Interestingly, at the AGM this weekend, Warren noted that they receive over 4,000 reports through their BRK hotline per year. He commented that most are not actionable, but that they have made significant investigations and changes based on what has been reported through the hotline.
Why do you describe them as pissed off? Simply because they use their rights to battle for better working benefits? This snide characterization of unionized labor undermines all workers' efforts at fair compensation.
Calling someone "pissed off" makes no value judgment about them being right or wrong, it just describes their emotional state.
I would describe the citizens of Flint, MI as "pissed off", and rightly so. Would you say that description is undermining their efforts to right past wrongs?
If I were you I would hesitate to make such hasty accusations.
Eh, maybe, maybe not. Language is powerful. Replaced the "pissed off" descriptor in that sentence with "shafted" or "fucked over" and it dramatically shifts the narrative.
That may be so, but the words used were "pissed off" and not any of the wildly different examples you've provided which dramatically change the narrative.
Even describing the employees' emotional state is unfair to labor, as emotions may not have entered into the decision to protest and emotions are perceived to be less important than cold business logic. Thee workers may need the benefits to survive in their community. When an employer cuts wages or hours or jobs, they say that there are no emotions involved, it's just business.
If I were you I would be more careful with the connotations of the language you choose, being mindful of how it is likely to be perceived.
Anecdata for sure, but it's been a reasonable characterisation of the Unions I've seen. The public sector and construction Unions here are notably corrupt.
I think unions are painted with a very broad stereotype by people who don't know them (including most people on HN, I would guess) and held to different standards than businesses, many of whom are notably corrupt.
Buffet did just make headlines by criticizing the CEO of Well Fargo, of whom Berkshire Hathaway is the largest shareholder, for their poor handling of the fake account scandal. Perhaps that's why Berkshire's code of conduct is attracting interest.
The startup crowd has a hard time with a lot of these, especially the "Corporate Opportunities" one. So much so that I'd venture a guess that many are unaware that legally that's a pretty fundamental responsibility for a principal/officer of a corporation.
I don't see why you think that's the case. It's pretty typical language in an offer letter in California and is even specifically called out as legit in the part of the California code that prohibits non-competes.
And Waymo seems pretty pissed over a violation of this term. The theft of secrets issue was just the trigger.
However, when Nation reporters visited the "hurricane-proof" shelters in June, six to eight months after they’d been installed, we found them to consist of twenty imported prefab trailers beset by a host of problems, from mold to sweltering heat to shoddy construction. Most disturbing, they were manufactured by the same company, Clayton Homes, that is being sued in the United States for providing the Federal Emergency Management Agency (FEMA) with formaldehyde-laced trailers in the wake of Hurricane Katrina. Air samples collected from twelve Haiti trailers detected worrying levels of this carcinogen in one, according to laboratory results obtained as part of a joint investigation by The Nation and The Nation Institute’s Investigative Fund.
If he truly cared so much about equality, he'd spend zillions to lobby Congress to massively raise taxes on the rich, publicly-finance political campaigns, commit to real climate change policy, enact single-payer healthcare and address broken justice and mental healthcare systems with reform and compassion of investing in citizens and the public commonwealth.
Sure his giving some capital to B&MGF seems like a noble deed, but it doesn't go far enough to change the world for the better in desperately vital ways given his assets, influence and capabilities.
Buffett might live in a tiny house in Nebraska and try to seem a "good guy," but actions ultimately speak louder than words. That might seem harsh/entitled/demanding but a few people like him control trillions of dollars and the politics of many countries (which is also partly our fault for not opposing these conditions and demanding a fairer division of profits/labor/representation.), he's in a much better position to act instead of "standing around" as if he's stuck in an economic "bystander effect."
Because capitalism is a system in which the rich get richer. This preferential accumulation of wealth where wealth already is is an inherent feature of capitalism.
The same kind of phenomenon can be seen in the population of cities for example: the more people there are in a city, the more other people are likely to move there.
So given that there is a runaway feedback loop that make the rich get richer faster than the poor get richer, and given that profound inequality is detrimental to the economy at large, it logically follows that there must exist some scheme to redistribute a part of the wealth of the extra-rich to the rest of society.
Taxation is (or should be) such a shame.
Note that there is no moral argument here. No finger pointing, no entiltement. Just a systemic view of things: it is detrimental to all to let a runaway feedback loop increase inequalities.
Except that huge inequalities exist in socialistic economies as well, and capitalism means the middle class of today live as well or better than the richest people in the world did in the 1920s.
I am not advocating switching to a planned economy. I'm just pointing out that any capitalistic system has a tendency to concentrate wealth.
I even acknowledge that the poor are getting richer. The problem is just that they are getting richer at a slower pace than the rich, and unless this problem is addressed through taxation, then it will lead to economic stagnation or worse.
