The CEO Fallacy

Warren Buffett is rich. He's also brilliant and accomplished. But it is a mistake to think he or any other CEO has much that's meaningful to say about economic policy (that is, simply by virtue of being rich or a CEO). And yet Warren Buffett runs his mouth a lot and the press laps it up. He weighs in both on the subject of wealth distribution and the subject of economic planning.

Buffett has re-emerged recently as a mouthpiece of the "Tax Me More" coalition. That punchline can be heard in this clip, too. Despite that one square of Mr. Buffett's toilet paper is probably roughly equivalent to my net worth, people -- especially middle class people -- need to speak up against this kind of redistributionist sentiment. And I say sentiment, because I don't think Buffet's position is informed by careful reflection.

Here are ten quick thoughts on what I call the "CEO Fallacy."

1. CEOs are not usually economists. They usually confuse planning an organization with planning an economy (order)--the latter which is not possible. But these are two very different systems.
2. If anyone wants to give more to the IRS, they should. 
3. Wealth in the hands of entrepreneurs and investors is more productive and prosperity-enhancing than in the hands of politicians.
4. Worrying about the gap between rich and poor is not the same as worrying about poverty. 
5. People like Buffett may arrive at their positions due to guilt, which is the other side of envy's coin.
6. Wealth usually signifies value has been created.
7. The constructal law says wealth will have a natural tendency to concentrate in the hands of few, for distinctly physical reasons.
8. Philanthropy can be just as difficult as investing. Running a for-profit can be just as hard as running a non-profit. If you find philanthropy burdensome, let someone else do it for you (like the Gates Foundation). But remember, every dollar Uncle Sam takes is a dollar effective foundations can't use.
9. Government creates monopolies -- even in doing good. It crowds out philanthropy.
10. Just because you're accomplished in one area doesn't mean you're an expert in all areas. 

Comments

[Troy Camplin]

I've made exactly these points about CEO's -- and Warren Buffet in particular. Just because someone knows how to run a business, that doesn't mean they understand how the economy works. They are different things. It's like claiming organic chemists must necessarily understand biology.