For me, one of the most interesting things about reading through the financial pages of the newspaper has been the realization that America's economic situation, both in good times and bad, is not a pre-ordained matter of fate. While economic processes, the intervention of various governmental organizations, and good old supply and demand all play their part in determining the direction of the nation, these forces are also not the whole story. A large chunk of the economy can also be tacked up to the personalities of its big players. For example, the failure of Silverado Savings and Loan in the late 1980's was due in no small part to Neil Bush (by the way, we're still paying for the bailout, which was estimated to have cost the American taxpayers $1 billion). Similarly, the Savings and Loan crisis was itself fueled by the amazing Michael Milken, whose ability to "restructure" debt made him the poster boy for 1980's greed. And, after all, who can deny the importance of Ivan Boesky when it comes to demonstrating the seductive nature of insider trading? While it is unreasonable to lay any economic boom or bust at a single person's door, there is no doubt that individuals can strongly influence the economy, both for good and for ill.
Warren Buffett
One person that I've been researching lately is Warren Buffett. The CEO and largest shareholder of Berkshire Hathaway, he is currently listed as the richest person in the world. On the surface, Buffett's business strategy is amazingly simple: he believes in so-called "value investing," in which he finds companies that are undervalued, purchases significant amounts of their stock, and holds on to it until the market comes to its senses and values the company more highly. Of course, while Buffett's strategy is simple in concept, it requires a great deal of financial knowledge and economic muscle to make it work.
What's really gotten to me about Buffett is his surprisingly egalitarian stances on pretty much everything. Although he is almost incalculably wealthy, he chooses to stay in Omaha, where he famously lives in the same house that he has occupied for almost fifty years. His salary is only $100,000, which is low for a senior executive in a holding company; for somebody with Buffett's skills and knowledge base, it borders on the ridiculous. In fact, as Buffett has repeatedly noted, under the current income tax system, he pays far less in taxes than many of his employees.
Buffett has something of a reputation for making these sorts of contrarian statements. Although one might expect a businessman at his level to aggressively pursue self-aggrandizement and self-serving economic policies, Buffett keeps a fairly low profile. He has already pledged most of his fortune to the Bill and Melinda Gates foundation, where he believes that it will do the most good. He has also, presumably, given a great deal of money to Grinnell College, where he is a trustee. Perhaps most interestingly, Buffett has passionately argued in favor of inheritance tax, arguing that it helps prevent the development of an entrenched class system in the United States.
Stephen Schwarzman
Another person who I've seen prominently featured in the news is Stephen Schwarzman. Founder and chairman of The Blackstone Group, L.P. (NYSE: BX), a private-equity fund, Schwarzman recently made news with his his reported 2007 paycheck of $5.1 billion. This included a base salary of $350,000, additional compensation of $350 million, and $4.77 billion in revenues from the sale of stock in his company.
In many ways, Schwarzman could almost be viewed as the anti-Buffett. He lives in a $37 million co-op on Park Avenue in New York City and an 11,000 square foot mansion in Palm Beach. He famously loves stone crab claws, a $400-per-serving delicacy which the Wall Street Journal has reported that he tosses back with considerable regularity. Perhaps most impressively, Schwarzman's 2007 birthday party, for which he rented out and completely redecorated the Park Avenue Armory, featured a performance by Rod Stewart, for which the singer was reportedly paid $1 million.
This isn't to say that Schwarzman is without generosity. For example, he recently donated $100 million to the New York Public Library. Of course, he did require that the NYPL rename its iconic marble edifice on 5th Avenue and 42nd Street after him. While one my question whether his investment, impressive as it is, should put Schwarzman on a level with John Jacob Astor, Samuel Tilden, and the other (often anonymous) investors who made the NYPL a possibility, there is no doubt that his money will come in handy. The NYPL is a non-profit organization and could certainly use the cash. Hey, at least he didn't force the library to rename Lord Astor and Lady Lenox, the marble lions in front of the building!
Schwarzman has also repeatedly carped about his income tax, and engineered the IPO of his Blackstone company to save a great deal of money on taxes, using methods that seem a little sketchy. In fact, his extravagant lifestyle led some legislators to attempt to alter the tax code in order to increase his liability. All of this is particularly interesting, given the fact that Blackstone's stock has lost 89% of its value since its initial offering.
Of course, Warren Buffett is no angel, and Stephen Schwarzman is no devil; moreover, as I'm sure some people will hasten to point out, comparing them is probably much like comparing apples and walruses. However, in their respective lifestyles, public statements, and business practices, Schwarzman and Buffett seem to embody two ends of the business spectrum: the schemer who's in it for the cash and the thoughtful, seasoned investor who's considering his effect on the world. Which one would you prefer to have around?
Bruce Watson is a freelance writer, blogger, and all-around cheapskate. He'll be damned if he's going to refer to the New York Public Library as the "Schwarzman Library." Now please excuse him, as he has to pay a visit to the "Blackstone."
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