Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Warren Buffett and our kid's future.
Old 02-28-2016, 12:50 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,451
Warren Buffett and our kid's future.

I've been an owner Warren Buffett's Berkshire Hathaway stock for 20 years and have been reading his annual report even before that.

There is always more than few nuggets of wisdom in his annual letters.

Quote:
It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do.

That view is dead wrong: The babies being born in America today are the luckiest crop in history.

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. Some commentators bemoan our current 2% per year growth in real GDP – and, yes, we would all like to see a higher rate. But let’s do some simple math using the much-lamented 2% figure. That rate, we will see, delivers astounding gains.

America’s population is growing about .8% per year (.5% from births minus deaths and .3% from net migration). Thus 2% of overall growth produces about 1.2% of per capita growth. That may not sound impressive. But in a single generation of, say, 25 years, that rate of growth leads to a gain of 34.4% in real GDP per capita. (Compounding’s effects produce the excess over the percentage that would result by simply multiplying 25 x 1.2%.) In turn, that 34.4% gain will produce a staggering $19,000 increase in real GDP per capita for the next generation. Were that to be distributed equally, the gain would be $76,000 annually for a family of four. Today’s politicians need not shed tears for tomorrow’s children.

Indeed, most of today’s children are doing well. All families in my upper middle-class neighborhood regularly enjoy a living standard better than that achieved by John D. Rockefeller Sr. at the time of my birth. His unparalleled fortune couldn’t buy what we now take for granted, whether the field is – to name just a few – transportation, entertainment, communication or medical services. Rockefeller certainly had power and fame; he could not, however, live as well as my neighbors now do.

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. Just as is now the case, there will be struggles for the increased output of goods and services between those people in their productive years and retirees, between the healthy and the infirm, between the inheritors and the Horatio Algers, between investors and workers and, in particular, between those with talents that are valued highly by the marketplace and the equally decent hard-working Americans who lack the skills the market prizes. Clashes of that sort have forever been with us – and will forever continue. Congress will be the battlefield; money and votes will be the weapons. Lobbying will remain a growth industry.

The good news, however, is that even members of the “losing” sides will almost certainly enjoy – as they should – far more goods and services in the future than they have in the past. The quality of their increased bounty will also dramatically improve. Nothing rivals the market system in producing what people want – nor, even more so, in delivering what people don’t yet know they want. My parents, when young, could not envision a television set, nor did I, in my 50s, think I needed a personal computer. Both products, once people saw what they could do, quickly revolutionized their lives. I now spend ten hours a week playing bridge online. And, as I write this letter, “search” is invaluable to me. (I’m not ready for Tinder, however.)

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.
In page 21 of the letter he goes on to talk about some of the amazing productivity gains that have occurred in the US and Berkshire which will help ensure this generation of babies are indeed the luckiest crop in human history.

Investors can learn a lot from the rest.
__________________

__________________
clifp is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-28-2016, 06:43 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,657
His letters are always interesting. Everyone should take this to heart: "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."
__________________

__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is online now   Reply With Quote
Old 02-28-2016, 11:14 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
I agree with the letter generally, but Buffett seems to understate the root problem that is causing so much anger and angst. The link between productivity growth and wage growth has been broken for a very long time.



So, yes, even at 2% growth the nation as a whole will be much richer in the future. But we can't assume based on the past 40 years of experience that most folks will be happy with that outcome if we don't also find a way to fix the above chart.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 02-28-2016, 12:12 PM   #4
Thinks s/he gets paid by the post
DrRoy's Avatar
 
Join Date: Dec 2015
Location: Michigan
Posts: 1,732
It's only anecdotal, but I can safely say that my kids will not likely match my income on a real basis. The chart above is part of the reason.
__________________
"The mountains are calling, and I must go." John Muir
DrRoy is online now   Reply With Quote
Old 02-28-2016, 12:16 PM   #5
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,492
I think Mr Buffet's point is that the standard of living will continue to rise and our children will enjoy and benefit from that.
__________________
MichaelB is offline   Reply With Quote
Old 02-28-2016, 01:11 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,453
Quote:
Originally Posted by MichaelB View Post
I think Mr Buffet's point is that the standard of living will continue to rise and our children will enjoy and benefit from that.
+1

And Buffett understands the conflict very well.

