Warren Buffett: From Value Investor To Political Entrepreneur?

Warren Buffett has been widely known for his VALUE investing approach, largely influenced by his mentor Ben Graham.

But, lately our icon's political liberal leaning views, wherein he strongly supports government intervention in markets, appears to have similarly exposed a shift in his investing strategy, where Mr. Buffett's model appears to have evolved into investing under "government umbrella" or capitalizing on opportunities provided by the recent government sponsored bailouts.

In short, the reason he supports government intervention has been because he and his Berkshire Hathaway directly benefits from these.

Here is an excerpt from the splendid article from Reuter's Rolf Winkler, (all bold highlights mine)

``Today, Buffett remains famous for investing The Right Way. He even has a television cartoon in the works, which will groom the next generation of acolytes.

``But it turns out much of the story is fiction. A good chunk of his fortune is dependent on taxpayer largess. Were it not for government bailouts, for which Buffett lobbied hard, many of his company’s stock holdings would have been wiped out.

``Berkshire Hathaway, in which Buffett owns 27 percent, according to a recent proxy filing, has more than $26 billion invested in eight financial companies that have received bailout money. The TARP at one point had nearly $100 billion invested in these companies and, according to new data released by Thomson Reuters, FDIC backs more than $130 billion of their debt.

``To put that in perspective, 75 percent of the debt these companies have issued since late November has come with a federal guarantee...

``He even traded the bailout, seeking morally hazardous profits in preferred stock and warrants of Goldman and GE because he had “confidence in Congress to do the right thing” — to rescue shareholders in too-big-to-fail financials from the losses that were rightfully theirs to absorb...

More of the rest of Buffett's conflict of interest here.

Nonetheless Mr. Winkler, apparently dismayed with the clash in the purist market based imagery against Mr. Buffett's actual practice, concludes, ``What saddens me is that Buffett is uniquely positioned to lobby for better public policy, but he’s chosen to spend his considerable political capital protecting his own holdings."

``If we learn one lesson from this episode, it’s that banks should carry substantially more capital than may be necessary. You would think Buffett would agree. He has always emphasized investing with a “margin of safety” — so why shouldn’t banks lend with one?"

So what do you call entrepreneurs who profit from government intervention?

According to Wikipedia.org, `` a business entrepreneur who seeks to gain profit through subsidies, protectionism, government contracts, or other such favorable arrangements with government(s) through political influence (also known as corporate welfare)" is known as a political entrepreneur.

And an economy that thrives on political entrepreneurship is also pejoratively known as "crony capitalism"-an allegedly capitalist economy in which success in business depends on close relationships between businesspeople and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, and so forth (wikipedia.org).

And I mistakenly thought that political entrepreneurship only existed in "banana republics" characterized by mostly autocratic rulers (or even manipulated democracies) under unfree economies.

Has the political economy changed so much that has compelled our icon to shift strategies?

Or has Mr. Buffett's performance been a chronic "mythologizing a humble background"- typical of tycoons as Joe Studwell in Asian Godfathers observed-where reputation and reality do not match?