The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [289]
“Starting from scratch,” he wrote, Kiewit “built one of the great construction companies of the world…. Although not the largest, it may well be the most profitable business of its type in the country, an achievement possible only because Kiewit was able to transmit, throughout an organization of thousands of employees, an unremitting insistence on excellence and efficiency.
“Kiewit was overwhelmingly a producer, not a consumer,” he went on. “Profits went to build the capacity of the organization, not to provide opulence to the owner.
“In essence, one who spends less than he earns is accumulating ‘claim checks’ for future use. At some later date he may reverse the procedure and consume more than he earns by cashing some of the accumulated claim checks. Or he may pass them on to others—either during his lifetime by gifts, or upon his death by bequest.”
William Randolph Hearst, Buffett wrote, used up many of his claim checks by building and maintaining his castle in San Simeon. He arranged to have ice hauled daily to the bears in his private zoo, much the way pharaohs used their claim checks to build the pyramids. Buffett had meditated on the economics of the pyramids. If he hired a thousand people to build a pyramid dedicated to himself, he says: “It would all go into the economy. Every dime. And a lot of forms of giving and spending are just a form of that. It’s crazy, and it’s probably somewhat morally wrong too. But there are people who would think it’s great that you’re giving employment to the people who are tugging the slabs for the pyramid. And they’re making a mistake. It isn’t productive. They’re thinking in terms of input, not output.
“If you want to build pyramids to yourself, and take a lot of resources out of society, you ought to pay like hell for it. You ought to pay a perfectly appropriate tax. I would force you to give back a huge chunk to society, so that hospitals get built and kids get educated too.”
Instead, he noted in this article, some who earned the claim checks passed them along to their heirs, enabling hundreds of descendants to “consume far more than they personally have produced; in effect, their whole lifetimes have been spent at the withdrawal window of the bank of societal resources.” Buffett found the results ironic.
“I love it,” he says, “when I’m around the country club, and I hear people talk about the debilitating aspects of a welfare cycle, where some woman had a child at seventeen, and she gets food stamps, and we’re perpetuating a cycle of dependency. And these same people are leaving their kids a lifetime supply of food stamps and beyond. But instead of having a welfare officer, they have a trust fund officer. And instead of having food stamps, they have stocks and bonds that pay dividends.”
Peter Kiewit, he wrote, “made major deposits in society’s bank…but his withdrawals have been few.” He left about five percent of his wealth to his family. The rest went to a charitable foundation for the benefit of the people of the region in which he lived, the same causes that Kiewit had supported when alive. Most of the company continued to be owned by his employees, and Kiewit had ensured that they could sell only to one another. “Peter Kiewit could not have better served his community and his compatriots,” Buffett concluded.
Among philanthropists, Buffett also admired Andrew Carnegie and John D. Rockefeller as original thinkers. Carnegie had built public libraries in poor neighborhoods all across the United States. The Carnegie Foundation had sent Abraham Flexner as an emissary to study medical education in