Category: Commentary

For six decades, Warren Buffett, now 92, has sent investors in his Berkshire Hathaway fund an annual letter containing his thoughts and observations about the business and its ecosystem.

I have just read his 2023 letter.  It is shorter and more spare than many of his prior ones.  This year, he focuses on data – fiscal results of investments and company business models.  He does so by looking back at the history of his investment decisions and their varying results.  He admits that some decisions were excellent, others mediocre and some just bad.

On balance, however, and that is a metric he uses – balance out the good, the bad and the ugly; track the trendlines instead of obsessing on the volatility highs and lows; separate sheep from goats, apples from oranges.

For his philosophical approach, he just mentions the obligation to do well for the people who trust him with their money and the reality that “the disposition of money unmasks humans”; that he is a business-picker, not a stock-picker.

He credits the secret sauce of success in investing as cash flow.  He struck gold when he invested in Coca Cola in August 1994 and with American Express in 1995.  Those two companies have  paid higher and higher dividends annually, as the earth has rotated around the sun ever since. Other companies did not pay good dividends, so their capital value to Berkshire dropped and dropped.  Conclusion: the weeds wither away as the flowers bloom.

Pick flowers, not weeds.

He notes that of the S&P 500 companies, in 2021, only 128 earned $3 billion or more, while 23 lost money.  Berkshire was the largest owner of 8 of these profitable giants.

Here, Buffett’s focus on data leads him to a theory, a theory of capitalism.  He understands that narratives do not drive facts.  Rather, facts drive conclusions about reality.  He writes: “Capitalism has two sides: the system creates an ever-growing pile of losers, while concurrently delivering a gusher of improved goods and services.”  It’s a mixed bag – some win and some lose.  On balance, however, capitalism delivers for everyone in gross, if not at the margin for some.

Buffett’s mindset is congruent with reality.  That should be a lesson for us.  Ideals and good intentions, the precise social engineering of equality and fairness, only intrude on a natural process and may not be integral to its system dynamics.  Our thinking and our wishing must partner with reality if well-being is to be experienced.  “If wishes were horses, beggars would ride,” was the old truth.  In a way, Buffett believes that the truth shall make you better off.

In line with this theory of real economic growth, Buffett admits that his profits have come from the working of a system that he does not control.  Rather, he knows his returns are only part of a giant stream of commerce, finance and industry, culture and governance flowing through history, driven by the decisions, preferences, fears and ambitions of millions of individuals.

He calls this stream the “American Tailwind,” as if he were only the pilot of a small plane being pushed forward (or backwards, as the case might be from time to time) by the force of a human system called the sovereign nation of the United States of America.  Buffet is proud of owning companies that are broadly aligned with America’s economic future.  He writes: “We count on the American Tailwind and though it has been becalmed from time to time, its propelling force has always returned.”

You can read the letter here.

May you invest as wisely as Warren Buffet has done.

I recently wrote a short comment on the morality of using words.  I just received a comment from Jim Lukaszewski on how we can get to “decency” in our relationships with others.  I thought his ideal of decency is pretty close to a common, cross-cultural understanding of morality, very much like the ideal of “virtue” proposed by Mencius and the behaviors advocated by the Buddha in his noble eightfold way to take in our lives.

In using words, Lukaszewski recommends:

The true test of civility is a commitment to verbal and written communication that are predominantly positive and declarative and behaviors that are simple, sensitive, sensible, constructive, positive, helpful, humble, empathetic and always benefit the recipient more than the giver.  Any other pathways lead only to trouble, prolong problems and delay mitigation and resolution.  Empathy means positive deeds that speak louder and more constructively than words.

The true test of civility is a commitment to verbal, written communication, deeds and actions that benefit a recipient more than the sender.  Here are 39 possible paths that can get you to civility, decency, integrity and trust.  Always pick as many as you can, as frequently as you can.

