You’ve Come a Long Way, Baby: an Addendum to my China Post of September 8, 2016

   The 1977 Northwestern trip to China—totally controlled by our hosts—took us to many places that I would dub as completely “safe,” in the immediate aftermath of the arrest of the Gang of Four and during the relatively brief reign of Hua Guofeng (spelled differently at the time) whose claim to fame was the alleged pronouncement by Mao, “With you at the helm I shall sleep in peace.”

   Mostly, wherever we went, we were sat around a table with a group of people who were our hosts. In most cases that included translators, though I quite vividly remember one occasion when one local spokesman cheerfully said in a booming voice, “we won’t need that young man,” since he had studied astronomy, as I recall it, at the University of Chicago.

   The main job of our hosts, whether at a school or a farming coop, was to tell us what they were up to with the prevailing tone being modest bragging, which was not at all the paradox it seems to be.

   On one occasion the local spokesman came close to negating that “modest” when he told us that they themselves had constructed an electron microscope. While personally, I did not know how significant that was, the more knowledgeable people in our group, while quite benign about that “confession,” made it pretty clear that they didn’t think it was such a big deal.

   That was then—very different from now. The New York Times of September 25 contains an article about the completion of a radio telescope in the mountains of South-West China. A villager called it a giant wok:   

 "The wok is the world’s largest single-dish radio telescope, and it officially began operating             on Sunday, accompanied by jubilant national television coverage, after more than five years of construction. The Five-hundred-meter Aperture Spherical Telescope, FAST for short, is             intended to project China’s scientific ambitions deep into the universe, bringing back dramatic discoveries and honors like Nobel Prizes."

Talk about giant:

"[The dish] has a collecting area of 2.1 million square feet, equal to almost 450 basketball               courts. At 1,640 feet in diameter, it will be roughly twice as sensitive as the world’s next-            biggest single-dish radio telescope, the Arecibo Observatory in Puerto Rico, which is 1,000             feet across."

Alas, most of my colleagues on that trip of almost forty years ago have passed away. But none of them, I am sure, would have predicted that the China we then encountered would blossom into the powerful giant it has become. I say “blossomed,” misleadingly, but will leave it to readers to give a name to the process that went from post-Mao days to the days of Xi Jinping.

Responses to Buffett OpEd

I just came across these responses to my Buffett op ed on my computer. Responses to op eds are rare; no doubt that is why I preserved these. Of this group, Burstein is an acquaintance and Bierman an old friend.  For the Buffet piece, see the blog post of September 3rd. ---RHW

On Aug 16, 2009, at 1:58 PM, Burstpsych@aol.com wrote:

Hi Rudy:  Congratulations on your essay on Warren Buffet in todays PP-G.  By emphasizing his multi-faceted sharp intuition, good judgment and character, you hit the nail on the head.  In healthy function, as in disease, many factors go together to determine the outcome.  Best wishes, Stuart Burstein

Greetings:

Many thanks for your flattering remarks.  See you at the Symphony. ---Rudy

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On Aug 16, 2009, at 9:54 PM, frederick Rokasky wrote:

Letter to the editor  

            In Mr, Weingartner’s Sunday Forum: ”How Warren Buffet got rich”, he writes about intuition and other things to explain Mr Buffet’s success.  But in truth what that success comes down too is natural talent.  If you have talent and know you have it and are will to work to develop it to it’s fullness, you can become very accomplished.  This doesn't take away from Mr. Buffet’s achievement at investing and amassing one of the great financial fortunes in the world.  Just as it doesn't take away from Ben Roethlisberger’s success as a very talented quarterback and team leader.  Or a host of talented others who are successful in their particular fields and are blessed by a, (not endowed from a deity), natural talent; be it in education, science, the arts, politics, government, sports, etc.  In my mind the key thing to remember is that without the extreme and inherent natural talent a person must work very hard to achieve what those of talent do seemingly effortlessly.  In any case it is good for all to celebrate their success whether it is from a nature talent or hard work,  

            In the end may I point out Gore Vidal's admonition, or what I humbly term his law:              “It is not enough to succeed.  Others must fail.”  Gore Vidal, b 1925, a very talented writer.  

