Why Economists are poor, 3 Fun Facts about Apple, and Socialism Be Damned
“Stay hungry. Stay foolish.”
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Today at a Glance:
· Quote: Why Economists are Smart But Not Rich
· Tweet: How to Argue Against Socialism
· Article: Why Steve Jobs was a lousy investor
· Three Fun Facts About Apple, Steve Jobs, and Warren Buffett
· One Speech: Jobs’ Commencement speech at Stanford
“I don’t pay any attention to what economists say, frankly. You have all these economists with these 160 IQs who spent their life studying it. Can you name me one super-wealthy economist who’s ever made money out of securities?”
Warren Buffett and Charlie Munger share a deep disdain for finance academics.
And if your measure is, “he who dies with more toys, wins," they are right.
But Buffett is wrong about all economists being poor.
Cliff Asness, founder of AQR Capital – a University of Chicago Ph.D.- writes academic papers and is also a billionaire.
Nevertheless, there may be other reasons why most economists aren’t rich.
Let’s look at three of them:
Economists aren’t trying to get rich. Many economists work for institutions of government and universities. That’s not a road to riches. Nobody asks Trappist monks why they aren’t rich. Getting rich for an academic economist is not a priority.
Economists are brilliant- but in very narrow ways. They have technical expertise. They have high IQs but have little insight into how financial markets operate.
The efficient market hypothesis hamstrings most economists. Believing that no one can beat the market, they never bother trying to get rich.
Buffett cites the example of the great British economist John Maynard Keynes who repeatedly failed as a speculator.
Keynes succeeded by giving up speculating and "settling on buying good businesses cheap.”
In short, Keynes adopted Buffett’s approach. And he died with a net worth equivalent to $30 million today.
How to Argue Against Socialism
Socialism has rarely been more popular among young people in the West.
A recent YouGov survey found that 44% of young people between the ages of 16 and 29 would prefer to live under socialism than capitalism.
And shockingly, another 7% would choose Communism.
In the eyes of much of America's academic elite, capitalism stands for values like selfishness, greed, and a lack of concern for others.
"Capitalism" conjures everything from images of dingy, polluted industrial towns of 19th-century England to the faceless power of big corporations of the 21st century. Capitalism is responsible for every evil motive, action, and result in economic history.
In contrast, socialism's motives are pure and noble. The values that drive socialism are altruism, cooperation, and harmony.
Both college freshmen and cocktail party socialists point out that “real” socialism has never been tried in practice.
Tell that to the tens of millions of victims of socialist despots like Lenin, Stalin, Mao Tse-tung, Kim Il Sung, Ho Chi Minh, Pol Pot, Castro, Mengistu, Ceausescu, and Hoxha – all killed in the name of socialism during the 20th century.
My grandparents spent seven years living in refugee camps in Germany after they were “liberated” by Stalin’s army. It was better than ending up in Stalin’s gulag like my wife’s grandparents did.
Here’s the reality.
Socialism has been tried many times. And each time, it has failed miserably. The result has always been economic poverty and political oppression.
Comparing the ideal of socialism with the reality of capitalism is a fallacy.
And the real-world outcomes of socialism aren't just bad.
They are horrific.
Steve Jobs Would Have Been a Lousy Stock Market Investor
Although he passed away in 2011, Steve Jobs, the founder of Apple (Nasdaq: AAPL), remains a household name among investors.
And the 91-year-old Buffett still fills stadiums at Berkshire Hathaway’s (NYSE: BRK-B) annual meetings.
You can debate who has had more influence on American business – Steve Jobs or Warren Buffett.
But based on accumulated wealth, Buffett wins hands down.
Even after the recent 23% pullback in Berkshire stock, he still boasts a net worth of about $110 billion.
Meanwhile, Jobs died in 2011 with a fortune valued at just $10.2 billion.
Here’s why ~~Jobs would have been a flop as a stock market investor
Buffett’s style of investing requires patience. And that’s one quality Jobs sorely lacked.
Jobs’ primary strength was his “reality distortion field.” He pushed until reality bent to his will. But not even Steve Jobs could bully the stock market into doing his bidding.
To be a successful investor, you must keep calm in the face of Mr. Market’s mood swings. But Jobs was the very incarnation of mood swings. But not even Jobs could have bullied the market.
Jobs wanted to “make a dent in the universe.” In contrast, Buffett got rich by betting against change. He assumed we would all use Gillette razors in the morning, drink Coke during the day, and shop at Costco at night.
Three Fun Facts about Steve Jobs, Apple, and Warren Buffett
1. The iPhone: the most successful consumer product in history
Do you own an iPhone?
You’re not alone.
Apple's iPhone has been, by far, the most successful product ever made:
More than McDonald’s hamburgers, Levi’s jeans, Nike shoes, Google searches, and Microsoft Windows.
Since its launch in 2007, Apple has sold more than 2.3 billion iPhones.
And sales are still growing.
In the past 12 months ending September 2022, iPhone sales were a staggering $205.5 billion.
To put that number in perspective…
That's more than the total revenue of all but 26 companies worldwide.
And more than all of Microsoft (MSFT), and more than Pfizer (PFE), and Johnson & Johnson (JNJ) combined.
2. Warren Buffett Made More Money From Apple than Steve Jobs Ever Did
Buffett has long been friends with Microsoft (Nasdaq: MSFT) founder Bill Gates.
Yet Buffett never bought more than a nominal 100 shares of Microsoft. In contrast, Berkshire Hathaway’s single largest investment in any one company has been Microsoft's rival, Apple.
Today, Apple accounts for roughly 40% of Berkshire’s publicly traded investment portfolio. It has generated over $120 billion in profits for Buffett since 2016.
That makes it by far the single most successful investment in Berkshire’s history.
Steve Jobs made a bigger dent in the universe.
But one of the great ironies of investment history is Buffett made far more on Apple stock than Steve Jobs ever did.
3. Steve Jobs Should Have Been Far Wealthier Than Buffett
Back in the mid-1980s, Jobs owned 20% of Apple.
But after he was ousted from the board, Jobs sold 99.99% of that 20% stake for a gain of $100 million.
He kept a single share to continue receiving annual reports and attend shareholder meetings.
Had Jobs never sold his 20% stake in Apple back in 1985, those shares would be worth $450 billion today.
That’s about 4.5 times Buffett’s net worth today.
Steve Jobs’ Commencement Speech at Stanford
“Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. Your time is limited, so don't waste it living someone else's life … Have the courage to follow your heart and intuition. They somehow already know what you truly want to become.”
Steve Jobs’ commencement speech at Stanford in 2005 may be the most popular speech of its ilk ever. It has been viewed over 50 million times on YouTube- a company that was formed just four months before and less than a mile away from where Jobs gave his speech.
I watched it again with my family this past Sunday. It’s a testament to Jobs’ impact that my eight-year-old son not only knew who Steve Jobs was but also was surprised to learn that Jobs no longer headed Apple.
“Stay hungry. Stay foolish.”
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