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Tuesday, Sep. 27, 2016

Warren Buffett, Trading Places, & the Endangered Middle Class

Posted Monday, June 25, 2012, at 6:12 PM

I have never met Warren Buffett, the Oracle of Omaha, whose net worth according to "Forbes Magazine" is 44 billion dollars. But I know a little about Buffett from a mutual friend who died in 2000 at the age of 96. The mutual friend was Joe Rosenfield, who was an incredibly wonderful human being and philanthropist.

Anyhow, this story (or comment) is about an article I read in the June 9th Sioux City Journal [http://siouxcityjournal.com/news/state-and-regional/nebraska/cost-to-lunch-with-warren-buffett-million/article_cdf91784-b24d-11e1-b4fe-0019bb2963f4.html], titled "Cost to lunch with Warren Buffett: $3.5 million". In the article, Josh Funk from the Associated Press wrote about an auction to benefit the Glide Foundation (which helps the homeless in San Francisco). An anonymous bidder purchased a private lunch with Warren Buffett for $3.46 million. According to the reporter, Buffett has been donating this "lunch with himself auction item" for 13 past auctions and has raised more than $11.5 million for the group.

I have heard and have read that Warren Buffett is a generous man and that he lives quite humbly---especially considering his $44 billion net worth. He has been in the news this past year offering to pay a higher percentage of his income tax and has said that it would be fair to tax the rich a higher percentage [http://siouxcityjournal.com/warren-buffett/image_213c5a06-dd5a-11e0-a9bd-001cc4c03286.html]. I am not finding fault with either Buffett or the outcome here---it is great to have three and a half mill donated to homeless people, wherever they may be. But I wonder what message this sends to a homeless person, who would be delighted to have $2.14 (the cost of two hamburgers from the dollar menu at a local franchise). What do people think about one millionaire/billionaire paying $3.5 million for a private lunch with another millionaire/billionaire?

Two things come to my mind: The French Revolution and the movie "Trading Places". I didn't pay that much attention in World History class, so I'll comment on the latter.

"Trading Places" involved a dollar bet between the wealthy Duke brothers (played by Ralph Bellamy and Don Ameche) about whether or not a beggar/con-man named Billy Ray Valentine (played by Eddie Murphy) could be successfully thrust into a career in a brokerage house--replacing a rising broker named Louis Winthorpe III (played by Dan Aykroyd). The other part of the bet was that the displaced broker would resort to crime when faced with his new-found poverty. Eventually, Valentine and Winthorpe learn of the bet and plot revenge against the Dukes. The Dukes end up broke and Valentine and Winthorpe end up being close friends and rich. (I told you it was a movie, right?)

What is happening to the so-called "middle class"? What is your reaction to the $3.5 million private lunch auction? Party on, Louis & Billy Ray!

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I obviously neither know Buffett personally nor would be pretentious enough to declare knowledge of his motives beyond speculation, but with regards to such speculation, I believe any businessman who has made his billions making deals and oddly endorsing random political initiatives must be a shrewd and often ruthless deal maker (not that I necessarily find any particular fault with such things). His endorsement of increasing marginal tax rates on the "wealthy" is specious considering his long time practice of keeping large swaths of his wealth in his tax-exempt foundation and his refusal to submit a check to his alleged loving and well-intentioned government's treasury in lieu of what he ostensibly views as a shortfall in wealth distribution. More likely, in my estimation, a deal between politicians (such as his sudden chummy attitude toward Obama) who favor tax increases was made in which he receives something in return for his endorsement as an "expert" on these matters (such as the denial of the Keystone Pipeline which directly benefited his investment in Burlington Northern rail which he acquired ala Berkshire not long before it became a hot button issue).

The private lunch auction likely has more to do with those placing bids looking for something in return-such as last year's winner who is now working for (surprise!) Berkshire Hathaway as one of its investors.

Personally I'm apathetic to their motives: if someone thinks a bid of millions of dollars for lunch with some billionaire is going to get them something in return, then that's their choice. And that their main intentions are not really charity (they would simply donate without the charade of an auction otherwise) is irrelevant since the money is still raised. It is, however, a major cause of cognitive dissonance to have an auction allegedly for charity for the homeless while simultaneously recommending national fiscal policies that indirectly lead to more homelessness due to market distortions, decreased capital reinvestment needed for increased productivity, and is later "stimulated" by inflation which disproportionately harms the poorest.

-- Posted by jlees on Fri, Jul 6, 2012, at 12:44 AM

I remember a time when people like me were labeled "working class". Everything i own came from my initiative! People like us,(working class)are the backbone of this nation. Sadly, most of us are losing our homes because of the economy. Why not help those that are trying to help themselves to.

-- Posted by brian48 on Wed, Aug 1, 2012, at 3:34 AM

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Description: JP's take on legal (and other) issues which interest him. Biography: Born in Spencer Iowa, February 6, 1957; Graduated Spencer High School 1975; University of Iowa (B.B.A. 1979); Creighton University School of Law (J.D. 1984); American Jurisprudence Award: Debtor/Creditor Relations; Assistant State Attorney, Florida, 12th Judicial Circuit, 1986-89; Assistant Clay County Iowa Attorney, 1989-93; Iowa State Bar Association: Volunteer Lawyers, 1993- ; American Citizenship Committee, 1994-98; Bridge the Gap Committee 1991-94; Criminal Justice Act Panel Member, 2002- ; National Association of Criminal Defense Lawyers, 2004- ; Iowa Association for Justice, 2004- ; American Bar Association, 1984- ; Florida Bar Association, 1986- .