1. Accountability
2. Apology
3. Calmness
4. Candor
5. Character
6. Charitability
7. Chivalry
8. Civility
9. Compassion
10. Constructiveness
11. Courtesy
12. Decency
13. Dignity
14. Empathy: positive deeds that always speak louder than words
15. Engagement
16. Forgiveness
17. Gratitude
18. Helpfulness
19. Honesty
20. Honor
21. Humility
22. Integrity
23. Listening: the greatest decency
24. Openness
25. Peacefulness
26. Pleasantness
27. Politeness
28. Positivity
29. Principle
30. Respect
31. Responsiveness
32. Sensibility
33. Sensitivity
34. Simplicity
35. Softness
36. Tact
37. Thoughtfulness
38. Transparency
39. Truthfulness

Remember, the reverse of any of these words, ideas or behaviors only lead to trouble, problems and delayed mitigation and resolution; plus, revictimizing those who have been injured.

Higher interest rates do more than cause prices to rise and investments to be postponed or cancelled.  They can reduce valuations of assets.  With higher interest rates, it takes longer for an asset to earn a market return, which reduces its net present value.

Also, loans made at a lower interest rate are worth less to potential buyers of such investment contracts when rates go up.  Thus, in the U.S., the Silicon Valley Bank bankrupted itself by putting too much of its capital into low interest rate U.S. government bonds.

Now in the U.S., nearly every publicly traded bank corporation has loans on its books as assets, which are worth less today than when they were made.  Rising interest rates cause the decline in market value of the loan repayment notes.

The mission of capitalism is to create wealth.  High interest rates, then, put obstacles in the way of that achievement.

So, when we seek to evaluate the social good – the public good – of capitalism, we should keep a close eye on those conditions which make for wealth creation and those which inhibit such economic growth.

Managing interest rates is a seeking of balance between too high and too low.  A middle way suggests itself as most conducive to enhancing society’s well-being.

One of the most exciting and stimulating aspects of capitalism is also one of its most alienating – innovation and the creation of new ways to use land, labor, capital and machines.  Some win, but others lose.  The system is a churning whirlpool of dynamic interactions.

Social media was created for us by capitalism through innovation, invention of technologies and satisfaction of consumer needs and wants.  Are we better or worse off for capitalism having invented and sold social media?  Both, perhaps.  As some Vietnamese Buddhists say, “No gain without a loss.”

The Economist recently opined that TikTok has “changed social media for good,” in the sense of “forever.”  TikTok invented an information collection system which used algorithms to decide which short videos should be shown to its consumers.  Consumers love the dependency on AI for entertaining them.  But the business model generates less revenue for the social media platform.

In five years, in the American social media market, TikTok has attracted some 100 million plus users.

To compete, Facebook and Instagram have turned their main feeds into algorithmically sorted “discovery engines.”  Similar, look-alike products have been put in the social media marketplace by Pinterest, Snapchat, YouTube, Netflix and now, Spotify.  As a result, short-term video has taken over social media.

Of the 64 minutes that the average American spends viewing such services a day, 40 minutes are spent on short videos.  The new format is less profitable than the old news feed.

TikTok monetizes its customers (suppliers?) at $0.31 for every hour of use, much lower than Facebook and Instagram.

The ad load attached to a short video is less than other content.

Secondly, video ads are more expensive to produce, limiting the number of advertisers willing to pay for their placement on the short video platforms.

Thirdly, video games attract customers.  Last year, globally, some 3.2 billion people played video games.  Usage has grown with the spread of smartphones, a technological innovation of capitalism.  The game market will be worth U.S. $185 billion this year.

Fourth, Elon Musk talks as if he has a new business model for Twitter.  He wants to promote “citizen journalism” (and profit therefrom) to take market share from the legacy media in print and television.  He plans to give users who tweet and have their posts checked for reliability and accuracy the role of journalists – finding news and bringing it before the public.  This is power to the people on a scale never imagined by the founders of Students for a Democratic Society in 1962 with their Port Huron Statement.

I recently read two articles about words – one made the point that some words have more power than others to persuade and motivate people, while the second article advised how to use two special words to “increase productivity, enhance collaboration among employees, make managers more effective and improve corporate performance.”

