“It is always morning in America”; Highlights from Warren Buffet’s Annual Shareholder Letter

Paul FennerBusiness & Economics

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Warren Buffet’s Berkshire Hathaway annual shareholder letter is always a great read for both investors and non-investors.  The manner in which he writes his letters in plain English so that people can better understand them is a true skill.

One of my favorite Buffet quotes is “it is always morning in America.”  So what does this mean?  Those familiar with the musical Anne might be able to relate to “the sun will come out tomorrow.”  The point of both quotes is that despite the gloom and doom and no matter how bad things may appear to be, America has had a strong track record of recovering from her lows and pushing into new highs.

  •  “American GDP per capita is now about $56,000. As I mentioned last year that – in real terms – is a staggering six times the amount in 1930, the year I was born, a leap far beyond the wildest dreams of my parents or their contemporaries. U.S. citizens are not intrinsically more intelligent today, nor do they work harder than did Americans in 1930. Rather, they work far more efficiently and thereby produce far more. This all-powerful trend is certain to continue: America’s economic magic remains alive and well.”
  • “Though the pie to be shared by the next generation will be far larger than today’s, how it will be divided will remain fiercely contentious…. Congress will be the battlefield; money and votes will be the weapons. Lobbying will remain a growth industry.”
  • “For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.”
  • “I told you how our partners at Kraft Heinz root out inefficiencies, thereby increasing output per hour of employment. That kind of improvement has been the secret sauce of America’s remarkable gains in living standards since the nation’s founding in 1776. Unfortunately, the label of “secret” is appropriate: Too few Americans fully grasp the linkage between productivity and prosperity.”
  • “The productivity gains…that have been achieved in America – have delivered awesome benefits to society. That’s the reason our citizens, as a whole, have enjoyed – and will continue to enjoy – major gains in the goods and services they receive.  To this thought there are offsets. First, the productivity gains achieved in recent years have largely benefitted the wealthy. Second, productivity gains frequently cause upheaval: Both capital and labor can pay a terrible price when innovation or new efficiencies upend their worlds.”
  • “A long-employed worker faces a different equation. When innovation and the market system interact to produce efficiencies, many workers may be rendered unnecessary, their talents obsolete. Some can find decent employment elsewhere; for others, that is not an option.”
  • “When low-cost competition drove shoe production to Asia, our once-prosperous Dexter operation folded, putting 1,600 employees in a small Maine town out of work. Many were past the point in life at which they could learn another trade. We lost our entire investment, which we could afford, but many workers lost a livelihood they could not replace. The same scenario unfolded in slow-motion at our original New England textile operation, which struggled for 20 years before expiring. Many older workers at our New Bedford plant, as a poignant example, spoke Portuguese and knew little, if any, English. They had no Plan B.”
  • “The solution, rather, is a variety of safety nets aimed at providing a decent life for those who are willing to work but find their specific talents judged of small value because of market forces. (I personally favor a reformed and expanded Earned Income Tax Credit that would try to make sure America works for those willing to work.) The price of achieving ever-increasing prosperity for the great majority of Americans should not be penury for the unfortunate.”

Last week I wrote about why people may believe that things are not better within the U.S.  I hope that readers will be able to tie the message from that article to these highlighted pieces from Buffet’s annual letter.  Despite America’s trials and tribulations, I too like Warren Buffet would never bet against the U.S. or its people.

Enjoy the reading and if you or someone that you know of would be interested in learning more, or is concerned with their current portfolio and what to expect in 2016, I would welcome the opportunity to arrange a meeting or a phone call.

What I Am Reading

Keeping Anxious Thoughts at Bay (Harvard Business Review)

The US economy is getting better, but US workers are getting worse (Business Insider)

Ted Williams, Baseball’s First Quant (The Big Picture)

Harvard Studied People For 75 Years & Found That Happiness Comes From One Thing… (TED)