2022: What makes a stock resilient to inflation?

WARREN BUFFETT: OK. If station 3 will please ask something about motherhood and apple pie, or something like that. (Laughter)

DAPHNE: Dear Mr. Buffet and Mr. Munger. My name is Daphne, I’m from NYC, and this is my fifth annual shareholders meeting. (Applause)

WARREN BUFFETT: Well, we appreciate you coming. We do, sincerely.

DAPHNE: As you know, for the past four consecutive months, we’ve been going through inflation, with an inflation rate north of 7% for the first time since 1982.

You both have experienced this before, from 1970 to 1975, at a time where your portfolio took paper losses and yet you made some of the best investment choices of your life.

Reflecting on that, my question is, if you had to pick one stock to bet on — (Laughter)

WARREN BUFFETT: You kinda sneaked up on us there for a second. (Laughter)

DAPHNE: — and be resilient in the inflation, which would you choose? And what specifically enables that stock to do very well in what might very likely be a difficult market?

WARREN BUFFETT: Well, I’ll tell you something even better than that one stock. (Laughter)

Maybe we’ll get to one stock.

But the best thing you can do is to be exceptionally good at something. If you’re the best doctor in town, if you’re the best lawyer in town, if you’re the best whatever it may be, no matter whether people are paying you with a zillion dollars or paying with — they’re going to give you some of what they produce in exchange for what you deliver.

And if you’re the one they pick out to do any particular activity, sing, or play baseball, or be their lawyer, whatever it may be, whatever abilities you have can’t be taken away from you, they can’t actually be inflated away from you.

Somebody else will give you some of the wheat they produce, or the cotton, or whatever it may be, and they will trade you for the skill you have.

So, the best investment by far is anything that develops yourself. And, again, it’s not taxed. (Applause) So that’s what I would do.

CHARLIE MUNGER: I got some advice for you, too. (Laughter)

When you have your own retirement account, and your friendly advisor suggests you put all the money into bitcoin — (laughter) — just say no. (Laughter) (Applause)

WARREN BUFFETT: Yeah.

Nobody can take away from you the talent you have. And the truth is that the world will always be willing. They’ll need to do something, and some people will not have skills, and they will get less of a the product of the society than somebody who has other skills.

And sometimes that has something to do with education, but a good bit of the time it doesn’t have anything to do with education.

But, just figure out what you’d like to be, and figure out how — and what you’d like to be is what you’re going to likely be good at, and, you know —

The world will always need somebody on that tube to tell us what’s going on. So, you know, study Becky Quick or somebody and (laughs) figure out, you know, what makes her good. And what you sort of naturally bring to the game.

I mean, I could have — who’s the guy that says you’ve got to spend 10,000 hours doing this or that, and then? Malcolm Gladwell.

Malcolm Gladwell, you know, would say, just spend 10,000 hours on something. Well, I could have spent 10,000 trying to become a heavyweight boxer, but (laughs) I don’t think would have felt very good at the end of the 10,000 hours. I mean —

And, you know, you stumble into what you really like doing, what you’re good at, what is useful to society. And then it doesn’t make any difference what the dollar bill, you know, is now worth, in terms of the purchasing power, a cent, or a half-a-cent, or a hundredth of a cent.

If you’re the best doctor in town, you know — they’ll bring you chickens, whatever they may do — but they can’t take it away from you.

And my guess is that — if you’ve come to five meetings, you know, you’ve got a very good future ahead of you. I mean, that shows — (Laughter)

It self-selects, I mean —

So, if you want to sell a piece of yourself, you know, we’ll buy that as the best investment we can make. We’ll take 10% of your future earnings, and we’ll give you a cash payment now. (Laughter)

And, you know, we’ll have a terrific asset. And you can have 100% of your future earnings. And if you develop your talent — maybe you’ll be a great dancer — people pay money to watch great dancers. We had Fred Astaire and his sister, Adele, that came from Omaha, you know.

Their name was Austerlitz then, but they could dance. And Adele did whatever she did with him, moved to England. And Fred Astaire went on to do a whole bunch of other things.

And Ginger Rogers had to do it all the same, backwards, in high heels, and she didn’t get paid as much because she was a woman.

But you’re going to do just fine. I’d bet a lot of money on you. (Laughs)