Iconic investor Warren Buffett lays out the history of the US economy

What, of course, is on everyone's mind for the last two months is knowing what the situation will be in terms of health in the United States and what the situation will be in terms of the

economy

in the United States in the months and such Maybe for years to come and I really have nothing to add to your health knowledge. In school, I did well in accounting, but I sucked at biology and I'm learning about these various topics the same way you are. Personally, I think it feels extraordinarily good to be able to listen to dr.

Fauci, who I had never heard of a year ago, but I think we're very fortunate as a country to have a 79-year-old there who can work 24 hours a day and keep a good mood with him and communicate very, very direct about quite complex topics and tell you when you know something and when you don't know something, so I'm not going to talk about any political figures at all or politics in general this afternoon, but I feel I owe a huge debt of gratitude to dr. fauci for educating me and informing me, actually along with my friend Bill Gates, also about what's going on and I know I understood it.

I got it from a direct person when I understood it from any of them so thank you dr. Bacchi, but when this hit us and as I said here in the auditorium there were 17 or 18,000 empty seats the last time I was here it was completely full. Creighton was playing Villanova and there were 17 or 18,000 empty seats. Not a single person in that crowd, this was in January, there was not a single person in that crowd that didn't think March Madness wasn't going to happen and it's been a huge shift in terms of the national demeanor, the national psyche is dramatic and When we began this unsolicited journey, it seemed to me that there was an extraordinary variety of possibilities both on the health side and on the economic side, I mean, you know. there was def with 5 on one side and DEFCON 1 on the other side and no one really knows, of course, all the possibilities that exist and they don't know what probability factor to apply to them, but in this particular situation it did seem to me, there was an extraordinary variety of things that could happen on the health side and they have been an extraordinary variety in terms of the

economy

and of course they intersect and affect each other, so they bounce off each other.

As you go along, I say again, I don't know anything you don't know about health issues, but I think the range of possibilities has narrowed, other than that perspective that you know we're not getting. in the best of cases and we know that we are not in the worst of cases. Initially, the possibility of the virus was difficult to assess and still is difficult to assess. There are many things we have learned about it. Many things we know. We don't know, but at least we know what we don't know and some very smart people are working on it and we're learning as we go, but the virus was obviously very transmissible and that's good and then it's not so good, but it's not as lethal as it could have been.

We had the Spanish flu in 1918 and my dad, my four brothers and their parents all went through that and they have a great story in the March 15 issue of Omaha. world herald that you can go to calmer and search is also on the first page I believe in Google if you put Spanish flu Omaha and during that particular time and maybe four months or so Omaha 974 I believed this and that was half of the one per percent of the population and that figure was not very different from the entire country, so if you think about half of one percent of the population now you are talking about a million southerners there and unfortunately in terms of At worst In most cases, I don't seem to know this and I did it.

I think it can almost be ruled out that it is as lethal as the Spanish flu was, but it is very, very transmissible and, of course, we have the problem that we do not know the denominator in exact terms. Oh, they thought about us because we don't know how many people have had it and didn't know they had it, but in any case, the range of probabilities about health narrowed a little bit. I would say that the range of probabilities are possibilities and uh, on the economic side they are still extraordinarily wide, yeah, we don't know exactly what happens when you voluntarily shut down a substantial part of your society and in two thousand eight nine the economic train derailed and There were some reasons why the road was weak in terms of the benches and all that kind of stuff, but this time we immediately took the train off the tracks and put it on a siding and I don't really know any parallels in terms about very, very well the The most important country in the world, the most productive enormous population, which in fact neglects its economy and its workforce and, obviously and inevitably, creates a great deal of anxiety and changes the psyche of the people and makes them lose your way a little.

In many cases, understandably, this is all an experiment. and then we will be able to know the answer to most questions reasonably soon, but we may not know the answers to some very important questions for many years, so it still has this enormous range of possibilities, but even in the face of that I would like talk to you about haha ​​the economic future of the country because I remain convinced as I am. I was convinced of this Second World War. I was convinced too, but during the Cuban missile crisis um 9/11, the financial crisis so that nothing could basically stop the United States and us.

