Wednesday, May 10, 2017

The Other Side of Buffett

     The great Warren Buffett, the Oracle of Omaha, held his annual shareholder's meeting for Berkshire Hathaway this past week. Some 40,000 people attended the event, called the Woodstock for Capitalists, to hear Buffett and partner Charlie Munger hold forth on the company, the country, the state of capitalism and what is perceived to be sane, responsible investing advice for regular middle-class Americans.

     Buffett is lauded for his common sense and his modesty -- the very fact that he still lives in Nebraska, rather than moving to New York, LA or Washington, DC, seems to give him credibility. And the fact that he lives in the same modest house he bought many decades ago somehow shows that he is "one of us" rather than the usual greedy, grasping, maximizing-shareholder-value corporate executive or Wall Street shark.

     To be honest, I have read several books by and about Buffett, and have paid attention to his musings for a number of years. He does offer good investment advice, and in many ways he is a reasonable, responsible person.

     He is a good businessperson. And there's nothing wrong with being a businessperson. But let's face it, that folksy image and golly-gee-whiz approach is mostly a product of marketing and public relations. He may be skeptical, like many of us, about the salesmanship and sheer arrogance that comes out of Wall Street. But he himself is a sharp, crafty operator who is singularly focused on making money for himself, his partners and, sure, his shareholders, too -- anyone who can pony up for at least one unit of BRK-A at $247,000 per share.

     What got me started on this is my recent experience with a real-estate agent who works for Berkshire Hathaway. Normally the real-estate agent is paid by the seller. But now Berkshire Hathaway is sneaking in a new fee, charging an extra $375 to the buyer. For administrative fees. For doing all the paperwork. In other words, for no other reason than it can.

     So at the same time folksy old Buffett trades on his image as a regular guy, in favor of fair, honest liberal capitalism, he is gouging homebuyers for an extra $375 just for the privilege of doing business with him.

     Meanwhile, Buffett is a vocal supporter of Hillary Clinton and other Democrats. But does he truly support Democratic policies and values? Well, Berkshire Hathaway also owns a railroad company that makes a lot of money by hauling coal -- dirty, old coal -- for the electric companies to burn and pollute the atmosphere. Buffett says the right things about the environment. But let's pay attention to what he does, not what he says. Think about it ... is what he does much different from Donald Trump lifting regulations on coal miners?

     Buffett also own a big interest in United Airlines. He surely had nothing to do with pulling that doctor off the flight. But don't you think, as a major shareholder, he has something to do with the general atmosphere and culture of the company? Ditto with Wells Fargo and all those bogus accounts the company opened without the permission or knowledge of its customers.

     Then there's Coca Cola. He owns a big chunk of the company, and guzzles several cans of Coke a day. Does it worry him that Coke contains enormous amount of sugar? Does he feel in any way responsible for the obesity epidemic going on in America today?

     Apparently not. For when he defends his product he sounds disturbingly like the cigarette makers who defend smoking, or the gun manufactures who say that guns don't kill people, people kill people.

     Says Buffet, as quoted in Fortune: "I drink about five Cokes a day. It has about 1.2 ounces of sugar in it ... I like to get my calories from this. I enjoy it ... and I think that choice should be mine. Maybe sugar is harmful and maybe you'd encourage the government to ban sugar ... But I think Coca Cola has been a very positive factor in the country and the world. And I really don’t want anyone telling me I can’t drink it."

     Now I don't mean to bash Warren Buffett. Or Coke, for that matter. Or Wells Fargo. I occasionally enjoy a Coke or a Diet Coke. Just please don't try to tell me that Coke is good for me. I have an account at Wells Fargo -- but it's been a joke in my family for years that you simply cannot walk in the door of a Wells Fargo branch without the teller trying to sell you on a service or open a new account -- and if you have a credit card through Wells Fargo it doesn't blush at charging 20% interest or more on an unpaid balance or cash advance. So don't try to tell me that Wells Fargo is looking after my best interests.

     And please don't try to tell me that Warren Buffett is some kind of American hero, or friend of the American consumer. He is not an evil person. He gives a lot of money to charity. But he has made his fortune selling sugar and coal and questionable financial products to the masses. All I'm saying is, it's a little early to start granting him sainthood.

21 comments:

Jono said...

There are several fees that banks charge on mortgages that are basically for coffee and doughnut money sometimes under the guise of insurance. With all those numbers flying around they figure that no one will notice and almost no one does.
Just the fact that Buffet has as much money as he does would suggest that he hasn't been totally benevolent all his life.

gigihawaii said...

Thanks for the heads up on Warren Buffett. Doesn't he have prostate cancer and is refusing treatment for it? I think that decision is foolish.

Jo Martin said...

You might be interested in watching the recent movie "Becoming Warren Buffett', I believe on Netflix. A documentary of his work life.

Linda Myers said...

I like him anyway.

denise said...

I have to agree with Linda above.

Meryl Baer said...

As the saying goes everything is relative and when comparing Buffett to a host of other moguls, past and present, he does pretty well. But I guess we wait and see what dirt comes out after he is gone.

retirementreflections said...

I agree with Meryl. Everything is relative and time will tell. Thought-provoking post!

Still the Lucky Few said...

