The case for a bright American future, according to billionaire Warren Buffett

Warren Buffett in 2012. (Nati Harnik/AP)

By Niraj Chokshi February 27
The Washington Post

Sourpusses take note: One of the world’s wealthiest and most respected investors thinks you’re dead wrong about the future of the country.

In his annual letter to shareholders, published on Saturday, Berkshire Hathaway Chairman Warren Buffett made a forceful argument that Americans should look to the future with optimism, despite the dour messages broadcast from the presidential campaign trail.

“For 240 years it’s been a terrible mistake to bet against America, and now is no time to start,” he said in the letter. “America’s golden goose of commerce and innovation will continue to lay more and larger eggs.”

[Why Warren Buffett thinks the presidential candidates are ‘dead wrong’]

For 50 years, Buffett has written the annual letters, which are widely read for his pithy and incisive analysis of the past, present and future of the holding company and the economy. This year, he laid out the case for a bright American future, even as he notes some cause for concern.

‘There will be struggles’

An Occupy Wall Street protest in Washington in 2011. (Linda Davidson/The Washington Post)

Even though he said the American economy is growing, Buffett nodded toward growing inequality.

Though the pie to be shared by the next generation will be farlarger than today’s, how it will be divided will remain fiercely contentious. Just as is now the case, there will be struggles for the increased output of goods and services.
…
Congress will be the battlefield; money and votes will be the weapons. Lobbying will remain a growth industry.

But, Buffett argued, there is a silver lining:

“Even members of the ‘losing’ sides will almost certainly enjoy – as they should – far more goods and services in the future than they have in the past,” he said.

The market excels at producing things people don’t know they want, he said. For example, Buffett noted that he never thought as a child that he would someday need a personal computer.

“I now spend ten hours a week playing bridge online,” he said. “And, as I write this letter, ‘search’ is invaluable to me. (I’m not ready for Tinder, however.)”

‘America’s economic magic remains alive and well’

Republican presidential candidate Donald Trump at a December rally in Grand Rapids, Mich. He often decries the state of the U.S. economy, recently saying, “We’re dying. This country is dying.” (Scott Olson/Getty Images)

A history of growth drives Buffett’s argument for optimism, which he framed as a response to the modern politics of fear.

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.
…
Today’s politicians need not shed tears for tomorrow’s children.

Buffett noted that American economic output, per person, has grown tremendously over his lifetime.

“American GDP per capita is now about $56,000,” he said. “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.”

American efficiency and productivity drove — and will continue to drive — that growth, he argued.

“This all-powerful trend is certain to continue: America’s economic magic remains alive and well.”

America’s ‘secret sauce’

Productivity, Buffett said early in the letter is “the all-important factor in America’s economic growth over the past 240 years” — a fact lost on too many Americans, Buffett lamented.

“That kind of improvement has been the secret sauce of America’s remarkable gains in living standards since the nation’s founding in 1776,” he said. “Unfortunately, the label of ‘secret’ is appropriate: Too few Americans fully grasp the linkage between productivity and prosperity.”

To prove his point, Buffett turned to three industries in which Berkshire has a stake: freight, insurance and utilities. Productivity gains in those and other industries “have delivered awesome benefits to society,” he said.

There are consequences, though: Productivity gains in America and abroad can disrupt lives, Buffett said.

When low-cost competition drove shoe production to Asia, our once-prosperous Dexter operation folded, putting 1,600 employees in a small Maine town out of work. Many were past the point in life at which they could learn another trade. We lost our entire investment, which we could afford, but many workers lost a livelihood they could not replace.

The United States should deal with such disruptions not by regulating the drivers of increased productivity but by ensuring a “variety of safety nets” exist for Americans whose skills don’t match those valued by markets. In particular, he points to the Earned Income Tax Credit, viewed by many as one of the most effective policy tools to help the poor.

Innovation ‘has its dark side’

NSA Director Adm. Michael Rogers testifies on Capitol Hill. An investigation into a December hack that interrupted power for 225,000 Ukrainians has found that the attack was synchronized and coordinated by highly-sophisticated actors in stages. (Alex Brandon/AP)

There are threats, notably cyber, biological, nuclear or chemical attacks on the nation, Buffett said.

The probability of such mass destruction in any given year is likely very small. It’s been more than 70 years since I delivered a Washington Post newspaper headlining the fact that the United States had dropped the first atomic bomb. Subsequently, we’ve had a few close calls but avoided catastrophic destruction. We can thank our government – and luck! – for this result.

Nevertheless, what’s a small probability in a short period approaches certainty in the longer run. (If there is only one chance in thirty of an event occurring in a given year, the likelihood of it occurring at least once in a century is 96.6%.) The added bad news is that there will forever be people and organizations and perhaps even nations that would like to inflict maximum damage on our country. Their means of doing so have increased exponentially during my lifetime. “Innovation” has its dark side.

Such risks are unavoidable, he said. And the consequences will probably be dire.