An excerpt from the OP's quote:

Quote:
... 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. Just as is now the case, there will be struggles for the increased output of goods and services between those people in their productive years and retirees, between the healthy and the infirm, between the inheritors and the Horatio Algers, between investors and workers and, in particular, between those with talents that are valued highly by the marketplace and the equally decent hard-working Americans who lack the skills the market prizes. Clashes of that sort have forever been with us – and will forever continue. Congress will be the battlefield; money and votes will be the weapons. Lobbying will remain a growth industry.

The good news, however, is that even members of the “losing” sides will almost certainly enjoy – as they should – far more goods and services in the future than they have in the past...
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 02-28-2016, 01:18 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,617
Quote:
Originally Posted by MichaelB View Post
I think Mr Buffet's point is that the standard of living will continue to rise and our children will enjoy and benefit from that.
Agreed. They can benefit as workers (with increases in wages, to the degree they occur), and they can benefit as investors (with increases in stock prices and corporate earnings, to the degree they occur). If GDP continues to climb, then one or both of these "elevators" will be going up. The choice is theirs to participate in both endeavors, and those who get aboard will likely do well. And, it's not just a US game: to the degree the developing world also does well, our kids can benefit by buying equities of foreign corps and US companies that sell to those new consumers.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Old 02-28-2016, 03:01 PM   #8
Recycles dryer sheets
 
Join Date: May 2013
Posts: 215
Though I always believed in buy and hold, Buffett's comments and actions circa 2008 gave me the confidence to go "all in" (about 90% of net worth) into the stock market very close to its generational low point. May he live another 85 years!


Sent from my iPhone using Early Retirement Forum
__________________
RenoJay is offline   Reply With Quote
Old 02-28-2016, 03:34 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,453
Countering the feel-good comments, Buffett warns us of terrorism. Read the following dire paragraph.

Quote:
What’s a small probability in a short period approaches certainty in the longer run. (If there is only one chance in thirty of an event occurring in a given year, the likelihood of it occurring at least once in a century is 96.6%.) The added bad news is that there will forever be people and organizations and perhaps even nations that would like to inflict maximum damage on our country. Their means of doing so have increased exponentially during my lifetime. “Innovation” has its dark side.

There is no way for American corporations or their investors to shed this risk. If an event occurs in the U.S. that leads to mass devastation, the value of all equity investments will almost certainly be decimated.

No one knows what “the day after” will look like. I think, however, that Einstein’s 1949 appraisal remains apt: “I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones.”
Sticks and stones? People now will have also useless smartphones to hurl at each other.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 02-28-2016, 11:07 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,533
Quote:
Indeed, most of today’s children are doing well. All families in my upper middle-class neighborhood regularly enjoy a living standard better than that achieved by John D. Rockefeller Sr. at the time of my birth. His unparalleled fortune couldn’t buy what we now take for granted, whether the field is – to name just a few – transportation, entertainment, communication or medical services. Rockefeller certainly had power and fame; he could not, however, live as well as my neighbors now do.
Couldn't agree more. Today's middle class (and even many of the poor) in America live better than kings and aristocrats from 100-200 years ago. Generally ample and varied food, clean water, cheap entertainment, free education, fast and safe transportation.

