This article will criticize the Oracle of Omaha, so if you're concerned
about your eyeballs melting, demons flying out of your nose, or
other effects of reading heresy, then please consider perusing purer
Buffett's holding company, Berkshire
Hathaway Inc., recently held its 2002 annual meeting. (Full
disclosure: I regret that I have zero financial interest in Berkshire.)
The annual meeting is also known affectionately as "Woodstock
for Capitalists" because shareholders have the wonderful opportunity
to ask anything of Buffett and his partner Charlie Munger, and interrogators
don't have to limit the subject to investing. In this year's meeting,
a shareholder asked whether Buffett and Munger were sporting products
from Berkshire's Fruit of the Loom subsidiary, to which Buffett
replied in the affirmative and jokingly suggested "Covering
the Asses of the Masses" as a possible new slogan.
enjoy reading Buffett's words because of his astounding
track record and because he usually offers tremendous wisdom
in a down-home, entertaining style – making Buffett the Keith
Jackson of investing. Reading various notes from the recent meeting
(recording devices are verboten), I felt like shouting a "Whoa,
Nellie!" of my own when I came across the following according
to Whitney Tilson: "The market system produces extraordinarily
inequitable results, which should be mitigated by the tax system.
It’s inappropriate that the spread of prosperity in a prosperous
country should be so inequitable due to quirks in people’s skills.
This is why I’m in favor of a progressive tax."
peeling myself off this brick wall, the ringing in my ears was the
sound of statists excitedly pecking in appeals to Buffett's authority
in their pro-tax rants as they
during the death tax elimination debate. This, of course, is argumentum
ad verecundiam. Buffett's investing success makes him an authority
on investing, not tax policy. It's useless to point this out, however,
because logic-heeding statists are trapped somewhere between military
intelligence headquarters and wherever missing socks from the dryer
Mehta's notes, Buffett laments that the U.S. "has been
a tremendous economic system. It's a system that showers rewards
on my particular skill set. Our society needs corrective aspects
because this is inappropriate." The Chairman obviously hasn't
been exposed to the Austrian School of economics, or he would realize
that a progressive tax simply diverts the rewards aimed at productive
people to skilled tax attorneys and CPAs as people seek to avoid
coercive taxation. Buffett shouldn't feel guilty for his success:
under Hoppe's natural order, his skills as an insurer would still
be valuableu2014unlike those proficient at finding tax shelters, who
merely serve as a counterbalance to market distortion due to taxation.
His sense of social conscience is a Good Thing, but resorting to
the coercive power of the State doesn't make one a philanthropist.
Buffett belongs to another school of economics. Tilson attributes
this argument to Buffett: "Imagine if a genie approached you
and someone else while you were in the womb and said, u2018What percent
of your future income would you bid in order to be born in the U.S.
versus Bangladesh?' I’ll bet the bidding would get pretty high pretty
fast." While we're imagining creepy Chicago School style economies
of two embryos, let's allow the unborn to bid on who they will be.
I might bid ninety percent of, say, Michael Jordan's income, so
should His Airness be taxed at a rate of at least ninety percent?
Levying taxes on a case-by-case, class envy basis would be horribly
impractical but also downright absurd. Certainly Buffett can agree
that peacefully spreading the prosperity of free markets to remove
the punishment of being born in Bangladesh would be better –
from both moral and economic perspectives – than punishing
Americans out of a twisted sense of egalitarianism.
these gripes, I still find Buffett to be an extraordinarily positive
influence on the market. His irreverent
mocking of Wall Street options accounting was powerful and stinging
but much needed. In the Berkshire
Owner's Manual, Buffett wrote, "Charlie Munger and I think
of our shareholders as owner-partners . . ." and, even at seventy-plus
grand per stub for Class A shares, investors are willing to pay
the Buffett premium. As Mises would argue, it's hard to argue with
his profitable record, and he sets a fantastic example for capitalists,
most notably in his ideas about corporate governance, with Berkshire's
shareholder-designated contributions program, by willingly owning
up to his mistakes, and by openly sharing his ideas on investment.
Buffett investment philosophy is simple: establish a circle of competence,
stay well within it, and ignore everything else. Mr. Buffett, please
consider taking your own advice on the issue of taxation.