원문 보기
this is a very uncertain time that we're living in i mean investments are acting weird nothing seems to be performing well headlines of inflation everywhere you look and because of this i've been spending a ton of time learning about inflation and this has led me to a 2009 recording of warren buffett talking about his top two methods to ride an inflationary wave without too much pain however in in typical buffett style he packs a whole lot information in just a few words so i wanted to do my part here and show his top two methods in battling inflation and break each one down further into terms that are easier to digest so let's go ahead and start with the very first method the best protection against inflation is your own earning power if you're the best teacher if you're the best surgeon if you're the best lawyer you know whatever it may be you will command a given part of other people's production of goods and services no matter what the currency is whether it's seashells or rice marks or for dollars so your own earning power is the best by far if you're the best journalist whatever it may be you will get your share of the national economic pie regardless of the value of whatever the currency may be is measured against some earlier standard now i want to go back to a line that buffett said and analyze it for a minute he said if you're the best you will command a given part of other people's production of goods and services no matter what the currency is now what does this mean this means that there is always a need for the very best work and this is because there are different types of customers first there are people who want a job done cheaply and don't really care much about quality as long as the job is done as long as the job's done they don't care you know maybe there's a few issues maybe they have to do some micro managing but they don't care they want to pay the cheapest price possible to get that done and then second you have those who want a job done cheaply but desire high quality work this is the worst customer to have and anyone who's owned a small business or offers a service knows these types of people you don't want to service these people that's the second kind of customer and third you have those who want a job done perfectly and don't really have much regard for price they are willing to pay more to have something done correctly for the first time and without thinking about it or they're willing to pay more for the best version of something these people typically don't have the time or the energy to make sure that everything is being done properly but they have the money to hire the very best person to make sure that that job is done properly these customers lean more towards what's called inelastic demand in economics this is where the demand of a good or service doesn't decrease quite in line with raising prices basically if the price goes up sales are not very affected when there's inelastic demand this is typically attributed to necessities things like food or clothing however it's also true for the highest quality version of something something that people are willing to pay more for now on this chart we can see the difference between elastic demand and inelastic demand with elastic demand we can see that the quantity demanded of some product or service decreases as price increases now we typically see this kind of demand in products that have a strong alternative for example if jiffy peanut butter or porsche cars increased their price 5x demand for those products would surely shrink some amount now a perfectly inelastic demand curve means the price of a product could go infinitely high and demand would not decrease at all this of course doesn't really happen in real life however you can think of some dystopian future where i don't know there's only a thousand gallons of water left on the earth and because of this the price of water could theoretically be infinitely high because there would still be demand for that limited resource but i don't think that's going to happen anytime soon but we'll see how 2021 pans out so all this economics talk gets us to one simple point that if you are the very best at something or more realistically in the top few percent of your field you are able to demand multiples higher than your lower quality competitors and you're able to do that without demand for your work decreasing dramatically and this is exactly how a top architect like norman foster gets paid 2.7 million dollars a year when the median architect wage is 82 000 a year now let's go back to buffett and see his second way to battle inflation the second best protection is a wonderful business you know if you if you own the coca-cola trademark company you will get a given portion of people's labor 20 years from now and 50 years from now for your product and it doesn't make any difference what's happened to the price level generally uh because people will give up three minutes of labor whatever it may be to enjoy you know a uh 12 ounces of you know of a product they like and so those are the and those are the great assets your own earning power first and then the earning power of a wonderful business that does not require heavy capital investment that requires heavy capital investment you get killed in inflation and with those guidelines i would tell you the best thing to do is invest in yourself so buffett says the second best way to battle inflation is to buy stock in or have ownership in a wonderful business now this is true firstly because of the same reasons a top performing individual doesn't really need to worry much about inflation when there's demand for a specific product or service when it's valued highly people will pay for that thing despite changing external factors like the dollar becoming worth less and less over time through inflation this means a company with a very strong brand and reputation can raise their prices in a high inflationary environment before their competitors do and the great company can raise their prices knowing full well the demand for their product will remain high or at least be affected less than their competitors this ability to raise prices first can be the difference between a profitable year or not during a particularly high inflation period looking back into history we can see inflation was very bad in the 1970s and early 80s with cpi increasing more than 10 percent in some years in fact it was so bad that between 1971 and 1981 the real return for the s p 500 was a negative 16 percent after adjusting for inflation this means you could have bought one thousand dollars worth of a nice safe s p 500 index fund in 1971 held it for 10 years and after that entire decade you were left with only 840 dollars in relative buying power that's what inflation can do at its worst now a company that's able to instantly increase their prices by 10 percent when their cost of labor their cost of equipment and supplies increase by 10 is going to fare much much better than a company who can't and this is the value of strong brands and strong companies and then buffett went on and said that no matter where the currency goes up down sideways or even if we start buying things exclusively with stamps or pokemon cards people who value a product will still give up a proportional amount of their labor to pay for that item simply because they value that item or they value that service and then finally buffett mentions to stay away from companies with heavy capital investment now why would this matter this is because every asset your company needs to produce its product is subject to inflation and increased prices so let's break this down with an example we're going to take two companies and for the sake of this example we'll say both are equally valued and demanded company a is a software company and in order to generate one million dollars in revenue they need to spend five hundred thousand dollars on things like staff office space computers and some basic supplies but their product being software is very scalable it doesn't really cost them anything more to sell 10 copies versus 20 copies now let's say 10 percent inflation comes in and now their expenses increase from 500 000 dollars to 550 thousand dollars this just dropped their profit by 10 percent now to 450 000 from their level of 500 000.
now company b is a small airline in order to generate 1 million dollars in revenue they need to spend 900 000 on things like staff maintenance lease payments rent you name it to make that one million dollars in revenue yes their service is scalable and valuable but it has high cost to expand and operate now with this company company b we have 10 inflation rolling in this increases their expenses from 900 000 up to 990 000 now company b's profit just decreased 90 from 100 000 in profit to only 10 000 and that is why heavy input costs to run a business can cause huge issues when inflation is high so in summary we can learn a lot from warren buffett's thoughts on inflation we know that if you personally offer a fantastic product or service or you own a business that does so your customers will continue to value and pay for your services no matter what happens in the economy or what happens to currency or for trading with seashells and pokemon cards in order to buy things so invest in yourself and as always have a profitable day
Comments 0