'My own butt' Spanx inspiration: Billionaire inventor

"My own butt was the inspiration" for the Spanx phenomenon, billionaire Sara Blakely told CNBC on Wednesday.

"I couldn't figure out what to wear under my white pants. I don't know if Warren has the same problem, Blakely said in a "Squawk Box" interview, while sitting next to Warren Buffett at Fortune's 15th annual "Most Powerful Women's Conference" in Washington. "I knew there was a void between the traditional underwear and the heavy-duty girdle."

At first, she made her own solution. "I cut the feet out of control top pantyhose. And realized it was better than anything I can buy on the market as far as smoothing. [But] it rolled up my leg all night under my pants. So I went home that night and said, 'I have to figure out to keep this below the knee.'"

Blakely said she grew up wanting to be a lawyer but "bombed" the LSATs. She landed at Disney World, looking to be the character Goofy. But she was too short and asked to be a Chipmunk. "I was not on a very good trajectory."

During the time of the Spanx epiphany, she had $5,000 in savings and was selling fax machines door to door, making $40,000 a year. "It was basically my only job out of college."

The first two years, Blakely said, she was involved in every aspect of manufacturing Spanx, "selling it, marketing it; trying to wear all the hats because I couldn't afford to hire anyone." She never took a business class and didn't know how the retail industry worked. I think I was probably not as intimidated as I maybe should have been had I known all the research. I went into an industry that had been on a 15-year decline." She got Spanx into Neiman Marcus by calling the retailer on the phone.

She eventually hired a CEO—who's been with her for 11 years—to do the things she couldn't do. "I was actually eager to hire my weaknesses. I find that a lot of entrepreneurs, we tend to get in the way sometimes of our own growth."

"I feel like I embody the 'American Dream,'" Blakely said. "I have all these 'pinch me' moments ... and now I'm sitting here" next to Buffett (who said "she's the reason you have to be bullish on America").

So from fax machine sales to the Spanx body shaper empire, Blakely has now taken a major step for charity—becoming the first female self-made billionaire to be a part of the Giving Pledge, a commitment by the world's wealthiest individuals and families to dedicate the majority of their wealth to philanthropy.

During her "Squawk" appearance, Blakely also told a story about her trip to England to expand Spanx internationally. "I jumped on a plane, went over to England with my little lucky red backpack and cold-called Harrods, Harvey Nichols, and Selfridges. And I also got an opportunity to be on the BBC."

"So the gentleman interviewing me starts out, 'So Sara, tell us about [what] Spanx can do for women in the U.K.," she continued. "I took a big pause and I said, 'It's all about the fanny. It smooths your fanny.'"

"This man lost all color in his face," she admitted. "And I had no idea, but apparently fanny means 'vagina' in England."

Blakely is now making Spanx undershirts for men ("Squawk" co-host Andrew Ross Sorkin wears them), and she gave a pack to Buffett during Tuesday's appearance. Buffett thanked her and said: "I am holding a gift which promises to transform my whole public persona. I may go change while we're doing this. And maybe you'll see a new Warren."

The Berkshire Hathaway boss also lauded Blakely with business praise—saying entrepreneurship is key to growing the economy. "Washington has its place, but it's much more important to have ... Sara Blakelys" driving innovation.

—By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.