-- Posted Thursday, 29 June 2006 | Digg This Article

MarketWatch’s David Weidner aspired to write a piece on Warren Buffett’s altruism today.  He suggested that we avoid constructing a hagiography for the man from Omaha  He is perhaps on track with this point. Buffett is not perfect as I am certain he himself would state. Serious analysis can not rest on the backs of sycophants. However, Weidner crossed a line in his attempt to be the lone contrarian to the nearly universal acclaim associated with Buffet’s philanthropic gesture.  He made numerous allusions to a lack of character on Mr. Buffet’s part – allusions that speak more to a lack of insight on Weidner’s end than of any serious shortcoming in America’s most generous philanthropist.  We would suggest that in the future Mr. Weidner adopt a more objective and informed opinion before attacking someone’s character. Some of his more questionable statements follow: “The most glaring of Buffett's transgressions occurred six days after Sept. 11, 2001. Earlier that year, Buffett's Berkshire Hathaway had agreed to pay more than 70% of face value for $500 million in bonds issued by bankrupt finance company Finova Group. He broke the contract after 9/11 by invoking an "act of war" clause in his contract citing the World Trade Center attacks less than a week earlier. It was that decision, to not honor an agreement at a time when the nation needed to come together, that for me solidified the notion that Buffett was not, after all, an outsider, but the coldest of Wall Street operators to the core.” While it is true that Berkshire was the first reported company to invoke an ‘act of war’ clause, what Mr. Wiender neglects to mention is that Berkadia – the jointly owned Leucadia/Berkshire entity set up to bail Finova out of trouble – could have withdrawn their offer before September 26, 2001 ‘under a variety of conditions’, including if the New York Stock Exchange closed during the offering period (Buffett). Following 9/11 – and after the NYSE was closed – Berkadia had the legal right to walk away from the offer. Had the deal been explicitly absolved because the NYSE was closed would Weidner be questioning Buffet’s patriotism?  It is not as if Berkshire was linked to the Nazi party or was somehow complicit in the holocaust (as some have controversially suggested about IBM). No, Buffett is the great villain of history solely because he invoked an already agreed to clause involving a (relatively speaking) paltry $500 million cache of bonds.  Needless to say, that Finova’s loans involved aircraft assets would have been enough for any rational person – patriots included - to back out of the proposed deal following 9/11.  Weidner doesn’t argue that Buffett broke any laws mind you, only that contracts should be treated as meaningless pieces of paper. Having the audacity to actually invoke one of the contract’s explicit terms is, apparently, beyond the pale. Mr. Weidner’s next affront is equally as pointless:   “It's not the only time Buffett has been ruthless in his business dealings. From his early years in the 1960s, Buffett has favored managers who slash costs, often through layoffs, to shine up his investments.” Even though he provides no evidence to back up his exaggerations (Buffett favors companies that grow over the long-term) lets play along: should Buffett instead favor managers who increase costs, often hire people for no reason, and consistently lose money Mr. Weidner?  Continuing his line of non-reasoning Weidner adds: “Now, as he hands out his wealth to people who got, in his words, "the short straws in life" his company is also offering buyouts to long-time employees of the Buffalo News, a paper he has run on a notoriously tight budget since the late 1970s.” In light of its current troubles, apparently Mr. Buffett didn’t run the Buffalo News’s budget tightly enough.  As for offering buyouts, that Buffet has the audacity to compensate his employees for potential job losses is such an affront to justice that we will not comment any further. Back to the villain angle: “On at least one occasion, Buffett may have sold out his friend American International Group's Hank Greenberg last year. Reports say Buffett's General Re was under investigation. Buffett told lawyers to give regulators documents about suspect dealings with AIG: American International Group, Inc. AIG was forced into a settlement. Greenberg was ousted, disgraced and is facing lawsuits. Buffett, who even testified against his former counterpart, went back to being a folk hero.” (emphasis added) As Business Week previously noted, Buffett and Greenberg have had a long and friction-filled history.  No friendly bridge games here. As for Buffett ‘selling out’ Greenberg, Mr. Weidner fails to mention that two Gen Re employees reportedly dropped the dime on AIG’s questionable deals. He also conveniently forgets to mention that Buffett answered all the questions asked to him openly and honestly, while Greenberg pleaded the fifth. More generally, is Weidner seriously suggesting that it is ethically suspect to route out potential corruption in one’s business firm – especially when it might implicate one’s friends? The gates of Heaven must be locked to those who put patronage ahead of principle! “But people as successful as Buffett don't accumulate $44 billion in wealth through charitable dealing.” Charitable dealings are not profitable? Wow. Profound… Astonishingly, after throwing dirt on Buffett and rather blatantly attacking capitalism, Weidner confuses us further by starting an argument with himself: “This isn't to throw dirt on Buffett or his contribution. Few on this planet have the power to change the world on the scale that Warren Buffett did Monday. Nor is this an attack on capitalism. Buffett shrewdly acquired his fortune and built the fortune of his shareholders.” In his concluding ramblings Weidner says that something is wrong when society cheers Buffett’s actions while ignoring Mother Teresa, and – alluding to a couple of quotes from the bible - he insinuates that Buffett is trying to buy his way into heaven.  While we agree with Weidner on his first point, speculating on the latter is not easy.  After all, while clearly no Mother Teresa, that Buffett is giving his life’s work to charity is notable.  In Matthew, Mark, and Luke, Jesus states the pertinent theme: “Go, sell everything you have and give to the poor, and you will have treasure in heaven.” In short, in a land known for $6,000 gold-and-burgundy floral patterned shower curtains and cocaine parties sponsored on the company dime, is it any wonder why Buffett is being portrayed by some as a caring angel? Quite frankly, if redistributing a massive amount of wealth from an oftentimes decadent America to those less fortunate is not a service to mankind we are unaware of what is or what could be. Yes, we know more about the myth than the man, and Buffett, who is reportedly agnostic, still possesses more money than any one man would ever need in 10-lifetimes. Nevertheless, given that Buffett has been under the microscope for decades Weidner’s attack is extraordinarily weak.  To be sure, if the worst Buffett ever did was send some of the most prosperous people in the world to the unemployment lines and befriend Greenberg, we’d say that his ends have justified the means. As for Buffett’s business savvy, he owes much of it to carefully selecting and engendering repentance from his managers: ‘Forgive me Buffett for I have sinned…profits are down this month’. Buffett was willing to forgive honest mistakes, up to a point. Weidner’s mistake is that his “analysis” is neither honest nor to the point.

-- Posted Thursday, 29 June 2006 | Digg This Article

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