If you want to address concentrated wealth address the tax system and real crony capitalism (not the fake kind that is used to slur Buffett). Eliminate patents, tariffs, tax businesses that receive government subsidies, etc.
Competition is the best bar to too much competition.
While I also long for the elimination of some of the things you list (mainly patents), I want to emphasize that even in a perfectly competitive and ideal market, the phenomenon of preferential wealth accretion would still happen.
Picketty's explanation is that capital's reward is higher than work's, but I'm not bent on defending that explanation (even if until a better one comes up, I'll stick to Picketty's).
As far as I know there is no counter example of the phenomenon itself (whatever the underlying reason is).
You can't stop some people from working harder or smarter than others, or saving money instead of spending everything they make. Those people will accumulate wealth far faster over time.
That is where you are mistaken. The people who will accumulate wealth the fastest over time are the people who already have wealth.
Even statistical anomalies like Bill Gates or Steve Jobs got more money, once they became slightly rich, from the capital they owned than from the work they produced.
Only because they didn't consume their capital, they kept it reinvested, and kept working. There have been thousands of business owners who could have become billionaires, but traded too much of their equity for a big house and expensive distractions.
> and given that profound inequality is detrimental to the economy at large
which has nothing to do with "liberty" - it's about "efficiency" or may be "equality" (of outcomes), but not "liberty" in any way.
(Also, there's a lot of valid criticism of Picketty that his supporters usually choose to completely ignore, but that's not the point of the argument anyway).
I don't understand your point about liberty. I did not talk about liberty. Could you please clarify ?
As for Picketty, the only serious criticism I'm aware of had to do with his explanation about why wealth begets wealth, not on the fact that there is a preferential accretion mechanism for wealth inherent to capitalism.
If you have any source or example where capital holders do not increase their share faster than non capital holders (say, e.g. workers) then I'd be happy to know about it.
If you work, you pay a load of tax, but if your income isn't primarily from salary or wages, you pay less through a variety of circumstances set up specifically to give you even greater advantages than being rich alone would provide. So now you're rich AND tax advantaged over the poor. A double whammy.
So the idea is that money creates even greater inequality, if you're born with money you have opportunities that poor people will never get even if they work their whole lives... because they're working. They'll never have the capital to exit that stage.
The point of "equality" meaning to make taxation on the rich more equal (or as you put it "taking their money") is so that everyone has an opportunity, not so that everyone has the same amount of money.
Further, in addition to there being advantages set up for the rich, we have built DISADVANTAGES into the system for the poor. A 100k job comes with medical insurance, but a min wage job does not. Minimum wage should mean the minimum needed to survive, not less. Not having to worry about medicine or a second job means you can spend some time working towards other opportunities.
> you pay less through a variety of circumstances set up specifically to give you even greater advantages than being rich alone would provide
The reason for that is not because "evil rich control Congress". It's because capital is much more mobile than labour and can move from one country to another much easier.
> is so that everyone has an opportunity
Opportunity at what point? When does the starting gun fire? Birth? But that would only explain the inheritance tax. If me and you start from the similar families and backgrounds, why should I give my money to you if I'm more successful - didn't we have equal opportunity?
Of course, people usually differ in their background. But this inequality comes from the greatest discrimination of all - all people in the world discriminating against people who're not their children or family. As long as this discrimination is allowed to exist, you _will_ have this sort of problems - and _equality_ of each individual's opportunity will always be at odds with his _liberty_ to pass over his resources (money, influence, relationships, status, education and intelligence) to his offspring. And people value this liberty to practice this particular discrimination very, very, very much.
How do you define a boundary at which those two competing ideas should meet?
Capital is more mobile... so we'll decrease the taxes on capital and increase the taxes on labor? If capital has built in advantages, it doesn't need extra legislative/taxation advantages added to it. Regular people need to pay rent and eat.
The bottom ~40% of American workers earn under $20K/year -- I have no problem with increasing the minimum wage to the point where people can actually pay rent and buy medicine, it's not like I'm asking everyone be given a helicopter. I have no problem taxing houses that are vacant year-round. Capital is wasted and hoarded many places to the detriment of the 99%, and not even to the benefit of the 1%.
Your comment about the starting gun, I think that if you lose your job you shouldn't immediately be homeless or sick because of it. Do we want to go back to living that poorly? Does it not matter as long as it's not happening to you? What if, one day, it does?
I don't want to live in a society where you can't walk to lunch without being asked for money by the homeless, where homeless people even exist, where the emergency room is always too slow because people can't go to a GP, where working 40 hours a week doesn't mean you'll be able to get a house or food, or where two parents must both work full time to break even to the detriment of the nation's children. I'd rather pay a little more tax. I'd rather my capital be a little less mobile. We'll still have the most billionaires, the most valuable companies, and all of that.