He faced big problems in the past. He faced exactly this problem. In fact, we haven't really faced anything close to this problem, but we do face tougher problems and American miracles. American magic has always prevailed and will do so again. And I would like. to take you through a little bit of

history

to essentially make my case that if you had to choose a time to be born and a place to be born and you didn't know what your sex was going to be, you didn't know what your intelligence was going to be. It would be if he didn't know what your special talents or your special deficiencies would be that you would do that once he wouldn't choose 1720 he wouldn't choose 1820 he wouldn't choose 1920 he had chosen he chose today and you would choose America and of course, the interesting thing about this is that since that the United States was organized in 1789, George Washington took the oath, the people who wanted to come here, can you imagine that way, for 231 years there have always been people who I wanted to come here, my friend?

I think it's a leap, conscious, shadow. I'm putting up the slide. What's up, but I'm going to call from some portions. Delicious pork, but the interesting thing about this country is what is on slide one. Let's put it and this is an extraordinarily young man. country now I'm comparing him to a couple of guys who are quite older, but when you think about the fact that my age is Charlie's age or our life experience and then we add this young man here Greg Gable and if our experiences Combined lives exceed the lifespan of the United States.

We are a very, very young country, but what we have achieved is miraculous. Now think about this little place in

history

and if we go to slide two, I've tried to estimate, well, let's go back and that would stay with the slide, but the population in 1790, you know, we had 3.9 million people here, and something like that, when you look up the census figures, you find out that there was a big fire in the Department of Commerce. It was built in 1921, so a lot of census records were lost, so these are not entirely, as there are some things where there are some gaps, but there were three point nine million people in the United States and in Actually I have point six million. closer to 0.7 million there were 700,000 of those people were slaves at that time, but there were three point nine million people, we are half of one percent of the population of the planet and if you had asked any of those three point nine million Any of them could imagine what life would be like 231 years later, even the most optimistic person and let him have been drinking a lot and even had a little marijuana and they still couldn't in their wildest dreams have thought that in three Charlie's lives of mine and Greg that in that period we would be looking at a country with 280 million vehicles shuffling along its roads, maybe not as many airplanes today, but they will come back and fly people at 40,000 feet from coast to coast in five hours. that there would be great universities in state after state, great hospital systems, and entertainment would be provided to the people in a way that no one could have dreamed of in 1790 in this country and 231 years have been beyond the dreams of anyone who went on the Internet and tried to prepare . for this and I tried, if you'll go to the next slide, I tried to find out what the wealth of the country was in 1790, 1789, its starting point and I marked in the United States.

Well, I tried 1780 and I tried 1790, I thought about it. It might be a little bit easier terms of a round year and I think about four million references came up and I didn't look at the four million, but I can tell you that the data collection and those early days on many fronts were not a even if it is a good day, you can't really, you can't find, but I would consider reliable figures, you can, you can find out how many mules or what part of the country and the few things like that NAB friend he had, I'm awake, but in real estate and one that You find them when you look at houses or apartment buildings or office buildings that, you know, are slightly different from each other, but they looked at comparable sales, so it's hard to find a lot of countries where wealth was estimated, but it was interesting to go back. and think about the fact that in 1803 we bought for fifteen million dollars, we did the Louisiana Purchase, that's a little after 1789, but that's the one that's the best policeman, as they say in real estate, that's the best cowboy that we could find for the land mass anyway and when we bought, we made that purchase, which by the way was equal to about a quarter of over eight hundred and five thousand square miles, but it was about a quarter. of what the lower 48 states now contain, so we bought about a quarter of the lower 48 for this fifteen million dollars in 1803 and if you live in Texas and your grandfather is about to die and call the grandchildren around him . and in his last words he always says don't sell the mineral rights well, the French also told us the mineral rights in that 15 million dollar deal, so we have that whole strip there, we have all of Kansas, essentially all of Oklahoma and they produced 21 billion barrels of oil for some other natural gas since the purchase one of the highlights is that we paid our 15 million for the purchase of Louisiana we paid 3 million of it 20 percent we paid with two hundred thousand ounces of gold valued at fifteen dollars an ounce and that three millionth part the French took and we got South Dakota as part of the Louisiana Purchase and the Homestake mine there before it closed produced over forty million ounces of gold and forty million ounces of gold and This is equivalent to about sixty billion dollars and, as I said, we, two hundred thousand ounces, took on twenty percent of our purchase price, so the Louisiana purchase was a bargain, but that is the going price for eight hundred thousand square miles, I suppose. time and three cents an acre, so I decided, by playing with various numbers like that, that as a reasonable estimate of the value of the country in 1789, a billion would not be an unreasonable figure now if it had been an act. by omission or something, I would have put a billion one hundred seven million four hundred dollars or something or made it look respectable, but it's a wild guess, but it's not, it's not a crazy figure, so what happened, let's move on .

