Becoming Warren Buffett

On the recommendation of my son yesterday, I spent some time last night watching HBO's recent documentary "Becoming Warren Buffett". 

It's available on YouTube and at the risk of sounding like I'm in love with Mr Buffett, it is an interesting 89 minutes, delving into his personal life, and not just looking into his success accumulating money.

From an investment perspective, the big takeaways are nothing new - compound interest, patience, value, but much of the documentary focuses on his personal relationships and Warren Buffett the 'man' rather than the 'investor'.

I found the opening scene very amusing. It featured Warren Buffett on his way to the office, stopping for a McDonald's breakfast. He starts his day by telling his wife to give him either $2.61, $2.95 or $3.17. 

On the day of filming he went with the middle option - sausage McMuffin with egg and cheese - saying "When I'm not feeling quite so prosperous, I might go with the $2.61" and adding that "the market was down this morning, so I'll pass up the $3.17". For a multi-billionaire to be saying, or even thinking that way, is actually quite hilarious.

A couple of times, it's mentioned that making money for Warren Buffett, now 86 years old, is just a way of keeping score, rather than for the money itself which he admits has no utility for him at this point, and at the end he says: 

"In a sense, the game that I'm in gets more interesting all the time. It's a competitive game, it's a big game, and I enjoy the game a lot"

I feel the same way about the, not quite so big world of betting and exchanges. More than eight years ago, I wrote:

I was thinking in the shower this morning, (yes, once a week, whether I need one or not), Betfair really is the ultimate video game. I've never been one for games, (friends at work spend hours playing Call of Duty - why? What's the point?), but in many ways the exchanges are one big on-line game. It's me versus an unknown opponent. My opinion versus yours, except in this game the points are real money.

In 2010, in a post about an article called the “Real Reasons You Gamble” by Dr Maurice Farber from the Department of Psychology at the University of Connecticut, I commented that:

I do find trading and investing a challenge, but an intellectual challenge rather than anything resembling a “war”. Trading is exciting, but without it I certainly don’t feel “desperately bored and empty”.

The New Yorker Magazine has an excellent review of the documentary which again, I wholeheartedly recommend: 

Over the end credits of the new HBO documentary “Becoming Warren Buffett,” we hear the incongruous sound of Buffett singing “Somewhere Over the Rainbow,” in a cracking voice. It’s a nod to a moment, earlier in the film, when Buffett’s daughter, Susie, says that she has a sweet spot for the song because her father used to sing it to her when she was a little girl. And, while it might seem like an odd way to end a film about the world’s most famous investor, it’s actually surprisingly fitting. The documentary, which was made with the coöperation of Buffett and his family, deals with Buffett the businessman and investor, but it’s Buffett the man and his complicated, and often difficult, relationships with the people he loved most that are the film’s real subject.

We are still treated to the greatest hits of Buffett’s business career. We hear about his early entrepreneurial endeavors—selling soda and gum door to door, delivering five hundred papers a day—as well as about his love of numbers and his interest, from a very young age, in the stock market. Buffett describes his discovery of Ben Graham, one of the fathers of value investing, from whom he learned the idea of buying “cigar butts”—companies that are on their last legs but are nonetheless so undervalued by the stock market that you can still make money off them (as you can get one last puff from a discarded cigar butt). And we get a picture of his partnership with Charlie Munger, who was instrumental in moving Buffett from buying bad businesses at cheap prices to buying great businesses—most famously, Coca-Cola—for reasonable prices, a move that was the foundation of his immense fortune.

But what makes “Becoming Warren Buffett” far more interesting than a simple hagiography is the exploration of Buffett’s personal life, and, in particular, his relationship with his first wife, Susan, who died in 2004. Personal relationships were not something that Buffett navigated naturally. At one point in the movie, he says, “I don’t have a mind that relates to the physical universe very well,” and the same seems to have been true of the emotional universe. Buffett, by his own description, was socially awkward as a kid (he attributes much of his later success to taking a Dale Carnegie public-speaking course as a young man), and the film is a portrait of a person for whom financial questions “are easy,” as Buffett says. “It’s the human problems that are the tough ones.”

In some ways, Buffett was the archetypal absent-minded professor, so locked inside his own head that he wasn’t always aware of what was going on around him. (He says he doesn’t recall the color of the walls of his bedroom or his living room.) This could be hard on the people around him. “Physical proximity with Warren doesn’t always mean he’s there with you,” Susan says, in an old “Charlie Rose” interview. His children reiterate this sentiment. His son, Howard, says that it’s difficult to connect with Buffett on an emotional level, “because that’s not his basic mode of operation.” Susie, his daughter, says that you had to speak to him in sound bites, because if you went on for too long you would “lose him to whatever giant thought he has in his head at the time.”

To some degree, Buffett’s cerebral, inward nature seems to have been there from the start. But the film also suggests, gently, that it may have been amplified by his family life when he was a boy. Buffett’s father—whose portrait still hangs on the wall of his son’s office at Berkshire Hathaway—was, by his account, a great dad, affectionate and inspirational. “The best gift I was ever given was to have the father I had when I was born,” Buffett says. But his mother, who was brilliant and ambitious, was another story. She was plagued with chronic headaches, and, Buffett says, “You didn’t want to be around her when she was having the headaches. She would lash out.” Buffett’s sister Doris is more blunt, saying that she remembers “being terrified” of her mother. “When I’d wake up in the morning, I’d listen to hear her voice. I could tell by her voice if it was going to be a terrible day or not.” It hardly seems like a stretch to speculate that Buffett’s emotional reserve might have been, in part, a reaction to the turmoil at home.

But Buffett has, over the years, pushed back against that reserve, and the movie examines him as a man trying, haltingly but successfully, to open himself up to the world and let more of it in. Buffett attributes this effort almost entirely to his first wife: “I was a lopsided person. She put me together.” Susan moved away from Omaha (where Buffett has lived for more than sixty years) in 1977, but the two of them remained close (and never divorced), and she helped to orchestrate his relationship with Astrid Menks, whom he married after she died. Susan—who is in some senses the real star of the documentary—seems to have been the driving force behind Buffett’s evolution as a person. She’s the one who got him interested in civil rights and feminism, who pushed him to become more of a public figure and to give more of his money away before during his lifetime. (Buffett, with his love of compound interest, wanted to pile it up and then donate it after he died.) The paradox of the movie’s title is that, in order to become “Warren Buffett,” the avuncular, modest figure who’s the anti-Trump, Buffett needed in many ways to stop being himself, or at least to stop being the self that came most naturally.

There’s another paradox the film hints at, too: the qualities that made it challenging for Buffett to deal with people are the very qualities that made him such a brilliant investor. This is more subtle than just the fact that Buffett loved numbers so much. In fact, his true genius isn’t just his ability to identify undervalued companies; it’s his ability to buy and hold onto those companies through the inevitable fluctuations that all markets experience. That’s not just about insight. It’s also about an ability to divorce yourself from emotion, to be rational at a time when other people are acting irrationally, and to be calm when others are fearful.

On the walls of the Berskhire offices, framed front pages from days of market panic, like the 1929 financial crash, serve as a reminder not to succumb to the passions of the moment. That’s something that all investors know they’re supposed to do. But actually being able to do it, being able to buy when everyone else is screaming, “Sell,” and not to buy when everyone is telling you to do so, is a very hard thing for most of us. For Buffett, it seems to have been as natural as breathing. But it’s not difficult to see how that hyperrationality, that ability to divorce yourself from what’s going on around you, might also make it difficult truly to connect with the events of everyday life, which happen, after all, in the moment. Buffett was born to be great at investing.

He had to work really hard to be good at living.