Since the Recession of 2009, the United States economy has been in the news semi-constantly. While most people agree that the economy is doing pretty well, it’s still something that many people are concerned with. In fact, both 2016 presidential candidates talked at length about their differing plans for the economy and how to continue that increase to get things back to where they should be.
However, billionaire investing genius Warren Buffett has said repeatedly that we shouldn’t worry about the economy. The Oracle of Omaha is bullish about the US and extremely optimistic about the future of the country, regardless of who is in charge. But why? Well, as it turns out, Buffett believes that there are two things that will improve the economy.
“There’s two things that make it better: innovation and productivity, which are interlocked in certain ways,” Buffett said in an interview with Politico. “When you think of it, all of the products that you and I are using to make our lives better weren’t even around 30 years ago. It’s pretty extraordinary.”
Innovation will lead to new markets, better products, and possibly even extraordinary profit for both businesses and the country at large. Only through innovation can we excel and continue to grow things. After all, consumers are more interested in new products than they are old ones, and innovation leads to a rise in the economy.
Productivity, by contrast, is less about new things and more about increasing the output of products and services and making things work better. Both things are absolutely essential, according to Buffett, for growth. Anything that improves “what people want to do with the 24 hours in the day” will indirectly improve the output, value of work, and economy in the long run.
“What really counts is gains in productivity,” Buffett said. “If you go back 100 years … the farms around where I live here were producing 30 bushels of corn per acre. Now they’re producing 160 bushels of corn per acre. Well, that’s dramatic, and of course they take less people to do it as well, so, just up and down the line, you look at how many man-hours it takes to produce an auto now compared to 50 years ago. So, productivity – that’s the way the human race improves.”