I.O.U.S.A - Addison Wiggin [90]
Warren Buffett: Manufacturing has gotten more productive at a rate faster than most service industries have. If you look at a philharmonic orchestra from 50 years ago and now, there probably hasn ’ t been a big change in productivity. There hasn ’ t been much change in productivity, for example, in higher education. The output compared to the input of hours has not improved dramatically. On the other hand, if you look at a ton of steel, if you look at a freight car moving, if you look at a car produced, you ’ ll see enormous increases in productivity. So in manufacturing, we now get more and more goods with fewer and fewer people. But that leaves those people available to do other things that we want them to do, whether it ’ s engage in heavyweight fi ghts or play in the philharmonic or do all kinds of things, and we still have as many cars and tons of steel and freight cars moving as we had in the past. But that ’ s all to the good. That ’ s what ’ s improved the standard of living in this country.
Q: So you ’ re not concerned, then, by the impact of lowering wage rates from other competing economies?
Warren Buffett: Overall, we ’ re better off if we can get somebody else to do the things they do best, and we do the things we do best. And, like I say, in the last 35 years or so we have managed to get huge increases in the standard of living while we import about c14.indd 183
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17 percent of our GDP as opposed to 5 percent, and people are living better and we ’ ve got 4.5 percent unemployment.
But economics is not simple stuff. To help people really understand it is not simple, and there are so many people that want to make it simple for their own purposes, or who have got some particular crusade they ’ re on. We came fairly close to the whole system imploding in the 1930s because of economic conditions. People became very responsive to communism in this country. They became responsive to Huey Long. They became responsive to the Townsend Plan in California. When people are scared about economics, they ’ ll listen to whoever is the most persuasive.
Q: Is that the rise of demagoguery?
Warren Buffett: It really is. One thing I don ’ t like about the consequences of sustained large trade defi cits is I think it makes the potential for demagoguery and really foolish policies more likely over time. When you think about the history of this country, our economic policies have been pretty darn good. I mean, any country that delivers a seven for one increase in per capita living in a century has done an awful lot of things right. It ’ s never happened before in mankind. If you go back three or four hundred years ago, nothing has really changed. But, of course, you and I live far better than John D. Rockefeller lived. We can attend the World Series. We can stay cool in summer and warm in winter far easier than he could. We can move around the country in a fraction of the time he could. All kinds of benefi ts have been showered upon us by the system, essentially. So it has worked out pretty well. There are always problems, but you want to make sure that you don ’ t throw out the baby with the bathwater.
Q: Could you just talk about your business philosophy, and what is appealing to you when you see a business? What is it that you ’ re looking for when you are looking to grow your business?
Warren Buffett: In businesses, we ’ re looking for an entity that has durable competitive advantage; somebody that not only is doing c14.indd 184
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well now, but will do well 10 or 20 years from now. In capitalism, when you have a wonderful business, it ’ s like having an economic castle. And the nature of capitalism is that people want to come in and take your castle. It ’ s perfectly understandable. If I ’ m selling television sets, there ’ s going to be 10 other people who are going to try and sell a better television set. If I have a restaurant here in Omaha, people are going to try and