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Buffett And Munger: Efficiency Of The American Workforce And Layoffs

Warren Buffett and Charlie Munger discuss the efficiency of the American workforce and job cuts. From the 1996 Berkshire Hathaway annual meeting.

Efficiency Of The American Workforce

Warren Buffett And Charlie Munger Discuss Efficiency Of The American Workforce And Layoffs

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Well I think that the trends you talk about the attention devoted to them. Could have some effect just in terms of how how the affect just in terms of how.

How the public and Congress may feel toward business at historically you know every industry at all times is interested in downsizing or becoming more efficient.

Now if the industry is growing you can you can achieve efficiency by doing more work or turning out more output with the same people. But you know if you go back. 150 years and look at the percentage of people in farming for example farming has downsized from being a very appreciable percentage of the American workforce to a very small percentage and essentially that's release people to do other things so it's in the interest of society to do to get as much output in anything as it can per per unit of labor employed. It's very difficult on the individual involved.

And and you know it's it's it's it's it's no fun I guess it's no fun being a horse.

When the tractor comes along and or a blacksmith. And when the car comes along but the the. So I don't I don't quarrel with the activities I quarrel sometimes with how it's done and and I do think there's been a certain lack of in certain cases some empathy or sensitivity and in terms of the way it's being done you should try to make your business more efficient.

We we hope we're not in businesses that will require us to lay off people overtime because we hope the physical output grows and that that that we become more productive and and can keep the same number of people to get greater output Dexter Shoe has done a great job of that over and over time they become more and more productive but they've sold more shoes instead of selling the same number of shoes and letting people go. But sometimes industry trends I mean the world look we have fewer people than we had a year or two ago and we we didn't we don't have any answer to that. Over time we got out of the textile business I wish we didn't have to but we did not know how to run a textile company in New England and compete effectively. Like I say I would love avoiding those businesses and to the extent we can we well I mean Geico is going to add people over time and Berkshire Hathaway is going to add people over time but I can't. But it is in the interest of society to do jobs more effectively. It's also in the interest of society it seems to me for to take care in some way of the people that are affected by that activity and either in some cases it may be retraining but in other cases you know doesn't work so well if you're 55 years old and you've been working in a textile mill all your life and all of a sudden the guy that runs the place can't make any money out of selling your output I mean that's not the fellow's fault it's been working in the next town over thirty years.

So there's a balance in that I think that the attention that's come about lately I think there's some degree it was a media fad based on on some particularly dramatic examples that a couple of companies. I don't think there is more displacement going on now as a percentage of the labor force annually than there was ten years ago in terms of in terms of reconstituting what people do. But it's gotten a lot of attention lately. There could be a backlash on that in terms of corporate tax rates or a number of things and we might feel it in that direction we wanted Berkshire to do everything as efficiently as we can. Part of that in a big way is not taking on a lot of people we don't need a lot of the mistakes that are being corrected now are because people got very fat and their businesses got very fat in the past and took on all kinds of people they don't need. We see that in a lot of businesses that we're exposed to and. And as long as they're very prosperous really no one does very much about it then when the time comes they all of a sudden find out they can get way more output. The oil companies are a classic example. You know the the the the people probably actually needed to produce refine and and market oil probably hasn't changed that much but if you look at the employment relative to two barrels produced refined and marketed it's gone down dramatically over 20 years ago. To me it just means that they weren't being run that well 20 years ago and they never should've.