Warren Buffett's Strategies for Protecting Your Wealth from Inflation

Inflation is at a 40-year high. Here's how to beat it according to Buffett.

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Key points

• With inflation at a 40-year high, Buffett says "the best thing you can do is to be exceptionally good at something."
• According to Buffett, the best investment you can make is in yourself and anything that develops you.
• Citing Malcolm Gladwell's 10,000-hour rule, Buffett further explains that people should figure out what they are good at and what's useful to society.

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Warren Buffett, chairman and CEO of Berkshire Hathaway, is widely considered to be one of the greatest investors of all time. His company's recent annual shareholder's meeting, held for the first time since the pandemic, drew 40,000 shareholders from around the world. Many come to listen to Buffett and his partner Charlie Munger's pearls of wisdom on the economy and the latest investment strategy.

Inflation is currently at 8.5% from a year ago, a 40-year high. Unfortunately, workers' wages are not keeping pace with inflation, making many items such as food and gas more unaffordable. During the meeting, a shareholder asked Buffett for advice on what to invest in due to the high inflation.

Invest in yourself

"The best thing you can do is to be exceptionally good at something," Buffett responded. "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... [people] are going to give you some of what they produce in exchange for what you deliver."

"Whatever abilities you have can't be taken away from you," Buffett further added. "They can't actually be inflated away from you. ... So the best investment by far is anything that develops yourself, and it's not taxed at all."

Buffett emphasized that sharpening one's skills and working to be the top of their field are inflation proof. No matter what the dollar is worth, if an individual has a skill that is in high demand, unlike a currency, the skill will continue to be in high demand.

This isn't the first time Buffett has addressed this issue. During the 2008 financial crisis, Buffett stated that the best thing a person can do to protect against inflation was to sharpen their skills and focus on being at the top of their field. Buffett said then that, "the best thing to do is invest in yourself."

Focus on what you are good at

Buffett continued his advice by highlighting the importance of figuring out what one is good at as opposed to relentlessly pursuing a fixed goal. He cited Malcolm Gladwell's 10,000-hour rule, which states that in order to achieve mastery of a skill, it takes 10,000 hours of intensive practice.

"Figure out what makes you good and what you sort of naturally bring to the game. I could have spent 10,000 hours trying to become a heavyweight boxer. I don't think I'd do very good at the end of the 10,000 hours. You stumble into what you really like doing, what you're good at, what's useful to society."

Another way to look at this is increasing your human capital. Your human capital consists of things like your education, professional expertise, financial knowledge, and your health. By investing in yourself and by focusing on what you are good at, you can ensure you receive your fair share despite inflation. This will help increase your financial opportunities and you will be able to charge a premium for useful skills.