There must be some floor threshold below which we're not willing to go as a society. Why have a minimum wage at all? Why have medicaid or guaranteed hospital access? The question is where should we put that threshold, my position is it isn't high enough.
Then again maybe all of this is a straw man, we could leave taxes as they are if we reallocated 50% of the military budget... we'd still have the biggest and best military in all of world history.
One more thing: there is more to capital motion than taxes, too, and the USA http://www.doingbusiness.org/rankings -- look at all the places we're ranked 30th to 50th in the world. So perhaps we can increase taxes while simultaneously increasing capital motion.
In the end, life's better if you're a little less greedy, who wants to be the richest man in a slum? Is it better to have a million dollars in Somalia or 100k in Boston?
> Capital is more mobile... so we'll decrease the taxes on capital and increase the taxes on labor?
Yes, because otherwise it will go away from "us". "We" don't put in laws and taxes for the whole world, "we" are countries that are competing one against another for that capital.
> I have no problem with increasing the minimum wage to the point where people can actually pay rent and buy medicine
More like "increasing the minimum wage to the point where people are replaced with automation or people from working at other places".
> What if, one day, it does?
Oh, but it just recently did. I lived a couple of months with friends, got into credit and used tax returns. I didn't even used any unemployment help, as I consider the whole concept unethical, although I could. Believe me, for me, it's not a hypothetical situation.
> where homeless people even exist
Then donate your own money to them. But what you're advocating instead is forcibly taking _other_ people's money so that they can pay for _your_ view on what society should look like.
> where working 40 hours a week doesn't mean you'll be able to get a house or food
Working hours don't contribute any value to the society - services and products are. I don't care how much did you work when I'm paying my money. Can you rephrase this in terms of actual services and products provided?
For example, if you told me that "working 2 shifts as a pediatrician" doesn't get you house or food, then I would agree that the country where it happens has a problem.
> or where two parents must both work full time to break even to the detriment of the nation's children
Children should be a luxury. I am right now in a pretty good financial situation, on a software engineer's salary, and I still don't feel like I can afford a child. If somebody is making a very poor financial decision to buy a luxury yacht that he can't afford, you don't feel sorry for them - why a different treatment for someone who gets a child?
> I'd rather pay a little more tax. I'd rather my capital be a little less mobile.
Go donate to a charity then. Invest your pension savings in a company that you consider "ethical". But although you're talking about "your" tax and "your" capital, you use these arguments to advocate what should be done to _other_ people's taxes and _other_ people's capital.
> Why have a minimum wage at all? Why have medicaid or guaranteed hospital access?
Beats me.
> we could leave taxes as they are if we reallocated 50% of the military budget... we'd still have the biggest and best military in all of world history
You would also have a lot of very angry veterans though. It is my understanding that about ~50% of american "military" budget actually goes to all kinds of pensions and compensation - cutting this doesn't exactly fit your ethical model, does it?
> In the end, life's better if you're a little less greedy, who wants to be the richest man in a slum? Is it better to have a million dollars in Somalia or 100k in Boston?
That's a question that every man should answer for himself. All your arguments are about enforcing your ethical system on other people, who may or may not agree with it.
It seems patently obvious that I'm being trolled or you're delusional about the viability of a libertarian society, but I'll make two final points:
Fortunately, most people don't agree with you, so we don't live in a hellhole.
You don't seem to understand that society is a whole unit, if you don't have a car, it doesn't mean you shouldn't pay for roads and that roads provide you no utility, the food you buy when you walk to the shop comes on a truck.
It seems that you believe only money, products, and services have value, and that people have no inherent value. Again, it's extremely fortunate that most people disagree with you.
Pretty bad. But yours was worse because it was even more generic, more ideological, and more declamatory—a trifecta of badness by HN's standard. Other standards evaluate these things differently, of course, but when posting here the house rules apply.
If a comment goes the wrong way down a one way street, please go in the opposite direction. That is, instead of more generic, be more specific; instead of more ideological, more unpredictable; instead of more declamatory, more thoughtful. Then you're making the discussion better even though someone else made it worse.
Anything about unsound investments which are nevertheless likely to be bailed out and so have a great expected ROI? Tax evasion by taking companies off the stock market and canceling dividends?
That Berkshire's code of ethics is linked here is an amazing PR achievement, rivaling such jewels as the one-time potent "Don't be evil" (actually beating this one hands down as it has worn out even though Google didn't get $billions of bailout money.)
Berkshire wholly owned subsidiaries continue to pay dividends, and Berkshire itself has to pay taxes on those dividends. How can we make ethical declarations if we don't get our facts straight?