Be well. Frederick J. Rokasky  

Greetings:  I agree with you about the need for talent.  I was merely trying to describe what
kind of talents he had.  Thanks for commenting. –Rudy Weingartner

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On Aug 17, 2009, at 11:45 AM, Liz wrote:

Dear Mr. Weingartner:  I first want to congratulate you on your nice article re:  Warren Buffett.  I went to high school with Warren and can attest to some of the qualities you expressed.  But mine are more on the personal side.  The high school was in Washington, D.C. as Warren's father was at this time (1947) a congressman from Nebraska.  You could see that Warren had financial dreams and goals even then.  For example, he purchased and placed a pin ball machine in a "guy's" hang-out near the school.  He then would split the profit with the owner.  This was so successful, that he repeated his "franchise" in other places.  This is substantiated in an earlier biography.  Beneath his picture, in our year book, it says, "...a future stock holder"  They got that right!  We have had more recent reunions and Warren has returned each time.  When he does, he is just "one of us" and that is the way he wants it.  At our last one, we "tried" to do some of the old cheers of our high  school days.  It was a pitiful sight.  But Warren went right along with it.  I am only writing you this e-mail because you seemed interested in Warren, though maily as a financial genius.  But there is this other side of Warren I thought you would enjoy.   I think that along with his other attributes, he is a person of whom  people feel they can trust.  And in this business world of today, that is a great asset.  Elizabeth Kokiko

Greetings:  Thanks for your very interesting  reminiscences of the young Warren.  Schroeder reports that he badly wanted to go back to Omaha and that his father finally agreed to let him return home. --Rudy Weingartner  

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Greetings:

On Aug 17, 2009, at 5:09 PM, Arthur Bierman wrote:

Rudy,

        Good piece.  Are you on your Buffet-Way, by the way?  Need startup money, probably.  First risk, sell your house, buy a company.  Go for it, old friend.

Art

Thanks for the compliment.  I still have a bit of a spirit of adventure---but not to that extent!  Hope all is well in Rome--where I assume you you still are.  Here we complained about the cold for most of the summer; today it is stinking hot so we complain about that. Never satisfied.

Best, Rudy

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Aging. Really Aging!

   Readers of my blog will have noticed that I have posted a great many autobiographical pieces. This fact is grounded in two deeply-rooted motives, the first respectable, the second somewhat dubious. For many years, I have produced a lot of prose about myself, in books and articles and, more recently, on this blog.  No apologies; I am self-consciously reflective about my life and write about it more for myself than for others. Somehow this activity makes my thoughts about myself more objective: they are then out there to be looked at—by me, if by no one else.

   There is also a less respectable reason for of all that writing and those blog posts. As I have confessed, I am addicted to writing. Put that sentence together with the paragraph above and you won’t  be surprised to see another piece about me and probably others in the future.
   “Probably” is surely appropriate, if only because of the age I’ve already reached, namely over halfway between 89 and 90. Here I want to give  a brief account about what happened to me during that last year.

   Last summer (‘twas 2015) I went off to San Francisco with my grandson, Max, from Los Angeles, where we were both staying with Mark and Shannon, my son and his wife. We took the very scenic train northward, the course of which was interrupted only a few hours before reaching our goal by a puzzling extended stop that was revealed later to have resulted from the train’s running over a suicidal person in its path. We got to our hotel very late.

   The next day—or was it a day later?—I had to be transported to a hospital with what turned out to be a gall bladder “event.” I was not hospitalized for very long and benefited, faute de mieux, from visits by old friends whom I had hoped to encounter quite differently. I was very sorry that I could not introduce Max to the city I had lived in for so many years.

   To end this last San Francisco stay, Mark drove up from Los Angeles and we speeded South, mostly at night, to his house in Woodland Hills. I then had a couple of visits to physicians and returned to my home in Mexico City.

