The best is enemy of the good.
The profoundest truths are paradoxical.
Saturday, December 8, 2012
Warren Buffett: Labeled "socialist" by Fox News
Warren Buffett’s tastes haven’t changed much over the years. “I like today what I liked fifty years ago,” he told me the other day. “I like reading 10-Ks. I like playing bridge. I haven’t acquired a lot of new habits. I was happy when I was in my twenties, and I don’t see a reason to change things.” We were having lunch with Carol Loomis, one of his closest friends, who is the editor of “Tap-Dancing to Work,” a new anthology of Fortunewritings by and about Buffett. As if to illustrate his point, lunch was the same lunch he’s probably been eating since he was a kid: a hamburger and fries, followed by vanilla ice cream, “strong on the chocolate syrup.” It isn’t just his tastes, though: as the new book shows, Buffett’s philosophy of investing has stayed remarkably consistent.
What has changed is Buffett’s reputation. No longer just America’s favorite investor, in recent years he’s become a kind of public sage, a role exemplified by his crusade to get the government to raise taxes on the wealthy—a crusade enthusiastically invoked by President Obama both in last January’s State of the Union address and in the recent Presidential campaign. Somehow, at a time when public hostility toward the super-rich has never been greater, he’s become not only the second-richest man in America but also one of the most revered.
Buffett’s disdain for the trappings of wealth can be exaggerated—“When I get rid of the plane, you’ll know I’m broke,” he told me—but it’s obviously a big part of his appeal to ordinary Americans. How can you not like a billionaire who still lives in a house that he bought in 1958? But Buffett’s popularity doesn’t stem from his life style alone. More important, his success evokes an economy very different from today’s risky, unstable one. These days, workers are told that they need to adapt to a world of perpetual change, constantly reinventing themselves. The investing world is dominated by a manic-depressive style, in which the average mutual fund turns over nearly its entire portfolio every year. Yet Buffett has prospered by ignoring all this. As an investor, he’s known for his patience—he says that he likes holding stocks “forever”—and he prefers a few big bets to an endless number of small ones. “If you go from flower to flower, you have to find a lot of flowers to make a lot of money,” he told me. “There aren’t that many great ideas out there.”
The way Buffett runs his company, Berkshire Hathaway, which owns more than eighty other companies outright, is similarly out of tune with the times. In the current stereotype of corporate acquirers, firms like Bain Capital load companies with debt, downsize their workforces, and strip them of assets. Buffett doesn’t do hostile acquisitions or major restructurings, and he almost never sells the companies he buys. He admits that this isn’t purely rational, although Berkshire is very profitable. But it plays to his strengths (he likes buying companies and building them) and mitigates his weaknesses (as he told me, he hates confrontation). “You’ve got to create the structures consistent with what your temperament needs to be,” he said. Whatever the personal reasons for his approach, it’s one that seems reassuring.
You can see this at work in his campaign to get the rich to pay more in taxes. There’s certainly a moral dimension to it—he calls the fact that he pays a lower tax rate than his secretary “an outrage.” Yet his tone is less hectoring than utilitarian: we need more revenue to narrow the deficit, and having the wealthy pay more in taxes won’t hurt them or the economy. His decision to give away ninety-nine per cent of his wealth feels similarly rational. As he told me, what his wealth amounts to is a giant pile of “claim checks” on the world’s resources, claim checks that are largely “worthless” to him but potentially valuable to others.Another crucial aspect of Buffett’s public appeal is his unnervingly even persona. He’s not placid—at eighty-two, he’s a garrulous bundle of energy, his conversation punctuated by little bursts of laughter—but he projects an aura of profound cool. During the financial crisis, he was the human equivalent of one of those “Keep Calm and Carry On” signs. It isn’t that he’s indifferent to danger. He was, after all, a prescient critic of the perils of program trading, derivatives, and the boom in speculation, and in conversation he seems skeptical about the prospects of really taming the markets: “Once you let genies out of the bottle in financial markets, you don’t get them back.” But his stern critiques of casino capitalism are leavened by a fundamental optimism about the future. “We’ve still got pretty damn good capital markets,” he said, and added that one should “bet that the intelligent thing will eventually get done.” You can dismiss this as Pollyanna-ish—or, alternatively, as what you would say if you were worth forty-five billion dollars. But it’s part of what makes Buffett likable: his quintessentially American conviction that there’s no problem we can’t solve.
We live in a moment when any argument for higher tax rates is bound to ruffle conservative feathers. Twice in the past year, Buffett has been publicly told to “shut up” about taxation, and last year Fox News labelled him a “socialist.” Yet Buffett’s positions are hardly radical, and the sight of an unrepentant capitalist out there talking about the greater good reassures ordinary people that the system is not beyond saving. Rather than fret about Buffett’s being a traitor to his class, Wall Street and the super-rich should see that his message helps keep the pitchforks at bay. If Buffett didn’t exist, the rich would have had to invent him. ♦