Ha, I believe I know what the parent meant. Technically by not distributing a dividend that would otherwise been paid the government does not collect on the taxes that would have been due had the dividend been paid. I see how one could stretch this to consider it "evasion" As the government has not collected taxes by there are a zillion obvious offsets to factor in here that make this a bit of a silly point to make.
Correct - apologies for not being clear... if I own a business and receive a dividend, I pay taxes. So that same income was taxed first at the corporate level and second at the personal level. THe evasion - which I consider to be a stretch here - is that by not paying a dividend it becomes trapped in retained earnings and the government doesn't receive its second piece.
I'm not saying I agree with the view here but the point is technically correct. A $100 of profit for Apple in the us is taxed 40% at corporate level to become $60 and by the time it gets to me it is worth 32
If they are pretax - You very well could evade taxes by spending excess money on acquisitions, allowing the stock price to increase based on future earnings. Then use step up capital gains when you die to avoid capital gains when transferring wealth to offspring.
Acquisitions are a capital asset and do not offset your tax liability. If a corporation earns $100 million and buys another company for $60 million, they still owe taxes on the full $100 million.
Silly indeed. Over the decades when Berkshire has elected to retain earnings vs distributing to shareholders, the capital has been compounded at Warren Buffett rates of return (and taxed when it hits the books as profit). If it were distributed the treasury would get a one-time dividend payment, but then the individual shareholders would be unlikely to compound that money at ~20%.
You know what's worse than a few people losing their jobs? Everyone losing their jobs because a competitor is more efficient and drives you out of business.
The choice isn't (always) "lay off some workers or go out of business". Instead it's "It's profitable now but it could be even more profitable if we did something that incurred job losses."
For example, Carrier was already very profitable when they decided to outsource to Mexico.
"A look at United Technologies’ annual report reveals even more good news: Commercial and industrial products, Carrier’s category, make up over half of UTC’s $56 billion in net sales. Climate, Controls & Security had 3 percent growth in 2015, the highest in the company; it was the only division to increase its profit margin year-over-year. “Organic sales growth at UTC Climate, Controls & Security was driven by the U.S. commercial and residential heating, ventilation and air conditioning (HVAC) and transport refrigeration businesses,” according to page 14 of the report. In other words, air conditioners – what the workers are making in Indianapolis – drove the growth of the best-performing facet of United Technologies’ business."
The choice happens at a higher level than such context is available. It's more like "encourage a philosophy of cost-cutting, which might be what saves us if a big, efficient rival comes up behind us too fast for us to begin cost-cutting in response—or allow for a culture of slack and waste, which will become very hard to change if we're ever in such a situation."
> "It's profitable now but it could be even more profitable if we did something that incurred job losses."
If keeping someone's employed is making the company less profitable than it could be if it fired him - why would the company keep paying this person money?
The argument being presented, is that a job is - to one degree or another - a right or entitlement. The argument is: while yes, that job is of low productive output and it may be questionable as to whether it serves any purpose or needs to exist, it employs someone and therefore should exist specifically for that employee's benefit as opposed to the benefit of the owner of the business who provides said job.
That's an emotional argument without any factual or rational merit to support it. It's meant to arrange the 'working class' as the rulers of the means of production. Standard labor vs capital debate.
No, a job is not a right or entitlement, but then again, that wasn't my argument. In the case of Carrier, they were trying to move part of their most profitable divisions to Mexico. It wasn't a case of employing people for charity, it was literally a case of adding more zeros to an already fat bank account.
I'm not understanding, could you clarify? Thx.
Oops, I think we're too far down the rabbit hole for "reply" to work. I'll take a stab at answering but forgive me if I'm answering the wrong question.
When a business is losing money, paying employees is a charity. When the business is making a great profit and decides that it could make even more by hurting/laying
off some employees, that is a choice with moral implications.
When there is plenty of ice cream bars for everyone but the first guy who arrives at the cafeteria grabs all of them out of the freezer and proceed to sell them to everyone who comes later, the first guy didn't earn them. He didn't actually increase the amount of ice cream. He only captured the value.
It is possible to not grab every single ice cream bar especially when you have more than you can ever eat. People and companies do this all the time. As a businessman, I don't find it necessary to screw every other party in a transaction in order to feel successful.
None of this addresses the question. We have the highest standard of living in history because businesses relentlessly increased productivity, in both good and bad years, and this eliminated unneeded low value jobs. It also creates more valuable new jobs.
If they hadn't done so, 95% of Americans would still be doing brutal farm labor.
On firms like Berkshire partner 3G Capital, which takes big companies and streamlines them:
I’m sensitive to the issue of cutting costs, which usually means a lot of people losing jobs. Rich people end up getting richer and a lot of people get fired. But ultimately, I think we don’t do the world a favor by employing more people than we need for companies to run efficiently. On the whole we advance civilization when companies run better.
