Warren Buffett is like my ten-year-old. When she gives me some BS story about something she needs me to buy or something she is suggesting, there’s always a good reason for it. But whenever there’s a good reason, there’s always a real reason. And the two are starkly different. My job is to figure out the truth while the opposite is still spitting out of her ten year old mouth.
With Buffett it’s the same. He’s like this saintly investor who can do no wrong in the public perception. He’s America’s grandpa investor, filled with sexual innuendos made honest and funny in that way that elderly people can transform ancient history into metaphor. And while he’s talking and you’re smiling, he very quietly tries to put his hand in your pants, on your wallet. It’s all innocent. Until you realize he just got more rich and you got more broke.
Let’s look at his hidden agendas, just like we should always look at the hidden agenda of anyone who has power over us (even my ten year old, who has infinite power over me). There’s nothing wrong with having ulterior motives, it’s just better to be aware of them than to be fooled by them. As background, I should mention that I’ve attended Buffett's annual meetings, written a book about him, and produced probably hundreds of articles about him.
A) He declared nuclear war on the US. This is a slight exaggeration but in 2001, almost immediately after the 9/11 attacks, he said on national TV that there was almost a 100% certainty that there would be a “nuclear event” on US soil within the next 50 years. He had no evidence to back this up. He said this when the nation was in its greatest fear. Living only 4 blocks from Ground Zero I took his words as gospel and I was very afraid. After all, Warren Buffett has the trust of the nation and he’s saying we are going to be attacked by a nuclear event. I could only imagine that it would be right near my home, where I had 1 kid, and another on the way. In part, I ended up moving far away because of this.
So what’s the reality of why he said this? For one thing, he has the largest insurance company in the world. Guess what? Suddenly he created a new market for himself. He’s the best businessman and salesman alive. He started insuring major events for nuclear catastrophes. After all, “there’s a near certainty” that one will happen. He made probably hundreds of millions of dollars over that one alarming statement.
B) He has his hand in my wallet. The guy has made billions of dollars by exploiting every possible situation he could. That’s fine. That’s what capitalism is. I’m a capitalist. But take your stinking hand out of my wallet you dirty ape. Why do you care how much someone is taxed? You say there is going to be societal unrest unless the people who provide funding for companies, create jobs and invest in innovation, are taxed? Societal unrest? Why not encourage that innovation instead of trying to steal everyone’s money straight out of their wallets. Why not shut down our various wars and 150 military bases if you want to pay down the deficit. There’s a million other ways to do it than putting your hand in everyone’s wallet.
C) He pretends to give to charity. I have nothing against giving to charity. But I often think people give to charity for the wrong reasons and don’t really understand much about the charities they are giving to. Buffett has said repeatedly he won’t give charity because he thinks it's better for him to compound his money and then give upon his death, which is what he is doing with the Gates Foundation (and which he has already started to do). So suddenly he is labeled as the greatest philanthropist ever when, in fact, he has barely given a dime to charity. Except in one case:
D) He lies about his kids. He often says his kids will get basically nothing from him. He says, nobody should win the “genetic lottery." In fact, there’s a notorious story where one of his daughters had to buy a necklace from Zales Jewelry (which Buffett owns) on a layaway plan.
Meanwhile, Buffett has given each of his kids a charitable foundation with billions each to manage. If a foundation has $3billion in it, then something like $90million can go to salaries. I think his kids will do fine with that kind of money. Buffett barely spent time with his kids when they were growing up (this is well-documented in every biography about him), he lies about how he gives them almost nothing, but meanwhile, they can make $90million a year salary. I don’t care about any of this. Just stop lying to us all about parental values and lecturing people on how much they should leave their kids. It’s all BS and once again, take your hands out of my wallet.
