The Kingswell 4th of July Spectacular 🇺🇸
In which Warren Buffett wraps himself in the American flag and breaks out into a U-S-A! U-S-A! chant
Happy Thursday and welcome to our new subscribers!
With the Independence Day holiday weekend fast approaching, many readers have already jetted off on vacation to sunny locales — or otherwise tuned out of the money game until next week.
So I decided to dedicate this issue to our newsletter’s (living) patron saint, Warren Buffett, and his unwavering faith and optimism in the United States of America.
Almost every year in his annual letter, Buffett waxes lyrical about the prosperity created here since 1776 — and how the American Dream remains alive and well for anyone still seeking it.
So, to celebrate the Fourth, I’ve pulled together a few of my favorite Buffett-isms on the subject for your enjoyment. Whether you live in the United States or just invest in companies based here, we’re all beneficiaries of what Buffett calls the “American Tailwind” — propelling all of us into a better (and more prosperous) tomorrow.
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With a bitter presidential election looming, Buffett sought to soothe frayed nerves on both sides with a gentle reminder that, no matter who won, everything would turn out just fine.
No handwringing over the future of the country here.
It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do.
That view is dead wrong: The babies being born in America today are the luckiest crop in history.
American GDP per capita is now about $56,000. As I mentioned last year, that — in real terms — is a staggering six times the amount in 1930, the year I was born, a leap far beyond the wildest dreams of my parents or their contemporaries.
U.S. citizens are not intrinsically more intelligent today, nor do they work harder than did Americans in 1930. Rather, they work far more efficiently and thereby produce far more. This all-powerful trend is certain to continue: America’s economic magic remains alive and well.
In a nutshell, the kids are gonna be alright.
Nothing rivals the market system in producing what people want — nor, even more so, in delivering what people don’t yet know they want. My parents, when young, could not envision a television set, nor did I, in my fifties, think I needed a personal computer.
Both products, once people saw what they could do, quickly revolutionized their lives. I now spend ten hours a week playing bridge online. And, as I write this letter, “search” is invaluable to me. (I’m not ready for Tinder, however.)
For 240 years, it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.
The following year, in the aftermath of said election, Buffett hadn’t changed his cheery tune.
One word sums up our country’s achievements: miraculous. From a standing start 240 years ago — a span of time less than triple my days on earth — Americans have combined human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law to deliver abundance beyond any dreams of our forefathers.
You need not be an economist to understand how well our system has worked.
Just look around you.
See the 75 million owner-occupied homes, the bountiful farmland, the 260 million vehicles, the hyper-productive factories, the great medical centers, the talent-filled universities, you name it — they all represent a net gain for Americans from the barren lands, primitive structures, and meager output of 1776.
Starting from scratch, America has amassed wealth totaling $90 trillion.
Buffett was still trying to turn down the partisan temperature in 2018. Instead of bickering over politics, he instead beseeched investors to recognize (and appreciate) the immense privilege of living in this country.
Our country’s almost unbelievable prosperity has been gained in a bipartisan manner. Since 1942, we have had seven Republican presidents and seven Democrats.
In the years they served, the country contended at various times with a long period of viral inflation, a 21% prime rate, several controversial and costly wars, the resignation of a president, a pervasive collapse in home values, a paralyzing financial panic, and a host of other problems.
All engendered scary headlines; all are now history.
Christopher Wren, architect of St. Paul’s Cathedral, lies buried within that London church. Near his tomb are posted these words of description (translated from Latin): “If you would seek my monument, look around you.”
Those skeptical of America’s economic playbook should heed his message.
In 1788 — to go back to our starting point — there really wasn’t much here except for a small band of ambitious people and an embryonic governing framework aimed at turning their dreams into reality. Today, the Federal Reserve estimates our household wealth at $108 trillion, an amount almost impossible to comprehend.
With Covid (somewhat) in the rearview mirror, Buffett changed tack and took readers on a tour of select Berkshire Hathaway subsidiaries that he felt best exemplified the American Dream.