    But alas, those summer weeks were a kind of turning point; for the first time I came really to feel old. Unberufen teu teu teu (a fancy German way to say “touch wood”) I do not, so far, have any life-threatening ailments: heart, blood pressure, etc. are all OK. My one unambiguous disability is that since the late summer, my bladder has been on strike. After several methods of dealing with that fact, I now have a hole at the bottom of my stomach that creates a short path from my bladder to the catheter bag strapped to my leg. It needs emptied, in Pittsburghese, about every five hours, day and night—a life sentence.

    Everything else, while just as annoying, does not have so clear a medical diagnosis. My knees have been lousy for quite some time; they are just getting worse. So getting in and out of cars is a big deal. Physical therapy hasn't really helped. Walking is slower and more effort-full, but I try to do some every day. The worst is what I call wobbliness. My left leg that suffers from a botched operation some years ago is not staying put, but is getting ever less reliable. The amount of walking I do now is a fraction of what I did only a year ago; it aggravates a persistent muscle spasm on my back that has been attenuated but not eliminated by massages. My skin, never great, sports all sorts of bumps and itchy spots and frequent signs of broken blood vessels. I've fallen a few times (fall is what old people do) with real consequences but not debilitating ones. To sum up, I attend to a lot of nuisance symptoms--not an exciting occupation--while my world (and body mass!) have shrunk a lot.
   Thank goodness, I go out to eat with the family and I get to some concerts. But most of my life is centered on my room, bright and very pleasant and practically furnished. I am remarkably well taken care of in the City of Mexico.

   Mentally, I find my memory affected, short term and long term, but not, so far, in a seriously debilitating way. For now, I don’t find the analytic function of my mind really compromised, but then  I’m not the best judge of that. I treasure the fact that I can maintain my blog, of which this piece will be the 165^th post. I skip comments on other aspects of aging, mine, or anyone’s, but be assured that I am also subject to them.

   Sounds benign? I suppose it is. But then these objective descriptions do not express what it feels like subjectively. But then, what else is new?

Higher Education that's for Profit

   Many years ago I somewhere wrote a couple of pages declaring that having for profit institutions of higher educations was not such a good idea. At the time, there were hardly any of them. As I recall, my main warning was focused on the temptation of such institutions to shave expenses of the merchandise they were selling—in this case, higher education. That is still an issue, since a seller always tries to peddle merchandise at the level that sells. That was the totality of my thought—then, before for profit higher education became big business.

   Two major things have changed since those long ago ruminations. Getting a degree that will yield a job has become the leading goal of students studying beyond high school. Never before has post-secondary education been so career—indeed, job—oriented. The second big change is the fact that most of these college careers are financed by loans from the government. The income of for profit higher ed institutions is dependent on their students’ getting loans to pay tuition. And we are talking about very large amounts of money.¹

   What seemed not a good idea long ago is even less good now. For profit higher education is not just another version of education as it has been since forever. The motives and hence goals are radically different, facts that of course change the product, in this case education beyond secondary school.

   It is a reasonable response to say, why not give the customers what they want. But with that response, we must reach up to a different level of discourse.  Students are not customers of higher education. Rather, they are more like clients of hospitals, who are not assumed, like people who buy furniture, to know what product is best for them—that is, what set of courses to take, not to mention what the content of those courses should be.

   I will come back  to the topic of the substance of the education presented and turn to crucial change since those long ago days, that makes for profit higher education possible. There’s gold in them thar hills! The students who themselves pay for their education or have their parents fork over the tuition are a fraction of the student body attending for profit institutions. The availability of governmental loans makes it possible for a great many to sign up, a cadre constituting the bulk of the population of for profit institutions.

  Further, institutions of higher education are not like furniture stores. If you are not happy with the couches available in the store around the corner or with the prices they charge, there is likely to be another one within striking distance that in effect competes with it. Such an opportunity to choose an institution is available in relatively very few places in the country.

