On 23rd May 2015 an article appeared in the Independent regarding comments Warren Buffett made (he is worth over $71bn), saying that the rich are not to blame for people being poor. We analyse his comments below. Do his comments stack up to scrutiny?
I am going to start by agreeing with him. Why? For two reasons. One is because there is a whole lot of disagreement elsewhere in this article and I hate to be accused of bias and secondly because there are indeed some people in this world who just don’t bother trying in life, no matter what opportunities are thrown their way they just never quite make an effort to do something good, either for themselves or others, and that’s not the fault of the rich. Well done Mr Buffett, we can all go home. Not quite. Actually, not by a long shot. Not by an oceans width, not by a.. I think you get what’s coming..
So, let’s analyse.
Mr Buffett was writing an ‘Opinion piece’ in the Wall Street Journal. (Where else would you write a rant against the poor).
He starts by citing the hard work and innovation of the late Steve Jobs. There is no doubt that Jobs had a talent for design but here already the first cracks start to form in Buffetts argument. Jobs was far from the brains of Apple, at least in the beginning. It was Wozniak who was the brains behind the workings of the early chip boards for Atari and the first ever Apple computer. It was only when Jobs came back with further innovation after leaving Apple that he began to find his fortunes with the injection of around $7M from an investor. Also Jobs was fortunate enough in the beginning to even be enrolled at college due to his adoption, without which his birth parents could not provide that education for him.
So already we see a lot of good fortune play into this success story rather than just ‘plain old hard work which anyone can achieve’ as seems to be being suggested by Buffett.
We all live far better because of Henry Ford, Steve Jobs, Sam Walton and the like
Of course, I am being very picky in my assessment of Jobs, I imagine he was very hard working and persistent in his efforts but it’s important to point out the fortunate aspects of his life because without these series of events he could just as easily been anyone else working 9-5, five days a week going someway towards showing that not all millionaires and entrepenurs get there by simply being that much more hard working than anyone else, sometimes it’s circumstances, which often no one has any direct control over.
All of the above leads directly to the next piece of analysis. Buffett goes on to say that the rich are not undeserving and that “most of them have contributed brilliant innovations or managerial expertise,”
This seems to suggest that only “the rich” are capable of providing managerial expertise or contributing innovations. Of course these individuals are not necessarily undeserving of their wealth but to point out that they are rich seems crude. Most will not be rich when they first produce their first innovation, they will be given a position or some funds, just like Steve Jobs in fact and from that their wealth comes. So whilst he praised the rich he would do well to remember not only this point but also that the ability to be innovative, especially with computing and electronics, takes education, and that is something we will analyse later in this blog. In any case Mr Buffett doesn’t believe improved education can help lessen the gap of inequality.
Mr Buffett, you can’t defend the rich by implying that rich people are inherently innovative over others. There are as many poor innovators who don’t get the lucky break that would launch the rest of their lives.
This though isn’t the hard stuff.
Buffett said “….the widening gap is an “inevitable consequence” of an advanced market-based economy’
In other words there will never be fair wages, the gap between the rich and the poor will forever widen because of Capitalism. If that is true what motivation is there to try harder if you know you don’t have a good start in life? After all it’s only the rich who are innovative. Right?
Buffett went on to say “We all live far better because of Henry Ford, Steve Jobs, Sam Walton and the like”
Really? That’s a matter of opinion and a matter of what someone judges to be ‘better’. Said like a true capitalist.
Finally Buffett said “It is simply a consequence of an economic engine that constantly requires more high-order talents while reducing the need for commodity-like tasks.”
I don’t even want to begin to think what he meant by that. I have a feeling I know exactly what he means.
So let’s rebut the nonsense we have heard.
There are two factors to take into account when referring to the rich. As a general rule the poor are indeed not poor because of the rich. It is a matter of circumstance. Are you born into a wealthy family or not? Have you gone through higher education or not? Even, have you had a lucky break or not? Hard work does come into it but if you’re born into poverty what inspiration does that give you? What countless things are going to be thrown at you that stand in your way. There is little point in the rich man saying people need to want it more, to strive to get out of poverty. It doesn’t work that way and psychology plays a major part. Of course if everyone thought the way that rich people suggest that poor people should think then that would no help because there wouldn’t be enough jobs to go round. It just doesn’t work that way which is exactly why only a tiny percentage of the worlds population earn the majority of the worlds wealth.
Also lets take into account that if you do get a lucky break and get rich quick then you have the funds to then go on to be a millionaire or vastly wealthy and thus become one of the worlds rich. It’s the old money goes to money argument. The complaint is that there is no trickle down effect. The money stays exactly where it is. This can be evidenced further during these Austere times that despite the poor people’s wages being frozen, the price of food going up and nearly 1 million people having to use food banks, for the rich there is little impact of any. Banks can be bailed out using the money of the poor people and the government can just print money for the rich trough quantitive easing methods. It’s all quite cost up there at the top.
Then there is the second type of rich people I was referring to. The ones that have a monopoly on the worlds resources. You and I know all about them and this is where Buffett is very wrong. Those rich people are the very reason why the poor remain poor especially in third world and developing nations.
Here, any argument in favour of the rich is entirely lost.
Just in case you were wondering about Buffett himself, in 1942 his father, Howard Buffett, an investor, businessman and politician, was elected to the first of four terms in the US congress and was able to put Warren through University. Warren pretty much, especially in his early career, worked in finance as a Stockbroker and of course eventually as an investor with his accumulated wealth.
Money to money. Well educated and born into an already high flying career minded family.