Let's move on to the next slide about the wealth of that country since then and here we have some figures that come out quite regularly, well, they come out regularly, where the Federal Reserve estimates the net worth of the households of people in the United States over all the homes of the country. United States and you can look them up and you'll see you know there's 30 trillion stocks and um I think maybe single family homes what else there's about 82 million owner occupied single family families and maybe 45 million. rental apartments and so on, so you started adding all this up and the Federal Reserve tells us and I invite you to look at the data, it's an interesting thing that now in the United States, 231 years later, we have a hundred trillion, we have more than a hundred trillion of household wealth even though the stock market is down a little bit since the last quarterly report, so you say, well, you know, we have a lot of inflation, all we really have in the United States, but the first half of our existence approximately We really didn't have that much inflation, we had inflationary periods and deflationary periods, but the general price level did not change so dramatically, but I will assume again for this calculation that how high there has been an inflation of 24 1, that is, it is a lot less than that and many commodities, but it is very difficult to measure and let's talk about equivalent benefits of different types of products, etc. and costs, but I think it is reasonable to say that the United States in real terms hasincreased and the wealth is something in the area of ​​five thousand four one, which is truly mind-boggling five thousand four one in real terms in a country that had half a percent of the and a lot of raw earth, but a vision that managed to achieve that in two hundred Thirty-one years ago there is no denying that this is beyond what anyone could have dreamed of before, but it was not done and this is important because now we have hit a roadblock.

It wasn't done without some serious bumps in the road, it wasn't two hundred and thirty-one years of constant progress and, in fact, we had been at the birth of this country, Whedon, then, seventy-two years and If we go to the next line In 1861, we now had about 31 million people; The 1960 census showed that about 31 million people were their pots in the country and 4 million of them were slaves and we had never really resolved the outstanding issue of what was involved in the compromises in 1789 and we will have more to say about that later, but we had something that not many countries experienced and a few adults in 1789 that in 17 and 72 years there was going to be a division.

That caused the President of the United States at Gettysburg to say that to test whether that nation or any nation so conceived and dedicated can long endure, imagine the President meeting the States wondering aloud whether the country over which he presided could resist for a long time only 72 years o Seventy-four years ago took place, so while this wonderful dream was developing, about a third of the way and we faced this real moment of decision and we participated in a contest that will go to the next slide . I made an estimate that they literally killed about 6% of men in the country between the ages of 18 and 60.

I guess there were over 600 thousand deaths in the war and I think it's a reasonable estimate that that group of eighteen to sixty men were by far the largest proportion, so imagine that six percent of working-age men in a country they are eliminated in four years, so when we look at the progress of this country and think about our own problems now, I just ask you. to reflect and we'll move on to the next slide which today would be equivalent to four billion men of the same age group being similarly wiped out so that was an incredible disruption that this country nevertheless overcame while compiling this American dream that It is one of the wonders of the world, perhaps the world's in many ways, so let's move on to another crisis of a different kind than the country's and this, of course, is the crisis of 1929 that led to the Great Depression and, um, this is the Dow Jones.

The Jones average, which we'll use for this at that point, is the one everyone paid attention to. Actually, the second most important average at that time, if you look at newspapers, was the most recent Times average, which has disappeared and, of course, Standard and Poor's has probably and is a tougher stick anyway, but the Dow Jones is a suitable criterion for Klee and on September 3, 1929 the Dow Jones average closed at 380,117 and the people were very happy and buying stocks on margin had worked wonderfully and the roaring 20s had a good I'm sorry with the coming of age of the automobile and the day of air travel and all sorts of new appliances and the increasing use of the telephone, believe it or not, it hadn't really caught on much before that, but boobs were They were ending.

