Prologue V

Chapter One The Young Warren Buffett 1

It Begins 8

From Investment Partnership to a

Compounding Conglomerate 13

Chapter Two Developing an Investment Philosophy 17

Howard Homan Buffett 19

Benjamin Graham 26

Charles Thomas Munger 32

In Closing . . . 47

Chapter Three Evolution of Value Investing 49

Stage One: Classic Value Investing 51

Stage Two: Valuing a Business, Not a Stock 65

Stage Three: The Value of Network Economics 81

Chapter Four Business-Driven Investing 115

Investment Zone 117

Chapter Five It’s Not That Active

Management Doesn’t Work 147

Chapter Six The Money Mind: Sportsman, Teacher, Artist 185

Epilogue 199

Acknowledgments 207

Berkshire Hathaway Library 211

For Further Reading 215

Notes 225

Index 237

Praise for Warren Buffett Inside the Ultimate Money Mind

“An erudite masterpiece. Robert Hagstrom is a rare individual: a deep thinker and clear writer. His skills are ideally suited to putting into context the philosophy and thought of our era’s most intelligent investor, Warren Buffett. The chapter on the special value that shareholders can add is a tour de force.”
—LAWRENCE A. CUNNINGHAM, author; professor and director, Quality Shareholders Initiative, George Washington University

“Robert Hagstrom’s book, The Warren Buffett Way, has long been an invaluable resource for anyone who wants to understand the methods that guide the world’s greatest investor. Hagstrom’s new book, Warren Buffett: Inside the Ultimate Money Mind, explains not just what Buffett does, but how he thinks. Hagstrom explains why—what Buffett calls a ‘money mind’ matters—and how to master it. It’s another must-read.”
—BETHANY MCLEAN, journalist and Contributing Editor, Vanity Fair; author, Saudi America and co-author, The Smartest Guys in the Room

“Pure Genius! Robert Hagstrom’s Warren Buffett: Inside the Ultimate Money Mind, for the first time, captures the blend and unique competitive mosaic of Warren Buffett’s artistic thought process. Never before has anyone attempted to describe the quality of the mind of the world’s greatest investor. Hagstrom, the world’s leading intellectual on Warren Buffett, does it again. This is a game changer in investment books.”
—ROBERT P. MILES, author; Executive in Residence, University of Nebraska at Omaha, Executive MBA Program, “The Genius of Warren Buffett”

“Trying to write about another human being, especially one as singular, accomplished, and complex as Warren Buffett is just hard. The beauty of Hagstrom’s book is its effervescence and thoughtful analysis of Buffett’s life and work. I can’t imagine engaging in a serious study of Warren Buffett without exploring the intangible dimensions as Robert does in his book.”
—TOM GAYNER, Co-chief Executive Officer, Markel Corporation

“Hagstrom’s books always enable readers to think about the world in new ways. His mastery of explaining the investment process of Warren Buffett is remarkable. This book continues that tradition and is a joy to read.”
—TREN GRIFFIN, author, Charlie Munger: The Complete Investor

In Warren Buffett: Inside the Ultimate Money Mind, bestselling author Robert Hagstrom breaks new ground with a deep analysis of Buffett’s essential wisdom, an intricate mosaic of wide-ranging ideas.

Widely known for his insightful analyses of Buffett’s investment methods, Hagstrom now takes on a much broader question: What shaped those methods? With a significant study of the multiple influences on Buffett’s thinking, Hagstrom parses a complex, nuanced worldview that is reflected in, but much greater than, the practice of investing. Buffett himself gave this worldview a memorable name: a Money Mind.

What exactly is a Money Mind? At one level, it’s a way of thinking about major financial issues such as capital allocation. At another level, it summarizes an overall mindset for successfully investing in today’s fast-paced stock market, a mindset that depends on commitment to learning, adapting, and facing down irrelevant noise. At a still deeper level, the profound philosophical and ethical construct at its core tells us a great deal about the person we call a Money Mind, a person who is quite likely to be successful in many aspects of life—including investing.

This is not a method book. It is a thinking book.

Warren Buffett: Inside the Ultimate Money Mind explains the philosophies of self-reliance, stoicism, rationalism, and pragmatism and their contributions to making intelligent investment decisions. It also outlines the evolution of value investing, discusses how to develop a business-driven investing mindset, and describes the defining traits of successful active management.

In short, Warren Buffett: Inside the Ultimate Money Mind helps readers understand the building blocks that go into making a Money Mind so they can begin to incorporate its principles in the service to a life of value.