What Would Warren Do?

I have never owned a single share of Berkshire Hathaway stock. My interest and observations of Warren Buffett have always been passive, but my admiration is nonetheless strong. As a captain of American industry, he strikes me as a solid individual who has conducted his life and business with values we can only revere. Old-fashioned? Absolutely. Out-of date? Never.

Wouldn’t it be interesting to know what Warren Buffett is thinking now as our democratic process has delivered this republic to a point of perpetual government deadlock? At the core of every issue: money.

Early Saturday the US House of Representatives passed a budget for the fiscal year 2011 that reduces the proposed discretionary spending by over $60 billion over the next seven months. After a cantankerous week that processed 600 amendments to this bill, the House struggled to wrap up work on the measure that affects a paltry 16% of the federal government.   Sounds like Don Quixote to me.

Without Senate approval and the President’s signature, this measure will die as many House-originated bills do. But this one may be different due to the shrill screaming from its supporters.

The federal government has operated on a continuing resolution that funded operations since October 1 at the same spending levels as the 2010 budget. That resolution expires on March 4th, and without a new budget or an extension of the resolution, the government is not authorized to spend any money. In other words, it will shut down.

To varying degrees, this showdown plays our every year. One difference this year is the presence in the House of 87 new freshman conservatives, who as one put it, “we don’t know the ways of Washington, and frankly, we don’t care.”

That last sentence is really bothersome to me. To their base, these words proclaim that they are going to rise above and repair what they see as a broken governing system. To others (including me), it says, “we may be ill-advised and uninformed, but that’s ok with you.”

Picture the furious opponents of health care reform screaming to “keep the government’s hands off my Medicare!

Warren Buffett has built one of the most profitable investment companies in American history. How? He earned money the old fashioned way – by delivering products and services to a buying public through a disciplined organization focused on their core objective: to create a return on their shareholder’s investment. To manage, they rely on the best people, the best information, and a decision-making structure designed to keep them on task.

I don’t recall hearing a lot of noise about the Berkshire Hathaway’s quarterly projections, wild share value swings, or controversy of any nature among its management. They just do their job. Sometimes that means adjusting costs to reflect changes in revenues, or hiring people when there is an opportunity to expand. Sometimes it means investing money when the payoff may take a while, but where the long term value is clear.

No bravado, just performance.

Compare that performance to our Congress. While there are many ways to describe, I will focus on three points that illustrate these differences and are the root of many problems in our process and our governing class:

Lack of transparency / lack of honesty – If you buy a share a stock, the law protects your right to know everything about the company that everyone else knows. Why not demand that right from our Congress? Our tax code is too convoluted for them to figure it out, much less us. But that enables them to separate truth from reality much easier. Think about hidden tax breaks for corporations that cost government revenues while the sponsor’s talks tough about fiscal responsibility.

Lack of consequences – What if a Fortune 500 company didn’t have a budget by the beginning of their fiscal year? Its stock would plummet over suspicions of what they were hiding or how incompetent they were. Why can’t Congress produce a budget on time? Similarly, Congress can wreck the financial future for its citizens through policies like medical insurance or social security, and not be affected due to the generous benefits given to those sworn into Congress.

Public policy vs. private virtues – Business capital is responsible to its shareholders. Good investments pay dividends. Yet Congress can commandeer public funds based on the religious mores or potential profit of a minority of the body politic. That practice is clearly wrong, yet is happens every day. I fault financial games to thwart disagreeable social programs (think proposed cuts to Planned Parenthood) in the same class as protecting tax exemptions for oil producers or hedge fund operators (and we still exempt billions of taxes from both categories). One costs the very poor – the other benefits the very rich.

Not to put words in his mouth, but I suspect that Mr. Buffett finds many of these practices not only disagreeable, but not serving the greater good.

Our federal government has suddenly evolved toward one resembling the Dark Ages, where the “king” is more interested in protecting the knights at the expense of the serfs. We are taking history in the wrong direction.

What would Warren think?

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