It was a happy place and then of course it will fuel the next downfall; look at what happened in the couple of months after September 3rd and the Dow Jones average almost halved and that was pretty impressive until we had this recent situation. in a shorter period of time we lost about a third, but the crash happened and there's a great book about it called The Great Crash by John Kenneth Galbraith. They let me insert a small plug here, there is a small company and an almond eye. I hate what this truncating this meeting could have done so dramatically to a lot of the businesses in Alma because I think the small businesses were the beneficiaries, but they really got a lot of business out of a Berkshire meeting and they're going to get it. in the future, but they suffered through a period like this and they just had a story about book one, well, the bookworm, if you buy any book that comes out of it, I think I recommend thinking about just putting the bookworm in the house and Ah, The Great Collapse is a wonderful book of mine.

John Kenneth Galbraith describes it. But I would like to go into a personal note that will have some relevance, not too much, but some relevance to the history of the Great Depression because in 1929. My father, who was 26 years old at the time, worked as a securities salesman at a small local bank. and I sold stocks and bonds, but I mainly sold stocks and when the stock fell 48 percent and they were selling it to people a few months ago, I really don't feel like going out and facing those same people, so I think my dad probably I would like to do what they say now, shelter in place, which means stay home and there really wasn't much in our house that we just had.

In a small yard, it was winter anyway, my dad would have been playing in the garden anyway and I didn't really, you know, the TV wasn't there and AH and he and my mother got along very well, so in those conditions, if you turn. to the next slide I was born about nine months later, but at that time I was actually born on August 30, but the stock market was closed that day, so I'm using the figures from the previous day, but it wasn't. I didn't realize at the time that the market was closed, but the stock market had actually rallied over 20% over that nine and a half month period or so.

People didn't think about the fall of 1930, they didn't think they were in the great depression, they thought it was a recession much like one that occurred at least a dozen times, although not always when the stock markets were important, but we had had many processions in the United States over time and this was nothing like It was something dramatically out of the ordinary, huh, but for a while, in fact, for about ten days after I was born, it was carried to place on Earth and the stock market managed to go up one or two percent there in those ten days, but that's the last day, well, from that point on, if you go to the next slide, the stock market it went from a level of it to 40 and 41, which was a notable decrease because if someone had given me $1,000 the day I was born and I had bought stocks with it on the Dow average, my thousand dollars would have become one hundred and seventy dollars in less than two years and that's something that none of us had ever experienced, that we may have had with a stock occasionally, but in terms of having a wide range of the United States, the brand now and 83% in two years and the eighty-nine percent reduction from the peak that was on September 39, 1929 was extraordinary and, um, in that intervening period, less than a year after I was born, the slightly Less than a year, my dad he went to the bank where he worked and he had his account and of course the bank had a closed sign so he didn't have a job and at the time he had two kids and his dad had a grocery store but Charlie and I worked for my grandfather.

Charlie worked there in 1940. I worked in 1941, so we didn't know each other, but my grandfather told my father not to worry about your purchases. I already said I'll leave you. build one that wasn't exactly him, he cared about his family, but he wouldn't go crazy and one of the things is that I look back on that period called Zion and I don't think economists in general like to give him that much It's a point important, but if we had had the FDIC ten years earlier, Wheaton, the FDIC started on January 1, 1934, it was part of the extensive legislation that took place when Roosevelt came, but if we had had the FDIC we would have had a very, very different, I think in the Great Depression people blame the smooth and smooth Hall here and I mean there are all kinds of things and the margin requirements in 29 and all those things went into creating a recession, but if you have over 4,000 banks fail, that's 4,000 local experiences or people save and save and save and save and save their money and then, one day, they go for it and it's gone, and that happens, you know, in all 48 states, and it happens to your neighbors and your family.

