Warren Buffett has a pretty optimistic take on being born in America: You've basically won the lottery. The Berkshire Hathaway (BRK) chairman thinks the U.S. market-based economic system has been cranking out wealth for centuries, and there's no reason to think it'll stop anytime soon.
In his 2016 letter to shareholders, Buffett pointed out that America's economic achievements have blown past anything the founding fathers could have imagined. He credits human talent, waves of ambitious immigrants, and the rule of law for building something special. Those early Americans were "venturesome pioneers," he wrote, who created a system that unleashed human potential through innovation and what he called an "abundance of capital."
"This economic creation will deliver increasing wealth to our progeny far into the future," Buffett wrote. "I'll repeat what I've both said in the past and expect to say in future years: Babies born in America today are the luckiest crop in history."
Why National Wealth Keeps Growing
Sure, plenty of Americans take on debt to buy homes, cars, and other stuff. And yes, some people lose those assets when they can't pay back their loans. But here's Buffett's point: the wealth doesn't vanish into thin air.
"Ownership customarily passes to an American lending institution that then disposes of it to an American buyer," Buffett explained. "Our nation's wealth remains intact. As Gertrude Stein put it, 'Money is always there, but the pockets change.'"
It's a pretty straightforward observation. When someone defaults on a mortgage, the house doesn't disappear. It just gets a new owner. The aggregate wealth stays in the system.
Since 1776, the country has built top universities, world-class medical centers, hyperproductive factories, millions of homes, and vast stretches of productive farmland. All of this represents genuine economic progress from what Buffett called "the barren lands, primitive structures and meager output of 1776."
The Market System as Traffic Cop
What's driving all this abundance? Buffett points to the market system itself, which he describes as an "economic traffic cop" that efficiently directs capital, brains, and labor to wherever they're most useful. That efficiency is what separates modern America from its colonial beginnings.
"Above all, it's our market system – an economic traffic cop ably directing capital, brains and labor – that has created America's abundance," Buffett said. "This system has also been the primary factor in allocating rewards."
He also noted something often overlooked: public support isn't just for the elderly. Millions of babies born each year get access to free public education, largely funded by local taxes. That's a massive investment in future generations that doesn't always get counted when people talk about government spending.
The Wealth Stays Here
Despite worries about foreign ownership and economic divisions, Buffett emphasized that the vast majority of American wealth belongs to Americans. Yes, foreigners own some U.S. assets, but Americans own roughly comparable assets abroad. The national balance sheet looks pretty solid.
"Foreigners, of course, own or have claims on a modest portion of our wealth," Buffett said. "Those holdings, however, are of little importance to our national balance sheet: Our citizens own assets abroad that are roughly comparable in value."
It's vintage Buffett: optimistic about America's long-term prospects, grounded in historical evidence, and convinced that the system that's worked for centuries will keep working for the babies being born today.