Warren Buffett On US Economy's Secret Sauce

Published: March 1, 2017, 7:28 p.m.

b"The Secret Sauce of US Prosperity
You may have heard Warren Buffett describe the US economy's success over the past few American centuries as a \\u201csecret sauce\\u201d and also heard his beliefs on how and why America will continue to grow and prosper. \\xa0It is part and parcel of his bedrock belief in US prosperity and one of his favorite themes.\\xa0 The secret sauce that powers the US economy, says Buffett, is made of innovation and productivity.
In a 2014 dialog with Quicken Loans Chairman Dan Gilbert, Buffett praised the staying power of the US economy, arguing that babies born in America today are the \\u201cluckiest people ever born in the history of the world\\u201d thanks to an economy and society that \\u201cunleashes human potential like no system has ever unleashed it in history.\\u201d
Polls these days show that a majority of Americans are pessimistic about the direction the country is heading, but Buffett says he \\u201ccould not disagree more\\u201d with those sentiments.\\xa0 For those worried about politicians reneging on Social Security or Medicare or Medicaid, he declares that \\u201cAmerica\\u2019s Social Security promises will be honored and perhaps made more generous.\\u201d\\xa0 And his message to parents fretting about dwindling job opportunities for their children is equally sunny and to-the-point: \\u201cAmerica\\u2019s kids will live far better than their parents did.\\u201d
In his 2015 annual Berkshire Hathaway letter to shareholders, Buffett wrote:
\\u201cFor 240 years, it\\u2019s been a terrible mistake to bet against America, and now is no time to start. America\\u2019s golden goose of commerce and innovation will continue to lay more and larger eggs.\\u201d
Forget Politics, Buy America
Just recently in an interview on CNBC, Buffett remarked that he was unconcerned by the outcome of the 2016 US election because the foundation of the US economy was sound and resilient.\\xa0 And he follows his optimistic take on the economy with his investment strategy. He said, \\u201cwe're almost always a net buyer of stocks over time.\\u201d\\xa0 For those that have followed his career at all, you know that this upbeat outlook about American business is nothing new for the Oracle of Omaha.\\xa0 In 2008, near the low point in the stock market meltdown, Buffett wrote an article for the New York Times titled \\u201cBuy America. I am.\\u201d\\xa0 He did exactly that, investing in stocks when fear ruled the market and, by all accounts, most of those investments have paid off handsomely.
History of The Sauce: Productivity Rules
The story of America's 240 year-long run of productivity gains and innovation is the \\u201csecret sauce\\u201d itself and is one that Buffett returns to again and again, and he doesn\\u2019t shy away from the label of \\u201csecret\\u201d which he thinks is entirely appropriate. Buffett loves to mention that the average American is six times more productive today than they were when he was born in 1930. Crucially, this growth has nothing to do with Americans being smarter or working harder today but is, instead, a result of changes in workplace efficiency that have \\u201cunleashed human potential.\\u201d\\xa0 In his view, productivity gains go hand in hand with innovation, meaning that technology drives productivity, and the need to improve productivity drives technology.
But this doesn't only work for companies. The development of new products and services that \\u201cimproves experiences\\u201d and even changes how people want to spend their time is another key part of the story of \\u201cAmerica's economic magic.\\u201d\\xa0 This kind of innovation brings products to market before consumers even know they want them. A great example of this is personal computers. PCs were hardly imagined as a concept at all until certain innovators brought them to market.\\xa0 Buffett believes deeply that this productivity-slash-innovation dynamic has brought \\u201cawesome benefits to society\\u201d and is responsible for the \\u201cmajor gains in the goods and services we've received\\u201d and ..."