I'm probably gonna be downvoted for this, but what the heck. I watched the Warren Buffet documentary on HBO with my 11 year old daughter. Now, I've raised my daughter to have an entrepreneurial mindset and to always look at ways to add value to the world. The major points of the documentary that stood out to her were that he has lots of money. He owns pieces of companies who do well, and in turn he does well. His wife didn't feel that was an ideal way to live her life and left to provide value to actual people.
I didn't really know what to say, because she is right. Warren Buffet is good at picking companies who are undervalued and making money from that. That's a skill I guess. But do you want a country filled with Warren Buffets? Is there any reason to value this kind of parasitic success? The guy isn't really much different than the mafia or a loan shark. He loans money to companies he thinks will succeed, and wants interest paid back to him. At least Bill Gates provided value (and he was predatory in doing so) and his work changed the world. Aside from his eventual philanthropy, it's hard to see how Warren Buffet has changed the world.
Maybe I'm missing something. But how do you inspire a young person to be like Warren Buffet. And more importantly, should you?
Is there any reason to value this kind of parasitic success?
I'm not sure you quite understand what Buffett does. Yes, his company invests in other companies. However, it's more typical for him to invest to: (1) gain a controlling share and (2) realign the company's management and strategy.
He often turning around companies through his own expertise. Not just "loaning them money and collecting interest".
Actually, not true! His philosophy is to invest in solid business that will generate outsize profits in the future. Early on, he tried to buy undervalued companies and then try to turn them around, but he admits that this was a bad strategy, so he changed.
Perhaps I'm nitpicking, but I don't think it's fair to characterise loaning money successfully as "parasitic". Credit is a useful thing to provide, many endeavours valuable to people would not exist without it. Moreover, loans (and trade more generally) aren't necessarily zero-sum; Warren Buffett getting rich doesn't automatically mean somebody somewhere else is losing out.
>Warren Buffett getting rich doesn't automatically mean somebody somewhere else is losing out.
I guess my point wasn't that somebody else was losing out. But that Warren Buffet could have made 1/1000th the amount of profit as he did and the world itself would not have lost out. Only Warren Buffet gains, not the world as a whole. Ultimately what value does Warren Buffet's success in terms of dollars bring to the world? Again, ignoring his eventual philanthropic choices.
Microsoft was founded by Bill Gates and Paul Allen. They have, and do, sell products and services. Celebrating Warren Buffet is analogous to celebrating someone who was a provider of capital to Microsoft rather than the people who provided the products and services. The people who found and build companies are "Makers". Warren Buffet is not a "Maker", he profits off of "Makers".
For some reason, it really sounds like you have an axe to grind with Mr. Buffet or maybe with captialism in general.
From my perspective, the problem with finance today is the tendency to think short term. The endless pursuit for profit next quarter. This is not the method Buffet uses... I find it refreshing to hear someone like him suggest that a longer term view is needed.
Sure, he isn't changing the world directly by running a massive software company but he contributes in the way he can and that's all you can really ask of anyone.
I have no axe to grind with Buffet in particular. He just happens to be the topic of this post. What I do take issue with is the making of what I would call "meta-money". People making money by doing little more than manipulating the money of others. Warren Buffet just happens to be a great example of this. If you think of the world as producers and consumers, then what is it that Warren Buffet produces? What is he doing to add value to the world such that he is justified in making billions of dollars doing that?
Don't get me wrong, I'm not saying he is a bad person or that he is not highly intelligent or even shouldn't be successful. What I am saying is that it's hard to justify that he has added proportional value to the world that is worth the money he has made. To each his own, but if this were a world full of people who only wanted to benefit upon the production done by others, then this would be a troublesome world. Just imagine, could Linus Torvalds have chosen to turn Linux into a profitable venture? Could he have been all about the money and not about producing a truly great OS that people could build upon? I just don't think it's wise to put Warren Buffet as a success story above, say, Linus because he made so much more money. I'd rather live in a world of mostly Linus' than a world of mostly Buffet's.
Buffett's a poor example of the meta-money problem. A lot of the finance industry probably adds negative value and is a problem. Buffett does add some value. If you think sound finance has no value take a look at Venezuela, Argentina, the dot com bubble, the housing bubble and so on.
He makes capital. Capital is a resource that you need to run, say, a software company. Makers don't usually go too far without it. And they, makers, are the ones who put their creations on the market, for good reason.
First, he's rarely loaning money. The vast majority of the time he's an investor and an owner. He's taking risk of loss.
Second, he's creating value for these businesses. The owners have worked hard, they need to sell to someone, and Warren provides them a way to keep building their lives work without having Wall Street force them to change how they do things.
Without buyers for shares, there can be no sellers, and then there are no capital markets, and we are all far poorer for it.
What your daughter could learn from Warren is
1) Basic investment valuation skills, which can be applied to any investment, business, or purchase (including cars and homes) and improve her live in many ways.
2) Business management skills. Understanding what makes a good vs. a bad company, competitive barriers, motivation, etc.
3) The need to avoid bias in decision making. He spends a great deal of time managing his own mental framework to ensure emotions and outside forces don't lead him to make less rational decisions.
She can read his investor letters for free online, and learn many of these skills just by reading them.
It's ironic that she's entrepreneurial, and all you can take from the documentary is that he intended to donate all his wealth to charity after he died and it had grown to the largest size possible, and his wife convinced him no, it was better to do it while he was still alive. And that somehow makes him a bad guy.
