Bill Gates got rich, and we all know what he provided to the world: ubiquitous computing. We are all better off because Microsoft expanded our ability to use computers for more efficient work and more enjoyable leisure. Even Apple fanatics should recognize that.
Steve Jobs got rich, and we all know what he provided to the world: fantastic new products with cool features. Even we who use Windows computers and Android phones recognize that our world got better because of Jobs’ achievements.
But what did Warren Buffett ever do to justify his wealth? Are you and I better off because of him? Well, I’m better off because I own a tiny bit of Berkshire Hathaway stock, but even without that, I would be better off because of Buffett. And you are better off, even if you don’t own any stock in his company. Here’s how.
Warren Buffett attends the world premiere screening of HBO’s “Becoming Warren Buffett” at The Museum of Modern Art on Thursday, Jan. 19, 2017, in New York. (Photo by Charles Sykes/Invision/AP)
The shareholder letter in the latest Berkshire Hathaway annual report has an account of Berkshire’s acquisition of Geico. Buffett writes:
“On my initial visit to GEICO in 1951, I was blown away by the huge cost advantage the company enjoyed over the giants of the industry. It was clear to me that GEICO would succeed because it deserved to succeed…. Auto insurance is a major expenditure for most families. Savings matter to them – and only a low-cost operation can deliver those.”
Let’s assume that Buffett’s account is accurate; I personally cannot say one way or the other. Let’s step away from the investment perspective and look at what is best for Americans. It’s best if they buy insurance at the lowest cost possible. We don’t want the cost so low that insurance companies lose money, because that can’t last. Be we want the cost to not include waste and inefficiency. So if you ran the economy, and you saw one small insurance company that had figured out how to deliver insurance more efficiently, you’d want to encourage it to grow.
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