People feel a tightening of their purse strings as they are currently facing the most serious inflation in decades. Many people are thinking about how to deal with the high inflation rate. Buffett suggests that the best thing you can do is to "do something extraordinarily well.
Inflation impacts the economy, with the prices of a large number of commodities, from gas to groceries rising sharply. Individuals can do little to avoid inflation in their spending. Still, Warren Buffett, a CEO and legendary investor in Berkshire Hathaway, says there are steps people can take to reduce the impact of inflation on themselves.
In a speech at Berkshire Hathaway's annual shareholder meeting on April 30, 2022, Buffett reiterated his long-standing suggestion, i.e., one of the strongest protections against inflation is to invest in yourself, improve your skills and work to become the best in your field.
Personal skills to fight inflation
Warren Buffett, a 91-year-old man, said, "The best thing you can do is be exceptionally good at something."
Using professions such as doctors and lawyers as examples, Buffett said, "you will be given something that others produce in exchange for what you can offer."
Unlike the currencies, Buffett added, skills are anti-inflation. If you have a skill that (the market) needs, this skill will remain in demand no matter how much the dollar is worth.
"Whatever abilities you have, they can't be taken away from you. They can't be taken away from you by inflation." He said, "The best investment is to develop whatever (skills) you have and not pay taxes at all."
"The best way to do that is to invest in yourself."
Sharing similar advice at the end of the Great Recession in 2009, Warren Buffett, then 78, said, "The best thing to do is invest in yourself."
He believes that investing in one's own physical and mental health, in one's knowledge base and skill training, is the same as laying the foundation for being able to create more wealth in the future.
Buffett said, "If you are the best teacher, the best surgeon, the best lawyer, then no matter what the value of the final currency is, you will get your fair share from the big national economic pie."
At that time, Buffett also said that the next best thing a person could do was invest in "a great business" that produced a product in demand regardless of the dollar's performance.
He cited companies like Coca-Cola as an example, saying that people will still want his favorite soda decades from now, and inflation will have no impact on their decisions.
Buffett said, "Price changes don't make any difference because people will still pay for the products they like."
"No one knows what inflation will be in 10 or 20 years."
At Saturday's conference, Buffett did not criticize the Fed's actions for increasing the money supply and stabilizing markets during the epidemic crisis, as some market analysts had done. It's simple, he said, Fed Chairman Jerome Powell did what he had to do.
When asked about his earlier comments about inflation, Buffett said that rising prices had done much more damage. "Inflation also fools bond investors. It fools people who have cash under their mattresses. It cheats almost everybody."
Buffett said inflation also increases the amount of capital that companies need to own, and that's not as simple as raising prices to maintain inflation-adjusted profits.
Buffett also cautions against not listening to people who claim to be able to predict the path of inflation. "Everyone is talking about inflation. The question is how much, and the answer is no one knows. No one knows what inflation will be in 10 or 20 years."
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