It has to have an effect on the psyche, that's incredible. Something very, very, very good that came from the person from my point of view like the FDIC and it would have been a somewhat different world, I'm sure if the bank The failures had not spread throughout this country and with people who thought that They were savers found out they had nothing when they went there and there was a sign that said closed by the way, FDIC. I think very few people know this, but. or at least they don't appreciate it, but the FDIC has not cost the American taxpayer a dime, I mean, their expenses have been paid, their losses have been paid through bank assessments, they have been a mutual insurance company of banks backed by the federal government. government and is associated with the federal government, but now it has a hundred billion dollars and that consists of premiums that were paid as investment income on the premiums minus the expenses and the payment of all losses, and think about the incredible amount of peace of mind that is obtained well that is given to people who were not in a similar situation and when the Great Depression came, the Great Depression continued and lasted a long time, but it lasted much longer in people's minds than in reality in its effects .

World War II came and in an involuntary way we adopted Keynesianism, we began to have fiscal deficits, of course, which are absolutely enormous and we took our debt to a percentage of GDP that we had never reached, that we had never reached before and never since. We had a huge economic recovery, but people's minds had been so marked by the memories that parents told their children. 1929 became a symbol in people's minds. I mean, if you said 1929 it was like saying 1776 or 1492. I mean, everyone knew exactly what you were talking about. and it affected stock prices quite noticeably to the point that, if you go to the next slide, it was on January 4, 1951 that the boy who was born on August 30, 1930 had finished college before the stock market would work again. where I was at that time before so take the years from 19:20 19:30 or 1929 redeemed 1951 or take the year from my birth 20 years and keep in mind that you know the country was only one hundred and forty years old when This started , that's 20 years of this incredible 231-year lifespan of our country that was completely, you know, a time for a long time of no economic growth and no sentiment on the part of people in terms of who else in the country and what American.

The economy was worth what all these corporations were doing much, much better than a long time ago, but it took all that time to restore to the market a price level, ah, it was the same, but it was one that I was born into 20 years earlier. , so if you think about the fact that we are holding on for a few months and we will hold on for many more months, but we don't know how it turns out and the people of the 1930s didn't know how it was going to turn out, but holding on and persevering prospered and the American miracle continued, but it's interesting that I don't actually have a slide for the next one because last night I was thinking that after all the slides had been prepared, I was actually thinking about this a little bit later, a little bit and I remembered that, in nineteen, in early 1954, the stock market was, the Dow was only at about 280 and I remember 1954 because it was the best year I've ever had in the stock market and the Dow went from essentially whatever you do ma'am or something in early of the year to a little over 400 at the end of the year and when I reached 400 as soon as I crossed 381 that famous figure from 1929 when I reached 400 ah, this will be Some of you find it hard to believe, but everyone was wondering if this 1929 It happened again and it seems a little crazy because it was a different country in 1954, but that was the common question and he actually managed to get it to that level.

Concern that we were about to jump off another cliff simply because the 3:81 of 1929 was surpassed held Senator Fulbright through Fulbright of Arkansas, who later became very famous in terms of the Foreign Relations Committee, but had the Senate Banking Committee and he called a special investigation and he calls it what he calls a stock market study, but actually, if you read it, he really wondered if we had built another house of cards over and over again. In his committee it is interesting to see the Senate Finance Committee, one of the members was Prescott Bush, the father of George HW Bush and grandfather of George W Bush, and he had some illustrious names and his committee in March 1955 with the Dow at 4:05 met. 20 of America's best minds to testify if we were going crazy again because the marketwas at 400, the Dow was at 400, and we'd been in this incredible trouble before, but that was the mentality of the country.

Unbelievable, we didn't really believe that America was what it was and the reason my boss I'm familiar with your thousand page book that I have here and I found it last night in the library was that I was working in New York on one of the 20 people who were called to testify before Senator Fuller and he testified right before Bill Martin, who ran the Federal Reserve, testified, and right after General Wood, who runs gentlemen, testified that Sears was very, very important and then and Bill Martin, of course, of the battle that the longest-serving president in the history of the Federal Reserve and he is the one who gave the famous quote about the role of the Federal Reserve was to remove the pile of balls just when the party was starting to get very heated. , but and where my boss sent me to the New York Public Library to gather information for him, something I could now do in five minutes with a computer and I have something and he went to testify and, on page 545 of this book, I knew Where to look.

