The Playbook Interview: Warren Buffett
The Sage of Omaha didn’t want to talk politics, but he shared his thoughts on the lingering effects of the recession, the media and his reading habits.
Warren Buffett doesn’t do many interviews these days, but when we took over Playbook, he said he would love to chat with us about his views of the economic and business climate. Buffett didn’t want to talk about politics, but his views are well known: He endorsed Hillary Clinton, and challenged Donald Trump to release his taxes. In a freewheeling chat Wednesday morning, the Berkshire Hathaway chairman said he is bullish on America and bearish on newspapers. He told us about the pile of books next to his chair and said that 2 percent economic growth isn’t too bad.
“It’s been over 240 years since 1776, it’s just been amazing what happened to a barren country with 2 million people that now turns out everything we do,” Buffett told us. “The expectations may have gotten a little unrealistic – [but] even 2 percent growth in one generation will produce $19,000 more – per capita, not per household – of real GDP. Just imagine, on average, a family of four, $76,000 of added GDP in one generation. So 2 percent growth will do wonders for this country starting from this space. It doesn’t match our best years, but it’s pretty damn good.”
“During my lifetime, here’s a guy that was born in 1930 … my lifetime real GDP per capita went up six for one,” he said. “Well, to think of an economy that already was among the top in the world, having in one person’s lifetime a six-for-one change in real output per capita, that’s staggering. That’s never happened in the history of the world. So, we had a lot of things come to bear in terms of energy and all kinds of industrial development … America learned how to unleash human potential.”
How will the economy improve?
“There’s two things that make it better: innovation and productivity, which are interlocked in certain ways. When you think of it, all of the products that you and I are using to make our lives better weren’t even around 30 years ago. It’s pretty extraordinary. And if you go back 100 years, every time I get in the dental chair, I think to myself, if this was 100 years ago, they’d be pouring whiskey down me and holding my arms. Now, I sit there and daydream about other stuff. So anything that improves experiences – what people want to do with the 24 hours in the day that they have. And secondly, what really counts is gains in productivity. If you go back 100 years … the farms around where I live here were producing 30 bushels of corn per acre. Now they’re producing 160 bushels of corn per acre. Well, that’s dramatic, and of course they take less people to do it as well, so, just up and down the line, you look at how many man-hours it takes to produce an auto now compared to 50 years ago. So, productivity – that’s the way the human race improves.”
Housing is his hot sector now:
“I would say that housing came back very late after the panic in 2008 and ‘09, and it’s starting to … it has showed continuing growth and momentum. But it didn’t come back as fast as I initially thought it would. And it’s been getting progressively stronger, particularly in the last year. That continues to this day. Household formations fall off a lot in recessions. People double up and move in with their in-laws, but eventually hormones win out. [laughter] And our population growth translates into new housing starts. Now, the one trend is people are moving more from living in single-family housing into rental. Sixty-two and a fraction percent now are in owner-occupied homes as opposed to rental. So there was more of an apartment development going on but now it’s translated to pretty good housing statistics, and we’re in a lot of areas that touch on that. We’re seeing a lot of strength there.”...MORE