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Warren Buffett and the American Dream

How much can a fund manager tell you about the American Dream?

May 30, 2001

How much can a fund manager tell you about the American Dream?

It happened on a trip to Atlanta. I had been invited there to talk about the U.S. economy. As soon as I finished up my presentation, I ran to the airport and got on the airplane back to Washington. Since I had chosen to get on an earlier flight, I had gotten the last seat on the plane. It was the middle seat in the last row, with two very large men seated on both sides of me. I sat down and began to read my newspaper.

As I was reading, a hand suddenly came up next to me and pulled the newspaper down. The hand belonged to the fellow seated to my right, a huge man — a blue-collar worker, with tattoos all over his arms. He had his sleeves rolled up, lunch box in his lap. He said, “You’re the guy that ran for the U.S. Senate in Texas, aren’t you? I voted for you. My entire union shop voted for you.”

Since I had ended up losing that race to a popular incumbent, I am shy about my short-lived political career, so I said, “Well, thank you very much,” and asked him to say hello to some mutual friends, put my newspaper back up, and went on reading.

But the hand came up and pulled the paper down again. The man said, “You’re the investment guy, isn’t that right?” He remembered that I had spent my previous career in the money management industry. So I said, “Yes, I am.”

He opened his lunch box, took out his thermos bottle and, from underneath it, pulled out two slips of paper — what are called confirmations of trades. He said, “I just put my entire savings in a self-directed 401(k) program with these two mutual fund managers. What do you think of them?”

Well, I looked at them and I said, “You know, there are at least 4,500 mutual funds. In fact, there are more mutual fund managers than there are stocks on the New York Stock Exchange. I’m afraid I don’t know these people. I’m sure they’re fine. But I’m curious. Why did you invest with them?”

You have to picture this moment. This is a giant fellow — muscular, huge, tough guy. And he leans over and whispers in my ear, like a lover, and says, “They buy what Warren buys.” Not thinking, I said, “Warren who?” And he yelled, “Buffett, man, Buffett.” And he said, and I quote, “They will make me more money than all of the money I made working 19 years on the rivet line.”

Now, here’s a worker, blue-collar, unionized, and he’s invested in corporate America. That little true story brought it home to me when we are otherwise, often loftily, speaking about the notion of “democratizing capitalism.” Even people who hadn’t been thought of as investors before are investing — and are really engaged in it. Even the man on the street knows who Warren Buffett is — in fact, for a long moment, knew him better than I did!

Some numbers underscore this. U.S. households in 2000 had $27 trillion invested in corporate securities, either directly or through mutual funds, like my friend the riveter. Today, 50 million U.S. households own mutual funds. 58% of them are from households with incomes of between $25,000 and $75,000.

Why does this matter? As shareholders and bondholders, over 50 million households now have an interest in the profitability of corporate America. To expand profits, corporations have to grow sales. To grow sales, they have to find new markets.

It’s thus no longer just the folks on Wall Street and the CEOs of those big multinational companies who have an investment in the continued growth of world trade. It’s real people on Main Street in the United States of America who have put down an investment in trade expansion and global financial stabilization.

That fact should do much to alter many of the arguments currently characterizing the public policy debate over trade in the United States. Whether the issue at hand is globalization, the World Trade Organization, fast track legislation or free trade agreements, one thing will become increasingly clear. With so many Americans invested so heavily in the global economy, the dynamics of the debate must change.

When these citizens consider their long-term financial interests, my guess is that the majority of Americans will opt for more global integration, not less. The bottom line is this. It does not matter whether you work by the sweat of your brow, like the fine fellow next to me on the plane that day, or in some fancy office building, whether you’re a riveter or a farmer or a rancher or a computer programmer or a lawyer.

All of these folks are heavily invested in an expanding economy. And since in the United States exports and imports now account for 27% of the economy, all of these people are invested in expanding trade.