To be human is to use words.  Our thoughts come to us in words and go from us to others with words.  Different cultures have their own special words to express understandings unknown to members of other cultures.  We present ourselves to others mostly with words.  We belong because we can speak our own words to others and we can hear the words of others to learn about them.  We discriminate ourselves from others based on thoughts and feelings associated with words.  We distance ourselves from others, denigrate them, hate them, make trouble for them, argue with them, try to influence them, with words.

So, if words are so important, what is the morality of using words?

I wrote recently in Pegasus about etiquette.  Social conventions include moral conventions on what words to use when, in order to be gracious to or hospitable with others.  Well-chosen words build social capital.  The wrong words can dissolve social capital.

Jonah Berger wrote in the Wall Street Journal that since we all like to think of ourselves positively, by framing particular actions in a way that helps create those positive perceptions of self, we can intentionally encourage people, including ourselves, to behave accordingly.

Have you ever had a conversation with yourself about yourself?  Did you use words with depressive affect or words which lifted your spirits, validated your sense of your agency and put you in a frame of mind to solve problems and make the world better?

Berger had one tip – when you are working with others, change key action points from verbs to nouns.  Don’t ask another to “help” you do something.  Rather, ask them if they would like to be a “helper.”

People asked to become voters turned out to vote 15% more than those asked to “go vote.”

Use words that convey confidence, speak with certainty and bring forth some charisma from your inner, genuine convictions.

You can let people know you have heard them by using concrete words anchoring their concerns.

Ask for advice.  That makes the people who ask seem more sure of themselves, more skilled and qualified.

Most importantly, don’t pass by or overlook opportunities to say “thank you.”

Those are the two words which can bring home your bacon.  Let others know you value them. Feeling valued makes everyone think more highly of those who let them know that they matter and more willing to go out of their way to help those who show gratitude and appreciation.

So, teamwork and collaboration deliver more results and contribute to higher morale when thanks are given by one to another.  Expressions of gratitude accomplish more when they are made publicly.

Words become moral when they seek moral ends – care and concern for others, sacrifice of self-interest, acting as steward and eschewing taking advantage of others.

Words are building blocks of social capital, of moral capitalism and moral government.

I saw that Roger Kimball, critic and respected editor and publisher of the New Criterion, devoted his most recent column in American Greatness to George Washington’s Farewell Address, which I quoted at some length in my last commentary.  Having his intellectual company is nice.

Kimball’s admiration for Washington’s advice can be found here.

The constitutional republic of the United States of America has just formally entered an existential crisis as serious as the breakdown of civil society which brought about its civil war of 1861-1865.

With the criminal indictment of Donald J. Trump by a politician affiliated with the Democrat Party, one faction of the American elite has abandoned government of the people, by the people and for the people.  Such authentic democracy, as once honored by Abraham Lincoln during a brutal civil war, has been replaced with factional criminalizing political rivals to prevent them from winning office.

This process of faction warring against faction, where no prisoners are taken and no mercy shown, is the very evil Madison described in his Federalist Paper No. 10 as the greatest danger which could ever threaten democratic systems.

As Sir John Glubb observed, the normal lifespan of a ruling dynasty or a powerful country, over the course of human history, has been about 250 years (The Fate of Empires and the Search for Survival, 1978).

This year, 2023, is the 247^th year of the United States as an independent, constitutional republic.  Has the time come for the evil of factionalism to bring an end to our republic?

In September 1796, the first American president, George Washington, wrote an open letter to the American people as he left the presidency having served two terms in office.  In his letter, he foresaw the very systemic factional dysfunctions now polarizing Americans and warned of the serious danger to the republic to be brought about by any degradation of the civic order into such mean-spirited and self-seeking contestations of interest and power.

Washington wrote that avoiding such factionalism would be “all important to the permanency of your felicity as a people.”

