AUDIENCE MEMBER 00:09
Hello, I’m Jaime McMahon (PH) from Birmingham, Alabama.
And I was hoping that, Mr. Buffett and Mr. Munger, y’all would expand a little bit on your ideas of an inheritance, and the positive and negative influences that can have on your heirs, and what you might be able to do as a businessperson, and an investor, and as a parent to sort of mitigate those negative influences.
WARREN BUFFETT 00:45
Yeah, well, I quoted — I think Kay Graham was quoting her father at the time but — some years back as saying, “If you’re quite rich, probably the idea of leaving your children enough so they can do anything, but not enough so they can do nothing, is not a bad formula.”
I think, if you’re talking about people that aren’t quite rich, I’ve seen — you know, socially, I wouldn’t have a system that involved inheritances. But recognizing the situation that exists, I think probably at lower levels, that leaving to the children in this society is perfectly OK.
But I believe enough in a meritocracy that if I were devising the system with a consumption tax and everything, I would probably make inheritance a form of consumption that would be very heavily taxed, because I don’t believe that because you happen to be the — come out of the right womb, essentially, that you are entitled to live an entirely different life than somebody who wasn’t quite as lucky, in terms of womb selection. (Laughter)
But in my own case, you know, I follow the “enough so they can do anything, but not enough so they can do nothing.” I think that society showered all these —
I was very lucky, I was wired the right way at the right time in history to do very well in this kind of a market economy. Whereas Bill Gates has told me if I was born some thousands of years ago, I’d been some animal’s lunch.
You know, (Laughter) I don’t run very fast. (Laughter) And there are different assets that are useful at different times.
And I’ll add, I’m not wired to play championship bridge, or championship chess, or not wired to be a basketball star or anything. It just so happens I’m in an area where it pays off like crazy to be good at capital allocation. And that doesn’t make me a more worthwhile human being than anybody else or anything. It just means I was lucky.
And should that luck, in effect, enable many generations of people that are good at womb selection to do nothing in this world? You know, I would have some reservations about that.
So that’s my own feeling on inheritance. But Charlie has a bigger family and he can give you a better answer.
CHARLIE MUNGER 03:19
Well, I feel, in a capitalist system, that there should be an inheritance tax, and that once that’s been imposed and paid, what each person wants to do in his own testamentary arrangements is up to that person.
I see very few people that I regard as ruined by money. Many of the people that I see ruined who have money would have been ruined without money.
(Laughter) And I think the percentage of the people that are going to be living the life of the French aristocracy before the revolution is always going to be very small. And there are plenty of grasping people to take the money away from the incompetents who inherit it.
Nothing we have to worry about a whole class of incompetents ruling the world as their money cascades ever higher. So I like a fair amount of charity, and certainly some testamentary charity is OK. But I feel it’s an individual choice that people have to make.
WARREN BUFFETT 04:40
They get a choice there. Number 9.
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