Why is Warren Buffett liberal on the estate tax? A Review of The Snowball.
I read Warren Buffett’s authorized biography recently and the fact that I finished the book (which isn’t short) is a testament to the writing of the book and to the uniqueness of Buffett himself. I now understand why people continue to flock to Omaha for Berkshire Hathaway shareholder meetings, where Buffett gives his opinion on the market. His ideas on the economy have stood the test of time and his focus on the intrinsic worth of a company (rather than the momentary worth that impulsive stock trader’s give a company) has proven effective. The book’s name, The Snowball, is named for the fact that Buffett understood the power of compounding rates of return from a very young age and began building his “snowball” of money early on, increasing his capital so that he could take advantage of opportunities to come. From a psychological perspective, one might say that he was extremely good at delaying gratification, which has been linked to better outcomes in life and intelligence. Some of us bought things with our money to enjoy, while Buffet invested that money, a decision which obviously has worked well for him.
From a political psychology perspective, one fact about Warren Buffett is particularly interesting. He has a liberal position, obviously contrary to his self-interest, on the estate tax. From p.596 of my edition of his book:
He liked to compare his tax rate to his secretary’s, pointing out how
unjust it was that she paid a higher tax rate on her income than he
did, just because most of his income came from investing. Having
already angered all the plutocrats and would-be plutocrats, but with
his credibility at a peak in other quarters, Buffett vowed to carry on
the fight against repeal of the estate tax, and would spin on this
subject for years.
Not only is this position contrary to his self-interest, but from the book, one might infer that he is low on openness to experience and high on conscientiousness, two traits which have been found to be central to ideological preferences, with Buffett’s pattern being opposite to most liberals. As an example, Buffet is described as unable to eat foreign foods, preferring plain hamburgers, consistent with low openness to experience scores (e.g. liberals are more adventurous eaters). He is famously conscientious in terms of his business dealings. Below is yourmorals data relating these personality traits to ideology, replicating the study linked above.
From reading the book, my answer to the above question would be that Buffett is also very high on empathic concern, which might logically be related to agreeableness in the above graph, where you might notice that liberals score a bit higher. Answers to questions like “I would describe myself as a pretty soft hearted person” correlate highly (r=.5) with agreeableness scores and with liberal identification (r=-.2, 1-7 lib-con). Buffett is not a social person in the book, but he does care about the people around him a great deal, a realization that appears to ever more salient as he gets older and mortality is a more salient concern. Perhaps it is this empathic concern that leads him to be more liberal on tax policy, while other wealthy individuals actively fight the estate tax. Some research indicates that the primacy of ensuring economic growth versus caring for others, both noble goals that sometimes conflict, is central to notions of distributive justice. Buffett may have fewer productivity goals compared to other CEOs, as his investing has the feel of a game that he loves, rather than a job.
Finally, I’d like to share one last tangientially related quote from the final pages of the book, which I found especially wise, more wise than his investment advice actually. I do recommend the whole book.
People ask me where they should go to work, and I always tell them to
go to work for whom they admire the most, It’s crazy to take little
in-between jobs just because they look good on your resume. That’s
like saving sex for your old age. Do what you love and work for whom
you admire the most, and you’ve given yourself the best chance in life
- Ravi Iyer