I didn't have to go over it all, but I had a quote that I remember and remember because Ben Graham was one of the three smartest people I've ever met in my life and he was the dean of people. in the securities business he wrote the classic book on securities analysis in 1934 he wrote the book to change my life telogen Buster in 1949 he was incredibly intelligent and when he testified the Dow at 404 he had a line there right at the beginning and his written testimony and he said that the stock market is high it looks high it's high but it's not as high as it seems but he said it's high and since then, if we go to the next slide, of course, we feel the American tailwind in full force and ​​the Dow, well you are seeing the yes and the Daoist went down on Friday but when I made the drop it was around 24,000 so today we are looking at a market that has produced $100 for every dollar all it did was believe in American only for a representative sample of the United States, you didn't have to read The Wall Street Journal, you didn't have to look up your stock price, you didn't have to pay a lot of money in fees for Anyone had to believe that the American miracle was intact, but it had had this trial period between 1929 and, well, really, certainly, 1950 is indicated by what happened when it went back up to 380, yes, this trial period and people really, but they.

They had lost faith to a certain extent, they just didn't see the potential of what America could do and we found out that when you get down to it, nothing can stop America and it's been true all along and they've been interrupted with things. more terrifying. scenarios where you had a war with one group of states and you found another group of states and it may have been tested again in the great depression and it may have been tested now to some extent but in the end the answer is never betting against America and that in My View is as true today as it was in 1789 and was even true during the Civil War and the depths of the depression.

Now I'm about to say something like that and don't change the slide yet. I'm about to say something that some of you might be tempted to argue with me about, but I wouldn't argue that we're imperfect in so many ways, but I would say, and if you put up the next slide, that we're imperfect. We are now a better country and an incredibly richer country than in 1789, we were very, very far from what we should be, but we have gone dramatically in the right direction, it's interesting, we said in 1776, suddenly, we revealed all these truths. It is evident that all men are created equal, endowed by their creator with certain unalienable rights, among them life, liberty and the pursuit of happiness, and yet, 14 years later, one year after we actually officially began, the country in 1789 adopted a Constitution, uh, we found that over 15% of the people in the country were slaves and we struggled with that, but when you say the word obvious, it sounds like you're saying that any damn fool can recognize that and certainly You say.

You can argue maybe a little about life and the pursuit of happiness, but I don't see how in the world anyone can reconcile freedom with the idea that that 15% of the population was enslaved and it took us a long time at least partially correct, what I said was that it took me a civil war, it was necessary to lose 6% of those people who were men who were between 18 and 60 years old, but we have moved in the right direction, we have a long way to go travel. come on, but now we've moved in the right direction, other than going back to that 1776 statement that all men are created equal and gifted by their creator, etc.

I think it was evident to 50% of the population that they were getting a fair deal for more than half the life of the country. It took 131 years out of our country's 231, it took 131 years until warm women were guaranteed the right to vote for our country's leaders and then what's even more remarkable is that after we passed the 19th Amendment From 1920, it was 61 more years before a woman was allowed to join those eight men on the Supreme Court. I grew up thinking that the Supreme Court, you know, must have said it had to be nine men, but it was when I was sixty-one. 192 years before Sandra Day O'Connor was appointed to the court and now you can say there was a problem with the pipeline, half the population maybe were women in 1920, but they weren't half the lawyers and we're ten percent of the population. lawyers probably, so you can understand some delay, but sixty-one years is a long time to pick 33 men in the middle, if that was completely by chance, then the odds against you being flipping coins are about 8 thousand million to 1, I don't like it.

I said there was a problem with the pipeline, but it took us a long time and it's not done yet, but I think it makes sense of the fact that we are a better society with a lot of room to go, but we are a better society that existed in 1789, already You know, when you go to Colonial Williamsburg, you know I've been there a couple of times, in fact, I saw the debate between Jimmy Carter and Gerald Ford there in 1976 and you know that. It was not a good time to be black, it was not a good time to be a woman, and both categories certainly still had potential for significant improvement in terms of fulfilling that promise made in 1776 about how we think it is self-evident. all men are created equal but we have progressed, we are a better society and we will be as the years go by if you move on to the next line and I believe that and I believe I will see if I can put these slides in the right order.

I think when you evaluate all the qualitative facts, what we have done to meet the aspirations of what we wrote in 1776, what was written in 1776 was not a fact, but an aspirational document and we have worked to achieve it. those aspirations and we have a long way to go