General Guidance for Business

Warren Buffett Discusses the American Economy

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Executive Summary

40 years ago, New York dropped dead. They lost their credibility and everybody was running against everybody else - politicians, bankers, and business people. Despite that, America has great headquarters and companies ever since. In the end, great management is a big key to success and recovery.


One day, Buffett read the entire Moody's manual and started following the Detroit International Bridge and the Detroit Tunnel. He planned to buy it, but somebody else ended up buying the bridge first.


Good governance for Detroit depends so much on the headquarter companies. Aside from that, transportation, philanthropy, and the concern of the citizens also play a huge role. Buffett would buy a company in Detroit and would be happy about that if given the chance.


Buffett loves a passionate CEO. He honestly wouldn't have bought shares of GM 70 years ago, because it was a totally different business back then. However, the car business has been rationalized at some degree by what it went through the years.

"You Can't Produce a Baby in One Month By Getting 9 Women Pregnant," Buffett exclaimed. Some things cannot be hurried up such as building a brand. A time table should determine the steps to follow. Berkshire Hathaway took a long time to get acquaintances and credibility. Any investor who can't stand the time should forget about getting in it in the first place.


Because of impatience of lack of education about investing, people do stupid things by turning positive into negative. Some investors will be tempted to sell his "good" stocks to buy "better" stocks. In the end, the choice of biting is up to the investor. However, shifting shares are not advisable as it increases tax charges.


Though there are investors in the stock market who lack knowledge in what they do, America is still going to be way ahead economically years from now. In 1776, it seemed that nothing was happening, but it has improved greatly just by looking back. USA had a population of 14 million, while China had 300 million. They were as hard working as Americans, but 100 years later, USA overtook them. Not because Americans are smarter, but because they have a system that unleashed.

In the end, a way to speed the process up in increasing money and improving the country is to have people expand their potentials. Potentials are a great of the country. If there are more people who use their talents freely, the country will be even better!

Full Transcript

40 years ago, New York dropped dead according to USA. They lost their credibility and everybody was running against everybody else - politicians, bankers, and business people. They were all mad at each other, but they sat down and worked for a solution. It didn't transform things in a day, week, or month, but they had an inherent strength. America has great headquarters and companies ever since. In the end, great management is a big key to success.


Berkshire owns 2% of General Motors. Buffett hired two fellows a few years ago to keep an eye on the funds. One of them has about 15% of his funds in GM stocks.


Buffett loves it when the CEO has a passion for his business. Mary loves cars! She knows a lot about cars! When Buffett was 16, he only thought of cars and girls, but he wasn't very good in girls. Therefore, he focused more on the cars. Americans love cars, and it's one thing that identifies them.


Honestly, Buffett wouldn't have bought shares of GM 70 years ago. However, the car business has been rationalized at some degree by what it went through the years. USA will always sell cars, and they will always make money. Someone will always make cars and sell them.


Who's to Blame?


Anyone can argue over what happened in the recession. However, one day in 2008, Bush did a great thing. He came out and issued the 10 most important words in the history of economics. Adam Smith talked about specialization of labor back in 1776. In 2008, Bush came out and said, "If money doesn't loosen up, this sucker could go down." Buffett exclaimed, "That was a great academic statement!"


Bernanke could not say, "We'll do whatever it takes." When the American public got scared in September 2008, 35 million Americans thought their money was safe. Immediately after one week, they got worried about it. 135 billion dollars flowed out in the money market fund in just 3 days. With this kind of panic, only one party can leverage it - the American government.


As long as the bankruptcy is handled fairly, its fine.


Detroit's Bridge and Tunnel Almost in Buffett's Hands?


Buffett took all the Moody's manual that has 10,000 pages. He looked at every company and focused on the transportation manual. He started following the Detroit International Bridge and the Detroit Tunnel. In 1970, they bought a firm out of the stock and Munger was placed to the board. The Canadians were hoping on them at that point, but then someone else got interested and ended up buying the bridge first.


For Detroit to build good governance, the headquarter companies are very important. Aside from that, they need to look at transportation, philanthropy, and how much a town cares about his own town. There are many other variables. Buffett would buy a company in Detroit and would be happy about that if given the chance.


Buffett stayed in Omaha and never moved to New York permanently for various reasons.


  • He can do business at any place he wants.

  • The cost of living is cheaper.

  • He's been living in his now for 56 years already.

  • His kids grew up there.

  • His house is like the center of the neighborhood.

  • His kids went to the same school he and his father went to.

  • They know almost everyone.

  • They are known in the place and they are safe.

  • "You Can't Produce a Baby in One Month By Getting 9 Women Pregnant"


    There are things that can't be hurried up like building a brand. It is far from possible to establish a brand in a day, week, month, or even a year sometimes. There's a time table to follow.


    Berkshire is an example. It took a long time to get acquaintances and credibility. Any investor who can't stand the time should forget about getting in it in the first place.


    People do stupid things in investing by turning positive into negative. Mr. Market is an example. Mr. market gives an overpriced price stock, and those who don't know much about investing might take it for fear of seeing the price increase. In other times, Mr. Market comes at the doorstep and sells a stock even when the investor is doing well in his own stocks. He will tempt the investor to sell his "good" stocks, because Mr. Market's stocks are "better". In the end, the choice of biting is up to the investor. However, just a friendly reminder, Mr. Market is never a good thing at any cost.


    The great partner in investing is a "drunk" partner. Someone who goes around and explores. Someone who does not sit and wait for stocks to come and then take whatever is offered to him. He's someone who look at a productive asset and sets his eyes on it.


    The 2008 was recession was like gold raining in one day. Buffett invested a lot of money. He didn't see it coming though; he had no idea. He just waited for it and focused on the run. The truth is no one can predict market fluctuations.


    1776 vs 2014


    America is going to be way ahead economically years from now. In 1776, it seemed that nothing was happening. the people at that time weren't smarter than us nor are we any smarter than them. But now, USA is amazing; it's improving. In 1776, it felt like nothing good was about to come out, but looking back and seeing it from a better perspective, the American system has unleashed great human potential.


    In 1790, USA had a population of 14 million, while China had 300 million. They were as hard working as Americans, but 100 years later, USA overtook them. Not because Americans are smarter, but because they have a system that unleashed.


    To get more people involved in a great system, equality of opportunity is important. Give everybody a shot! All men are created equal, but in the early 1900s, women were not equal to men. When America used half of its talents in the 1900s, it was productive and impressive. What more if it used all of its talents? America has a great long way to go!


    A way to speed the process up in increasing money and improving the country is to have people expand their potentials. Potentials are a great of the country. If there are more people who use their talents freely, the country will be even better!


    Buffett's sisters were told that they could be a nurse, teacher, or a retail clerk. They could have dreamt of a dream like Buffett. It was pathetic and unfair to limit their dreams. Good thing is that America is making progress already by giving equal treatment for everyone.


    The Future of Education


    It's really difficult to change the education system in the USA. The country spends almost $12,000/kid/year and there are 50 million kids. A good public school system is essential to the future.


    The entire Buffett generation went to a public school, and Warren Buffett sees that there are money being spent. However, more funds are needed. Education is something very significant percentage. Big philanthropists are trying to make it better.


    5 years ago Bill Gates and Buffett had the idea of calling some friends to talk about their philosophy. It took them about 3 hours. In the end, they found out that people get wealthy, and they don't know what to do what the money.


    The group now has 127 members who pledged to donate at least half of their net worth during their life and their death.


    There is more success in local philanthropists. Most foundation have a broad topic and tend to be very localized on the other hand.