He continued:

Let me now take a more comprehensive view and warn you in the most solemn manner against the baneful effects of the spirit of party, generally.  This spirit, unfortunately, is inseparable from our nature, having its root in the strongest passions of the human mind.  It exists under different shapes in all governments, more or less stifled, controlled, or repressed; but in those of the popular form, it is seen in its greatest rankness and is truly their worst enemy.  The alternate domination of one faction over another, sharpened by the spirit of revenge natural to party dissension, which in different ages and countries has perpetrated the most horrid enormities, is itself a frightful despotism.  But this leads at length to a more formal and permanent despotism. The disorders and miseries which result gradually incline the minds of men to seek security and repose in the absolute power of an individual; and sooner or later, the chief of some prevailing faction, more able or more fortunate than his competitors, turns this disposition to the purposes of his own elevation on the ruins of public liberty.  Without looking forward to an extremity of this kind (which nevertheless ought not to be entirely out of sight), the common and continual mischiefs of the spirit of party are sufficient to make it the interest and the duty of a wise people to discourage and restrain it.  It serves always to distract the public councils and enfeeble the public administration.  It agitates the community with ill-founded jealousies and false alarms, kindles the animosity of one part against another, foments occasionally riot and insurrection.

Washington named the deadly disease which might destroy the republic:

All obstructions to the execution of the laws, all combinations and associations under whatever plausible character with the real design to direct, control, counteract or awe the regular deliberation and action of the constituted authorities, are destructive of this fundamental principle and of fatal tendency.  They serve to organize faction; to give it an artificial and extraordinary force; to put in the place of the delegated will of the nation the will of a party, often a small, but artful and enterprising minority of the community; and according to the alternate triumphs of different parties, to make the public administration the mirror of the ill concerted and incongruous projects of faction, rather than the organ of consistent and wholesome plans digested by common councils and modified by mutual interests.  However combinations or associations of the above description may now and then answer popular ends, they are likely, in the course of time and things, to become potent engines by which cunning, ambitious and unprincipled men will be enabled to subvert the power of the people and to usurp for themselves the reins of government, destroying afterwards the very engines which have lifted them to unjust dominion.

In harmony with Washington’s warning, the Caux Round Table Principles for Government require, as a norm of social justice, that:

Holders of public office are accountable for their conduct while in office.  They are subject to removal for malfeasance, misfeasance or abuse of office.  The burden of proof that no malfeasance, misfeasance or abuse of office has occurred lies with the officeholder.

The state is the servant and agent of higher ends.  It is subordinate to society.  Public power is to be exercised within a framework of moral responsibility for the welfare of others.  Governments that abuse their trust shall lose their authority and may be removed from office.

Public office is not to be used for personal advantage, financial gain or as a prerogative manipulated by arbitrary personal desire.  Corruption – financial, political and moral – is inconsistent with stewardship of public interests.  Only the rule of law is consistent with a principled approach to use of public power.

The rule of law shall be honored and sustained, supported by honest and impartial tribunals and legislative checks and balances.

When the criminal law is invoked (abused?) to single out a political rival for mean reasons of personal fear or ambition, justice collapses and civil strife begins, where “the strong do what they can and the weak suffer what they must.”

U.S. Supreme Court Justice Oliver Wendell Holmes wrote in an opinion that “a page of history is worth a volume of logic.”

What history can teach us of the dangers now facing the American people?

The collapse of the Roman Republic.

How fitting, I suppose, that the indictment of Donald Trump came in the month of March, when the final years of the Roman Republic began on the Ides of March 44 BC with the assassination of Julius Caesar, like Trump a man of outsized ego and ambition.

In his play Julius Caesar, Shakespeare well put the consequences of that death for the Roman people.  He has Antony say:

Over thy wounds now do I prophesy …
A curse shall light upon the limbs of men.
Domestic fury and fierce civil strife
Shall cumber all the parts of Italy.
Blood and destruction shall be so in use,
And dreadful objects so familiar,
That mothers shall but smile when they behold
Their infants quartered with the hands of war,
All pity choked with custom of fell deeds,
And Caesar’s spirit, ranging for revenge,
With Ate by his side come hot from hell,
Shall in these confines with a monarch’s voice
Cry “Havoc!” and let slip the dogs of war,
That this foul deed shall smell above the earth
With carrion men, groaning for burial.

