Warren Buffett on Why Investing in the US Is a “Winner’s Game”

So I’m writing up my notes from lunch with Warren Buffett. I put all the business thinking here. And I wrote up his stuff about becoming a better person here and here.

But I wanted to write a separate article on his really convincing argument why investing long term in the US is a “winner’s game”. His argument was basically the following five points:

Point 1: If you flew over the USA 150 years ago, there was virtually nothing to see. The country basically had a few million people and lots of open space. And now, less than two lifetimes later, the country is covered in roads, infrastructure, business and life. That is amazing.

Point 2: In just Warren’s own lifetime, there has been a 6x increase in the GDP per capita. And beyond this wealth increase, the quality of life has increased dramatically in every way. Your ability to travel, to access information, to communicate, to get health treatments, to enjoy entertainment, to secure food and so on. Every middle class American lives a better and more wealthy life than the world’s richest person in 1930.

Point 3: He says all this is amazing progress in the US is due to the “unleashing of human potential”. This is what the US system is doing – unleashing human potential. Capital and business similarly do well in this country. It is an “entrepeneur’s dream”.

Point 4: This type of economic progress creates a huge “tailwind” for investment. Investing in the USA long-term is a “winner’s game”.

Point 5: And you really want to be in businesses that benefit from this massive tailwind. But you only capture it by putting money to work long term. You won’t get the benefits if you jump in and out of the market. As Charlie Munger has often said “ the big money is in the waiting”.

I thought that entire argument was pretty compelling.

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He went more into how the US is an “entrepreneur’s dream”. He talked about Rose Blumkin and how she came to the US as teenager and eventually founded the Nebraska Furniture Mart.

He also told the story of Jack Taylor, another entrepreneur. Jack was born in 1922 in St. Louis. He went to World War II. He later became a used car salesman and did some car leasing. He eventually got into car rentals, starting with 17 cars. This little business grew to become Enterprise Rental Car, which now hires more US college graduates than any other company.

His point was that these peoples’ stories were possible because of the American system. He made a pretty good joke about when everyone was working on farms, Steve Jobs and Bill Gates wouldn’t have picked vegetables any better than anyone else.

He also talked about what this economic advancement means for society, describing the USA as a “super-rich family”. And in this family, everyone should work. Everyone should be able to afford a couple of kids. Everyone should get an education. Everyone should have a decent life. However, it is worth remembering that not everyone has skills that are valuable in a market system. That is an important question to think about.

Finally, he was asked what he thought the key challenge is for the US system going forward. What could wreck this system? He said the “challenge is to keep the motivation, the culture and the atmosphere”. If this happens, the US will continue to unleash the potential of those who fit well in a market system.

Thanks for reading - jeff

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I write and speak about the Chinese consumers and digital China.

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Some previous posts include:

• I Took 20 Chinese Students to Meet Warren Buffett. Here's What Happened.
• Stop Calling Me an Introvert. I Prefer "Power Thinker"
• How I Went From NYC to Working for Prince Alwaleed
• My Favorite Map for Understanding China

About: I am a Professor of Investment at Peking University Guanghua School of Management in Beijing. I am also an investor, speaker and former executive / slave to Prince Alwaleed.