Michael Lewis takes down Warren Buffett

By Felix Salmon
May 18, 2009

Michael Lewis has done it again, this time with a monster 4,700-word book review of Alice Schroeder’s biography of Warren Buffett. (Of course, it’s much less of a monster than the 838-page book itself, and it’s much more readable than Schroeder’s ridiculously overspecific prose.)

Lewis is no fan of Buffett’s, and dwells in his review on many of the investor’s weaknesses: his juvenile shoplifting, his dysfunctional family life, his “diet of an eight-year-old”. He even explains why he thinks that “there has never been a better time to bet against Warren Buffett” — not that Lewis himself is about to do so.

Lewis says that Buffett is unhappy with Schroeder’s book; he’ll be much less happy with this article, I’m sure. But of course Buffett won’t respond directly; he’ll just schedule another marathon interview session on CNBC and revel in the adoration of the cameras and the anchors. He might not be loved by his family, but he’s good at finding people who love him in the world of financial media.

Update: To clear up a bit of confusion, yes, the Lewis piece bends over backwards to claim that it isn’t a takedown. But it is. It’s much harsher on Buffett than the book it’s ostensibly a review of, and the reader is left with a distinctly unpleasant impression of Buffett.

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Comments
11 comments so far

Well, I just got done reading Lewis’ review, and I’m a little puzzled about your characterization of it. It was very explicitly favorable toward both Buffett and Schroeder. Did you not read it through?

Posted by Mark R | Report as abusive

> But the problem, as he most surely knew, was never derivatives. (This was a man who, in 1998, stood ready to buy the entire trillion-dollar derivatives book of the collapsed hedge fund Long Term Capital Management.) The problem was stupidly priced derivatives.

I think this captures a lot. Buffett — like anyone who becomes known as a decent communicator — simplifies a lot in his public comments. His problem isn’t just with cheap derivatives, but with derivatives that people buying and selling them don’t understand — which are, ipso facto, stupidly priced.

I just read the book and can tell you its just too damned long- winded. The author tortures us with unnecessarily long trivia descriptions of early remote family relationships, as if that will later have some bearing on how the great Buffet will react to fluctuations in his subsidiaries stock prices.
The most intersting part for me was hearing about Buffets early adulthood, which is where he first gets a bankroll together, and hasn’t been detailed previously. I’ve read many books about Buffett and my opinion on the man is that he has a system that works for him because of his and his associates anally retentive personalities, but there are better and less time consuming systems. In summary, I think Buffet could have been a lot richer (which has been his only real goal in life) if he hadn’t had such a high opinion of his own methods, but ultimately he would have been a richer man if he’d spent more time smelling the roses.

Posted by Buffetreader | Report as abusive

Bully for Lewis for taking on the Boob of The Breadbasket. He destroys the US’s oldest rating’s agency by taking them public, uses their clout to swoop in and disrupt the monolines ability to raise capital in a crisis and throws $billions at several iceberg magnets like GE and Wells Fargo, lost tons in the currency market and pulled the cord too early on Silver. Back before his senility, he used to keep his mouth shut. Looks like at age 78, he’s doing his victory lap. Speaking of laps, I heard he had a few Cees bon-bons in his “Depends” when he heard Becky Quick of CNBC got married.

Posted by John P. Crowley | Report as abusive

Hmm. I was left with a more complete picture of Buffett as a flawed and insecure human, but I’d I say I like him more than I did yesterday. Lewis clearly (to me) feels the same way. It doesn’t seem at all like he’s “bend(ing) over backwards to claim that it isn’t a takedown.” Rather, Lewis has seen the man’s warts and come out regarding him fondly.

Posted by Mark R | Report as abusive

After hearing Buffett rail against inflation recently, shortly before the report of the biggest deflationary year since 1945, I can believe that the world has passed him by. Surely he’s correct; inflation will rear its ugly head again, someday, but to hear that it’s a problem today shows just how out of touch Buffett is.

Posted by Curmudgeon | Report as abusive

you can throw Brian Wesbury under that inflation bus while you’re at it. He was cautioning about future inflationary concerns late last week on cnbc…and crazily suggesting the FED should tighten by end of 2009

Posted by Griff | Report as abusive

This is from the last paragraph of the review. How someone could see it as a take-down of St. Warren is beyond me.

“Buffett might not like it, but this book has done him a very Buffett-like service. Twenty years from now, when the financial markets have forgotten our current trauma, and finance is once again fashionable, some young person will pick it up and discover that history’s most legendary investor was not a cartoon but a real live human being. And still, somehow, deeply admirable.”

Posted by Ramdas | Report as abusive

“But the problem, as he most surely knew, was never derivatives. (This was a man who, in 1998, stood ready to buy the entire trillion-dollar derivatives book of the collapsed hedge fund Long Term Capital Management.) The problem was stupidly priced derivatives.”

I love Michael Lewis, but in his conclusion to this paragraph he doesn’t know what he is talking about. People love to read other people summarizing what Warren said, but it’s pretty easy to read what he wrote about derivatives, it’s right up on his web site. The correct answer, Mr. Lewis, is “counterparty risk”. Buffett warned about taking on counterparty risk from people who might not be able to pay you.

Buffett lives by that credo, he doesn’t take any counterparty risk in his derivatives, the people who bought them do. And there was no counterparty risk into buying Long Term Capital Management.

So it doesn’t matter if a derivative is priced correctly if you’ll never get paid.

And BTW fear of “counterparty risk” is the reason that U.S. taxpayers have sunk over $100B into AIG,, so Buffett was and is exactly right on this issue.

Posted by Randy Hill | Report as abusive

I don’t buy Michael’s views for the most part. His argument is that it would always be profitable by taking only few positions and believing that investing is like tossing a coin. Hence, too few risks and thus, Buffet’s success is a simpleton’s formula, if applied right.
1) Why don’t Michael try the same and achieve a compounded growth rate of over 20% over next 20 years?
2) The incident on Wall Street journal’s report appears to me more like hearsay than based on facts. Time and again, media has proved that it can stoop down to any level to entertain the readers and grow the business. Michael, did you consult Buffet or James Burke before you wrote that piece?

Posted by Maavi | Report as abusive

It is really too bad that Lewis is such a cynic, because in his efforts to be objective and contrarian he badly reveals his rationalization and bias. Lewis’s presumption that Buffett’s distancing from Schroeder was due to an assumed less flattering portrayal in a biography that was in actuality very benign is laughable. The whole book read like a novel and gave no special insights to Buffett’s personality. Keep in mind that this is the first biography that Buffett ever collaborated on. In all likelihood, he did not approve of how well it was written. After reading it a handful of times, I cannot say that I disagree either. Lowenstein’s book, for example, is far better.

Posted by peregrine01 | Report as abusive
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