Save your cookie preferences

We use cookies to remember your site preferences, record your referrer and improve the performance of our site. For more information, see our cookie policy.

Please select an option below and 'Save' your preferences.

Save

You can update your cookie preferences at any time from the 'Cookies' link in the footer.

We use cookies (including third-party cookies such as Google) to remember your site preferences and to help us understand how visitors use our sites so we can improve them. To learn more, please see our privacy policy and our cookie policy.

To agree to our use of cookies, click 'Accept' or choose 'Options' to set your preferences by cookie type.

Options Accept

  • English
  • Deutsch
  • Español
  • Français
  • Italiano
  • Polski
  • 日本語
  • 简体中文
  • 繁體中文
  • Daily audit
  • Help
  • Contact
  • Deposit
  • Login
  • Open account
  • ABOUT US
    • About BullionVault
    • In the press
    • Reviews
    BUY/SELL BULLION
    • Live order board
    • Daily Price
    • Regular Investing
    INVESTMENT GUIDE
    • Guide to gold
    • -How to buy gold
    • -Gold investment
    • -Gold investment plan
    • -Investment insurance
    • -Compare asset performance
    • Guide to silver
    • -How to buy silver
    • Guide to platinum
    • -How to buy platinum
    GOLD NEWS
    • Gold news front page
    • -Gold price news
    • -Opinion & analysis
    • -Market fundamentals
    • -Gold/Silver Investor Index
    • -Infographics
    CHARTS
    • Gold price
    • Silver price
    • Platinum price
    • Price alerts
  • Login
  • Open account
  • BUY/SELL BULLION
  • Live order board
  • Daily Price
  • Regular Investing
  • INVESTMENT GUIDE
  • Guide to gold
    • ⤷
    • How to buy gold
    • Gold investment
    • Gold investment plan
    • Investment insurance
    • Compare asset performance
  • Guide to silver
    • ⤷
    • How to buy silver
  • Guide to platinum
    • ⤷
    • How to buy platinum
  • GOLD NEWS
  • Gold news front page
    • ⤷
    • Gold price news
    • Opinion & analysis
    • Market fundamentals
    • Gold/Silver Investor Index
    • Infographics
  • CHARTS
  • Gold price
  • Silver price
  • Platinum price
  • Price alerts
  • ABOUT US
  • About BullionVault
  • In the press
  • Reviews
  • Help
  • Contact
  • Daily audit
    • English
    • Deutsch
    • Español
    • Français
    • Italiano
    • Polski
    • 日本語
    • 简体中文
    • 繁體中文

Gold News

Live support

NEED HELP? ASK US NOW

Search form

Gold News front page

Gold Price News

Gold Price Gains as Dollar Drops, Selling from GLD ETF Erases 2019's Growth

More...

Gold Investing In Depth

Learn about gold bullion bars

Learn about gold bullion coins (and costs)

Gold investment: Why & how?

Gold Investment Analysis

  • Latest Gold Investor Index
  • Diversification: Gold as investment insurance
  • 40-year Asset Performance Comparison Table

Gold Articles

Opinion & Analysis

Gold Price News

Investment News

Gold in History

Gold Books

Gold Investor Index

Gold Infographics

Archive

  • February 2019 (21)
  • January 2019 (33)
  • December 2018 (28)
  • November 2018 (39)
  • October 2018 (38)
More...

List of authors

Warren Buffett's Wealth

Monday, 7/08/2013 17:47
How the Sage of Omaha came around to the "family office" way of thinking...
 
TODAY we want to do something a little unusual, writes Bill Bonner in his Daily Reckoning.
 
We want to tell you why we've set up something called a 'family office'.
 
Family offices have for hundreds of years been protecting and growing family wealth, based on a number of unique long-term investment strategies. They've also been helping families pass on their wealth through the generations.
 
Of course, it would be a whole lot easier to give our money away. To let the government take it. Or simply to let the lawyers sort it out after we are gone. Although we're suspicious of these alternatives, we can't prove the results will be any better with our family office approach.
 
Who knows? Maybe even Ted Turner's gift of $1 billion to the UN will turn out to be money well spent. But we doubt it.
 
Real wealth is never really in the public's hands. Every Dollar, every acre, every ton of steel or pound of butter ends up under someone's control. Some living person benefits.
 
If the government takes your money, it is only to pass it along to one of its favourite activities. No matter how it describes the activity – feeding the poor, protecting the country or stimulating the economy – the money always makes its way to someone else's pocket.
 
Some people, notably Warren Buffett, believe society is better off if each generation has to earn its own way. Buffett believes people who prove they can earn wealth should be the ones who have it and control it – not those members of what he calls the 'lucky sperm club' who inherit it.
 
Presumably, this meritocracy of wealth producers would lead to better decisions, faster GDP growth and a more prosperous world. But to achieve this brave new world, Buffett suggests that the government tax the wealth of each dying generation so members of the next one can begin on a level playing field.
 
You can see the nonsense of this immediately. The wealth that passes to the government doesn't just sit there until the brightest young entrepreneur or the sharpest new investor claims it. Instead, it is allocated to whatever project the government favours at the time.
 