> On the whole we advance civilization when companies run better.
I understand that's a tenet of capitalism and is almost a religious belief beyond question. But, empirically, how do we know that this is actually true?
Because being deliberately inefficient in order to give more people jobs is a slightly concealed case of the broken window fallacy; so all the same arguments apply.
Basically, when companies do that, they're engaging in a form of welfare, but it's neither fair (because of differences in implementation) nor efficient (because it involves wasted labor). It's fairly obvious that it would be better to have the same people who wouldn't be employed if not for inefficiencies, employed to work on something else efficiently - even if it's public projects, for example - and pay them by taxing the increased (due to higher efficiency) output of the original company.
I think it's both logically pretty clear, and empirically "proven" by comparing countries like the US with e.g. Russia. I write "proven" in scare quotes because it's hard/impossible to really empirically prove these kinds of claims without true experiments, which you can't really do, just look at the imperfect experiments of history and infer.
Either way, there is a sneaking assumption hiding inside the "we advance civilization" quote that can't be proven no matter what, and that is what does it mean to be a more advanced civilization? This is not something that can be proven because it depends on your value system. I am compltely in the camp that this is true and that civilization today is better (e.g. less people dying, more material wealth, more stuff we'd like to do being available, more art, etc). But you can also disagree with that and thus disagree that efficiency is so great.
Because efficient companies produce goods and services for lower prices than inefficient companies, which, happening at scale throughout the economy, lowers the cost of living and raises the standard of living for everyone. An increase in the amount of goods and services produced per head is the definition of economic growth, which most of us consider to be a good thing. Improvements to our quality of living essentially require economic growth.
Take a listen to this NPR Planet Money podcast (and article) called "The History of Light" [1]. It describes how much it cost to light a room, in terms of a typical day's wages, at various points in history until today:
> The history of light is the history of economic growth — of things getting faster, cheaper, and more efficient. In Babylonian times, 4,000 years ago, a day's labor would buy very little light. You could buy enough light to illuminate a room but not for very long. Maybe 10 minutes. It was really expensive.
Today, a day's worth of wages can afford to light a room for thousands of hours. This affordability has radically changed our society, mostly for the positive. It's now possible to study and be productive in the evening. Many of the improvements to the efficiency of lighting also enabled cheap heating as well.
Another related interesting article is "The $3500 Shirt - A History Lesson in Economics" [2]. This one traces the cost of clothing from the middle ages to today. Consider: why did people used to wear clothing until it became rags? Because clothing was extraordinarily labor-intensive and thus expensive. A single shirt back then might cost $3500 in today's money. Now clothing is a negligible cost for most people in the USA, including the poor.
Companies (and individuals) and their desire for efficient production have brought these costs down, and the costs of so many other goods. I've heard it said that today the average person in America has a quality of living substantially better than that of a medieval king. I believe it: with our lighting, heating, and potable water delivered to our homes; sanitary food & restrooms; medical and dental care, etc. -- all available to (mostly) everyone due to low prices. Not to mention the luxuries available to us in our homes like television, music, radio, video games, etc. Cheap spices from everywhere in the world. Food from most everywhere is available at low prices and high quality in local supermarkets. Travel is cheap, and many people can afford to travel virtually anywhere urban in the world within 24 to 48 hours by aircraft - amazing by any historical standard. And it's so reliable we take it for granted.
All changes that originate from economic growth.
During the industrial revolution, a lot of automation replaced human labor in clothing production. This did have the negative effect of putting the spinsters and weavers and so on out of business, but had the positive effect of making clothing vastly cheaper for everyone. People found new jobs and society continued, and was better off overall. Similarly, the development of the automobile largely put the industry supporting the horse-and-buggy out of business. But everyone was better off overall having fast and cheap transportation.
So how do we know that it's true? I suppose we don't have any way of saying in a particular case, but we can look to history to see how innovations that made products and services cheaper have benefited society overall.
Perhaps 1000 years in the future, they will trace how much computing a day's wages could buy, and how that went on to transform society too.
You overstate the reliability a bit (or rather, the things we take for granted are not so reliably supported) but I'm not going to argue your broader point at all.
However, this:
Because efficient companies produce goods and services for lower prices than inefficient companies
Is not correct. Efficient companies are capable or producing goods and services for lower prices than inefficient ones, but they will typically only do so in the presence of true competition. Otherwise, companies are always quite happy to realize the fruits of higher efficiency as higher margins.
That may be an nit to pick, but it's an important one.
Efficient companies require less resources to produce the same amount of goods and services. The resources that are not used to produce goods and services can be used to do other things. This is true even if the company uses the savings to realize higher margins instead of lowering prices.
