When Buffet Talks, We'd Better Listen

Warren Buffet appeared on CNBC’s Squawk Box on Monday, March 9. He said the following:

“When people get scared, they change their buying habits. When they quit buying as much, people lay off. We are in a very, very vicious negative feedback cycle. It will end, but, believe me, I mean, I don't want this to be the last line of the movie, the last line of my annual report that America's best days lie ahead.”

Click on the following link to get the transcript of the entire interview.

So what’s one of the most respected authorities in the world saying about the global economic crisis?

It’s not about numbers, and it’s not about complicated formulas—it’s about attitude.

We could spend hours, weeks, and months going line by line through the stimulus package, the US budget, and economic reports put out by the brightest minds in the country. The bottom line is, that we need to shift our attitudes and change our behaviors.

Fear is taking hold of too many of us.

I’m not suggesting that we bury our heads in the sand and ignore that people are losing their homes, businesses are closing, and lots of suffering is taking place.

But I am saying that there is a lot of good that’s clearly getting ignored. And I’ll argue that we’re doing this to ourselves.

Just watch the news. It’s all about how bad things are. Again, I’m not denying the media reports. But how many of us are still employed? How many of us are still paying our mortgages, eating out, and going to the gym?

The grooves of doom and gloom are digging deeper into our subconscious. The result? Let’s review Mr. Buffet’s observations:

“People get scared…They quite buying as much…people lay off.”

Notice the order of his observations:

1. People get scared
2. They quit buying as much
3. People lay off

He didn’t say:

1. People lay off
2. They quit buying as much
3. People get scared.

"People get scared" was the first in his trio.

So for the 90% or so of us who have jobs, we’ve got to take on a positive attitude and counter the fear that’s taken hold of us.

As Mr. Buffet said, “We’re in a very, very vicious negative feedback cycle.” He didn’t say, “We will be” (future tense). Or that “we’re going to be” (present progressive). He said, “We are.” Present tense. Right now. So it’s time to do our best to snap out of it.

It’s fear that’s making an already difficult situation even worse. If two-thirds the world’s most powerful economy is based on consumer spending within its borders, then Buffet is making a stern warning and admonishment to all of us.

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