I have all the knowledge known to man on a device that weighs a few ounces, consumes a few watts of electricity, costs $50 (less than a laborer's daily wage), fits in my pocket, and can play movies, games, take pictures and connect me to real time video chats with any human around the world with a similar device. In fact, I have a half dozen of these devices around the house because they are so cheap.
__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (5, 11, and 12).
FUEGO is offline   Reply With Quote
Old 02-29-2016, 05:16 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Amethyst's Avatar
 
Join Date: Dec 2008
Posts: 5,900
Logic aside, there must be some reason why today's millennial crop of workers are fiercely wedded to the belief that their parents and grandparents had it better than they do.

My "company"'s internal social media, where many highly-educated young workers hang out, makes this clear. They moan and groan about student loans, which they're looking for somebody to take off their backs, and cite Internet memes such as "Old Economy Steve" (who is roughly my age, apparently, yet lived in a world I don't recognize) to support their fetish.

They may have it "worse" in some ways, but I doubt anybody my age would hesitate to change places with them. Just sayin'.

Amethyst
__________________
If you understood everything I say, you'd be me ~ Miles Davis
'There is only one success – to be able to spend your life in your own way.’ Christopher Morley.
Amethyst is offline   Reply With Quote
Old 02-29-2016, 07:38 AM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,908
Quote:
Originally Posted by FUEGO View Post
............I have all the knowledge known to man on a device that weighs a few ounces, consumes a few watts of electricity, costs $50 (less than a laborer's daily wage), fits in my pocket, and can play movies, games, take pictures and connect me to real time video chats with any human around the world with a similar device. In fact, I have a half dozen of these devices around the house because they are so cheap.
I have one, too. I use it to watch kitten videos and argue with strangers on the internet.
__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Old 02-29-2016, 07:40 AM   #13
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,156
Quote:
Originally Posted by travelover View Post
I use it to watch kitten videos and argue with strangers on the internet.
No, you don't.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 02-29-2016, 07:41 AM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,908
Quote:
Originally Posted by Amethyst View Post
Logic aside, there must be some reason why today's millennial crop of workers are fiercely wedded to the belief that their parents and grandparents had it better than they do. ..................
Amethyst
Kids these days are bums. You give them a pencil and they bite off the eraser.
__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Old 02-29-2016, 07:41 AM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,908
Quote:
Originally Posted by REWahoo View Post
No, you don't.
Do, too.
__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Old 02-29-2016, 07:42 AM   #16
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,156
Quote:
Originally Posted by travelover View Post
Do, too.
Prove it.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 02-29-2016, 07:42 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,908
Quote:
Originally Posted by REWahoo View Post
Prove it.
Google it!
__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Old 02-29-2016, 07:43 AM   #18
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,156
Quote:
Originally Posted by travelover View Post
Google it!
I'm not doing your work for you. If you can't post a link, then I win.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 02-29-2016, 07:46 AM   #19
Thinks s/he gets paid by the post
Nemo2's Avatar
 
Join Date: May 2011
Location: Belleville, ONT
Posts: 4,331
Quote:
Originally Posted by REWahoo View Post
I'm not doing your work for you. If you can't post a link, then I win.
__________________
"Exit, pursued by a bear."

The Winter's Tale, William Shakespeare
Nemo2 is online now   Reply With Quote
Old 02-29-2016, 07:46 AM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,908
Quote:
Originally Posted by REWahoo View Post
I'm not doing your work for you. If you can't post a link, then I win.
https://www.google.com/search?q=kitt...utf-8&oe=utf-8
__________________

__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
"Warren Buffett goes broke!" Nords Other topics 0 12-10-2006 12:45 PM
"Warren Buffett's gotta die someday, right?" Nords FIRE and Money 24 11-13-2006 11:39 AM
Warren Buffett gives away his fortune REWahoo Other topics 27 07-06-2006 02:08 PM
Warren Buffett REWahoo FIRE and Money 8 03-04-2006 09:31 PM
Wikipedia entry on Warren Buffett Jay_Gatsby FIRE and Money 0 07-16-2005 01:46 PM

 

 
All times are GMT -6. The time now is 03:01 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.