More efficiency increases purchasing power (or reduces working hours or resource usage, at least) even if there is no competition. Competition just gives an incentive to become more efficient.
That's the toy model presented in introductory courses, but we have good of evidence that it isn't that simple. Or at least that we don't understand the dynamics very well. The resources used for other things do not necessarily help that much globally, they can just accumulate in less useful ways (i.e. trickle down economics is mostly wishful thinking)
The compelling impact of growth pointed out earlier (over centuries) was largely driven by the breaking of monopolies and increase in market access, as well as social change allowing more efficient allocation of resources.
Not really, history shows us lots of complicated things that give lie to most statements as simple as yours. However, even if it were that simple, the mechanism by which the consumer benefits is the one that I describe, not the production of the efficiencies. Which is why it is important. "Briefly", after all, can be most of your lifetime.
The point was that if they don't sell them for lower prices, the benefit is quite limited. You need competition and market access to spreads the benefits around.
This is a question I often have, and I've not come up with a good answer either way. Here are some of the examples I ponder:
The modern PC exists because IBM basically spread the knowledge around in their manuals, allowing many compatible devices to be made. In terms of capitalism, this was a dramatic mistake - IBM didn't make profit off of these knockoffs. But had they not, it may well have been similar to Unix (next entry), where many incompatible devices (hardware, in this case, not software) gave a fractured market that just didn't move very far.
Unix and related variants - AT&T lost the copyright to BSD because they had failed to enforce it (because that predated the Bourne convention). During the lawsuit, when the future of OpenBSD/NetBSD/FreeBSD was slightly in question, many devs worked on some little toy project known as Linux. Today, we have a healthy market of these open source solutions, but had BSD source not been freely available, would the BSDs have gotten any success? Would Linux exist in its modern form had the BSDs not served to create both a market and supporting software? GNU Herd seems to imply "no".
And of course, the Internet - Had some marketing exec been in a position do something about it, the modern Web would never have been created, and the internet itself as something that average people can connect to would be behind a series of paywalls and incompatible standards. Microsoft crushed Netscape, and announced that IE6 would be the "last version" of IE. When Firefox hit a point where it was better, competition was renewed and we eventually moved towards common standards, but that was only possible because Netscape opened their code (and reputation). Other competing browsers had been, but they went nowhere in terms of market share.
A few other non-tech examples:
Car door handles and mirrors (and etc). If you need to buy a replacement car part, it's ridiculously priced compared to what it is. Why? Because there's very little competition in that market. Even within their own brands most cars have very specific parts outside of the engine. Ideally I'd buy a car that was reliable and had standardized parts - but no such car is available, because the manufacturers not only lack an incentive, they have an incentive to keep it incompatible so they and their partners can enjoy a nice markup on replacement parts.
Coke and Pepsi - Between them, they control the vast majority of the soft drink market. But of course, their products are different. Mr. Pibb is not Dr. Pepper, Coke is not Pepsi..People will prefer one or the other, and their preferences won't line up with the corporate owner/controller, and if you have multiple people you are practically guaranteed to have preferences from both brands. Not a problem...unless you want to eat out. Virtually every restaurant (and some universities, conference centers, etc) has an exclusive deal with one or the other. Theoretically we could vote with our wallets and frequent those places that DON'T have an exclusive deal. If you can find any. And if that is more important than, you know, things like food and service and prices.
Who needs to replace a car door handle? Almost no one. If you do, it's easy to go to a pick and pull junkyard to get one. If you are making new car door handles, and have to widely distribute and store them so they are available for the few people who need a new replacement, are you going to sell at a low markup or a high markup? Being cheap won't attract pick and pullers. A low margin won't convince stores to stock slow selling parts.
And if you run a restaurant, do you really want two soft drink delivery services coming in while your staff is doing food prep? Do you want to make space for two fountain machines, double sets of replacement canisters and twice as many possible customer problems with bad mix settings, running out of syrup, etc?
PepsiCo and Coca Cola control about 75% of the carbonated beverages market in the US. Dr Pepper Snapple Group (a separate company entirely, Pepsi doesn't make a Dr-type soda) has about 17%. The rest is a whole mass of specialty and local producers.
Interestingly, you will find Dr Pepper in most quick service restaurants despite their exclusive contracts. Those contracts are not with a particular brand, but with a particular distributor. Dr Pepper has cross-distribution contracts with a bunch of major distributors so they get to ride along.
it's not even about criticizing capitalism (though there's lots to say about that) as it is about criticizing the philosophy of managerialism that Munger's comment exemplifies.
to me it seems like nothing less than an elite member of a specific social class congratulating himself, and by proxy those he represents, for being a cog in the big machine. Charlie's cog is a very big one indeed so he can make comments like that with no irony or self-awareness.