Another icon bites the dust! But then, we've always suspected that he had feet of clay. After all, just by virtue of being a successful businessman, he has to be at least a little self-serving and ruthless. But just the same, I'm sorry to let go of that 'aw-shucks' image. I liked it! Seems you can't trust anyone.

DJan said...

Very informative post. He has never been one of my heroes, but he's never been one of my villains, either. I have a MUCH reduced impression of him now, after reading this, and his five-cokes-a-day habit is just the worst! How did he ever get so old? I think I'll watch that Netflix documentary about him now.

Tom Sightings said...

You know, Linda and Denise, he's a likable guy ... and I don't mean to villainize him. He's okay. It's just that I don't understand why the press treats him as though he's descended from god, when in fact he's very rich but otherwise just as flawed as the rest of us. Maybe the press simplifies everyone into a cartoon character -- either a good guy or a bad guy and no one in between (and thus contributes to the polarization we see today?)

Morgan said...

I heart Buffett. :)

I mostly DO think he's a great guy. Watching the community meetings that he takes the time to do with graduating seniors, the way he encourages everyone to understand that wealth and responsibility go hand in hand, that consumption does not need to increase to infinity... I think that usually being very, very, very rich takes the flaws of a person and magnify them, so if his flaws are just drinking a lot of coca cola based on the health information of his generation then I figure they are pretty small.

I hold several index funds which include a lot companies such as coke or Wells Fargo so I may join him as a cause of obesity in the US.

PS. I'm completely surprised you included the doctor that refused to get off the airplane! Having to drag a grown man off a private transportation device like a child is hardly something to support.

Anonymous said...

His real estate company is not forthcoming at all, they include many fees and the real estate agents are unrelenting..In our tiny community they have a very bad reputation from real estate people who are trying to level the field on costs to buy homes now mostly out of reach for anyone, shame on the current fees and level of prices..I think he cultivates a image that will want people to buy his many professional holdings, drinking 5 cokes a day is abysmal at best..But he sleeps well at night and has many followers to invest in many of his holding, dairy queen and geico are other companies he is big into well this is America and people are free to do as they please, but the image of this man being like a God is ridiculous he is just a man, human and flawed like all people are! I think the former president Jimmy Carter who touted Bernie said it best, everyone has a right to vote and urge others to vote for whomever they please..!!!!!!!!!!!!!!!!!!

joared said...

Interesting perspective on Buffett. Coincidentally, came across the link allowing me to watch a streaming video of his shareholder's meeting this past week, so since I didn't have anything else going, I spent many hours out of the day watching the affair, including the selective Q&A. Bogle was also introduced -- another lauded financial guy who has reportedly acted to benefit the average person investor. I suppose everything is relative when it comes to the 1% or 2% people and the criteria by which they're judged.

I'm reminded of recently hearing a L.A. Times writer with the name Lazarus observing --in relation to uptick in airline stock values -- after the United debacle as showing there will be no change in passenger service unless we hoi polloi flyers somehow rebel to make it happen. United stockholders aren't going to make it happen as they care only for profit/dividends they make. Airline company administration isn't going to make it happen as Wall St presses them for max proft. I would add, Buffett's purported hands off of the companies he owns philosophy isn't going to make a difference for passengers, since he just wants profit, too, so we know what he champions. I'm not sure what would make him different, if he is, from any of the other corporate gurus, as you question.

RJ said...

Let's just say that Warren Buffet is one of my favorite CEOs....

retirementallychallenged.com said...

My husband and I have attended a couple of the BH shareholders' meetings (we are teeny-tiny B share-holders, not A) and have really enjoyed them. It's hard to be completely pure and be an investor - at any level - much less at his. But, I'd take his (and his friend Bill Gates) brand of capitalism over most of Wall Street's any day.

joared said...

I'm not opposed to profit, but how much is enough? Isn't there a balance between quality and service with profit? I think this is the area in which capitalism has run amuck.

Anonymous said...

People haven't yet evolved into perfection; so, I'll give Mr Buffet license to be a flawed person.

Addressing Joared's question: How much is enough is the central question in life, as far as I can tell. Obviously, I've chosen an "enough" that is much less than Mr Buffet's.

Wells Fargo: When they bought out the brokerage firm that had bought out A.G. Edwards some years ago, I transferred to a different brokerage. I voted with my feet, so to speak.

Cop Car

Steve Brown said...

Why do we judge prominent people differently than we judge other people we know? If we can, at least for the sake of argument, agree that there's nothing wrong with capitalism and investing, who among us doesn't invest in something even we disagree with, even if inadvertently, via an index fund. I see no reason smoking should be legal, but I probably invest in tobacco. I don't drink soda, but I am certain I have indirect holdings in Coke, Pepsi, and even DPSG. I wouldn't call myself a tree-hugger, but I certainly am not in favor of deliberately screwing up the planet by building more coal-fired power plants.

I guess the only difference between me and that liberal Buffet is that he has a little more money than I do. I'm pretty awful.

Barbara said...

Wow. I didn't know that about the real estate agents. Thumbs down. And you are right about Buffet having a persona. We must all pay attention to who and what we follow not just read the hype.

blackjack82 said...
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Laura Lee Carter said...

HA HA! I thought this was about Jimmy Buffet! Shows you where my heads at...