Instead of being invested by the best wealth creators, in other words, it ends up being put to work by the worst: politicians and bureaucrats.
 
The next generation finds itself poorer, because the wealth that its parents created has been wasted...spent...and used up. Government does not preserve wealth; it consumes it.
 
Capital claimed by the government in the form of inheritance taxes does not remain a pool of resources, to be drawn out by the next generation.
 
Instead, it is given to the unemployed...to contractors and consultants...to people who are retired or in need of medical attention. Not necessarily bad things, but not the sorts of things that bring prosperity and growth.
 
But Buffett has recently moved in our direction. He put his son Howard – who had previously been kept largely out of his business – in position to take over when he is gone.
 
Buffett had previously argued that people with the responsibility of allocating wealth should be the brightest and best – those who had proven their mettle in the world of business and finance.
 
Surely, Howard Buffett was not chosen by those standards. Compared with the many thousands of top money managers, investors and businessmen Buffett might have chosen, Howard has little experience and fewer successes.
 
We've always thought the world is probably a better place when productive capital is not drained away by the government. Families, trained to invest wisely and to preserve their wealth, are almost certainly better custodians. They are much more likely to retain and enhance their capital over generations.
 
Why?
 
Because the skills necessary for building wealth – including the habits and the customs that allow you to hold onto it and pass it along to the next generation – can take a long time to accumulate. Why are the Swiss so wealthy, for example, and the Bolivians...or the Zimbabweans...or the Albanians...or the Baltimoreans...so poor?
 
The Swiss have the habit of wealth; the others do not. There are some skills that take more than a generation to acquire. Great hotel chains, for example, are often in the hands of a single family for many generations.
 
A young man who grows up in such a family works in the hotel from an early age. He sits at the dinner table when important issues are discussed. He learns from his parents and grandparents. He has the hotel industry 'in his blood'.
 
That is true in the publishing industry too (in which our family has an enterprise). Or the entertainment industry. In Hollywood, there are some skills that can take years of technical training. Lighting. Sound. Camera work. There are also many habits and attitudes that make showbiz different from other businesses.
 
Some are subtle and almost invisible to outsiders. Some are matters of traditions and connections that 'open doors' for young people. People who grow up in the milieu – in showbiz families – understand the codes. They are more likely to have the skills necessary to succeed than new arrivals.
 
So part of the reason we do what we do is simply to give our children an edge. An old friend set up a family foundation. He gave it a modest motto: Primum, non nocere. First, do no harm.
 
He is not naive enough to think that just because he intends to do good, good will inevitably result. We've seen over and over – in foreign aid programs, in domestic social welfare and in rich families – that giving money to people is not necessarily a good thing.
 
Foreign aid undermines local businesses. Social welfare programs remove the incentive to work. Inheritances often have the same effect: The children become 'trustafarians' with few skills, little self-confidence and even less self-esteem. So my friend undertakes his own do-good programs very carefully, with his eyes wide open.
 
We do the same. But we also recognize that since all wealth ultimately must be owned by someone – no matter what we do – our wealth will change hands. If it goes into the pockets of welfare recipients or foreign aid programs, we will not see the damage it does. But that is comfort only to a scoundrel.
 
Instead, we take the responsibility that our friend takes – to direct our wealth to people who will not be harmed by it. Instead, we hope to make them stronger. That is a large burden...but it is one we cannot escape.
 
We will try to do the best we can.
  • Reddit logo
  • Facebook logo
  • Twitter logo
  • Google logo
  • Yahoo logo
  • LinkedIn logo
  • Digg logo
  • StumbleUpon logo
  • Technorati logo
  • del.icio.us logo

Bill Bonner is founder and owner of Agora Inc., one of America's largest consumer newsletter publishers. Best-selling author and globe-trotting correspondent since 1999 for the Daily Reckoning email, he is chairman of family-wealth advisory Bonner & Partners, and co-author with his son Will of Family Fortunes: How to Build Family Wealth and Hold Onto It for 100 Years (Wiley, 2012).

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News, RSS links are shown there.

Follow Us

Facebook Youtube Twitter LinkedIn

 

Mobile apps

 - live trading 24/7

 - buy & sell instantly

 - up-to-the-second charts

 

 

 

Daily news email
Go to 'communications settings' 

Get the latest daily gold price news free by email

Latest gold news by email

 

 

 

Gold Investor Index
5 February 2019

Gold Investor Index

Gold up, investing up!

 

 

 

CNBC TV-18
3 January 2019

CNBC TV-18

Gold jumps into New Year

 

 

 

Portfolio Adviser
19 October 2018

Vaulted large bar gold. Source: BullionVault

Beyond gold 'chatter'

 

 

 

Money Observer
6 August 2018

Bitcoin ain't gold

No, Bitcoin isn't "new" gold

 

 

 

  •  Email us

Market Fundamentals

  • Gold 'Set to Drive' Silver Price Gains in 2019
  • LBMA Gold Price Forecasts See Tight Range in 2019
  • Gold Mining M&A Now 'Easier' Than New Exploration
More...
  • Cost calculator
  • Cookies
  • Terms & conditions

©BullionVault Ltd 2005-

  • Twitter
  • Facebook
  • Google Plus
  • LinkedIn
  • YouTube