What has gone wrong with the American people?  In a word, the loss of moral rectitude.

In his farewell letter to the American people, Washington would say: “It is substantially true that virtue or morality is a necessary spring of popular government.”

There is a precedent for Washington’s admonition in the collapse of the Roman Republic.

Some years ago now, I was reading Cicero’s letters to his friend Atticus, who was then on a business trip to Greece.  In a letter of June, 59 BC, Cicero described the politics of Rome, then dominated by the first triumvirate – a junta of Crassus (money), Pompey (soldiers) and Caesar (brains).  Cicero wrote that the Roman elite was petulant.  When Caesar entered the theater, no one clapped.  When a playwright inserted a pun on Pompey’s name into a performance, there were 12 standing ovations from the audience.  Young Claudio was running around spreading inside stories of juries being bribed and other abuses of power.

Then Cicero concluded: “These things, while they make us glad that our judgments are still free, make us the more sad because we see that our virtue is in chains – nos virtutem adligata est.

From that loss of virtue, there was no recovery.  History was a straight line of factionalism and bloodshed down to 27 BC, when the Roman Empire was put in place by Octavian, Caesar’s great-nephew and adopted son.  The strong had done what they could and the weak would henceforth suffer as they must.

The indictment brought on Tuesday April 4, 2023 against Donald Trump by the New York County district attorney states that his alleged crime was to, 34 times, make a false entry in the business records of an enterprise with respect to an invoice from an attorney.

The indictment further alleges that Donald Trump himself personally “made and caused” such entry with the intent to “commit another crime.”  No other crime or criminal statue is mentioned in the indictment.

Nor does the indictment state why the entry for payment of an invoice from an attorney was false.  There is no recitation of why the services being paid for by Trump were not legal in form or substance.

Such an indictment, on its face, seems arbitrary and capricious.  Under the rule of law, any government action or decision which is arbitrary or capricious is usually thought to be, per se, irrational and so illegal.  The Administrative Procedure Act instructs courts to “hold unlawful and set aside agency action, findings and conclusions found to be arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law.”

A U.S. district court in Arizona has ruled that the U.S. Department of Justice’s narrow interpretation of the requirements for a criminal misdemeanor under the Endangered Species Act went beyond unreviewable prosecutorial discretion and its policy was arbitrary and capricious and in violation of the Administrative Procedure Act (WildEarth Guardians v. U.S. Department of Justice, U.S. District Court Arizona, June 27, 2017).

In this regard of selective prosecution based on arbitrary and capricious prejudice, consider similar conduct by Hillary Clinton.  Several months before Donald Trump made payment of such invoices from an attorney in 2017, Hillary Clinton, then a candidate running against Donald Trump for the office of president of the United States, did seemingly authorize her campaign to pay invoices received from the campaign’s attorneys for their work in procuring a false and defamatory statement (the Steele dossier), which was leaked to the public, accusing Donald Trump of serving as an agent of or as an accomplice conspiring with the Russian government.  This false statement was procured by the Clinton campaign in order to work a fraud on the American people that would influence the outcome of the 2016 presidential election.

There has been no indictment of Hillary Clinton or anyone associated with her campaign for making a false bookkeeping entry to hide the origin of the creation and dissemination of that false and defamatory disinformation designed to manipulate an election outcome.

Our chairman, Brad Anderson, formerly CEO of Best Buy, recently sat down with Marissa Streit, CEO of Prager University, to discuss whether he could start Best Buy today and if so, how he would approach it.

He also discusses his meeting with Steve Jobs and what he learned.

You can watch it above or  here.

It’s a little over 40 minutes in length.

We recently posted more short videos on relevant and timely topics.  They include:

–Technology In, Technology Out

–There’s No Capitalism Without Customers

–Understanding Balance

–Getting Out of The Way of Technology

–A Message from 1929

All our videos can be found on our YouTube page here.  We recently put them into 9 playlists, which you can find here.

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