Buffett: Fear Is Winning -- But It Won't Win In The End

In a wide-ranging interview with Dateline NBC’s Tom Brokaw, Warren Buffett says that fear is currently winning out over hope in the U.S. economy — but that he wouldn’t bet against the country’s ability to recover from this crisis and go on to new heights.

“Right now fear is [winning],” Buffett said. “It really is an economic Pearl Harbor. … The country is facing something it hasn’t faced since World War II. And [people] are fearful about it. And they don’t know quite what to do about it. And … temporarily it looks like we’re losing. … Interestingly enough, we were losing for a while after Pearl Harbor. But the American people never doubted that we’d win. I mean, we had that attitude then. I think, right now, that they’re sort of paralyzed.”

“Now,” Buffett says, “we have to get mobilized — to win the war, which we will.”


Buffett says the U.S. is stuck in a negative feedback cycle: “We have fear which leads to people not wanting to spend, and — and not wanting to make investments. And then that leads to more fear. … We’ll break out of it. But, it takes time, and nobody can predict exactly when it’ll happen. But it will happen faster, I will guarantee you — because we have the right president in office — than would be the case otherwise.”

Buffett’s thoughts on a couple key issues:

  • How Long Will It Take?: Asked how long he thinks it will take for the government’s stimulus packages to make an impact on the economy, Buffett said he isn’t sure — but it won’t be five years, as some cynics have suggested. “I don’t know what the stock market will do in the next year,” Buffett said. “What I do know is that, if you go back to the 20th century, 100 years, you had two great wars, you had other very large wars, you had the Great Depression, you had the flu epidemic, you had a dozen recessions and panics, you had all kinds of things. At the end of that century … the average American was living seven times as well as the start of the century. The Dow Jones average went from 66 to 11,497 — with all those problems. This is a country that has the ingredients that– that– well, it unleashes the potential of humans. … And they’re still here. I mean — so [will things be better in] five years — you can put me down on that one. You can’t put me down on one year.”
  • Will We Learn?: Buffett says he thinks we won’t soon see a repeat of the factors that led to the current crisis — but he’s not sure America will learn a greater lesson from the crisis. “Most people won’t,” he said. “But some institutions will. And– and some will learn it whether they want to or not,” he said. “But … most people have a propensity to spend what they– what they make and maybe a little more. “We will see bubbles, though, again in the future,” Buffett continued. “Human nature, you know, greed and fear will keep — continue to exist. … And we will have other bubbles, and they won’t be exactly like this one. But they won’t — you won’t see this particular type repeated for quite a while.
  • Future Consequences: Regarding the huge deficits the government is running up by its bailout and stimulus plans, Buffett says there will be unpleasant consequences. But he adds that the economic crisis is so severe that the country must straighten out the economy first and deal with the consequences later. “This is a war that needs to be won,” he said. “And the sooner the better. Because every — every time you read about 523,000 … people losing their jobs in December, that’s — those are 523,000 human tragedies. I mean … I can think of nothing worse than going home and saying, you know, to a family that, ‘I’ve lost my job and we’ve got mortgage payments and food to buy.'”

Among the other topics Buffett touches on are taxes (he reiterates his belief that the wealthy don’t pay enough); President-elect Barack Obama (“I don’t think there’s anybody better for the job”); more regulation (“probably a good idea”, but “I wouldn’t look at that as a panacea”); and his own willingness to deal with Berkshire Hathaway’s stock drop (“I’ve never sold a share in my life. … You shouldn’t own stocks unless you can handle them going down 50 percent”)

In the end, Buffett’s main point seems to be that the U.S. is in a very troubling position right now, but that the American people’s ingenuity and resilience will eventually get us out of the tough times. “Since 1776 it’s never paid to bet against America,” he said. “We come through things. But … it’s not always a smooth ride.”