such companies. Lowenstein amazingly delivers the point of view that Buffet applied to make these investments. He explains the reasoning behind the long term investments that Buffett was willing to make.
The book has also shown that Buffett had critical thinking ability which made him identify possible changes that impacted positively on his companies. This forms a strong point where other businessmen can use to impact in their businesses. Seeking knowledge is important in ensuring success in Business just as Buffett sought knowledge in the insurance and the newspaper industry as brought in the book by Lowenstein. Buffetts knowledge in estimation of the intrinsic value of a business insured him from of losses. As a matter of fact he excelled in business more than his teacher Graham. With time, Buffett realized that some businesses were plainly bad. Lowenstein explains this using Berkshire Hathaway, which is a textile company that Buffett bought cheap but so far it had offered no substantial returns.
Buffett: The making of an American Capitalist offers knowledge on Warren Buffett as opposed to business knowledge. More so what might have worked at Buffett’s time might not be practical in the present or future. This is due to change in circumstances as well as rewriting of the rules of the game. History might repeat itself but there are minimal chances of doing so in the world of business.
Effect of the book on peoples way of Thinking
Several business lessons can be drawn from, Buffett: The Making of an American Capitalist if read carefully. Buffett employed the finest brains who were not only excellent but also honest people to manage his businesses. Regardless of his vast financial knowledge, Buffett used very talented people and allowed them to make independent decisions. He never stood in their way because he understood their contribution in the success of his businesses.
Berkshire Hathaway company was kept afloat by Buffetts policy. He instilled loyalty in employees and kept a strong tradition that let the textile company live on. However he made no attempts to improve the company because he knew that nothing positive would come out of it. Lowenstein illustrates how low the profits of Berkshire were in 1970. He writes that it received meager profits of only $45,000 when compared to $2.1 million garnered in insurance whereas his banking businesses produced $2.6 million (Lowenstein 200).
This book depicts Buffett as an investor who understood the value of insurance earlier before others could. He knew that claims were paid after the company had collected payments. This money widened the scope of his investments. Lowenstein is keen to note that Buffett valued his philosophy of being fearful when others were greedy. He could not purchase stock when they were highly valued. This explains why he had not hugely invested in stocks.
Buffett: The Making of an American Capitalist’’ shows how Buffett did not invest without seeing the value behind it. It goes further to explain why he bought the shares in The Washington Post when the stock market had crushed. He was greedy when others were fearful. Whenever wisdom is applied in the world of business, results will be great profits and the name of the investor is engraved in history as it is to Warren Buffet. Greater details of the history and investments of Warren Buffett are found in the book.
Conclusion
In conclusion, it is possible for one to become greater than Warren Buffett just as he became greater than Graham, his teacher. However, this will only occur through sound business plans with the help of brilliant expertise. Moreover, when one reads Buffett: The Making of an American Capitalist’’ he may never regret because vast knowledge and investment skills are offered. It may be a chance for potential investors to learn from past mistakes and repeat some of the successes however historical the book may seem (Lowenstein 370).
Works Cited
Lowenstein, Roger. Buffett: The Making Of an American Capitalist. New York: Doubleday, 1995. Print.