E) Taxes, part II. Despite his ongoing demands that people pay more taxes, Berkshire Hathaway has been in an ongoing tax dispute with the IRS since 2002. In other words, he doesn’t want to pay taxes (note how he conveniently avoids the estate tax by giving it all to charity upon his death) and his company doesn’t want to pay taxes. Why is this? Because he correctly believes that he is a better allocator of money than the US government. Well, I think I am also, and most people are (I wouldn’t send little kids to fight 5 wars for instance). So why is Buffett so insistent that everyone pay more taxes than him?
F) He’s not your Grandpa. Everyone loves Buffett. He has fun sexual metaphors to describe complicated business situations (in the 70s when he found lots of cheap stocks, for instance, he felt like a kid in “a whorehouse”). Every annual meeting is usually filled with fun sexual innuendos and everyone laughs, “Oh, that Warren." He has a small house on a suburban block. When I was in Omaha a cabdriver even offered to drive me past there. It really was a small house on a suburban block! That’s amazing! He’s so humble! I don’t know what homes he owns now but at least in the past ten years he owned this nice Laguna Beach $4million home:
Again, nothing against him. It’s just that my grandpa doesn’t own a home like that.
G) Stocks forever. But it’s because of this “Grandpa” image that he’s able to say things to people like they should “buy and hold stocks forever” and people listen to him. Of course he wants you to hold a stock forever. Let’s say he owns the same stock as you. You own 10,000 shares and he owns 20 million shares. If things start to go down with that company you have an enormous advantage over Buffett. You can sell in one day, in one trade even. It might take him months to sell. Buffett does not buy and hold stocks forever. Just in the past six months alone he’s sold hundreds of millions worth of Kraft Foods and Johnson & Johnson.
H) Healthcare. Despite Buffett’s support of President Obama (he can support whoever he wants, I could care less) it’s interesting how he has common sense when it comes to Obamacare, saying that it is insufficient. However, even though I believe this also, I still think its worthwhile looking carefully at his agenda. Of course he is going to criticize any system that puts stress on the insurance industry. He’s the largest insurance company! One of his criticisms stated that the “medical industry is very focused on maintaining it’s income." Duh! Again, Warren, keep your hands out of other people’s pockets. By the way, my own personal feeling, which I believe Warren supports, is that companies like CVS (which he just bought shares of ) and Wal-mart should continue to open cheap healthcare facilities to provide lower cost medical care. This is the real direction of healthcare right now. Not over regulation.
Meanwhile, even more revealing about Buffett’s opinion on healthcare is his statement to John Gutfreund during the 1987 RJR Nabisco battle documented in Barbarians at the Gates: “I’ll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It’s addictive. And there’s fantastic brand loyalty.”
Great stuff, Warren. According to cancer.gov, of the “250 chemicals in nicotine, over 50 are known to cause cancer.”
I) Is he a straight shooter? Buffett has long been known for his honesty and forthrightness. Little is brought up of his penny stock manipulation in the 70s (the SEC slapped him on the wrist). Far worse were the financial transactions Gen Re arranged for AIG so AIG could produce fraudulent results that lifted its stock price. It’s these manipulations that, in part, caused the AIG collapse and part of the collapse of the entire economic system. Buffett’s firm paid a $90million fine (give or take). A slap on the wrist. Did Buffett know what was going on? “I saw the contract” was all he admitted to.
J) For more, see my post: “8 Unusual Things I Learned From Warren Buffett” including his worst investment ever (not what you would guess) and his being a victim of reverse antisemitism (cruel irony considering his father was a John Birch Republican).
I don’t think Buffett is a bad guy. I don’t know him. I have no personal opinion of him. But he’s not your grandfather. Like any hard-core investor, he’d slit your throat in a dark alley before letting you make a dime of profit off of him.
My main point is: always look at agendas. Try to understand the real reasons behind someone’s “good reasons”. And yes, I know there will be comments like “blah blah Buffett is 1000x the investor and man you are.” He probably is. I’m probably a worse punk than he is. But I admit it.
A version of this column originally appeared in TechCrunch.