   Let me now produce a summary of the relationship of students to institutions of higher education that are for profit. What I say won’t hold for every case, but for far too many of them.

   In order for the institutions to make a profit, their product has to cost less than what is paid for it by consumers. Further, within limits (extensive or narrow, depending on many variables) an increase in volume yields an increase in profit.

   There are many ways to reduce the cost of what is given to students. The most obvious is to keep the wages down of those who do the teaching. That’s not the way to get the best people to do that central job!

  Volume is increased by various procedures to attract “customers”—again, that is students. Probably the most successful institutional claim is that there is a job, indeed a career, to be had after completing the work for a given degree. There is evidence that an institution will exaggerate in the claims it makes or will even lie.

   Whence the income of these for profit educational institutions?  As I said, only a modest fraction comes from fees paid by the students from their own or their parents’ funds. What has made this industry big business is the existence of government loans to students to fund their education.

   Let’s look at the way that works. The potential student signs up for a degree program and receives a loan to pay for its cost—up front. That case, however, differs importantly from the two most widespread ways of receiving loans: a mortgage for purchasing a house or a loan for buying a car, say, when not having the wherewithal to pay the full price up front. Not only must the borrower qualify in various ways to receive the mortgage or the car loan, the norm in such very widespread cases is that the repayment of the loan begins at once. The borrower is made aware of his or her obligations from the very start.

   For obvious reasons, loans to fund educational programs differ sharply from this familiar pattern. The money to pay for the cost of education comes up front, while the requirement to repay the loan is deferred to a later, perhaps much later, time. You don’t have to be a clever manipulator to accept such a loan without then worrying about future obligations. Not to mention the fact that a hefty fraction of those loans’ recipients are adolescents and not mature agents fully aware of the obligations they are incurring.

   When you look at this entire picture you can see that by recognizing that for profit institutions

act like most other vendors in the market place, they nevertheless differ from the bulk of those in the special characteristics of the products they are selling and both of the characteristics—immature and impecunious—of the buyers.

   I resist he temptation to produce a peroration on the inadvisability of fostering for profit institutions of higher education and only hope that I have conveyed something of my skepticism.

China of Yore

My Three Trips to China

   Like everyone else, I daily read about goings-on in China. Today it is the largest economy after that of the US and is predicted to become number one in 2018. That does not resemble the China I encountered on three separate occasions, none of them during the country’s ascent to be a mega-power. I’ll now provide brief glimpses into each of those quite different visits, wondering who in China, if anyone, thinks of some of those times as the Good Old Days.

   My first visit was in 1946  as a nineteen-year old enlisted seaman in the US Navy. An APA (a troop transport ship) had brought a great many of us from California to Shanghai to be replacements for enlisted men who had served long enough to be sent home and discharged from the Navy.

   I became a member of the crew of the LST 919 (Landing Ship Tank) and was assigned to duties in the wheelhouse, pleasantly above deck in the fresh air. The ship performed various tasks that took us to Shanghai and Hong Kong, among other cities. At this point I can’t really differentiate between my experiences in those two ports, though I think of the latter to have had a distinctive British feeling. In neither place did the LST (peacetime crew of around 70) have the rank to moor, so, when on liberty, one needed to be at the right time and the right place to catch the small boat that would take us to where our ship was anchored in the harbor.

   On shore, usually with a colleague, we would wonder around, in effect sight-seeing. While I very much wanted to buy one of those carved chess sets, I never had the money to do so, since the LST did not have a paymaster and was never in port long enough for us to be paid. Eating a good meal was a major feature of those few hours on shore.

   One of those Shanghai visits concluded with an uncomfortable adventure. My companion and I suddenly realized that we had wandered so far from the shore that it was questionable whether we could get to the designated pick-up spot in time to catch the boat back to our ship. We felt we had to accept rickshaw rides back to the water, since those fellows knew the way and were able to move much faster than we could. I cannot tell you how uncomfortable I was to be pulled by another human being, rather than by some beast or, better, a motor. It went against my American grain.

