Inflation
On the topic of inflation, Buffett and Munger maintain that the primary protection any individual has is their own earning power. If you operate with a specific skill set in a niche market, you will likely be able to command sufficient resources for your services regardless of the medium of exchange or the value of the relative currency of your home country to the other specie in the world. The second best protection is the ownership of an excellent business. How do the two men define such an enterprise? It has durable competitive advantages protecting it from competition, does not require a lot of capital investment to grow, thereby throwing off cash rather than consuming it, and is run by talented, able, and honest management. They believe that Berkshire Hathaway is relatively well positioned for inflationary environments should they arise in the future.
Other Words of Wisdom from Buffett and Munger
- “Margin of safety is getting more in value than you are paying.”
- The only logical basis to gauge the relative attractiveness of an investment is your personal opportunity cost.
- To be successful, it’s more important to avoid a few key big mistakes than it is to be brilliant. Given long enough, most people get what they deserve.
