The government needs to enact policies to help those adversely affected by global trade
Good afternoon. I’m Whitney Tilson, a shareholder from New York.
My question is related to the ones asked earlier about job cuts. Perhaps, the only thing that makes American workers angrier than layoffs is to shut down an operation entirely and move the jobs overseas.
Ask anyone in Ohio or Michigan, and they’ll tell you stories about companies that have been operating in those states for decades, benefitting from the educational system, infrastructure and so forth, things that were paid for by local taxpayers.
But, then, some high-paid consultants came along and showed the company how it could reduce its costs by relocating production to Mexico or China. And poof, the good U.S. jobs disappeared.
My observation is that most investors and those in corporate America today worship at the altar of maximizing shareholder value, which is code for doing whatever is necessary to boost the share price as high as possible.
But in doing so, companies are taking actions that make millions of workers feel, at best, fearful and left behind and, at worst, deeply harmed by corporate America.
It makes so many people so angry that I think it’s testing the post-World War II economic order, which is rooted in free trade, and even the strength of our democracy. I’d argue that it was decisive in our last election.
So my question to you is, do you think that businesses should consider factors outside of pure economics when making these types of decisions? What obligations, if any, do they have to their employees and communities in which they operate?
And lastly, if a Berkshire CEO came to you and asked for your approval to close a U.S. operation and relocate it overseas to save money, what questions would you ask beyond the economics of this decision? Thank you.
Yeah. Well, the truth is that… in certain cases, production that would otherwise… that had formerly been in the United States has definitely been supplanted by production that comes from other parts of the world.
Originally… I was there when Fruit of the Loom was called Union Underwear and bought by Graham-Newman Corp in 1955, I believe. And it was probably all domestic then. And the truth is if it was all domestic now, it wouldn’t exist.
We had the same thing happen with Dexter Shoe. And it was a wonderful company and skilled workers. And in the end, if we sold the shoes at a price that yielded what they cost us, they were not competitive with shoes from around the world.
Trade, I would argue… both ways, export, import… massive trade should be… and is, actually
…enormously beneficial both to the United States and the world. I mean, it will… it… greater productivity will benefit the world in a general way.
But to be roadkill, to be the textile worker in New Bedford that was put out of a job eventually, to be the shoe worker in Dexter… at Dexter to be… was put out of work, you know, is…
I mean, it would be no fun to go through life and say, “I’m doing this for the greater good and so that shoes or underwear will sell for five percent less,” or something, “and the American public will actually never know.”
So what you need is two things, in my view. You’ve got an enormously prosperous country.
You’ve got almost $60,000 of GDP per capita. It’s unbelievable… six times what it was when I was born, in real terms.
So we’ve got the prosperity. And that prosperity is enhanced by trade. We were only exporting five percent of our GDP back in 1970, and that’s… I think it’s around 12 percent or something like that now.
We’re doing what we do best. But we need an educator-in-chief, logically the president… I don’t mean this specific president. I mean any president who’s been around for decades… has to be able to explain to the American public the overall benefits of, essentially, free trade.
And then, beyond that, we have to have policies that take care of the people that become the roadkill in the process.
Because it doesn’t make any difference to me if… as far as I’m concerned, if my life is miserable because I’ve been put out of business by something that’s good for 320-some million people in some infinitesimal way, and it’s messed up my life when I’ve tried to live it in a proper way.
So we have got the resources to take care of those people. The investors, I don’t worry about. I wrote about this a few years ago.
The investors can diversify their investments in such a way that, overall, trade probably benefits them and they don’t get killed by a specific industry condition.
But the worker, in many cases, can’t do that. You’re not going to retrain some 55-year-old worker in New Bedford who may not even speak English in our textile mill or something. I mean, they…
If they get destroyed by something that’s good for society, they get destroyed, unless government puts in some policies that takes care of people like that. And we’ve got a rich society that can do that. And we got a society that will benefit by free trade.
And I think we ought to try to hit both objectives of making sure that there is not roadkill and that, at the same time, we get… 320 million people… get the benefits of free trade.
Well, I don’t quarrel with that. And we have unemployment insurance for that exact reason.
But I’m afraid that a capitalist system is always going to hurt some people as it modifies and improves. There’s no way to avoid it.
Yeah. Well, capitalism is brutal to capital if you’re in the wrong businesses. And, like I say, you can diversify those results.
Capitalism is brutal to people that have the bad luck to be skilled or develop their skills for decades.
But a rich… a very rich society can actually… if it’s beneficial to society overall, it can take care of those people. I mean, it just… you know, the new tax…
The bill that was passed a couple days ago reduces my taxes, you know, by 17 percent. You know, and is that needed by the government or anything of the sort?
I wouldn’t start spending the money.
No. And… but that was the will, I mean, of the…
No, I agree. I don’t think… who knows what happens with the bill? But I’m just… to have that happen, and I don’t think…
I think if you polled a thousand people in Omaha that were walking to a shopping center as to whether my tax bill had been cut by some very large sum because of what passed, I don’t think many people would have the faintest idea what happened, in terms of the coverage of it and all of that that took place.
So I… we’ve got… we do have… it’s probably more like 57- or $58,000 of GDP per capita… family of four, $230,000. But nobody should be roadkill in this sort of society…
Well, remember what Bismarck said: There are two things that nobody should have to watch.
One is the making of the sausage. And the other is the making of legislation.
Yeah. Well, I would say that somebody ought to watch.
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