Re: Truth and Warren Buffett

April 13, 2005

Re: Truth and Warren Buffett
From: Dean Lawrence R. Velvel
VelvelOnNationalAffairs.blogspot.com

Dear Colleagues:

Regular readers of this blog, and persons who in future read the just published second and third volumes of the quartet called Thine Alabaster Cities Gleam, will know that I consider honesty to be the cardinal virtue. It is the essential foundationstone upon which all other virtues are built, especially competence. (It is very hard, after all, to act competently on the basis of false, and therefore wrong, information). And when you think about it, you find that most of the world’s problems stem from various forms of governmental, corporate and personal dishonesty: from outright lies, half truths, false spin, refusals to disclose (i.e., secrecy of all types), and cornball crapola. People’s personal problems, too, often flow from dishonesty of one type or another to which they have been subjected. One would invite the reader to consider any problem that may be upsetting her, particularly any problem of our public life, to see whether one of the foregoing forms of dishonesty is deeply involved with it, is often indeed the reason for it. Usually the question finds its answer in the affirmative. Are you talking Viet Nam? Gulf War I? Gulf War II? American torture and renditions? American relations with Iran over the decades? The savings and loan debacle of the ‘80s? The market bubble and collapse of the late ‘90s and the early 21st Century? The plagiarism of professors at Harvard and elsewhere? Dishonesty in some form -- from lies to the hiding of truth to cornball crapola -- is at the root of much that was wrong, was the base that allowed things to go very wrong.

One doesn’t need to be a right wing fundamentalist moralist to believe that honesty is, as said, the cardinal virtue and necessity. (Not that the right wing zealots are always honest, even if deeply wacked out). The country is filled with Elmer Gantrys, after all. And just look at the deeply dishonest George Bush, a right wing fundamentalist who wouldn’t know the truth if he fell over it face first. (Yet these right wing nutbags want to impose their views on everyone, both at home and abroad.)

Because it is the cardinal virtue on which all other virtues essentially depend, one wishes there were a political party devoted to honesty and to rejection of dishonesty in all its forms, a party that made these matters the basis of its platform. Of course, this idea will be hooted at by all those -- today this would be nearly everyone -- who think that phrases like political honesty, or honest politicians, necessarily are oxymorons, necessarily are contradictions in terms. It will also be hooted at by people who think more generally -- perhaps not quite everyone, but almost surely huge numbers or even most Americans these days -- that dishonesty in its various forms is simply the way of the world whether you’re talking politics, business, the professions, or personal relations. That so many have come so far since 1960 in believing these things is a major tragedy. It may even be the major national tragedy of the period during which this writer has been an adult. It can lead to no good.

With views such as these, this writer has found it especially interesting in recent days to read about Warren Buffett. I first read of Buffett in the late 1960s, in a book by a writer whose nom de plume was Adam Smith. (His real name, if memory serves, was George Goodman.) At the time, Buffett and his financial record, which had already begun, were unknown to the public at large. In later years, of course, he became very much a public figure, as his fame spread because of financial acumen that has now lifted his personal fortune to over 40 billion dollars and made him America’s second richest individual. (The only person richer is Bill Gates, who made much of his money by tactics that this writer and others think a polar remove from admirable.)

Buffett has had some degree of relationship to the current scandal involving AIG, and he has given an interview to regulators. According to what one usually (but not always) reads in the papers, his connection to the problem was small and non culpable. Non culpability depends, of course, on whether his story or the stories told by some executives of a company called General Re are closer to the truth. The newspaper presentations on the matter so far seem to generally (but not exclusively) be in favor of Buffett, although one naturally cannot be perfectly sure about the situation as yet. A certain amount hangs fire, waiting upon future developments or disclosures.

What has been particularly interesting, however, has been the reaction of people who know Buffett and have been willing to speak to the press, and also the quotations, printed in the media, from past statements Buffett himself has made. Whether the printed reaction from friends and acquaintances has been orchestrated behind the scenes, is something one does not know (although, in modern America, it would be surprising if it weren’t). And even if orchestrated, it is possible -- in this case it may even be quite probable -- that the people who are commenting are saying what they believe.

