I want to dedicate this post to Warren Buffett for his article posted in TIME on 4 January 2018. You can read it through the link there before reading this post because I don’t want to give a false perception to the article. I wrote this under my interpretation thus this might not directly related to what he meant to share.
“I have good news. First, most American children are going to live far better than their parents did. ” – Warren Buffett
There goes his first two sentences. It instantly caught my eyes and I disagree with this statement. Apparently, he knows that I am not the only one who disagreed. In the subsequent paragraphs, he acknowledge that these days, not as many people are as optimistic as him. But the he did some calculation that includes real GDP growth and population growth. Assuming 2% real GDP growth and 0.8% net population growth, he infers:
“In 25 years–a single generation–1.2% annual growth boosts our current $59,000 of GDP per capita to $79,000. This $20,000 increase guarantees a far better life for our children.” – Warren Buffett
The first time I read this, I was nodding my head because the reasoning sound plausible. But, I noticed, he had a strong assumption: the growth are equally divided to everyone. I guess we can all agree that this assumption does not hold. Just do a simple search in Google about wealth and income inequality and some amazing statistics will greet you (i.e. this one); none shows equal distribution. That being said, with the calculation in the article, we can be sure that some children will be better off than their parents but I argue that majority (if not all) of the children in this group will be from the wealthy family or in other words the minority. The other might strive as well but they need arduous effort to be achieve it. Best scenario, of course the one Warren Buffett shows; but it is highly unlikely. Second best scenario, children will be as well off as their parents. I am not trying to be pessimistic but the truths are pointing to that dark side (he did mention this issue in the later part of the article).
I do not entirely disagree Mr. Buffett, especially in his point of innovation and productivity and market economics. Because of innovation that transformed the industry, ways of production, labor and capital, arguably everything today are done differently than decades ago. A lot of people lost their job, some jobs disappeared and new jobs were created. Those who cannot adapt due to lack of skill or opportunity were left behind while those in the upper social class tried their best to absorb as much wealth as possible. Some people called it greed but I say it is human nature. Anyway, getting back to the point, this will increase the probability that more people will have worse prospect that their parents.
“These devastating side effects can be ameliorated: a rich family takes care of all its children, not just those with talents valued by the marketplace.” – Warren Buffett
He mentioned this point just before he concluded his writing. As a parent, it is a very nice advise. All children should be treated the same in hope that they will get the same opportunity to success. But the word ‘rich parent’ made me feel a bit uncomfortable. Does this means that only if rich people care equally to their offspring that the “devastating side effects” i.e. leftover people due to specialization can be lighten. I am skeptical that doing so could make much change. Most of leftover people came from lower proportion of the society, so maybe it would be better for the rich to care for their lower counterpart as to donate or provide opportunity?
Anyway, I am not an American and this has very little impact to my life. I just came across this article by chance and while reading it, I found some odd points which are peculiar to me. Maybe he meant it differently or I interpreted it wrongly, seems impossible to get his answer. However, I just want to share my opinion and the seriousness of our -might be doomed- future.