So what?! They are operating within the constraints of the market. Before the vulture capitalists swooped in prices were very reasonable for 30 years, the previous owners chose not to exploit their monopoly, then these two increased their efficiency.
they didn't increase efficiency at all, they just increase the amount they were able to squeeze out of the IP. thats not an efficiency vs inefficiency, its n vs n+1.
It's not that they started producing more units, it's that some folks (the ones using the drugs) were taking advantage of a market inefficiency (the insufficiently low price) which when corrected, meant greater returns for Shkreli et al.
Just as when a "retail" day trader hits on a system that enables them to make a large amount of money, they're taking advantage of an inefficiency, and, in a way, helping to correct it.
It's not pretty, but being ugly doesn't make it inaccurate.
Your assertion being that layoffs and cost cutting are inherently unethical? That is to say, it is evil and wrong to ever fire anyone. It is also evil and wrong to cut costs?
I'm not the OP of the comment you're responding to but...
I think it is unethical to take away the livelihood of someone if the only reason you are doing it is to add even more zeros to your already fat bank account.
But the only reason a business hires employees is to make more money. We are not employed out of charity. Can we complain that greed compels them to fire us when it also compels them to hire us in the first place?
Also, you are assuming the only one being rewarded by layoffs are executives. As someone dutifully putting away money for retirement in a 401k, I am the primary beneficiary of such layoffs in their stock prices(assuming the company is publicly traded). Should I feel guilty that my greed has caused layoffs?
Of course not, not anymore than you should feel guilty for investing in tobacco companies. If causing others suffering is really so bad, it would be illegal right? /s
Their livelihood is already gone. They have nothing productive to do. It is far more ethical to let them go and secure productive employment elsewhere so that they may have some dignity rather than to pay them to do nothing.
"I think it is unethical to take away the livelihood of someone if the only reason you are doing it is to add even more zeros to your already fat bank account."
Even if one would agree to judge things within your frame, i.e. employee's share vs. employer's, you still have a moral dilemma with allocating resources wisely. Judging from their past income spending practice, employees will most likely consume, whereas employers will most likely invest. I hardly see any reason against supporting the later kind of players.
I would be a lot more concerned about Berkshire's holdings of soft drink and fast food companies. Talk about bad ethics...
When someone asks about the ethics of Coke (generally, any sugar/carbonated beverage), and Buffett responds that he still drinks it, or that he eats fast food, that's begging the question. Without the regular/addicted consumers of those products, the companies wouldn't be good investments, and everyone knows regular consumption of soft drinks or fast food is bad for you, statistically speaking. Outliers (like Buffett himself, if he really eats as poorly as he says he does—like avoiding most vegetables) are irrelevant.
Do you feel the same about motorcycle manufacturers? I'd guess the mortality risk of a 30 minute motorcycle ride is higher than the risk of a 30 minute Dairy Queen meal.
I suppose that depends on how strongly the manufacturers market their motorcycles to less-safe use... for instance, marketing higher cc sport motorcycles for regular commuters or illegal motocross rather than taking them to a track.
Motorcycles, while less safe for the rider, are more safe for everyone else, and they pollute less, so in general I suppose the ethical situation is less obviously bad for motorcycle companies than for fast food companies.
Fast food and soft drinks are specifically engineered to be as enticing as possible, playing on biological cravings that are unhelpful since the advent of mass food production, and offer no other benefits other than satisfying those cravings. It's difficult to be a large-scale for-profit food business of any kind, and still be able to fully justify your company's actions, ethically speaking. However, fast food companies, junk food companies, [carbonated] sugar water companies, and to a moderate extent many prepackaged food brands, drag down the ethics of the whole industry. They're harming public health, it's obvious, and the only defense is a naive (ignoring marketing and network effects, and habitual irrational human tendencies) retort that capitalism, individual choice, etc should always win.
You can blame the consumers—the companies are just making what the people "want"—except that's not how capitalism has worked for most of the last century. The marketing/advertising/promotion juggernaut has a life of its own and significantly boosts demand for things that are bad for consumers, bad for the environment, or both.
Even if it were pure consumer-driven demand, should free-market capitalism be a suicide pact? Are consumers only hurting themselves with unhealthy food? They're driving up healthcare costs and disability costs, which raises everyone's health insurance costs and taxes. You can argue correctly that it's inefficiency on the part of health insurance companies, but that inefficiency isn't going away until it's cost-effective and accepted to monitor everyone's diets. For the moment, they have to assume that every person they cover is eating or drinking more junk than they should. The cost of Warren Buffett laughing off health ethics concerns and emphasizing that he drinks coke or eats burgers becomes an externality, not so different from pollution.