   I was one of the 919 crew who had a couple of days’ liberty in Tientsin, a more authentically Chinese a city than we had visited before. The most dramatic thing that happened to me there was not Chinese at all, but ur-Anerican. I had somehow given myself a quite trivial cut. But in addition to a band aid I was given a swift ride in a jeep across town to get a tetanus shot, for sure the second, maybe the third since I was in the navy.

   My second visit to China, in 1977, three decades later, was of course very different. I was then a dean at Northwestern, working in my office, when I got a phone call from my boss, President Robert Strotz. How would you and Fannia like to join a group of us in the coming summer for a trip to China? A number of Northwestern trustees wanted to explore business possibilities, now that it was no longer the land of Mao Zedong. They had found out that only “educational” groups were admitted. So we went, a small group of trustees and university officers and a few wives.

   It was immensely interesting¹ and just about completely controlled by our hosts. We were accompanied at all times by a guide, charming and speaking excellent English and every stop we made consisted mainly of the local hosts telling us about themselves. The culmination was a big banquet that, by the standards of the place and the times, was quite plush. When all kinds of essentially routine toasts were produced, I also decided to get up to propose a toast to the people in the kitchen who had produced all that good food. (After all, it was a communist state and they were the Workers.) That prompted a number of kitchen folks in their white working smocks to come out into our dining hall to acknowledge my toast. They were clearly not accustomed to being singled out in that way.

   My third visit to China, 1983. A dean I knew wanted to organize a group of US deans to make a trip to Taiwan and asked me to come. I agreed when I determined that after Taiwan I could visit the mainland, my real interest. So I secured an invitation from the president of Fudan University, Mme Xie Xide, with whom I had earlier worked out a Northwestern-Fudan student exchangeship.

   We saw a lot of Taiwan: interesting and pleasant. We also met with numerous groups from the world of education to whom we were supposed to impart some of our deanish wisdom. But of course that isn’t how it worked. For our host groups it was show and tell: they showed and told; we listened and, I hope, were successful in hiding that we were bored.  

   That visit to Fudan was very pleasant and basically uneventful. However, the people there facilitated Fannia’s and my visit to Xian.  We were connected with a mentor in that city, who picked us up at the airport: a young man who spoke excellent—indeed, colloquial—English, even though he had never been outside China. From around ten in the morning until four in the afternoon he was in charge of us. He took us to see the archeological sights of the ancient terra cotta armies: a pretty flamboyant vision!  

   After our mentor left us in the latter part of the afternoon, we drifted around town. I recall one occasion when, standing at an intersection, I took out my map to decide which way to go next. When I looked up, I found that we were surrounded by a great many locals looking at us, but obviously very friendly. From Xian we flew home.

   That third trip was my last to China. The period of rapid building of housing and skyscrapers had not yet begun and while there was plenty of automobile traffic, bicycles were still prevalently in use. Even if I were still traveling, I would not be anxious to see a China that is becoming like so much of the built-up developed world.
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1Fannia Weingartner, Sixteen Days in the People's Republic of China, 1977

Warren Buffett

Herewith one of my Pittsburgh Post-Gazette pieces that made it on a Sunday: a rare occasion.

OPINION / PERSPECTIVES

Sunday Forum: How Warren Buffett got rich

Rudolph H. Weingartner has a few thoughts on how to get from here to there

Sunday, August 16, 2009

Reading the wonderful biography of Warren Buffett by Alice Schroeder, "The Snowball: Warren Buffett and the Business of Life," got me to thinking about the different ways in which people have become really, really rich and how unusual Mr. Buffett is in that category.

The norm among the mega rich (let me pretend that there is such a norm) is that, above all, such a specimen knows one thing superbly well -- Rockefeller, oil; Carnegie, steel; Walton, retail; Gates, software -- on which his fortune rests. I am taking stick-to-it-ive-ness and luck for granted.

