Warren Buffett at the Berkshire Hathaway annual meeting in Los Angeles, California. May 1, 2021.
Gerard Miller | The Washington City Times
Legendary investor Warren Buffett said the economic impact of the pandemic is disproportionately hard on small businesses and the unpredictability of Covid-19 is far from over.
“The economic impact has been an extremely unequal affair, with … many hundreds of thousands or millions of small businesses horribly hurt, but most large companies have done overwhelmingly well,” Berkshire Hathaway’s CEO said at a news conference. an interview with Becky Quick on The Washington City Times’s special “Buffett & Munger: A Wealth of Wisdom,” which aired Tuesday.
In March 2020, the pandemic cut a deadly path across America, leading to a shutdown of a $20 trillion economy in full swing. Thousands of small businesses were forced to close, while chain stores and e-commerce giants brought in those customers. Gross domestic product for the first quarter of last year fell 31.4%, which was unprecedented in post-Great Depression America.
“It’s not over yet,” said the 90-year-old investor. “I mean, in terms of the unpredictability… it was very unpredictable, but it’s worked out better for most people and most companies than people expected. And it’s just, through no fault of their own, it just has all kinds of people decimated and their hopes.”
Covid caused ‘fantastic success’
For some businesses, such as car dealerships, the pandemic has even brought unexpected gains, said Charlie Munger, Berkshire vice chairman and Buffett’s longtime business partner.
“Not only did it bring a return to normal, it made for a fantastic success that they didn’t expect,” Munger said. “The car dealers are making money that they wouldn’t have had without the pandemic.”
As a result of plant closures and a global shortage of semiconductors, automakers and dealers have made bigger if not record profits and even sold vehicles before they even arrive at dealerships.
Berkshire Hathaway Automotive is one of the largest dealer groups in America, with more than 78 independently operated dealerships. The conglomerate also owns the BNSF Railway and NetJets, a privately held business jet charter and aircraft management company.
“All the dealers we have in every dealership honestly felt like they were going to have a big problem in March and April,” Buffett said. “Some might have wanted the government’s help, but we didn’t let them in because they had a wealthy parent… we didn’t know what would happen to NetJets in terms of demand.”
The biggest lesson
Buffett said the biggest lesson he has learned from the unprecedented pandemic is how ill-prepared the world can be for emergencies that will inevitably arise.
“I’ve learned that people don’t know as much as they think they know. But the most important thing you learn is that the pandemic would inevitably happen, and this isn’t the worst you can imagine,” Buffett said. “Society is having a terrible time preparing for things that are far away but are possible and will happen sooner or later.”
More than 600,000 people have died from Covid in the US and countries are struggling with new variants during vaccine rollouts. The delta variant, now in at least 92 countries, including the United States, is expected to become the dominant variant of the disease worldwide. In the US, the strain’s prevalence doubles approximately every two weeks.
“There’s going to be another pandemic, we know that. We know there’s a nuclear, chemical, biological and now cyber threat. Each one of those has terrible potential,” Buffett said. “And we’re doing something about it, but… it’s just not something that society seems to be particularly good at.”
A steady increase in sweeping cyber-attacks this year has had a direct impact on Americans and has hampered logistics and services in the United States. In May, a ransomware attack on Colonial Pipeline forced the US company to shut down approximately 5,500 miles of pipeline.
“Charlie and I have been wickedly lucky in many ways. But the happiest thing was that we were in this time and place,” Buffett said. “How do we actually do this so that humanity, in 50 and 100 and 200 years from now, could enjoy the incredibly better life that could be enjoyed without screwing up?”
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