🍬 See’s Candies:
Success stories abound throughout America. Since our country’s birth, individuals with an idea, ambition, and often just a pittance of capital have succeeded beyond their dreams by creating something new or by improving their customer’s experience with something old.
Charlie [Munger] and I journeyed throughout the nation to join with many of these individuals or their families. On the West Coast, we began the routine in 1972 with our purchase of See’s Candy.
A full century ago, Mary See set out to deliver an age-old product that she had reinvented with special recipes. Added to her business plan were quaint stores staffed by friendly salespeople. Her first small outlet in Los Angeles eventually led to several hundred shops, spread throughout the West.
Today, Mrs. See’s creations continue to delight customers while providing life-long employment for thousands of women and men. Berkshire’s job is simply not to meddle with the company’s success. When a business manufactures and distributes a non-essential consumer product, the customer is the boss.
And, after 100 years, the customer’s message to Berkshire remains clear: “Don’t mess with my candy.”
In 1936, Leo Goodwin, along with his wife, Lillian, became convinced that auto insurance — a standardized product customarily purchased from agents — could be sold directly at a much lower price. Armed with $100,000, the pair took on giant insurers possessing 1,000 times or more their capital.
Government Employees Insurance Company (later shortened to GEICO) was on its way.
By luck, I was exposed to the company’s potential a full seventy years ago. It instantly became my first love (of an investment sort). You know the rest of the story: Berkshire eventually became the 100% owner of GEICO, which at 84 years of age is constantly fine-tuning — but not changing — the vision of Leo and Lillian.
There has been, however, a change in the company’s size. In 1937, its first full year of operation, GEICO did $238,288 of business. Last year the figure was $35 billion.
🛋 Nebraska Furniture Mart:
The company’s founder, Rose Blumkin (“Mrs. B”), arrived in Seattle in 1915 as a Russian emigrant, unable to read or speak English. She settled in Omaha several years later and by 1936 had saved $2,500 with which to start a furniture store.
Competitors and suppliers ignored her, and for a time their judgment seemed correct: World War II stalled her business, and at year-end 1946, the company’s net worth had grown to only $72,264. Cash, both in the till and on deposit, totaled $50 (that’s not a typo).
One invaluable asset, however, went unrecorded in the 1946 figures: Louie Blumkin, Mrs. B’s only son, had rejoined the store after four years in the U.S. Army. Louie fought at Normandy’s Omaha Beach following the D-Day invasion, earned a Purple Heart for injuries sustained in the Battle of the Bulge, and finally sailed home in November 1945.
Once Mrs. B and Louie were reunited, there was no stopping NFM.
Driven by their dream, mother and son worked days, nights, and weekends. The result was a retailing miracle. By 1983, the pair had created a business worth $60 million.
Mrs. B, it should be noted, worked daily until she was 103 — a ridiculously premature retirement age as judged by Charlie and me.
NFM now owns the three largest home-furnishings stores in the U.S. Each set a sales record in 2020, a feat achieved despite the closing of NFM’s stores for more than six weeks because of Covid-19.
A post-script to this story says it all: When Mrs. B’s large family gathered for holiday meals, she always asked that they sing a song before eating. Her selection never varied: Irving Berlin’s “God Bless America”.
🏘 Clayton Homes // 🚚 Pilot Travel Centers:
Each company was started by a young man who graduated from the University of Tennessee and stayed put in Knoxville. Neither had a meaningful amount of capital nor wealthy parents.
But, so what? Today, Clayton and Pilot each have annual pre-tax earnings of more than $1 billion. Together, they employ about 47,000 men and women.
Jim Clayton, after several other business ventures, founded Clayton Homes on a shoestring in 1956, and “Big Jim” Haslam started what became Pilot Travel Centers in 1958 by purchasing a service station for $6,000. Each of the men later brought into the business a son with the same passion, values, and brains as his father.
Sometimes there is a magic to genes.
Horatio Algers, the lot of ‘em.
Buffett signed off this ode to the American heartland with a killer line that doubles as his patriotic mission statement:
Our unwavering conclusion: Never bet against America.
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Disclosure: This is not financial advice. I am not a financial advisor. Do your own research before making any investment decisions.