Warren Buffett is one of my heroes.
I admire his investment prowess. I admire his devotion to frugality despite an enormous personal fortune. I admire his independent thinking. Most of all, I admire that he just donated $37 billion to charity.
Not everyone believes Buffett is worthy of admiration, though. Columnist Ted Rall writes:
Enron was evil — no question — but Rall goes beyond criticizing Lay. He attacks Gates and Buffett:
Consider investor Warren Buffett and Microsoft chairman Bill Gates, worth $44 billion and $50 billion, respectively, according to Forbes. Each one has accumulated one thousand times more cash than Ken “#1 Bush Campaign Donor” Lay. But we’re supposed to like, and even admire, these rogues.
Why does Rall call these men rogues? He doesn’t like them because they’ve made a lot of money, and he doesn’t believe they could have done so honestly:
It’s hard to see how their billions are more ethically legit than Lay’s misbegotten millions. Sorry, but “working hard” doesn’t cut it. I don’t care if you stay late at the office every night, work weekends and holidays, or you never go on vacation. It doesn’t matter how smart, imaginative or lucky you are. It just isn’t possible to earn $44 billion in a single lifetime. Not honestly, anyway.
Rall’s logic is baffling. He cannot conceive of making a large sum of money ethically, therefor it cannot be possible. Where does he draw the line? Can $10 billion be made ethically? $1 billion? $100 million? How does the amount of money earned have anything to do with how ethically it was acquired? Does Rall know anything about Warren Buffett and his philosophy?
I’ve read some biographical sketches (including this wikipedia entry), and I’ve listened to a couple of interviews. The chapter on Buffett from 50 Success Classics is available online. This profile of Buffett from 1999 at Salon provides the essentials of his personal story: he earns a modest salary, he’s lived in the same house for nearly fifty years, his peculiar investment philosophy has built Berkshire-Hathaway into a financial giant that trades at $69,000 per share. Buffett’s holdings are worth billions, but he never sells them.
Rall’s accusations are without substance. He has no evidence that Buffett has done anything unethical, just vague suspicions. He doesn’t say “Buffett did this specific thing and that specific thing”, but “I think he must have done something wrong somewhere”.
It’s [hard] to draw a direct line between Buffett’s convoluted arbitrage machinations and the reduced incomes of thousands of other people, but anyone who has been downsized by a shareholder-terrorized managing board has experienced the impoverishing of the workers whose employers he targets.
It’s hard to draw a direct line because one doesn’t exist. Here is a list of every company Buffett currently owns via Berkshire-Hathaway. How many of these companies have experienced the trouble that Rall claims? I can’t name any. Are the employees at Benjamin Moore paint stores unhappy? Is GEICO downsizing? Is Dairy Queen run by a “shareholder-terrorized managing board”?
Rall tries other rhetorical tricks, like “guilt by association”:
The average member of the Forbes 400 list of the richest Americans has seen his income rise 3.5 times — from $800 million (adjusted to 2006 dollars) to $2.8 billion — in the last 20 years. Meanwhile, real income for more than half the population increased…zero. Nada. Zip.
That’s true. But Buffett doesn’t earn anywhere near that much. Buffett earns an annual salary of $100,000.
Buffett isn’t even the Evil Conservative that Rall would wish him to be. Financial consultants have blasted Buffett in the past because he thinks the rich should be taxed more, not less. Conservatives are disgusted by him, dubbing him a socialist dragoon. The Right condemns Buffett for his ideas; the Left condemns him because he’s rich!
I’m especially puzzled that Rall is angry at Buffett and Gates for contributing their money to charity.
Recent grants paid out by the Gates Foundation include $100,000 for the museum at Pearl Harbor, $241,500 “to provide sustainable public access computer hardware and software upgrades” to libraries in Los Angeles, and $21 million “to provide curriculum and support for teachers as a part of a transformation that aims to prepare…Chicago public school students for success in post-secondary education.”
Good causes all, but maintaining Pearl Harbor is one of the reasons we pay federal taxes. Why does a national war memorial need help from Gates? One can’t help wonder whether L.A. libraries and Chicago schools might be less cash-strapped in the first place if so much of our society’s wealth hadn’t been monopolized by America’s tiny, increasingly powerful oligarchy, rather than going to city taxpayers in the form of fair wages and affordable computers.
If Buffett is guilty of monopolizing wealth at the expense of schools and museums, then so is every small investor who plays the market. So is every state pension fund. Why is it Buffett’s fault that the L.A. libraries and the Chicago schools didn’t use their endowments (whatever they might be) to make the same investments he did? Wealth is being “monopolized” by Buffett only because he made shrewd investments, investments that others could have made, too.
Rall enjoys projecting hypothetical motives onto Buffett, but what does Buffett really believe? In a conversation with Yahoo! Finance, he says:
[I agree] with Andrew Carnegie, who said that huge fortunes that flow in large part from society should in large part be returned to society.
This sounds like a noble ideal, no matter which side of the political fence you’re on. If Buffett thinks that Bill and Melinda Gates are the best people to distribute this vast fortune, then so be it. He has his reasons:
If you think about it — if your goal is to return the money to society by attacking truly major problems that don’t have a commensurate funding base — what could you find that’s better than turning to a couple of people who are young, who are ungodly bright, whose ideas have been proven, who already have shown an ability to scale it up and do it right?
You don’t get an opportunity like that ordinarily. I’m getting two people enormously successful at something, where I’ve had a chance to see what they’ve done, where I know they will keep doing it — where they’ve done it with their own money, so they’re not living in some fantasy world — and where in general I agree with their reasoning. If I’ve found the right vehicle for my goal, there’s no reason to wait.
Buffett deserves praise, not condemnation. According to Barbara Ireland:
[Buffett is] not the standard business conservative [...] I saw a humane attitude on social issues. He had two major issues: world population control and nuclear weapons control [...] Because he doesn’t impose his politics, most people don’t even know what they are.
Buffett is a man with an independent mind. He’s conservative with his money, but liberal with is ideas. I may not agree with everything he says or does, but I recognize he makes decisions based on deliberation, and for that I respect him. From the little I know of him, he is a good man. He is a model of smart financial decisions, both on the personal-finance level and on the high-finance level.
I don’t mind if you complain about the rich, but don’t make complaints without substance, and don’t try to turn the largest charitable donation in history into something evil.
Warren Buffett is a hero.
For more thoughts on Warren Buffett, check out money and giving thoughts at Free Money Finance.
[via Editor at Large]
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