Furthermore, forget the products they make, and forget their marketing. Companies of this sort actively seek to subvert science, funding contrarian studies: that sugar isn't actually bad for you, that more carbs are good (not just for marathon runners, but for the average office worker too), that high-fat dairy and meat are the true causes of health problems, and many others.
And what do consumers gain? A little bit of transient happiness—at least, they think the junk food is making them happy, but more likely they're just at a local maximum and they could find healthier food that would still taste good, leading to more overall happiness taking into account the realization that the healthier food isn't killing them (as fast).
Buffett's response is an admission that he can't fully justify those companies' products and tactics, so he doesn't even try. It's sad. In one sense, someone's going to hold the stock, so why not him? Does holding stock of a company like that obligate you to campaign for better food standards that will probably harm your investment, in the short term at least? Of course not, and it's difficult to see how such a constraint could be added to securities law, but shouldn't some constraint like that be added if it were possible? This is where capitalism fails. Problems develop when you legally require companies to make money for shareholders and fail to ethically hold shareholders responsible for the consequences of a company's actions. It means consequences for a company's actions are going to lag far behind (decades, at least) scientific realization that the company is making money by externalizing costs.
I'm not that down on Buffett or BH for their investments, but this is a systemic problem highlighted by Buffett's public lack of concern for these issues. These are problems that need to be solved at a higher level (government) until low-level solutions are found (profitable food that tastes like fast food but that's also good for you). So far, government has been unable to do much because the people, who are hooked on these products due to habit and all the marketing, use the levers of democracy to prevent government from acting. I'm not optimistic that anything will change soon, but I don't see how that removes the ethical liability from those businesses.
I don't know. So the premise is: "We have to invest in companies that are ethical nightmares because there's nowhere else good to put our money."
How does that absolve you from ethical responsibility? Shareholders driven by money (as almost all are) will turn a blind eye toward harm the companies are doing as long as they can get away with it, and the courts and laws lag decades behind scientific consensus, sometimes longer when the companies themselves engage in muddying the waters about the underlying science claims made about their products or the externalities of their business.
If you want to stay out of prison, you do what Buffett does. You make light of ethical concerns because taking them seriously makes people take notice, and maybe stop drinking so much coke or eating so much fast food, and then you've indirectly hurt your stock holdings, and that would be a disservice to your shareholders.
I guess what you do, if you want to be ethical, is don't buy Coke or whatever ethically dubious company it is, and hope a group of forward-thinking philanthropic billionaires buys it instead, and that they'll move mountains to reform or pivot the company to a more ethical business model.
I don't see how ethics can mean anything at all if it's not ethically bad to hold shares in a company (BH owns what, 10% of Coke?), if you're holding it for the financial returns generated by its current business model, rather than to reform the company's unethical behavior through your stock ownership. You can say it's inevitable that someone will hold the stock and someone will get those potential dividends. However, if everyone takes a moral stand, nobody will buy the stock, the stock craters, and then someone can pick up the company for a song, then do something better like using all the r&d and marketing power for developing good food and convincing people it's trendy and tastes great, which seems to affect customer perception of taste more than actual taste.
Nobody wants to pay current market cap (or 51% of it, at least) for one of those giant unethical companies just to try to use that ownership to reform the company into something more ethical. Those companies have boxed themselves into a corner through marketing. They've convinced so many people to consume unhealthy products or products whose manufacture harms the environment, and they make such a good profit out of it, that the market cap is too high and it's too expensive for reformers to buy a majority stake and do something better.
Just because I don't see any solution doesn't mean I'm going to throw up my hands and call it ethical to hold Coca Cola stock. It seems to be all the rage to redefine words though, so if you redefine ethical to mean direct ethical implications, an investment in Coke is no longer unethical. Problem solved, I guess?
You clearly don't have any idea of who 3G Capital is.[0] They are not a small consulting firm that somebody else hires. If they are investing in a company it is because they want to change the culture of the company. And to do that, they need to be the leader, not to follow.
Their philosophy is about use numbers. They use metrics for everything. From the water used in bathrooms to the necessity of pay for first class travel for the executives. And if a job can be done using just one person, use 3 people is almost a crime for them.
[1]Buffet: most managers cannot control their lust for hyper-activity, preferring instead to go out and buy something, they are constantly comparing themselves to companies inside and outside of their own industry, making changes to reflect the "new ways of thinking", which are in fact only the old ways with new fads inserted and most managers tend to have an exaggerated sense of their own abilities.
That is why he have a partnership with 3g Capital. They like to make things simple, not complex. They never spend money just because they have money. They like to cut and spend less even if everything is alright.[2] Sicupira: “Costs are like fingernails: they always have to be cut.”.
BTW They start investing in technology companies using InnovaCapital and invested in SnapChat, Apple and others. [3]
Edit: Added that it was 4k per year.