The immensely popular head of Berkshire Hathaway, Warren Buffett, who is one of the richest people in the world, has pledged to give away 99% of his wealth to charity. He is working with Microsoft Corporation’s equally famous cofounder, Bill Gates, to inspire other US billionaires to pledge at least half their fortunes to charity.
Buffett made very incisive comments about the market system when he explained the reasons for giving away his wealth. He spoke about the capricious nature of the market system and luck. Buffett, with all his wealth, has the luxury of trying to compensate for the distortions of the market system and his luck. Poor people do not. Buffett’s analysis of the market system should be examined. Solutions should be found to make our world less unequal and people’s fate less reliant on luck and charity.
Buffett explained his charity thus: “My luck was accentuated by my living in a market system that sometimes produces distorted results, although, overall, it serves our country well.” He added: “I’ve worked in an economy that rewards someone who saves the lives of others on a battlefield with a medal and rewards a great teacher with ‘thank you’ notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions. In short, fate’s distribution of long straws is wildly capricious.”
Buffett supports the market system because it serves the US well. The rest of his comments are a fairly serious indictment of the system. It shows that the ability to accumulate wealth often has little to do with the contribution an individual makes to society. In fact, the people who “detect the mispricing of securities” often are a cost to society and make their money not simply by identifying mispricing but are the ones who cause bubbles and crashes in financial markets. Financial speculation of this sort draws investment capital and skilled people away from activities that could benefit society as a whole towards the sole purpose of individual enrichment.
Buffett’s comments also touch on matters of race and gender. He says: “My wealth has come from a combination of living in America, some lucky genes and compound interest,” he wrote. “Both my children and I won what I call the ovarian lottery. (For starters, the odds against my 1930 birth taking place in the US were at least 30 to 1. My being male and white also removed huge obstacles that a majority of Americans then faced.)”
Talking about race and wealth is still very pertinent in countries such as the US and South Africa. These countries have long histories of racial oppression and exploitation. Within the market systems that operated during these periods, racial oppression allowed white people to exploit black people for self-enrichment. Much of the wealth accumulated in both the US and South Africa is tainted by a history of racial oppression and exploitation. Buffett also mentions gender. He acknowledges that his opportunities were greater than those of women because he is male. He acknowledges that, in the market system, there are institutions that cause inequality between men and women and give men an advantage.
Buffett explains his situation as luck. Of course, he is being hugely modest. He is remarkably talented at making money through building businesses and finding mispriced securities. However, he is correct when he says he was lucky. Racial and gender discrimination were not obstacles to the accumulation of his fortune but may very well have contributed to his success.
There are huge problems with the market system. We should not allow an ‘ovarian lottery’ to exist in our societies. There is a role for the State to regulate this market and to promote more equal opportunities. In the meantime, I believe that not only billionaires but all people who have benefited from the ovarian lottery and distortions in the market system should follow in Buffett’s footsteps. They should not only be more charitable but also recognise that an unfair system and luck played a role in their lives.