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Berkshire Hathaway (BRK-A, BRK-B) CEO Warren Buffett is many things.
But in his view, a successful leader of the Federal Reserve is likely not one of them.
"I do not think I could run the Fed as well as Jay Powell has run it," Warren Buffett said Wednesday in an interview with CNBC.
Buffett noted the challenge for Powell — as is true for any Fed chair — is: "You have to act."
"And you have to act on insufficient information," Buffett added. "You've got the ultimate responsibly to the American public. It doesn't mean you can stop recessions, it doesn't mean that you can turn bad loans into good loans or anything else, but it does mean that you've got to keep the system working."
A unique cocktail of selflessness and selfishness, humility and bravado, compassion and indifference is required of the Fed chair or any public servant granted the latitude of that given to the head of the U.S. central bank. And on this count, the Fed chair may indeed stand alone.
In the course of taking actions that shape a broad swath of economic activities, critics will emerge. And all the Fed chair is left with is their own sense of duty and responsibility to the U.S. economy.
But in outlining what makes Powell a good Fed chair, Buffett also manages to explain what makes him a great investor.
Buffett only acts on sufficient information. He doesn't have a responsibility to the American public. The financial resources of Berkshire Hathaway and the operational expertise of its business unit leaders actually can turn bad loans into good.
To be a great investor you must remain hyper-focused on variables you can control; to be a successful central bank official you must remain adaptable to variables you largely cannot.
Buffett's notes on the Fed's job and his own self-criticism do not, of course, signal that Buffett doesn't pay attention to the Fed and where it sets monetary policy. As Buffett told Yahoo Finance some years ago everything in stock valuations comes back to interest rates.
All else equal, higher rates are bad for stocks, lower rates are better. Look the market's performance in 2021 and then again in 2022 and you need not be a CFA to understand the role rates play in the market.
But understanding and paying attention to Fed policy doesn't require Buffett to actually take a view on that policy.
Buffett saying nice things about the Powell Fed is not a new development. During Berkshire Hathaway's 2021 annual meeting, Buffett said the Fed "resurrected" the U.S. economy during throes of the pandemic.
On Wednesday, Buffett said that had Powell not been leading the Fed in March 2020, the U.S. economy "could have gotten a very different result."
Yet his annual letter to shareholders has not, in recent years, devolved into an extended screed on the dangers of low or high interest rates. A discussion about what the central bank ought to do does not feature during Buffett's hours-long shareholder meeting each year.
Writing in his 2022 letter to shareholders, Buffett revealed what he called Berkshire's "secret sauce." Which, after some inspection, was hardly that secret — buy good companies and wait a few decades.
"The weeds wither away in significance as the flowers bloom," Buffett wrote. "Over time, it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well."
No one makes it to that advanced station in life by worrying about someone else's problems.
We've all got enough of our own.
Even Warren Buffett.
By Myles Udland · Head of News
