Dear Mr. Buffett,
Now that my hair is grey and since I’ve learned so much from you over the years, I feel compelled to express my gratitude for your wisdom and example— but perhaps also qualified to offer some observations pertinent to the criticism you have recently received.
The wisest among our peers would agree that despite one’s learning and past accomplishments, there are two immutable attributes that outstanding investors ought to possess: a sense of humility and one of skepticism. My own knowledge of you has come as a result of reading your own words and examining your actions rather than reading the hagiographies that our contemporaries have bestowed on you or the silly postings on gurufocus.com.
In that spirit of skepticism, allow me to suggest that there are perhaps two of you: The old Buffett (Old B) and the new one (New B). As I reflect upon your words and record over the many years, I can clearly see that the new replaced the old sometime around 1997, give or take a year or two. The Old B was a real investor: skeptical, keen, introspective, intellectually honest and possessing an unwavering eye as to what was right and wrong. I used to read your letters to Berkshire shareholders with a sense of appreciation for the judgment and clarity of your thoughts and convictions. But now it’s all gone. The New B is lost in his own self-importance. He has become obsessed with his own legacy, having transformed himself into a participant and apologist for the failed credit culture of our times, even an evangelist for state intervention, favoritism and political entrepreneurship. Worse, this New B seems to have also lost his penchant for value and even become intellectually sloppy if not outright dishonest.
My personal library contains an archive of all your letters to Berkshire shareholders, going back to the brilliant days of the old Buffett Partnership in the late 1950s. I would be the first among many to acknowledge the trove of wisdom and judgment that can be found there. But I am thinking of discarding the letters of the New B. He writes too many words that are worth less and less.
Your most recent letter is an example of the intellectual sloppiness I mentioned earlier. There is nothing outstanding to be found among the many words but only warmed-over and self-exculpating arguments in your failure to see either the genesis of or the ongoing nature of a financial calamity that has become nothing short of tyrannical for the owner of any savings.
You are eager to remind us of your long-term track record. Often, it is to be found prominently in the first paragraph of your letters. But why is it that you never give it to us in inflation-adjusted terms? It’s not that you don’t understand inflation. Did you know, for example, that in the 10 years ended in 2001 the Berkshire shareholder had a total return of 536%— after inflation? But that in the subsequent 10 years ending in 2011, despite the sweet deals that you seem to get from your politically connected friends, your shareholder was merely 18.6% ahead? For ten whole years? It’s the Old B and the New B, you see? Something happened somewhere, Mr. Buffett, and you seem to have missed it. Your value-seeking nose has steered you wrong. You know it but you want to pretend it isn’t so.
But you don’t just pretend. You preach to us the futility of owning gold as a useless and non-productive asset. Why mention it now, Mr. Buffett? Is it because you want to discredit something you don’t quite understand, or because you want to defend your recent record of buying banks and homebuilding companies that are on a slow and winding road to extinction? Or is it that you want to defend the criminal government employees bent on money debasement as a way to save your railroad traffic? Wouldn’t you agree that the rest of us have a right to have savings (in addition to long-term investments) including the right to object to someone destroying them?
I suggest you consider reflecting on the very yardstick you use in measuring value—money. You are quite right that wealth is created on factory floors and not by holding a metal such as gold. We agree. Yet, what you do not seem to know, or perhaps have conveniently forgotten, is the nature of money in itself. Imagine a brilliant engineer who is indifferent as to the distinction between inches and centimeters but only minds the numbers. That’s you. Your investment calculations have failed over and over again (well, except for those sweetheart deals you get with the warrants and everything), yet you don’t seem to be concerned with the root cause of the distortions that have caused you so much grief. That’s fine. But what I don’t get is the arrogance and self-importance that is attached to your attack on those who see gold as a means of capital preservation—and have profited handsomely from their foresight for 11 years in a row. Why attack this now, Mr. Buffett? Why offer disingenuous arguments to support a thesis that is not even part of your own investment methodology? Why attack? Are you envious? Did someone put you up to it? Did you have a bad morning?
You are not too old to go to basics and learn about money, Mr. Buffett. Moses did not lead his people out of Egypt until he was 80. By your own admission, you have long years ahead of you. So, if you still possess a bit of the humility and skepticism of old, consider a crash-course in money. You ought to start with Mises. That’s Ludwig von Mises. Beyond that, you may wish to consider the idea that perhaps, just perhaps, you may be wrong about a few things. Barring such remedies, and being far too unimportant to give you advice, I will echo the sentiments of Mr. Chris Christie, the New Jersey governor. When he was recently asked by a reporter to comment about your silly neo-Marxist everyone-according-to-their-means idea, he suggested that you just “write a check and shut up.” That’s two pieces of advice. I’d forget about the check.
Sincerely yours, OvS
This article was previously published in Edelweiss Journal, Issue 5 (15 March 2012)