Warren Buffett: How to Create a Fair Social System

photo by trackrecord

With the increasing analysis of the differences between President Obama’s policies and those of Mitt Romney, I felt that these wise thoughts by Warren Buffet would be very timely.  Mr. Buffet gives a brief and entertaining explanation of how difficult it actually is to create a fair social system.  I feel like we have all become very good at critiquing our politicians but when it comes down to actually coming up with creative solutions ourselves, it is a real challenge.

Here is Mr. Buffet:

Let’s just say, Sandy, that it was 24 hours before you were born, and a genie appeared, and said “Sandy, you look like a winner.  I have enormous confidence in you, and what I’m going to do is let you set the rules of the society into which you will be born.  You can set the economic rules, the social rules, and whatever rules you set will apply during your lifetime, and your children’s lifetimes.”

And you’ll say, “Well, that’s nice, but what’s the catch?”

And the genie says, “Here’s the catch.  You don’t know if you’re going to be born rich or poor, white or black, male or female, able-bodied or infirm, intelligent or retarded.  All you know is that you’re going to get one ball our of a barrel with, say, 5.8 billion balls in it.”  You’re going to participate in what I call the Ovarian Lottery.  And it’s the most important thing that will happen to you in your life, but you have no control over it.  It’s going to determine far more than your grades in school or anything else that happens to you.

Now, what rules do you want to have?  I’m not going to tell you the rules, and nobody will tell you; you have to make them up for yourself.  But they will affect how you think about what you do in your will and things of that sort.  That’s because you’re going to want to have a system that turns out great quantities of good and services, so that your kids can live better than you did, and so that your grandchildren can live better than your kids.  You’re going to want a system that keeps Bill Gates and Andy Grove and Jack Welch working long, long after they don’t need to work.  You’re going to want the most able people working more than 12 hours a day.  So you’ve got to have a system that incentives them, and that turns out goods.  But you’re also going to want a system that takes care of the bad balls, the ones that aren’t lucky.  If you have a system that is turning out enough goods and services, you can take care of them.  You want a system where people are free of fear to some extent.  You don’t want people worrying about being sick in their old age, or fearful about going home at night.  So you’ll try to design something, assuming you have the goods and services to solve that sort of thing.  You’ll want equality of opportunity – a good school system – to make you feel that every piece of talent out there will get the same shot at contributing.  And your tax system will follow from your reasoning on that.  And what you do with the money you make is another thing to think about.  As you work though that, everybody comes up with something a little different.  I just suggest you play that little game. (Warren Buffet, “Buffet & Gates on Success,” KCTS/Seattle, May 1998, transcript p.12)