“No one knows what ‘the day after’ will look like,” Buffett said. “I think, however, that Einstein’s 1949 appraisal remains apt: ‘I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones.’ “

The real reason half of America supports the FBI over Apple

Apple CEO Tim Cook talks and takes photos with customers in Washington. (Jabin Botsford/The Washington Post)

By Brian Fung February 23 at 2:17 PM
The Washington Post

Maybe it's just the people who follow me on social media. But a recent finding by the Pew Research Center that half of Americans support the FBI over Apple in an ongoing duel over iPhone security produced a very lopsided response in my Twitter feed. And it looked nothing like the actual poll results.

This is not a major surprise, but it's an opportunity to unpack a crucial dynamic behind the Apple-FBI dispute.

As I said, the discrepancy between Pew's results and the opposite reaction on social media could simply be a result of the kinds of people who follow tech writers on Twitter, a social network whose audience is pretty tech-friendly to begin with. But that isn't an argument for dismissing that reaction. In fact, I want to argue that there's something else at play here, and nothing sums it up better than this tweet: No, Apple is fighting a war most Americans don't understand.

What we're witnessing here is a peculiar artifact of technology polling that you don't get on social issues like abortion or religion, where convictions tend to remain rooted in ideology. Opinions about technology turn out to be very malleable, and in more ways than just how a survey question is phrased or how big the sample is. But how do we evaluate that?

As an example, let's look at the way the public responded to Edward Snowden's leaks about the National Security Agency. Days after the news broke, nearly 60 percent of Americans said they supported the NSA's surveillance programs. This was at a time when most people were still trying to understand what these programs were about and how extensive they were — or if they were even real. But as the nation learned more, discovering how spies were collecting everything from call records to cellphone geolocation data, the tide of opinion slowly began shifting against the intelligence community. By November 2013, five months after Snowden's disclosures, 46 percent of Americans said the NSA had gone too far in its surveillance activities. Two months after that, the country hit a milestone when a Pew Research Center/USA Today survey discovered that the share of Americans disapproving of the NSA's surveillance programs had risen to 53 percent. Although the questions in each poll were slightly different, together they nonetheless paint the picture of a gradually awakening population. The moment we're in right now is a bit like the moment we were in during the initial days of the Snowden reports. Many Americans, journalists included, are still learning new details about the Apple-FBI fight. For instance, on Tuesday Michael Scarcella, editor of the National Law Journal, reported that there are as many as 12 other federal court cases involving data on iPhones running older versions of iOS.

These documents lend support to Apple's claim that its high-profile showdown with the FBI is indeed about more than just one iPhone.

Although Pew's latest survey shows that three out of four Americans have "heard" about the fight involving Apple and the FBI, it's less clear just what they've heard about that dispute. And were they to learn more, Apple's defenders say, it's likely that they would take a different view.

The government says its efforts are not aimed at defeating encryption broadly but are narrowly targeted to the iPhone used by one of the San Bernardino shooters.

“We simply want the chance, with a search warrant, to try to guess the terrorist’s passcode without the phone essentially self-destructing, and without it taking a decade to guess correctly,” FBI chief James Comey said in a message to the public. “We don’t want to break anyone’s encryption.”

But many technologists oppose letting the government break open even a single iPhone — because it really means giving the FBI the tools to crack open every iPhone on the planet, they say. As a tech entrepreneur, Ryan Orbuch, told the Guardian:

“When you do InfoSec and your job is security, your moral view of the world is based on the fact that you can provide security through math, security that’s complete and secure not just because of any social contract but because literally the math works,” Orbuch said. “When someone comes and says I want you to break this for me, it goes against everything we believe in.”

What's more, Apple's advocates say, giving law enforcement a way to break into a secure phone means creating vulnerabilities that hackers and other nations' spies can also exploit. And it is ultimately self-defeating because it will simply encourage terrorists and criminals to communicate through other means that are even harder to detect, according to some pro-encryption lawmakers.

"I don’t think the American people are going to react very well to that kind of policy when people really break this down in the way I’ve described," Sen. Ron Wyden (D-Ore.), a vocal privacy advocate, told the Daily Dot.

Law-abiding citizens may think they have nothing to hide and would never expect to find themselves on the business end of a law enforcement operation. But privacy groups have long argued that with more and more of our personal data winding up in the hands of corporations (if not the public), it has become increasingly easy for others to make even innocent people appear suspicious. A classic example can be found in swatting — a practice where digital pranksters dig up your personal information and then use it to call a SWAT team to your house, under the false pretense that you are about to commit a violent crime. This is a costly and dangerous form of harassment, and it can happen to even the most experienced security researchers.

Greater familiarity with technology, and what it can and can't be used for, can lend a different perspective on a range of issues. On this one in particular, even basic exposure to smartphones can be enough to sway some Americans into viewing the FBI's position more skeptically. By a 41-33 margin, smartphone owners were far more likely to support Apple's position than non-smartphone owners in the Pew study this week.

It took seven months for public opinion to shift on the NSA. Apple may be hoping for a similar outcome on this issue, but the pace at which this saga is playing out suggests the company may not have that kind of time.