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During an April 6 visit to the Kellogg School, author Alice Schroeder detailed some of the investment insights that she gleaned from Warren Buffett as part of her research for a biography on the business icon.

Alice Schroeder

Buffett biographer reveals the real ‘Oracle of Omaha’

Author and financial analyst Alice Schroeder shares insider insights on billionaire investor Warren Buffett as part of Kellogg Distinguished Lecture Series

By Amy Trang

4/8/2009 - As the author of a biography about the famous investor and philanthropist Warren Buffett, Alice Schroeder is often asked the question, “What is the legendary businessman really like?”

Watch video of Alice Schroeder's presentation
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The answer is not simple, Schroeder explained during an April 6 visit to the Kellogg School. There is, after all, the Warren Buffett who dressed like Elvis for his annual Christmas card, and the Buffett who couldn’t get a date as a kid. But then there is Warren Buffett the “great white shark,” whose investments and business dealings have influenced millions — and made him a billionaire many times over.

Schroeder presented her insights to Kellogg students on the latter facet of Buffett, the 78-year-old chairman and CEO of Berkshire Hathaway, a holding company that owns firms like Dairy Queen and MidAmerican Energy. Schroeder is a former CPA and Morgan Stanley analyst who was granted exclusive access to Buffett for her book, The Snowball: Warren Buffett and the Business of Life (Bantam, 2008).

She explained that Buffett, a renowned “value investor,” tends to seek deals that fall into one of three categories. He acquires companies that have a brand value, such as See’s Candies. He also tends to invest in companies that have low-cost operations, such as GEICO insurance. Firms that have a chokehold in their market also appeal to Buffett, Schroeder said.

Buffett often uses an “and then what?” framework when considering potential investments so that he can better predict the future beyond the present circumstances, Schroeder said. Part of that forward thinking stems from Buffett’s childhood, when he saw his grandfather’s grocery business fail while his father’s investment firm enjoyed success.

“Seeing long-term trends are important in how Warren Buffett makes his decisions,” she said. “[To him,] nothing is unforeseeable.”

Schroeder also said that Buffett keeps a mental scorecard that guides his investment decisions — even when the rest of the world seems headed in another direction. For instance, in 2002 he declaimed that derivatives were weapons of financial mass destruction.

“He’s very tough,” Schroeder said. “He’s ruthless when he wants to be. He sees reality very clearly.”

Now approaching 80, Buffett does have fears about mortality, Schroeder said, but she emphasized that he still wishes to accomplish more in his life.

“His legacy is his teaching,” Schroeder said. “He wants to have an influence on people’s ideas on investing.”

Schroeder’s visit was the latest in the Kellogg Distinguished Lecture Series and was sponsored by the Kellogg School Office of the Dean. The initiative brings preeminent thought leaders from academia, journalism and business to campus to address key issues and leadership challenges confronting managers today.