Berkshire Hathaway 2009 Annual Meeting Audience Question # 40

The United States has a system that works and unleashes human potential

Warren Buffett:

Area 8.

Audience Member:

Hello. Mark Hoffman from San Diego, California. Just want to thank you for all your wisdom and advice over the years.

Also like to thank the boys at… the Blumkins… the Furniture Mart. They gave us a great tour the other day. I’m from an organization called Eel. And they really showed us the culture at Berkshire and what you guys do.

My question is, looking at the overall world economy, the Berkshire businesses are great. But my question is, is there underlying issues you see in the world economy, like going off the gold standard 40 years ago and fiat currency in countries making money like crazy?

If the Berkshire businesses are great, but the underlying economy is a problem, where do we go from there? What are the questions you’re asking yourself about the world economy? Thanks.

Warren Buffett:

Yeah, there’s always a lot of things wrong with the world. Unfortunately, it’s the only world we’ve got. I mean, so we live with it, and we deal with it.

But the beauty of it is this system works very well. I don’t have the faintest idea what’s going to happen in business or markets in the next year or two years.

But the one thing I know is that, over time, people will live better and better in this country. We have a system that works. It unleashes human potential.

I was just thinking, we have, today, about 35,000 people here. That was almost 1 percent of the population of the United States in the first census in 1790. Just 100 groups like this, and you were talking the whole country.

If you look at the… if we had had this room filled, back in 1790, with 35,000 citizens of the United States then, they would’ve been just as smart as we were, natively, their intelligence.

They would’ve lived in a country with resources that, obviously, same fertile soil, the same temperature, the same minerals, all of that. So they were just as able as we are.

But they weren’t turning out anything like we turn out today. I mean, just look at how we live compared to those people several hundred years ago.

So we have had a system that works. It unleashes human potential. And China went, for a long time, without a system that unleashed potential. Now they’ve got a system that’s unleashing human potential.

We haven’t reached the end of that road, by a long shot. I mean, we’re just starting, basically. We will have bad years in capitalism. I mean, it overshoots in markets. It gets overcome by fear and greed and all of that sort of thing.

But if you look at the 19th century, you know, we had a civil war. And we had 15 years or so of bad economic times spread out through that century. We had six panics, as they called them in those days.

And the 20th century had a couple of great wars. And we had plenty of recessions. And we had the Great Depression. So we have these interruptions in the progress of our society.

But overall, we move ahead. And we not only move ahead, we move ahead at a pretty damn rapid rate, when you think about it.

I mean, when, in the 20th century, we had a 7-for-1 improvement in living. And we did that. You know, we had slavery for a long time. We had blacks counted as three-fifths of a person. We didn’t let women vote for 130 years or thereabouts.

I mean, we have… we were wasting human potential. And we still are. But we were doing it more so for centuries. But we do keep moving forward in kind of fits and starts.

And right now, we’re sputtering somewhat, in terms of the economy. But there is no question, in my mind, that there is enormous human potential and that every period, every year we will meet, you can name a bunch of problems.

I mean, it will happen. But the opportunities will win in the end. And you know, your kids will live better than you live. And your grandchildren will live better.

And we will find more and more ways to find easier and better ways to do things that we haven’t even dreamt of yet.

Charlie?

Charlie Munger:

Well, now that I’m so close to the age of death, I find myself getting more cheerful about the economic future… which I’m not going to be here to enjoy.

And what I find really cheerful is that we are plainly going to harness the direct energy of the sun. And we’re going to have electrical power all over the world.

And that’s going to enable overpopulated countries to turn seawater into fresh. And it’s going to eliminate a lot of the environmental problems and preserve more of the hydrocarbon resources for future needs in… as chemical feedstocks.

What I see is a final breakthrough that solves the main technical problem of man. And you can see it coming right over the horizon. And of course, MidAmerican and BYD will be participating in it.

So, I think it’s hugely a mistake to think only about your probable misfortunes. You should also think about what’s good about your situation.

And what’s good about our situation now is the main technical problem of mankind is about to be fixed. It’s the… if you have enough energy, you can solve a lot of your other problems.

Warren Buffett:

He is getting more optimistic as he gets older.

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