2020: America's wealth, in real terms, has increased by 5,000x
WARREN BUFFETT: I went to the internet in trying to prepare for this, and I tried — if you’ll move to the next slide — I tried to find out what was the wealth of the country in 1790 — 1789 — our starting point. And I punched in “United States wealth.” I tried 1789. I tried 1790. I thought it might be a little easier in terms of a round year, and I think 4 million or so references came up. And I didn’t look at all 4 million.
But I can tell you the data collection in those early days on many, many fronts was not — and even not today — you really can’t — you can’t find what I would consider reliable figures. You can find out how many mules there were in the country, and a few things like that and add — try to add them up.
But in real estate, you know, when you find — when you’re looking at houses or apartment houses or office buildings, that, you know, they’re each slightly different than each other. But they look to comparable sales, so it’s hard to find a lot of countries that have been sold where the wealth has been estimated.
But it was interesting to go back and think about the fact that in 1803, we purchased for $15 million — we made the Louisiana Purchase. Now that’s a little later than 1789, but — but that’s the — that’s the best comp, as they say in real estate — that’s the best copy we could find for land mass anyway, and —
When we purchased — made that purchase — that was equal, incidentally, to about a quarter —800,000-plus square miles — but it was about a quarter of what the lower 48 states now contain.
So, we bought about a quarter of the lower 48 for those $15 million back in 1803.
And if you live in Texas, and your grandfather is close to dying, and he calls — he calls the grandchildren, children around him, and in his final words, he always says, “Don’t sell the mineral rights.”
Well, the French sold us the mineral rights on that $15 million deal as well. So, we — we got that whole strip there — we got all of Kansas, and essentially all of Oklahoma. They’ve produced 21 billion barrels of oil for us and a lot of natural gas since the purchase.
One of the sidelights is that we paid our 15 million for the Louisiana Purchase — we paid 3 million of it —20 percent of it — we paid with a — with 200,000 ounces of gold, valued at 15 bucks an ounce. And that 3 million to the French took — and we got South Dakota as part of the Louisiana Purchase, and the Homestake mine up there, before it closed, produced, well over 40 million ounces of gold. And 40 million ounces of gold comes to about $60 billion worth. And like I say we 20 — 200,000 ounces took care of 20 — 20 percent of our purchase price.
So, the Louisiana Purchase was a bargain, but it’s what the going price was for 800,000 square miles, I guess, at the time and — three cents an acre.
And so, I decided, by playing around with various numbers such as that, that it as a — as a reasonable estimate of the worth of the country, in 1789, a billion was not a crazy figure.
Now if I’d been an academician or something, I would have put $1,107,400,000 or something like that — or it’s a —I would have made it look respectable — but it’s a wild guess. But it’s not — it’s not a crazy figure.
So, what has happened — let’s move on to the next slide — to the wealth of that country since then? And here we have some figures that come out pretty regularly — well, they do come out regularly — where the Federal Reserve estimates the net household worth of people in the United States — all the households in the United States.
And you can look these up and you’ll — you’ll see that, you know, there’s 30 trillion of stocks. And I think maybe single-family homes — what are there — there’s 82 million or so owner-occupied single families and maybe 45 million rental apartments and so on. So, you start adding all these up.
And the Federal Reserve tells us — and I invite you to look at the — the data — it’s kind of interesting — that we now in the United States, 231 years later, we have 100 trillion— we have more than 100 trillion — of household wealth, even though the stock market’s gone down somewhat since the last quarterly report.
So, you say, well, you know, we’ve had a lot of inflation, everything. We actually, in the United States, for the first half of our existence roughly, we didn’t really have that much inflation. We had inflationary periods and deflationary periods, but the general price level did not change that dramatically.
But I will assume again for this calculation that — that there’s been 20-for-1 inflation that’s — it’s way less than that in many commodities, but — and it’s very hard to measure and to talk about equivalent benefits from different kinds of products and so on — and cost — but I think it’s reasonable to say that the United States, in real terms, has increased in wealth at something in the area of 5000-for-1.
Which is really — its mind blowing — 5000-for-1 — in real terms — in a country that had a half a percent of the — and a bunch of raw land — but a vision that — to accomplish that in 231 years. There’s just no denying that — that’s beyond what anybody could have dreamt earlier.