What this Buffett biography reveals is that its protagonist would never have made it into the firmament of the richest men of all time if he had lacked just one trait of quite a few that were necessary to his phenomenal success.

Let me state briefly of what Mr. Buffett's wealth consists: his dominant interest in a company, Berkshire Hathaway. While that outfit began life as a textile manufacturer, that activity has long since moved to other lands. Instead, B-H is a holding company that owns or has a significant stake in roughly four score companies, ranging from those that write insurance to others selling jewelry. Since Mr. Buffett took over B-H, it has gained flamboyantly in value and, until the recent time of troubles, its stock was always significantly ahead of the market. What Bernard Madoff falsely claimed, Warren Buffett, the Oracle of Omaha, did.

OK, that's the achievement. What did it take to accomplish it? Start with two gut traits, necessary for so much success. The first I call nose. It's my term for informed intuition, the ability to smell out what is plausible or more. Necessary but certainly not sufficient. Plausibility is not basis enough for the investment of millions. Needed for that is a trait that is in many ways antithetical to the immediacy of insight, namely analytical savviness, a certain brand of brain power. Antithetical because the exercise of that power takes a great deal of time and patience. On many occasions, the biographer Schroeder reports, the application of that ability converted Mr. Buffett into a virtual hermit, shut up in an office, reading and calculating.

This is not a trivial point. In general, if not inevitably, people who are brilliantly intuitive tend to go by the seat of their pants, hit or miss and, if good at it, hit more than miss. But Warren Buffett is not one to think that a major investment decision can be left to the gut, however much it may be the starting point. Laboriously, it is necessary to determine its actual value, a measure that is not revealed by the price of its stock, by gross sales or even by the profit its activities bring in. That value has to be dug out by delving deeply into its operations and assessment of its assets, together with a calculation as to what the company can become if its practices were modified. That's work, even drudgery; it requires plowing through irrelevancies to get to what is relevant. The intuitive Mr. Buffett is capable of squelching his gut and doing the work.

OK, again. What's next? Intuition acknowledged, laborious homework done, what does it take to act, where acting means allocating millions? This calls for that second gut trait: grit, the courage to go after an envisaged goal, obstacles and uncertainties to the contrary notwithstanding. Now taking risks is not a characteristic conventionally associated with the patient analysis of endless prose and numbers. The ability to act decisively is seldom found together with professorial studiousness. But what heightens the tension in Mr. Buffett's enterprise is that his findings are inevitably in conflict with conventional wisdom. Were that not so, the Oracle of Omaha would be just one of many bidding for a large slice of a company. Grit must take him to go against the grain.

The writing of a big check is not the end of the story. With his investment, Mr. Buffett gains authority, a power that must now be put to use. Since it has been determined that much more is possible for this company than it has so far been able to actualize -- promising an increased future value -- it must now change its ways. Almost always that requires that new people be put in charge, a crucial and possibly wrenching change. To effect such a transformation calls for two aptitudes, neither of which can be expected from a person who had locked himself up to delve into the books of the enterprise just garnered: the ability to fire -- not the most endearing trait and one that Mr. Buffett exercises with reluctance -- and the ability to hire. This crucial move calls for the knack of sizing up people for their skills and character, preceded by the humdrum work of surveying who's out there. How many people do you know who are good at either of those tasks, even where the stakes are much lower?

Finally, consider the context within which Mr. Buffett operates. You rub my back and I'll rub yours is one maxim that applies. But serving as the basis of all transactions, including relations with powerful governmental agencies, is trust. Mr. Buffett would not be one of the richest men on the globe if he were not universally regarded as truthful and honorable. In the long run, that reputation can be earned only by someone who actually is honest and upright.

It is not a mystery, looking at the traits and abilities that Warren Buffett possesses to a superlative degree, that he should have achieved so much. But as is true for so many outstanding players in history, it is a mystery how such a fortuitous bundle was packed into a single person.

Rudolph H. Weingartner is a professor emeritus of philosophy at the University of Pittsburgh (rudywein@comcast.net).