The essence of the reaction is that Buffett is a very honest guy, is, in the media’s words, “a model for corporate integrity and someone who has spent his 74 years trying to integrate personal values such as honesty, trust and openness with the business political and public worlds around him.” “‘He is,”’ one professor said,“‘grounded in a core value system of ethics.’” One president of a local Omaha company (admittedly) owned by Buffett’s Berkshire Hathaway, said “‘You can’t ask for anyone with more honesty and integrity. Warren has walked the talk for 74 years.’” ‘“Warren always says it takes 60 years to make a great reputation and you can lose it in 60 seconds,”’ said an executive of another local Omaha company also (admittedly) owned by Berkshire Hathaway. The executive added, “‘we live by that saying, and you know what? So does he.’”

Statements made by Buffett himself at one time and another reinforce this image. For example, “‘We also believe candor benefits us as managers: The C.E.O. who misleads others in public may eventually mislead himself in private.’” “‘A small chance of distress or disgrace cannot, in our view, be offset by a large chance of extra returns.’” And in connection with the AIG scandal itself, Buffett wrote to Berkshire’s managers and board members that “‘The current investigation of the insurance industry underscores the imperative of the message that I regularly send to you in my (more or less) biannual memo: Berkshire can afford to lose money, even lots of money; it can’t afford to lose reputation, even a shred of reputation . . . . And in the long run we will have whatever reputation we deserve. There is plenty of money to be made in the center of the court. There is no need to play around the edges.’” (This last remark about the center of the court is of particular interest to me. One often hears that so and so may have come close to the line, but didn’t cross it. My reaction to his is that a truly honest and decent person will stay away from the line instead of trying to come as close to it as possible without crossing it. (This bears a somewhat humorous semi-analogy to something that was said by one of the early Rothchilds, if I remember correctly. He said, I think, that he doesn’t want the 20 percent at the top, nor the 20 percent at the bottom. He just wants the 60 percent in the middle.))

Now, if the people who have been quoted about Buffett are telling the truth, if what they say is accurate, and if his companies have comported themselves in accordance with the sentiments expressed in the quotations from him, then what we have here is a phenomenon that is contrary to much of the conventional wisdom of today’s America. That conventional wisdom holds (in accordance with my earlier comments about oxymorons) that a certain amount, maybe even an extensive amount, of deception and dishonesty is essential for success. Naturally, people do not usually express this thought openly. For hypocrisy is the tribute one pays to virtue, as I think the Duc de la Rochefoucauld once said. But you see what people truly believe in what they do, not in the hypocrisy they utter. And what people do in this country, in order to be successful in politics, in business, in the professions, in life, is to lie, spin distort, and hold secret. That is their actual practice, though not what they verbally propound. Only occasionally are their real feelings revealed verbally, as when they pejoratively call someone an idealist for believing in extensive honesty, or say that honest conduct by someone will not lead to success. (Remember when American business defended its practice of paying foreign bribes as being necessary to success because other countries’ companies were paying bribes and would get the foreign business if we didn’t pay bribes too?)

Yet, if what has been said about and by Buffett is true, we have a situation in which someone rose to become the nation’s second richest man by conduct that is honest, has integrity and (unlike some of Bill Gates’ conduct) is praiseworthy. In a nation about which it was truly said (by Coolidge, was it?) that the business of America is business, in a country in which people in business and the professions will cut your throat for a dime, a man amassed over $40 billion while, if statements about and by him are correct, displaying “honesty, trust and openness,” being “‘grounded in a core value system of ethics,’” “‘walk[ing] the talk,’” and staying ‘“in the center of the court’”.

It sounds too good to be true, doesn’t it? And maybe we will one day learn that some of it wasn’t true, or wasn’t always true (e.g., perhaps we may one day learn of some definite culpability on Buffett’s part in the AIG situation). But unless and until there comes a day when it is learned that much or most of what has been said about and by Buffett is mere hype (as is unhappily true of so much that we hear), Buffett’s career is a reproach to the conventional wisdom that lies, deception and spin are the order of the day, and equally is a reproach to those who conduct themselves -- be it in business, politics, or whatever -- in accordance with that conventional wisdom. Correlatively, unless and until it is shown that what is being said about Buffett by those who know him is largely untrue, perhaps he is a sign of hope to those institutions and people who try to act in accordance with ideals, perhaps he is a sign to them that honest, decent conduct is not necessarily the road to failure and ruin in today’s heavily dishonest America.*





*This posting represents the personal views of Lawrence R. Velvel. If you wish to respond to this email/blog, please email your response to me at velvel@mslaw.edu. Your response may be posted on the blog if you have no objection; please tell me if you do object.