by
Bill Bonner
What's Warren Buffett to do? He is too old to rock and roll. And too rich to dissipate his fortune before he dies. And yet, said Andrew Carnegie, "a man who dies wealthy, dies disgraced." It takes talent to make money. It takes a certain kind of talent to get rid of it, too. Rarely do you find both talents together. A man who has little money, knows how to spend it. He buys trifles and gets some pleasure out of it. A man like Buffett, on the other hand, has spent so much time making money that he lacks the time and temperament to part with it. Instead, he pays vast sums to lawyers to protect his stash for as long as possible. And then, he starts a foundation and gives it all away, anyway. The Sage of the Plains has opined many times that he does not want to contribute to the "lucky sperm club" of people who are born rich. He forgets that the day he was born, he had already squirmed into an equally lucky club of America's power elite. His father was a member of Congress, and one of the very few of that class, apparently, with any sense or honor. But rather than thank his own lucky stars for that bit of fortune, Warren now seeks to darken the heavens for everyone, insisting on the need for inheritance taxes so that we can all start out with our share of the national debt and little else. A "meritocracy" he calls this. A meritocracy is a dreadfully practical system. In a free market, at least theoretically, the people who merit fortunes are those who most give other people what they want. A man who offers a computer software program that doesn't work, for example, is not likely to merit much profit. Microsoft products do work...at least, most of the time. And at least long enough for them to get onto your desk. And Gates has done a spectacular job of getting them onto your desk. On the other hand, an investor who buys shares recklessly does the world no favor. He puts his capital in the wrong places. He throws his seed on barren rock, where it is wasted. He merits no reward. But we will ask the question right out loud: why is it better to have money concentrated in the hands of a few plucky meritocrats, rather than in the hands of the many lucky children they leave behind? Buffett will say that the meritocrats earn it and know what to do with it. We wonder then what it he is thinking when he gives his money away; every penny will go to people who never earned it. June 2006 will go down in the history books as a propitious one for world improvement. Bill Gates announced his retirement from Microsoft; he will devote himself full time to doing good, he said. Then, the second richest man in the world, Buffett, said he was giving $31 billion to the project. And how could anyone carp? The papers were united in their praise of the two. After all, they offered to ease the suffering of the poor...to cure diseases...to bring technology to bear on the problems of poverty and disease – with their own money! Here were rich men headed for heaven, said the press reports. But what would actually become of Buffett's money? Would it not end up going to the poorest people in the world...people who have no idea of how to make money or what to do with it, if they make it? What kind of meritocracy is this? Then, on Wednesday, July 12, 2006, came a full-page ad in the Financial Times, with photos. There was Bill Clinton, looking little different than he did in his high school yearbook. And there were Laura Bush, Jacques Chirac, Rupert Murdoch, Tony Blair, and of course, Buffett and Gates. All of them had pledged to "identify immediate, practical solutions to the world's most challenging issues." But if these people could come up with such solutions so easily, why have they been holding out on us? Couldn't they have spared a day or two for such important work last year...or the day before? Whenever we hear about so many of the world's great ones gathering in one place – in this case the Clinton Global Initiative, a confab organized by the William J. Clinton Foundation – we shudder. What if a giant meteor should strike that very spot? Would all these visionary solutions disappear like wooly mammoths? Would humankind have to endure another millennium in the mud? Elsewhere in the Financial Times we discovered that "Gates and Clinton link on African health." And here we paused to draw breath. The two are traveling around the Dark Continent, figuring out how to spend Buffett's money brightening the place up with health and development programs. They might as well be Thomas Aquinas and Mahatma Gandhi setting up a fireworks display; smart men, but not likely to know what they're doing. So, what will come of all of it? We don't know. But we shake our head. If only Buffett had not made so much! A lesser fortune might have been squandered in the usual way: effortlessly. Women, houses, boats, art. Yes, art. Buffett might have acquired the most expensive collection of contemporary art in the world. Think of all the contemporary artists whose hearts he would have gladdened. He could have afforded as many sliced cows, pickled sheep, unmade beds, and splatter-paintings as he wanted. Then, he could have thrown the whole thing open to the public, who would have admired him, thanked him, and had a hearty guffaw behind his back. But at least the people in whose pockets his money ended up could have decided for themselves what to do with it. For it is thus, with real income, honestly earned by sweat and saving, that people are lifted out of poverty. Acts of grand benevolence, on the other hand, whatever good they do in the short term (and we don't deny that they do great good in the short term) usually make things worse in the long term. Instead of getting to choose what they want, people get what the givers choose to give them, not as customers, but as charity cases. Of course, acts of personal charity are enjoined on us. And we hope we take pleasure in doing them. But when the scale is large enough, charity begins to smack more of a public spectacle than a private virtue...more of a government program than of an unalloyed act of generosity. Along with hope and help, it carries with it, ever so faintly, the acrid whiff of humbug. We do not fault Buffett and Gates. What can these poor rich men do? They have too much money to spend...even far too much to give away wisely. Buffett says he wants to avoid passing on the corrupting influence of unearned money. He will give his children "enough so they can do anything, but not enough so they can do nothing." Is this wisdom or breathtaking naïveté for a moneyman? We know some people who do nothing with almost no money. Others inherit fortunes and do quite a lot with them. Britain's great houses, its great gardens, and many of its great achievements in every field, from lepidoptery to Egyptology to applied mechanics and astro-physics, were made by people who inherited enough money to not need merit. In America, according to Buffett and the levelers, the only game that matters is making money. And you can only be a winner if you make a lot of it. But Britain's hereditary aristocracies were born successful on an entirely different scale. They didn't have to prove anything by making money; their social status was secure at birth. So, instead of grubbing for money, they could poke around the ruins of Carthage or study fossils from the Cambrian era. What surprises us is how little the two greatest capitalists of all time seem to understand of how the world of money actually works. Let us imagine that they build a brand new foundation, for example. And let us set aside our normal cynicism and further imagine that the project is not undone by corruption or incompetence. All the members of staff are saints. All the contractors are archangels. All the clients listen to National Public Radio and recycle. And yet, how does the dynamic duo know that the project is worth doing? In the absence of independent customers and freely set prices, how can they tell? If the two had merely distributed their money, chances are the recipients would have done many and varied things with it. Most would have eaten it up or frittered it away. A few might have used it to start businesses that might have added to the prosperity of the whole society. Others could have bought themselves education...skills...or tools that would have allowed them to earn more money in the future. But thanks to Buffett's magnanimity, they will all now get what Gates and his army of experts, functionaries, consultants, flunkies, and hangers-on want them to have. That is why it is better to give than to receive. The receiver gets neither what he merits nor what he wants...but what the giver puts to him.
We don't know, but we will publish the time and place of the Clinton reunion when we get them...just in case the gods want to take aim. July 15, 2006 Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis. Copyright © 2006 Bill Bonner |
